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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-19581
May 1, 1998
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
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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 and a First Supplemental Indenture dated as of
September 9, 1997 (collectively, 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 30, 1998, the last reported sale price of the Common Stock on
the Nasdaq National Market was U.S. $2.06 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.
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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.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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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 May 1, 1998.
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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 (781) 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, 1997, 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") is a developer, manufacturer and marketer of
male and female healthcare products. The Company has acquired or developed
technology in three core areas: prostate cancer, urinary incontinence, and
breast cancer. The Company has a direct hospital-based business line and a
urinary incontinence consumer-oriented product line. The direct hospital-based
business line is comprised of its CaverMap Surgical Aid, intended to aid
physicians in preserving vital nerves during prostate cancer surgery, its
Iodine-125 radiation seeds for prostate cancer brachytherapy, and its BEACON
Technology System, a minimally invasive incontinence surgical line. In an area
where the Company has decided to seek marketing partners, the Company's
doctor-prescribed ("office-based") continuum of continence care product line
includes the Impress Softpatch, the INTROL Bladder Neck Support Prosthesis, the
Reliance Insert, and the PelvicFlex video. In breast cancer screening, the
Company is developing its investigational BreastView, BreastExam and BreastCheck
electronic palpation technology in order to aid physicians and patients in the
important mission of finding suspicious breast lumps earlier. The Company also
continues to dedicate significant resources to the development and/or
acquisition of product lines that fit into its strategic platforms. The
Company's executive offices are located at 64 A Street in Needham, Massachusetts
02194. Its telephone number is (781) 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 FOR THE COMPANY'S PRODUCTS
The BEACON Technology system, the CaverMap Surgical Aid and the BEBIG Iodine
I-125 seeds will be competing against existing treatments and surgical products
in the urinary incontinence and prostate cancer markets, respectively. The
Impress Softpatch and the INTROL represent a new approach to managing certain
types of female UI. There can be no assurance that any of the Company's products
will gain any significant degree of market acceptance. The Company believes that
recommendations by physicians will be essential for market acceptance of both
the Impress Softpatch and the INTROL, which are and will be marketed on a
prescription basis and potentially an over-the-counter basis for the Impress
Softpatch, and there can be no assurance that any such recommendations, if such
recommendations are ever made, will be followed. In addition, there can be no
assurance that the Impress Softpatch and the INTROL will be accepted by female
UI sufferers in the United States or abroad. The Impress Softpatch and INTROL
are each patient-managed therapies and as such patients may at any time decide
to discontinue their use. 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 Impress Softpatch and INTROL were each deemed to be sufficient for
clearance by the FDA, there can be no assurance that either product will
continue to prove to be safe and effective over the long-term and after wider
use.
DEPENDENCE ON FEW PRODUCTS
The Company expects to derive a substantial part of its revenues for the next
several years from sales of the Impress Softpatch, the BEACON Technology system,
the CaverMap Surgical Aid and BEBIG's Iodine I-125 seeds. The Company's failure
to commercialize successfully all 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
product 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. See "Business--Research and
Development."
LIMITED MANUFACTURING CAPABILITY AND EXPERIENCE
The Company has limited experience in manufacturing commercial quantities of the
Impress Softpatch and has not manufactured significant quantities of any other
products. The Company may not be able to develop sufficient capacity or
capability to produce the quantities of the Impress Softpatch that may be
required to support its sales.
DEPENDENCE ON OTHERS FOR COMPONENTS AND RAW MATERIALS
Certain of the raw materials for the manufacture and assembly of the Company's
products are available only from single sources and are manufactured by third
parties. Interruptions in supplies of raw materials 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
Although the FDA has approved or cleared the BEACON Technology System, the
CaverMap Surgical Aid, the Impress Softpatch, the INTROL Bladder Neck Support
Prosthesis and the Reliance Insert for marketing in the United States, the
Company has sold only limited amounts or no quantities for each. The Company has
developed a direct marketing and sales group in the United States for its
products. 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 can otherwise
design and implement an effective marketing and sales strategy for the BEACON
surgical kits, the CaverMap Surgical Aid, BEBIG Iodine I-125 seeds,the Impress
Softpatch, and BreastCheck, BreastExam and BreastView, or any future product
developed by the Company.
LIMITED OPERATING HISTORY; HISTORY OF LOSSES; PROFITABILITY UNCERTAIN
The Company has experienced significant operating losses since inception and, as
of December 31, 1997, had an accumulated deficit of $105.9 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 its products 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 cash flow 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
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 relied on the distribution systems
of third party distributors.
COMPETITION AND TECHNOLOGICAL ADVANCES
The prostate cancer treatment and incontinence surgery and incontinence product
industries are highly competitive. The Company's ability to compete in the
urinary incontinence management field will depend primarily upon physician and
consumer acceptance of the Reliance Insert and the Impress Softpatch,
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 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 distributed and sold. Although
approval to market the Reliance Insert and clearance to market Impress Softpatch
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, 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 or the Impress Softpatch, 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 marketing, research
and product development, seeking out partnerships that fit into its strategic
platforms and pursuit of regulatory approvals.
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 on 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 all of its products, 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 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 trademarks chosen and registered 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 for any of its products or, the commercialization of
any of its products. 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. See "Executive Officers of the Registrant."
UNCERTAINTY RELATING TO THIRD-PARTY REIMBURSEMENT
In the United States, 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 or Impress
Softpatch and that the prospect of substantial third-party reimbursement for
either device 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 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. 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 or Impress Softpatch 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 or Impress Softpatch, 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 or Impress Softpatch may have on the
commercialization of such products abroad or in the United States. See
"Business--Third-Party Reimbursement."
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 of
the Notes.
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.
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 or Notes convertible into 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.
CONCENTRATION OF OWNERSHIP
As of December 31, 1997, directors and executive officers of the Company and
their affiliates owned approximately 19% 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. See
"Security Ownership of Certain Beneficial Owners and Management."
ABSENCE OF DIVIDENDS
The Company has not paid cash dividends and does not anticipate doing so for the
foreseeable future.
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. 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 approximately 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 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, 1997 the Company also has options outstanding to
purchase an aggregate of 1,722,538 shares of Common Stock and has an additional
404,249 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, 1997, the Company had reserved
5,195,391 shares of Common Stock for issuance upon conversion of the Notes.
<PAGE>
-12-
<PAGE>
RECENT EVENTS
The Company restructured its operations during the first quarter of 1998 to
increase its emphasis on hospital-based sales efforts and to decrease its
investment in the consumer-oriented continence care business, which the Company
believes is best approached through utilizing marketing partners. The
restructuring involved the company-wide reduction of approximately 40 employees.
This initiative is designed to reduce operating costs while allowing the Company
to create a business model with a significantly lower break-even level. The
Company will take a restructuring charge of approximately $1.0 million in the
first quarter of 1998.
The Company has been increasing its emphasis on surgical products, such as the
CaverMap Surgical Aid and the BEACON Technology System, and other treatments for
prostate cancer such as the Iodine-I125 radiation seeds, for which there exist
both large and focused markets. In the U.S., commercial availability of the
BEACON Technology System began in the first quarter of 1998, the CaverMap
Surgical Aid is expected to be commercially available in mid-1998, and the
Iodine-I125 radiation seeds in early 1999. As the BreastCheck technology moves
closer to market, the Company is assessing the optimal commercialization path,
either through direct marketing or via partnerships as well as financing
alternatives for this business. Due to market requirements and opportunities,
the Company has decided to seek one or more marketing partnerships for its
consumer-oriented continence care products: the Impress Softpatch, the INTROL
Bladder Neck Support Prosthesis, the Reliance Insert and the PelvicFlex Video.
During the first quarter of 1998, the Company signed an agreement with BEBIG
GmbH for the exclusive right to market BEBIG's Iodine-125 ("I125") seed for
prostate brachytherapy treatment in North and South America, and non-exclusive
rights in other parts of the world. Prostate brachytherapy is a
minimally-invasive procedure in which small radiation sources, or "seeds", are
implanted into the prostate to treat localized cancer. The procedure is
frequently performed on an out-patient basis. According to the terms of the
agreement, BEBIG will design and build an automated manufacturing line, based on
its proprietary technology, at its faciltiy in Berlin, Germany. The agreement
calls for a total commitment by the Company of approximately $1.75 million in
milestone payments to be made if BEBIG's performance goals are met. The Company
intends to launch commercially its Iodine I-125 seeds for prostate cancer
brachytherapy in early 1999.
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
1992 1993 1994 1995 1996 1997
$1,634 $3,708 $7,993 $9,712 $47,660 $34,633
---- ------ ------ ------ ------- -------
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 May 1, 1998. 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(%)(2) 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. 360 0.52 27,106 * -
Decl. of Trust for the Defined
Benefit Plans of ICI American
Holdings, Inc. 550 0.80 41,412 * -
Delaware State Employees'
Retirement Fund 2,100 3.04 158,117 * -
General Motors Employees
Domestic Group Trust
Mellon Bank, N.A. as trustee 8,350 12.10 628,705 1.98 -
Hillside Capital Incorporated,
Corporate Account 140 0.20 10,541 * -
Thermo Electron Balanced
Investment Fund 550 0.80 41,412 * -
The SMM Company B.V. 450 0.65 33,882 * -
Goldman, Sachs & Co. 15,679 22.72 1,180,535 3.73 -
Catholic Mutual Relief Society
of America Retirement Plan:
Trust 200 0.29 15,059 * -
Hartford Fire Insurance
Company 755 1.09 56,847 * -
Employers' Reinsurance
Company 750 1.09 56,470 * -
Putnam Convertible Oppor-
tunities and Income Trust 670 0.97 50,447 * -
New Hampshire State
Retirement System 935 1.36 70,400 * -
Putnam Convertible Income-
Growth Trust 5,615 8.14 422,776 1.34 -
Putnam Balanced Retirement
Fund 200 0.29 15,059 * -
Museum of Fine Arts, Boston 150 0.22 11,294 * -
Boston College Endowment 350 0.51 26,353 * -
Promutual 785 1.14 59,106 * -
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 * -
Motors Insurance Corporation 1,208 1.75 90,955 * -
General Motors Foundation, Inc. 192 0.28 14,457 * -
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 6,600 9.57 496,941 1.57 -
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 * -
PaineWebber Incorporated 1,786 2.59 134,475 * -
Putnam High Yield
Total Return Fund 25 0.04 1,882 * -
Walker Art Center 200 0.29 15,059 * -
Global Bermuda L.P. 2,000 2.90 150,588 * -
</TABLE>
- ------------------------------
* Less than 1.0%
(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 1, 1998 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 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., PaineWebber 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.
-16-
<PAGE>
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 AND
A FIRST SUPPLEMENTAL INDENTURE, DATED AS OF SEPTEMBER 9, 1997 (COLLECTIVELY, 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
-17-
<PAGE>
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 EquiServe L.P.
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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 dependent upon the United States Holder's holding period in the Common
Stock 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 LLP, 150 Federal Street, Boston,
Massachusetts.
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Annual Report on Form 10-K for the year ended December 31, 1997, 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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