<PAGE> 1
As filed with the Securities and Exchange Commission on June 17, 1998
Registration Statement No. 333-51879
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
AMENDMENT NO. 1 TO
FORM S-3
----------------------
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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SEPRACOR INC.
(Exact name of registrant as specified in its charter)
----------------------
DELAWARE 22-2536587
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
111 LOCKE DRIVE
MARLBOROUGH, MASSACHUSETTS 01752
----------------------------------------
(Address, including zip code, and
telephone number, including area code,
of registrant's principal
executive offices)
TIMOTHY J. BARBERICH
CHIEF EXECUTIVE OFFICER
SEPRACOR INC.
111 LOCKE DRIVE
MARLBOROUGH, MASSACHUSETTS 01752
(508) 481-6700
-------------------------------------------
(Name, address, including zip code, and
telephone number, including area code,
of agent for service)
----------------------
COPY TO:
MARK G. BORDEN, ESQ.
HALE AND DORR LLP
60 STATE STREET
BOSTON, MASSACHUSETTS 02109
(617) 526-6000
----------------------
<PAGE> 2
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: AS SOON AS
PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] _______.
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ] __________.
If delivery of the Prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
======================================================================================================================
Proposed
Maximum Proposed
Amount Aggregate Maximum Amount of
Title of Each Class of Securities to be to be Price Aggregate Registration
Registered Registered Per Share(1) Offering Price(1) Fee(2)
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
6 1/4% Convertible Subordinated Debentures
Due 2005..................................... $189,475,000 -- $189,475,000 $55,896
- - ----------------------------------------------------------------------------------------------------------------------
Common Stock, $.10 par value per share....... 4,012,617 shares(3) 39.53 499,620 148
- - ----------------------------------------------------------------------------------------------------------------------
Total........................................ N/A N/A $189,990,836 $56,044(4)
- - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee.
(2) Pursuant to Rule 457(i) there is no filing fee with respect to the
3,999,978 shares of Common Stock issuable upon conversion of the
Debentures because no additional consideration will be received in
connection with the exercise of the conversion privilege. With respect
to the 12,639 shares of Common Stock offered hereby that are not
issuable upon conversion of the Debentures, the registration fee has
been computed pursuant to Rule 457(c) based upon $39.53, the average
of the high and low prices of the Company's Common Stock on the Nasdaq
National Market on June 12, 1998.
(3) Plus such additional indeterminate number of shares as may become
issuable upon conversion of the Debentures being registered hereunder
by means of adjustment to the conversion price.
(4) Of this amount, $55,896 was paid on May 5, 1998 with the initial filing
as payment for the registration of the Debentures. The additional fee
of $148 for the registration of the 12,639 shares of Common Stock
offered hereby that are not issuable upon conversion of the Debentures
is being paid with this Amendment No. 1 to Registration Statement on
Form S-3.
THE COMPANY HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE COMPANY SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
SHALL DETERMINE.
================================================================================
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 17, 1998
PROSPECTUS
SEPRACOR INC.
$189,475,000 PRINCIPAL AMOUNT OF 6 1/4% CONVERTIBLE
SUBORDINATED DEBENTURES DUE 2005
(Interest payable August 15 and February 15)
--------------------------------
4,012,617 Shares of Common Stock
($0.10 par value per share)
---------------------
This Prospectus relates to (i) $189,475,000 aggregate principal amount
of 6 1/4% Convertible Subordinated Debentures due 2005 (the "Debentures") of
Sepracor Inc. ("Sepracor" or the "Company"), (ii) 3,999,978 shares of Common
Stock, par value $.10 per share ("Common Stock") of the Company which are
issuable upon conversion of the Debentures plus such additional indeterminate
number of shares of Common Stock as may become issuable upon conversion of the
Debentures as a result of adjustments to the conversion price (the "Conversion
Shares"); and (iii) 12,639 additional shares of Common Stock (the "Additional
Shares"). The Conversion Shares and the Additional Shares are referred to herein
collectively as the "Shares". The Debentures and the Shares that are being
registered hereby are to be offered for the account of the holders thereof or by
their transferees, pledgees, donees or other successors in interest (the
"Selling Securityholders"). The Debentures were initially acquired from the
Company by Morgan Stanley & Co. Incorporated, Lehman Brothers Inc., Smith Barney
Inc. and Vector Securities International, Inc. (the "Initial Purchasers") in
February 1998 in connection with a private offering. The Initial Purchasers have
advised the Company that the Debentures have since been resold by the Initial
Purchasers to "qualified institutional buyers," as defined in Rule 144A under
the Securities Act of 1933, as amended (the "Securities Act"), and institutional
"accredited investors," as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act. See "Description of Debentures."
The Debentures are convertible into Common Stock of the Company at any
time after May 6, 1998 through maturity, unless previously redeemed, at a
conversion price of $47.369 per share, subject to adjustment in certain events.
See "Description of Debentures -- Conversion of Debentures." The Debentures are
eligible for trading in the Private Offerings, Resales and Trading through
Automatic Linkages ("PORTAL") market of the National Association of Securities
Dealers, Inc. The Company's Common Stock is listed on the Nasdaq National Market
("Nasdaq") under the symbol "SEPR." On June 15, 1998, the closing price of the
Common Stock as reported by the Nasdaq National Market was $38.375 per share.
The Debentures are not redeemable by the Company prior to February 18,
2001. Thereafter, the Debentures will be redeemable on at least 30 days' prior
notice at the option of the Company, in whole or in part, at any time, at the
redemption prices set forth in this Prospectus, in each case together with
accrued interest. Upon a Fundamental Change (as defined herein), each holder of
Debentures shall have the right, at the holder's option, to require the Company
to repurchase such holder's Debentures at a price equal to 100% of the principal
amount of the Debentures to be
<PAGE> 4
redeemed plus accrued interest to, but excluding, the date of redemption. See
"Description of Debentures -- Redemption at Option of the Holder."
The Debentures are unsecured obligations of the Company, subordinate in
right of payment to all present and future Senior Obligations (as defined
herein) of the Company and will be effectively subordinated to all indebtedness
and liabilities of subsidiaries of the Company. At December 31, 1997, Senior
Obligations aggregated approximately $6.2 million. The Indenture will not
restrict the incurrence of any other indebtedness or liabilities by the Company
or its subsidiaries. See "Description of Debentures -- Subordination of
Debentures."
Certain of the Initial Purchasers have advised the Company that they
intend to make a market in the Debentures. Such Initial Purchasers, however, are
not obligated to do so and any such market making may be discontinued at any
time without notice, in the sole discretion of such Initial Purchasers. No
assurance can be given that any market for the Debentures will develop or be
maintained.
The Debentures and the Shares are being registered to permit public
secondary trading of (i) the Debentures and, upon conversion, the Conversion
Shares and (ii) the Additional Shares, by the holders thereof from time to time
after the date of this Prospectus. The Company has agreed, among other things,
to bear all expenses (other than underwriting discounts and commissions) in
connection with the registration and sale of the Debentures and the Shares
covered by this Prospectus.
The Company will not receive any of the proceeds from sales of
Debentures or the Shares by the Selling Securityholders. The Debentures and the
Shares may be offered in negotiated transactions or otherwise, at market prices
prevailing at the time of sale or at negotiated prices. See "Plan of
Distribution." The Selling Securityholders may be deemed to be "underwriters" as
defined in the Securities Act. If any broker-dealers are used by the Selling
Securityholders, any commissions paid to broker-dealers and, if broker-dealers
purchase any Debentures or Shares as principals, any profits received by such
broker-dealers on the resale of the Debentures or Shares may be deemed to be
underwriting discounts or commissions under the Securities Act. In addition, any
profits realized by the Selling Securityholders may be deemed to be underwriting
commissions.
-------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
-------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
The date of this Prospectus is __________ __, 1998.
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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 and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission
pursuant to the informational requirements of the Exchange Act may be inspected
and copied at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at the
Commission's regional offices located at Seven World Trade Center, Suite 1300,
New York, New York 10048, and at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such materials also may be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. In addition, the Company is required
to file electronic versions of these documents through the Commission's
Electronic Data Gathering, Analysis and Retrieval system (EDGAR). The Commission
maintains a World Wide Web site at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The Common Stock of the Company is
traded on the Nasdaq National Market. Reports and other information concerning
the Company may be inspected at the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on
Form S-3 (together with all amendments, supplements, exhibits and schedules
thereto, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Act") with respect to the Debentures and the Shares offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto, as certain items
are omitted in accordance with the rules and regulations of the Commission. For
further information pertaining to the Company, the Debentures and the Shares,
reference is made to the Registration Statement and to the exhibits and
schedules filed therewith. Statements contained in this Prospectus regarding the
contents of any agreement or other document are not necessarily complete, and in
each instance reference is made to the copy of such agreement or document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference. The Registration Statement, including all
exhibits and schedules thereto, may be inspected without charge at the office of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of
all or any part thereof may be obtained from the Commission at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference: (i) the Company's Annual Report on Form 10-K
for the year ended December 31, 1997 and filed with the Commission on March 31,
1998, as amended by Annual Report on Form 10-K/A filed with the Commission on
March 31, 1998; (ii) the Company's Current Reports on Form 8-K, dated February
5, 1998 and February 11, 1998; (iii) the Company's Current Report on Form 10-Q
filed with the Commission on May 15, 1998; and (iv) the Company's Registration
Statement on Form 8-A dated July 16, 1991 registering the Common Stock under
Section 12(g) of the Exchange Act.
All documents filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the offering being made hereby
shall be deemed to be incorporated by reference into this Prospectus and to be a
part hereof from the date of filing such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein
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<PAGE> 6
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 each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any or all of the foregoing documents incorporated by reference into this
Prospectus (without exhibits to such documents other than exhibits specifically
incorporated by reference into such documents). All such requests shall be
directed to: Sepracor Inc., 111 Locke Drive, Marlborough, Massachusetts 01752,
Attention: Chief Financial Officer, telephone: (508) 481-6700.
---------------------
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
Certain statements in this Prospectus and in the documents incorporated
herein constitute "forward-looking statements" within the meaning of Section 27A
of the Act and Section 21E of the Exchange Act. For this purpose, any statements
contained herein or incorporated herein that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, the words "believes," "plans," "expects" and similar expressions are
intended to identify forward-looking statements. There are a number of important
factors that could cause the results of the Company to differ materially from
those indicated by such forward-looking statements. These factors include those
set forth in "Risk Factors" herein.
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<PAGE> 7
THE COMPANY
Sepracor Inc. is a leading specialty pharmaceutical company focused on
the cost-effective development of safer, purer and more effective drugs that are
improved versions of widely-prescribed pharmaceutical compounds. Typically,
these improved chemical entities ("ICEs") are patented, single-isomer or
active-metabolite forms of the parent compound. The Company selects for
development widely-sold parent drugs with significant potential for improved
efficacy, side-effect profile, or both. The Company develops these drugs by
leveraging its broad patent position, significant expertise in chiral chemistry
and pharmacology, and experience in conducting clinical trials and seeking
regulatory approvals for new drugs. Sepracor's drug development program has
yielded an extensive portfolio of drug candidates intended to treat a broad
range of indications. To date, certain of these candidates are being developed
at lower cost and in less time than the new chemical entities ("NCEs") that
characterize traditional drug development. In addition, the Company believes
that the probability of U.S. Food and Drug Administrator ("FDA") approval of its
ICE(TM) drug candidates is increased because the parent drugs have previously
been approved.
The Company's strategy for commercializing its ICEs includes licensing
and co-promotion collaborations with major pharmaceutical companies and direct
marketing through one or more specialty sales forces. On February 4, 1998,
Sepracor announced a collaboration and license agreement with Janssen
Pharmaceutica N.V., a wholly owned subsidiary of Johnson & Johnson ("Janssen"),
relating to the development and marketing of norastemizole (the "Janssen
Agreement"). Under the terms of the Janssen Agreement, Sepracor and Janssen will
jointly fund the development of norastemizole, and Janssen has an option to
acquire certain rights regarding the product in the U.S. and abroad. Upon
exercise of such option, Janssen and Sepracor will share equally the costs and
profits associated with the further development, marketing and sale of
norastemizole in the U.S. and Sepracor will have the right to co-promote the
product in the U.S. Alternatively, in the event Sepracor decides not to
co-promote the product, it is entitled to royalties, if any, on Janssen's sales
of the product in the U.S. Outside of the U.S., Janssen has the right to develop
and market norastemizole subject to the payment of royalties to Sepracor, if
any. In addition, Janssen has exclusive worldwide rights to sell
over-the-counter forms of norastemizole subject to the payment of royalties to
Sepracor.
In December 1997, Sepracor licensed to Schering-Plough Ltd
("Schering-Plough") worldwide rights to develop and market
descarboethoxyloratadine ("DCL"), an active-metabolite form of loratadine.
Currently, Schering-Plough markets loratadine as Claritin(R), the world's
leading non-sedating antihistamine, and may use DCL to effectively extend the
period of marketing exclusivity for its antihistamine franchise. In July 1993,
Sepracor licensed to Hoechst Marion Roussel, Inc. ("HMRI") its U.S. patent
rights covering fexofenadine. In October 1996, HMRI introduced Allegra(R)
(fexofenadine) as an improved version of the non-sedating antihistamine
Seldane(R), and subsequently announced plans to remove Seldane from the market.
In July 1997, the Company filed a new drug application ("NDA") with the FDA for
the nebulized form of levalbuterol, the Company's single-isomer form of
albuterol, for the treatment of asthma. The Company intends to market
levalbuterol through its respiratory sales force.
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<PAGE> 8
DRUG DISCOVERY
Sepracor has undertaken a long-term new drug discovery program directed
at discovering novel molecules and mechanisms for treatment of infectious
disease, inflammation and pain. In connection with this program, Sepracor, using
its combinatorial chemistry expertise, has independently developed an extensive
library of new compounds which are screened against biological receptors both by
Sepracor and its biotechnology company partners.
MANUFACTURING
The Company conducts the formulation of its drug compounds primarily at
its laboratories in Marlborough, Massachusetts. The Company also currently owns
and operates a current Good Manufacturing Practices ("cGMP") compliant
manufacturing facility in Windsor, Nova Scotia, which it believes has sufficient
capacity to support the production of its drug candidates in quantities required
for its clinical trials.
SUBSIDIARIES
Since 1994, Sepracor has established and independently financed three
subsidiaries: BioSepra Inc. ("BioSepra"), HemaSure Inc. ("HemaSure") and
Versicor Inc. ("Versicor"). The establishment of these and other subsidiaries
has allowed Sepracor to concentrate on its core pharmaceutical business.
BioSepra, currently a 64% owned subsidiary of the Company, develops,
manufactures and sells chromatographic media for use by pharmaceutical companies
in the research, methods design, process development and commercial-scale
manufacture of biopharmaceuticals. HemaSure, currently a 37% owned subsidiary of
the Company, applies its proprietary filtration technologies to develop products
to increase the safety of donated blood through the filtering of white blood
cells. Versicor, currently a 22% owned subsidiary of the Company, develops novel
drug candidates principally for the treatment of infectious diseases. In the
fourth quarter of 1997, Versicor completed a private financing for approximately
$22 million.
---------------------------
Sepracor, BioSepra, HemaSure, Versicor, ICE, HyperD, LeukoNet and
Steripath are trademarks of Sepracor, BioSepra, HemaSure or Versicor. Other
trademarks used in this Prospectus are the property of their respective owners.
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<PAGE> 9
RISK FACTORS
This Prospectus (including the documents incorporated by reference
herein) contains, in addition to historical information, forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed below, as well as
those discussed elsewhere in this Prospectus (including the documents
incorporated by reference herein).
OPERATING LOSSES
Sepracor has not been profitable since inception, and there can be no
assurance that Sepracor will achieve profitability. For the year ended December
31, 1997, Sepracor incurred net losses applicable to common shares on a
consolidated basis of approximately $26.7 million (including $600,000 of
dividends relating to the Company's Series B Redeemable Exchangeable Preferred
Stock which was redeemed by the Company in early 1998). Sepracor expects to
continue to incur losses in future periods.
RISKS RELATED TO SEPRACOR'S PHARMACEUTICAL DEVELOPMENT PROGRAM
Early Stage of Product Development. Although Sepracor has commercially
licensed one of its ICEs, fexofenadine, substantially all of its ICEs are still
undergoing clinical trials or are at the early stages of development. There can
be no assurance that any of the Company's drugs will have improved
characteristics that provide greater benefits or fewer side effects than the
corresponding parent drugs or that research efforts undertaken by Sepracor will
lead to the discovery of future drugs with such improved characteristics. All of
the drugs under development will require significant, additional research,
development, preclinical and/or clinical testing, regulatory approval and a
commitment of significant additional resources prior to their commercialization.
There can be no assurance that any products under development will be developed
successfully, be proven to be safe and efficacious in clinical trials, offer
therapeutic or other improvements over comparable drugs, meet applicable
regulatory standards, be capable of being produced in commercial quantities at
acceptable costs or be successfully marketed.
Patent Uncertainties. Sepracor has filed various patent applications
covering compositions containing, and methods of using, single-isomer or
active-metabolite forms of various compounds for specific applications. While as
of December 31, 1997, method-of-use patents ("use patents") have been issued to
Sepracor covering 28 such compounds, including descarboethoxyloratadine,
fexofenadine, levalbuterol, (S)-oxybutynin (S)-doxazosin, norcisapride and
(R)-fluoxetine, the Company has only patent applications pending on a number of
other such compounds, including (R,R)-formoterol, (S)-lansoprazole,
(S)-zopiclone, (S)-sibutramine and (R)-bupropion. In addition, there can be no
assurance that: (i) any additional patents will be issued to Sepracor, (ii)
litigation will not be commenced seeking to challenge any patents granted to
Sepracor or that such challenges will not be successful, (iii) the U.S. Patent
and Trademark Office ("PTO") will not commence patent interference proceedings
involving the Company's patents or patent applications, (iv) any such patents
will afford protection against competitors with similar compounds or technology,
or (v) processes or products of Sepracor, even if covered by a valid patent, do
not, or will not, infringe upon patents of third parties. The ability to
commercialize successfully any ICE will depend, to a significant degree, upon
the ability to obtain and maintain use patents of sufficient scope to prevent
third parties from developing similar or competitive products. Most of the ICEs
for which the Company has obtained use patents or filed applications therefor,
such as (S)-doxazosin, fexofenadine, (R)-fluoxetine, (S)-fluoxetine,
(S)-zopiclone, (S)-lansoprazole, norcisapride and (S)-sibutramine, are claimed
by composition of matter or other patents or patent applications held by third
parties, typically drug companies. In each such case, unless subject to an
existing license agreement, the ICE may not be commercialized until the
expiration
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<PAGE> 10
of corresponding third party composition-of-matter or other patents (unless a
license is obtained to such third party patents or such third party patents
expire or are determined to be invalid, unenforceable or not infringed by a
court of proper jurisdiction). There can be no assurance that any license
required under any such third party patent would be made available or, if
available, would be available on terms acceptable to the Company. In addition,
significant funds would be required to contest the validity of any such
third-party patent and to defend any claim that Sepracor infringes any such
third-party patent and there can be no assurance that Sepracor would prevail in
any litigation involving such third party patents.
Because of the length of time and expense associated with the
development of new products and processes, the pharmaceutical industry has
traditionally placed considerable importance on obtaining patent and trade
secret protection for significant new technologies, products and processes.
Proprietary rights relating to the products of Sepracor will be protected from
unauthorized use by third parties only to the extent that they are covered by
valid and enforceable patents or are maintained in confidence as trade secrets.
Certain of the technology that may be used in the products of Sepracor is not
covered by any patents or patent applications. In the absence of patent
protection, the business of Sepracor may be adversely affected by competitors
who independently develop substantially equivalent technology.
Patent Interference. In July 1997, the PTO informed Sepracor that it
had declared an interference between Sepracor's previously issued use patent on
fexofenadine to treat allergic rhinitis and another similar patent application
of Sepracor, and HMRI's use patent application on the anti-histaminic effects of
fexofenadine on hepatically impaired patients. The primary objective of a patent
interference, which can only be declared by the PTO, is to determine which party
was the first to invent any overlapping subject matter claimed by more than one
party. In the course of an interference, the parties typically present evidence
relating to their invention of the overlapping subject matter. The PTO then
reviews the evidence to determine which party has the earliest legally
sufficient date of invention, and, therefore, is entitled to a patent claiming
the overlapping subject matter.
If Sepracor prevails in the interference, Sepracor will retain all of
its claims in its issued patent. If, however, Sepracor loses the interference,
HMRI will be issued a U.S. patent containing its claims involved in the
interference and may not be obligated to pay Sepracor milestone or royalty
payments pursuant to the terms of the license agreement whereby Sepracor
licensed its U.S. patent rights covering fexofenadine to HMRI in 1993.
Sepracor and HMRI have agreed to resolve the interference by
arbitration. Selection of the arbitrator and initiation of the arbitration
proceeding is expected to occur in the first half of 1998. While it is possible
that the arbitrator's decision may be rendered during 1998, there can be no
assurance that the arbitrator's decision will be rendered at that time. Once
rendered, the arbitrator's decision must be submitted to the PTO for final
approval. The interference is in its early stages and the Company is unable to
predict its outcome.
Regulatory Approvals and Clinical Trials. The marketing and sale of
pharmaceutical products developed by Sepracor or its development partners will
require FDA approvals as well as similar approvals in foreign countries. To
obtain such approvals, the safety and efficacy of such products must be
demonstrated through clinical trials. There can be no assurance that the results
of such clinical trials will be consistent with the results obtained in
preclinical studies or that the results obtained in later phases of clinical
trials will be consistent with those obtained in earlier phases. There also can
be no assurance that any such products will be shown to be safe and efficacious
or that regulatory approval for any such products will be obtained on a timely
basis, if at all. The clinical trial and regulatory approval process can take a
number of years and require the expenditure of substantial resources. With
respect to certain of the Company's ICEs, the Company has been able to
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<PAGE> 11
shorten the regulatory approval process of its ICEs by relying on preclinical
and clinical toxicology data already on file with the FDA with respect to the
parent drug. Although Sepracor has to date been successful in employing this
strategy in connection with the approval process of certain of its proposed
products, there can be no assurance that the FDA will permit the Company to
utilize this strategy in the future. Accordingly, the Company may be required to
expend significant resources to complete such preclinical and clinical studies
for its other ICEs, thereby significantly delaying the regulatory approval
process. The failure of the Company to obtain regulatory approval on a timely
basis and unanticipated significant expenditures on preclinical and clinical
studies could adversely affect the financial condition of the Company. While the
Company expects FDA approval of its NDA for the nebulized form of levalbuterol
in late 1998, there can be no assurance that the FDA will approve such NDA by
such date, if at all.
Sales and Marketing Uncertainties. The Company currently has very
limited sales and marketing experience. If the Company is successful in
developing and obtaining regulatory approval for its products under development,
it expects to license certain products to large pharmaceutical companies and
market and sell certain other products through its direct specialty sales forces
or through other arrangements, including co-promotion arrangements. In
anticipation of expected FDA approval of the nebulized form of levalbuterol
later this year, the Company is beginning to establish a direct sales force to
market the inhalation solution of levalbuterol. Further, as the Company begins
to enter into co-promotion arrangements or market and sell additional products
directly, the Company will need to significantly expand its sales force. It is
expected that the Company will incur significant expense in establishing its
direct sales force. The ability of the Company to realize significant revenues
from its direct marketing and sales activities is dependent on its ability to
attract and retain qualified sales personnel in the pharmaceutical industry.
There can be no assurance, however, that the Company will be able to attract and
retain such qualified sales personnel, that it will successfully expand its
marketing and direct sales force in the future on a timely basis, that the cost
of establishing such marketing or sales force will not exceed any product
revenues, that its sales and marketing efforts will be successful, or that the
need to comply with FDA limits on drug product marketing, including limits on
claims of comparative safety or efficacy, will not inhibit the effectiveness of
such marketing. In addition, the Company will need to enter into co-promotion
arrangements with third parties where its own direct sales force is neither well
situated nor large enough to achieve maximum penetration in the market. There
can be no assurance that the Company will be successful in entering into any
such arrangements or that the terms of any such arrangements will be favorable
to the Company.
Manufacturing Uncertainties. The Company currently operates a cGMP
compliant manufacturing plant which the Company believes has sufficient capacity
to support the production of its drugs in quantities required for its clinical
trials. While the Company believes it has the capability to scale up its
manufacturing processes and manufacture sufficient quantities of certain of the
products which may be approved for sale, without additional expansion, the
Company will not have the capability to manufacture in sufficient quantities all
of the products which may be approved for sale. Accordingly, the Company may be
required to expend additional resources to expand its current facility,
construct an additional facility or contract the production of these drugs to
third party manufacturers. There can be no assurance that the Company will have
the resources to expand its existing or develop additional facilities or
contract with manufacturers to produce its products in commercial quantities or
that any contract with third party manufacturers will be on favorable terms to
the Company. The Company currently has a supply contract with ChiRex Inc.
("ChiRex") that commits the Company to purchase through December 31, 2001 all of
its annual requirements of those drugs which it will market directly through its
specialty sales force, provided ChiRex meets certain pricing, supply and quality
control conditions. Under the supply agreement, however, Sepracor retains the
right to manufacture commercial quantities of its drugs in its Nova Scotia
manufacturing plant. There can be no assurance that the Company will succeed in
scaling up its manufacturing processes or maintaining cGMP compliance. Failure
in either respect can lead to refusal by the FDA
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<PAGE> 12
to approve marketing applications. Failure to maintain cGMP compliance may also
be the basis for action by the FDA to withdraw approvals that have been granted
and for other regulatory action.
Risk of Product Liability. The testing, marketing and sale of human
health care products entails an inherent risk of product liability and there can
be no assurance that product liability claims will not be asserted against
Sepracor. Sepracor and its subsidiaries maintain limited product liability
insurance coverage for both the clinical trials and commercialization of its
products. There can be no assurance that Sepracor will be able to obtain further
product liability insurance on acceptable terms, if at all, or that any current
insurance subsequently obtained will provide adequate coverage against all
potential claims.
Dependence on Collaborative Partners. Sepracor's ability to
commercialize certain drugs that it develops is likely to depend in significant
part on its ability to enter into collaborative agreements with pharmaceutical
companies to fund all or part of the costs to complete the development of such
drugs and to manufacture and/or market such drugs. To date, the Company has
entered into three such collaborative agreements. The Company has licensed its
U.S. patent rights to Allegra (fexofenadine) to HMRI and is entitled to receive
royalties on all U.S. sales of Allegra when the patent on the parent drug
expires. The Company, however, is currently party to an interference involving
Allegra which, if decided adversely to the Company, could result in the loss of
all or substantially all of the royalties to which the Company is entitled under
the license agreement on future sales of Allegra. See "-- Patent Interference."
The Company has also licensed its worldwide patent rights in DCL to
Schering-Plough, pursuant to which the Company is entitled to receive royalties
from Schering-Plough upon the initial sale of the product. The Company has
entered into an agreement with Janssen with respect to the joint development and
co-promotion of norastemizole. In each of these collaborative arrangements and
any additional collaborative arrangements the Company may enter into in the
future, the Company is dependent upon the efforts of the collaboration partners
and there can be no assurance that such efforts will be successful. If any
collaborators were to breach or terminate their agreements with the Company or
fail to perform their obligations thereunder in a timely manner, the development
and commercialization of the products could be delayed or terminated. Any such
delay or termination could have a material, adverse effect on the Company's
financial condition and results of operation. Sepracor's failure or inability to
perform certain of its obligations under a collaborative agreement could result
in a reduction or loss of the benefits to which Sepracor is otherwise entitled
under such agreement. There can be no assurance that Sepracor will be able to
enter into any such agreements for ICEs in the future or that such collaborative
agreements, if any, will be entered into on terms favorable to the Company.
LEVERAGE
As of December 31, 1997, as adjusted for the issuance of the
Debentures, the Company's total long-term debt and shareholders' equity would
have been approximately $273.7 million and $12.0 million, respectively. The
Indenture does not restrict the ability of the Company or its subsidiaries to
incur additional indebtedness, including Senior Obligations. Additional
indebtedness of the Company may rank senior to or pari passu with the Debentures
in certain circumstances. See "Description of Debentures." The Company's ability
to satisfy its obligations will be dependent upon its future performance, which
is subject to many factors, including factors beyond the Company's control.
There is no assurance that the Company will be able to meet its debt service
requirements or to repay the Debentures at maturity or at the request of the
holders upon a Fundamental Change.
NEED FOR ADDITIONAL FUNDS
Sepracor will require substantial additional funds for its research and
product development programs, operating expenses, the pursuit of regulatory
approvals and expansion of its production,
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sales and marketing capabilities. Adequate funds for these purposes, whether
through collaborative or other arrangements with corporate partners or equity or
debt financing, may not be available when needed or on terms acceptable to
Sepracor. Insufficient funds could require Sepracor to delay, scale back or
eliminate certain of its research and product development programs or to license
third parties to commercialize products or technologies that Sepracor would
otherwise develop or commercialize itself. Sepracor may need to raise additional
funds to support its long-term product development and commercialization
programs. There can be no assurance that such capital will be available on
favorable terms, if at all. Sepracor's cash requirements may vary materially
from those now planned because of increased research and development expenses,
patent developments, relationships with collaborative partners, the FDA
regulatory process, the capital requirements of Sepracor and BioSepra and other
factors.
INTENSE COMPETITION
Sepracor and its subsidiaries encounter and expect to continue to
encounter intense competition in the sale of their current and future products.
The fields in which Sepracor and its subsidiaries compete are subject to rapid
and substantial technological change. There can be no assurance that
developments by others will not render the products or technologies of Sepracor
and its subsidiaries obsolete or noncompetitive. Many competitors and potential
competitors have substantially greater resources, manufacturing and marketing
capabilities, research and development staff and production facilities than
Sepracor and its subsidiaries.
FLUCTUATIONS IN OPERATING SALES
Sepracor's quarterly operating results are likely to fluctuate
significantly. Such fluctuations will depend on factors such as the timing of
collaborative agreements for Sepracor's pharmaceutical development candidates
and development costs for those pharmaceuticals, timing of product sales and
market penetration, timing of operating expenses, including marketing expenses
and the costs of establishing a direct sales force, and the timing of
significant orders for BioSepra's products.
RISKS RELATING TO BIOSEPRA
Dependence on Product Sales. The future success of BioSepra will depend
largely on the success of BioSepra's HyperD media, which was introduced in March
1993. There can be no assurance that HyperD media will achieve commercial
success and any failure of such product to achieve success would have a material
adverse effect on the business and result of operations of BioSepra.
Need for Additional Funds. BioSepra could require additional funds
before the end of 1998 if and to the extent that it fails to achieve its
operating plan, which contemplates significant increases in sales of HyperD
media. As of December 31, 1997, Sepracor had guaranteed $774,000 of outstanding
bank borrowings and lease financing obligations of BioSepra. At such time as
BioSepra requires additional financing, there can be no assurance that such
financing will be available on favorable terms, if at all. If BioSepra requires
additional financing and such capital is not available on acceptable terms from
third parties, Sepracor may, but is not obligated to, guaranty or provide such
financing.
Challenge of Market Penetration. Sales of chromatographic media
products such as HyperD media typically involve long lead times, and customers
generally evaluate several different media products before committing to a
volume purchase. Also, customers are typically reluctant to change the media
used in the production process for a pharmaceutical previously approved by the
FDA because such a change would, in certain cases, require additional FDA
approval. For these reasons, BioSepra's future success will depend in large part
on its ability to sell its products to customers at the
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<PAGE> 14
early stage of their product development cycles. There can be no assurance that
BioSepra will be able to compete effectively against its existing or future
competitors.
RISKS RELATING TO HEMASURE
Early Stage of Product Development. Other than the LeukoNet Pre-Storage
Leukoreduction Filtration System (the "LeukoNet System"), HemaSure's blood
filtration and transfusion products are in the research and development stage,
and some or all of these products may require preclinical and clinical testing
prior to submission of any regulatory application for commercial use. There is
no assurance that such regulatory approval will ever be received. HemaSure's
planned products are subject to the risks of failure inherent in the development
of drug, biological and medical device products and products based on new
technologies. These risks include the possibility that HemaSure's approach to
blood filtration and transfusion will not be successful; that HemaSure's planned
products will not be technologically superior, easier to use or more economical
than products currently on the market; that third parties will market superior
or equivalent products; that any or all of HemaSure's planned products will fail
to receive necessary regulatory clearance; that any such products will be
difficult or uneconomical to manufacture on a large scale; or that proprietary
rights of third parties will preclude HemaSure from marketing such products. As
a result, there can be no assurance that HemaSure's research and development
activities will result in any commercially viable products.
Limited Customers. The customers for HemaSure's potential products are
a limited number of national and regional blood centers, which collect, store
and distribute blood and blood products. HemaSure's principal competitors have
long standing and, in some cases, exclusive relationships (including long-term
supply contracts) with these blood centers, and there can be no assurance that
HemaSure will be successful in marketing its products to these centers.
SUBORDINATION OF DEBENTURES
The Debentures are unsecured and subordinate in right of payment to all
current and future Senior Obligations of the Company. Senior Obligations include
all indebtedness (other than the Company's 7% Convertible Subordinated
Debentures due 2002) of the Company, whether existing on or created or incurred
after the date of the issuance of the Debentures, that is not made subordinate
to or pari passu with the Debentures by the instrument creating the indebtedness
and the Company's obligations under a put agreement to purchase $2.0 million of
indebtedness of Versicor, a former wholly owned subsidiary, in the event of a
default thereof by Versicor. At December 31, 1997, the aggregate amount of
Senior Obligations outstanding was approximately $6.2 million and the aggregate
amount of indebtedness of the Company that would be pari passu with the
Debentures is approximately $80.9 million. The Indenture does not limit the
amount of additional indebtedness, including Senior Obligations, which the
Company or any of its subsidiaries can create, incur, assume or guarantee and
the incurrence of additional indebtedness by the Company could adversely affect
the Company's ability to pay its obligations on the Debentures. By reason of
such subordination of the Debentures, in the event of insolvency, bankruptcy,
liquidation or reorganization of the Company or upon acceleration of the
Debentures due to an Event of Default under the Indenture and in certain other
events, the assets of the Company will be available to pay the amounts due on
the Debentures only after all Senior Obligations of the Company have been paid
in full after which there may not be sufficient assets remaining to pay amounts
due on any or all of the Debentures then outstanding. In addition, holders of
the Debentures are effectively subordinated to the claims of creditors of the
Company's subsidiaries to the extent of the assets of such subsidiaries. In the
event of the insolvency, bankruptcy, liquidation, reorganization, dissolution or
winding up of the business of any subsidiary of the Company, creditors of such
subsidiary generally will have the right to be paid in full before any
distribution is made to the Company or the holders of the Debentures. The
Company anticipates that from time to time it will incur additional
indebtedness, including Senior Obligations, and that it and
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<PAGE> 15
its subsidiaries will from time to time incur other additional indebtedness and
liabilities. See "Description of Debentures."
LIMITATIONS ON REPURCHASE UPON A FUNDAMENTAL CHANGE
In the event of a Fundamental Change, each holder of the Debentures
will have the right, at the holder's option, to require the Company to
repurchase all or a portion of such holder's Debentures as described herein
under the caption "Description of Debentures -- Redemption at Option of the
Holder." The Company's ability to repurchase the Debentures upon a Fundamental
Change may be limited by the terms of the Company's Senior Obligations and the
subordination provisions of the Indenture. Further, the ability of the Company
to repurchase Debentures upon a Fundamental Change will be dependent on the
availability of sufficient funds and compliance with applicable securities laws.
Accordingly, there can be no assurance that the Company will be able to
repurchase the Debentures upon a Fundamental Change. The failure of the Company
to repurchase any Debentures upon a Fundamental Change at the request of the
holder would constitute an Event of Default under the Debentures, which could
result in the acceleration of other indebtedness of the Company at the time
outstanding pursuant to cross-default provisions. The term "Fundamental Change"
is limited to certain specified transactions and may not include other events
that might adversely affect the financial condition of the Company nor would the
requirement that the Company offer to repurchase the Debentures upon a
Fundamental Change necessarily afford holders of the Debentures protection in
the event of a highly leveraged reorganization, merger or similar transaction
involving the Company. See "Description of Debentures."
ABSENCE OF PUBLIC MARKET; TRANSFER RESTRICTIONS
There is no existing market for the Debentures and there can be no
assurance as to the liquidity of any markets that may develop for the
Debentures, the ability of the holders to sell their Debentures or the price at
which holders of the Debentures may be able to sell their Debentures. Future
trading prices of the Debentures will depend on 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 Initial
Purchasers have informed the Company that certain of the Initial Purchasers
intend to make a market in the Debentures offered hereby; however, the Initial
Purchasers are not obligated to do so, and any such market making activity may
be terminated at any time without notice to the holders of the Debentures. The
Debentures are eligible for trading in the PORTAL Market; however, the Company
does not intend to apply for listing of the Debentures on Nasdaq or any
securities exchange.
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<PAGE> 16
USE OF PROCEEDS
All of the Debentures and the Shares are being sold by the Selling
Stockholders or by their pledgees, donees, transferees or other successors in
interest, and the Company will not receive any proceeds from the sale of such
Shares.
RATIO OF EARNINGS TO FIXED CHARGES
The Company has not recorded earnings for the year ended December 31,
1997 or for any of the four preceding fiscal years and therefore is not able to
disclose the ratio of earnings to fixed charges. However, the following table
discloses the net loss applicable to common shares and the amount of fixed
charges of the Company for the periods indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net loss applicable
to common share................ (20,907) (20,343) (33,412) (60,710) (26,723)
Fixed charges .................. -- -- 565 989 989
</TABLE>
Fixed charges consist of the amortization of deferred financing costs
relating to the 7% Subordinated Convertible Debentures due 2000 and accrued
dividends on Sepracor Series B Redeemable Exchangeable Preferred Stock.
DESCRIPTION OF DEBENTURES
The Debentures were issued under an Indenture dated as of February 10,
1998 (the "Indenture") between the Company and The Chase Manhattan Bank, as
trustee (the "Trustee"). A copy of the form of Indenture and Registration Rights
Agreement (as defined below) will be available from the Trustee upon request by
a registered holder of the Debentures. The following summaries of certain
provisions of the Debentures, the Indenture and the Registration Rights
Agreement do not purport to be complete and are subject to, and are qualified in
their entirety by reference to, all the provisions of the Debentures, the
Indenture and the Registration Rights Agreement, including the definitions
therein of certain terms which are not otherwise defined in this Prospectus.
Wherever particular provisions or defined terms of the Indenture (or of the Form
of Debenture which is a part of the Indenture) or the Registration Rights
Agreement are referred to, such provisions or defined terms are incorporated
herein by reference. References in this section to the "Company" are solely to
Sepracor Inc., a Delaware corporation, and not its subsidiaries.
GENERAL
The Debentures represent unsecured general obligations of the Company
subordinate in right of payment to certain other obligations of the Company as
described under "Subordination of Debentures" and convertible into Common Stock
as described under "Conversion of Debentures." The Debentures rank pari passu in
right of payment with the Company's 7% Convertible Subordinated Debentures due
2002. The Debentures are limited to $189.475 million aggregate principal amount
and have issued only in denominations of $1,000 and integral multiples thereof
and will mature on February 15, 2005 unless earlier redeemed at the option of
the Company or at the option of the holder upon a Fundamental Change (as
defined).
The Indenture does not contain any financial covenants or restrictions
on the payment of dividends, the incurrence of Senior Obligations (as defined
below under "Subordination of Debentures") or the issuance or repurchase of
other outstanding securities of the Company. The Indenture contains no covenants
or other provisions to afford protection to holders of the Debentures
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<PAGE> 17
in the event of a highly leveraged transaction or a change in control of the
Company except to the extent described under "Redemption at Option of the
Holder."
The Debentures bear interest at the annual rate of 6 1/4% from February
10, 1998, payable semi-annually on August 15 and February 15, commencing on
August 15, 1998, to holders of record at the close of business on the preceding
January 31 and July 31, respectively, except (i) that the interest payable upon
redemption (unless the date of redemption is an interest payment date) will be
payable to the person to whom principal is payable and (ii) as set forth in the
next succeeding sentence. In the case of any Debenture (or portion thereof)
which is converted into Common Stock of the Company during the period from (but
excluding) a record date for any interest payment date to (but excluding) such
interest payment date either (i) if such Debenture (or portion thereof) has been
called for redemption on a redemption date which occurs during such period, or
is to be redeemed in connection with a Fundamental Change on a Repurchase Date
(as defined) which occurs during such period, the Company shall not be required
to pay interest on such interest payment date in respect of any such Debenture
(or portion thereof) or (ii) if otherwise, any Debenture (or portion thereof)
submitted for conversion during such period shall be accompanied by funds equal
to the interest payable on such interest payment date on the principal amount so
converted. See "Conversion of Debentures." Interest may, at the Company's
option, be paid either (i) by check mailed to the address of the person entitled
thereto as it appears in the Debenture register, provided that a holder of
Debentures with an aggregate principal amount in excess of $2.0 million shall,
at the written election of such holder, be paid by wire transfer in immediately
available funds, or (ii) by transfer to an account maintained by such person
located in the United States; provided, however, that payments to The Depository
Trust Company, New York, New York ("DTC") will be made by wire transfer of
immediately available funds to the account of DTC or its nominee. Interest will
be computed on the basis of a 360-day year comprised of twelve 30-day months.
FORM, DENOMINATION AND REGISTRATION
The Debentures have issued in fully registered form, without coupons,
in denominations of $1,000 principal amount and integral multiples thereof.
Global Debentures, Book-Entry Form. Debentures held by "qualified
institutional buyers," as defined in Rule 144A under the Securities Act
("QIBs"), or by any person who acquired such Debentures in compliance with
Regulation S under the Securities Act (a "Non-U.S. Person"), but not by other
purchasers, are curently evidenced by one or more global Debentures (each, a
"Global Debenture") which have been deposited with, or on behalf of, DTC and
registered in the name of Cede & Co. ("Cede") as DTC's nominee. Except as set
forth below, a Global Debenture may be transferred, in whole or in part, only to
another nominee of DTC or to a successor of DTC or its nominee.
QIBs and Non-U.S. Persons may hold their interests in the applicable
Global Debenture directly through DTC if such holder is a participant in DTC, or
indirectly through organizations which are participants in DTC (the
"Participants"). Transfers between Participants will be effected in the ordinary
way in accordance with DTC rules and will be settled in clearing house funds.
QIBs and Non-U.S. Persons who are not Participants may beneficially own
interests in Global Debentures 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 a Global Debenture, Cede for all purposes will be
considered the sole holder of such Global Debenture. Except as provided below,
owners of beneficial interests in a Global Debenture will not be entitled to
have certificates registered in their names, will not receive or be
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<PAGE> 18
entitled to receive physical delivery of certificates in definitive registered
form, and will not be considered the holders thereof.
Payment of interest on and the redemption price or repurchase price of
a Global Debenture will be made to Cede, the nominee for DTC, as the registered
owner of such Global Debenture by wire transfer of immediately available funds
on each interest payment date or redemption date or Repurchase Date (as
defined), as the case may be. Neither the Company, the Trustee nor any paying
agent will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in a
Global Debenture or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
The Company has been informed by DTC that, with respect to any payment
of interest on, or the redemption price of, a Global Debenture, DTC's practice
is to credit Participants' accounts on the payment date therefor with payments
in amounts proportionate to their respective beneficial interests in the
principal amount represented by such Global Debenture as shown on the records of
DTC, unless DTC has reason to believe that it will not receive payment on such
payment date. Payments by Participants to owners of beneficial interests in the
principal amount represented by a Global Debenture held through such
Participants will be the responsibility of such Participants, as is now the case
with securities held for the accounts of customers registered in "street name."
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a person
having a beneficial interest in the principal amount represented by a Global
Debenture to pledge such interest to persons or entities that do not participate
in the DTC system, or otherwise take actions in respect of such interest, may be
affected by the lack of a physical certificate evidencing such interest.
Neither the Company nor the Trustee (or any registrar, paying agent or
conversion agent under the Indenture) will have any responsibility for the
performance by DTC or its Participants or Indirect Participants of their
respective obligations under the rules and procedures governing their
operations. DTC has advised the Company that it will take any action permitted
to be taken by a holder of Debentures (including, without limitation, the
presentation of Debentures for exchange as described below), only at the
direction of one or more Participants to whose account with DTC interests in a
Global Debenture are credited, and only in respect of the principal amount of
the Debentures represented by such Global Debenture as to which such Participant
or Participants has or have given such direction.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-entry
changes to the accounts of its Participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and may include
certain other organizations such as the Initial Purchasers. Certain of such
Participants (or their representatives), together with other entities, own DTC.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through, or maintain a custodial
relationship with a Participant, either directly or indirectly.
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of interests in Global Debentures among Participants, it is
under no obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. If DTC is at any
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<PAGE> 19
time unwilling or unable to continue as depositary and a successor depositary is
not appointed by the Company within 90 days, the Company will cause Debentures
to be issued in definitive registered form in exchange for Global Debentures.
Certificated Debentures. Debentures sold to investors that were neither
QIBs nor Non-U.S. Persons were issuable in definitive registered form and may
not be represented by a Global Debenture. In addition, QIBs and Non-U.S. Persons
may request that certificated Debentures be issued in exchange for Debentures
represented by a Global Debenture. Furthermore, certificated Debentures may be
issued in exchange for Debentures represented by Global Debentures if no
successor depositary is appointed by the Company as set forth above under
"Global Debentures, Book-Entry Form."
CONVERSION OF DEBENTURES
The holders of Debentures will be entitled at any time after May 6,
1998 through the close of business on the final maturity date of the Debentures,
subject to prior redemption, to convert any Debentures or portions thereof (in
denominations of $1,000 or multiples thereof) into Common Stock of the Company,
at a conversion price set forth of $47.369 on the cover page of this Prospectus,
subject to adjustment as described below. Except as described below, no payment
or other adjustment will be made on conversion of any Debentures for interest
accrued thereon or for dividends on any Common Stock issued. If any Debentures
not called for redemption are converted during the period from (but excluding) a
record date for any interest payment date to (but excluding) such interest
payment date, such Debentures must be accompanied by funds equal to the interest
payable on such interest payment date on the principal amount so converted. The
Company is not required to issue fractional shares of Common Stock upon
conversion of Debentures and, in lieu thereof, will pay a cash adjustment based
upon the market price of Common Stock on the last business day prior to the date
of conversion. In the case of Debentures called for redemption, conversion
rights will expire at the close of business on the business day preceding the
day fixed for redemption unless the Company defaults in the payment of the
redemption price. A Debenture in respect of which a holder is exercising its
option to require redemption upon a Fundamental Change may be converted only if
such holder withdraws its election to exercise its option in accordance with the
terms of the Indenture.
The initial conversion price of $47.369 per share of Common Stock is
subject to adjustment under formulae as set forth in the Indenture in certain
events, including:
(i) the issuance of Common Stock of the Company as a
dividend or distribution on the Common Stock;
(ii) certain subdivisions and combinations of the Common
Stock;
(iii) the issuance to all holders of Common Stock of certain
rights or warrants to purchase Common Stock;
(iv) the distribution to all holders of Common Stock of
capital stock (other than Common Stock) or evidences of Indebtedness of
the Company or of assets (including securities, but excluding those
rights, warrants, dividends and distributions referred to above or paid
in cash);
(v) distributions consisting of cash, excluding any
quarterly cash dividend on the Common Stock to the extent that the
aggregate cash dividend per share of Common Stock in any fiscal quarter
does not exceed the greater of (x) the amount per share of Common Stock
of the next preceding quarterly cash dividend on the Common Stock to
the extent that such
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<PAGE> 20
preceding quarterly dividend did not require an adjustment of the
conversion price pursuant to this clause (v) (as adjusted to reflect
subdivisions or combinations of the Common Stock), and (y) 3.75% of the
average of the last reported sales price of the Common Stock during the
ten trading days immediately prior to the date of declaration of such
dividend, and excluding any dividend or distribution in connection with
the liquidation, dissolution or winding up of the Company. If an
adjustment is required to be made as set forth in this clause (v) as a
result of a distribution that is a quarterly dividend, such adjustment
would be based upon the amount by which such distribution exceeds the
amount of the quarterly cash dividend permitted to be excluded pursuant
to this clause (v). If an adjustment is required to be made as set
forth in this clause (v) as a result of a distribution that is not a
quarterly dividend, such adjustment would be based upon the full amount
of the distribution;
(vi) payment in respect of a tender offer or exchange offer
by the Company or any subsidiary of the Company for all or any portion
of the Common Stock (other than tender offers or exchange offers for
less than fifteen percent (15%) of the outstanding shares of Common
Stock of the Company) to the extent that the cash and value of any
other consideration included in such payment per share of Common Stock
exceeds the Current Market Price (as defined in the Indenture) per
share of Common Stock on the trading day next succeeding the last date
on which tenders or exchanges may be made pursuant to such tender or
exchange offer, and
(vii) payment in respect of a tender offer or exchange offer
by a person other than the Company or any subsidiary of the Company in
which, as of the closing date of the offer, the Board of Directors is
not recommending rejection of the offer. The adjustment referred to in
this clause (vii) will only be made if the tender offer or exchange
offer is for an amount that increases the offeror's ownership of Common
Stock to more than 25% of the total shares of Common Stock outstanding,
and if the cash and value of any other consideration included in such
payment per share of Common Stock exceeds the Current Market Price per
share of Common Stock on the business day next succeeding the last date
on which tenders or exchanges may be made pursuant to such tender or
exchange offer. The adjustment referred to in this clause (vii) will
generally not be made, however, if, as of the closing of the offer, the
offering documents with respect to such offer disclose a plan or an
intention to cause the Company to engage in a consolidation or merger
of the Company or a sale of all or substantially all of the Company's
assets and such consolidation or merger is consummated within twelve
(12) months of the closing of the offer.
In the case of (i) any reclassification of the Common Stock or (ii) a
consolidation, merger or combination involving the Company or a sale or
conveyance to another person of the property and assets of the Company as an
entirety or substantially as an entirety, in each case as a result of which
holders of Common Stock shall be entitled to receive stock, other securities,
other property or assets (including cash) with respect to or in exchange for
such Common Stock, the holders of the Debentures then outstanding will generally
be entitled thereafter to convert such Debentures into the kind and amount of
shares of stock, other securities or other property or assets which they would
have owned or been entitled to receive upon such reclassification,
consolidation, merger, combination, sale or conveyance had such Debentures been
converted into Common Stock immediately prior to such reclassification,
consolidation, merger, combination, sale or conveyance assuming that a holder of
Debentures would not have exercised any rights of election as to the stock,
other securities or other property or assets receivable in connection therewith.
In the event of a taxable distribution to holders of Common Stock or in
certain other circumstances requiring conversion price adjustments, the holders
of Debentures may, in certain circumstances, be deemed to have received a
distribution subject to United States income tax as a
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<PAGE> 21
dividend; in certain other circumstances, the absence of such an adjustment may
result in a taxable dividend to the holders of Common Stock. See "Certain United
States Federal Income Tax Considerations" below.
The Company from time to time may to the extent permitted by law reduce
the conversion price by any amount for any period of at least 20 days, in which
case the Company shall give at least 15 days' notice of such reduction, if the
Board of Directors has made a determination that such reduction would be in the
best interests of the Company, which determination shall be conclusive. The
Company may, at its option, make such reductions in the conversion price, in
addition to those set forth above, as the Board of Directors deems advisable to
avoid or diminish any income tax to holders of Common Stock resulting from any
dividend or distribution of stock (or rights to acquire stock) or from any event
treated as such for income tax purposes. See "Certain United States Federal
Income Tax Considerations."
No adjustment in the conversion price will be required unless such
adjustment would require a change of at least 1% in the conversion price then in
effect; provided that any adjustment that would otherwise be required to be made
shall be carried forward and taken into account in any subsequent adjustment.
Except as stated above, the conversion price will not be adjusted for the
issuance of Common Stock or any securities convertible into or exchangeable for
Common Stock or carrying the right to purchase any of the foregoing
OPTIONAL REDEMPTION BY THE COMPANY
The Debentures are not entitled to any sinking fund. At any time on or
after February 18, 2001, the Debentures will be redeemable at the Company's
option on at least 30 days' notice as a whole or, from time to time, in part at
the following prices (expressed as a percentage of the principal amount),
together with accrued interest to, but excluding, the date fixed for redemption:
If redeemed during the period beginning February 18, 2001 and ending on
February 14, 2002 at a redemption price of 103.571%, and if redeemed during the
12-month period beginning February 15:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- - ---- ----------------
<S> <C>
2002.......................................................... 102.679%
2003.......................................................... 101.786
2004.......................................................... 100.893
</TABLE>
and 100% at February 15, 2005, provided that any semi-annual payment of interest
becoming due on the date fixed for redemption shall be payable to the holders of
record on the relevant record date of the Debentures being redeemed.
If less than all of the outstanding Debentures are to be redeemed, the
Trustee shall select the Debentures to be redeemed in principal amounts of $
1,000 or multiples thereof by lot, pro rata or by another method the Trustee
considers fair and appropriate. If a portion of a holder's Debentures is
selected for partial redemption and such holder converts a portion of such
Debentures, such converted portion shall be deemed to be of the portion selected
for redemption.
The Company may not give notice of any redemption of Debentures if an
Event of Default with respect to the payment of interest on any Debentures has
occurred and is continuing.
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<PAGE> 22
REDEMPTION AT OPTION OF THE HOLDER
If a Fundamental Change (as defined) occurs at any time prior to
February 15, 2005, each holder of Debentures shall have the right, at the
holder's option, to require the Company to redeem any or all of such holder's
Debentures on the date (the "Repurchase Date") that is 30 days after the date of
the Company's notice of such Fundamental Change. The Debentures will be
redeemable in multiples of $ 1,000 principal amount.
The Company shall redeem such Debentures at a price equal to 100% of
the principal amount to be redeemed plus accrued interest to (but excluding) the
date of redemption; provided that, if such Repurchase Date is an interest
payment date, then the interest payable on such date shall be paid to the holder
of record of the Debentures on the relevant record date.
The Company is required to mail to all holders of record of the
Debentures a notice of the occurrence of a Fundamental Change and of the
redemption right arising as a result thereof on or before the tenth day after
the occurrence of such Fundamental Change. The Company is also required to
deliver the Trustee a copy of such notice. To exercise the redemption right, a
holder of Debentures must deliver, on or before the 30th day after the date of
the Company's notice of a Fundamental Change (the "Fundamental Change Expiration
Time"), written notice of the holder's exercise of such right, together with the
Debentures to be so redeemed, duly endorsed for transfer, to the Company (or an
agent designated by the Company for such purpose). Payment for Debentures
surrendered for redemption (and not withdrawn) prior to the Fundamental Change
Expiration Time will be made promptly following the Repurchase Date.
The term "Fundamental Change" means the occurrence of any transaction
or event in connection with which all or substantially all Common Stock shall be
exchanged for, be converted into, be acquired for, or constitute in all material
respects solely the right to receive, consideration which is not all or
substantially all common stock listed (or, upon consummation of or immediately
following such transaction or event which will be listed) on a United States
national securities exchange or approved for quotation on the Nasdaq National
Market or any similar United States system of automated dissemination of
quotations of securities prices (whether by means of an exchange offer,
liquidation, tender offer, consolidation, merger, combination, reclassification,
recapitalization or otherwise).
The Company will comply with the provisions of Rule 13e-4 and any other
tender offer rules under the Exchange Act to the extent then applicable in
connection with the redemption rights of the holders of Debentures in the event
of a Fundamental Change.
The redemption rights of the holders of Debentures could discourage a
potential acquiror of the Company. The Fundamental Change redemption feature,
however, is not the result of management's knowledge of any specific effort to
obtain control of the Company by means of a merger, tender offer, solicitation
or otherwise, or part of a plan by management to adopt a series of anti-takeover
provisions.
The term "Fundamental Change" is limited to certain specified
transactions and, accordingly the Company could, in the future, enter into other
transactions, including certain recapitalizations of the Company, that would not
constitute a Fundamental Change, but that would increase the amount of Senior
Obligations outstanding at such time or otherwise adversely affect the financial
condition of the Company. In addition, the payment of the Fundamental Change
redemption price on the Debentures may be subordinated to the prior payment of
Senior Obligations as described under "Subordination of Debentures" below. There
are no restrictions in the Indenture on the creation of additional Senior
Obligations or other indebtedness. Under certain circumstances, the incurrence
of
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<PAGE> 23
additional indebtedness could have an adverse effect on the Company's ability to
service its indebtedness, including the Debentures. A default of the Company on
its obligations to pay the Fundamental redemption price could result in
acceleration of the payment of other indebtedness of the Company at the time
outstanding pursuant to cross-default provisions. The Company's failure to
redeem tendered Debentures in connection with a Fundamental Change would in any
event constitute an Event of Default under the Indenture. If a Fundamental
Change were to occur, there can be no assurance that the Company would have
sufficient funds to pay the redemption price for all the Debentures tendered by
the holders thereof. Further, the ability of the Company to repurchase
Debentures upon a Fundamental Change will be dependent on compliance with
applicable laws.
SUBORDINATION OF DEBENTURES
The Indebtedness evidenced by the Debentures is subordinated to the
extent provided in the Indenture to the prior payment in full of all Senior
Obligations of the Company and in effect is pari passu in right of payment with
the Company's 7% Convertible Subordinated Debentures due 2002. The Debentures
also are effectively subordinated to all indebtedness and other liabilities,
including trade payables and lease obligations, if any, of the Company's
subsidiaries.
Upon any distribution of assets of the Company upon any dissolution,
winding up, liquidation or reorganization, the payment of the principal of, or
premium, if any, and interest (including Liquidated Damages (as defined), if
any) on the Debentures is to be subordinated to the extent provided in the
Indenture in right of payment to the prior payment in full in cash of all Senior
Obligations. In the event of any acceleration of the Debentures because of an
Event of Default (as defined), the holders of any Senior Obligations then
outstanding would be entitled to payment in full in cash of all obligations in
respect of such Senior Obligations before the holders of the Debentures are
entitled to receive any payment or distribution in respect thereof. The
Indenture will require that the Company promptly notify holders of Senior
Obligations if payment of the Debentures is accelerated because of an Event of
Default.
The Company also may not make any payment upon or in respect of the
Debentures (including upon redemption at the option of the holder of any
Debenture or at the option of the Company) if (i) a default in the payment of
the principal, premium, if any, interest, rent or other obligations in respect
of Senior Indebtedness occurs and is continuing (a "Payment Default") or (ii)
any other default occurs and is continuing with respect to Designated Senior
Obligations (as defined) that permits a holder of the Designated Senior
Obligation as to which such default relates to accelerate its maturity and the
Trustee receives a written notice of such default (a "Payment Blockage Notice")
from the Company or other person permitted to give such notice under the
Indenture (a "Non-Payment Default"). Payments on the Debentures may and shall be
resumed (a) in case of a Payment Default, upon the date on which such default is
cured or waived or ceases to exist and (b) in case of a Non-Payment Default, the
earlier of the date on which such Non-Payment Default is cured or waived or
ceases to exist or 179 days after the date on which the applicable Payment
Blockage Notice is received by the Trustee if the maturity of such Designated
Senior Obligations has not been accelerated and no Payment Default with respect
to any Senior Obligations has occurred which has not been cured or waived (in
which case clause (a) shall instead be applicable). No new period of payment
blockage may be commenced pursuant to a Payment Blockage Notice unless and until
365 days have elapsed since the initial effectiveness of the immediately prior
Payment Blockage Notice. No Non-Payment Default that existed or was continuing
on the date of delivery of any Payment Blockage Notice to the Trustee shall be,
or shall be made, the basis for a subsequent Payment Blockage Notice.
Notwithstanding the foregoing, in the event that the Trustee or any
holder of the Debentures receives any payment or distribution of assets of the
Company of any kind in contravention of any of the subordination provisions of
the Indenture, whether in cash, property or securities, including,
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<PAGE> 24
without limitation, by way of set-off or otherwise, in respect of the Debentures
before all Senior Obligations are paid in full, then such payment or
distribution will be held by the recipient in trust for the benefit of holders
of Senior Obligations or their representatives to the extent necessary to make
payment in full of all Senior Obligations remaining unpaid, after giving effect
to any concurrent payment or distribution, or provision therefor, to or for the
benefit of the holders of Senior Obligations.
By reason of the subordination provisions described above, in the event
of the Company's bankruptcy, dissolution or reorganization, holders of Senior
Obligations may receive more, ratably, and holders of the Debentures may receive
less, ratably, than the other creditors of the Company. Such subordination will
not prevent the occurrence of any Event of Default under the Indenture.
The term "Senior Obligations" means the principal of, premium, if any,
interest (including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding) and rent payable on or
in connection with, and all fees, costs, expenses and other amounts accrued or
due on or in connection with, Indebtedness (as defined) of the Company, whether
outstanding on the date of the Indenture or thereafter created, incurred,
assumed, guaranteed or in effect guaranteed by the Company (including all
deferrals, renewals, extensions or refundings of, or amendments, modifications
or supplements to, the foregoing), unless in the case of any particular
Indebtedness the instrument creating or evidencing the same or the assumption or
guarantee thereof expressly provides that such Indebtedness shall not be senior
in right of payment to the Debentures or expressly provides that such
Indebtedness is pari passu or junior to the Debentures. Notwithstanding the
foregoing, the term Senior Obligations shall not include the Company's 7%
Subordinated Debentures due 2002 or any Indebtedness of the Company to any
subsidiary of the Company, a majority of the voting stock of which is owned,
directly or indirectly, by the Company.
The term "Indebtedness" means, with respect to any Person (as defined)
and without duplication:
(a) all indebtedness, obligations and other liabilities
(contingent or otherwise) of such Person for borrowed money (including
obligations of the Company in respect of overdrafts, foreign exchange
contracts, currency exchange agreements, interest rate protection
agreements, and any loans or advances from banks, whether or not
evidenced by notes or similar instruments, and all commitment, standby
and other fees due and payable to financial institutions with respect
to credit facilities available to such Person) or evidenced by bonds,
debentures, notes or similar instruments (whether or not the recourse
of the lender is to the whole of the assets of such Person or to only a
portion thereof), other than any account payable or other accrued
current liability or obligation incurred in the ordinary course of
business in connection with the obtaining of materials or services;
(b) all reimbursement obligations and other liabilities
(contingent or otherwise) of such Person with respect to letters of
credit, bank guarantees or bankers' acceptances;
(c) all obligations and liabilities (contingent or otherwise)
in respect of leases of real or personal property or other assets of
such Person required, in conformity with generally accepted accounting
principles, to be accounted for as capitalized lease obligations on the
balance sheet of such Person and all obligations and other liabilities
(contingent or otherwise) under any lease or related document
(including a purchase agreement) in connection with the lease of real
property which provides that such Person is contractually obligated to
purchase or cause a third party to purchase the leased property and
thereby guarantee a minimum residual value of the leased property to
the lessor and the obligations of such Person under
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<PAGE> 25
such lease or related document to purchase or to cause a third party to
purchase such leased property;
(d) all obligations of such Person (contingent or otherwise)
with respect to an interest rate or other swap, cap or collar agreement
or other similar instrument or agreement or foreign currency hedge,
exchange, purchase or similar instrument or agreement;
(e) all direct or indirect guaranties or similar agreements by
such Person in respect of, and obligations or liabilities (contingent
or otherwise) of such Person to purchase or otherwise acquire or
otherwise assure a creditor against loss in respect of, indebtedness,
obligations or liabilities of another Person of the kind described in
clauses (a) through (d);
(f) any indebtedness or other obligations described in clauses
(a) through (e) secured by any mortgage, pledge, lien or other
encumbrance existing on property which is owned or held by such Person,
regardless of whether the indebtedness or other obligation secured
thereby shall have been assumed by such Person; and
(g) any and all deferrals, renewals, extensions and refundings
of, or amendments, modifications or supplements to, any indebtedness,
obligation or liability of the kind described in clauses (a) through
(f).
The term "Designated Senior Obligations" means Senior Obligations under
the Company's existing revolving credit facility, the Company's obligations
under a put agreement to purchase $2.0 million of indebtedness of Versicor, a
former wholly owned subsidiary, in the event of a default thereof by Versicor,
or any other Senior Obligations in which the instrument creating or evidencing
the same or the assumption or guarantee thereof (or related agreements or
documents to which the Company is a party) expressly provides that such Senior
Obligations shall be "Designated Senior Obligations" for purposes of the
Indenture (provided that such instrument, agreement or other document may place
limitations and conditions on the right of such Senior Indebtedness to exercise
the rights of Designated Senior Obligations).
The Debentures are effectively subordinated to all liabilities,
including trade payables and lease obligations, if any, of the Company's
subsidiaries. Any right of the Company to receive the assets of any of its
subsidiaries upon the liquidation or reorganization thereof (and the consequent
right of the holders of the Debentures to participate in these assets) will be
effectively subordinated to the claims of that subsidiary's creditors (including
trade creditors), except to the extent that the Company is itself recognized as
a creditor of such subsidiary, in which case the claims of the Company would
still be subordinate to any security interests in the assets of such subsidiary
and any indebtedness of such subsidiary senior to that held by the Company.
The Company's subsidiaries are separate and distinct legal entities and
have no obligation, contingent or otherwise, to pay any amounts due pursuant to
the Debentures or to make any funds available therefor, whether by dividends,
loans or other payments. In addition, the payment of dividends and the making of
loans and advances to the Company by its subsidiaries may be subject to
statutory, contractual or other restrictions and are dependent upon the earnings
or financial condition of those subsidiaries and subject to various business
considerations. As a result, the Company may be unable to gain access to the
cash flow or assets of its subsidiaries.
As of December 31, 1997, the Company had approximately $6.2 million of
Senior Obligations and approximately $80.9 million in aggregate principal amount
of 7% Subordinated Debentures due 2002. The Indenture will not limit the amount
of additional indebtedness, including Senior Obligations, which the Company can
create, incur, assume or guarantee, nor will the Indenture limit
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<PAGE> 26
the amount of indebtedness or -other liabilities that any subsidiary can create,
incur, assume or guarantee.
The Company is obligated to pay reasonable compensation to the Trustee
and to indemnify the Trustee against certain losses, liabilities or expenses
incurred by it in connection with its duties relating to the Debentures. The
Trustee's claims for such payments will generally be senior to those of the
holders of the Debentures in respect of all funds collected or held by the
Trustee.
EVENTS OF DEFAULT; NOTICE AND WAIVER
An Event of Default is defined in the Indenture as being: default in
payment of the principal of or premium, if any (upon redemption or otherwise),
on the Debentures (whether or not such payment is permitted to be made under the
subordination provisions described above); default for 30 days in payment of any
installment of interest, including Liquidated Damages, if any, on the Debentures
(whether or not such payment is permitted to be made under the subordination
provisions described above); default by the Company for 60 days after notice in
the observance or performance of any other covenants in the Debentures or the
Indenture; or certain events involving bankruptcy, insolvency or reorganization
of the Company or any of its Significant Subsidiaries. The Indenture provides
that the Trustee may withhold notice to the holders of the Debentures of any
default (except in payment of principal or premium, if any, or interest
(including Liquidated Damages, if any) with respect to the Debentures) if the
Trustee considers it in the interest of the holders of the Debentures to do so.
The Indenture provides that if an Event of Default shall have occurred
and be continuing, the Trustee or the holders of not less than 25% in principal
amount of the Debentures then outstanding may declare the principal of, premium,
if any, and accrued interest (including Liquidated Damages, if any) on the
Debentures to be due and payable immediately. In the case of certain events of
bankruptcy or insolvency of the Company, the principal of, premium, if any, and
accrued interest (including Liquidated Damages, if any) on the Debentures shall
automatically become and be immediately due and payable. However, if the Company
shall cure all defaults (except the nonpayment of principal of, premium, if any,
and interest (including Liquidated Damages, if any) on any of the Debentures
which shall have become due by acceleration) and certain other conditions are
met, with certain exceptions, such declaration may be canceled and past defaults
may be waived by the holders of a majority of the principal amount of the
Debentures then outstanding.
The Indenture provides that any payment of principal, premium, if any,
or interest (including Liquidated Damages, if any) that is not made when due
(whether OR not such payment is permitted to be made under the subordination
provisions described above) will accrue interest, to the extent legally
permissible, at the annual rate set forth on the cover page hereof from the date
on which such payment was required under the terms of the Indenture until the
date of payment.
The holders of a majority in principal amount of the Debentures then
outstanding shall have the right to direct in writing the time, method and place
of conducting any proceedings for any remedy available to the Trustee, subject
to certain limitations specified in the Indenture.
The Indenture provides that no holder of the Debentures may pursue any
remedy under the Indenture, except for a default in the payment of principal,
premium, if any, or interest (including Liquidated Damages, if any), on the
Debentures, unless such holder shall have previously given to the Trustee
written notice of a continuing Event of Default, and the holders of at least 25%
in principal amount of the outstanding Debentures shall have made a written
request, and offered reasonable indemnity, to the Trustee to pursue the remedy,
and the Trustee shall not have received from the holders of a majority in
principal amount of the outstanding Debentures a direction inconsistent with
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<PAGE> 27
such request and shall have failed to comply with such request within 60 days
after receipt of such request.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of a majority in principal amount of
the Debentures at the time outstanding, to modify the Indenture or any
supplemental indenture or the rights of the holders of the Debentures, except
that no such modification shall (i) extend the fixed maturity of any Debenture,
reduce the rate or extend the time for payment of interest thereon, reduce the
principal amount thereof or premium, if any, thereon, reduce any amount payable
upon redemption thereof, change the obligation of the Company to redeem any
Debenture upon the happening of any Fundamental Change in a manner adverse to
the holders of the Debentures, impair the right of a holder to institute suit
for the payment thereof, change the currency in which the Debentures are
payable, impair the right to convert the Debentures into Common Stock subject to
the terms set forth in the Indenture, or modify the provisions of the Indenture
with respect to the subordination of the Debentures in a manner adverse to the
holders of the Debentures in any material respect, without the consent of each
holder of a Debenture so affected or (ii) reduce the aforesaid percentage of
Debentures whose holders are required to consent to any such modification of the
Indenture or any such supplemental indenture, without the consent of the holders
of all of the Debentures then outstanding. The indenture also provides for
certain modifications of its terms without the consent of the holders of the
Debentures.
REGISTRATION RIGHTS OF THE DEBENTUREHOLDERS
Pursuant to the terms of a Registration Rights Agreement, dated
February 10, 1998, between the Company and the Initial Purchasers (the
"Registration Rights Agreement"), the Company has filed with the Commission a
shelf registration statement, of which this Prospectus is a part, covering
resales by holders of the Debentures and the Common Stock issuable upon
conversion of the Debentures within 90 days after the closing date of the
original issuance of the Debentures (without giving effect to the exercise of
the over-allotment option). The Company has agreed to use reasonable best
efforts to keep the shelf registration statement effective until the earlier of
(i) the sale pursuant to the shelf registration statement of all the securities
registered thereunder or the sale to the public of all securities pursuant to
Rule 144 and (ii) the expiration of the holding period applicable to such
securities pursuant to Rule 144(k) under the Securities Act or any successor
provision, calculated assuming the holder is not an affiliate of the Company.
The Registration Rights Agreement provides that the Company will be permitted to
suspend the use of this Prospectus for a period not to exceed an aggregate of 60
days in any 365 day period under certain circumstances relating to pending
corporate developments, public filings with the Commission and similar events.
The Company has agreed to pay predetermined liquidated damages to those holders
of Debentures and those holders of Common Stock issued upon conversion of the
Debentures who have requested to sell pursuant to the registration statement if
the Prospectus is unavailable for a period in excess of that permitted above.
The Company has further agreed, if such failure to file or unavailability
continues for a period of 30 days in excess of that permitted above, to pay
predetermined liquidated damages to all holders of Debentures and all holders of
Common Stock issued upon conversion of the Debentures, whether or not such
holder has requested to sell pursuant to the shelf registration statement. A
holder who sells the Debentures or the Common Stock issued upon conversion of
the Debentures pursuant to the shelf registration statement generally will be
required to be named as a selling stockholder in this Prospectus, deliver this
Prospectus to purchasers and be bound by those provisions of the Registration
Rights Agreement which are applicable to such holder (including certain
indemnification provisions). The Company will pay all expenses of the
registration statement, provide to each registered holder who has requested to
sell pursuant to the shelf registration statement copies of this Prospectus,
notify each registered holder who has requested to sell pursuant to the shelf
registration statement when the
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<PAGE> 28
shelf registration statement has become effective and take certain other actions
as are required to permit, subject to the foregoing, unrestricted resales of the
Debentures or the Common Stock.
INFORMATION CONCERNING THE TRUSTEE
The Chase Manhattan Bank, as Trustee under the Indenture, has been
appointed by the Company as paying agent, conversion agent, registrar and
custodian with regard to the Debentures.
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<PAGE> 29
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain material United States federal
income and estate tax considerations relating to the purchase, ownership and
disposition of the Debentures and of Common Stock into which Debentures may be
converted, but does not purport to be a complete analysis of all the potential
tax considerations relating thereto. This summary is based on the provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), the applicable
Treasury Regulations promulgated or proposed thereunder ("Treasury
Regulations"), judicial authority and current administrative rulings and
practice, all of which are subject to change, possibly on a retroactive basis.
This summary deals only with holders that will hold Debentures and Common Stock
into which Debentures may be converted as "capital assets" (within the meaning
of Section 1221) 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 Debentures as a position in a hedging transaction, "straddle or
conversion transaction" for tax purposes, or persons that have a "functional
currency" other than the U.S. dollar. This summary discusses the tax
considerations applicable to the initial purchasers of the Debentures who
purchase the Debentures at their "issue price" as defined in Section 1273 of the
Code and does not discuss the tax considerations applicable to subsequent
purchasers of the Debentures. The Company has not sought any ruling from the
Internal Revenue Service ("IRS") with respect to the statements made and the
conclusions reached in the following summary, and there can be no assurance that
the IRS will agree with such statements and conclusions. INVESTORS CONSIDERING
THE PURCHASE OF DEBENTURES SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO
THE APPLICATION OF THE UNITED STATES FEDERAL INCOME 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 Debenture or Common Stock that for United States federal income tax
purposes is (i) a citizen or resident of the United States, (ii) a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any political subdivision thereof, (iii) an estate the income
of which is subject to United States federal income taxation regardless of its
source, or (iv) a trust if (a) a court within the United States is able to
exercise primary supervision over the administration of the trust and (b) one or
more U.S. persons have the authority to control all substantial decisions of the
trust.
Payment of Interest
Interest on a Debenture generally will be includable 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. The Company is obligated to pay liquidated damages
to holders of the Debentures in certain circumstances described under
"Description of Debentures -- Registration Rights of the Debentureholders." The
Company believes that any such payment should be treated as subject to an
"incidental contingency" for purposes of the original issue discount rules
because the amount of such payments, if required to be made, is expected to be
insignificant relative to the total expected amount of remaining payments on the
Debentures. Accordingly, any such amounts should be taxable to holders as
payments of interest. The Company expects that the Debentures will not have
original issue discount.
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<PAGE> 30
Sale, Exchange or Redemption of the Debentures
Upon the sale, exchange or redemption of a Debenture, 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 tax basis in the Debenture. A United
States Holder's adjusted tax basis in a Debenture generally will equal the cost
of the Debenture to such Holder, less any principal payments received by such
Holder. Such capital gain or loss will be long-term if the United States
Holder's holding period is more than 18 months, will be mid-term if the holding
period is more than 12 months and equal to or less than 18 months, will be
short-term if the holding period is equal to or less than 12 months. Under the
Taxpayer's Relief Act of 1997 (the "1997 Act"), long- term capital gains are
taxed at a maximum rate of 20%, mid-term capital gains are taxed at a maximum
rate of 28%, and short-term capital gains are taxed at a maximum rate of 39.6%.
Also, under the 1997 Act, in taxable years beginning after December 31, 2000,
the rate of tax applicable to long-term capital gains in certain circumstances
may be reduced below 20% for property held for more than five years.
Constructive Dividends on Debentures
If at any time (i) the Company makes a distribution of cash or property
to its stockholders or purchases Common Stock and such distribution or purchase
would be taxable to such stockholders as a dividend for United States 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
Common Stock) and, pursuant to the anti-dilution provisions of the Indenture,
the Conversion Rate of the Debentures is increased, or (ii) the Conversion Rate
of the Debentures is increased at the discretion of the Company, such increase
in Conversion Rate may be deemed to be the payment of a taxable dividend to
United States Holders of Debentures (pursuant to Section 305 of the Code). Such
Holders of Debentures could therefore have taxable income as a result of an
event pursuant to which they received no cash or property.
Conversion of the Debentures
A United States Holder generally will not recognize any income, gain or
loss upon conversion of a Debenture into Common Stock, except with respect to
cash received in lieu of a fractional share of Common Stock. Such Holder's tax
basis in the Common Stock received on conversion of a Debenture will be the same
as such Holder's adjusted tax basis in the Debenture 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 Debenture converted.
Cash received in lieu of a fractional share of Common Stock upon
conversion will be treated as a payment in exchange for the fractional share of
Common Stock. Accordingly, the receipt of cash in lieu of a fractional share of
Common Stock 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 tax basis in the fractional share).
Dividends on Common Stock
The amount of any distribution by the Company in respect of the Common
Stock will be equal to the amount of cash and the fair market value, on the date
of distribution, of any property distributed. Generally, distributions will be
treated as a dividend, subject to tax as ordinary income, to the extent of the
Company's current or accumulated earnings and profits, then as a tax-free return
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<PAGE> 31
of capital to the extent of the Holder's tax basis in the Common Stock and
thereafter as gain from the sale of exchange of such stock.
In general, a dividend distribution to a corporate United States Holder
will qualify for the 70% dividends received deduction if the Holder owns less
than 20% of the voting power and value of the Company's stock (other than any
non-voting, non-convertible, non-participating preferred stock). A corporate
United States Holder that owns 20% or more of the voting power and value of the
Company's stock (other than any non-voting, non-convertible, non-participating
preferred stock) generally will qualify for an 80% dividends received deduction.
The dividends received deduction is subject, however, to certain holding period,
taxable income and other limitations.
Sale of Common Stock
Upon the sale or exchange of Common STOCK, A United States Holder
generally will recognize capital gain or loss equal to the difference between
(i) the amount of cash and the fair market value of any property received upon
the sale or exchange and (ii) such Holder's adjusted tax basis in the Common
Stock. Such capital gain or loss will be long-term if the United States Holder's
holding period is more than 18 months, will be mid-term if the holding period is
more than 12 months and equal to or less than 18 months, will be short- term if
the holding period is equal to or less than 12 months. Under the 1997 Act,
long-term capital gains are taxed at a maximum rate of 20% and mid-term capital
gains are taxed at a maximum rate of 28%, and short-term capital gains are taxed
at a maximum rate of 39.6%. Also, under the 1997 Act, in taxable years beginning
after December 31, 2000, the rate of tax applicable to long-term capital gains
in certain circumstances may be reduced below 20% for property held for more
than five years. A United States Holder's basis and holding period in Common
Stock received upon conversion of a Debenture are determined as discussed above
under Conversion of the Debentures".
Information Reporting and Backup Withholding Tax
In general, information reporting requirements will apply to payments
of principal, premium, if any, and interest on a Debenture, payments of
dividends on Common Stock, payments of the proceeds of the sale of a Debenture
and payments of the proceeds of the sale of Common Stock to certain noncorporate
United States Holders. The payor will be required to withhold backup withholding
tax at the rate of 31% if (a) the payee fails to furnish a taxpayer
identification number ("TIN") to the payor or establish an exemption from backup
withholding, (b) the IRS notifies the payor that the TIN furnished by the payee
is incorrect, (c) there has been a notified payee underreporting with respect to
interest, dividends or original issue discount described in Section 3406(c) of
the Code or (d) there has been a failure of the payee to certify under the
penalty of perjury that the payee is not subject to backup withholding under the
Code. 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 and may entitle the Holder to a refund, provided that
the required information is furnished to the IRS.
NON-UNITED STATES HOLDERS
As used herein, the term "Non-United States Holder" means any
beneficial owner of a Debenture or Common Stock that is not a United States
Holder.
Payment of Interest
Generally, interest income of a Non-United States Holder that is not
effectively connected with a United States trade or business will be subject to
a withholding tax at a 30% rate (or, if applicable, a
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<PAGE> 32
lower treaty rate). However, interest paid on a Debenture by the Company or any
Paying Agent to a Non-United States Holder will qualify for the "portfolio
interest exemption" and therefore will not be subject to United States federal
income tax or withholding tax, provided that such interest income is not
effectively connected with a United States trade or business of the Non-United
States Holder and provided that the Non-United States Holder (i) does not
actually or constructively own (pursuant to the conversion feature of the
Debentures or otherwise) 10% or more of the combined voting power of all classes
of stock of the Company entitled to vote, (ii) is not a controlled foreign
corporation related to the Company actually or constructively through stock
ownership, (iii) is not a bank which acquired the Debentures in consideration
for an extension of credit made pursuant to a loan agreement entered into in the
ordinary course of business and (iv) either (a) provides a Form W-8 (or a
suitable substitute form) signed under penalties of perjury that includes its
name and address and certifies as to its non-United States status, or (b) is a
securities clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business and
provides a statement to the Company or its agent under penalties of perjury in
which it certifies that a Form W-8 (or a suitable substitute) has been received
by it from the Non-United States Holder or qualifying intermediary and furnishes
the Company or its agent with a copy thereof.
Recently released Treasury Regulations provide alternative methods for
satisfying the certification requirements described in clause (iv) above. The
Treasury Regulations are effective for payments made after December 31, 1998.
Generally, any certification provided on a Form W-8 that is validly in effect
prior to January 1, 1999 will be treated as a valid certification until it
expires under the Treasury Regulations or, if earlier, until December 3 1, 1999.
Accordingly, the alternative methods of satisfying the certification
requirements will generally not be effective until January 1, 1999, and
subsequent years.
Except to the extent that an applicable treaty otherwise provides, a
Non-United States Holder generally will be taxed in the same manner as a United
States Holder with respect to interest if the interest income is effectively
connected with a United States trade or business of the Non-United States
Holder. Effectively connected interest received by a corporate Non-United States
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 a properly executed IRS Form 4224 to the payor.
Sale, Exchange or Redemption of the Debentures
A Non-United States Holder of a Debenture will generally not be subject
to United States federal income tax or withholding tax on any gain realized on
the sale, exchange or redemption of the Debenture (including the receipt of cash
in lieu of fractional shares upon conversion of a Debenture into Common Stock)
unless (1) the gain is effectively connected with a United States trade or
business of the Non-United States Holder, (2) in the case of a Non-United States
Holder who is an individual, such Holder is present in the United States for a
period or periods aggregating 183 days or more during the taxable year of the
disposition and certain other conditions are met or (3) the Holder is subject to
tax pursuant to the provisions of the Code applicable to certain United States
expatriates.
Conversion of the Debentures
In general, no United States federal income tax or withholding tax will
be imposed upon the conversion of a Debenture into Common Stock by a Non-United
States Holder except with respect to the receipt of cash in lieu of fractional
shares by Non-United States Holders upon conversion of a Debenture where any of
the conditions described above under "Non-United States Holders -- Sale,
Exchange or Redemption of the Debentures" is satisfied.
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<PAGE> 33
Sale or Exchange of Common Stock
A Non-United States Holder generally will not be subject to United
States federal income tax or withholding tax on the sale or exchange of Common
Stock unless any of the conditions described above under "Non-United States
Holder -- Sale, Exchange or Redemption of the Debentures" is satisfied.
Dividends
Distributions by the Company with respect to the Common Stock that are
treated as dividends paid (or deemed paid), as described above under "United
States Holders -- Dividends; -- Constructive Dividends" to a Non-United States
Holder (excluding dividends that are effectively connected with the conduct of a
trade or business in the United States by such Holder and are taxable as
described below) will be subject to United States federal withholding tax at a
30% rate (or lower rate provided under any applicable income tax treaty). Except
to the extent that an applicable tax treaty otherwise provides, a Non-United
States Holder generally 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-United States
Holder. If such Non-United States Holder is a foreign corporation, it may also
be subject to a United States branch profits tax on such effectively connected
income 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.
Under currently applicable Treasury Regulations, dividends paid to an
address in a foreign country are presumed to be paid to a resident of that
country (unless the payor has knowledge to the contrary) for purposes of the
withholding discussed above and, under the current interpretation of Treasury
Regulations, for purposes of determining the applicability of a tax treaty rate.
Under recently issued Treasury Regulations, however, Non-United States Holders
of Common Stock who wish to claim the benefit of an applicable treaty rate would
be required to satisfy certain certification requirements. The new Treasury
Regulations are effective for payments made after December 31, 1998.
Death of a Non-United States Holder
A Debenture held by an individual who is not a citizen or resident of
the United States at the time of death will not be includable in the decedent's
gross estate for United States estate tax purposes, provided that such Holder or
beneficial owner did not at the time of death actually or constructively own 10%
or more of the combined voting power of all classes of stock of the Company
entitled to vote, and provided that, at the time of death, payments with respect
to such Debenture would not have been effectively connected with the conduct by
such Non-United States Holder of a trade or business within the United States.
Common Stock actually or beneficially held by an individual who is a
Non-United States Holder at the time of his or her 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.
Information Reporting and Backup Withholding Tax
United States information reporting requirements and backup withholding
tax will not apply to payments on a Debenture to a Non-United States Holder if
the statement described in "Non-United
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<PAGE> 34
States Holders -- Payment of Interest" is duly provided by such Holder, provided
that the payor does not have actual knowledge that the Holder is a United States
person.
Information reporting requirements and backup withholding tax, will not
apply to any payment of the proceeds of the sale of a Debenture, or any payment
of the proceeds of the sale of Common Stock effected outside the United States
by a foreign office of a "broker" (as defined in applicable Treasury
Regulations); unless such broker (i) is a United States person, (ii) is a
foreign person that derives 50% or more of its gross income for certain periods
from the conduct of a trade or business in the United States or (iii) is a
controlled foreign corporation for United States federal income tax purposes.
Payment of the proceeds of any such sale effected outside the United States by a
foreign office of any broker that is described in (i), (ii) or (iii) of the
preceding sentence will not be subject to backup withholding tax, but will be
subject to information reporting requirements unless such broker has documentary
evidence in its records that the beneficial owner is a Non-United States Holder
and certain other conditions are met, or the beneficial owner otherwise
establishes an exemption. Payment of the proceeds of any such sale to or through
the United States office of a broker is subject to information reporting and
backup withholding requirements, unless the beneficial owner of the Debenture
provides the statement described in "Non-United States Holders -- Payment of
Interest" or otherwise establishes an exemption.
If paid to an address outside the United States, dividends on Common
Stock held by a Non-United States Holder will generally not be subject to the
information reporting and backup withholding requirements described in this
section. However, under recently issued Treasury Regulations, dividend payments
will be subject to information reporting and backup withholding unless
applicable certification requirements are satisfied. The new Treasury
Regulations apply to dividend payments made after December 31, 1998.
United States Real Property Holding Corporations
The discussion of the United States taxation of Non-United States
Holders of Debentures and Common Stock assumes that the Company is at no time a
United States real property holding corporation within the meaning of Section
897(c) of the Code. Under present law, the Company would not be a United States
real property holding corporation so long as (a) the fair market value of its
United Stated real property interests is less than (b) 50% of the sum of the
fair market value of its United States real property interests, its interests in
real property located outside the United States, and its other assets which are
used or held or use in a trade or business. The Company believes that it is not
a United States real property holding corporation and does not expect to become
such a corporation. If the Company becomes a "United States real property
holding corporation," gain recognized on a disposition of Debentures or Common
Stock would be subject to United States federal income tax unless (i) the Common
Stock is "regularly traded on an established securities market" within the
meaning of the Code and (ii) either (A) the Non-United States Holder disposing
of Common Stock did not own, actually or constructively, at any time during the
five-year period preceding the disposition, more than 5% of the Common Stock, or
(B) in the case of a disposition of Debentures, the NonUnited States Holder did
not own, actually or constructively, Debentures which, as of any date on which
such holder acquired Debentures, had a fair market value greater than that of 5%
of the Common Stock.
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<PAGE> 35
SELLING SECURITYHOLDERS
The Debentures were originally acquired on February 10, 1998 from the
Company by the Initial Purchasers. The Initial Purchasers advised the Company
that the Initial Purchasers have resold the Debentures in transactions exempt
from the registration requirements of the Securities Act to "qualified
institutional buyers" (as defined in Rule 144A of the Securities Act) and
certain institutional "accredited investors" (as defined in Rule 501(a)(1), (2),
(3), or (7) under the Securities Act). These subsequent purchasers, or their
transferees, pledgees, donees or successors, may from time to time offer and
sell any or all of the Debentures and/or Conversion Shares pursuant to this
Prospectus.
The Debentures and the Conversion Shares have been registered pursuant
to the Registration Rights Agreement which provides that the Company file a
Registration Statement with regard to the Debentures and the Conversion Shares
within 90 days of the date of original issuance of the Debentures and keep such
Registration Statement effective until the earlier of (i) the sale pursuant to
the Registration Statement of all the securities registered pursuant to the
Registration Rights Agreement thereunder and (ii) the expiration of the holding
period applicable to such securities under Rule 144(k) under the Securities Act
or any successor provision.
In addition, 12,639 Additional Shares are being registered pursuant to
the Registration Statement for the account of certain securityholders of the
Company.
The Selling Securityholders may choose to sell Debentures and/or Shares
from time to time. See "Plan of Distribution."
DEBENTURES AND CONVERSION SHARES. The following table sets forth the
name of each Selling Securityholder who has provided the Company with notice as
of the date of this Prospectus pursuant to the Registration Rights Agreement of
such Selling Securityholder's intent to sell or otherwise dispose of Debentures
and/or Conversion Shares pursuant to the Registration Statement, the principal
amount of Debentures and the number of Conversion Shares which may be sold from
time to time by such Selling Securityholder pursuant to the Registration
Statement and the amount of outstanding Debentures and Common Stock beneficially
owned by such Selling Securityholder prior to the offering (assuming no
conversion of the Debentures). No such Selling Securityholder nor any of its
affiliates has held any position or office with, been employed by or otherwise
has had any material relationship with, the Company or any of its affiliates
during the three years prior to the date of this Prospectus. Because the Selling
Securityholder may offer all or some portion of the Debentures and Conversion
Shares, no estimate can be given as to the amount or percentage of Debentures or
Common Stock that will be held by the Selling Securityholders upon termination
of sales pursuant to this Prospectus. In addition, the Selling Securityholders
identified below may have sold, transferred or disposed of all or a portion of
their Debentures since the date on which they provided the information regarding
their holdings in transactions exempt from the registration requirements of the
Securities Act.
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<PAGE> 36
<TABLE>
<CAPTION>
Amount of Shares of
Amount of Debentures Common Stock
Debentures that Owned Before Shares That May Owned Before
Name May be Sold Offering be Sold(1) Offering
---- --------------- ------------ --------------- ------------
<S> <C> <C> <C> <C>
ICI American
Holdings Trust $ 425,000 $ 425,000 8,972 0
Zeneca Holdings Trust
425,000 425,000 8,972 0
State of Delaware
PERS 1,000,000 1,000,000 21,110 0
Starvest Fund-
Discretionary 500,000 500,000 10,555 0
State of Oregon/SAIF
Corporation 4,000,000 4,000,000 84,443 0
State of Oregon PERS 4,500,000 4,500,000 94,998 0
Nalco Chemical Corp.
Retirement 225,000 225,000 4,749 0
Kapiolani Medical
Center for Women and
Children 100,000 100,000 2,111 0
Hawaiian Airlines
Pension for Salaried
Employees 15,000 15,000 316 0
Hawaiian Airlines
Pilots' Retirement Plan 70,000 70,000 1,477 0
Hawaiian Airlines
Pension Plan - IAM 50,000 50,000 1,055 0
Allstate Insurance
Company 2,000,000 2,000,000 42,221 0
Shepard Investments
International Inc. 14,875,000 14,875,000 314,023 0
Silverton International
Fund Limited 1,500,000 1,500,000 31,662 0
Nomura Securities
(Bermuda) Ltd. 7,000,000 7,000,000 147,775 0
Paloma Securities
L.L.C. 1,725,000 1,725,000 36,416 0
Bost & Co., as
nominee for Mellon
Securities Trust
Company 100,000 100,000 2,111 0
Ell & Co., as nominee
for The Northern
Trust Company of
New York 580,000 580,000 12,244 0
Salkeld & Co., as
nominee for Bankers
Trust Company 615,000 615,000 12,983 0
Bankers Trust
Company 1,500,000 1,500,000 31,662 0
Bear Stearns Securities
Corp. 1,500,000 1,500,000 31,662 0
The Income Fund of
America, Inc. 7,350,000 7,350,000 155,164 0
The TCW Group, Inc. 12,315,000 12,315,000 259,980 0
Unknown (2) 127,105,000 127,105,000 2,683,294 0
</TABLE>
- - ------------
(1) Assumes conversion of full amount of Debentures held by such holder at the
initial rate of $47.369 in principal amount of Debentures per share of
Common Stock.
(2) Certain of the Debentures are currently evidenced by a global Debenture
which has been deposited with DTC and registered in the name of Cede & Co.
as DTC's nominee. Therefore, the Company is unable to provide the names of
the remaining Selling Stockholders.
ADDITIONAL SHARES. Set forth below are the names of certain other
Selling Securityholders who acquired shares of Common Stock in certain
transactions not related to the sale of Debentures and the maximum number of
Additional Shares that may be sold by each such Selling Securityholder from time
to time hereunder. No such Selling Securityholders nor any of their affiliates
has held any position or office with, been employed by or otherwise have had any
material relationship with, the Company or any of its affiliates during the
three years prior to the date of this Prospectus. The percentage of Common Stock
beneficially owned by each of the Selling Securityholders identified below both
prior to and after giving effect to the offering being made hereby is less than
1%.
<TABLE>
<CAPTION>
Number of Shares of
Common Stock
Beneficially Owned Prior Number of Shares of Number of Shares of
to this Common Stock to be Common Stock Beneficially
Name Offering Offered Hereunder Owned After this Offering
---- ------------------------ ------------------- -------------------------
<S> <C> <C> <C>
Robash Inc. 243 243 0
Beincke Investment Fund L.P. 1,944 1,944 0
Theodore H. Ashford 4,243 243 4,000
Bedrock Asset Trust I 7,778 7,778 0
Bankers Trust Company, as 80,539 2,431 78,108
Trustee of the Hughes
Aircraft Company
Retirement Plans
</TABLE>
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<PAGE> 37
This Prospectus may be supplemented as necessary to set forth information
respecting any Selling Securityholder providing the Company with notice
subsequent to the date of this Prospectus pursuant to the Registration Rights
Agreement of such Selling Securityholder's intent to sell or otherwise dispose
of Debentures and/or Shares pursuant to the Registration Statement.
PLAN OF DISTRIBUTION
The Debentures and the Shares are being registered to permit public
secondary trading of such securities by the holders thereof from time to time
after the date of this Prospectus. The Company has agreed, among other things,
to bear all expenses (other than underwriting discounts and selling commissions)
in connection with the registration and sale of the Debentures and the Shares
covered by this Prospectus.
The Company will not receive any of the proceeds from the offering of
Debentures and the Shares by the Selling Securityholders. Debentures and Shares
offered hereby may be sold from time to time directly by any Selling
Securityholder or, alternatively, through underwriters, broker-dealers or
agents. If Debentures or Shares are sold through underwriters or broker-dealers,
the Selling Securityholder will be responsible for underwriting discounts or
commissions or agent's commissions. Such Debentures or Shares may be sold in one
or more transactions at fixed prices, at prevailing market prices at the time of
sale, at varying prices determined at the time of sale, or at negotiated prices.
Such sales may be effected in transactions (which may involve crosses or block
transactions) (i) on any national securities exchange or quotation service on
which the Debentures or Shares may be listed or quoted at the time of sale, (ii)
in the over-the-counter market, (iii) in transactions otherwise than on such
exchanges or services or in the over-the-counter market, or (iv) through the
writing of options. In connection with sales of the Debentures or Shares or
otherwise, any Selling Securityholder may enter into hedging transactions with
broker-dealers, which may in turn engage in short sales of the Debentures or
Shares in the course of hedging the positions they assume. Any Selling
Securityholder may also sell short and deliver Debentures or Shares to close out
such short positions, or loan or pledge Debentures or Shares to broker-dealers
that in turn may sell such securities.
The outstanding Common Stock is publicly traded on Nasdaq. The Initial
Purchasers have advised the Company that certain of the Initial Purchasers are
making and currently intend to continue making a market in the Debentures;
however, they are not obligated to do so and any such
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<PAGE> 38
market-making may be discontinued at any time without notice, in the sole
discretion of the Initial Purchasers. The Company does not intend to apply for
listing of the Debentures on Nasdaq or any securities exchange. Accordingly, no
assurance can be given as to the development or liquidity of any trading market
that may develop for the Debentures. See "Risk Factors -- Absence of Public
Market; Transfer Restrictions."
The Selling Securityholders and any broker-dealers, agent or underwriters
that participate with the Selling Securityholders in the distribution of the
Debentures or the Shares may be deemed to be "underwriters" within the meaning
of the Securities Act, in which event any commissions received by such
broker-dealers, agents or underwriters and any profits realized by the Selling
Securityholders on the resales of the Debentures or the Shares may be deemed to
be underwriting commissions or discounts under the Securities Act.
In addition, any securities covered by this Prospectus which qualify for
sale pursuant to Rule 144, Rule 144A or any other available exemption from
registration under the Securities Act may be sold under Rule 144, Rule 144A or
such other available exemption rather than pursuant to this Prospectus. There is
no assurance that any Selling Securityholder will sell any or all of the
Debentures or Shares described herein, and any Selling Securityholder may
transfer, devise or gift such securities by other means not described herein.
The Debentures were originally sold by the Company to the Initial
Purchasers in February 1998 in a private placement. The Company agreed to
indemnify and hold the Initial Purchasers harmless against certain liabilities
under the Securities Act that could arise in connection with sale of the
Debentures by the Initial Purchasers. The Registration Rights Agreement provides
for the Company and the Selling Securityholders to indemnify each other against
certain liabilities arising under the Securities Act.
The Company has agreed pursuant to the Registration Rights Agreement to use
its best efforts to cause the Registration Statement to which this Prospectus
relates to become effective as promptly as is practicable and to keep the
Registration Statement effective until the earlier of (i) the sale pursuant to
the Registration Statement of all the securities registered pursuant to the
Registration Rights Agreement thereunder and (ii) the expiration of the holding
period applicable to such securities under Rule 144(k) under the Securities Act
or any successor provision. The Registration Rights Agreement provides that the
Company may suspend the use of this Prospectus in connection with sales of
Debentures and Conversion Shares by holders for a period not to exceed an
aggregate of 60 days in any 365 day period, under certain circumstances relating
to pending corporate developments, public filings with the Commission and
similar events. Expenses of preparing and filing the Registration Statement and
all post-effective amendments will be borne by the Company.
LEGAL MATTERS
The validity of the Debentures and the Shares offered hereby will be passed
upon for the Company by Hale and Dorr LLP, a limited liability partnership
including professional corporations, 60 State Street, Boston, Massachusetts
02109.
EXPERTS
The consolidated balance sheets as of December 31, 1997 and 1996 and the
consolidated statements of operations, stockholders' equity, cash flows and the
related financial statement schedule for each of the three years in the period
ended December 31, 1997, incorporated by reference in this prospectus, have been
incorporated herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants. In those reports that firm states that with respect to
one subsidiary its opinion is based on reports of other independent public
accountants, namely Arthur Andersen LLP. The financial statements and supporting
schedule referred to above have been included herein on reliance upon the
authority of those firms as experts in accounting and auditing.
-36-
<PAGE> 39
========================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS
BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS OTHER THAN THOSE
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 OR THE SELLING SECURITYHOLDERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF ANY OFFER TO BUY TO ANY PERSON IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
OF AN OFFER OR SOLICITATION WOULD BE UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
OFFER OR SALE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE HEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information........................ 3
Incorporation of Certain Documents
By Reference............................. 3
Special Note Regarding Forward-Looking
Information................................ 4
The Company.................................. 5
Risk Factors................................. 7
Use of Proceeds.............................. 14
Ratio of Earnings to Fixed Charges........... 14
Description of Debentures.................... 14
Certain United States Federal
Income Tax Considerations.................. 27
Selling Securityholders...................... 33
Plan of Distribution......................... 35
Legal Matters................................ 36
Experts...................................... 36
</TABLE>
=========================================================
SEPRACOR INC.
$189,475,000 PRINCIPAL AMOUNT
OF 6 1/4% CONVERTIBLE SUBORDINATED
DEBENTURES DUE 2005
4,012,617 SHARES of
COMMON STOCK
--------------
PROSPECTUS
--------------
________, 1998
=========================================================
<PAGE> 40
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses to be incurred in
connection with the sale and distribution of the securities being registered
hereby, all of which will be borne by the Registrant. All amounts shown are
estimates except the Securities and Exchange Commission registration fee.
<TABLE>
<S> <C>
Filing Fee - Securities and Exchange
Commission.................................... $ 56,044
Nasdaq Listing Fee................................ 17,500
Legal fees and expenses of the
Company....................................... 30,000
Accounting fees and expenses...................... 17,500
Printing expenses................................. 3,000
Total Expenses.................................... $124,044
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article NINTH of the Registrant Restated Certificate of Incorporation
(as amended, the "Certificate of Incorporation") provides that no director of
the Registrant shall be liable for any breach of a fiduciary duty, except to the
extent that the Delaware General Corporation Law prohibits the elimination or
limitation of liability of directors for breach of fiduciary duty.
Article THIRTEENTH of the Certificate of Incorporation provides that a
director or officer of the Registrant (a) shall be indemnified by the Registrant
against all costs, charges, expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement incurred in connection with any litigation
or other legal proceeding (other than an action by or in the right of the
Registrant) brought against him by virtue of his position as a director or
officer of the Registrant if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Registrant, and, with respect to any criminal action or proceeding, has no
reasonable cause to believe his conduct was unlawful and (b) shall be
indemnified by the Registrant against all costs, charges and expenses (including
attorneys' fees) incurred in connection with any action by or in the right of
the Registrant brought against him by virtue of his position as a director or
officer of the Registrant if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Registrant, except that no indemnification shall be made with respect to any
such matter as to which such person shall have been adjudged to be liable to the
Registrant, unless a court determines that, despite such adjudication but in
view of all of the circumstances, he is entitled to indemnification of such
expenses. Notwithstanding the foregoing, to
II-1
<PAGE> 41
the extent that a director or officer has been successful, on the merits or
otherwise, including, without limitation, the dismissal of an action without
prejudice or the settlement of an action without admission of liability, he is
required to be indemnified by the Registrant against all costs, charges and
expenses (including attorneys' fees) incurred in connection therewith. Expenses
shall be advanced to a director or officer at his request, provided that he
undertakes to repay the amount advanced if it is ultimately determined that the
is not entitled to indemnification for such expenses.
Indemnification is required to be made unless the Board of Directors or
independent legal counsel determines that the applicable standard of conduct
required for indemnification has not been met. In the event of a determination
by the Board of Directors or independent legal counsel that the director or
officer did not meet the applicable standard of conduct required for
indemnification, or if the Registrant fails to make the applicable standard of
conduct required for indemnification, or if the Registrant fails to make an
indemnification payment within 60 days after such payment is claimed by such
person, such person is permitted to petition the court to make an independent
determination as to whether such person is entitled to indemnification. As a
condition precedent to the right of indemnification, the director or officer
must give the Registrant notice of the action for which indemnity is sought and
the Registrant has the right to participate in such action or assume the defense
thereto.
Article THIRTEENTH of the Certificate of Incorporation further provides
that the indemnification provided therein is not exclusive, and provides that in
the event that the Delaware General Corporation Law is amended to expand the
indemnification permitted to directors or officers the Registrant must indemnify
those persons to the fullest extent permitted by such law as so amended.
Section 145 of the Delaware General Corporation Law provides that a
corporation has the power to indemnify a director, officer, employee or agent of
the corporation and certain other persons serving at the request of the
corporation in related capacities against amounts paid and expenses incurred in
connection with an action or proceeding to which he is or is threatened to be
made a party by reason of such position, if such person shall have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, in any criminal proceeding, if such person
had no reasonable cause to believe his conduct was unlawful; provided that, in
the case of actions brought by or in the right of the corporation, no
indemnification shall be made with respect to any matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent that the adjudicating court determines that such indemnification is
proper under the circumstances.
The Registrant maintains a general liability insurance policy which
covers certain liabilities of directors and officers of the Registrant arising
out of claims based on acts or omissions in their capacities as directors or
officers.
II-2
<PAGE> 42
ITEM 16. LIST OF EXHIBITS.
<TABLE>
<S> <C>
5 Opinion of Hale and Dorr LLP.
23.1 Consent of Hale and Dorr LLP, included in Exhibit 5 filed herewith.
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of Arthur Andersen LLP.
24* Power of Attorney.
25* Statement of Eligibility of the Trustee on Form T-1
</TABLE>
- - --------------
* Previously Filed.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement. Notwithstanding the foregoing, any
increase or decrease in the volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any derivation from the low or high and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the Registration Statement;
and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), that are
incorporated by reference in this Registration Statement.
(2) That, for the purposes of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
II-3
<PAGE> 43
The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein and the offering of such securities
at the time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the indemnification provisions described herein, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-4
<PAGE> 44
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 1 to Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Marlborough, Commonwealth of
Massachusetts, on this 12th day of June, 1998.
SEPRACOR INC.
By: /s/ Timothy J. Barberich
-----------------------------------
Timothy J. Barberich
President and Chief Executive Officer
II-5
<PAGE> 45
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to Registration Statement has been signed by the following
persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- - --------- ----- ----
<S> <C> <C>
/s/ Timothy J. Barberich President; Chief Executive Officer June 12, 1998
- - ------------------------------------ and Director (Principal Executive
Timothy J. Barberich Officer)
/s/ David P. Southwell* Executive Vice President; Chief June 12, 1998
- - ------------------------------------ Financial Officer (Principal Financial
David P. Southwell Officer)
/s/ Robert F. Scumaci* Senior Vice President, Finance and June 12, 1998
- - ------------------------------------ Administration (Principal Accounting
Robert F. Scumaci Officer)
/s/ James G. Andress* Director June 12, 1998
- - ------------------------------------
James G. Andress
/s/ Digby W. Barrios* Director June 12, 1998
- - ------------------------------------
Digby W. Barrios
/s/ Robert J. Cresci* Director June 12, 1998
- - ------------------------------------
Robert J. Cresci
/s/ Robert F. Johnston* Director June 12, 1998
- - ------------------------------------
Robert F. Johnston
/s/ Keith Mansford, Ph.D.* Director June 12, 1998
- - ------------------------------------
Keith Mansford, Ph.D.
/s/ James F. Mrazek* Director June 12, 1998
- - ------------------------------------
James F. Mrazek
/s/ Alan A. Steigrod* Director June 12, 1998
- - ------------------------------------
Alan A. Steigrod
*By: /s/ Timothy J. Barberich
--------------------------------
Timothy J. Barberich
Attorney-in-Fact
</TABLE>
II-6
<PAGE> 1
HALE AND DORR LLP
Counsellors at Law
60 State Street, Boston, Massachusetts 02109
617-526-6000 * FAX 617-526-5000
EXHIBIT 5
June 17, 1998
Sepracor Inc.
111 Locke Drive
Marlborough, MA 02142
Ladies and Gentlemen:
This opinion is furnished to you in connection with a Registration
Statement on Form S-3, as amended (the "Registration Statement") filed with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Securities Act"), relating to the registration of (i)
$189,475,000 principal amount of 6 1/4% Convertible Subordinated Debentures due
2005 ("Debentures"), (ii) an aggregate of 3,999,978 shares of Common Stock, $.10
par value per share issuable upon conversion of the Debentures (the "Conversion
Shares"), and (iii) an aggregate of 12,639 shares of Common Stock held by
certain stockholders of the Company (the "Additional Shares"), of Sepracor Inc.
We have examined signed copies of the Registration Statement and all
exhibits thereto, all as filed with the Commission. We have also examined and
relied upon the original or copies of minutes of meetings of the stockholders
and Board of Directors of the Company, stock record books of the Company, a copy
of the By-Laws of the Company, as amended, and a copy of the Certificate of
Incorporation of the Company, as amended.
In our examination of the foregoing documents, we have assumed (i) the
genuineness of all signatures and the authenticity of all documents submitted to
us as originals, (ii) the conformity to the originals of all documents submitted
to us as certified, facsimile or photostatic copies, and (iii) the authenticity
of the originals of such latter documents.
Based upon the foregoing, we are of the opinion that:
1. The Debentures have been duly and validly authorized and issued;
2. The Conversion Shares have been duly and validly authorized
and when issued upon conversion of the Debentures in
accordance with the terms of such Debentures, will be validly
issued, fully paid and non-assessable;
3. The Additional Shares have been duly and validly authorized and
issued and are fully-paid and non-assessable.
Please note that we are opining only as to the matters expressly set
forth herein, and no opinion should be inferred as to any other matters.
<PAGE> 2
Sepracor Inc.
June 17, 1998
Page 2
We hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Securities Act and to the use of our
name therein and in the related Prospectus under the caption "Legal Matters." In
giving such consent, we do not hereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act or the
rules and regulations of the Commission.
It is understood that this opinion is to be used only in connection
with the offer and sale of the Debentures, the Conversion Shares and the
Additional Shares while the Registration Statement is in effect.
Very truly yours,
/s/ Hale and Dorr LLP
Hale and Dorr LLP
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement of Sepracor Inc. on Form S-3 (File No. 333-51879) of our
reports dated February 19, 1998, except as to the information in Note W for
which the date is March 26, 1998, on our audits of the consolidated financial
statements and the financial statement schedule of Sepracor Inc. We also consent
to the reference to our firm under the caption "Experts".
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
June 15, 1998
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in Sepracor Inc.'s registration statement on Form S-3/Amendment No. 1
of our report dated January 27, 1998 (except for the matter discussed in Note Q
as to which the date is March 26, 1998) included in BioSepra Inc. and
subsidiaries Form 10-K for the year ended December 31, 1997 and to all
references to our Firm included in this registration statement.
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
June 15, 1998
