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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-24901
PROSPECTUS
$517,500,000
EMC CORPORATION
3 1/4% CONVERTIBLE SUBORDINATED NOTES DUE 2002
INTEREST PAYABLE MARCH 15 AND SEPTEMBER 15
11,421,319 SHARES OF COMMON STOCK
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This Prospectus relates to $517,500,000 aggregate principal amount of 3 1/4%
Convertible Subordinated Notes due 2002 (the "Notes") of EMC Corporation, a
Massachusetts corporation (together with its subsidiaries, "EMC" or the
"Company"), and 11,421,319 shares of common stock, par value $.01 per share of
the Company (the "Common Stock"), which are initially issuable upon conversion
of the Notes plus such additional indeterminate number of shares of Common
Stock as may become issuable upon conversion of the Notes as a result of
adjustments to the conversion price (the "Shares"). The Notes and the Shares
that are being registered hereby are to be offered for the account of the
holders thereof (the "Selling Securityholders"). The Notes were issued and
sold in March 1997 in transactions exempt from the registration requirements
of the Securities Act of 1933, as amended (the "Securities Act"), to persons
reasonably believed by Smith Barney Inc., Alex. Brown & Sons Incorporated and
Morgan Stanley & Co. Incorporated (the "Initial Purchasers") to be "qualified
institutional buyers" (as defined in Rule 144A under the Securities Act) or
institutional "accredited investors" (as defined in Rule 510(a)(1), (2), (3)
or (7) under the Securities Act or outside the United States to certain
persons in offshore transactions in reliance on Regulation S under the
Securities Act. See "Plan of Distribution."
The Notes are convertible into Common Stock at any time after May 10, 1997
and at or before maturity, unless previously redeemed, at a conversion price
of $45.31 per share, subject to adjustment in certain events. The Common Stock
is traded on the New York Stock Exchange under the symbol EMC. On June 25,
1997, the last reported sale price of the Common Stock on the New York Stock
Exchange Composite Tape was $39.00 per share.
The Notes do not provide for a sinking fund. The Notes are redeemable, at
the option of the Company, in whole or in part, at any time on or after March
15, 2000 at the redemption prices set forth in this Prospectus, together with
accrued interest. The Notes are redeemable at the option of the holder upon a
Change of Control (as defined herein) at 100% of the principal amount thereof,
plus accrued interest. See "Description of Notes."
The Notes 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 other liabilities
of subsidiaries of the Company. The Indenture will not restrict the incurrence
of any other indebtedness or liabilities by the Company or its subsidiaries.
See "Description of Notes--Subordination."
For a description of certain tax consequences to holders of the Notes see
"Certain United States Federal Tax Consequences."
The Notes and the Shares are being registered to permit public secondary
trading of the Notes and, upon conversion, the underlying Common Stock, 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 Notes and the underlying Common Stock covered by
this Prospectus.
Upon their original issuance, the Notes became eligible for trading in the
Private Offerings, Resales and Trading through Automated Linkages ("PORTAL")
Market. However, the Notes sold pursuant to this Prospectus will no longer be
eligible for trading on the PORTAL Market. No assurance can be given that an
active market for the Notes will develop or as to the liquidity or
sustainability of any such market. See "Risk Factors--Absence of Existing
Active Public Market."
The Company will not receive any of the proceeds from the sale of the Notes
or the Shares by the Selling Securityholders. The Notes and the Shares may be
offered in negotiated transactions or otherwise, at market prices prevailing
at the time of sale or at negotiated prices. In addition, the Shares may be
offered from time to time through ordinary brokerage transactions on the New
York Stock Exchange. 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 Notes or Shares as principals, any profits
received by such broker-dealers on the resale of the Notes 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" 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.
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THE DATE OF THIS PROSPECTUS IS JUNE 26, 1997
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Some of the information set forth or incorporated by reference in this
Prospectus constitutes forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. All such forward-looking
statements are necessarily only estimates of future results, and there can be
no assurance that actual results will not materially differ from expectations.
Factors which could cause actual results to differ from expectations include,
among others, a shortage of key components or products which meet EMC's
delivery or quality requirements, the Company's "hockey stick" pattern of
quarterly sales, competitive pricing pressures in the computer storage market,
reliance on indirect channels of distribution, competition in the computer
data storage industry, the Company's ability to successfully integrate
acquisitions and the Company's ability to manage growth. Specific reference is
made to the risks and uncertainties described under "Risk Factors."
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements, information statements and other
information with the Commission. Such reports, proxy and information
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following
Regional Offices of the Commission: Seven World Trade Center, Suite 1300, New
York, New York 10048; and 500 West Madison Avenue, Suite 1400, Chicago,
Illinois 60661. Copies of such material can be obtained from the public
reference section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates, or from the Commission's Internet Web site at
http://www.sec.gov. In addition, such materials also may be inspected and
copied at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1996 (File No. 1-9853) and its Current Report on Form 8-K dated March 13,
1997 are incorporated herein by reference.
In addition, all reports and other documents subsequently filed by the
Company pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act,
prior to the termination of the offering made hereby, shall be deemed to be
incorporated by reference herein. Any statement included in a document
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 statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to any person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy
of any or all of the documents which have been incorporated by reference in
this Prospectus, other than exhibits to such documents unless such exhibits
are specifically incorporated by reference into the documents so incorporated.
Requests for such copies should be directed to: Investor Relations Department,
EMC Corporation, 171 South Street, Hopkinton, Massachusetts 01748 (telephone
number (508) 435-1000).
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THE COMPANY
EMC designs, manufactures, markets and supports a wide range of storage-
related hardware, software and service products for the multi-billion dollar
market for mainframe, open systems and network attached storage systems. Since
the introduction of its first Symmetrix Integrated Cached Disk Array in 1991,
EMC has rapidly become a leading supplier of intelligent enterprise storage
and retrieval technology for both mainframe and open systems environments.
These products are sold as storage solutions for customers utilizing a variety
of the world's most popular computer system platforms. EMC's products provide
solutions for a wide range of customer storage requirements, from the highest
performance mission critical applications to extremely high capacity business
support applications.
The Company was organized as a Massachusetts corporation in 1979. The
Company's corporate headquarters is located at 171 South Street, Hopkinton,
Massachusetts 01748, and the telephone number is (508) 435-1000.
RISK FACTORS
This Prospectus and the documents incorporated herein contain certain
forward-looking statements within the meaning of the Federal Securities Laws.
Actual results could differ materially from those projected in the forward-
looking statements as a result of certain risk factors, including those set
forth below and elsewhere in this Prospectus and the documents incorporated by
reference herein. In addition to other information contained or incorporated
by reference in this Prospectus, prospective investors should consider
carefully the factors listed below in evaluating an investment in the Notes or
the Shares offered hereby.
UNEVEN PATTERN OF QUARTERLY RESULTS
There has been a historic and recurring "hockey stick" pattern of the
Company's quarterly sales, by which a disproportionate percentage of a
quarter's total sales occur in the last month and weeks and days of each
quarter, making prediction of revenues, earnings and working capital for each
financial period especially difficult and uncertain and increasing the risk of
unanticipated variations in quarterly results and financial condition.
This pattern of sales is itself believed to be the result of many factors
including the significant size of EMC's average product price in relation to
its customers' budgets, resulting in long lead times for customers' budgetary
approval, which tends to be given late in a quarter; the tendency of customers
to wait until late in a quarter to commit to purchase in the hope of obtaining
more favorable pricing from one or more competitors seeking their business;
and, at times, seasonal influences, as well as the fourth quarter influence of
customers' spending their remaining capital budget authorization prior to new
budget constraints in the next year's first quarter.
The "hockey stick" pattern of the Company's sales also makes it extremely
difficult to predict near-term demand and adjust manufacturing capacity
accordingly. Substantial variance of orders from the predicted demand may
limit the Company's ability to assemble, test and ship orders received in the
last weeks and days of each quarter, which could adversely affect quarterly
revenues and earnings.
In addition, revenues in any quarter are substantially dependent on orders
booked and shipped in that quarter and the Company's backlog at any particular
time is not necessarily indicative of future sales levels. This is because the
Company manufactures its products on the basis of its forecast of near-term
demand and maintains inventory in advance of receipt of firm orders from
customers; orders are generally shipped by the Company shortly after receipt
of the order; and customers may reschedule orders with little or no penalty.
These are additional factors making the prediction of revenues extremely
difficult. Further, any unexpected decline in revenues without a corresponding
and timely slowdown in expenses could have a material adverse effect on the
Company's business, results of operations or financial condition.
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COMPETITION
There is strong competition in the computer data storage industry. EMC
competes with many companies in the mainframe and open systems markets,
certain of which have substantially greater financial and technological
resources, larger distribution capabilities, earlier access to customers and
greater overall customer loyalty than EMC. In the mainframe market, EMC
competes primarily with International Business Machines Corporation ("IBM").
In the open systems market, the Company's primary competition is provided by
systems vendors, including IBM, Digital Equipment Corporation and Sun
Microsystems Corporation. In the Company's opinion, the major competitive
advantage of the open systems vendors is their overall market presence and
ability to provide integrated Central Processing Unit, storage and software
packages. EMC's business may be adversely affected by the announcement or
introduction of new products by its competitors, price reductions of its
competitors' equipment or services and the implementation of certain marketing
strategies by its competitors. As a significant number of EMC's products are
designed to be fully compatible with IBM computers and IBM operating systems,
EMC's business could also be adversely affected by modifications in the design
or configuration of IBM computer systems.
PRICING
Competitive pricing pressures exist in the computer storage market, and have
had and may in the future have an adverse effect on the Company's revenues and
earnings. There also has been and may continue to be a willingness on the part
of certain large competitors to reduce prices in order to preserve or gain
market share, which cannot be foreseen by the Company. The Company believes
that pricing pressures are likely to continue as competitors develop more
competitive product offerings.
To date, the Company has been able to manage its component and product
design costs. However, there can be no assurance that the Company will be able
to continue to achieve reductions in component and product design costs. The
relative and varying rates of product price and component cost declines could
have an adverse effect on the Company's earnings.
DEPENDENCE ON SUPPLIERS
The Company purchases certain components and products from suppliers who EMC
believes are currently the only suppliers of those components or products that
meet EMC's requirements. Among the most important components that EMC uses are
disk drives and high density memory components ("DRAMs"). Disk drives are a
key component of the Company's products and the Company currently purchases
substantially all of its disk drives from a single supplier. EMC purchases
DRAMs from a small number of qualified suppliers. A failure by any supplier of
disk drives, high density DRAMs or other components to meet EMC's delivery or
quality requirements for an extended period of time could have a material
adverse effect on EMC. The Company is currently transitioning its product line
from use of 5.250 9 gigabyte ("GB") disk drives to new 3.50 9 GB and 5.250 23
GB disk drive technologies. This transition may intensify the above risks.
From time to time, because of high industry demand and/or the inability of
certain vendors to consistently meet on a timely basis the Company's component
quality standards, the Company has experienced delays in deliveries of disk
drives and high density DRAMs needed to satisfy orders for its Integrated
Cached Disk Array ("ICDA") products. The Company is currently working with
such vendors to proactively maintain and/or improve component quality
standards and also continues to seek alternative sources of supply. If such
shortages and/or performance problems were to intensify, the Company could
lose some time-sensitive customer orders which could adversely affect
quarterly revenues and earnings. The adverse effect of a supplier's failure to
meet EMC's requirements may be intensified by the "hockey stick" pattern of
the Company's sales and the necessity of meeting critical manufacturing
schedules.
NEW PRODUCTS
Technology and user needs change rapidly in the computer data storage
industry, which requires ongoing technological development and introduction of
new products. Sales of the Symmetrix series of products
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constitute the principal source of revenues for EMC and such sales are
expected to continue to be the principal source of its revenues in the near
future. EMC expects competition in the sale of ICDA products to increase, and
there can be no assurance that the Symmetrix series of products will continue
to achieve market acceptance. Significant delays in the development of ICDA
technology for future products or product enhancements would be to the
advantage of EMC's competitors. Furthermore, the continued development of ICDA
technology and its incorporation into EMC's future generations of products
cannot be assured even with significant additional investments.
Further risks inherent in new product introductions include the uncertainty
of price-performance relative to products of competitors, including
competitors' responses to the introductions, and the desire by customers to
evaluate new, more expensive products for longer periods of time.
CHANGE IN REGULATIONS
The Company's business, results of operations and financial condition could
be adversely affected if laws, regulations or standards relating to the
Company or its products were newly implemented or changed.
MANUFACTURING RISKS
EMC's products operate near the limits of electronic and physical
performance and are designed and manufactured with relatively small
tolerances. If flaws in design, production, assembly or testing occur on the
part of EMC or its suppliers, EMC may experience a rate of failure in its
products that results in substantial repair or replacement costs and potential
damage to EMC's reputation. Continued improvement in manufacturing
capabilities and control of material and manufacturing quality and costs will
be critical factors in the future growth of EMC. EMC frequently revises and
updates manufacturing and test processes to address engineering and component
changes to its products and evaluates the reallocation of manufacturing
resources among its facilities. There can be no assurance that EMC's efforts
to monitor, develop and implement appropriate test and manufacturing processes
for its products, especially the Symmetrix series of products, will be
sufficient to permit EMC to avoid a rate of failure in its products that
results in substantial delays in shipment, significant repair or replacement
costs and potential damage to EMC's reputation, any of which could have a
substantial adverse effect on EMC's operations and ultimately on its financial
results.
INDIRECT CHANNELS OF DISTRIBUTION
In 1996, the Company derived a significant percentage of its product
revenues from reseller and original equipment manufacturer ("OEM") channels. A
substantial portion of these reseller and OEM revenues stems from the
Company's reseller agreement with Hewlett-Packard Company ("HP"), which
currently expires in August of 1997. The Company's financial results could be
adversely affected if such contracts were terminated, if the Company's
relationship with such resellers or OEMs were to deteriorate or if the
financial condition of its resellers and OEMs were to weaken. In addition, the
Company is currently experiencing growth in the transition from the mainframe
to the open systems market. In this regard, the Company may have an increased
reliance on indirect channels of distribution. There can be no assurance that
the Company will be successful in maintaining or expanding these indirect
channels of distribution. If the Company is not successful, the Company may
lose certain sales opportunities. Furthermore, the partial reliance on
indirect channels of distribution may materially reduce the visibility to
management of potential orders.
ALLIANCES
Many of the Company's products are marketed in conjunction with the products
of other vendors, and the Company plans to continue its strategy of developing
key alliances. There can be no assurance that the Company will be successful
in its ongoing strategic partnerships or that the Company will be able to find
further suitable business relationships as it develops new products. Any
failure to continue or expand such relationships could have a material adverse
effect on the Company's business, financial condition and results of
operation.
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There can be no assurance that the Company's distributors and strategic
partners, many of which have significantly greater financial and marketing
resources than the Company, will not develop and market products in
competition with the Company in the future, discontinue their relationships
with the Company, or form competing arrangements with the Company's
competitors.
INTERNATIONAL SALES
A substantial portion of the Company's revenues is derived from sales
outside the United States. In addition, a substantial portion of the Company's
products are manufactured outside of the United States. Accordingly, the
Company's future results could be adversely affected by a variety of factors,
including changes in foreign currency exchange rates, changes in a specific
country's or region's political or economic conditions, trade restrictions,
import or export licensing requirements, the overlap of different tax
structures or changes in international tax laws, changes in regulatory
requirements, compliance with a variety of foreign laws and regulations and
longer payment cycles in certain countries.
MANAGEMENT OF GROWTH
The Company has a history of rapid growth. The Company's future operating
results will depend on management's ability to manage growth, continuously
hire and retain significant numbers of qualified employees, forecast revenues
and control expenses. An unexpected decline in the growth rate of revenues
without a corresponding and timely reduction in expense growth could have a
material adverse effect on the Company's business, results of operations or
financial condition.
DEPENDENCE UPON KEY PERSONNEL
The Company's continued growth and success depends to a significant extent
on the continued service of senior management and other key employees and the
hiring of new qualified employees. Competition for highly-skilled personnel is
intense in the high technology industry. There can be no assurance that the
Company will be successful in continuously recruiting new personnel and in
retaining existing personnel. The loss of one or more key employees or the
Company's inability to attract additional qualified employees or retain other
employees could have a material adverse effect on the Company's business,
results of operations or financial condition.
ENFORCEMENT OF THE COMPANY'S INTELLECTUAL PROPERTY RIGHTS
No assurance can be given that the Company's patent applications will issue
as patents or that any patents that may issue will provide the Company with
adequate protection for the covered products or technology. Additionally,
there can be no assurance that the Company's confidentiality agreements will
adequately protect its trade secrets, know-how or other proprietary
information. Further, there can be no assurance that the Company's activities
will not infringe on the patents or proprietary rights of others or that the
Company will be able to obtain licenses to any technology that it may require
to conduct its business or that, if obtainable, such technology can be
licensed at a reasonable cost. Although the Company has significantly
increased its patents and patent applications, the rapidly changing technology
of the computer industry makes EMC's future success dependent upon the
technical competence and creative skills of its personnel rather than on
existing patent protection.
RISKS ASSOCIATED WITH FUTURE ACQUISITIONS
As part of its business strategy, the Company may make acquisitions of, or
significant investments in, businesses that offer complementary products,
services and technologies. Any such future acquisitions or investments would
be accompanied by the risks commonly encountered in an acquisition of a
business. Such risks include, among other things, the difficulty of
assimilating the operations and personnel of the acquired business, the
inability of management to maximize the financial and strategic position of
the Company through the successful incorporation of acquired personnel and
customers, the maintenance of uniform standards, controls, procedures and
policies and the impairment of relationships with employees and customers as a
result
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of any integration of new management personnel. These factors could have a
material adverse effect on the Company's business, results of operations or
financial condition. The Company expects that the consideration paid for
future acquisitions, if any, could be in the form of cash, stock, rights to
purchase stock or a combination thereof. Dilution to existing stockholders and
to earnings per share may result to the extent that shares of stock or other
rights to purchase stock are issued in connection with any such future
acquisitions.
VOLATILITY OF STOCK PRICE
The Company's stock price, like that of other technology companies, is
subject to significant volatility. The announcement of new products, services
or technological innovations by the Company or its competitors, quarterly
variations in the Company's results of operations, changes in revenue or
earnings estimates by the investment community and speculation in the press or
investment community are among the factors affecting the Company's stock
price. In addition, the stock price may be affected by general market
conditions and domestic and international economic factors unrelated to the
Company's performance. Because of these reasons, recent trends should not be
considered reliable indicators of future stock prices or financial results.
ABSENCE OF EXISTING ACTIVE PUBLIC MARKET
Upon their original issuance, the Notes became eligible for trading on the
PORTAL Market. However, the Notes sold pursuant to this Prospectus will no
longer be eligible for trading on the PORTAL Market. There can be no assurance
that an active trading market for the Notes will develop or as to the
liquidity or sustainability of any such market, the ability of the holders to
sell their Notes or the price at which holders of the Notes may be able to
sell their Notes. Future trading prices of the Notes will depend on many
factors, including, among other things, prevailing interest rates, the
Company's operating results, the price of the Company's Common Stock and the
market for similar securities. The Company intends to apply for listing of the
Notes on the New York Stock Exchange.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the Notes
or the Shares by the Selling Securityholders. See "Selling Securityholders"
for a list of those persons and entities receiving proceeds from sales of
Notes or Shares.
DIVIDEND POLICY
The Company has never paid cash dividends on its Common Stock. While subject
to periodic review, the current policy of the Board of Directors is to retain
all earnings to provide funds for the continued growth of the Company.
RATIO OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges for each of the periods
indicated is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------------------------------------
DECEMBER 31, DECEMBER 30, DECEMBER 31, JANUARY 1, JANUARY 2,
1996 1995 1994 1994 1993
------------ ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C>
40.8x 33.2x 22.6x 29.6x 9.6x
</TABLE>
For the purposes of these computations, "earnings" consist of pre-tax income
before fixed charges. "Fixed charges" consist of interest on indebtedness,
including capitalized leases, amortization of debt expense and implicit
interest on rental arrangements.
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DESCRIPTION OF NOTES
The Notes were issued under an indenture dated as of March 11, 1997 (the
"Indenture") between the Company and State Street Bank and Trust Company, as
trustee (the "Trustee"). The following summaries of certain provisions of the
Indenture do not purport to be complete and are subject to, and are qualified
in their entirety by reference to, all of the provisions of the Indenture,
including the definition therein of certain terms. Whenever particular
sections or defined terms of the Indenture are referred to, such sections or
defined terms are incorporated herein by reference. Copies of the Indenture
are available from the Company upon request.
GENERAL
The Notes are unsecured, subordinated obligations of the Company, are
limited to $517,500,000 in aggregate principal amount and will mature on March
15, 2002. The Notes bear interest at the rate per annum shown on the front
cover of this Prospectus from the date of original issuance of Notes pursuant
to the Indenture, or from the most recent Interest Payment Date to which
interest has been paid or provided for, payable semi-annually on March 15 and
September 15 of each year, commencing September 15, 1997, to the person in
whose name the Note (or any predecessor Note) is registered at the close of
business on the preceding March 1 or September 1, as the case may be (whether
or not a Business Day). Interest on the Notes will be paid on the basis of a
360-day year of twelve 30-day months.
Principal of and premium, if any, and interest on the Notes are payable (i)
in respect of Notes held of record by The Depositary Trust Company ("DTC") or
its nominee, in same day funds on or prior to the respective payment dates and
(ii) in respect of Notes held of record by holders other than DTC or its
nominee, in same day funds, at the office of the Trustee in New York, New
York, and the Notes may be surrendered for transfer, exchange or conversion at
the office of the Trustee in New York, New York. In addition, with respect to
Notes held of record by holders other than DTC or its nominee, payment of
interest may be made at the option of the Company by check mailed to the
address of the persons entitled thereto as it appears in the Register for the
Notes on the Regular Record Date for such interest.
The Notes have been issued only in registered form, without coupons and in
denominations of $1,000 or any integral multiple thereof. No service charge
will be made for any transfer or exchange of the Notes, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge and any other expenses (including the fees and expenses of the Trustee)
payable in connection therewith. The Company is not required (i) to issue or
register the transfer or exchange of any Notes during a period beginning at
the opening of business 15 days before the day of the mailing of a notice of
redemption and ending at the close of business on the day of such mailing,
(ii) to register the transfer of or exchange of any Note selected for
redemption in whole or in part, except the unredeemed portion of Notes being
redeemed in part, or (iii) to register the transfer or exchange of any Notes
surrendered for conversion or repurchase upon the occurrence of a Change of
Control.
All monies paid by the Company to the Trustee or any Paying Agent for the
payment of principal of and premium and interest on any Note which remain
unclaimed for two years after such principal, premium or interest become due
and payable may be repaid to the Company. Thereafter, the holder of such Note
may, as an unsecured general creditor, look only to the Company for payment
thereof.
CONVERSION RIGHTS
The Notes are convertible, in whole or from time to time in part (in
denominations of $1,000 or multiples thereof), into shares of Common Stock of
the Company at any time after May 10, 1997 and at or prior to redemption or
final maturity on March 15, 2002 at the conversion price set forth on the
cover page of this Prospectus (the "Conversion Price"), adjusted as described
in the following paragraphs, except that if a Note or portion thereof is
earlier called for redemption, the conversion right with respect thereto will
terminate at the close of business on the date fixed for redemption and will
be lost if not exercised prior to that time, unless the Company shall default
in payment of the redemption price.
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Fractional shares of Common Stock will not be delivered upon conversion, but
a cash adjustment will be paid in respect of such fractional interests based
on the Current Market Price (as defined in the Indenture) of the Company's
Common Stock.
The Conversion Price is subject to adjustment upon certain events, including
(i) the issuance of Common Stock as a dividend or distribution on the Common
Stock; (ii) a combination, subdivision or reclassification of Common Stock;
(iii) the issuance to all holders of Common Stock of rights, warrants or
options entitling them to subscribe for or purchase Common Stock (or
securities convertible into Common Stock) at less than the Current Market
Price; provided, however, that in the case of certain rights, warrants or
options that are not exercisable until the occurrence of a specified event or
events, the Conversion Price will not be adjusted until the occurrence of the
earliest such specified event; (iv) the distribution to all holders of Common
Stock of capital stock (other than Common Stock), evidences of indebtedness of
the Company, assets (excluding regular periodic cash dividends paid from
surplus), or rights or warrants to subscribe for or purchase securities of the
Company (excluding the dividends, distributions, rights and warrants mentioned
above); (v) a distribution consisting exclusively of cash (excluding any cash
distributions referred to in (iv) above) to all holders of Common Stock in an
aggregate amount that, together with (A) all other cash distributions
(excluding any cash distributions referred to in (iv) above) made within the
12 months preceding such distribution and (B) any cash and the fair market
value of other consideration payable in respect of any previous tender offer
by the Company or a Subsidiary (as defined in the Indenture) for the Company's
Common Stock consummated within the 12 months preceding such distribution,
exceeds 10% of the Company's market capitalization (being the Current Market
Price times the number of shares of Common Stock then outstanding) on the date
fixed for determining the stockholders entitled to such distribution; (vi) the
completion of a tender offer made by the Company or any Subsidiary for the
Company's Common Stock involving an aggregate consideration that, together
with (X) any cash and the fair market value of any other consideration paid or
payable in respect of any previous tender offer by the Company or a Subsidiary
for the Company's Common Stock consummated within the 12 months preceding the
consummation of such tender offer and (Y) the aggregate amount of all cash
distributions (excluding any cash distributions referred to in (iv) above) to
all holders of Common Stock within the 12 months preceding the consummation of
such tender offer exceeds 10% of the Company's market capitalization on the
date of consummation of such tender offer; and (vii) issuances of Common Stock
to an Affiliate (as defined in the Indenture) for a net consideration per
share less than the Current Market Price (other than issuances of Common Stock
under certain benefit plans of the Company).
The Company is permitted to make such reductions in the Conversion Price as
it determines to be advisable in order that any stock dividend, subdivision of
shares, distribution of rights to purchase stock or securities or distribution
of securities convertible into or exchangeable for stock made by the Company
to its stockholders will not be taxable to the recipients.
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, in
exchange for cash, property or services.
If at any time (a) the Company makes a distribution of property to its
stockholders or purchases Common Stock in a tender offer and such distribution
or purchase would be taxable to such stockholders as a dividend for federal
income tax purposes (e.g., distributions of evidences of indebtedness or
assets of the Company but generally not stock dividends or rights to subscribe
for capital stock) and, pursuant to the antidilution provisions of the
Indenture, the Conversion Price of the Notes is reduced or (b) the Conversion
Price is reduced at the discretion of the Company, such reduction may be
deemed to be the receipt of taxable income by holders of the Notes. Holders of
Notes therefore could have taxable income as a result of an event in which
they receive no cash or property. See "Certain United States Federal Tax
Consequences--Adjustment of Conversion Price."
Subject to any applicable right of the holders to cause the Company to
repurchase their Notes upon a Change of Control (as defined below), in the
case of certain consolidations, mergers or statutory exchanges of securities
with another corporation to which the Company is a party, or the sale or
conveyance of the Company's
9
<PAGE>
assets substantially as an entirety, there will be no adjustment to the
Conversion Price, but each holder will have the right, at the holder's option,
to convert all or any portion of such holder's Notes into the kind and amount
of securities, cash or other property receivable upon the consolidation,
merger, statutory exchange or transfer by a holder of the number of shares of
Common Stock into which such Note might have been converted immediately prior
to such consolidation, merger, statutory exchange or transfer (assuming such
holder failed to exercise any rights of election and received per share the
kind and amount of consideration received per share by a plurality of non-
electing shares). In the case of a cash merger of the Company into another
corporation or any other cash transaction of the type mentioned above, the
effect of these provisions would be that thereafter the Notes would be
convertible at the Conversion Price in effect at such time into the same
amount of cash per share into which the Notes would have been convertible had
the Notes been converted into Common Stock immediately prior to the effective
date of such cash merger or transaction. Depending upon the terms of such cash
merger or transaction, the aggregate amount of cash into which the Notes would
be converted could be more or less than the principal amount of the Notes.
Notes surrendered for conversion after the close of business on a record
date for payment of interest and before the close of business on the next
succeeding interest payment date (unless such Notes are subject to redemption
on a redemption date in that period) must be accompanied by payment of an
amount equal to the interest thereon that is to be paid on such interest
payment date. Subject to the foregoing, no payments or adjustments will be
made upon conversion on account of accrued interest on the Notes or for any
dividends or distributions on any shares of Common Stock delivered upon such
conversion. No adjustment of the Conversion Price will be required to be made
in any case until cumulative adjustments amount to 1% of such price.
The Company will endeavor to comply with all federal and state securities
laws regulating the offer and delivery of shares of Common Stock upon
conversion of Notes and will endeavor to list with or upon the New York Stock
Exchange, or any other national securities exchange upon which its Common
Stock is listed, the shares of Common Stock deliverable upon conversion of the
Notes.
SUBORDINATION
The payment of the principal of and premium, if any, and interest on the
Notes, including redemptions at the option of a holder upon the occurrence of
a Change of Control, is subordinated in right of payment, as set forth in the
Indenture, to the prior payment in full of all Senior Indebtedness of the
Company. Senior Indebtedness is defined as (a) the principal of, premium, if
any, and accrued and unpaid interest on (i) indebtedness of the Company for
money borrowed, whether outstanding on the date of execution of the Indenture
or thereafter created, incurred or assumed, (ii) guarantees by the Company of
indebtedness for money borrowed by any other person, or reimbursement
obligations under letters of credit, in either case, whether outstanding on
the date of execution of the Indenture or thereafter created, incurred or
assumed, (iii) indebtedness evidenced by notes (other than the Notes),
debentures, bonds or other instruments of indebtedness for the payment of
which the Company is responsible or liable, by guarantees or otherwise,
whether outstanding on the date of execution of the Indenture or thereafter
created, incurred or assumed, (iv) obligations of the Company under interest
rate and currency swaps, caps, floors, collars or similar agreements or
arrangements intended to protect the Company against fluctuations in interest
or currency rates, whether outstanding on the date of execution of the
Indenture or thereafter created, incurred or assumed, and (v) obligations of
the Company under any agreement to lease, or any lease of, any real or
personal property, which obligations, whether outstanding on the date of
execution of the Indenture or thereafter created, incurred or assumed, are
required to be capitalized on the books of the Company in accordance with
generally accepted accounting principles, or guarantees by the Company of
similar obligations of others, and (b) modifications, renewals, extensions and
refundings of any such indebtedness, obligations or guarantees; unless, in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such indebtedness, obligations or guarantees,
or such modification, renewal, extension or refunding thereof, is not superior
in right of payment to the Notes; provided, however, that Senior Indebtedness
will not be deemed to include, and the Notes will rank pari passu in right of
payment with, any obligation of the Company to any of its subsidiaries.
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<PAGE>
In the event of (a) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding
in connection therewith, relative to the Company or to its creditors, as such,
or to its assets or (b) any liquidation, dissolution or other winding-up of
the Company, whether total or partial, whether voluntary or involuntary and
whether involving insolvency or bankruptcy, or (c) any assignment for the
benefit of creditors or any other marshaling of assets and liabilities of the
Company, the holders of all Senior Indebtedness will first be entitled to
receive payment in full of all amounts due or to become due thereon or in
respect thereof before the holders of the Notes are entitled to receive any
payment on account of the principal of, or premium, if any, or interest on the
Notes (other than payment (a "Permitted Payment") consisting solely of shares
of stock, securities or indebtedness subordinated at least to the extent of
the Notes provided by a plan of reorganization or adjustment that does not
adversely alter the rights of holders of Senior Indebtedness). Following the
occurrence of any of the events described above, if the Trustee or any holder
of the Notes receives any payment or distribution of assets of the Company of
any kind or character before all Senior Indebtedness is paid in full, then
such payment or distribution (other than a Permitted Payment) will be required
to be paid over or delivered to the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee, agent or other person making payment
or distribution of the assets of the Company for application to the payment of
all amounts payable on or in respect of Senior Indebtedness remaining unpaid,
to the extent necessary to pay such amounts in full after giving effect to any
concurrent payment or distribution to or for the holders of Senior
Indebtedness.
The Indenture also provides that in the event there shall have occurred and
be continuing (i) any default in the payment when due of principal of,
premium, if any, or interest on any Senior Indebtedness or (ii) any other
event of default with respect to any Senior Indebtedness, then no payment
shall be made by the Company on account of the principal of, premium, if any,
or interest on the Notes or on account of the purchase or redemption or other
acquisition of the Notes (x) in the case of any event of default described in
clause (i) above, unless and until the Senior Indebtedness to which such
default relates is discharged or such event of default shall have been cured
or waived or shall have ceased to exist or the holders of such Senior
Indebtedness or their agents shall have waived the benefits of this provision,
and (y) in the case of any event of default specified in clause (ii) above,
from the date the Company or the Trustee receives written notice of such
default (a "Senior Default Notice") from the holders of at least 25% in
principal amount of the kind or category of Senior Indebtedness to which such
default relates or any representative of such holders until the earlier of (A)
180 days after such date or (B) the date, if any, on which the Senior
Indebtedness to which such default relates is discharged or such default shall
have been cured or waived or shall have ceased to exist or the holders of such
Senior Indebtedness or their agents shall have waived the benefits of this
provision; provided, however, that not more than one Senior Default Notice is
permitted to be given during any period of 360 consecutive days, regardless of
the number of defaults with respect to Senior Indebtedness during such 360-day
period. Subject to the payment in full of all Senior Indebtedness, the holders
of the Notes will be subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distributions of assets of the Company
applicable to Senior Indebtedness until the Notes are paid in full.
Notwithstanding anything in the Indenture to the contrary, neither the
Trustee nor any holder of Notes may exercise any right either may have to
accelerate the maturity of the Notes at any time when payment of any amount
owing on the Notes is prohibited, in whole or in part, as described in the
preceding paragraphs; provided, however, that such right may nevertheless be
so exercised upon the earliest of the acceleration of the maturity of any
Senior Indebtedness, the exercise by any holder of Senior Indebtedness of any
remedies available to such holder upon a default or event of default with
respect to such Senior Indebtedness or the occurrence of an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization.
By reason of the subordination of the Notes, in the event of insolvency,
creditors of the Company who are holders of Senior Indebtedness may recover
more, ratably, than the holders of the Notes. In addition, the right of the
Company, and, therefore, the right of creditors of the Company (including
Noteholders), to participate in any distribution of assets of any subsidiary
of the Company upon its liquidation or reorganization or otherwise is
necessarily subject to the prior claims of creditors of the subsidiary, except
to the extent that claims of the Company itself as a creditor of the
subsidiary may be recognized.
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<PAGE>
The Indenture does not limit the amount of other indebtedness or securities
that may be issued by the Company or any of its subsidiaries.
OPTIONAL REDEMPTION
The Notes may not be redeemed by the Company prior to March 15, 2000.
Thereafter, the Notes may be redeemed at the option of the Company, in whole
or in part, at any time and from time to time, upon not less than 15 nor more
than 60 days notice by mail at the applicable redemption prices (expressed in
percentages of principal amount) set forth below.
If redeemed during the twelve-month period beginning March 15,
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2000........................ 101.30%
2001........................ 100.65%
</TABLE>
together with interest accrued and unpaid thereon to the date fixed for
redemption. If all accrued and payable interest on the Notes has not been
paid, the Notes may not be redeemed in part and the Company may not purchase
or acquire any Notes otherwise than pursuant to a purchase or exchange offer
made on the same terms to all holders of the Notes.
If less than all the Notes are to be redeemed, the Trustee will select those
to be redeemed by lot or such other method as the Trustee in its discretion
shall deem appropriate and fair. Notice of redemption will be given to holders
of the Notes to be redeemed by first class mail at their last address
appearing on the Register for the Notes.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company will not consolidate with or merge into any other person or
convey, transfer or lease its properties and assets substantially as an
entirety to any person, and the Company will not permit any person to
consolidate with or merge into the Company unless (a) if applicable, the
person formed by such consolidation or into which the Company is merged or the
person or corporation which acquires the properties and assets of the Company
substantially as an entirety is a corporation, partnership or trust organized
and validly existing under the laws of the United States or any state thereof
or the District of Columbia and expressly assumes payment of the principal of
and premium, if any, and interest on the Notes and performance and observance
of each obligation of the Company under the Indenture, (b) after consummating
such consolidation, merger, transfer or lease, no Event of Default or event
which, after notice or lapse of time or both, would become an Event of Default
will occur and be continuing, (c) such consolidation, merger, conveyance,
transfer or lease does not adversely affect the validity or enforceability of
the Notes and (d) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, conveyance, transfer or lease complies with the provisions of the
Indenture.
PURCHASE OF NOTES AT THE OPTION OF THE HOLDER UPON A CHANGE OF CONTROL
In the event of a Change of Control, each holder of Notes will have the
right, at the holder's option, subject to the terms and conditions of the
Indenture, to require the Company to purchase all or any part (provided that
the principal amount must be $1,000 or an integral multiple thereof) of the
holder's Notes on the date that is 40 business days after the occurrence of
such Change of Control (the "Purchase Date") for a purchase price equal to
100% of the principal amount thereof, plus interest accrued and unpaid thereon
to the Purchase Date.
Within 20 business days after the occurrence of the Change of Control, the
Company shall mail to the Trustee and to each holder (and to beneficial owners
as required by law) a notice of the occurrence of the Change of Control,
setting forth, among other things, the terms and conditions of, and the
procedures required for exercise of, the holder's right to require the
purchase of such holder's Notes.
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<PAGE>
To exercise the purchase right, a holder must deliver written notice of such
exercise to the Trustee prior to the close of business on the Purchase Date,
specifying the Notes with respect to which the right of purchase is being
exercised. Such notice of exercise may be withdrawn by the holder by a written
notice of withdrawal delivered to the Trustee at any time prior to the close
of business on the Purchase Date.
Under the Indenture, a "Change of Control" is deemed to have occurred at
such time as (i) any Acquiring Person has become such person or (ii) there
shall be consummated any consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation (other than a
consolidation or merger with a wholly owned subsidiary of the Company in which
all shares of Common Stock outstanding immediately prior to the effectiveness
thereof are changed into or exchanged for the same consideration) or pursuant
to which the Common Stock would be converted into cash, securities or other
property, in each case, other than a consolidation or merger in which the
holders of Common Stock immediately prior to the consolidation or merger have,
directly or indirectly, at least a majority of common stock of the continuing
or surviving corporation immediately after the consolidation or merger;
provided, however, that a Change of Control shall not be deemed to have
occurred if either (a) the average of the last sale prices of the Common Stock
for any five trading days during the ten trading days immediately preceding
the Change of Control is at least equal to 105% of the Conversion Price in
effect immediately preceding the time of such Change of Control or (b) the
consideration, in the transaction giving rise to such Change of Control, to
the holders of Common Stock consists of cash, securities that are, or
immediately upon issuance will be, listed on a national securities exchange or
quoted on the NASDAQ National Market System, or a combination of cash and such
securities, and the aggregate fair market value of such consideration (which,
in the case of such securities, shall be equal to the average of the last sale
prices of such securities during the ten consecutive trading days commencing
with the sixth trading day following consummation of such transaction) is at
least 105% of the Conversion Price in effect on the date immediately preceding
the closing date of such transaction.
"Acquiring Person" means any person or group (as defined in Section 13(d)(3)
of the Exchange Act) who or which, together with all affiliates and associates
(as defined in Rule 12b-2 under the Exchange Act), becomes the beneficial
owner of shares of Common Stock or other voting securities of the Company
having more than 50% of the total number of votes that may be cast for the
election of directors of the Company; provided, however, that an Acquiring
Person shall not include (x) the Company, (y) any Subsidiary of the Company or
(z) any current or future employee benefit plan of the Company or any
Subsidiary of the Company or any entity holding Common Stock of the Company
for or pursuant to the terms of any such plan. Notwithstanding the foregoing,
no person shall become an Acquiring Person as the result of an acquisition of
Common Stock by the Company which, by reducing the number of shares
outstanding, increases the proportionate number of shares beneficially owned
by such Person to more than 50% of the Common Stock of the Company then
outstanding; provided, however, that if a Person shall become the beneficial
owner of 50% or more of the Common Stock of the Company then outstanding by
reason of share purchases by the Company and shall, after such share purchases
by the Company, become the beneficial owner of any additional shares of Common
Stock of the Company, then such Person shall be deemed to be an Acquiring
Person.
The Company will comply with the provisions of Rule 13e-4, Rule l4e-l and
any other tender offer rules under the Exchange Act which may then be
applicable, and will file Schedule 13E-4 or any other schedule required
thereunder in connection with any offer by the Company to purchase Notes at
the option of the holders upon a Change of Control.
The Change of Control purchase feature of the Notes may in certain
circumstances make more difficult or discourage a takeover of the Company and,
thus, the removal of incumbent management. The Change of Control purchase
feature, however, is not the result of management's knowledge of any specific
effort to accumulate shares of Common Stock or 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.
Instead, the Change of Control purchase feature is a standard term contained
in other similar debt offerings and the terms of such feature result from
negotiations between the Company and the Initial Purchasers.
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<PAGE>
The right to require the Company to repurchase Notes as a result of a Change
of Control could create an event of default under Senior Indebtedness of the
Company as a result of which any repurchase could, absent a waiver, be blocked
by the subordination provisions of the Notes. The Company's Board of Directors
may not waive a Change of Control. Failure by the Company to repurchase the
Notes when required will result in an Event of Default with respect to the
Notes whether or not such a repurchase is permitted by the subordination
provisions.
If a Change of Control were to occur, there can be no assurance that the
Company would have sufficient funds to pay the Change of Control purchase
price for all Notes tendered by the holders thereof. The Company's ability to
make such payments may be limited by the terms of its then-existing borrowing
and other agreements. No Notes may be purchased if there has occurred and is
continuing an Event of Default described below under "Events of Default"
(other than a default in the payment of the purchase price with respect to
such Notes).
EVENTS OF DEFAULT
An Event of Default with respect to the Notes is defined in the Indenture as
being default for 30 days in payment of any interest installment on the Notes
(even if such payment is prohibited by the subordination provisions of the
Indenture); default in payment of principal of or premium, if any, on the
Notes either in connection with any redemption or otherwise (even if such
payment is prohibited by the subordination provisions of the Indenture);
default in the payment of the purchase price in respect of any Note on the
Purchase Date therefor (even if such payment is prohibited by the
subordination provisions of the Indenture); failure to provide timely notice
of a Change of Control as required by the Indenture; failure to observe or
perform for 45 days after notice thereof any other covenant in the Indenture;
default in payment of any principal of, interest on or premium in respect of
any instrument or instruments evidencing or securing other indebtedness for
borrowed money having an aggregate principal amount of $25,000,000 or more
that shall have occurred and be continuing and that (except in the case of a
default in payment of principal at maturity) shall have been accelerated,
which acceleration shall not have been rescinded or annulled within 30 days
after notice is given to the Company by the Trustee or to the Company and the
Trustee by the holders of 25% or more in aggregate principal amount of the
Notes; or certain events of bankruptcy, insolvency, reorganization,
receivership or liquidation involving the Company or certain of its
subsidiaries.
The Company is required to file with the Trustee annually a written
statement as to the fulfillment of its obligations under the Indenture. The
Indenture provides that the Trustee may withhold notice to the holders of the
Notes of any default (except in payment of principal of, premium, if any, or
interest on the Notes) if the Trustee considers it in the interest of the
holders of the Notes to do so. The Indenture provides that, if an Event of
Default (other than an Event of Default resulting from bankruptcy, insolvency
or reorganization) shall have occurred and be continuing, either the Trustee
or the holders of 25% or more in aggregate principal amount of the Notes may
declare the principal of all the Notes and the interest accrued thereon to be
due and payable immediately, but if the Company shall cure all defaults
(except the nonpayment of principal of and premium, if any, and accrued
interest on Notes that shall have become due by acceleration) and certain
other conditions are met, such declaration may be annulled and past defaults
may be waived by the holders of a majority in aggregate principal amount of
the Notes. Prior to a declaration of acceleration, certain Events of Default
and past defaults may be waived by the holders of a majority in aggregate
principal amount of the Notes. In the case of an Event of Default resulting
from certain events of bankruptcy, insolvency or reorganization, all unpaid
principal of and accrued interest on the Notes then outstanding shall be due
and payable immediately without any declaration or other act on the part of
the Trustee or the holders of Notes.
Subject to the provisions of the Indenture relating to the duties of the
Trustee in case an Event of Default should occur and be continuing, the
Trustee shall be under no obligation to exercise any of the rights or powers
under the Indenture at the request or direction of any of the Noteholders,
unless such Noteholders have offered to the Trustee reasonable security or
indemnity. Subject to such provision for security or indemnification, the
holders of a majority in aggregate principal amount of the Notes will have the
right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee, or exercising any trust or power
14
<PAGE>
conferred on the Trustee, provided that the Trustee shall have the right to
decline to follow any such direction if the Trustee shall be advised by
counsel that the action or proceeding so directed may not lawfully be taken or
the Trustee shall determine that the action or proceeding so directed could
involve the Trustee in personal liability or would be unduly prejudicial to
the rights of the holders not joining in such directions or would conflict
with the Indenture.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than a majority of the aggregate
principal amount of the Notes then outstanding, to execute a supplemental
indenture to add provisions to, or change in any manner or eliminate any
provisions of, the Indenture or modify in any manner the rights of the holders
of the Notes, provided that no such supplemental indenture may, among other
things, (1) extend the time for payment of principal of or any premium or
interest on any Note or reduce the principal amount thereof or the interest
thereon or any premium payable upon the redemption thereof or impair the right
of any holder to institute suit for payment of the Notes, or make the
principal thereof or any premium or interest thereon payable in any coin or
currency other than that provided in the Indenture, or modify the
subordination provisions of the Indenture in a manner adverse to the holders
or impair the right to convert the Notes into Common Stock or to require the
Company to repurchase the Notes upon the occurrence of a Change of Control
without the consent of the holder of each outstanding Note so affected, or (2)
reduce the aforesaid percentage of the aggregate principal amount of Notes,
the holders of which must consent to authorize any such supplemental
indenture, without the consent of the holders of all outstanding Notes.
FORM, DENOMINATION AND REGISTRATION
The Notes have been issued in fully registered form, without coupons, in
denominations of $1,000 in principal amount and integral multiples thereof.
Notes currently held by "qualified institutional buyers" as defined in Rule
144A under the Securities Act or by persons who are not U.S. persons who
acquired such Notes in "offshore transactions" in reliance on Regulation S
under the Securities Act ("Non-U.S. Persons") are currently evidenced by
restricted global Notes (the "Restricted Global Notes") which were deposited
with, or on behalf of, DTC and registered in the name of Cede and Co.
("Cede"), as DTC's nominee.
Any purchaser (a "Public Holder") of Notes pursuant to this Prospectus will
receive a beneficial interest in an unrestricted global note (the "Public
Global Note") which will be deposited with, or on behalf of, DTC and
registered in the name of Cede, as DTC's nominee. Except as set forth below,
the record ownership of the Public Global Note may be transferred in whole or
in part, only to another nominee of DTC or to a successor of DTC or its
nominee.
A Public Holder may hold its interest in the Public Global Note directly
through DTC if such Public Holder is a participant in DTC, or indirectly
through organizations which are participants in DTC ("Participant" or
"Participants"). Transfers between Participants are effected in the ordinary
way in accordance with DTC rules and will be settled in same day funds.
Public Holders who are not Participants may beneficially own interests in
the Public Global Note 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 Public Global Note, Cede for all purposes is
considered the sole holder of the Public Global Note.
Payment of interest on and the redemption price (upon redemption at the
option of the Company or at the option of the Holder upon a Change of Control)
of the Public Global Note will be made to Cede, the nominee for DTC, as the
registered owner of the Public Global Note, by wire transfer of immediately
available funds.
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<PAGE>
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 Public
Global Note or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests.
With respect to any payment of interest on and the redemption price (upon
redemption at the option of the Company or at the option of the Holder upon a
Change of Control) of the Public Global Note, DTC's practice is to credit
Participants' accounts on the payment date therefor with payments in amounts
proportionate to their respective beneficial interests represented by the
Public Global Note 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 represented by the Public
Global Note 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 represented by the Public Global Note 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.
Subject to the provisions of the Indenture, persons purchasing Notes
pursuant to this Prospectus and having beneficial interests in the Public
Global Note may upon request exchange such beneficial interest for Notes
issued in definitive form. In addition, 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 Notes to be issued in
definitive form in exchange for the Public Global Note.
PAYMENTS OF PRINCIPAL AND INTEREST
The Indenture requires that payments in respect of the Notes (including
principal, premium, if any, and interest) held of record by DTC (including
Notes evidenced by the Public Global Note) be made in same day funds. Payments
in respect of the Notes held of record by holders other than DTC may, at the
option of the Company, be made by check and mailed to such holders of record
as shown on the Register for the Notes.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company and the Initial Purchasers have entered into a Registration
Rights Agreement dated March 6, 1997 (the "Registration Rights Agreement").
Pursuant to the Registration Rights Agreement, the Company has filed with the
Commission on April 10, 1997 a registration statement (the "Shelf Registration
Statement") on Form S-3, of which this Prospectus is a part, to cover resales
of Transfer Restricted Securities (as defined below) by the holders thereof
who satisfy certain conditions relating to the provision of information in
connection with the Shelf Registration Statement. Notwithstanding the
foregoing, the Company will be permitted to prohibit offers and sales of
Transfer Restricted Securities pursuant to the Shelf Registration Statement
under certain circumstances and subject to certain conditions (any period
during which offers and sales are prohibited being referred to as a
"Suspension Period"). "Transfer Restricted Securities" means each Note and
each Share until the date on which such Note or Share has been effectively
registered under the Securities Act and disposed of in accordance with the
Shelf Registration Statement, the date on which such Note or Share is
distributed to the public pursuant to Rule 144 under the Securities Act or the
date on which such Note or Share may be sold or transferred pursuant to Rule
144(k) (or any similar provisions then in force).
Holders of the Transfer Restricted Securities not already included under
"Selling Securityholders" below will be required to deliver information to be
used in connection with, and to be named as selling securityholders
16
<PAGE>
in, the Shelf Registration Statement and to provide any comments they may wish
to make on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Transfer
Restricted Securities included in the Shelf Registration Statement. The
Transfer Restricted Securities of any holder who elects not to include such
securities in the Shelf Registration Statement could be deemed to be less
liquid than if such securities were included in the Shelf Registration
Statement. In addition, there can be no assurance that the Company will be
able to maintain an effective and current registration statement as required.
The absence of such a registration statement may limit the holder's ability to
sell such Transfer Restricted Securities or adversely affect the price at
which such Transfer Restricted Securities can be sold.
If the Shelf Registration Statement is filed and declared effective but
shall thereafter cease to be effective (without being succeeded immediately by
an additional registration statement filed and declared effective) or usable
for the offer and sale of Transfer Restricted Securities for a period of time
(including any Suspension Period) which shall exceed 60 days in the aggregate
in any of the one-year periods ending on the first, second or third
anniversaries of March 11, 1997, or which shall exceed 30 days in any calendar
quarter within any of such one-year periods (each such event referred to
above, a "Registration Default"), the Company will pay liquidated damages to
each holder of Transfer Restricted Securities who has complied with such
holder's obligations under the Registration Rights Agreement. The amount of
liquidated damages payable during any period during which a Registration
Default shall have occurred and be continuing is that amount which is equal to
one quarter of one percent (25 basis points) per annum per $1,000 principal
amount or $2.50 per annum per 22.0702 shares of Common Stock (subject to
adjustment in the event of stock splits, stock recombinations, stock dividends
and the like) constituting Transfer Restricted Securities for each 90-day
period until the Shelf Registration Statement again becomes effective or
usable, as the case may be, up to a maximum amount of liquidated damages of
$0.25 per week per $1,000 principal amount of Notes or $12.50 per annum per
22.0702 shares of Common Stock (subject to adjustment as set forth above)
constituting Transfer Restricted Securities. All accrued liquidated damages
shall be paid to Record Holders by wire transfer of immediately available
funds or by federal funds check by the Company on each Damages Payment Date
(as defined in the Registration Rights Agreement). Following the cure of all
Registration Defaults, liquidated damages will cease to accrue with respect to
such Registration Default.
The Company shall cause the Shelf Registration Statement to be effective for
a period of three years from the effective date thereof or such shorter period
that will terminate when each of the Transfer Restricted Securities covered by
the Shelf Registration Statement ceases to be a Transfer Restricted Security.
Notwithstanding the foregoing, the Company shall not be obligated to maintain
the effectiveness of the Shelf Registration Statement if it has obtained an
opinion of counsel that the Transfer Restricted Securities may be freely
offered and sold in the public markets without the continued effectiveness of
the Shelf Registration Statement.
The foregoing summary of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, the provisions of the Registration Rights
Agreement. Copies of the Registration Rights Agreement are available from the
Company.
GOVERNING LAW
The Indenture and, except as may otherwise be required by mandatory
provisions of law, the Notes will be governed by and construed in accordance
with the laws of the State of New York, without giving effect to such state's
conflicts of laws principles.
INFORMATION CONCERNING THE TRUSTEE
The Company and its subsidiaries may maintain deposit accounts and conduct
other banking transactions with the Trustee in the ordinary course of
business.
17
<PAGE>
ABSENCE OF PUBLIC MARKET; TRANSFER RESTRICTIONS
Upon their original issuance, the Notes became eligible for trading on the
PORTAL Market. However, the Notes sold pursuant to this Prospectus will no
longer be eligible for trading on the PORTAL Market. There can be no assurance
that an active trading market for the Notes will develop or as to the
liquidity or sustainability of any such market, the ability of the holders to
sell their Notes or at what price holders of the Notes will be able to sell
their Notes. Future trading prices of the Notes will depend upon many factors
including, among other things, prevailing interest rates, the Company's
operating results, the price of the Common Stock and the market for similar
securities. The Company intends to apply for listing of the Notes on the New
York Stock Exchange.
DESCRIPTION OF CAPITAL STOCK
Currently, the total number of shares of all classes of capital stock which
the Company is authorized to issue is 775,000,000 shares, consisting of
750,000,000 shares of common stock, $.01 par value per share, and 25,000,000
shares of preferred stock, $.01 par value per share (the "Series Preferred
Stock").
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held and
have no preemptive or other rights to subscribe for additional shares from the
Company. There are no cumulative voting rights, with the result that holders
of more than 50% of the shares of Common Stock are able to elect 100% of the
Company's directors. All outstanding shares of Common Stock are validly issued
and fully paid and nonassessable. Holders of Common Stock are entitled to such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. See "Dividend Policy." Upon any voluntary or involuntary
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to receive the net assets of the Company, after the Company
shall have satisfied or made provision for its debts and obligations and for
the payment to holders of shares of any class or series (including any then
outstanding shares of Series Preferred Stock) having preferential rights to
receive distributions of the net assets of the Company. See "Preferred Stock."
The transfer agent and registrar for the Common Stock is Boston EquiServe
LLP.
PREFERRED STOCK
The shares of Series Preferred Stock may be issued from time to time in one
or more series without further action by the stockholders of the Company,
except as may be required by applicable law or stock exchange rules. The Board
of Directors of the Company may determine, in whole or in part, the
preferences, voting powers, qualifications and special or relative rights or
privileges, if any, of any such series before the issuance of any shares of
that series; provided, however, that if and to the extent that shares of any
series have voting rights, such rights shall not be in excess of the greater
of (i) one vote per share of such series or (ii) if the shares of such series
are convertible into shares of Common Stock, such number of votes per share as
equals the number of shares of Common Stock into which one share of such
series is at the time of such vote convertible. The Board of Directors shall
determine the number of shares constituting each series of Series Preferred
Stock and each series shall have a distinguishing designation.
It is not possible to state the precise effects of the authorization of the
Series Preferred Stock upon the rights of holders of Common Stock until the
Board of Directors determines the respective preferences, limitations and
relative rights of the holders of one or more series of Series Preferred
Stock. However, such effects might include (a) a reduction of the amount
otherwise available for payment of any dividends on Common Stock, to the
extent dividends are payable on any issued shares of Series Preferred Stock,
and restrictions on dividends on Common Stock if dividends on outstanding
Series Preferred Stock are in arrears; (b) dilution of the voting power of the
Common Stock to the extent that outstanding Series Preferred Stock has voting
rights; and (c) the holders of
18
<PAGE>
Common Stock not being entitled to share in the Company's assets upon
liquidation until satisfaction of any liquidation preference granted to
outstanding Series Preferred Stock.
The Series Preferred Stock might have the effect of discouraging an attempt
by another person or entity, through the acquisition of a substantial number
of shares of the Company's Common Stock, to acquire control of the Company
with a view to imposing a merger, sale of all or any part of the Company's
assets or a similar transaction or otherwise to exercise such control, since
the issuance of new shares of Series Preferred Stock could be used to dilute
the stock ownership or voting rights of such person or entity. Furthermore,
shares of Series Preferred Stock, or warrants or other rights to acquire
shares of Series Preferred Stock or Common Stock could be issued to holders of
the Common Stock under a stockholders' rights plan (or otherwise) on terms
designed to enable stockholders to receive fair and equal treatment in the
event of any proposed acquisition of the Company. The adoption of such a
rights plan could make it more difficult for a third party to acquire, or
could discourage a third party from acquiring, the Company or a large block of
the Company's Common Stock. Management is not aware of any effort by any
person to gain control of the Company. The Board of Directors has, however,
periodically reviewed the advantages and disadvantages of adopting a
stockholders' rights plan. Although the Board of Directors has considered,
based upon such review, that it may be in the best interests of the Company
and its stockholders to enact such a plan, the Board has not decided to enact
a stockholders' rights plan as of the date of this Prospectus.
The Company has no current agreements, commitments or understandings with
respect to the sale or issuance of the shares of Series Preferred Stock.
CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
The following is a summary of certain United States federal income and
estate tax considerations relating to the purchase, ownership and disposition
of the Notes and the Shares, but does not purport to be a complete analysis of
all of the potential tax considerations relating thereto. This summary is
based on laws, regulations, rulings and decisions now in effect, all of which
are subject to change. This summary deals only with holders that hold Notes
and Shares as capital assets and does not address tax considerations
applicable to investors that may be subject to special tax rules, such as
banks, tax-exempt organizations, insurance companies, dealers in securities or
currencies, persons that will hold the Notes or Shares as part of an
integrated investment (including a "straddle") comprised of Notes or Shares
and one or more other positions, persons that have a "functional currency"
other than the U.S. dollar or holders of Notes that did not acquire the Notes
in the initial distribution thereof at their original issue price.
INVESTORS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS REGARDING THE APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX AND
ESTATE TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES
ARISING UNDER THE LAWS OF ANY STATE, LOCAL, OR FOREIGN TAXING JURISDICTION, OR
UNDER ANY APPLICABLE TAX TREATY.
UNITED STATES HOLDERS
As used herein, the term "United States Holder" means the beneficial owner
of a Note or Shares that is a United States person. A "United States person"
is (1) a citizen or resident of the United States, (2) an entity created or
organized in or under the laws of the United States or any political
subdivision thereof that is classified as a corporation or as a partnership,
(3) an estate the income of which is subject to United States federal income
taxation regardless of its source, or (4) a trust if (i) a U.S. court is able
to exercise primary supervision over the trust's administration and (ii) one
or more U.S. fiduciaries have the authority to control all the trust's
substantial decisions. The term "United States" means the United States of
America (including the States and the District of Columbia).
19
<PAGE>
PAYMENT OF INTEREST
Interest on a Note generally will be includible in the income of a United
States Holder as ordinary income at the time such interest is received or
accrued, in accordance with such holder's method of accounting for United
States federal income tax purposes.
SALE, EXCHANGE OR REDEMPTION OF THE NOTES
Upon the sale, exchange or redemption of a Note, a United States Holder
generally will recognize capital gain or loss equal to the difference between
(i) the amount of cash proceeds and the fair market value of any property
received on the sale, exchange or redemption (except to the extent such amount
is attributable to accrued interest income, which is taxable as ordinary
income) and (ii) such holder's adjusted basis in the Note. A United States
Holder's adjusted basis in a Note generally will equal the cost of the Note to
such holder. Such capital gain or loss will be long-term capital gain or loss
if the holder's holding period in the Note was more than one year at the time
of sale, exchange or redemption.
CONVERSION OF THE NOTES
A United States Holder generally will not recognize any income, gain, or
loss upon conversion of a Note into Shares except with respect to cash
received in lieu of a fractional Share. Such holder's basis in the Common
Stock received on conversion of a Note will be the same as such holder's
adjusted basis in the Note at the time of conversion (reduced by any basis
allocable to a fractional share interest), and the holding period for the
Common Stock received on conversion will generally include the holding period
of the Note converted.
Cash received in lieu of a fractional Share upon conversion will be treated
as a payment in exchange for the fractional Share. Accordingly, the receipt of
cash in lieu of a fractional Share generally will result in capital gain or
loss (measured by the difference between the cash received for the fractional
Share and the United States Holder's adjusted basis in the fractional Share).
ADJUSTMENT OF CONVERSION PRICE
If at any time (a) the Company makes a distribution of property to its
stockholders or purchases Common Stock in a tender offer and such distribution
or purchase would be taxable to such stockholders as a dividend for federal
income tax purposes (e.g., distributions of evidences of indebtedness or
assets of the Company but generally not stock dividends or rights to subscribe
for capital stock) and, pursuant to the antidilution provisions of the
Indenture, the Conversion Price of the Notes is reduced or (b) the Conversion
Price is reduced at the discretion of the Company, such reduction may be
deemed to be the receipt of taxable income by holders of the Notes. Holders of
Notes therefore could have taxable income as a result of an event in which
they receive no cash or property. Similarly, a failure to adjust the
conversion price of the Notes to reflect a stock dividend or other event
increasing the proportionate interest of the holders of outstanding Company
Common Stock could in some circumstances give rise to deemed dividend income
to United States Holders of such Common Stock.
DIVIDENDS ON THE SHARES
Dividends paid on the Shares generally will be includible in the income of a
United States Holder as ordinary income to the extent of the Company's current
or accumulated earnings and profits. Subject to certain limitations, a
corporate taxpayer holding Common Stock that receives dividends thereon
generally will be eligible for a dividends-received deduction equal to 70
percent of the dividends received. Under legislation proposed as part of the
Clinton administration's fiscal year 1998 budget proposal, the 70-percent
dividends-received deduction would be reduced to 50 percent for dividends paid
or accrued more than 30 days after the date of enactment of the legislation.
SALE, EXCHANGE OR REDEMPTION OF COMMON STOCK
Upon the sale, exchange or redemption of Shares, a United States Holder
generally will recognize capital gain or loss equal to the difference between
(i) the amount of cash proceeds and the fair market value of any
20
<PAGE>
property received on the sale, exchange or redemption and (ii) such holder's
adjusted basis in the Shares. Such capital gain or loss will be long-term
capital gain or loss if the holder's holding period in the Shares was more
than one year at the time of sale, exchange or redemption.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
In general, information reporting requirements will apply to payments of
principal, premium, if any, and interest on a Note, payments of dividends on
Shares, and payments of the proceeds of the sale of a Note or Shares to
certain non-corporate United States holders, and a 31% backup withholding tax
may apply to such payments if the United States Holder (i) fails to furnish or
certify its correct taxpayer identification number to the payor in the manner
required, (ii) is notified by the Internal Revenue Service (the "IRS") that it
has failed to report payments of interest and dividends properly, or (iii)
under certain circumstances, fails to certify that it has not been notified by
the IRS that it is subject to backup withholding for failure to report
interest and dividend payments. Any amounts withheld under the backup
withholding rules from a payment to a United States Holder will be allowed as
a credit against such holder's United States federal income tax liability and
may entitle the holder to a refund.
NON-UNITED STATES HOLDERS
Subject to the discussion of backup withholding below, payments of interest
on the Notes to, or on behalf of, any beneficial owner of a Note that is not a
United States Holder (a "Non-U.S. Holder") will not be subject to U.S. federal
income or withholding taxes, provided that such interest income is not
effectively connected with a United States trade or business of the Non-U.S.
Holder and provided that (i) such Non-U.S. Holder does not actually or
constructively own 10 percent or more of the total combined voting power of
all classes of stock of the Company, (ii) such Non-U.S. Holder is not a
controlled foreign corporation for U.S. tax purposes that is related to the
Company actually or constructively through stock ownership and (iii) the Non-
U.S. Holder certifies, under penalties of perjury, that it is not a United
States person and provides its name and address in compliance with applicable
requirements.
Except to the extent that an applicable treaty otherwise provides, a Non-
U.S. Holder generally will be taxed in the same manner as a United States
Holder with respect to interest paid on the Notes if the interest income is
effectively connected with a United States trade or business of the Non-U.S.
Holder. Effectively connected interest received by a corporate Non-U.S. Holder
may also, under certain circumstances, be subject to an additional "branch
profits tax" at a 30% rate (or, if applicable, a lower treaty rate). Even
though such effectively connected interest is subject to income tax, and may
be subject to the branch profits tax, it is not subject to withholding tax if
the holder delivers IRS Form 4224 to the payor.
Any capital gain realized on the sale, exchange, redemption or other
disposition of a Note or of Shares (including the receipt of cash in lieu of
fractional shares upon conversion of a Note into Shares) by a Non-U.S. Holder
will not be subject to United States federal income or withholding taxes
unless (1) in the case of an individual, such holder is present in the United
States for 183 days or more in the taxable year of the sale, exchange,
redemption, or other disposition or receipt and certain other conditions are
met, (2) the gain is effectively connected with a United States trade or
business of the Non-U.S. Holder, (3) the holder is subject to tax pursuant to
the provisions of the Code applicable to certain United States expatriates, or
(4) the Company is a United States real property holding corporation. The
Company does not believe that it is or is likely to become a United States
real property holding corporation.
Except as described above with respect to the receipt of cash in lieu of
fractional shares by certain Non-U.S. Holders upon conversion of a Note, no
United States federal income or withholding taxes will be imposed upon the
conversion of a Note into Shares.
Dividends paid (or deemed paid, as described under "United States Holders--
Adjustment of Conversion Price") on Shares held by a Non-U.S. Holder
(excluding dividends that are effectively connected with the
21
<PAGE>
conduct of a trade or business in the United States by such holder) will be
subject to withholding of United States federal income tax at a 30 percent
rate (or lower rate provided under any applicable tax treaty, assuming the
holder of the Shares satisfies any certification or documentation requirements
necessary to claim the benefits of such treaty). Except to the extent that an
applicable tax treaty otherwise provides, a Non-U.S. Holder will be taxed in
the same manner as a United States Holder on dividends paid (or deemed paid)
that are effectively connected with the conduct of a trade or business in the
United States by the Non-U.S. Holder. If such Non-U.S. Holder is a foreign
corporation, it may also be subject to a United States branch profits tax at a
30% rate or such lower rate as may be specified by an applicable income tax
treaty. Even though such effectively connected dividends are subject to income
tax, and may be subject to the branch profits tax, they will not be subject to
U.S. withholding tax if the holder delivers IRS Form 4224 to the payor.
Payments made on a Note or Shares and proceeds from the sale of a Note or
Shares received by a Non-U.S. Holder will not be subject to a backup
withholding tax of 31% or to information reporting requirements unless, in
general, the holder fails to comply with certain reporting procedures or
otherwise fails to establish an exemption from such tax or reporting
requirements under applicable provisions of the Code.
On April 15, 1996, the Internal Revenue Service released proposed revisions
(the "Proposed Regulations") to the regulations interpreting the withholding
tax, information reporting and backup withholding tax rules described above.
In general, the Proposed Regulations would require certain Non-U.S. Holders to
provide additional information in order to establish an exemption from or
reduce the rate of withholding tax or backup withholding tax, and in
particular would require that foreign partnerships and partners of a foreign
partnership provide certain information and comply with certain certification
requirements not required under existing law. The Proposed Regulations are
proposed generally to be effective for payments made after December 31, 1997.
It is not possible to predict whether, or in what form, the Proposed
Regulations ultimately will be adopted.
A Note will not be subject to United States federal estate tax as a result
of the death of a holder who is not a citizen or resident of the United States
at the time of death, provided that such holder did not at the time of death
actually or constructively own 10 percent or more of the combined voting power
of all classes of stock of the Company and, at the time of such holder's
death, payments of interest on such Note would not have been effectively
connected with the conduct by such holder of a trade or business in the United
States. Shares held by an individual at the time of the individual's death (or
previously transferred subject to certain retained rights or powers) will be
subject to United States federal estate tax unless otherwise provided by an
applicable estate tax treaty.
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<PAGE>
SELLING SECURITYHOLDERS
The following table sets forth certain information furnished to the Company
through June 26, 1997 as to the security ownership of the Selling
Securityholders. Except as set forth below, none of the Selling
Securityholders has had a material relationship with the Company or any of its
predecessors or affiliates within the past three years.
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL NUMBER OF SHARES
AMOUNT OF NOTES OF COMMON STOCK
NAME THAT MAY BE SOLD THAT MAY BE SOLD*
- ---- ------------------- -----------------
<S> <C> <C>
Aim High Yield Fund..................... $ 5,000,000 110,350
Aim Income Fund......................... 1,000,000 22,070
Allstate Insurance Company.............. 4,000,000 88,280
Alscott Investments, LLC................ 640,000 14,124
American Community Mutual Insurance Com-
pany................................... 200,000 4,414
American Pioneer Life Insurance Company
of New York............................ 40,000 882
American Progressive Life & Health...... 40,000 882
American Public Entity Excess Pool...... 40,000 882
American Republic Insurance Company..... 150,000 3,310
Amwest Surety Insurance Company......... 280,000 6,179
Associated Electric & Gas Insurance..... 850,000 18,759
Associated Physicians Insurance Compa-
ny..................................... 20,000 441
Austin Firefighters Conv. .............. 130,000 2,869
Bank of America Convertible Securities.. 230,000 5,076
Bankers Trust TTEE for Chrysler Corp.
Emp.#1 Pension Plan.................... 2,800,000 61,796
Baptist Hosp. of Miami.................. 115,000 2,538
BCS Life Insurance Company.............. 250,000 5,517
Boston Museum of Fine Arts.............. 45,000 993
BZW Securities Limited.................. 15,265,000 336,901
C.I. American Fund...................... 120,000 2,648
CSA Fraternal Life...................... 50,000 1,103
California Public Employees' Retirement
System................................. 1,500,000 33,105
Care America Life Insurance Company..... 40,000 882
Carrigaholt Capital (Bermuda) L.P....... 1,000,000 22,070
Catholic Relief Insurance Company of
America................................ 195,000 4,303
Central States Health & Life Company of
Omaha.................................. 180,000 3,972
Century National Insurance Company...... 530,000 11,697
Champion International Corp. Master
Retirement Trust....................... 715,000 15,780
Chase Manhattan Bank TTEE IBM Corp.
Retirement Plan Trust.................. 5,000,000 110,350
Chicago Mutual Liability Company........ 40,000 882
Chrysler Insurance Company.............. 1,950,000 43,036
Colgate-Palmolive Company Retirement
Trust.................................. 650,000 14,345
Concord Life Insurance Company.......... 90,000 1,986
Condor Insurance........................ 65,000 1,434
Delta Airlines Master Trust............. 4,990,000 110,130
Employee Benefit Convertible
Securities............................. 125,000 2,758
Engrs Joint Pension FD.................. 190,000 4,193
Farmers Home Mutual Insurance........... 205,000 4,524
Federated Rural Electric Insurance
Company................................ 60,000 1,324
Fidelity Financial Trust: Fidelity
Convertible Securities Fund............ 45,000,000 993,158
Fidelity Magellan Fund.................. 30,000,000 662,105
Franklin and Marshall College........... 400,000 8,828
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL NUMBER OF SHARES
AMOUNT OF NOTES OF COMMON STOCK
NAME THAT MAY BE SOLD THAT MAY BE SOLD*
- ---- ------------------- -----------------
<S> <C> <C>
Froley, Revy Investment Company Inc.
Account: Oregon Equity Fund/State of
Oregon................................. $ 3,500,000 77,245
Froley, Revy Investment Company Inc.
Account: Starvest Discretionary........ 365,000 8,055
Frontier Insurance Company.............. 530,000 11,697
Global Series Fund II--Prudential
Inconvertible Fund..................... 2,000,000 44,140
Golden Rule Insurance Company........... 2,800,000 61,796
Goodville Mutual Casualty Company....... 20,000 441
Gopher State Mutual Insurance Company... 80,000 1,765
Goschen Hoppen--Home Insurance Company.. 35,000 772
Grace Brothers, Ltd..................... 2,000,000 44,140
Grain Dealers Mutual Insurance.......... 90,000 1,986
Guarantee Trust Life Insurance Company.. 480,000 10,593
Guaranty Income Life Insurance Company.. 200,000 4,414
Hughes Aircraft Company Master
Retirement Trust....................... 1,660,000 36,636
John M. Olin Foundation, Inc............ 2,960,000 65,327
J.P. Morgan & Co. Incorporated.......... 21,110,000 465,901
J.P. Morgan Securities, Inc............. 16,500,000 364,158
Lebanon Mutual Insurance Company........ 55,000 1,213
Lincoln National Convertible Securities
Fund................................... 2,960,000 65,327
Lincoln National Life Insurance......... 7,620,000 168,174
Lipper Convertibles, L.P................ 5,000,000 110,350
Lipper Offshore Convertibles, L.P....... 1,500,000 33,105
Lone Star Life Insurance Company........ 530,000 11,697
Massachusetts Mutual Life Insurance
Company................................ 1,700,000 37,519
MassMutual Corporate Value Partners
Limited................................ 550,000 12,138
MassMutual High Yield Partners, LLC..... 750,000 16,552
McMahan Securities Company L.P.......... 295,000 6,510
Medico Life Insurance Company........... 290,000 6,400
Med Marc Insurance...................... 270,000 5,958
Merrill Lynch Capital Markets PLC....... 13,000,000 286,912
Merrill Lynch, Pierce, Fenner & Smith
Inc.................................... 7,220,000 159,346
Midwest Securities Life................. 90,000 1,986
Midwestern National Life Insurance
Company of Ohio........................ 190,000 4,193
Millers Casualty Insurance Company of
Texas.................................. 125,000 2,758
Millers Mutual Fire Insurance Company of
Texas.................................. 670,000 14,787
Mutual Protective Insurance Company..... 300,000 6,621
N-A Core Growth Fund.................... 3,515,000 77,576
N-A Income & Growth Fund................ 1,190,000 26,263
National Chiropractic................... 225,000 4,965
New York Life Insurance & Annuity
Corporation............................ 1,750,000 38,622
New York Life Insurance Company......... 7,250,000 160,008
Norwest Bank MN, N.A.................... 325,000 7,172
Occidental College...................... 105,000 2,317
OCM Convertible Limited Partnership..... 250,000 5,517
OCM Convertible Trust................... 5,455,000 120,392
Oak Tree Partners, L.P.................. 5,660,000 124,917
Old Guard Fire Insurance Company........ 90,000 1,986
Old Guard Insurance Company............. 195,000 4,303
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL NUMBER OF SHARES
AMOUNT OF NOTES OF COMMON STOCK
NAME THAT MAY BE SOLD THAT MAY BE SOLD*
- ---- ------------------- -----------------
<S> <C> <C>
Ozark National Life Insurance Company.... 460,000 10,152
Pacific Horizon Capital Income Fund...... $ 3,300,000 72,831
Pacific Innovation Trust Capital Income
Fund.................................... 55,000 1,213
Pacific Mutual Life Insurance Company.... 500,000 11,035
Paloma Securities L.L.C.................. 9,250,000 204,149
Partners Reinsurance Company Ltd......... 375,000 8,276
Phico Insurance Company.................. 150,000 3,310
Phoenix Convertible Fund................. 1,000,000 22,070
Physicians Mutual Insurance Company...... 230,000 5,076
Pioneer Insurance Company................ 45,000 993
Pitney Bowes Retirement Fund............. 1,100,000 24,277
Police & Fireman's Insurance
Association............................. 45,000 993
Port Authority of Alleghany County
Retirement and Disability Allowance Plan
for Employees Represented by Local 85 of
Amalgamated Transit Union............... 860,000 18,980
Reliable Life Insurance Company.......... 400,000 8,828
RJR Nabisco, Inc. Defined Benefit Master
Trust................................... 400,000 8,828
Robertson Stephens Co. L.L.P............. 1,250,000 27,587
Robertson Stephens Growth & Income Fund.. 1,350,000 29,794
Robertson Stephens Growth & Income
Portfolio of the Equi-Select
Series Trust............................ 600,000 13,242
Royal Bank of Canada..................... 15,500,000 342,087
San Diego City Retirement................ 370,000 8,165
S D County Convertible................... 1,560,000 34,429
Secura Insurance, A Mutual Company....... 220,000 4,855
Service Life and Casualty Insurance
Company................................. 20,000 441
Service Lloyd Insurance Company.......... 20,000 441
Shepherd Investments International,
Ltd..................................... 30,425,000 671,485
Smith Barney Inc.(1)..................... 2,620,000 57,823
Societe Generale Securities Corporation.. 3,700,000 81,659
South Dakota Retirement System........... 1,000,000 22,070
Standard Mutual Insurance Company........ 110,000 2,427
Stark International...................... 14,925,000 329,397
State of Connecticut Combined Investments
Fund.................................... 4,185,000 92,363
State Employees' Retirement Fund of the
State of Delaware....................... 1,340,000 29,574
State Street Bank c/f GE Pension Trust
Global Investment....................... 1,800,000 39,726
Tennessee Consolidated Retirement
System.................................. 4,000,000 88,280
Texas Builders Insurance Company......... 40,000 882
The Class IC Company, Ltd................ 1,000,000 22,070
The Dow Chemical Company Employees
Retirement Plan......................... 1,000,000 22,070
The Income Fund of America, Inc.......... 20,000,000 441,403
Toronto Dominion (New York) Inc.......... 20,000,000 441,403
Transguard Insurance Company............. 550,000 12,138
United National Insurance Company........ 1,250,000 27,587
United National Life Insurance........... 100,000 2,207
United States Olympic Foundation......... 750,000 16,552
United Teacher Associates Insurance
Company................................. 800,000 17,656
Vanguard Convertible Securities Fund,
Inc..................................... 2,795,000 61,686
Van Kampen American Capital Harbor Fund.. 2,000,000 44,140
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL NUMBER OF SHARES
AMOUNT OF NOTES OF COMMON STOCK
NAME THAT MAY BE SOLD THAT MAY BE SOLD*
- ---- ------------------- -----------------
<S> <C> <C>
Vista Balanced Fund...................... 100,000 2,207
Vista Growth & Income Fund............... $ 3,600,000 79,452
Vista Select Balanced Fund............... 300,000 6,621
Wake Forest University................... 295,000 6,510
Weirton Trust............................ 745,000 16,442
Western Home Insurance Company........... 90,000 1,986
Westward Life Insurance Company.......... 35,000 772
Wisconsin Lawyers Mutual Insurance
Company................................. 90,000 1,986
Wisconsin Mutual Insurance Company....... 60,000 1,324
World Insurance Company.................. 250,000 5,517
Any other Selling Securityholders or
future transferee from such Selling
Securityholder(2)....................... 110,840,000 2,446,259
------------ ----------
$517,500,000 11,421,252**
============ ==========
</TABLE>
- --------
(1) Smith Barney Inc. was an Initial Purchaser of the Notes. See "Plan of
Distribution."
(2) Information regarding these persons or entities will be added by supplement
to this Prospectus.
* Assumes a conversion price of $45.31 per share and a cash payment in lieu of
any fractional share interest.
** Total differs from amount to be registered due to the rounding down of
fractional shares.
26
<PAGE>
The preceding table has been prepared based upon information furnished to
the Company by DTC, State Street Bank and Trust Company, Trustee under the
Indenture, and by or on behalf of the Selling Securityholders. From time to
time, additional information concerning ownership of the Notes and Shares
offered hereby may rest with certain holders of the Notes and Shares who are
not named in the preceding table, with whom the Company believes it has no
affiliation and from whom the Company has received no response to its request
for such information.
In view of the fact that Selling Securityholders may offer all or a portion
of the Notes or Shares held by them pursuant to the offering contemplated by
this Prospectus, and because this offering is not being underwritten on a firm
commitment basis, no estimate can be given as to the principal amount of Notes
or the number of Shares that will be held by the Selling Securityholders after
completion of the offering made hereby. In addition, the Selling
Securityholders may have sold, transferred or otherwise disposed of all or a
portion of their Notes and/or Shares, since the date on which they provided
the information set forth above, in transactions exempt from the registration
requirements of the Securities Act.
Information concerning the Selling Securityholders may change from time to
time and any such changed information may be set forth in supplements to this
Prospectus if and when necessary. In addition, the per share conversion price,
and therefore the number of Shares issuable upon conversion of the Notes, is
subject to adjustment under certain circumstances. Accordingly, the aggregate
principal amount of Notes and the number of Shares issuable upon conversion of
the Notes offered hereby may increase or decrease.
PLAN OF DISTRIBUTION
The Notes 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 Notes and the Shares covered
by this Prospectus.
The Company will not receive any of the proceeds from the offering of Notes
or the Shares by the Selling Securityholders. The Company has been advised by
the Selling Securityholders that the Selling Securityholders may sell all or a
portion of the Notes and Shares beneficially owned by them and offered hereby
from time to time on any exchange on which the securities are listed on terms
to be determined at the times of such sales. The Selling Securityholders may
also make private sales directly or through a broker or brokers.
Alternatively, any of the Selling Securityholders may from time to time offer
the Notes or the Shares beneficially owned by them through underwriters,
dealers or agents, who may receive compensation in the form of underwriting
discounts, commissions or concessions from the Selling Securityholders and the
purchasers of the Notes or Shares for whom they may act as agent. The
aggregate proceeds to the Selling Securityholders from the sale of the Notes
or Shares offered by them hereby will be the purchase price of such Notes or
Shares less discounts and commissions, if any.
The Notes and the Shares may be sold from time to time in one or more
transactions at fixed offering prices, which may be changed, or at varying
prices determined at the time of sale or at negotiated prices. Such prices
will be determined by the holders of such securities or by agreement between
such holders and underwriters or dealers who may receive fees or commissions
in connection therewith.
The outstanding Common Stock is listed for trading on the New York Stock
Exchange, and the Shares have been approved for listing on the New York Stock
Exchange. The Company intends to apply for listing of the Notes on the New
York Stock Exchange. However, no assurance can be given that an active trading
market for the Notes will develop or as to the liquidity or sustainability of
any such market. See "Risk Factors--Absence of Existing Active Public Market."
27
<PAGE>
The Selling Securityholders and any broker and any broker-dealers, agents or
underwriters that participate with the Selling Securityholders in the
distribution of the Notes 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 profit on the
resale of the Notes or the Shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
In addition, any securities covered by this Prospectus which qualify for
sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under
Rule 144 or Rule 144A rather than pursuant to this Prospectus. There is no
assurance that any Selling Securityholder will sell any or all of the Notes or
Shares described herein, and any Selling Securityholder may transfer, devise
or gift such securities by other means not described herein.
The Notes were issued and sold in March 1997 in transactions exempt from the
registration requirements of the Securities Act to persons reasonably believed
by the Initial Purchasers to be "qualified institutional buyers" (as defined
in Rule 144A under the Securities Act) or institutional "accredited investors"
(as defined in Rule 510(a)(1), (2), (3) or (7) under the Securities Act or
outside the United States to certain persons in offshore transactions in
reliance on Regulation S under the Securities Act. Pursuant to the
Registration Rights Agreement, the Company has agreed to indemnify each
Initial Purchaser and each Selling Securityholder, and each Selling
Securityholder has agreed to indemnify the Company, each Initial Purchaser and
each other Selling Stockholder against certain liabilities arising under the
Securities Act.
The Company will use its best efforts to cause the registration statement to
which this Prospectus relates to become effective on or prior to July 9, 1997
and to use its reasonable best efforts to keep the registration statement
effective for a period of three years from the effective date thereof, or
until the Shelf Registration is no longer required for transfer of the Notes
or the Shares. The Company may prohibit offers and sales of Notes and Shares
pursuant to the registration statement to which this Prospectus relates at any
time if (A)(i) it is in possession of material non-public information, (ii)
the Board of Directors of the Company or the Executive Committee thereof
determines (based on advice of counsel) that such prohibition is necessary in
order to avoid a requirement to disclose such material non-public information
and (iii) the Board of Directors of the Company or the Executive Committee
thereof determines in good faith that disclosure of such material non-public
information would not be in the best interests of the Company and its
shareholders or (B) the Company has made a public announcement relating to an
acquisition or business combination transaction including the Company and/or
one or more of its subsidiaries (i) that is material to the Company and its
subsidiaries taken as a whole and (ii) the Board of Directors of the Company
or the Executive Committee thereof determines in good faith that offers and
sales of Notes and Shares pursuant to the registration statement to which this
Prospectus relates prior to the consummation of such transaction (or such
earlier date as the Board of Directors or the Executive Committee thereof
shall determine) is not in the best interests of the Company and its
shareholders. Expenses of preparing and filing the registration statement to
which this Prospectus relates and all post-effective amendments thereto will
be borne by the Company.
LEGAL MATTERS
Certain legal matters with respect to the legality of the issuance of the
Notes and Shares offered hereby will be passed upon for the Company by Ropes &
Gray, Boston, Massachusetts. David B. Walek, Esq., Clerk of the Company, is a
partner of Ropes & Gray. Certain partners of Ropes & Gray are the beneficial
owners of an aggregate of approximately 48,000 shares of Common Stock.
EXPERTS
The consolidated financial statements of the Company as of December 30, 1995
and December 31, 1996 and for each of the three years in the period ended
December 31, 1996 appearing in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 and incorporated by reference in this
Prospectus have been incorporated herein in reliance on the report of Coopers
& Lybrand L.L.P., independent accountants, given on the authority of that firm
as experts in accounting and auditing.
28
<PAGE>
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NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLI-
CATION THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COM-
PANY SINCE THAT DATE.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 2
Incorporation of Certain Information by Reference.......................... 2
The Company................................................................ 3
Risk Factors............................................................... 3
Use of Proceeds............................................................ 7
Dividend Policy............................................................ 7
Ratio of Earnings to Fixed Charges......................................... 7
Description of Notes....................................................... 8
Description of Capital Stock............................................... 18
Certain United States Federal Tax Consequences............................. 19
Selling Securityholders.................................................... 23
Plan of Distribution....................................................... 27
Legal Matters.............................................................. 28
Experts.................................................................... 28
</TABLE>
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$517,500,000
EMC/2/
EMC CORPORATION
3 1/4% CONVERTIBLE SUBORDINATED NOTES DUE 2002
----------------
PROSPECTUS
JUNE 26, 1997
----------------
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