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As filed with the Securities and Exchange Commission on January 21, 1999
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------------------
WATSON PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
NEVADA 95-3872914
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
311 BONNIE CIRCLE
CORONA, CALIFORNIA 91720
(909) 270-1400
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
---------------------------------
ROBERT C. FUNSTEN
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
WATSON PHARMACEUTICALS, INC.
311 BONNIE CIRCLE
CORONA, CALIFORNIA 91720
(909) 270-1400
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
MICHEL J. FELDMAN, ESQ.
STEVE CURTIS, ESQ.
D'ANCONA & PFLAUM LLC
111 E. WACKER DR., STE. 2800
CHICAGO, IL 60601-4205
(312) 602-2000
---------------------------------
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this
Registration Statement on Form S-3
---------------------------------
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. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Proposed Proposed
Title of Amount maximum maximum Amount of
securities to to be offering price aggregate registration
be registered registered per share offering price fee
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
common stock
($0.0033 par value) 55,587(1) $ 34.54(2) $1,920,071 $534.00(3)
Total Registration Fee: $534.00
</TABLE>
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(1) The number of shares set forth to be registered corresponds to the
aggregate number of shares of common stock of TheraTech, Inc. ("TheraTech")
which could be purchased upon exercise of all options issued under the
TheraTech, Inc. 1992 Amended and Restated Directors' Stock Option Plan. These
options when granted were to be exercisable for shares of TheraTech common
stock. Pursuant to an Agreement and Plan of Merger dated as of October 23, 1998
(the "Merger Agreement"), these options have been converted to the right to
acquire 55,587 shares of Watson Pharmaceuticals, Inc. ("Watson" or "Registrant"
or "Company") common stock.
(2) Represents the weighted average exercise price of options granted
under the Plan, as adjusted to reflect the Exchange Ratio in the Merger
Agreement. Actual exercise prices range from $22.53 to $42.25 per share.
(3) Registration Fee computed pursuant to Rule 457(h)(1)
---------------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
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file an amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until this Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
INTRODUCTORY STATEMENT NOT FORMING PART OF PROSPECTUS
This Registration Statement relates to the shares of the Registrant's
Common Stock issuable upon exercise of the TheraTech options described herein.
The Registrant has already filed a Registration Statement on Form S-8 relating
to shares of the Registrant's Common Stock issuable upon exercise of the stock
options held by officers, consultants, and employees of TheraTech which are
eligible to be registered on Form S-8.
<PAGE> 4
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.
<PAGE> 5
PRELIMINARY PROSPECTUS DATED JANUARY 21, 1999
SUBJECT TO COMPLETION
PROSPECTUS
55,587 SHARES
WATSON PHARMACEUTICALS, INC.
COMMON STOCK ($0.0033 PAR VALUE)
On January 15, 1999 (the "Effective Time"), a subsidiary of Watson
Pharmaceuticals, Inc., a Nevada corporation ("Watson" or the "Company"), merged
with TheraTech, Inc., a Delaware corporation ("TheraTech"), pursuant to an
Agreement and Plan of Merger (the "Merger Agreement") dated as of October 23,
1998, (the "Merger"). As a result of the Merger, TheraTech became a wholly owned
subsidiary of Watson, and each share of TheraTech common stock outstanding at
the Effective Time was converted into the right to receive approximately 0.2663
of a share of Watson Common Stock. As a further result of the Merger, certain
options previously exercisable for TheraTech common stock are now exercisable
for Watson common stock, par value $0.0033 per share ("Common Stock").
This Prospectus relates to up to 55,587 shares of Watson Common Stock
that may be issued upon exercise of options issued under the TheraTech, Inc.
1992 Amended and Restated Directors' Stock Option Plan ("Directors' Plan").
See "DESCRIPTION OF OPTIONS" below for a description of the options.
The Company's Common Stock is traded on the New York Stock Exchange
under the symbol "WPI." On January 20, 1999, the last reported sale price of the
Company's Common Stock on the New York Stock Exchange was $56.13 per share.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES HAS
APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED UNDER THIS PROSPECTUS OR
DETERMINED IF THIS PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------------
The date of this Prospectus is __________________, 1999
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WHERE YOU CAN FIND MORE INFORMATION
Information regarding Watson and TheraTech, including historical
financial statements and detailed descriptions of the business of Watson is
included in documents other than this Prospectus. Watson files annual, quarterly
and special reports, proxy statements and other information with the Securities
and Exchange Commission. You may read and copy reports, statements or other
information about Watson on file at the Securities and Exchange Commission's
public reference rooms in Washington, D.C., New York, New York and Chicago,
Illinois. Please call the Securities and Exchange Commission at 1-800-SEC-0330
for further information on the public reference rooms. You may also find
Watson's and TheraTech's Securities and Exchange Commission filings through
commercial document retrieval services and the web site maintained by the
Securities and Exchange Commission at http://www.sec.gov. You may find
additional information about Watson via its website: http://www.watsonpharm.com.
Information in the Company's web site is intended to be timely and accurate;
however, there can be no assurance that this is the case. Such information is
expressly excluded from this Prospectus.
The Company has filed with the Commission under the Securities Act of
1933, as amended (the "Securities Act"), a registration statement on Form S-3
(herein, together with all amendments and exhibits thereto, referred to as the
"Registration Statement") with respect to the shares of the Company's Common
Stock to be issued pursuant to this Prospectus. This document is a part of that
Registration Statement. This Prospectus does not contain all of the information
set forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. Statements
contained herein or in any document incorporated by reference herein as to the
contents of any contract or other document referred to herein or therein are not
necessarily complete, and in each circumstance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, or incorporated by reference. Each such statement is qualified in all
respects by such reference. The Registration Statement and any amendments
thereto, including exhibits filed as a part thereof, are available for
inspection and copying as set forth above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Prospectus may refer you to information about Watson located in
other documents. The information in those documents, which are identified below,
is specifically deemed to be part of this Prospectus and to have been delivered
to you in connection with making your decision to vote on the merger. You can
obtain a free copy of these and other documents on the Securities Exchange
Commission's Web site or, free of charge, by writing, calling or faxing:
Attention: Ms. Sara Swee
Director Of Corporate Communications.
Watson Pharmaceuticals, Inc.
311 Bonnie Circle
Corona, California 91720
Tel: (909) 270-1400
Fax: (909) 270-1429
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The following documents filed with the Commission are incorporated by
reference herein:
1. Annual Report of the Company on Form 10-K for the year ended December
31, 1997, as amended.
2. The Registrant's quarterly reports on Form 10-Q for the quarterly
periods ended March 31, 1998, June 30, 1998 and September 30, 1998, as amended.
3. Current Reports of the Company on Form 8-K dated February 28, 1998,
April 30, 1998, May 13, 1998 and November 18, 1998.
4. The description of the Company's Common Stock contained in its
Registration Statement on Form 8-A dated April 3, 1992.
You should also consider as a part of this document all documents that
Watson files under the Securities Exchange Act of 1934, as amended, after the
date of this Prospectus but prior to the termination of the offering made by
this Prospectus. If any document Watson files under the Securities Exchange Act
of 1934 changes in any way a statement made in any earlier document, including
this document, you should consider the most recently reported information to be
the correct information, rendering the earlier statements invalid to the extent
they are modified.
You should only rely on the information contained in this document or
that we have referred you to. We have not authorized anyone to provide you with
different information. You should only consider this Prospectus an offer to
purchase the securities discussed in this Prospectus if it is lawful in the
jurisdiction in which you reside. Although we believe we have provided you with
all of the information which would be helpful to you in your decision to acquire
shares of Common Stock, it is possible that after we have delivered this
Prospectus to you events may occur at Watson which might affect your decision
and or the value of Common Stock.
INFORMATION REGARDING WATSON
Watson is a fully integrated pharmaceutical company engaged in the
research and development, production, marketing and distribution of off-patent
and branded pharmaceutical products.
Watson has made significant recent acquisitions of businesses, products
and technologies. During 1997, Watson acquired Royce Laboratories, Inc., a
developer and manufacturer of off-patent pharmaceutical products, and Oclassen
Pharmaceuticals, Inc., a developer and marketer of dermatology products. Watson
acquired The Rugby Group, Inc., a developer and marketer of off-patent
pharmaceutical products, in February 1998. Watson also made several product
acquisitions during 1997 and 1998, including the acquisition of certain oral
contraceptive products from G.D. Searle & Co. and the acquisition of an
anti-hypertensive product from Rhone-Poulenc Rorer. Watson continues regularly
to review potential opportunities to acquire or invest in other technologies,
products or product rights and businesses compatible with its existing business.
Watson's principal executive offices are located at 311 Bonnie Circle,
Corona, California 91720. Its telephone number is (909) 270-1400.
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RISK FACTORS
This Prospectus contains forward-looking statements within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act. You
should be aware that any such statements are projections or estimates as to
future events, which may or may not occur. In addition to the other information
in this Prospectus, you should carefully consider the following risk factors.
DIFFICULTIES INTEGRATING THE BUSINESSES OF WATSON AND THERATECH
The merger of Watson and TheraTech involves the integration of two
companies that have previously operated independently. Watson and TheraTech may
encounter difficulties in integrating their businesses, which could have a
material adverse effect on the operating results or financial condition of the
combined company's business. Watson or TheraTech may experience disruption in
its business or employee base as a result of uncertainty following the merger
and during the integration process. There is also a risk that key employees of
TheraTech may seek employment elsewhere, including with competitors.
Furthermore, the operations, management and personnel of the two companies may
not be compatible, and Watson or TheraTech may also experience the loss of key
personnel for that reason. We also cannot assure you that the companies will be
able to successfully blend their products and technology to create the
advantages which the TheraTech merger is intended to create. Further, there may
be overlap between the products or customers of Watson and TheraTech which may
create conflicts in relationships or other commitments detrimental to the
integrated businesses.
DEPENDENCE ON PRODUCT DEVELOPMENT AND COMMERCIALIZATION
Watson's future results of operations will depend to a significant
extent upon its ability to successfully commercialize new proprietary and
off-patent pharmaceutical products in a timely manner. As a result, new products
must be continually developed, tested and manufactured and, in addition, must
meet regulatory standards and receive requisite regulatory approvals. Products
of Watson currently in development may or may not receive the regulatory
approvals necessary for marketing by Watson or other third-party partners.
Furthermore, the development and commercialization process is time-consuming and
costly, and we cannot assure you that any of Watson's products, if and when
developed and approved, can be successfully commercialized. Risk particularly
exists with respect to the development of proprietary products, because of the
uncertainties and higher costs associated with research and development of such
products and the unproven market acceptability of such products. Delays or
unanticipated costs in any part of the process or the inability of Watson to
obtain regulatory approval for its products, including failure to maintain
its manufacturing facilities in compliance with all applicable regulatory
requirements, could adversely affect Watson's operating results.
EFFECT OF FUTURE TRANSACTIONS ON WATSON'S BUSINESS OR STOCK PRICE IS UNCERTAIN
Watson regularly reviews potential transactions related to technologies,
products or product rights and businesses complementary to its business. Such
transactions could include mergers, acquisitions, strategic alliances, licensing
agreements or co-promotion
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agreements. In the future, Watson may choose to enter into such transactions at
any time. The impact of transactions on the market price of a company's stock is
often uncertain, but may cause substantial fluctuations to the market price.
Consequently, you should be aware that any announcement of any such transaction
could have a material adverse effect upon the market price of Watson's common
stock. Moreover, depending upon the nature of any transaction, Watson may
experience a charge to earnings, which could be material, and possibly have an
adverse impact upon the market price of Watson common stock. In connection with
the TheraTech merger, Watson expects to record merger expenses of approximately
$20 million. In addition, any such transaction could be disruptive to the
management of Watson, and any such disruption could also have a material adverse
effect on its business or financial condition.
WATSON'S BUSINESS IS AFFECTED BY GOVERNMENT REGULATION
All pharmaceutical manufacturers are subject to extensive, complex,
costly and evolving governmental regulations and restrictions administered by
the Federal Food and Drug Administration ("FDA"), other federal and state
agencies, and numerous governmental authorities in other countries. Moreover,
Watson and certain of its vendors are subject to the periodic inspection of
their facilities and operations and/or the testing of their products by the FDA,
the U.S. Drug Enforcement Agency ("DEA"), the U.S. Environmental Protection
Agency ("EPA") and similar state, local and foreign regulatory authorities. Each
of these organizations conducts periodic inspections to confirm continued
compliance with its regulations. Failure to comply with any of these regulations
could result in fines, unanticipated compliance expenditures, interruption of
production and criminal prosecution. Although Watson has instituted internal
compliance programs, we cannot assure you that such programs will meet
regulatory agency standards and that any lack of compliance will not have a
material adverse effect on Watson.
In recent years, the process for obtaining governmental approval to
market pharmaceutical products has become more rigorous, time-consuming and
costly, and Watson cannot predict the extent to which it may be affected by
legislative and regulatory developments. Watson is dependent on receiving FDA
and other governmental approvals prior to marketing and shipping its products.
Consequently, there is always the chance that the FDA or other applicable agency
will not approve products, or that the rate, timing and cost of such approvals
will adversely affect Watson's product introduction plans or results of
operations. The Uruguay Round Agreements Act ("URAA"), which became effective
June 8, 1994, lengthens the term of existing and future patents by changing the
patent term to the longer of 17 years from the date of patent grant or 20 years
from the date of patent application. These URAA changes could postpone approval
eligibility of some products.
INDUSTRY IS COMPETITIVE
The pharmaceutical industry is intensely competitive. Watson's
competitors vary depending upon product categories, and within each product
category, upon dosage strengths and drug delivery systems. Such competitors
include the major brand name and off-patent manufacturers of pharmaceuticals,
especially those doing business in the United States. Many competitors have been
in business for a longer period of
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time than Watson, have a greater number of products on the market and have
greater financial and other resources. Newly introduced off- patent products
with limited or no off-patent competition are typically sold at higher selling
prices, often resulting in increased gross profit margins. As competition from
other manufacturers intensifies, selling prices typically decline. Consequently,
the maintenance of profitable operations will depend, in part, on Watson's
ability to maintain efficient production capabilities and to develop and
introduce new products in a timely and cost-effective manner. It is possible
that developments by others will make Watson's products or technologies
noncompetitive or obsolete.
WATSON IS DEPENDENT ON KEY PERSONNEL
The success of Watson's present and future operations will depend, to a
great extent, upon the experience, abilities and continued services of certain
executive officers of Watson, including Allen Chao, Ph.D. The loss of the
services of any of these officers could have a material adverse effect on the
combined company. Watson has entered into employment agreements with certain of
its executive officers, including Dr. Chao and Dinesh C. Patel, Ph.D. Watson
does not carry key-man life insurance on any of its officers. Watson's success
also will depend upon its ability to attract and retain other highly qualified
scientific, managerial, sales and manufacturing personnel. However, there is a
risk of departure of employees due to certain factors, including factors
relating to the integration process following the TheraTech merger, and such
departures may occur with respect to the combined company. Competition for such
personnel is intense. In this respect, Watson competes with numerous
pharmaceutical and healthcare companies, as well as universities and nonprofit
research organizations. We cannot assure you that Watson will continue to
attract and retain qualified personnel.
POTENTIAL VOLATILITY OF STOCK PRICE AND ABSENCE OF DIVIDENDS
The market prices for securities of companies engaged primarily in
pharmaceutical development, manufacture and distribution have historically been
highly volatile, and the market price of Watson common stock has been and may
continue to be volatile. For example, the market price of Watson common stock
fluctuated during the past twelve months between $32.38 per share and $63.00 per
share and may continue to fluctuate. Generally market price fluctuations in a
company's stock may be due to acquisition or other material public
announcements, along with a variety of additional factors including, without
limitation, (i) new product introductions, (ii) the purchasing practices of a
company's customers, (iii) changes in the degree of competition for a company's
products, (iv) the announcement of technological innovations or new commercial
products by a company or its competitors, (v) governmental regulation, (vi)
regulatory approvals or regulatory issues, (vii) developments relating to
patents or proprietary rights, (viii) publicity regarding actual or potential
clinical results with respect to products under development by a company or
others and (ix) political developments or proposed legislation in the
pharmaceutical or healthcare industry. Any of these factors, among others, could
have a significant impact on the market price of the Watson common stock.
Watson has not paid any cash dividends since inception, although certain
of its wholly-owned subsidiaries may have paid dividends
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prior to a combination with Watson. Watson does not anticipate paying cash
dividends in the foreseeable future. Certain financing contracts and
arrangements between Watson and third parties restrict Watson's ability to pay
dividends.
DIFFICULTY IN OBTAINING AND PROTECTING PATENTS AND PROPRIETARY RIGHTS
Watson's success with its proprietary products will depend in part on
its ability to obtain patent protection for its products. Watson has a number of
U.S. and foreign patents issued and pending. However, we cannot assure you that
Watson's patent applications will be approved, or if approved will be upheld in
a court of law. We also cannot assure you that such patents will provide
competitive advantages for their respective products or will not be challenged
or circumvented by competitors.
Watson also relies on trade secrets and proprietary know-how which it
seeks to protect, in part, through confidentiality agreements with its partners,
customers, employees and consultants. It is possible that these agreements will
be breached or that they won't be enforceable in every instance, and that Watson
will not have adequate remedies for any such breach. It is also possible that
Watson's trade secrets will become known or independently developed by
competitors.
Watson may be required or may desire to obtain licenses to patents and
other proprietary rights held by third parties to develop, manufacture and
market products. We cannot assure you that Watson will be able to obtain these
licenses on commercially reasonable terms, if at all, or that any licensed
patents or proprietary rights will be valid or enforceable. In addition,
intellectual property law is subject to change by the courts and other
governmental bodies. For example, a 1997 Supreme Court ruling could impact a
party's ability to enforce its patents and to defend against potential patent
infringement claims by third parties. Watson's ability to commercialize its
products will depend on it not infringing the valid patent rights of others.
Litigation concerning patents and proprietary technologies can be protracted and
expensive and brand companies are increasingly suing competitors as a way of
delaying the introduction of competitors' products. Any such litigation may be
costly and time consuming, and could result in a substantial delay in a new
product introduction, any of which could have a material adverse effect on
Watson's business, financial condition or results of operations.
INCREASED COMPETITION RELATED TO CERTAIN SIGNIFICANT PRODUCTS
During the nine months ended September 30, 1998, sales of Dilacor XR(R)
and Diltiazem XR accounted for approximately 18% of Watson's total revenues. In
the same period, sales in the hydrocodone bitartrate/acetaminophen product group
accounted for approximately 15% of Watson's total revenues. During fiscal year
1997, sales in the hydrocodone bitartrate/acetaminophen product group accounted
for approximately 23% of total revenues. Also in fiscal year 1997, sales of
Dilacor XR(R) and Diltiazem XR accounted for approximately 22% of total revenues
following the purchase by Watson of Dilacor XR(R) in June of 1997. In fiscal
years 1996 and 1995, sales in the hydrocodone bitartrate/acetaminophen product
group accounted for approximately 29% and 35% of total 1996 and 1995 revenues,
respectively. Due to FDA approval of products that will compete with Watson's
products, there has been and will
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continue to be increased price competition with respect to the hydrocodone
group, Dilacor XR(R) and Diltiazem XR. Consequently Watson may experience a
reduction in future sales of such products which, absent additional offsetting
revenues, could have a material adverse effect on the financial condition and
results of operations of Watson.
DEPENDENCE ON CERTAIN SUPPLIERS
Some materials used in Watson's manufactured products, and some products
sold by Watson, are currently available only from sole or limited suppliers.
This includes products which have historically accounted for a significant
portion of Watson's revenues. In addition, sources for materials for Watson's
products must be approved by the FDA, the DEA and/or other governmental agencies
or bodies. For some products sold by Watson, only one or very few suppliers have
been approved for certain materials or products used in Watson's products. Any
interruption or delay in supply of materials or products from sole or limited
source suppliers, or delays in the applicable governmental approval of new
suppliers, or delay in approving Watson as the manufacturer of such products,
could have a material adverse effect on Watson's business.
WATSON'S ABILITY TO ADDRESS THE YEAR 2000 ISSUE
Watson has assessed and continues to assess the potential impact of the
situation commonly referred to as the "Year 2000 Issue." The Year 2000 Issue
concerns the inability of information systems and computer software programs to
properly recognize and process date sensitive information relating to the Year
2000 and beyond. Watson has several information system improvement initiatives
underway which management believes will adequately address the Year 2000 Issue.
However, if third party payors, suppliers, distributors, transporters or joint
venture partners do not adequately address their Year 2000 Issues or if Watson
fails to successfully complete its Year 2000 initiative, it could be adversely
affected in the future. For more information on Watson's Year 2000 preparedness,
see Watson's Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1998.
<PAGE> 13
DILUTION
In April, 1998, Watson filed a registration statement with the SEC which
allows Watson to raise up to $300 million from offerings of senior or
subordinated debt securities, common stock, preferred stock or a combination
thereof, at such times and in such amounts as Watson deems appropriate. To date,
Watson has issued $150 million in senior unsecured notes pursuant to such
registration statement. In addition, (i) Watson may engage in future
transactions, including the acquisition of technologies, products, product
rights and businesses, which could involve the issuance of its securities and
(ii) Watson has commitments pursuant to existing option plans and free-standing
options and warrants which are likely to result in the issuance of additional
shares of Watson common stock. You should be aware that the issuance of any
securities for these or other reasons could result in dilution of your equity
interest in Watson. In addition, the Watson Board of Directors has the authority
to issue, without vote or action of shareholders, shares of preferred stock, in
one or more series, and to fix the rights, preferences, privileges and
restrictions thereof. You should be aware that any such series of preferred
stock could contain dividend rights, conversion rights, voting rights, terms of
redemption, redemption prices, liquidation preferences or other rights superior
to the rights of holders of Watson common stock. The Watson Board of Directors
has no present intention of issuing any such preferred series, but reserves the
right to do so in the future.
UNCERTAINTY OF JOINT VENTURE INCOME
A portion of Watson's net income is derived from joint ventures. In
addition, a substantial portion of Watson's efforts in developing
controlled-release technology prior to the TheraTech merger was primarily
conducted through joint ventures. These arrangements involve various partners.
Watson does not control the joint ventures or the commercial exploitation of the
licensed products, and we cannot assure you that such joint ventures will be,
or, if profitable, will continue to be profitable. Although restrictions
contained in certain of Watson's joint venture arrangements have not in the past
had a material adverse impact on Watson's marketing of its products, any such
marketing restriction could affect future revenues and have a material adverse
effect on its operations. Further, in connection with its proprietary drug
delivery systems, TheraTech has depended upon certain partners to fund all or a
portion of the costs of, or to undertake, product development, testing,
regulatory approval and marketing. We cannot assure you that Watson or TheraTech
could replace such collaborative arrangements or successfully
<PAGE> 14
develop, test and market such products on their own. Watson's earnings may be
negatively impacted if existing collaborative partners withdraw or if these
products are not timely developed, approved or successfully commercialized.
Additionally, it is uncertain how the combination of Watson and TheraTech will
affect TheraTech's ability to continue its collaborative efforts and
partnerships with certain third parties, including large pharmaceutical
companies.
PRODUCT LIABILITY INSURANCE IS EXPENSIVE AND DIFFICULT TO OBTAIN
The design, development and manufacture of Watson's products involve an
inherent risk of product liability claims and associated adverse publicity.
Insurance coverage is expensive and difficult to obtain, and may not be
available in the future on acceptable terms, or at all. Although Watson
currently maintains product liability insurance for its products in the amounts
Watson believes to be commercially reasonable, we cannot assure you that the
coverage limits of Watson's insurance policies will be adequate. A claim brought
against Watson, whether fully covered by insurance or not, could have a material
adverse effect upon Watson.
<PAGE> 15
USE OF PROCEEDS
The net proceeds received by the Company upon any exercise of the
options described below under "DESCRIPTION OF OPTIONS" will be added to the
Company's capital and will be used for general corporate purposes. During
periods that the exercise prices of such options are higher than the market
price of the Company's Common Stock, the Company does not expect that such
options will be exercised.
DESCRIPTION OF OPTIONS
In connection with the Merger, each of the TheraTech options has become
an option to purchase a number of whole shares of Watson Common Stock equal to
the number of shares of TheraTech common stock into which such options were
exercisable immediately prior to the Effective Date multiplied by the Exchange
Ratio of 0.2663, at an option exercise price determined by dividing the exercise
price of such option immediately prior to the Effective Date by the Exchange
Ratio of 0.2663 (being rounded to the nearest full cent with $0.005 rounded
upward).
GENERAL DESCRIPTION
Under the Directors' Plan, directors of TheraTech who were not officers
or employees of TheraTech ("Non-Employee Directors") were eligible to receive
option grants. The Directors' Plan provided for (i) an initial grant of an
option to acquire 7,500 shares of TheraTech common stock (which equates to
approximately 1,997 shares of Watson Common Stock after applying the Exchange
Ratio of 0.2663) providing that one-third of the shares subject to each initial
grant option becoming exercisable on the first, second and third anniversary of
its grant date, respectively, and (ii) each Non-Employee Director received a
grant of an option to purchase 4,000 shares of TheraTech common stock during
each year thereafter that a Non-Employee Director continued to serve as
director (which equates to approximately 1,065 shares of Watson Common Stock
after applying the Exchange Ratio of 0.2663). A total of 161,500 shares of
TheraTech common stock was authorized for issuance under the Directors' Plan,
which equates to approximately 43,007 shares of Watson Common Stock, after
applying the Exchange Ratio of 0.2663.
The exercise price per share of all stock options granted under the
Directors' Plan was equal to the per share fair market value of TheraTech common
stock on the date of grant. Payment of the purchase price upon exercise of any
option granted under the Directors' Plan may be made in cash, by Watson Common
Stock held by the optionee or by promissory note.
LEGAL MATTERS
The validity of the issuance of the Company's Common Stock being offered
hereby will be passed upon for the Company by D'Ancona & Pflaum LLC, Chicago,
Illinois. As of the date of this registration statement, Michel J. Feldman, a
member of D'Ancona & Pflaum LLC and a director of the Company, beneficially owns
36,000 shares of the Company's Common Stock, 1,000 of which he disclaims
beneficial ownership. In addition, other members of D'Ancona & Pflaum LLC own
additional shares of the Company's Common Stock, which ownership is not material
in the aggregate.
<PAGE> 16
EXPERTS
The consolidated financial statements of Watson Pharmaceuticals, Inc. as
of December 31, 1997 and 1996 and for each of the three years in the period
ended December 31, 1997 incorporated in this Prospectus by reference to the
Annual Report on Form 10-K of Watson Pharmaceuticals, Inc. for the year ended
December 31, 1997, as amended, have been so incorporated in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The financial statements of Oclassen Pharmaceuticals, Inc. for the years
ended December 31, 1996 and 1995 incorporated by reference in this prospectus
and elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports.
The consolidated financial statements of Somerset Pharmaceuticals, Inc.
and subsidiaries as of December 31, 1997 and 1996, and for each of the three
years in the period ended December 31, 1997, incorporated in this Prospectus by
reference from the Annual Report on Form 10-K of Watson Pharmaceuticals, Inc.
for the year ended December 31, 1997, as amended, have been audited by Deloitte
& Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
<PAGE> 17
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The only expenses incurred in connection with this transaction are the
following, all of which are estimated.
<TABLE>
<S> <C>
Accounting fees and expenses........................................ $ 5,000
Legal fees and expenses............................................. $ 5,000
Total............................................................... $10,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 78.751 of the Nevada Revised Statutes authorizes a corporation,
under certain circumstances, to indemnify its directors and officers (including
reimbursement for expenses incurred). The Registrant has provided for
indemnification to the fullest extent permitted by the provisions of the Nevada
statute in its Articles of Incorporation and Bylaws.
The Registrant maintains a directors' and officers' liability insurance
policy that, subject to the terms and conditions of the policy, provides
coverage up to $30,000,000 in the aggregate (subject to a $250,000 retention per
loss) arising from any wrongful act (as defined by the policy) in his or her
capacity as a director or officer. The policy reimburses the Registrant for
amounts which lawfully indemnifies the Registrant or as required or permitted by
law to indemnify its directors and officers.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<S> <C>
2.1 Agreement and Plan of Merger, among Watson Pharmaceuticals,
Inc., TheraTech, Inc. and The Jazz Merger Corp. dated as of
October 23, 1998, incorporated by reference to Appendix A of the
Proxy Statement/Prospectus included in the Registration
Statement on S-4, Reg. No. 333-68007, and hereby incorporated by
reference.
3.1 Articles of Incorporation of Watson and all amendments thereto,
filed as Exhibit 3.1 to Watson's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1995 and Exhibit 3.1 (A) to
Watson's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996 and hereby incorporated by reference.
3.2 Bylaws of Watson, as amended as of December 11, 1998, filed as
Exhibit 3.2 to Watson's Registration Statement on Form S-8 filed
on January 21, 1999 and hereby incorporated by reference.
4.1 TheraTech, Inc. 1992 Amended and Restated Directors' Stock
Option Plan, incorporated by reference to TheraTech's Proxy
Statement filed in connection with its 1994 Annual Meeting of
Stockholders, and hereby incorporated by reference.
5.1 Opinion of D'Ancona & Pflaum LLC as to the legality of the
common stock being offered.
</TABLE>
<PAGE> 18
<TABLE>
<S> <C>
5.2 Opinion of Kummer, Kaempfer, Bonner & Renshaw as to the
legality of the common stock being offered.
23.1 Consent of D'Ancona & Pflaum LLC (included in exhibits 5.1).
23.2 Consent of Kummer, Kaempfer, Bonner & Renshaw (included in
exhibit 5.2).
23.3 Consent of PricewaterhouseCoopers LLP.
23.4 Consent of Deloitte & Touche LLP.
23.5 Consent of Arthur Andersen LLP.
24.1 Power of Attorney, included on the signature page of this
Registration Statement.
</TABLE>
(b) Financial Statement Schedules
None.
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;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
Registration Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement;
Provided, however, that paragraphs (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 with or furnished to the
Commission by the Registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement
<PAGE> 19
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual
report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by
reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions (see Item 15 above), 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 Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, 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 that time shall
be deemed to be the initial bona fide offering thereof.
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Corona, State of California, on the 21st day of
January, 1999.
WATSON PHARMACEUTICALS, INC.
(Registrant)
By: /s/ ALLEN CHAO
-------------------------------------
Allen Chao, Ph.D.
Chairman, Chief Executive Officer and
President (Principal Executive Officer)
Each person whose signature appears below appoints Allen Chao, Ph.D.,
as his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his stead, in any capacities to
sign any and all amendments, including post-effective amendments to this
Registration Statement and to file the same, with all exhibits thereto and all
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorney-in-fact
and agent or his substitute or substitutes may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLES DATE
---------- ------ ----
<S> <C> <C>
/s/ ALLEN CHAO Chairman, Chief Executive January 21, 1999
----------------------------------- Officer and President
Allen Chao, Ph.D. (Principal Executive Officer)
/s/ MICHAEL BOXER Chief Financial Officer January 21, 1999
----------------------------------- (Principal Financial Officer)
Michael Boxer
/s/ CHATO ABAD Vice President - Finance January 21, 1999
----------------------------------- (Principal Accounting Officer)
Chato Abad
/s/ MICHEL J. FELDMAN Director January 20, 1999
-----------------------------------
Michel J. Feldman
/s/ MICHAEL FEDIDA Director January 20, 1999
-----------------------------------
Michael Fedida
Director January __, 1999
-----------------------------------
Alec D. Keith, Ph.D.
Director January __, 1999
-----------------------------------
Albert F. Hummel
/s/ RONALD R. TAYLOR Director January 20, 1999
-----------------------------------
Ronald R. Taylor
Director January __, 1999
-----------------------------------
Andrew L. Turner
</TABLE>
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<S> <C>
2.1 Agreement and Plan of Merger, among Watson Pharmaceuticals,
Inc., TheraTech, Inc. and The Jazz Merger Corp. dated as of
October 23, 1998, incorporated by reference to Appendix A of the
Proxy Statement/Prospectus included in the Registration
Statement on S-4, Reg. No. 333-68007, and hereby incorporated by
reference.
3.1 Articles of Incorporation of Watson and all amendments thereto,
filed as Exhibit 3.1 to Watson's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1995 and Exhibit 3.1 (A) to
Watson's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996 and hereby incorporated by reference.
3.2 Bylaws of Watson, as amended as of December 11, 1998, filed as
Exhibit 3.2 to Watson's Registration Statement on Form S-8 filed
on January 21, 1999 and hereby incorporated by reference.
4.1 TheraTech, Inc. 1992 Amended and Restated Directors' Stock
Option Plan, incorporated by reference to TheraTech's Proxy
Statement filed in connection with its 1994 Annual Meeting of
Stockholders and hereby incorporated by reference.
5.1 Opinion of D'Ancona & Pflaum LLC as to the legality of the
common stock being offered.
5.2 Opinion of Kummer, Kaempfer, Bonner & Renshaw as to the
legality of the common stock being offered.
23.1 Consent of D'Ancona & Pflaum LLC (included in exhibit 5.1).
23.2 Consent of Kummer, Kaempfer, Bonner & Renshaw (included in
exhibit 5.2).
23.3 Consent of PricewaterhouseCoopers LLP.
23.4 Consent of Deloitte & Touche LLP.
23.5 Consent of Arthur Andersen LLP.
24.1 Powers of Attorney, included on the signature page of this
Registration Statement.
</TABLE>
<PAGE> 1
Exhibit 5.1
January 21, 1999
Watson Pharmaceuticals, Inc.
311 Bonnie Circle
Corona, CA 91720
Ladies & Gentlemen:
We have acted as counsel for Watson Pharmaceuticals, Inc. (the
"Company") in connection with the filing with the Securities and Exchange
Commission of a Registration Statement on Form S-3 (the "Registration
Statement") relating to the offer and proposed sale of 55,587 shares of the
Company's common stock, $.0033 par value ("Common Stock"), under the terms of
the TheraTech, Inc. 1992 Amended and Restated Directors' Stock Option Plan
("Plan") described in the Registration Statement ("Stock Options").
In arriving at this opinion, we have examined the Company's Articles of
Incorporation, its Bylaws, the records of the corporate proceedings of the
Company authorizing the issuance and sale of the shares of Common Stock covered
by the Registration Statement, the Stock Options, an opinion of Nevada Counsel,
and such other instruments and documents as we have deemed appropriate.
Based upon the foregoing, we are of the opinion that all necessary
corporate action for the authorization, reservation and issuance of the shares
of Common Stock to be offered and sold by the Company pursuant to the Stock
Options has been taken; and that said shares of Common Stock are duly
authorized, and upon delivery of same to the participants under the Stock
Options against payment therefor upon the terms set forth in the Stock Options,
said shares of Common Stock will be validly issued, fully paid and
non-assessable shares of Common Stock of the Company.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm in such Registration
Statement.
D'ANCONA & PFLAUM LLC
By: /s/ Steve Curtis
------------------------------------
Steve Curtis, Member
<PAGE> 1
Exhibit 5.2
OPINION OF NEVADA COUNSEL
January 19, 1999
D'Ancona & Pflaum LLC
111 E. Wacker Drive
Suite 2800
Chicago, Illinois 60601-4205
RE: WATSON PHARMACEUTICALS, INC.
Ladies and Gentlemen:
You have requested our opinion as special Nevada counsel for Watson
Pharmaceuticals, Inc., a Nevada corporation ("Watson"), in connection with the
filing of a Registration Statement on Form S-3 (the "Registration Statement")
relating to the registration of up to 55,587 shares (the "Shares") of Watson's
common stock, par value $.0033 ("Watson Common Stock") that may be issued upon
the exercise of options issued under the TheraTech, Inc. 1992 Amended and
Restated Directors' Stock Option Plan (the "Directors Plan"). Previously, a
subsidiary of Watson merged with TheraTech, Inc. pursuant to an Agreement and
Plan of Merger dated October 23, 1998 (the "Merger Agreement"). We are not
general counsel to Watson, and we have been retained specially to represent
Watson in this transaction for the purpose of rendering this opinion to you. Any
opinions expressed herein shall be limited to the extent that we have been
retained as special Nevada counsel.
In connection with this opinion, we have examined the following
documents (collectively, the "Documents"):
1. Articles of Incorporation of Watson as filed with the Nevada
Secretary of State on January 2, 1985, as amended on September
28, 1987, as amended on August 27, 1991, as amended on February
20, 1992, as amended on July 18, 1995, and as amended on May 30,
1996.
2. Bylaws of Watson, certified by Watson to be currently in full
force and effect as of December 11, 1998.
3. A mechanically executed copy of the Merger Agreement.
4. Certificate of the Secretary of Watson dated as of January 19,
1999.
5. Draft of the Registration Statement, to be filed with the
Securities and Exchange Commission.
In our examination of the Documents, we have assumed the genuineness of
all signatures, the legal capacity of natural persons who signed the Documents,
the authenticity of all Documents submitted to us as originals, the conformity
to the originals of all Documents submitted to us as copies and the authenticity
of the originals of such latter Documents. We assume the due authorization of
each Document by each party thereto. We assume that the
<PAGE> 2
Documents have not been rescinded, modified, or altered in any manner whatsoever
as of the date hereof.
In rendering the following opinions, we have relied without
investigation on the certificates of officers of Watson, and we have not
independently verified any of the factual matters set forth in any other
Documents upon which we have relied. Furthermore, we have been provided with a
copy of the Registration Statement, and we have relied without investigation
upon the representations contained therein. We have not been asked, nor have we
endeavored, to review, revise or in any manner comment upon the contents of the
Registration Statement.
We are admitted to the Bar of the state of Nevada. In rendering our
opinions hereinafter stated, we have relied upon the applicable laws of the
state of Nevada as those laws presently exist and as they have been applied and
interpreted by courts having jurisdiction within the state of Nevada. We express
no opinion as to the laws of any other jurisdiction or of the United States of
America.
Based on such examination and subject to the limitations and assumptions
herein provided, we are of the opinion that Watson has the full power and
authority under the laws of the State of Nevada, and under its Articles of
Incorporation and Bylaws, as amended, to issue the Shares in accordance with the
Merger Agreement and the Directors' Plan and that the Shares are validly
authorized shares of Watson Common Stock, and when issued, will be legally
issued, fully paid and nonassessable and not subject to any preemptive or
similar rights.
These opinions are effective as of the date hereof. No extensions of our
opinion may be made by implication or otherwise. We express no opinion other
than as herein expressly set forth. We understand that you will rely on our
opinion in rendering your separate opinion addressed to the Securities and
Exchange Commission in connection with the Registration Statement. Our opinions
are not to be otherwise quoted in whole or in part without the express written
consent of this firm.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, and any and all amendments thereto.
Very truly yours,
/s/ KUMMER KAEMPFER BONNER & RENSHAW
------------------------------------
Kummer Kaempfer Bonner & Renshaw
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
February 2, 1998, except as to Note 2, which is as of February 27, 1998
appearing on page F-2 of Watson Pharmaceuticals, Inc.'s Annual Report on Form
10-K for the year ended December 31, 1997. We also consent to the reference to
us under the heading "Experts" in such Prospectus.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PRICEWATERHOUSECOOPERS LLP
Costa Mesa, California
January 18, 1999
<PAGE> 1
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Watson Pharmaceuticals, Inc. on Form S-3 of our report dated February 4, 1998
relating to the consolidated financial statements of Somerset Pharmaceuticals,
Inc. and subsidiaries as of December 31, 1997 and 1996 and for each of the three
years in the period ended December 31, 1997, appearing in the Annual Report on
Form 10-K/A of Watson Pharmaceuticals, Inc. for the year ended December 31, 1997
and to the reference to us under the heading "Experts" in the Prospectus, which
is part of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
- -------------------------
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
January 18, 1999
<PAGE> 1
EXHIBIT 23.5
CONSENT OF ARTHUR ANDERSEN LLP
As independent public accountants, we hereby consent to the
incorporation by reference in this Registration Statement of our report dated
January 17, 1997 and to all references to our Firm included in this Registration
Statement on Form S-3.
/s/ ARTHUR ANDERSEN LLP
-----------------------
ARTHUR ANDERSEN LLP
January 15, 1999
