<PAGE>
April 22, 1997
P R O S P E C T U S
UROMED CORPORATION
$69,000,000 of 6% Convertible Subordinated Notes due
October 15, 2003 (the "Notes")
(Interest payable April 15 and October 15)
and
An Indefinite Number of Shares of Common Stock,
No Par Value, Issuable Upon Conversion of the Notes
___________
This Prospectus ("PROSPECTUS") relates to the Offering for resale of
$69,000,000 aggregate principal amount of the outstanding 6% Convertible
Subordinated Notes due October 15, 2003, of UroMed Corporation, a
Massachusetts corporation (the "COMPANY"), and the shares (the "CONVERSION
SHARES") of common stock, no par value per share (the "COMMON STOCK"), of the
Company which are issuable upon conversion of the Notes. The Notes are
subject to an Indenture, dated as of October 15, 1996 (the "INDENTURE"),
between the Company and State Street Bank and Trust Company, as Trustee (the
"TRUSTEE"). The Notes and Conversion Shares may be offered from time to time
by the holders thereof (the "SELLING SECURITYHOLDERS"). See "Plan of
Distribution." Information concerning the Selling Securityholders may change
from time to time and, to the extent required, will be set forth in
Supplements to this Prospectus.
The aggregate principal amount of Notes that may be offered by the Selling
Securityholders pursuant to this Prospectus is $69,000,000. As of the date
of this Prospectus, the aggregate principal amount of Notes outstanding is
$69,000,000. The Notes are convertible into Common Stock initially at a
conversion rate of 75.2941 shares per U.S.$1,000 principal amount of Notes,
subject to adjustment upon the occurrence of certain events, at any time
prior to the close of business on the maturity date, unless previously
redeemed or repurchased. Interest on the Notes is payable on April 15 and
October 15 of each year, commencing on April 15, 1997, with payment in full
of the principal amount of the Notes due on October 15, 2003.
On or after October 15, 1999, the Notes are redeemable, in whole or in
part, at the option of the Company at the redemption prices set forth herein,
plus accrued interest. If less than all of the Notes are to be redeemed, the
particular Notes to be redeemed shall be selected not more than 60 days prior
to the Redemption Date (as defined in the Indenture), by the Trustee from the
outstanding Notes not previously called for redemption, by such method as the
Trustee shall deem fair and appropriate and which may provide for the
selection for redemption of portions (equal to $1,000 or any integral
multiple thereof) of the principal amount of Notes of a denomination larger
than $1,000. See "Description of Notes -- Optional Redemption."
The Notes are unsecured obligations of the Company and are subordinated
in the right of payment to all existing and future Senior Debt (as such term
is hereinafter defined under "Description of Notes -- Subordination") of the
Company and are expressly made subordinate and subject in right of payment to
the prior payment in full of all Senior Debt. There is no Senior Debt (as
defined in the Indenture) outstanding as of the date hereof. In addition,
the Notes will be effectively subordinated in right of payment to all
indebtedness and other liabilities that may be incurred by any subsidiary of
the
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Company. The Company has no subsidiaries as of the date hereof. The
Indenture will not restrict the incurrence of any indebtedness, including
Senior Debt, by the Company or any subsidiary thereof.
All of the Notes were initially issued and sold to Goldman, Sachs & Co.,
PaineWebber Incorporated and J.P. Morgan Securities Inc. (the "PURCHASERS")
pursuant to an exemption from the registration requirements of the Securities
Act of 1933, as amended (the "SECURITIES ACT"), provided by Section 4(2)
thereof. The Notes were sold simultaneously by the Purchasers in
transactions exempt from the registration requirements of the Securities Act
in the United States to persons reasonably believed by the Purchasers to be
Qualified Institutional Buyers as defined in Rule 144A under the Securities
Act, to a limited number of institutional investors that are accredited
institutional investors within the meaning of Rule 501(a) under the
Securities Act, and outside the United States to non-U.S. persons in offshore
transactions in reliance on Regulation S under the Securities Act.
The Company has not and does not intend to apply for listing of the Notes on
any securities exchange or for inclusion of the Notes on any automated
quotation system.
The Selling Securityholders, who include one of the Purchasers, as
principals for their own account, directly, through agents designated from
time to time, or through dealers or underwriters also to be designated, may
sell the Notes and Conversion Shares from time to time on terms to be
determined at the time of sale. Such dealers may include the Purchasers.
See "Plan of Distribution." The Selling Securityholders and any
broker-dealers, agents or underwriters that participate with the Selling
Securityholders in the distribution of the Notes or Conversion Shares may be
deemed to be "underwriters" within the meaning of the Securities Act, and any
commissions received by them and any profit on the resale of the Notes or
Conversion Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. For information
concerning indemnification arrangements between the Company and the Selling
Securityholders, see "Plan of Distribution."
The Common Stock is traded on the Nasdaq National Market under the
symbol "URMD." On April 21, 1997, the last reported sale price of the
Common Stock on the Nasdaq National Market was U.S. $4.00 per share.
The Company will not receive any of the proceeds from the resale of the
Notes or Conversion Shares. The Company has agreed to bear certain expenses
in connection with the registration and sale of the Notes and Conversion
Shares being offered by the Selling Securityholders.
___________
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
INVESTORS EVALUATING ANY INVESTMENT IN THE SECURITIES OFFERED HEREBY, SEE
"RISK FACTORS" BEGINNING ON PAGE 5.
___________
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.
___________
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
OR ANY PROSPECTUS SUPPLEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THIS PROSPECTUS NOR ANY PROSPECTUS SUPPLEMENT CONSTITUTES
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT
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IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY
OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT NOR ANY SALE MADE THEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF.
PRICE TO PUBLIC UNDERWRITING DISCOUNTS PROCEEDS TO SELLING
AND COMMISSIONS SECURITYHOLDERS
Per Share (l) (1)(2)(3) (1)(2)
Total (1) (1)(2)(3) (1)(2)
(1) The Selling Securityholders may from time to time effect the sale of the
Notes and Conversion Shares at prices and at terms then prevailing or at
prices related to the then-current market price, or in negotiated
transactions.
See "Plan of Distribution" and "Selling Securityholders."
(2) The Selling Securityholders will receive all of the net proceeds from the
sale of the Notes and Conversion Shares and will pay all underwriting
discounts and selling commissions, if any, applicable to any such sale. The
Selling Securityholders and any broker-dealers, agents or underwriters who
participate in the distribution of the Notes and Conversion Shares may be
deemed to be "underwriters" within the meaning of the Securities Act, and
any commission received by them and any profit on the resale of the offered
Securities purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. See "Plan of Distribution." The Company
will not receive any proceeds from the sale of the Notes or the Conversion
Shares.
(3) Expenses of preparing and filing the Registration Statement of which this
Prospectus forms a part and all post-effective amendments to the
Registration Statement and/or supplements to this Prospectus will be
borne by the Company. In the event of a firm underwritten offering of some
or all of the Notes and Conversion Shares, the Selling Securityholders
participating in such underwritten offering will be responsible for any
expenses customarily borne by selling securityholders, including, without
limitation, underwriting discounts and commissions.
The date of this Prospectus is April 22, 1997.
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TABLE OF CONTENTS
Available Information. . . . . . . . . . . . . . . . . . . . . . . . . . 4
Incorporation of Certain Documents by Reference. . . . . . . . . . . . . 5
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Recent Events. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Ratio of Earnings to Fixed Charges . . . . . . . . . . . . . . . . . . . 13
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Selling Securityholders. . . . . . . . . . . . . . . . . . . . . . . . . 13
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Description of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Description of Capital Stock . . . . . . . . . . . . . . . . . . . . . . 31
United States Taxation . . . . . . . . . . . . . . . . . . . . . . . . . 33
Validity of Securities . . . . . . . . . . . . . . . . . . . . . . . . . 37
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and in accordance
therewith files periodic reports and other information with the Securities
and Exchange Commission (the "COMMISSION"). Such reports, proxy statements
and other information concerning the Company may be inspected and copies may
be obtained (upon payment of prescribed rates) at public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the regional offices of the Commission located
at Seven World Trade Center, 13th Floor, New York, New York 10048 and at
Citicorp Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois
60661-2511. The Company's Common Stock is listed on The Nasdaq Stock Market,
and reports, proxy statements and other information concerning the Company
can also be inspected at the offices of the National Association of
Securities Dealers, Inc. at 1735 K Street, Washington, D.C. 20006. In
addition, the Company is required to file electronic versions of these
documents with the Commission through the Commission's Electronic Data
Gathering, Analysis, and Retrieval (EDGAR) system. 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 Company has filed a Registration Statement on Form S-3 (the
"REGISTRATION STATEMENT") under the Securities Act with the Commission with
respect to the Notes and Conversion Shares being offered pursuant to this
Prospectus. As permitted by the rules and regulations of the Commission,
this Prospectus omits certain of the information contained in the
Registration Statement. For further information with respect to the Company
and the Notes and Conversion Shares being offered pursuant to this
Prospectus, reference is hereby made to such Registration Statement,
including the exhibits filed as part thereof. Statements contained in this
Prospectus concerning the provisions of certain documents filed with, or
incorporated by reference in, the Registration Statement are not necessarily
complete, each such statement being qualified in all respects by such
reference. Copies of all or any part of the Registration Statement, including
the documents incorporated by reference therein or exhibits thereto, may be
obtained upon payment of the prescribed rates at the offices of the
Commission set forth above.
Upon request, the Company will provide without charge to each person to
whom a copy of this Prospectus has been delivered a copy of any information
that was incorporated by reference in the Prospectus (other than exhibits to
documents, unless such exhibits are specifically incorporated by reference
into the information incorporated by reference in the Prospectus). The
Company will also provide upon specific request, without charge to each
person to whom a copy of this Prospectus has been delivered, a copy of all
documents filed from time to time by the Company with the Commission pursuant
to the Exchange Act. Requests for such copies should be directed to Kristen
Galfetti, Investor Relations Specialist, 64 A Street, Needham, Massachusetts
02194. Telephone requests may be directed to Ms. Galfetti at (617)
433-0033.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There is incorporated herein by reference the Annual Report on Form 10-K
of the Company for the fiscal year ended December 31, 1996 filed with the
Commission pursuant to Section 13(a) of the Exchange Act, and the description
of the Common Stock contained in the Company's Registration Statement on Form
8-A filed with the Commission pursuant to Section 12(g) of the Exchange Act.
All documents filed by the Company 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 of the Notes and Conversion Shares
shall be deemed to be incorporated by reference in this Prospectus and to be
a part hereof from the date of filing such documents. Any statement
contained herein or in a document, all or a portion of which is incorporated
or deemed to be incorporated by reference herein, shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document or
portion thereof which also is or is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
THE COMPANY
UroMed Corporation (the "COMPANY" or "UROMED") is focused on the
development, manufacture and marketing of products for the management of
urological and gynecological disorders. The Company's first three products,
the Reliance-R-(1) Insert (the "RELIANCE INSERT"), the Impress-TM- Softpatch
(the "IMPRESS SOFTPATCH") and the recently acquired Introl-R-Bladder Neck
Support Prosthesis (the "INTROL DEVICE")(2), are intended for the
management of certain types of female urinary incontinence ("UI"). UI is the
loss of bladder control resulting in the involuntary leakage of urine in
amounts considered to be a social or personal problem. According to published
sources, there are more than 10.0 million UI sufferers in the United States,
of which approximately 85% are women. The Company has initially identified a
target market of approximately 1.5 million UI sufferers whose UI condition is
of a level such that management by the use of the Reliance Insert would be
medically appropriate and who meet certain target demographics. The Impress
Softpatch is designed for a broader group of approximately 3.5 million
additional UI sufferers in the United States whose UI condition is mild to
moderate. The Company's executive offices are located at 64 A Street in
Needham, Massachusetts 02194. Its telephone number is (617) 433-0033.
RISK FACTORS
AN INVESTMENT IN THE NOTES AND CONVERSION SHARES OFFERED HEREBY INVOLVES
A HIGH DEGREE OF RISK. PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE
FOLLOWING RISK FACTORS, IN ADDITION TO THE OTHER INFORMATION CONTAINED IN
THIS PROSPECTUS, BEFORE PURCHASING THE NOTES OR CONVERSION SHARES OFFERED
HEREBY.
UNCERTAINTY OF MARKET ACCEPTANCE OF THE RELIANCE INSERT, IMPRESS SOFTPATCH
AND INTROL DEVICE
Each of the Reliance Insert, the Impress Softpatch and the Introl Device
represents a new approach to managing certain types of female UI, and there
can be no assurance that any of such products will gain any significant
degree of market acceptance. The Company believes that recommendations by
physicians will be essential for market acceptance of the Reliance Insert,
the Impress Softpatch and the Introl Device, which will be marketed on a
prescription basis, and there can be no assurance that any such
recommendations, if such recommendations are forthcoming, will be followed.
_____________________________
(1)Reliance-R- is a registered trademark for the Company's balloon-tipped
device.
(2)Introl-R- is a registered trademark for the Company's intravaginal device.
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In addition, there can be no assurance that the Reliance Insert, the Impress
Softpatch or the Introl Device will be accepted by female UI sufferers in the
United States or abroad. The Reliance Insert must be inserted into the
urethra. Accordingly, some female UI sufferers may not be willing to use the
device. Furthermore, the Reliance Insert and the Introl Device and, to a
lesser degree, the Impress Softpatch may not be appropriate for use by UI
patients who lack sufficient dexterity or who suffer from other physical or
mental conditions that could have an impact on the safe and efficacious use of
the devices. Certain transitory adverse effects such as hematuria (incidence
of blood in the urine), urinary tract infection, device migration and
anatomical findings such as irritation of the mucosa, were evident in varying
degrees in the Company's clinical trials of the Reliance Insert. The
observation of such adverse effects in patients, or the perception that the
product could cause any such adverse effects, could have the effect of
discouraging some potential users of the Reliance Insert. The Reliance Insert,
the Impress Softpatch and the Introl Device are each patient-managed therapies
and as such patients may at any time decide to discontinue their use. During
the course of the Company's clinical trials of the Reliance Insert, a
considerable number of the patients enrolled in the trials chose to
discontinue use of the Reliance Insert prior to the end of a complete year for
a variety of reasons, including discomfort and, in some cases, urinary tract
infections, experienced while using the device. The Company expects that
patients will experience a foreign-body sensation, and in some cases,
discomfort, during acclimation and use of the product. Results of the clinical
trials of the Impress Softpatch indicated that some patients experienced
slight tissue irritation after use of that device and that 48% of the patients
were unable to report that they were completely dry when using the device.
Although the safety and efficacy of the Reliance Insert, the Impress Softpatch
and the Introl Device were each deemed to be sufficient for clearance by the
FDA, there can be no assurance that any of such products will continue to
prove to be safe and effective over the long-term and after wider use.
Finally, the pricing of the Reliance Insert, the Impress Softpatch and the
Introl Device in the United States and in many foreign markets has not yet
been finally determined, and the pricing policies of the Company and its
European distributors could adversely impact market acceptance of these
products as compared to competing products and treatments.
Any of the foregoing factors, or other factors, including the
availability or non-availability of third-party reimbursement, could limit or
detract from market acceptance of the Company's products in the United States
and abroad. Insufficient market acceptance of the Reliance Insert, the
Impress Softpatch or the Introl Device owuld have a material adverse effect
on the Company's business, financial condition and results of operations.
DEPENDENCE ON TWO PRODUCTS
The Company expects to derive substantially all of its revenues for
the next several years from sales of the Reliance Insert and the Impress
Softpatch. The Company's failure to commercialize successfully both of these
products would have a material adverse effect on the Company's business,
financial condition and results of operations. The Company does not expect
that commercialization of other new products will be feasible without a
substantial, continuing commitment to research and development for an
extended period of time or acquisitions of new properties, or both. Also, the
development of any new products may require that such products will be
subject to clinical trials and regulatory clearance or approval before
commercialization. There can be no assurance as to whether or when
commercialization of other products might begin or as to the likelihood that
any such initiative would be successful.
LIMITED MANUFACTURING CAPABILITY AND EXPERIENCE
The Company has limited experience in manufacturing commercial
quantities of its Reliance Insert and has not manufactured significant
quantities of any other products, including the Impress Softpatch and has not
yet manufactured the Introl Device. In
addition, the Company is currently unable, due in part to the current volume
of production, to manufacture Reliance Inserts at a cost below the price at
which such products are currently being sold to the Company's European
distributors and domestic customers. In order to successfully commercialize
the Reliance Insert in the United States and abroad, the Company will have to
reduce per-unit manufacturing costs while maintaining the extremely high
quality standards required. In addition, the Company may have to increase its
manufacturing capacity to support expected demand for the Reliance Insert
generated by sales to direct customers in the United States and sales to the
Company's distributors in Europe during the second half of 1997. Moreover, in
the event that demand for the Reliance Insert is greater than expected, the
Company may not be able to develop additional manufacturing capacity to
produce quantities of the Reliance Insert sufficient to supply such
requirements in a timely fashion. In the event that the Company's planned
expansion of its manufacturing capacity is delayed for any reason due to
problems encountered during such expansion, the Company may be unable to
produce quantities of the Reliance Insert to fulfill its commitments to its
European distributors or the demand of the United States market. The Company
has not yet developed any capacity to manufacture the Impress Softpatch or
the Introl Device, and
has not yet been able to demonstrate that it will be able to manufacture the
Impress Softpatch or the Introl Device or to develop such capacity on a
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cost-effective basis. Even if the Company does develop such capacity, it may
not be able to develop sufficient capacity to produce the quantities of the
Impress Softpatch or the Introl Device that may be required to support sales
of either. In order to develop sufficient additional manufacturing capacity,
the Company will have to make substantial capital expenditures on additional
units of the Company's automated assembly equipment for the Reliance Insert
and new equipment to manufacture the Impress Softpatch, and expand the
Company's existing manufacturing facility into space currently used for other
functions, or acquire additional manufacturing space at other locations. In
the event that the Company is unable to manufacture sufficient quantities of
the Reliance Insert, the Impress Softpatch or the Introl Device to support
its obligations under its European marketing and sales agreements and
ultimately to support sales in the United States, the Company may be required
to enter into arrangements with third parties to manufacture these products.
These other manufacturers may not be able to manufacture the Reliance Insert,
Impress Softpatch or the Introl Device on commercially acceptable terms or in
quantities sufficient to permit the successful commercialization of such
products.
DEPENDENCE ON OTHERS FOR COMPONENTS AND RAW MATERIALS
Certain of the raw materials for the manufacture of the Reliance Insert
and the Impress Softpatch are available only from single sources, and certain
of the components of the Reliance Insert are manufactured by third parties.
Interruptions in supplies of raw materials or components of the Reliance
Insert may occur as a result of business risks particular to such suppliers
or the failure of the Company and any such supplier to agree on satisfactory
terms. Such sources may also decide for reasons beyond the control of the
Company, such as concerns about potential medical product liability risk in
general, to cease supplying such materials or components for use in medical
devices generally. In the event of such an interruption, alternative sources
of raw materials or components may be limited. The Company is currently a
party to supply agreements with only some of its key suppliers and may not be
able to obtain agreements with some of its suppliers of raw materials or
components if it so desires. In the event that the Company replaces its
current raw materials used in the Reliance Insert or Impress Softpatch with
alternative materials, such product, as modified, may require new FDA and
other regulatory approvals, and additional clinical and other testing may be
required in order to obtain such approvals. Any interruption in the supply of
raw materials currently used by the Company or any components incorporated in
the Reliance Insert, or the usage of any alternative raw materials, would
have a material adverse effect on the Company's business, financial condition
and results of operations.
LACK OF MARKETING AND SALES EXPERIENCE; DEPENDENCE ON EUROPEAN MARKETING
AND SALES AGREEMENTS
Although the FDA has cleared the Reliance Insert, the Impress Softpatch
and the Introl Device for marketing in the United States, the Company has sold
only limited amounts of the Reliance Insert in the United States and has not
sold the Impress Softpatch or the Introl Device. The Company developed a
direct marketing and sales group in the United States for its products and has
begun to commercialize the Reliance Insert internationally through marketing
and sales agreements. However, there can be no assurance that the Company has
built an effective sales force, will be able to continue to attract and retain
a qualified marketing and sales group in the United States, or otherwise
design and implement an effective marketing and sales strategy for the
Reliance Insert, the Impress Softpatch, the Introl Device or any future
product developed by the Company.
The Company believes that a portion of its future product revenue will
be derived from certain European markets including Germany, France, The
Netherlands, the United Kingdom, Sweden, Norway, Denmark and Finland. The
Company has entered into marketing and sales agreements with several European
companies providing for the marketing and sale of the Reliance Insert in
these countries on an exclusive basis. In general, pursuant to these
agreements, the Company is required to provide sufficient quantities of
Reliance Inserts for sale by its European distributors, and the Company's
European distributors are permitted to market and sell the Reliance Insert in
such countries at prices and in a manner determined by such companies. There
can be no assurance that the Company's European distributors will be able to
successfully market and sell the Reliance Insert in their respective
countries, that they will devote sufficient resources to support the market
launch of the Reliance Insert in those countries, or that they will market
the Reliance Insert at prices that will permit it to gain market acceptance
in their respective territories. In addition, these agreements impose certain
obligations upon the Company relating to delivery of commercial quantities of
the Reliance Insert, the maintenance of product liability insurance and the
clinical performance of the Reliance Insert. Failure or inability of the
Company to comply with any of these obligations under these agreements could
permit the Company's distributors to terminate their respective agreements.
In addition, there can be no assurance that each or any of these distributors
will perform its obligations under its respective agreement with the Company.
Any such termination or non-performance, or any failure by the Company's
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European distributors to effectively market the Reliance Insert in their
respective territories, will have a material adverse impact on the Company's
ability to market and sell the Reliance Insert in these territories, and
perhaps other territories, including the United States. The Company has not
entered into any distribution arrangements with respect to the Impress
Softpatch or the Introl Device for the European market or elsewhere, and does
not currently have a marketing strategy that would enable it to undertake
commercialization of the Impress Softpatch or the Introl Device in Europe on
a unilateral basis. In the event that the Company is successful in developing
satisfactory distribution arrangements in one or more European markets for
the Impress Softpatch or the Introl Device, such distribution arrangements
will be subject to risks and uncertainties similar to those of the Company's
existing relationships with respect to the Reliance Insert.
LIMITED OPERATING HISTORY; HISTORY OF LOSSES; PROFITABILITY UNCERTAIN
Since inception in October 1990, the Company has been primarily engaged
in research and development of the Reliance Insert. The Company acquired the
Impress Softpatch technology in May 1996 and acquired the product line and
associated license rights to the Introl Device in April 1997. The Company has
experienced significant operating losses since inception and, as of March
31, 1997, had an accumulated deficit of $79.6 million, including $30.2
million relating to the acquisition of the Impress Softpatch technology and
related expenses. In addition, the development and commercialization by the
Company of the Reliance Insert, the Impress Softpatch, the Introl Device and
other new products, if any, will require substantial product development
expenditures for the foreseeable future. The Company's future profitability
is dependent upon its ability to successfully commercialize these products.
There can be no assurance that the Company will generate sufficient revenue
to pay interest and principal on the Notes or to achieve continued
profitability. The Company expects its operating losses to increase over the
foreseeable future and there can be no assurance that the Company will be
profitable in the future or that the Company's existing capital resources and
any funds provided by future operations will be sufficient to fund the
Company's needs, or that other sources of funding will be available.
LACK OF DISTRIBUTION EXPERIENCE; UNCONVENTIONAL DISTRIBUTION SYSTEM
The Company has limited experience in distributing units of its products
to its ultimate consumers. In Europe, where nearly all of the sales of the
Company's products have been made to date, the Company relies on the
distribution systems of third party distributors. In addition, the
distribution system that the Company has developed in the United States is
designed as a direct-to-consumer system in which the Company expects that
most of its sales will be made over the telephone during calls originating
with the consumer, rather than in sales directly to pharmacies. These orders
would be filled directly by the Company. The Company is aware of no other
medical device manufacturer who has employed such a distribution strategy in
the United States. There can be no assurance that the Company's distribution
system, will be successful in filling orders made by the Company's customers
on a timely, accurate and cost-effective basis, or that the Company's
consumers will be willing to telephone orders to the Company directly. In
addition, as a licensed pharmacy, the Company's fulfillment center in Nashua,
New Hampshire is subject to state and federal regulation of its operations.
Any significant failure by the Company to fulfill orders for its products on
an accurate and timely basis, or otherwise to meet ongoing licensing
requirements, could result in a suspension or loss of its license and
interruption of its distribution activities, which in turn would have a
material adverse effect on the Company's business, financial condition and
results of operations.
COMPETITION AND TECHNOLOGICAL ADVANCES
The incontinence product industry is highly competitive. The Company's
ability to compete in the UI management field will depend primarily upon
physician and consumer acceptance of the Reliance Insert, the Impress
Softpatch and the Introl Device, consistency of product quality and delivery,
price, technical capability and the training of health care professionals and
consumers. Other factors within and outside the Company's control will also
affect its ability to compete, including its product development and
innovation capabilities, its ability to obtain required regulatory
clearances, its ability to protect the proprietary technology included in its
products, its manufacturing, marketing and distribution capabilities and its
ability to attract and retain skilled employees. Certain of the Company's
competitors have significantly greater financial, technical, research,
marketing, sales, distribution and other resources.
RISKS RELATING TO FDA OVERSIGHT AND OTHER GOVERNMENT REGULATION
The medical devices currently being manufactured, or proposed to be
manufactured, by the Company, including the Reliance Insert, the Impress
Softpatch and the Introl Device, and the facilities at which the Company
manufactures its products, are subject to regulation by the FDA and, in many
instances, by comparable agencies in the foreign countries in which these
devices are
-8-
<PAGE>
distributed and sold. Although approval to market the Reliance Insert and
clearance to market the Impress Softpatch and the Introl Device in the United
States has been granted by the FDA, the process of obtaining regulatory
approvals for the marketing and sale of any additional products, or the
modification of existing products, by the Company could be costly and
time-consuming and there can be no assurance that such approvals will be
granted on a timely basis, if at all. The regulatory process may delay the
marketing of new products for lengthy periods, impose substantial additional
costs and furnish an advantage to competitors who have greater financial
resources. Moreover, regulatory approvals for new or modified products, if
granted, may include significant limitations on the indicated uses for which
a product is marketed. In addition, the extent of potentially adverse
governmental regulations that might arise from future legislative,
administrative or judicial action cannot be determined. The final approval
granted by the FDA for marketing the Reliance Insert in the United States was
conditioned upon final labeling review, which has been completed, and an
undertaking to complete a five-year post-marketing study covering 150
patients designed to determine (i) the degree of urinary tract infection
associated with use of the device, including type and frequency of
symptomatic bacteriuria, and (ii) the long-term effect of use of the device
on urethral integrity. If the FDA were to believe that the Company is not in
compliance with applicable law and regulations, the FDA could take one or
more of the following actions: withdraw previously approved applications;
require notification to users regarding newly found, unreasonable risks;
request the repair, refund or replacement of faulty devices; request
corrective advertisements, formal recalls or temporary marketing suspension;
refuse to review or clear applications to market any of the Company's future
products in the United States or to allow the Company to enter into
government supply contracts; or institute legal proceedings to detain or
seize products, enjoin future violations or assess criminal penalties against
the Company, its officers or employees. Civil penalties for Food, Drug and
Cosmetic Act violations may be assessed by the FDA in lieu of or in addition
to instituting legal action. Any such action by the FDA could result in
disruption of the Company's operations for an indeterminate period of time.
The Company's manufacturing facility in Needham, Massachusetts, the
operations conducted there, and any future manufacturing facilities developed
or acquired by the Company and any operations conducted there are subject to
on-going inspections by the FDA. The Company registered the facility with the
FDA in connection with its Pre-Market Approval application for the Reliance
Insert and FDA representatives inspected the facility and operations prior to
granting approval of such application. Although the Company's facility passed
inspection in connection with this approval, as a registered manufacturing
facility subject to "Good Manufacturing Practices" ("GMP"), this facility is
subject to future inspections no less frequently than once every two years.
Any revocation of the Company's approval for marketing either the Reliance
Insert, the Impress Softpatch or the Introl Device, or any material product
recall or loss of certification of the Company's manufacturing facility,
would have a material adverse effect on the Company's business, financial
condition and results of operations. The Company is also subject to
regulation under federal, state and local regulations regarding maintenance
of a licensed pharmacy, work place safety, environmental protection and
hazardous and controlled substance controls, among others. The Company
cannot predict the extent of government regulations or impact of new
government regulations which might have an adverse effect on the production
and marketing of the Company's products.
RISK OF INADEQUATE FUNDING; FUTURE CAPITAL FUNDING
The Company plans to continue to expend substantial funds on expansion
of its manufacturing facilities or acquisition of additional manufacturing
facilities, marketing and distribution of its products, research and product
development and pursuit of regulatory approvals. The Company also intends to
invest in additional equipment in order to establish sufficient manufacturing
capabilities to supply commercial volumes of its Reliance Insert and
Impress Softpatch in the United States and abroad. Changes in technology or
sales growth beyond currently contemplated manufacturing capabilities will
require further capital investment. There can be no assurance that the
Company's existing capital resources and any funds generated from future
operations will be sufficient to finance any required investment or pay
interest and principal of the Notes or that other sources of funding will be
available. In addition, future sales of substantial amounts of the Company's
securities in the public market could adversely affect prevailing market
prices and could impair the Company's future ability to raise capital through
the sale of its securities.
UNCERTAINTY REGARDING PATENTS AND PROTECTION OF PROPRIETARY TECHNOLOGY
The Company's ability to compete effectively will depend, in part, on
its ability to develop and maintain proprietary aspects of its technology.
There can be no assurance as to the validity of the United States patents
held by the Company with respect to the technology underlying the Reliance
Insert, the validity of the United States patents with respect to the
technology underlying the Impress Softpatch, or as to the degree of protection
offered by these patents. There can be no assurance that the Company's
patents will not be challenged, invalidated or circumvented in the future. In
addition, there can be no assurance that competitors, many of which have
substantial resources and have made substantial investments in
-9-
<PAGE>
competing technologies, will not seek to apply for and obtain patents that
will prevent, limit or interfere with the Company's ability to make, use and
sell its products either inside or outside the United States. The defense and
prosecution of patent litigation or other legal or administrative proceedings
related to patents is both costly and time-consuming, even if the outcome is
favorable to the Company. During the pendency of any such proceedings, the
Company may be restrained, enjoined or otherwise limited in its ability to
make, use or sell a product incorporating the patents or technology that are
the subject of such claim, which would have a material adverse effect on the
Company's business, financial condition and results of operations. An adverse
outcome in any such proceeding could subject the Company to significant
liabilities to third parties, require disputed rights to be licensed from
others or require the Company to cease making, using or selling any products.
There can be no assurance that any licenses required under any patents or
proprietary rights would be made available on terms acceptable to the
Company, if at all.
The Company also relies on unpatented proprietary technology and there
can be no assurance that others may not independently develop the same or
similar technology or otherwise obtain access to the Company's unpatented
proprietary technology. In addition, the Company cannot be certain that
others will not independently develop substantially equivalent or superseding
proprietary technology, or that an equivalent product will not be marketed in
competition with the Company's products, thereby substantially reducing the
value of the Company's proprietary rights. There can be no assurance that any
confidentiality agreements between the Company and its employees or
consultants will provide meaningful protection for the Company's trade
secrets, know-how or other proprietary information in the event of any
unauthorized use or disclosure of such trade secrets, know-how or other
proprietary information. Finally, there can be no assurance that the
Company's Reliance trademark, the Company's Introl trademark or any
trademarks registered for the Impress Softpatch will provide meaningful
protection.
PRODUCT LIABILITY RISK; LIMITED INSURANCE COVERAGE
The manufacture and sale of medical products and the conduct of clinical
trials using new technology entail the risk of product liability claims.
There can be no assurance that the Company's existing insurance coverage
limits are adequate to protect the Company from any liabilities which it
might incur in connection with the clinical trials of the Company's Reliance
Insert, the commercialization of the Reliance Insert in the United States and
in Europe or the contemplated commercialization of the Impress Softpatch or
the Introl Device. Such insurance is expensive and in the future may not be
available on acceptable terms, if at all. A successful product liability
claim or series of product liability claims brought against the Company in
excess of its insurance coverage would have a material adverse effect on the
Company's business, financial condition and results of operations. In
addition, any claims, even if not ultimately successful, could adversely
affect the market acceptance of the Company's products.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent upon a number of key scientific and management
personnel (most of whom do not have employment agreements providing for a
fixed term of employment). The loss of the services of one or more key
individuals would have a material adverse effect on the Company's business,
financial condition and results of operations. The Company's success will
also depend on its ability to attract and retain other highly qualified
scientific and management personnel. The Company faces competition for such
personnel and there can be no assurance that the Company will be able to
attract or retain such personnel.
UNCERTAINTY RELATING TO THIRD-PARTY REIMBURSEMENT
In the United States and many foreign countries, third-party
reimbursement is currently generally available for surgical procedures for
incontinence, but generally unavailable for patient-managed products such as
diapers and pads. As part of its near-term marketing plan in the United
States, the Company does not believe it will obtain government or private
insurance reimbursement for its Reliance Insert, Impress Softpatch or Introl
Device and that the prospect of substantial third-party reimbursement for any
of such devices in the United States may be difficult. In Europe, the Company
and its European distributors have agreed to adopt a strategy of pursuing
reimbursement for the use of the Reliance Insert in each of their respective
territories where it is appropriate. The availability of third-party
reimbursement for the Reliance Insert in Europe varies from country to
country. While the Company has received notice that full reimbursement for
the use of the Reliance Insert will be provided by the relevant German,
Swedish and Norwegian governmental authorities and by certain authorities
covering
-10-
<PAGE>
much of Denmark and Finland, it is unclear whether reimbursement will be
available for the Reliance Insert in the remainder of Denmark or Finland, or
whether reimbursement will be available for the Reliance Insert in France,
The Netherlands or the United Kingdom. It is also unclear whether or not such
reimbursement approvals that the Company has received may at some point in
the future be reversed. The Company has not yet established a strategy with
respect to seeking reimbursement for the Impress Softpatch outside of the
United States. In addition, the Company has not yet established a strategy
with respect to seeking reimbursement for the Introl Device inside or outside
of the United States. If third-party reimbursement is unavailable in the
relevant European country or in the United States, consumers will have to pay
for the Reliance Insert, Impress Softpatch or Introl Device themselves,
resulting in greater relative out-of-pocket cost of such therapies as
compared to surgical procedures and other management options for which
third-party reimbursement is available. Changes in the availability of
third-party reimbursement for the Reliance Insert, Impress Softpatch or
Introl Device, for products of the Company's competitors or for surgical
procedures may affect the pricing of the Company's products or the relative
cost to the consumer. The Company is not able to predict the effect that the
availability or unavailability of third-party reimbursement for the Reliance
Insert, Impress Softpatch or Introl Device may have on the commercialization
of such products abroad or in the United States.
INTERNATIONAL SALES AND OPERATIONS RISKS
The Reliance Insert is currently being marketed and sold by the
Company's European distributors in Germany, Sweden, Denmark, Norway, The
Netherlands, the United Kingdom and Finland and the Company intends to sell
the Reliance Insert in France through its French distributor. International
sales and operations may be limited or disrupted by the imposition of
government controls, export license requirements, political instability,
trade restrictions, changes in tariffs or difficulties in staffing and
managing international operations. Foreign regulatory agencies often
establish product standards different from those in the United States and any
inability to obtain foreign regulatory approvals on a timely basis would have
an adverse effect on the Company's international business and its financial
condition and results of operations. Additionally, the Company's business,
financial condition and results of operations may be adversely affected by
fluctuations in currency exchange rates as well as increases in duty rates
and difficulties in obtaining export licenses. International sales of the
Reliance Insert in the fourth quarter of 1996 were lower than expected and
the Company expects that international sales of the Reliance Insert will be
minimal for at least the first half of 1997. There can be no assurance that
the Company will be able to successfully commercialize the Reliance Insert,
the Impress Softpatch or Introl Device or any future product in any foreign
market.
VOLATILITY OF MARKET PRICES
The market price of the Common Stock and Notes may be highly volatile.
Factors such as quarter-to-quarter variations in the Company's operations or
financial performance and announcements of technological innovations or new
products, results of clinical trials or other regulatory or reimbursement
events by the Company or its competitors or any of its or their regulators
could cause the market price of the Common Stock or Notes to fluctuate
significantly. In addition, in recent years the stock markets in general, and
the market prices for medical technology companies in particular, have
experienced significant volatility, which often may have been unrelated to
the operating performance of the affected companies. Such volatility may
adversely affect the market price of the Common Stock or Notes.
CERTAIN CHARTER AND BY-LAW PROVISIONS MAY AFFECT MARKET PRICES
The Company's Restated Articles of Organization and the Company's
Amended and Restated By-Laws contain provisions that may have the effect of
making it more difficult for a third party to acquire control of, or of
discouraging acquisition bids for, the Company. This could limit the price
that certain investors might be willing to pay in the future for shares of
Common Stock or the Notes. See "Description of Capital Stock."
CERTAIN MASSACHUSETTS LAWS MAY AFFECT MARKET PRICES
Certain Massachusetts laws contain provisions that may have the effect
of making it more difficult for a third party to acquire control of, or of
discouraging acquisition bids for, the Company. These laws include Chapter
110F of the Massachusetts General Laws, which prohibits certain "business
combinations" with "interested stockholders," and Chapter 110D, entitled
"Regulation of Control Share Acquisitions." These provisions could limit the
price that certain investors might be willing to pay in the future for shares
of Common Stock or the Notes. See "Description of Capital Stock."
-11-
<PAGE>
EFFECT OF ISSUANCE OF PREFERRED STOCK
Shares of preferred stock may be issued in the future without further
stockholder approval and upon such terms and conditions, and having such
rights, privileges and preferences, as the Board of Directors may determine.
The rights of the holders of Common Stock will be subject to, and may be
adversely affected by, the rights of the holders of any preferred stock that
may be issued in the future. In addition, the issuance of preferred stock
could have the effect of making it more difficult for a third party to
acquire control of, or of discouraging acquisition bids for, the Company.
This could limit the price that certain investors might be willing to pay in
the future for shares of Common Stock or the Notes. See "Description of
Capital Stock."
ABSENCE OF TRADING MARKET; TRANSFER RESTRICTIONS
There is no existing trading market for the Notes and there can be no
assurance as to the liquidity of any such market that may develop, the
ability of the holders of Notes to sell such securities, the price at which
the holders of Notes would be able to sell such securities or whether a
trading market, if it develops, will continue. If such a market were to
exist, the Notes could trade at prices higher or lower than their principal
amount depending on many factors, including prevailing interest rates, the
market for similar securities and the operating results of the Company. Each
purchaser of Notes offered hereby in making its purchase will be deemed to
have made certain acknowledgments, representations and agreements. Transfers
of Notes and Common Stock issuable upon conversion of the Notes are subject
to certain restrictions.
CONCENTRATION OF OWNERSHIP
As of December 31, 1996, directors and officers of the Company and their
affiliates owned approximately 24% of the outstanding Common Stock
(including options to purchase Common Stock exercisable within 60 days of
such date). As a result, such persons have the ability to assert significant
influence over the Company and the direction of its affairs and business.
ABSENCE OF DIVIDENDS
The Company has not paid cash dividends and does not anticipate doing so
for the foreseeable future. See "Price Range of Common Stock and Dividend
Policy."
SHARES AVAILABLE FOR FUTURE SALE
The future sale of shares of the Company's Common Stock could have an
adverse effect on the market price of the Common Stock or the Notes. Not
including the registration statement related to this Prospectus, the Company
currently has two effective registration statements on file with the
Securities and Exchange Commission initially covering the resale of up to an
aggregate of 8,519,538 shares of Common Stock held by certain current
shareholders of the Company. Of these 8,519,538 shares, 6,184,512 shares are
covered by a registration statement which was declared effective in October
1995 registering shares of Common Stock held by 73 holders. These shares,
representing shares of Common Stock issued upon the conversion of the
Company's previously outstanding convertible preferred stock, were registered
at the request of the holders of such shares. All of these shares, with the
exception of 1,641,257 shares held by an affiliate of the Company, may be sold
currently under Rule 144(k) under the Securities Act without regard to volume
or other limitations. The remaining 2,335,026 shares, which were issued to the
former shareholders of Advanced Surgical Intervention, Inc. in connection with
the acquisition of the Impress Softpatch technology in May 1996, are covered
by a registration statement which was declared effective in June 1996. These
shares are held by approximately 273 holders, with the largest number of
shares held by any single holder thereunder being approximately 252,000
shares. The Company believes that many of the shares covered by these
registration statements have been sold in the open market prior to the date
hereof. All of the shares covered by these registration statements are freely
tradeable in the open market without volume limitations. As of December 31,
1996 the Company also had options outstanding to purchase an aggregate of
1,546,858 shares of Common Stock and had an additional 1,064,720 shares of
Common Stock reserved for issuance of options which may be granted and
exercised under the Company's existing employee benefit plans. Any shares of
Common Stock issued upon the exercise of such outstanding options or any
options granted in the future will be, upon issuance, freely tradeable on the
open market, subject in some cases to the volume limitations imposed by Rule
144 under the Securities Act. As of December 31, 1996, the Company had
reserved 5,195,391 shares of Common Stock for issuance upon conversion of the
Notes.
-12-
<PAGE>
RECENT EVENTS
On April 7, 1997, the Company acquired the product line, all associated
license rights and all other rights of Johnson & Johnson Medical, Inc. and
certain of its affiliates (collectively, "Johnson & Johnson") to the Introl
Device. The Introl Device is a prescription intravaginal device which is
designed to elevate the bladder neck to its normal anatomical position,
simulating the effect of bladder neck suspension surgery. The Introl Device
has been cleared for marketing in the United States by the FDA and in certain
other countries.
RATIO OF EARNINGS TO FIXED CHARGES
As a result of the losses incurred by the Company since inception,
earnings have been insufficient to cover fixed charges. The following table
sets forth the dollar amount by which earnings did not cover fixed charges
for the periods indicated (amounts in thousands):
FISCAL YEAR ENDED DECEMBER 31
1991 1992 1993 1994 1995 1996
$580 $1,634 $3,708 $7,993 $9,712 $47,660
---- ------ ------ ------ ------ -------
For purposes of computing the ratio of earnings to fixed charges,
earnings consist of the net loss plus fixed charges. Fixed charges consist of
interest expense and one-third of the rent expense from operating leases,
which management believes is a reasonable approximation of an interest factor.
USE OF PROCEEDS
The Notes and any Conversion Shares offered by the Selling
Securityholders are not being sold by the Company, and the Company will not
receive any proceeds from the sale thereof.
SELLING SECURITYHOLDERS
The Notes were issued and sold by the Company to Goldman, Sachs & Co.,
PaineWebber Incorporated, and J.P. Morgan & Co. (the "PURCHASERS") on October
15, 1996, pursuant to a private placement, and were acquired by the Selling
Securityholders in connection with resale transactions with the Purchasers
pursuant to Section 4(z) of the Securities Act, Rule 144A, Regulation D or
Regulation S under the Securities Act or from other holders acquiring such
Notes from prior holders thereof.
The Selling Securityholders may from time to time offer and sell
pursuant to this Prospectus any or all of the Notes and the Common Stock
issued upon conversion of the Notes. The term Selling Securityholder
includes the holders listed below and the beneficial owners of the Notes and
their transferees, pledges, donees or other successors.
The following table sets forth information with respect to the record
holders of the Notes as of January 7, 1997. It has been prepared based on
information furnished to the Company by or on behalf of the Selling
Securityholders. Each of Goldman, Sachs & Co., PaineWebber Incorporated, and
J.P. Morgan & Co. maintain ongoing business relations with the Company and in
connection therewith provides investment banking services to the Company for
which they receive customary fees. None of the other Selling Securityholders
has, or within the past three years has had, any position, office or other
material relationship with the Company.
-13-
<PAGE>
<TABLE>
<CAPTION>
Principal Shares of Percent of Shares of
Amount of Percent of Common Common Common
Notes Owned Notes Out- Stock that Stock Stock Owned
Name of Selling Securityholder ($000) standing(%) May be Sold(1) Outstanding(%)(1) After Offering
- ------------------------------- ----------- ---------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
The TCW Group Inc. 2,170 3.14 163,388 * -
Zazove Convertible Fund, L.P. 800 1.16 60,235 * -
United National Life Insurance 55 0.08 4,141 * -
Lincoln National Life Insurance 2,845 4.12 214,211 * -
Lincoln National Convertible
Securities Fund 1,380 2.00 103,905 * -
Weirton Trust 320 0.46 24,094 * -
Decl. of Trust for the Defined
Benefit Plans of Zeneca
Holdings, Inc. 300 0.43 22,588 * -
Decl. of Trust for the Defined
Benefit Plans of ICI American
Holdings, Inc. 450 0.65 33,882 * -
Delaware State Employees'
Retirement Fund 1,750 2.54 131,764 * -
General Motors Employees
Domestic Group Trust 7,000 10.14 527,058 * -
Hillside Capital Incorporated,
Corporate Account 100 0.14 7,529 * -
Thermo Electron Balanced
Investment Fund 450 0.65 33,882 * -
The SMM Company B.V. 450 0.65 33,882 * -
Goldman, Sachs & Co. 15,179 22.00 1,142,889 4.14 -
Catholic Mutual Relief Society
of America Retirement Plan:
Trust 200 0.29 15,059 * -
Hartford Fire Insurance
Company 400 0.58 30,118 * -
Employers' Reinsurance
Company 750 1.09 56,470 * -
Putnam Convertible Oppor-
tunities and Income Trust 370 0.54 27,859 * -
New Hampshire State
Retirement System 500 0.72 37,647 * -
Putnam Convertible Income-
Growth Trust 3,200 4.64 240,941 * -
Putnam Balanced Retirement
Fund 200 0.29 15,059 * -
Museum of Fine Arts, Boston 80 0.12 6,024 * -
Boston College Endowment 190 0.28 14,306 * -
Promutual 420 0.61 31,623 * -
OCM Convertible Trust 2,880 4.17 216,847 * -
Delta Airlines Master Trust 2,010 2.91 151,341 * -
State Employees' Retirment
Fund of the State of Delaware 710 1.03 53,459 * -
State of Connecticut Combined
Investment Funds 1,400 2.03 105,412 * -
Hughes Aircraft Company
Master Retirement Trust 480 0.70 36,141 * -
Offshore Strategies Ltd. 400 0.58 30,118 * -
Laterman & Co. 140 0.20 10,541 * -
Laterman Strategies 90's LP 260 0.38 19,576 * -
Bond Fund Series -
Oppenheimer Bond Fund for
Growth 2,250 3.26 169,412 * -
United National Insurance
Company 55 0.08 4,141 * -
</TABLE>
-14-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
General Motors Employees
Domestic Group Pension Trust,
Mellon Bank, N.A., as Trustee 6,000 8.70 451,764 * -
Allstate Insurance Company 1,500 2.17 112,941 * -
United National Insurance
Company 55 0.08 4,141 * -
Dean Witter Convertible
Securities Trust 2,750 3.99 207,059 * -
Paloma Securities L.L.C. 50 0.07 3,765 * -
SUBTOTAL: $60,499 87.68% 4,555,218 14.67 -
Unnamed holders of Notes and
Conversion Shares or any future
transferees, pledgees, donees or
successors of or from any such
unnamed holder. 8,501 12.32% 640,075 2.36 *(3)
- -----------------------------------------------------------------------------------------------------
TOTAL: $69,000 100% 5,195,287 216.39 0
</TABLE>
______________________________
* Less than 0.1%
(1) Represents the number of Conversion Shares into which the Notes
listed for such Selling Securityholder in this table are convertible as of
the date of this Prospectus. Prior to this Offering of the Notes and the
Conversion Shares, none of the Selling Securityholders owned any shares of
Common Stock. Due to rounding, this column does not exactly total the
aggregate number of Conversion Shares initially issuable upon conversion of
the Notes, which is 5,195,293.
(2) Percentage of Common Stock Outstanding is calculated using the
number of shares outstanding on March 31, 1996 plus the number of
Conversion Shares into which the Notes listed for such Selling Stockholder in
this table are convertible as of the date of this Prospectus.
(3) Assumes that the unnamed holders of Offered Securities or any
future transferees, pledgees, donees, or successors of or from any such
unnamed holder do not beneficially own any Common Stock other than the Common
Stock issuable upon conversion of the Notes at the initial conversion rate.
The per share conversion price and, therefore, the number of Conversion
Shares issuable upon conversion of the Notes is subject to adjustment under
certain circumstances. Accordingly, the number of Conversion Shares issuable
upon conversion of the Notes may increase or decrease. In addition, the
Selling Securityholders identified above may have sold, transferred or
otherwise disposed of all or a portion of their Notes, since the date on
which they provided the information regarding their Notes, in transactions
exempt from the registration requirements of the Securities Act.
Because the Selling Securityholders may, pursuant to this Prospectus,
offer all or some portion of the Notes or Conversion Shares issuable upon
conversion of the Notes, no estimate can be given as to the amount of the
Notes or Conversion Shares of Common Stock that will be held by the Selling
Securityholders upon termination of any such sales. In addition, since the
date on which the Selling Securityholders provided the information regarding
their holdings of Notes, they may have sold, transferred or otherwise
disposed of all or a portion of their Notes in transactions exempt from the
registration requirements of the Securities Act.
-15-
<PAGE>
PLAN OF DISTRIBUTION
This Prospectus relates to the resale of $69,000,000 of Notes issued on
October 15, 1996, and the resale of the shares (the "CONVERSION SHARES") of
Common Stock issuable upon conversion of Notes. This Prospectus does not
cover the initial issuance of shares of Common Stock upon conversion of the
Notes. The Notes and Conversion Shares may be offered from time to time by
the Selling Securityholders.
The Selling Securityholders, acting as principals for their own
accounts, may sell all or a portion of the Notes or Conversion Shares from
time to time on any exchange on which such securities are listed on terms to
be determined at the times of such sales. The Selling Securityholders may
also make private sales directly or through a broker or brokers.
Alternatively, any of the Selling Securityholders may from time to time offer
the Notes or Conversion Shares which may be offered hereby and beneficially
owned by them through underwriters, dealers or agents, who may receive
compensation in the form of underwriting discounts, commissions or
concessions from the Selling Securityholders and the purchasers of the Notes
or Conversion Shares for whom they may act as agent. To the extent required,
the aggregate principal amount of Notes and number of Conversion Shares to be
sold hereby, the names of the Selling Securityholders, the purchase price,
the name of any such agent, dealer or underwriter and any applicable
commissions, discounts or other terms constituting compensation with respect
to a particular offer will be set forth in an accompanying Supplement to this
Prospectus. The aggregate proceeds to the Selling Securityholders from the
sale of the Notes or Conversion Shares offered by them hereby will be the
purchase price of such Notes or Conversion Shares of Common Stock less
discounts and commissions, if any. The Company will not receive any of the
proceeds from the resale of the Notes or Conversion Shares offered hereby.
To the best knowledge of the Company, there are currently no plans,
arrangements or understandings between any Selling Securityholders and any
broker, dealer or underwriter regarding the sale of the Notes or Conversion
Shares by the Selling Securityholders. There is no assurance that any
Selling Securityholders will sell any of the Notes or Conversion Shares
offered by it hereunder or that any of Selling Securityholder will not
transfer, devise or gift such Notes or Conversion Shares by other means not
described herein.
The Notes and the Conversion Shares may be sold from time to time in one
or more transactions at fixed offering prices, which may be changed, or at
varying prices determined at the time of sale or at negotiated prices. Such
prices will be determined by the holders of such securities or by agreement
between such holders and underwriters or dealers who may receive fees or
commissions in connection therewith.
The outstanding Common Stock is listed for trading on the Nasdaq
National Market, and the Company currently intends to apply for listing of
the Conversion Shares on the Nasdaq National Market. The Notes are currently
eligible for trading in the PORTAL market of the National Association of
Securities Dealers, Inc. The Notes are not expected to remain eligible for
trading through the PORTAL market after the effectiveness of the Registration
Statement relating to this Prospectus. The Company does not intend to apply
for listing of the Notes on any securities exchange or for inclusion of the
Notes on any automated quotation system. There is no assurance as to
development or liquidity of any trading market that may develop for the Notes.
Each of Goldman, Sachs & Co., Paine Webber Incorporated and J.P. Morgan
Securities, Inc. have engaged in transactions with and performed various
investment banking and other services for the Company in the past, and may do
so from time to time in the future.
In order to comply with the securities laws of certain states, if
applicable, the Notes and Conversion Shares offered hereby will be sold in
such jurisdiction only through registered or licensed brokers or dealers. In
addition, in certain states the Notes or Conversion Shares offered hereby may
not be sold unless they have been registered or qualified for sale in the
applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
The Selling Securityholders and any brokers-dealers, agents or
underwriters that participate with the Selling Securityholders in the
distribution of the Notes or Conversion Shares offered hereby may be deemed
to be "Underwriters" within the meaning of the Securities Act, in which event
any commissions or discounts received by such broker-dealers, agents or
underwriters and any profit on the resale of the Notes or Conversion Shares
offered hereby and purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
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The Company and the Selling Securityholders have agreed to indemnify
each other against certain liabilities arising under the Securities Act. The
Company has agreed to pay all expenses incident to the offer and sale of the
Notes and Conversion Shares offered hereby by the Selling Securityholders to
the public, other than the broker's commissions and underwriting discounts
and commissions.
DESCRIPTION OF NOTES
THE NOTES WERE ISSUED UNDER AN INDENTURE, DATED AS OF OCTOBER 15, 1996
(THE "INDENTURE"), BETWEEN THE COMPANY AND STATE STREET BANK AND TRUST
COMPANY, AS TRUSTEE (THE "TRUSTEE"), COPIES OF WHICH ARE AVAILABLE FOR
INSPECTION AT THE CORPORATE TRUST OFFICE OF THE TRUSTEE IN THE BOROUGH OF
MANHATTAN, THE CITY OF NEW YORK. WHEREVER PARTICULAR DEFINED TERMS OF THE
INDENTURE (INCLUDING THE NOTES AND THE VARIOUS FORMS THEREOF) ARE REFERRED
TO, SUCH DEFINED TERMS ARE INCORPORATED HEREIN BY REFERENCE (THE NOTES BEING
REFERRED TO IN THE INDENTURE AS "SECURITIES"). THE FOLLOWING SUMMARIES OF
CERTAIN PROVISIONS OF THE INDENTURE DO NOT PURPORT TO BE COMPLETE AND ARE
SUBJECT TO, AND ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO, THE DETAILED
PROVISIONS OF THE NOTES AND THE INDENTURE, INCLUDING THE DEFINITIONS THEREIN
OF CERTAIN TERMS.
GENERAL
The Notes are unsecured subordinated obligations of the Company, limited
to $69,000,000 aggregate principal amount and having a date of maturity of
October 15, 2003. Payment in full of the principal amount of the Notes will
be due on October 15, 2003 and will be payable at a price of 100% of the
principal amount thereof.
The Notes bear interest at 6% per annum from October 15, 1996, payable
semi-annually on April 15 and October 15 of each year, commencing April 15,
1997, until the principal thereof is paid or made available for payment, to
the Person in whose name the Note (or any Predecessor Note) is registered at
the close of business on the preceding April 1 or October 1, as the case may
be. Interest on the Notes at such rate will be computed on the basis of a
360-day year of twelve 30-day months. Additional interest may be payable on
the Notes in the amounts, and under the circumstances, described under
"--Registration Rights" below.
The Notes will be convertible into Common Stock initially at the
conversion rate of 75.2941 shares per $1,000 principal amount of Notes
subject to adjustment upon the occurrence of certain events described under
"--Conversion Rights," at any time prior to the close of business on the
maturity date, unless previously redeemed or repurchased.
The Notes are redeemable at the option of the Company, at any time on or
after October 15, 1999, in whole or in part, at the redemption prices set
forth below under "--Optional Redemption," plus accrued interest to the
redemption date. The Notes also are subject to repurchase by the Company at
the option of the Holders in the event of a change of control of the Company,
as described below under "--Repurchase at Option of Holders Upon a Change In
Control."
Most of the Notes were initially offered and sold to qualified
institutional buyers in reliance on Rule 144A ("RULE 144A NOTES"). The Notes
were also offered and sold in offshore transactions in reliance on Regulation
S ("REGULATION S NOTES") and to institutional accredited investors in
reliance upon exemptions from the registration requirements of the Securities
Act other than Rule 144A and Regulation S ("OTHER NOTES"). The Rule 144A
Notes and Regulation S Notes were initially issued in global (i.e.,
book-entry) form, while the Other Notes were issued in certificated (i.e.,
not in book-entry) form. See "--Form, Denomination, Transfer, Exchange and
Book-Entry Procedures."
The principal of, premium, if any, and interest on the Notes will be
payable, and the Notes may be surrendered for registration of transfer,
exchange and conversion, at the office or agency of the Company in The
Borough of Manhattan, The City of New York. In addition, payment of interest
may, at the option of the Company, be made by check mailed to the address of
the Person entitled thereto as it appears in the Security Register. See
"--Payment and Conversion." Payments, transfers, exchanges and conversions
relating to beneficial interests in Notes in book-entry form will be subject
to the procedures applicable to global Notes described below.
The Company appointed the Trustee at its Corporate Trust Office as
paying agent, transfer agent, registrar and conversion agent for the Notes.
In such capacities, the Trustee is responsible for, among other things, (i)
maintaining a record of the aggregate holdings of Notes represented by each
Global Note (as defined below) and accepting Notes for exchange
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and registration of transfer, (ii) ensuring that payments of principal,
premium, if any, and interest in respect of the Notes received by the Trustee
from the Company are duly paid to DTC or its nominees, (iii) transmitting to
the Company any notices from Holders of the Notes, (iv) accepting conversion
notices and related documents and transmitting the relevant items to the
Company and (v) delivering certificates for Common Stock issued on conversion
of the Notes.
FORM, DENOMINATION, TRANSFER, EXCHANGE AND BOOK-ENTRY PROCEDURES
The Notes were issued in fully registered form, without interest
coupons, in minimum denominations of $1,000 and integral multiples thereof.
Furthermore, purchasers of Other Notes were subject to a minimum initial
purchase obligation of $100,000 for each such purchaser. Notes were not
issued in bearer form. Notes sold were issued only against payment in
immediately available funds.
RULE 144A AND REGULATION S NOTES. The Rule 144A Notes were initially
represented by one or more Notes in registered, global form without interest
coupons (collectively, the "RESTRICTED GLOBAL NOTE"). The Regulation S Notes
were initially represented by one or more Notes in registered, global form
without interest coupons (collectively, the "REGULATION S GLOBAL NOTE" and,
together with the Restricted Global Note, the "GLOBAL NOTES"). The Global
Notes were deposited upon issuance with the Trustee as custodian for The
Depository Trust Company ("DTC"), in New York, New York, and registered in
the name of DTC or its nominee, in each case for credit to an account of a
direct or indirect participant in DTC as described below.
The Rule 144A Notes (including beneficial interests in the Restricted
Global Note) are subject to certain restrictions on transfer and such Notes
bear the following legend:
THE SECURITIES EVIDENCED HEREBY AND THE COMMON STOCK ISSUABLE UPON THEIR
CONVERSION HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933
(THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT (A) BY ANY INITIAL INVESTOR THAT IS NOT A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT,
(1) TO A PERSON WHO THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER ACQUIRING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION COMPLYING WITH RULE 144A, (2)
IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (3) PURSUANT TO AN EXCEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (4) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT OR (B) BY ANY INITIAL INVESTOR THAT IS
A QUALIFIED INSTITUTIONAL BUYER OR BY ANY SUBSEQUENT INVESTOR, AS SET FORTH
IN CLAUSE (A) ABOVE OR TO AN INSTITUTION THAT IS AN ACCREDITED INVESTOR
WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) IN A TRANSACTION
EXCEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND, IN EACH
CASE (A) AND (B), IN COMPLIANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE
STATES OF THE UNITED STATES AND OTHER JURISDICTIONS, SECURITIES OWNED BY AN
INITIAL INVESTOR THAT IS NOT A QUALIFIED INSTITUTIONAL BUYER MAY NOT BE HELD
IN BOOK-ENTRY FORM AND MAY NOT BE TRANSFERRED WITHOUT CERTIFICATION THAT THE
TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS, AS PROVIDED IN THE
INDENTURE REFERRED TO BELOW."
The Regulation S Notes bear the following legend:
THIS NOTE AND THE COMMON STOCK ISSUABLE UPON ITS CONVERSION HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT AND MAY NOT BE OFFERED, SOLD OR
DELIVERED IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY
U.S. PERSON, UNLESS SUCH SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT
OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF IS AVAILABLE.
Except as set forth below, the Global Notes may be transferred, in whole
and not in part, only to another nominee of DTC or to a successor of DTC or
its nominee. Beneficial interests in the Global Notes may not be exchanged
for Notes in certificated form except in the limited circumstances described
below under "--Exchanges of Book-Entry Notes for Certificated Notes." In
addition, beneficial interests in the Restricted Global Note may not be
exchanged for beneficial
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interests in the Regulation S Global Note or vice versa except in accordance
with the transfer and certification requirements described below under
"--Exchanges between the Restricted Global Note and the Regulation S Global
Note."
OTHER NOTES. Other Notes will be issued only in registered,
certificated (I.E., not in book-entry) form without interest coupons. Other
Notes will be subject to certain restrictions on transfer and will bear a
restrictive legend as described under "Notice to Investors." Other Notes may
not be exchanged for beneficial interests in any Global Note except in
accordance with the transfer and certification requirements described below
under "--Exchanges of Certificated Notes for Book-Entry Notes."
EXCHANGES BETWEEN THE RESTRICTED GLOBAL NOTE AND THE REGULATION S GLOBAL
NOTE. Beneficial interests in the Restricted Global Note may be exchanged
for beneficial interests in the Regulation S Global Note and vice versa only
in connection with a transfer of such interest. Such transfers are subject to
compliance with the certification requirements described below.
A beneficial interest in the Restricted Global Note may be transferred
to a person who takes delivery in the form of an interest in the Regulation S
Global Note, only upon receipt by the Trustee of a written certification on
behalf of the transferor (in the form provided in the Indenture) to the
effect that such transfer is being made in accordance with Rule 904 of
Regulation S or (if available) Rule 144 under the Securities Act (a
"REGULATION S GLOBAL NOTE CERTIFICATE") and that, if such transfer occurs
prior to the expiration of the Restricted Period, the interest transferred
will be held immediately thereafter through Euroclear or CEDEL.
Any beneficial interest in one of the Global Notes that is exchanged for
an interest in the other Global Note will cease to be an interest in such
Global Note and will become an interest in the other Global Note.
Accordingly, such interest will thereafter be subject to all transfer
restrictions and other procedures applicable to beneficial interests in such
other Global Note for as long as it remains such an interest.
Any exchange of a beneficial interest in the Regulation S Global Note
for a beneficial interest in the Restricted Global Note or vice versa will be
effected in DTC by means of an instruction originated by the Trustee through
the DTC Deposit/Withdraw at Custodian ("DWAC") system. Accordingly, in
connection with any such exchange, appropriate adjustments will be made in
the records of the Security Registrar to reflect a decrease in the principal
amount of such Regulation S Global Note and a corresponding increase in the
principal amount of such Restricted Global Note or vice versa, as applicable.
EXCHANGES OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES. A beneficial
interest in a Global Note may not be exchanged for a Note in certificated
form unless (i) DTC (x) notifies the Company that it is unwilling or unable
to continue as Depositary for the Global Note or (y) has ceased to be a
clearing agency registered under the Exchange Act and in either case the
Company thereupon fails to appoint a successor Depositary, (ii) the Company,
at its option, notifies the Trustee in writing that it elects to cause the
issuance of the Notes in certificated form or (iii) there shall have occurred
and be continuing an Event of Default or any event which after notice or
lapse of time or both would be an Event of Default with respect to the Notes.
In all cases, certificated Notes delivered in exchange for any Global Note or
beneficial interests therein will be registered in the names, and issued in
any approved denominations, requested by or on behalf of the Depositary (in
accordance with its customary procedures). Any certificated Note issued in
exchange for an interest in the Global Note will bear the legend restricting
transfers that is borne by such Global Note. Any such exchange will be
effected through the DWAC System and an appropriate adjustment will be made
in the records of the Security Registrar to reflect a decrease in the
principal amount of the relevant Global Note.
EXCHANGES OF CERTIFICATED NOTES FOR BOOK-ENTRY NOTES. Other Notes,
which will be issued in certificated form, may not be exchanged for
beneficial interests in any Global Note unless such exchange occurs in
connection with a transfer of such Other Notes that complies with Rule 144A,
in the case of an exchange for an interest in the Restricted Global Note, or
Regulation S or (if available) Rule 144, in the case of an exchange for an
interest in the Regulation S Global Note. In addition, in connection with any
such exchange and transfer, the Trustee must have received on behalf of the
transferor a Restricted Global Note Certificate or a Regulation S Global Note
Certificate, as applicable. Any such exchange will be effected through the
DWAC System and an appropriate adjustment will be made in the records of the
Security Registrar to reflect an increase in the principal amount of the
relevant Global Note.
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CERTAIN BOOK-ENTRY PROCEDURES FOR GLOBAL NOTES. THE DESCRIPTIONS OF THE
OPERATIONS AND PROCEDURES OF DTC, EUROCLEAR AND CEDEL THAT FOLLOW ARE
PROVIDED SOLELY AS A MATTER OF CONVENIENCE. THESE OPERATIONS AND PROCEDURES
ARE SOLELY WITHIN THE CONTROL OF THE RESPECTIVE SETTLEMENT SYSTEMS AND ARE
SUBJECT TO CHANGES BY THEM FROM TIME TO TIME. THE COMPANY TAKES NO
RESPONSIBILITY FOR THESE OPERATIONS AND PROCEDURES AND URGES INVESTORS TO
CONTACT THE SYSTEM OR THEIR PARTICIPANTS DIRECTLY TO DISCUSS THESE MATTERS.
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 ("PARTICIPANTS") and facilitate the clearance
and settlement of securities transactions between participants through
electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical transfer and delivery of certificates.
Participants include securities brokers and dealers, banks, trust companies
and clearing corporations and may include certain other organizations.
Indirect access to the DTC system is available to other entities such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("INDIRECT PARTICIPANTS").
DTC has advised the Company that its current practice, upon the issuance
of the Restricted Global Note and the Regulation S Global Note, is to credit,
on its internal system, the respective principal amount of the individual
beneficial interests represented by such Global Notes to the accounts with
DTC of the participants through which such interests are to be held.
Ownership of beneficial interests in the Global Notes will be shown on, and
the transfer of that ownership will be effected only through, records
maintained by DTC or its nominees (with respect to interests of participants)
and the records of participants and indirect participants (with respect to
interests of persons other than participants).
AS LONG AS DTC, OR ITS NOMINEE, IS THE REGISTERED HOLDER OF A GLOBAL
NOTE, DTC OR SUCH NOMINEE, AS THE CASE MAY BE, WILL BE CONSIDERED THE SOLE
OWNER AND HOLDER OF THE NOTES REPRESENTED BY SUCH GLOBAL NOTE FOR ALL
PURPOSES UNDER THE INDENTURE AND THE NOTES. Except in the limited
circumstances described above under "--Exchanges of Book-Entry Notes for
Certificated Notes," owners of beneficial interests in a Global Note will not
be entitled to have any portions of such Global Note registered in their
names, will not receive or be entitled to receive physical delivery of Notes
in definitive form and will not be considered the owners or Holders of the
Global Note (or any Notes represented thereby) under the Indenture or the
Notes.
Investors may hold their interests in the Restricted Global Note
directly through DTC, if they are participants in such system, or indirectly
through organizations (including Euroclear and CEDEL) which are participants
in such system. Investors may hold their interests in the Regulation S Global
Note through CEDEL or Euroclear, if they are participants in such systems, or
indirectly through organizations which are participants in such systems.
After the expiration of the Restricted Period (but not earlier), investors
may also hold their interests in the Regulation S Global Note through
organizations other than CEDEL and Euroclear that are participants in the DTC
system. CEDEL and Euroclear will hold interests in the Regulation S Global
Note on behalf of their participants through customers' securities accounts
in their respective names on the books of their respective depositories. The
depositories, in turn, will hold such interests in the Regulation S Global
Note in customers' securities accounts in the depositories' names on the
books of DTC. All interests in a Global Note, including those held through
Euroclear or CEDEL, will be subject to the procedures and requirements of
DTC. Those interests held through Euroclear and CEDEL will also be subject to
the procedures and requirements of such system. Transfers and exchanges of
interests in a Global Note will also be subject to the procedures described
above under "--Exchanges between the Restricted Global Note and the
Regulation S Global Note," if applicable.
The laws of some states require that certain persons take physical
delivery in definitive form of securities that they own. Consequently, the
ability to transfer beneficial interests in a Global Note to such persons may
be limited to that extent. Because DTC can act only on behalf of its
participants, which in turn act on behalf of indirect participants and
certain banks, the ability of a person having beneficial interests in a
Global Note to pledge such interest to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
interests, may be affected by the lack of a physical certificate evidencing
such interests.
Payments of the principal of, premium, if any, and interest on Global
Notes will be made to DTC or its nominee as the registered owner thereof.
Neither the Company, the Trustee nor any of their respective agents will have
any responsibility
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or liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in the Global Notes or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment
of principal or interest in respect of a Global Note representing any Notes
held by it or its nominee, will immediately credit participants' accounts
with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Note for such Notes as shown
on the records of DTC or its nominee. The Company also expects that payments
by participants to owners of beneficial interests in such Global Note held
through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts
of customers registered in "street name." Such payments will be the
responsibility of such participants.
Except for trades involving only Euroclear and CEDEL participants,
interests in the Global Notes will trade in DTC's Same-Day Funds Settlement
System and secondary market trading activity in such interests will therefore
settle in immediately available funds, subject in all cases to the rules and
procedures of DTC and its participants. Transfers between participants in DTC
will be effected in accordance with DTC's procedures, and will be settled in
same-day funds. Transfers between participants in Euroclear and CEDEL will be
effected in the ordinary way in accordance with their respective rules and
operating procedures.
Subject to compliance with the transfer and exchange restrictions
applicable to the Notes described elsewhere herein, cross-market transfers
between DTC participants, on the one hand, and Euroclear or CEDEL
participants, on the other hand, will be effected by DTC in accordance with
DTC's rules on behalf of Euroclear or CEDEL, as the case may be, by its
respective depositary; however, such cross-market transactions will require
delivery of instructions to Euroclear or CEDEL, as the case may be, by the
counterparts in such system in accordance with the rules and procedures and
within the established deadlines (Brussels time) of such system. Euroclear or
CEDEL, as the case may be, will, if the transaction meets its settlement
requirements, deliver instructions to its respective depository to take
action to effect final settlement on its behalf by delivering or receiving
interests in the relevant Global Note in DTC, and making or receiving payment
in accordance with normal procedures for same-day funds settlement applicable
to DTC. Euroclear participants and CEDEL participants may not deliver
instructions directly to the depositories for Euroclear or CEDEL.
Because of time zone differences, the securities account of a Euroclear
or CEDEL participant purchasing an interest in a Global Note from a DTC
participant will be credited, and any such crediting will be reported to the
relevant Euroclear or CEDEL participant, during the securities settlement
processing day (which must be a business day for Euroclear and CEDEL)
immediately following the DTC settlement date. Cash received in Euroclear or
CEDEL as a result of sales of interests in a Global Note by or through a
Euroclear or CEDEL participant to a DTC participant will be received with
value on the DTC settlement date but will be available in the relevant
Euroclear or CEDEL cash account only as of the business day for Euroclear or
CEDEL following the DTC settlement date.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange
as described below and the conversion of Notes) only at the direction of one
or more participants to whose account with DTC interests in the Global Notes
are credited and only in respect of such portion of the aggregate principal
amount of the Notes as to which such participant or participants has or have
given such direction. However, if there is an Event of Default (as defined
below) under the Notes, DTC reserves the right to exchange the Global Notes
for legended Notes in certificated form, and to distribute such Notes to its
participants.
Although DTC, Euroclear and CEDEL have agreed to the foregoing
procedures in order to facilitate transfers of beneficial ownership interests
in the Global Notes among participants of DTC, Euroclear and CEDEL, they are
under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. None of the Company, the
Trustee nor any of their respective agents will have any responsibility for
the performance by DTC, Euroclear and CEDEL, their participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations, including maintaining, supervising or reviewing
the records relating to, or payments made on account of, beneficial ownership
interests in Global Notes.
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PAYMENT AND CONVERSION
The principal of the Notes will be payable in U.S. dollars, against
surrender thereof at the office or agency of the Company designated by it for
such purpose in the Borough of Manhattan, The City of New York, and at any
other office or agency of the Company maintained for such purpose, in U.S.
currency by dollar check or by transfer to a dollar account (such a transfer
to be made only to a Holder of an aggregate principal amount of Notes in
excess of $2,000,000 and only if such Holder shall have furnished wire
instructions in writing to the Trustee no later than 15 days prior to the
relevant payment date) maintained by the Holder with a bank in the United
States. Payment of interest on a Note may be made by dollar check mailed to
the address of the person entitled thereto as such address shall appear in
the Security Registrar, or, upon written application by the Holder to the
Security Registrar setting forth instructions not later than the relevant
Record Date, by transfer to a dollar account (such a transfer to be made only
to a Holder of an aggregate principal amount of Notes in excess of $2,000,000
and only if such Holder shall have furnished wire instructions in writing to
the Trustee no later than 15 days prior to the relevant payment date)
maintained by the Holder with a bank in the United States.
Any payment on a Note due on any day which is not a Business Day need
not be made on such day, but may be made on the next succeeding Business Day
with the same force and effect as if made on such due date, and no interest
shall accrue on such payment for the period from and after such date.
"Business Day," when used with respect to any place of payment, place of
conversion or any other place, as the case may be, means each Monday,
Tuesday, Wednesday, Thursday and Friday which is not a day on which banking
institutions in such place of payment, place of conversion or other place, as
the case may be, are authorized or obligated by law or executive order to
close.
Notes may be surrendered for conversion at the office or agency of the
Company in the Borough of Manhattan, The City of New York, at any other
office or agency of the Company maintained for such purpose and at the office
or agency of any additional conversion agent appointed by the Company. In
the case of Global Notes, conversion will be effected by DTC upon notice from
the holder of a beneficial interest in a Global Note in accordance with its
rules and procedures. Notes surrendered for conversion must be accompanied
by a conversion notice and any payments in respect of interest, as
applicable, as described below under "-Conversion Rights."
REGISTRATION RIGHTS
The holders of the Notes and the Common Stock issuable upon conversion
thereof are entitled to the benefits of a Registration Rights Agreement,
dated as of October 15, 1996, between the Company and the Purchasers (the
"Registration Rights Agreement"). Pursuant to the Registration Rights
Agreement, the Company has, at its expense, filed a shelf registration
statement (the "Shelf Registration Statement") with the Commission with
respect to resales of the Notes and the Common Stock issuable upon conversion
thereof (collectively, the "Registrable Securities") and agreed for the
benefit of the Holders from time to time and the holders from time to time of
the Common Stock issued upon conversion thereof that it will, at its expense,
(i) use its reasonable best efforts to cause such Shelf Registration
Statement to be declared effective by the Commission as promptly as
practicable but within 180 days after the first date of original issuance of
the Notes, and (ii) use its reasonable best efforts to maintain such Shelf
Registration Statement continuously effective under the Securities Act until
the date (the "Expiration Date") which is the earliest of the dates described
in the following clauses (a), (b) and (c): (a) the third annual anniversary
of the later of the (x) date of the effectiveness of the Shelf Registration
Statement (the "effective time") and (y) the latest date of original issuance
of the Notes, (b) such time as all Registrable Securities covered by the
Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement, transferred pursuant to Rule 144 under the Securities
Act or other wise transferred in a manner that results in a new security not
subject to transfer restrictions under the Securities Act being delivered
pursuant to the Indenture and (c) such time as, in the opinion of counsel,
all of the Registrable Securities held by nonaffiliates of the Company are
eligible for resale pursuant to Rule 144(k) (or any successor or analogous
rule) under the Securities Act and the legend described under "Notice to
Investors" has been removed from such Registrable Securities. Notwithstanding
the foregoing, the Company will be permitted to suspend the use of the
prospectus that is part of the Shelf Registration Statement for a period not
to exceed 30 days in any three month period or 60 days in any 12 month period
(with any such period referred to as a "blackout period"), if the Board of
Directors of the Company shall have determined in good faith that it is in
the best interests of the Company to suspend such use and the Company
provides the Holders with written notice of such suspension.
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The Shelf Registration Statement was declared effective on April 11, 1997. In
the event that the Shelf Registration Statement ceases to be effective or the
Company suspends the use of the prospectus that is part of the Shelf
Registration Statement (whether pursuant to a blackout period or otherwise)
at any time after the effective time and prior to the Expiration Date for a
period in excess of 60 days, whether or not consecutive, during any 12-month
period, then the interest rate borne by the Notes shall increase by an
additional one-half percent (0.50%) of the principal amount thereof per annum
from and including the 61st day of ineffectiveness or suspension to but
excluding the first day on which the Shelf Registration Statement thereafter
becomes effective or the prospectus becomes available for use. Any reference
herein, or in the Indenture or the Notes, to interest shall be deemed also to
refer to any additional interest that may be payable as described in this
paragraph.
The Registration Rights Agreement provides that holder of 33 1/3% of the
Registrable Securities may elect to have one underwritten offering of
Registrable Securities. The managing underwriter(s) for any such offering
must be selected by Holder of 50% of the Registrable Securities to be
included in the underwritten offering and must be reasonably acceptable to
the Company.
The Company will pay all fees and expenses incident to the filing of the
Shelf Registration Statement and maintaining its effectiveness for resales of
Registrable Securities. In addition, in the event of an underwritten
offering, the Company will pay the fees and expenses incurred by it in
connection with such offering including those of its independent counsel and
accountants, and will also pay up to a maximum of $75,000 for the fees and
expenses of a single counsel selected by holders of not less than 25% of the
Registrable Securities included in such offering to represent them in
connection with such offering. The holders participating in such offering
will be responsible (on a pro rata basis based on the principal amount of
Registrable Securities included in such offering) for all fees and expenses
of such counsel in excess of $75,000. Except as provided in the preceding
sentence, each holder of Registrable Securities included in the Shelf
Registration Statement will be responsible for all underwriting discounts and
commissions payable in connection with the sale of such holders of
Registrable Securities and any other fees and expenses incurred by it in
connection with the Shelf Registration Statement.
In the Registration Rights Agreement, the Company has agreed to
indemnify the holders of Registrable Securities against certain liabilities,
including liabilities under the Securities Act, provided that any holder
seeking indemnification did not use a prospectus during a blackout period or
an outdated prospectus after the Company has provided such holder an updated
prospectus, and each holder of Registrable Securities included in the Shelf
Registration Statement is obligated to indemnify the Company, any other
holder and any underwriters participating in the offering of Registrable
Securities against any liability with respect to information furnished by
such holder in writing to the Company (including the information in a Selling
Securityholder's Questionnaire) expressly for use in the Shelf Registration
Statement.
This summary of certain provisions of the Registration Rights Agreement
does not purport to be complete and is subject to, and qualified in its
entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of the form of which will be made available to holders of
Notes (i) for inspection at the offices of the Company specified above or at
the Corporate Trust Office of the Trustee in the City of New York or (ii)
upon request to the Company.
CONVERSION RIGHTS
The Holder of any Note will have the right, at the Holder's option, to
convert any portion of the principal amount of a Note that is an integral
multiple of $1,000 into shares of Common Stock at any time following October
15, 1996 unless previously redeemed or repurchased, at a conversion rate of
75.2941 shares per $1,000 principal amount of Notes (the "CONVERSION RATE")
subject to adjustment as described below. The right to convert a Note called
for redemption or delivered for repurchase will terminate at the close of
business on the Redemption Date or Repurchase Date for such Note, unless the
Company defaults in making the payment due upon redemption or repurchase, as
the case may be.
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The right of conversion attaching to any Note may be exercised by the
Holder by delivering the Note at the office or agency of the Company in the
Borough of Manhattan, The City of New York, at any other office or agency of
the Company maintained for such purpose and at the office or agency of any
additional conversion agent appointed by the Company, accompanied by a duly
signed and completed notice of conversion, a copy of which may be obtained
from the Trustee and any conversion agent. The conversion date will be the
date on which the Note and the duly signed and completed notice of conversion
are so delivered. As promptly as practicable on or after the conversion date,
the Company will issue and deliver to the Trustee a certificate or
certificates for the number of full shares of Common Stock issuable upon
conversion, together with payment in lieu of any fraction of a share or, at
the Company's option, rounded up to the next whole number of shares; such
certificate will be sent by the Trustee to the Conversion Agent for delivery
to the Holder. Such shares of Common Stock issuable upon conversion of the
Notes, in accordance with the provisions of the Indenture, will be fully paid
and non-assessable and may bear restrictive legends governing their transfer
as provided in the Indenture.
Any Note surrendered for conversion during the period from the close of
business on any Regular Record Date next preceding any Interest Payment Date
to the opening of business on such Interest Payment Date (except Notes (or
portions thereof) called for redemption on a Redemption Date or repurchasable
on a Repurchase Date occurring, in either case, within such period) must be
accompanied by payment of an amount equal to the interest payable on such
Interest Payment Date on the principal amount of such Notes being surrendered
for conversion. The interest payable on any Interest Payment Date with
respect to any Note (or portion thereof, if applicable) which has been called
for redemption on a Redemption Date, or is repurchasable on a Repurchase
Date, occurring, in either case, during the period from the close of business
on the Regular Record Date next preceding such Interest Payment Date to the
opening of business on such Interest Payment Date, which Note is surrendered
for conversion (in whole or in part) during such period, shall be paid upon
conversion to the Holder in an amount equal to the interest that would have
been payable on the portion of such Note that is being called for redemption
or is being repurchased and is being converted if such portion had been
converted as of the close of business on such Interest Payment Date. The
interest so payable on any Interest Payment Date in respect of any Note (or
portion thereof, as the case may be) which has not been called for redemption
on a Redemption Date, or is not eligible for repurchase on a Repurchase Date,
occurring, in either case, during the period from the close of business on
the Regular Record Date next preceding such Interest Payment Date to the
opening of business on such Interest Payment Date, which Note (or portion
thereof, as the case may be) is surrendered for conversion during such
period, shall be paid to the Holder of such Note as of such Regular Record
Date. Interest payable on any Interest Payment Date in respect of any Note
surrendered for conversion on or after such Interest Payment Date shall be
paid to the Holder of such Note as of the next preceding Regular Record Date,
notwithstanding the exercise of the right of conversion.
As a result of the foregoing provisions, Holders that surrender Notes
for conversion on a date that is not an Interest Payment Date will not
receive any interest for the period from the Interest Payment Date next
preceding the date of conversion to the date of conversion or for any later
period, even if the Notes are surrendered after a notice of redemption has
been given (except for the payment of interest on Notes called for redemption
on a Redemption Date or repurchasable on a Repurchase Date between a Regular
Record Date and the Interest Payment Date to which it relates, as provided
above). No other payment or adjustment for interest, or for any dividends in
respect of Common Stock, will be made upon conversion. Holders of Common
Stock issued upon conversion will not be entitled to receive any dividends
payable to holders of Common Stock as of any record date before the close of
business on the conversion date. No fractional shares will be issued upon
conversion but, in lieu thereof, the Company will calculate an appropriate
amount to be paid in cash on the basis set forth in the Indenture or, at its
option, round up to the next whole number of shares.
A Holder delivering a Note for conversion will not be required to pay
any taxes or duties in respect of the issue or delivery of Common Stock on
conversion. However, the Company shall not be required to pay any tax or duty
which may be payable in respect of any transfer involved in the issue or
delivery of the Common Stock in a name other than that of the Holder of the
Note. Certificates representing shares of Common Stock will not be issued or
delivered unless the person requesting such issue has paid to the Company the
amount of any such tax or duty or has established to the satisfaction of the
Company that such tax or duty has been paid.
The Conversion Rate is subject to adjustment in certain events,
including (a) dividends (and other distributions) payable in Common Stock on
shares of capital stock of the Company, (b) the issuance to all holders of
Common Stock of certain rights, options or warrants entitling them to
subscribe for or purchase Common Stock at less than the then current market
price (determined as provided in the Indenture) of Common Stock as of the
record date for shareholders entitled to
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receive such rights, options or warrants, (c) subdivisions, combinations and
reclassifications of Common Stock, (d) distributions to all holders of Common
Stock of evidences of indebtedness of the Company, shares of capital stock or
other property (including securities, but excluding those dividends, rights,
options, warrants and distributions referred to above, dividends and
distributions paid exclusively in cash and distributions upon mergers or
consolidations to which the fifth succeeding paragraph applies), (e)
distributions consisting exclusively of cash (excluding any cash portion of
distributions referred to in (d) above, or cash distributed upon a merger or
consolidation to which the fifth succeeding paragraph applies) to all holders
of Common Stock in an aggregate amount that, combined together with (i) other
such all-cash distributions made within the preceding 12 months in respect of
which no adjustment has been made and (ii) any cash and the fair market value
of other consideration payable in respect of any tender offer by the Company
or any of its Subsidiaries for Common Stock concluded within the preceding 12
months in respect of which no adjustment has been made, exceeds 12.5% of the
Company's market capitalization (being the product of the then current market
price of the Common Stock and the number of shares of Common Stock then
outstanding) on the record date for such distribution and (f) the successful
completion of a tender offer made by the Company or any of its subsidiaries
for Common Stock which involves an aggregate consideration that, together
with (i) any cash and other consideration paid in a tender offer by the
Company or any of its Subsidiaries for Common Stock expiring within the 12
months preceding the expiration of such tender offer in respect of which no
adjustment has been made and (ii) the aggregate amount of any such all-cash
distributions referred to in (e) above to all holders of Common Stock within
the 12 months preceding the expiration of such tender offer in respect of
which no adjustments have been made, exceeds 12.5% of the Company's market
capitalization on the expiration of such tender offer. The Company reserves
the right to make such increases in the conversion rate in addition to those
required in the foregoing provisions as it considers to be advisable in order
that any event treated for income tax purposes as a dividend or distribution
of stock or issuance of rights or warrants to purchase or subscribe for stock
will not be taxable to the recipients. No adjustment of the conversion rate
will be required to be made until the cumulative adjustments amount to 1.0%
or more of the conversion rate. The Company shall compute any adjustments to
the conversion price pursuant to this paragraph and will give notice to the
Holders of any such adjustments.
Notwithstanding the foregoing, in the event that the Company decides to
distribute to all holders of the Common Stock common stock ("OTHER STOCK") of
another corporation ("OTHER CORPORATION") and actually makes such
distribution, then in lieu of making the adjustment to the Conversion Rate
required by the Indenture in respect of such distribution, the Company, at
its option if the requirements described below are satisfied, may place in
escrow for the benefit of the Holders a number of shares of Other Stock equal
to the aggregate number of shares of Other Stock that would be distributed to
all Holders as of the record date for such distribution in respect of the
shares of Common Stock issuable on conversion of their Notes, had such Notes
been converted on such date. In the event the Company exercises this option,
upon all conversions of Notes from time to time after such record date,
Holders will receive their respective pro rata portions of the Other Stock
held in escrow in addition to Common Stock. (Holders converting after such
record date and before the distribution date will receive a due bill for the
relevant number of shares of Other Stock, which will be distributed on the
distribution date.) Upon any such conversion, a Holder's pro rata portion
will equal the principal amount of Notes being converted divided by the
aggregate principal amount of all Notes Outstanding on the record date for
such distribution.
The Company may exercise the option described in the preceding paragraph
only if: (i) the aggregate number of shares of Other Stock so placed in
escrow does not exceed 33 1/3% of the aggregate number of all publicly traded
shares of Other Stock and (ii) the total market capitalization of the Other
Corporation is at least $50 million. Compliance with the two requirements
described above will be determined as of the date on which the distribution
of Other Stock to the holders of Common Stock is completed, PROVIDED that if,
on the record date for such distribution, shares of Other Stock are already
publicly traded, then compliance with these requirements will be determined
as of such record date. If these requirements are to be satisfied as of the
distribution date but are not, the Company will adjust the Conversion Rate in
respect of such distribution as required by the Indenture, retroactively to
the day after such record date (and any Holder that receives a due bill upon
conversion after such record date but before the distribution date will
receive Common Stock pursuant to such adjustment, rather than Other Stock).
Shares of Other Stock will be deemed to be "publicly traded" if such shares
are not held by an affiliate of the Other Corporation (other than the
Company), may be freely traded by the holders (other than the Company)
without registration under the Securities Act, are of a class of securities
registered under Section 12(b) or (g) of the Exchange Act and are either
approved for trading in the Nasdaq National Market or listed on the New York
Stock Exchange or the American Stock Exchange. The "total market
capitalization" of the Other Corporation for these purposes will be the
product of the market price per share of Other Stock on the applicable date
times the aggregate number of shares of Other Stock (other than shares held
by any affiliate of the Other Corporation other than the Company) outstanding
on the applicable date. In the event that the aggregate number of shares to
be escrowed for the benefit of the Holders would exceed
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the 33 1/3% limit described in clause (i) above, the Company may still
exercise its option to escrow shares of Other Stock if (a) the number of
shares escrowed equals 33 1/3% of the aggregate number of publicly traded
shares of Other Stock on the applicable date and (b) the Conversion Rate is
adjusted as required by the Indenture as if the aggregate number of shares of
Other Stock distributed to holders of Common Stock consisted only of the
remaining number of shares that would have been escrowed pursuant to this
paragraph but for the limitation in clause (i) above, to the extent so
distributed. (In such a case, any due bill received by a Holder as described
above will be appropriately adjusted by the Company as necessary.)
If the Company exercises its option as described above, it will make
appropriate adjustment in the number of shares of Other Stock deliverable
upon conversion of Notes in light of any event occurring with respect to
Other Stock after the applicable date referred to above, in each case in a
manner consistent with the provisions of the Indenture relating to adjustment
of the Conversion Rate to the greatest extent possible, subject to the
following sentence. If, as a result of any such adjustment, the Company would
be required to deliver on conversion of all Notes then Outstanding a larger
number of shares of Other Stock than the number then held in escrow (together
with any shares to be received in respect of those in escrow as a result of
such event), the Company will, in lieu of making such adjustment to the
extent necessary, provide for an amount of cash equal to the fair market
value of such adjustment (to the extent not made) to be delivered upon
conversion of any Note thereafter, in addition to the shares of Other Stock
otherwise deliverable. In addition, in the event that any Other Stock held in
escrow at any time (x) ceases to be a class registered under Section 12(b) or
(g) of the Exchange Act, (y) ceases to be either approved for trading in the
Nasdaq National Market or listed on the New York Stock Exchange or the
American Stock Exchange or (z) would not be freely tradeable under the
Securities Act when delivered upon conversion of Notes to a Holder that is
not an affiliate of the Other Corporation, the Company will provide for cash
to be delivered upon subsequent conversions of Notes in lieu of such Other
Stock, in each case in an amount equal to the fair market value of the
relevant portion of such Other Stock immediately prior to such event, in the
case of (x) or (y), or immediately prior to such conversion, in the case of
(z). Any additional shares of Other Stock required to be delivered on
conversion of Notes, and any cash required to be delivered in lieu of Other
Stock, as described above will be placed in escrow for the benefit of the
Holders of the Notes (with any interest earned on such cash being for the
account of the Company).
Notwithstanding the foregoing, the Company may, in lieu of placing any
cash in escrow as described in the preceding paragraph, elect to adjust the
Conversion Rate so that, upon any subsequent conversion, a Holder of Notes
would receive an incremental number of shares of Common Stock equal to the
fair market value of the portion of such cash that it would have received
absent such adjustment. All determinations regarding adjustments in the
number of shares of Other Stock, the substitution of cash for Other Stock and
any adjustment in the Conversion Rate in lieu of the substitution of cash are
to be made by the Board of Directors of the Company in good faith, and any
such determination by the Board will be conclusive.
In case of any consolidation or merger of the Company with or into
another Person or any merger of another Person into the Company (other than a
merger which does not result in any reclassification, conversion, exchange or
cancellation of the Common Stock), or in the case of any conveyance, sale,
transfer or lease of all or substantially all of the properties and assets of
the Company, each Note then outstanding will, without the consent of the
Holder of any Note, become convertible only into the kind and amount of
securities, cash and other property receivable upon such consolidation,
merger, sale, conveyance, lease or other transfer by a holder of the number
of shares of Common Stock into which such Note was convertible immediately
prior thereto (assuming such holder of Common Stock failed to exercise any
rights of election and that such Note was then convertible).
The Company from time to time may increase the Conversion Rate 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 increase, if the Board of Directors has
made a determination that such increase would be in the best interests of the
Company, which determination shall be conclusive. No such increase shall be
taken into account for purposes of determining whether the closing price of
the Common Stock (and, if applicable, the fair market value of any Other
Stock or related property then held in escrow) exceeds the Conversion Price
(as defined below) by 105% in connection with an event which otherwise would
be a Change in Control.
If at any time the Company makes a distribution of property to its
shareholders which would be taxable to such shareholders as a dividend for
federal income tax purposes (E.G., distributions of evidences of indebtedness
or assets of the Company, but generally not stock dividends on Common Stock
or rights to subscribe for Common Stock) and, pursuant to the anti-dilution
provisions of the Indenture, the number of shares into which Notes are
convertible is increased, such
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increase may be deemed for federal income tax purposes to be the payment of a
taxable dividend to Holders of Notes. See "United States Taxation--United
States Holders--Dividends".
SUBORDINATION
The payment of the principal of, premium, if any, and interest on, the
Notes (including amounts payable on any redemption or repurchase) will be
subordinated in right of payment to the extent set forth in the Indenture to
the prior full and final payment of all Senior Debt of the Company. "Senior
Debt" means the principal of (and premium, if any) and 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) on, and all fees and other
amounts (including collection expenses, attorney's fees and late charges)
owing with respect to, the following, whether direct or indirect, absolute or
contingent, secured or unsecured, due or to become due, outstanding at the
date of execution of the Indenture or thereafter incurred, created or
assumed: (a) indebtedness of the Company for money borrowed or evidenced by
bonds, debentures, notes or similar instruments, (b) reimbursement
obligations of the Company with respect to letters of credit, bankers'
acceptances and similar facilities issued for the account of the Company, (c)
every obligation of the Company issued or assumed as the deferred purchase
price of property or services purchased by the Company, excluding any trade
payables and other accrued current liabilities incurred in the ordinary
course of business, (d) obligations of the Company as lessee under leases
required to be capitalized on the balance sheet of the lessee under United
States generally accepted accounting principles, (e) obligations of the
Company under interest rate and currency swaps, caps, floors, collars or
similar arrangements intended to protect the Company against fluctuations in
interest or currency exchange rates, (f) indebtedness of others of the kinds
described in the preceding clauses (a) - (e) that the Company has assumed,
guaranteed or otherwise assured the payment thereof, directly or indirectly,
and/or (g) deferrals, renewals, extensions and refundings of, or amendments,
modifications or supplements to, any indebtedness or obligation described in
the preceding clauses (a) through (f) whether or not there is any notice to
or consent of the Holders of Notes; PROVIDED, HOWEVER, that the following
shall not constitute Senior Debt: (i) any particular indebtedness or
obligation that is owed by the Company to any of its direct and indirect
Subsidiaries and (ii) any particular indebtedness, deferral, renewal,
extension or refunding if it is expressly stated in the governing terms or in
the assumption thereof that the indebtedness involved is not senior in right
of payment to the Notes or that such indebtedness is PARI PASSU with or
junior to the Notes.
No payment on account of principal, premium, if any, or interest on the
Notes may be made if (a) there shall have occurred and be continuing (i) a
default in the payment of any Senior Debt or (ii) any other default with
respect to any Senior Debt permitting the holders thereof to accelerate the
maturity thereof, provided that, in the case of this clause (ii), such
default shall not have been cured or waived or ceased to exist after written
notice of such default shall have been given to the Company and the Trustee
by any holder of Senior Debt, or (b) in the event any judicial proceeding
shall be pending with respect to any such default in payment or event of
default. Upon any acceleration of the principal due on the Notes or payment
or distribution of assets of the Company to creditors upon any dissolution,
winding up, liquidation or reorganization, whether voluntary or involuntary,
or in bankruptcy, insolvency, receivership or other proceedings, all amounts
due on all Senior Debt must be paid in full before the Holders of the Notes
are entitled to receive any payment. By reason of such subordination, in the
event of insolvency of the Company, creditors of the Company who are holders
of Senior Debt may recover more, ratably, than the Holders of the Notes, and
such subordination may result in a reduction or elimination of payments to
the Holders of the Notes. As of the date of this Offering Circular, the
Company had no Senior Debt outstanding.
In addition, the Notes will be effectively subordinated to all
indebtedness and other liabilities (including trade payables and lease
obligations) of the Company's subsidiaries. As of the date hereof, the
Company has no subsidiaries.
The Indenture does not limit the ability of the Company or any of its
subsidiaries to incur indebtedness, including Senior Debt.
OPTIONAL REDEMPTION
The Notes may not be redeemed prior to the close of business on October
14, 1999. Thereafter, the Notes may be redeemed, in whole or in part, at the
option of the Company, upon not less than 30 nor more than 60 days' prior
notice as provided under "--Notices" below, at the redemption prices set
forth below. Such redemption prices (expressed as a percentage of principal
amount) are as follows for the 12-month period beginning on October 15 of the
following years:
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YEAR REDEMPTION PRICE
---- ----------------
1999 103.429
2000 102.571
2001 101.714
2002 100.857
and thereafter at a redemption price equal to 100% of the principal amount,
in each case together with accrued interest to the redemption date.
REPURCHASE AT OPTION OF HOLDERS UPON A CHANGE IN CONTROL
If a Change in Control (as defined below) occurs, each Holder of Notes
shall have the right, at the Holder's option, to require the Company to
repurchase all of such Holder's Notes, or any portion of the principal amount
thereof that is equal to $1,000 or an integral multiple of $1,000 in excess
thereof, on the date (the "REPURCHASE DATE") that is 45 days after the date
of the Company Notice (as defined below), at a price in cash equal to 100% of
the principal amount of the Notes to be repurchased, together with interest
accrued to the Repurchase Date (the "REPURCHASE PRICE").
The Company may, at its option, in lieu of paying the Repurchase Price
in cash, pay the Repurchase Price in Common Stock. The number of shares of
Common Stock tendered in payment shall be determined by dividing the
Repurchase Price by the value of the Common Stock, which for this purpose
shall be equal to 95% of the average of the closing bid prices of the Common
Stock for the five consecutive Trading Days ending on and including the third
Trading Day preceding the Repurchase Date. Such payment may not be made in
Common Stock unless the Company satisfies certain conditions with respect
thereto prior to the Repurchase Date as provided in the Indenture.
On or before the 30th day after the occurrence of a Change in Control,
the Company is obligated to give to all Holders of the Notes notice, as
provided in the Indenture (the "COMPANY NOTICE"), of the occurrence of such
Change in Control and of the repurchase right arising as a result thereof. To
exercise the repurchase right, a Holder of Notes must deliver on or before
the fifth day prior to the Repurchase Date irrevocable written notice to the
Trustee of the Holder's exercise of such right, together with the Notes with
respect to which the right is being exercised.
A Change in Control shall be deemed to have occurred at such time after
the original issuance of the Notes as there shall occur:
(i) the acquisition by any Person of beneficial ownership, directly or
indirectly, through a purchase, merger or other acquisition transaction or
series of transactions, of shares of capital stock of the Company entitling
such Person to exercise 50% or more of the total voting power of all shares
of capital stock of the Company entitled to vote generally in elections of
directors, other than any such acquisition by the Company or any employee
benefit plan of the Company; or
(ii) any consolidation or merger of the Company with or into any other
Person, any merger of another Person into the Company, or any conveyance,
transfer, sale, lease or other disposition of all or substantially all of the
properties and assets of the Company to another Person (other than (a) any
such transaction (x) which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock
and (y) pursuant to which holders of Common Stock immediately prior to such
transaction have the entitlement to exercise, directly or indirectly, 50% or
more of the total voting power of all shares of capital stock entitled to
vote generally in the election of directors of the continuing or surviving
person immediately after such transaction and (b) any merger which is
effected solely to change the jurisdiction of incorporation of the Company
and results in a reclassification, conversion or exchange of outstanding
shares of Common Stock into solely shares of common stock);
PROVIDED, HOWEVER, that a Change in Control shall not be deemed to have
occurred if the sum of the closing bid price per share of the Common Stock
for any five Trading Days within the period of 10 consecutive Trading Days
ending immediately after the later of the date of the Change in Control or
the date of the public announcement of the Change in Control (in the case of
a Change in Control under clause (i) above) or ending immediately before the
Change in Control (in the case of a Change in Control under clause (ii)
above) plus the fair market value per share (as determined by the Board of
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Directors in good faith, which determination shall be conclusive) of any
Other Stock or other property then held in escrow for the benefit of the
Holders as described above under "--Conversion Rights", shall equal or exceed
105% of the Conversion Price of the Notes in effect on each such Trading Day.
The "Conversion Price" is equal to $1,000 divided by the Conversion Rate.
"Beneficial owner" shall be determined in accordance with Rule 13d-3
promulgated by the Commission under the Exchange Act. "Person" includes any
syndicate or group which would be deemed to be a "person" under Section 13
(d)(3) of the Exchange Act.
The Company may, to the extent permitted by applicable law, at any time
purchase Notes in the open market or by tender at any price or by private
agreement. Subject to certain limitations imposed by the Purchase Agreement
with the Purchasers, any Note so purchased by the Company may be reissued or
resold or may, at the Company's option, be surrendered to the Trustee for
cancellation. Any Notes surrendered as aforesaid may not be reissued or
resold and will be cancelled promptly.
The foregoing provisions would not necessarily afford Holders of the
Notes protection in the event of highly leveraged or other transactions
involving the Company that may adversely affect Holders.
MERGERS AND SALES OF ASSETS BY THE COMPANY
The Company shall not consolidate with or merge into any other Person
or, directly or indirectly, convey, transfer, sell or lease all or
substantially all of its properties and assets to any Person, and the Company
shall not permit any Person to consolidate with or merge into the Company or
convey, transfer, sell or lease all or substantially all of its properties
and assets to the Company, unless (a) the Person formed by such consolidation
or into or with which the Company is merged or the Person to which the
properties and assets of the Company are so conveyed, transferred, sold or
leased, is a corporation, limited liability company, partnership or trust
organized and existing under the laws of the United States, any State thereof
or the District of Columbia and shall expressly assume the due and punctual
payment of the principal of, premium, if any, and interest on the Notes and
the performance of the other covenants of the Company under the Indenture and
shall have provided for conversion rights as described above under
"--Conversion Rights", (b) immediately after giving effect to such
transaction, no Event of Default, and no event which, after notice or lapse
of time or both, would become an Event of Default, shall have occurred and be
continuing and (c) the Company shall have provided to the Trustee an
Officer's Certificate and Opinion of Counsel as provided in the Indenture.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture: (a) failure
to pay principal or premium, if any, on any Note when due, whether or not
such payment is prohibited by the subordination provisions of the Indenture,
(b) failure to pay any interest on any Note when due, continuing for 30 days,
whether or not such payment is prohibited by the subordination provisions of
the Indenture; (c) default in the Company's obligation to provide notice of a
Change in Control; (d) failure to perform any other covenant or warranty of
the Company in the Indenture, continuing for 60 days after written notice to
the Company by the Trustee or the Holders of at least 10% in aggregate
principal amount of Outstanding Notes; (e) failure to pay when due the
principal of, or acceleration of, any indebtedness for money borrowed by the
Company in excess of $5,000,000 if such indebtedness is not discharged, or
such acceleration is not annulled, within 30 days after written notice to the
Company by the Trustee or the Holders of at least 10% in aggregate principal
amount of Outstanding Notes; and (f) certain events of bankruptcy, insolvency
or reorganization of the Company. Subject to the provisions of the Indenture
relating to the duties of the Trustee in case an Event of Default shall occur
and be continuing, the Trustee will be under no obligation to exercise any of
its rights or powers under the Indenture at the request or direction of any
of the Holders, unless such Holders shall have offered to the Trustee
reasonable indemnity. Subject to such provisions for the indemnification of
the Trustee, the Holders of a majority in aggregate principal amount of the
Outstanding Notes will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee.
If an Event of Default (other than an Event of Default specified in
clause (f) above) occurs and is continuing, either the Trustee or the Holders
of not less than 25% in aggregate principal amount of the Outstanding Notes
may accelerate the maturity of all Notes. If an Event of Default specified in
clause (f) occurs and is continuing, the principal and any accrued interest
on all of the Notes then Outstanding shall IPSO FACTO become due and payable
immediately without any declaration or other Act on the part of the Trustee
or any Holder.
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At any time after a declaration of acceleration has been made but before
a judgment or decree based on acceleration has been issued, the Holders of a
majority in aggregate principal amount of Outstanding Notes may, under
certain circumstances as set forth in the Indenture, rescind and annul such
acceleration if all Events of Default, other than the nonpayment of
accelerated principal and interest, have been cured or waived as provided in
the Indenture. For information as to waiver of defaults, See "--Modification
and Waiver."
No Holder of any Note will have any right to institute any proceeding
with respect to the Indenture or for any remedy thereunder, unless such
Holder shall have previously given to the Trustee written notice of a
continuing Event of Default and unless also the Holders of at least 25% in
aggregate principal amount of the Outstanding Notes shall have made written
request, and offered reasonable indemnity, to the Trustee to institute such
proceeding as trustee, and the Trustee shall not have received from the
Holders of a majority in aggregate principal amount of the Outstanding Notes
a direction inconsistent with such request and shall have failed to institute
such proceeding within 60 days. However, such limitations do not apply to a
suit instituted by a Holder of a Note for the enforcement of payment of the
principal of, premium, if any, or interest on such Note or after the
respective due dates expressed in such Note or of the right to convert such
Note in accordance with the Indenture.
The Company will be required to furnish to the Trustee annually a
statement as to the performance by the Company of certain of its obligations
under the Indenture and as to any default in such performance.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made with the
written consent of the Holders of not less than a majority in principal
amount of the Notes at the time Outstanding. However, no such modification or
amendment may, without the consent of the Holder of each Outstanding Note
affected thereby, (a) change the Stated Maturity of the principal of, or any
installment of interest on, any Note, (b) reduce the principal amount of, or
the premium, if any, or rate of interest on, any Note, (c) modify the
provisions with respect to the repurchase right of the Holders in a manner
adverse to the Holders, (d) change the place or currency of payment of
principal of, premium, if any, or interest on any Note, (e) impair the right
to institute suit for the enforcement of any payment on or with respect to,
or the right to convert, any Note, (f) except as otherwise permitted or
contemplated by provisions concerning consolidation, merger, conveyance,
transfer, sale or lease of all or substantially all of the property and
assets of the Company or distributions of Other Stock, adversely affect the
right to convert Notes, (g) modify the subordination provisions in a manner
adverse to the Holders of the Notes, (h) reduce the above-stated percentage
of aggregate principal amount of Outstanding Notes necessary for waiver of
compliance with certain provisions of the Indenture or for waiver of certain
defaults or (i) modify the obligation of the Company to deliver information
required under Rule 144A to permit resales of Notes and Common Stock issuable
upon conversion thereof in the event the Company ceases to be subject to
certain reporting requirements under the United States securities laws.
The Holders of a majority in aggregate principal amount of Outstanding
Notes may waive compliance by the Company with certain restrictive provisions
of the Indenture. The Holders of a majority in aggregate principal amount of
the Outstanding Notes may waive any past default by the Company under the
Indenture, except a default in the payment of principal, premium, if any, or
interest or a default in any covenant or provision which under the Indenture
cannot be modified or amended without the consent of each Holder of
Outstanding Notes.
NOTICES
Notice to Holders of the Notes will be given by mail to the addresses of
such Holders as they appear in the Security Register. Such notices will be
deemed to have been given on the date of mailing of the notice.
Notice of a redemption of Notes will be given at least once not less
than 30 nor more than 60 days prior to the Redemption Date (which notice
shall be irrevocable) and will specify the Redemption Date and the Redemption
Price.
PAYMENT OF STAMP AND OTHER TAXES
The Company shall pay all stamp and other duties, if any, which may be
imposed by the United States or any political subdivision thereof or taxing
authority thereof or therein with respect to the issuance of the Notes. The
Company
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will not be required to make any payment with respect to any other tax,
assessment or governmental charge imposed by any government or any political
subdivision thereof or taxing authority therein.
GOVERNING LAW
The Indenture and the Notes will be governed by and construed in
accordance with the laws of the State of New York.
THE TRUSTEE
State Street Bank and Trust Company is the Trustee for the Notes.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 50,000,000 shares of
Common Stock, no par value, and 500,000 shares of preferred stock, $.01 par
value ("PREFERRED STOCK").
COMMON STOCK
As of March 31, 1997, there were 26,493,367 shares of Common Stock
outstanding. Holders of Common Stock are entitled to one vote for each share
held of record on all matters submitted to a vote of stockholders.
Accordingly, holders of a majority of the shares of Common Stock entitled to
vote in any election of Directors may elect all of the Directors standing for
election. Subject to preferential dividend rights with respect to any
outstanding Preferred Stock, holders of Common Stock are entitled to receive
ratably such dividends, if any, as may be declared by the Board of Directors
out of funds legally available therefor. Upon liquidation, dissolution or
winding up of the Company, holders of Common Stock are entitled to share
ratably in the assets of the Company legally available for distribution to
the holders of Common Stock, and subject to any prior rights of any
outstanding Preferred Stock. Holders of Common Stock have no cumulative
voting rights nor any preemptive, subscription, redemption or conversion
rights. All outstanding shares of Common Stock are, and the shares issuable
upon the conversion of the Notes offered hereby will be, when issued and paid
for, validly issued, fully paid and non-assessable. The rights, preferences
and privileges of holders of Common Stock are subject to, and may be
adversely affected by, the rights of the holders of shares of any series of
Preferred Stock which the Company may designate and issue in the future.
PREFERRED STOCK
The Board of Directors is authorized, without stockholder approval, to
issue the Preferred Stock in one or more series, with such rights,
preferences and qualifications as the Board of Directors may in its
discretion determine. The Company currently has no plans to issue any shares
of Preferred Stock. If the Company issues Preferred Stock in the future, the
terms of the Preferred Stock may include, among other things, extraordinary
voting, dividend, redemption or conversion rights which could discourage
acquisition bids of the Company and adversely affect the holders of Common
Stock. Massachusetts Law and Certain Charter and By-Law Provisions Certain
Anti-Takeover Provisions
MASSACHUSETTS LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
CERTAIN ANTI-TAKEOVER PROVISIONS
The Company is subject to the provisions of Chapter 110F of the
Massachusetts General Laws, an anti-takeover law. In general, this statute
prohibits a Massachusetts corporation with more than 200 stockholders from
engaging in a "business combination" with "interested stockholders" for a
period of three years after the date of the transaction in which the person
becomes an interested stockholder, unless either (i) the Board of Directors
approves the business combination or the transaction in which the interested
stockholder became an interested stockholder prior to such stockholder
becoming an interested stockholder, (ii) the interested stockholder acquires
90% of the outstanding voting stock of the corporation (excluding shares held
by certain affiliates of the corporation) at the time the stockholder becomes
an interested stockholder or (iii) the business combination is approved by
both the Board of Directors at a meeting or by written consent and holders of
two-thirds of the outstanding voting stock of the corporation (excluding
shares held by the interested stockholder) at a meeting and not by written
consent. An "interested stockholder" is a person who, together with
affiliates and associates, owns (or at any time within the prior three years
did own) 5% or more of the corporation's voting stock. A "business
combination" includes a merger, a stock or asset sale, and certain other
specified transactions resulting in a financial benefit to the
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stockholder. In addition, Massachusetts General Laws Chapter 110D, entitled
"Regulation of Control Share Acquisition," provides, in general, that any
stockholder of a corporation subject to this statute who acquires 20% or more
of the outstanding voting stock of a corporation may not vote such stock
unless the stockholders of the corporation so authorize at a meeting and not
by written consent.
Massachusetts General Laws Chapter 156B, Section 50A, requires that,
unless an express election is made, a publicly held Massachusetts corporation
have a classified Board of Directors consisting of three classes as nearly
equal in size as possible. The Company is subject to the provisions of
Section 50A.
Certain of the provisions of the Company's Restated Articles of
Organization discussed above and the Massachusetts Business Corporation Law
would make more difficult or could discourage a proxy contest or the
acquisitions of control by a holder of a substantial block of the Company's
stock or the removal of the incumbent Board of Directors and could also have
the effect of discouraging a third party from making a tender offer or
otherwise attempting to obtain control of the Company, even though such an
attempt might be beneficial to the Company and its stockholders. In addition,
because certain provisions of the Restated Articles of Organization and the
Massachusetts Business Corporation Law are designed to discourage
accumulations of large blocks of the Company's stock by purchasers whose
objective is to have such stock repurchased by the Company at a premium, such
provisions could tend to reduce the temporary fluctuations in the market
price of the Company's stock which are caused by such accumulations.
Accordingly, stockholders could be deprived of certain opportunities to sell
their stock at a temporarily higher market price.
Reference is made to the full text of the foregoing statutes, the
Company's Restated Articles of Organization and the Company's Amended and
Restated By-laws for their entire terms, and the partial summary contained
herein is not intended to be complete.
ELIMINATION OF MONETARY LIABILITY FOR OFFICERS AND DIRECTORS
The Company's Restated Articles of Organization also incorporate certain
provisions permitted under the Massachusetts General Laws relating to the
liability of Directors. The provisions eliminate a Director's liability for
monetary damages for a breach of fiduciary duty, including gross negligence,
except in circumstances involving certain wrongful acts, such as the breach
of a Director's duty of loyalty or acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law or
authorization of distributions in violation of the Restated Articles of
Organization or of loans to officers or Directors of the Company, but do not
eliminate a Director's duty of care. Moreover, the provisions do not apply to
claims against a Director for violations of certain laws, including federal
securities laws. The Company's Restated Articles of Organization and Amended
and Restated By-Laws also contain provisions to indemnify the Directors,
officers, employees or other agents to the fullest extent permitted by the
Massachusetts General Laws. The Company believes that these provisions will
assist the Company in attracting or retaining qualified individuals to serve
as Directors or officers.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Restated Articles of Organization also contain provisions
to indemnify its Directors, officers, employees or other agents to the
fullest extent permitted by the Massachusetts General Laws. These provisions
may have the practical effect in certain cases of eliminating the ability of
stockholders to collect monetary damages from Directors. The Company believes
that these provisions will assist the Company in attracting or retaining
qualified individuals to serve as Directors or officers.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock of the Company is
Boston EquiServ LLP.
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UNITED STATES TAXATION
The following is a summary of certain United States federal income and
estate tax considerations relating to the purchase, ownership and disposition
of the Notes and of Common Stock into which Notes 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 laws, regulations, rulings and
decisions now in effect (or, in the case of certain United States Treasury
Regulations ("TREASURY REGULATIONS"), now in proposed form), all of which are
subject to change. This summary deals only with holders that will hold Notes
and Common Stock into which Notes may be converted as "capital assets"
(within the meaning of Section 1221 of the Internal Revenue Code of 1986, as
amended (the "CODE")) 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 Notes 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 Notes who
purchase the Notes 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 Notes. The Company has not sought any ruling from the
Internal Revenue Service with respect to the statements made and the
conclusions reached in the following summary, and there can be no assurance
that the Internal Revenue Service will agree with such statements and
conclusions. INVESTORS CONSIDERING THE PURCHASE OF NOTES 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 a beneficial owner
of a Note or Common Stock that for United States federal income tax purposes
is (i) a citizen or resident of the United States, (ii) treated as a domestic
corporation or domestic partnership, or (iii) an estate or trust other than a
"foreign estate" or "foreign trust" as defined in Section 7701(a)(31) of the
Code.
PAYMENT OF INTEREST
Interest on a Note 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.
SALE, EXCHANGE OR REDEMPTION OF THE NOTES
Upon the sale, exchange or redemption of a Note, a United States Holder
generally will recognize capital gain or loss equal to the difference between
(i) the amount of cash proceeds and the fair market value of any property
received on the sale, exchange or redemption (except to the extent such
amount is attributable to accrued interest income, which is taxable as
ordinary income) and (ii) such Holder's adjusted tax basis in the Note. A
United States Holder's adjusted tax basis in a Note generally will equal the
cost of the Note to such Holder, less any principal payments received by such
Holder. Such capital gain or loss will be long-term capital gain or loss if
the United States Holder's holding period in the Note is more than one year
at the time of sale, exchange or redemption, and otherwise will be short-term
capital gain or loss.
CONVERSION OF THE NOTES
A United States Holder generally will not recognize any income, gain or
loss upon conversion of a Note into Common Stock except with respect to cash
received in lieu of a fractional Share of Common Stock. Such United States
Holder's tax basis in the Common Stock received on conversion of a Note will
be the same as such Holder's adjusted tax basis in the Note at the time of
conversion (reduced by any basis allocable to a fractional share interest),
and the holding period for the Common Stock received on conversion will
generally include the holding period of the Note converted.
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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
Distributions paid on the Common Stock generally will be includable in
the income of the United States Holder as ordinary income to the extent of
the Company's current or accumulated earnings and profits. Distributions paid
on shares of Common Stock that are in excess of the Company's current or
accumulated earnings and profits will generally be treated, first, as a
tax-free return of capital to the extent of the United States Holder's
adjusted tax basis in its shares, and then as capital gain.
United States Holders should also note that, as a consequence of the
conversion feature inherent in the Notes, under Section 305 of the Code,
certain events, such as a modification to the conversion price of the Notes
to take into account certain dividends, if any, distributed on the Common
Stock, could cause a Holder of Notes to realize ordinary income in respect of
the Notes without a corresponding receipt of cash or other property.
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
pursuant to the sale or exchange and (ii) such United States Holder's
adjusted tax basis in the Common Stock. Such capital gain or loss will be
long-term capital gain or loss if the United States Holder's holding period
in the Common Stock is more than one year at the time of the sale or
exchange. A United States Holder's basis and holding period in Common Stock
received upon conversion of a Note are determined as discussed above under
"--Conversion of the Notes."
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
In general, information reporting requirements will apply to payments of
principal, premium, if any, and interest on a Note, payments of dividends on
Common Stock, payments of the proceeds of the sale of a Note and payments of
the proceeds of the sale of Common Stock to certain noncorporate United
States Holders, and a 31% backup withholding tax may apply to such payments
if the United States Holder (i) fails to furnish or certify his correct
taxpayer identification number to the payor in the manner required, (ii) is
notified by the Internal Revenue Service (the "IRS") that he has failed to
report payments of interest and dividends properly, or (iii) under certain
circumstances, fails to certify that he has not been notified by the IRS that
he is subject to backup withholding for failure to report interest and
dividend payments. Any amounts withheld under the backup withholding rules
from a payment to a United States Holder will be allowed as a credit against
such Holder's United States federal income tax and may entitle the United
States 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 Note or Common Stock that is not a United States Holder.
PAYMENT OF INTEREST
Payment of interest on a Note by the Company or any paying agent to a
Non-United States Holder will quality 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 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 receiving interest on a loan entered into in
the ordinary course of business and (iv) either (a) provides a Form W-8 (or
suitable substitute form) signed under penalties of perjury that includes its
name and address and certifies as to its non-United States status in compliance
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with applicable law and regulations, or (b) deposits the Note with a
securities clearing organization, bank or financial institution that holds
customers' securities in the ordinary course of its trade or business and
which holds the Note and provides a statement to the Company or its agent
under penalties of perjury in which it certifies that such 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 proposed Treasury Regulations (the "PROPOSED REGULATIONS")
would provide alternative methods for satisfying the certification
requirement described in clause (iv) above. The Proposed Regulations also
would require, in the case of Notes held by a foreign partnership, that (a)
the certification described in clause (iv) above be provided by the partners
rather than by the foreign partnership and (b) the partnership provide
certain information, including a United States taxpayer identification
number. A look-through rule would apply in the case of tiered partnerships.
The Proposed Regulations would be effective for payments made after December
31, 1997. There can be no assurance that the Proposed Regulations will be
adopted or as to the provisions that they will include if and when adopted in
temporary or final form.
Except to the extent otherwise provided under an applicable treaty, a
Non-United States Holder generally will be taxed in the same manner as a
United States Holder with respect to interest on a Note if such 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 United States federal income tax, and may be subject
to the branch profits tax, it is not subject to withholding tax if the Holder
delivers IRS Form 4224 to the payor.
Interest income of a Non-United States Holder that is not effectively
connected with a United States trade or business and that does not qualify
for the portfolio interest exemption described above will generally be
subject to a withholding tax at a 30% rate (or, if applicable, a lower treaty
rate).
SALE, EXCHANGE OR REDEMPTION OF THE NOTES
A Non-United States Holder of a Note 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 a Note (including the receipt of cash in
lieu of fractional shares upon conversion of a Note to 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 either such Holder has a "tax home" in the United States
or the disposition is attributable to an office or other fixed place of
business maintained by such Holder in the United States, (3) the Holder is
subject to tax pursuant to the provisions of the Code applicable to certain
United States expatriates, or (4) the Company is a United States real
property holding corporation (see discussion under "United States Foreign
Investment in Real Property Tax Act" below).
CONVERSION OF THE NOTES
In general, no United States federal income tax or withholding tax will
be imposed upon the conversion of a Note 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 Note
where any one of the four exceptions described above under "Non-United States
Holders---Sale, Exchange or Redemption of the Notes" is applicable.
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 one of the four exceptions described above under
"Non-United States Holders--Sale, Exchange or Redemption of the Notes" is
applicable.
DIVIDENDS
Dividends paid (or deemed paid, as described above under "United States
Holders--Dividends") on Common Stock to a Non-United States Holder will be
subject to United States federal withholding tax at 30% rate (or lower rate
provided
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under an applicable income tax treaty), unless the dividends are effectively
connected with the conduct of a trade or business in the United States (and
are attributable to a United States permanent establishment of such Holder,
if an applicable income tax treaty so requires as a condition for the
Non-United States Holder to be subject to United States income taxes on a net
income basis in respect of such dividends). Except to the extent otherwise
provided under an applicable tax treaty, a Non-United States Holder will be
taxed in the same manner as a United States Holder on dividends paid (or
deemed paid) that are effectively connected with the conduct of a trade or
business in the United States by the Non-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 withholding tax if the Non-United States Holder timely delivers
IRS Form 4224 to the payor.
Under current 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
rules discussed below and, under the current interpretation of Treasury
Regulations, for purposes of determining the applicability of a tax treaty
rate. Under the Proposed Regulations, however, a Non-United States Holder of
Common Stock who wishes to claim the benefit of an applicable treaty rate
would be required to satisfy applicable certification requirements. In
addition, under the Proposed Regulations, in the case of Common Stock held by
a foreign partnership (x) the certification requirement would generally be
applied to the partners of the partnership and (y) the partnership would be
required to provide certain information, including a United States taxpayer
identification number. The Proposed Regulations also provide look-through
rules for tiered partnerships. It is not certain whether, or in what form,
the Proposed Regulations will be adopted or the provisions they will include
if and when adopted in temporary or final form.
DEATH OF A NON-UNITED STATES HOLDER
A Note 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 Note 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 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
Under current law, information reporting on IRS Form 1099 and backup
withholding will not apply to payments on a Note to a Non-United States
Holder if the statement described in "Non-United 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. The Company
or a paying agent, however, may report (on IRS Form 1042-S) payments of
interest on Notes.
Information reporting requirements and backup withholding tax will not
apply to any payment of the proceeds of the sale of a Note 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) 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 as to the United States. 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 Note provides
the statement described in "Non-United States Holder--Payment of Interest" or
otherwise establishes an exemption.
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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, provided the payor does not have definite knowledge that the payee
is a United States person (see discussion under "Non-United States
Holders--Dividends" with respect to the Proposed Regulations).
These backup withholding and information reporting rules are under
review by the United States Department of the Treasury, and their application
to the Notes and Common Stock could be changed prospectively by future
regulations.
UNITED STATES FOREIGN INVESTMENT IN REAL PROPERTY TAX ACT
Under the Foreign Investment in Real Property Tax Act ("FIRPTA"), any
person who acquires a "United States real property interest" (as described
below) from a foreign person must deduct and withhold a tax equal to 10% of
the amount realized by the foreign transferor. In addition, a foreign person
who disposes of a United States real property interest generally is required
to recognize gain or loss that is subject to United States federal income
tax. A "United States real property interest" generally includes any interest
(other than an interest solely as a creditor) in a United States corporation
unless it is established under specific procedures that the corporation is
not (and was not for the prior five-year period) a "United States real
property holding corporation." However, stock in a United States corporation
generally will not be treated as a United States real property interest if,
at any time during the calendar year, that class of stock of the corporation
is regularly traded on an established securities market and the relevant
Holder holds five percent or less of such class of stock (the "REGULARLY
TRADED EXEMPTION"). The Company has not been, is not, and does not anticipate
becoming a United States real property holding corporation. In the unlikely
event that it is not established that the Company is not a United States real
property holding corporation, then, unless an exemption applies, both the
Common Stock and the Notes would be treated as United States real property
interests and the disposition of either Common Stock or Notes by a Non-United
States Holder would be subject to FIRPTA tax and withholding.
VALIDITY OF SECURITIES
The validity of the Notes and Common Stock offered herein have been
passed upon for the Company by Bingham, Dana & Gould LLP, 150 Federal Street,
Boston, Massachusetts.
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Annual Report Form 10-K for the year ended 12/31/96, have been incorporated
herein in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
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