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PROSPECTUS
FILED PURSUANT TO RULE 424(B)(3)
SEC FILE NO. 333-20933
$97,750,000
OCCUSYSTEMS, INC.
6% CONVERTIBLE SUBORDINATED NOTES DUE 2001
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This Prospectus relates to the offering by the Selling Securityholders (the
"Selling Securityholders") of up to an aggregate of $97,750,000 of 6%
Convertible Subordinated Notes due 2001 (the "Notes") of OccuSystems, Inc., a
Delaware corporation ("OccuSystems" or the "Company"), and the 3,291,246 shares
of Common Stock, par value $.01 per share (the "Common Stock"), that are
issuable upon conversion of the Notes at the initial conversion price (the
"Conversion Price") of $29.70 per share (equivalent to a conversion rate of
33.67 shares per $1,000 principal amount of Notes), subject to adjustment in
certain events. The Notes will be convertible at the option of the holder into
shares of Common Stock at any time on or after the 90th day following the latest
date of initial issuance of the Notes and prior to the close of business on the
Stated Maturity of the Notes, unless previously redeemed or repurchased. See
"Description of Notes--Conversion Rights." The Notes offered hereby were
originally offered by the Company in an underwritten private placement.
Interest on the Notes is payable semi-annually on June 15 and December 15 of
each year, commencing on June 15, 1997. The Notes are redeemable, in whole or
in part, at the option of the Company, at any time on or after December 15,
1999, at the redemption prices set forth herein, plus accrued and unpaid
interest and liquidated damages, if any, to the date of redemption. The Company
will be required to offer to purchase the Notes upon a Change of Control (as
defined) at 100% of the principal amount thereof, plus accrued and unpaid
interest and liquidated damages, if any, to the date of purchase. There can be
no assurance that the Company will have available financial resources necessary
to repurchase the Notes in such circumstances.
The Notes are unsecured, general obligations of the Company, subordinated in
right of payment to all existing and future Senior Indebtedness (as defined) of
the Company. The Indenture (as defined) will not restrict the incurrence of
Senior Indebtedness or other indebtedness by the Company and its subsidiaries.
At March 31, 1997, the Company had no Senior Indebtedness outstanding. See
"Description of Notes."
The Notes may be sold from time to time pursuant to this Prospectus by the
Selling Securityholders. The Notes may be sold by the Selling Securityholders
in ordinary brokerage transactions, in transactions in which brokers solicit
purchases, in negotiated transactions, or in a combination of such methods of
sale, at market prices prevailing at the time of sale, at prices relating to
such prevailing market prices or at negotiated prices. See "Plan of
Distribution." The distribution of the Notes is not subject to any underwriting
agreement. The Company will receive no part of the proceeds of sales from the
offering by the Selling Securityholders. All expenses of registration incurred
in connection with this offering are being borne by the Company, but all selling
and other expenses incurred by the Selling Securityholders will be borne by such
Selling Securityholders. None of the securities offered pursuant to this
Prospectus have been registered prior to the filing of the Registration
Statement of which this Prospectus is a part.
On May 12, 1997, the last reported sale price for the Company's Common Stock
on the Nasdaq National Market (where it trades under the symbol "OSYS") was $23
1/8 per share.
SEE "RISK FACTORS" ON PAGE 3 FOR CERTAIN FACTORS RELEVANT TO AN
INVESTMENT IN THE NOTES.
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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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MAY 16, 1997
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "SEC" or the "Commission"). Reports,
proxy statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, NW, Washington, D.C. 20549, and at the Commission's Regional
Offices at Seven World Trade Center, 13th Floor, New York, New York 10048 and
CitiCorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511. Copies of such material can be obtained by mail from the Public Reference
Section of the Commission at 450 West Fifth Street, NW, Washington, D.C. 20549,
at prescribed rates. The reports, proxy statements and other information may
also be obtained from the Web site that the Commission maintains at
http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act") with respect to the securities offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which were omitted in accordance with the rules and
regulations of the Commission. For further information, reference is hereby
made to the Registration Statement. Any statements contained herein concerning
the provisions of any document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission are not necessarily complete, and in each
instance reference is made to the copy of such document so filed. Each such
statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995;
2. The Company's Current Report on Form 8-K dated January 2, 1996;
3. The Company's Current Report on Form 8-K/A dated March 14, 1996;
4. The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1996;
5. The Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1996;
6. The Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996;
7. The Company's Current Report on Form 8-K dated November 1, 1996;
8. The Company's Current Report on Form 8-K dated December 4, 1996;
9. The Company's Current Report on Form 8-K/A dated December 5, 1996;
10. The Company's Current Report on Form 8-K dated December 23, 1996;
11. The description of the Company's Common Stock contained in Item 1 of the
Registration Statement on Form 8-A (File No. 0-24440) filed with the
Commission on April 4, 1995, including any amendment or report filed for
the purpose of updating such description filed with the Commission
pursuant to Section 13 of the Exchange Act;
12. The Company's Current Report on Form 8-K dated April 21, 1997; and
13. The Company's Current Report on Form 8-K dated May 13, 1997.
All other documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus and prior to the
filing of a post-effective amendment which indicates that all securities offered
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have been sold or which deregisters all securities then remaining unsold, 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 in this Prospectus or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained in this Prospectus or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
RISK FACTORS
Prospective investors should consider carefully the following factors,
together with the other information set forth in this Prospectus, in evaluating
an investment in the Notes.
DEPENDENCE ON FUTURE ACQUISITIONS AND JOINT VENTURES
The Company's growth in new and existing markets is dependent upon an
aggressive acquisition and joint venture strategy. The Company is in various
stages of negotiations to acquire practices from a number of prospective selling
groups. There can be no assurance that further suitable acquisition candidates
can be found, that acquisitions can be financed or consummated on favorable
terms or that such acquisitions, if completed, will be successful. In addition,
the Company anticipates that the Emerging Issues Task Force of the Financial
Accounting Standards Board will be evaluating certain matters relating to the
physician practice management industry, which the Company expects to include a
review of accounting for business combinations. The Company is unable to
predict the impact, if any, that this review may have on the Company's
acquisition strategy.
The Company has also entered into, and is in various stages of negotiations to
form, joint ventures to own and operate occupational healthcare centers in
selected markets. The Company's strategy is to form these joint ventures with
competitively positioned hospital management companies, hospital systems and
other healthcare providers. There can be no assurances that the Company will
continue to utilize joint ventures as part of its growth strategy, that further
suitable joint ventures can be formed or that such ventures will be successful.
RAPID GROWTH OF THE COMPANY
Over the past five years, the Company has experienced rapid growth in its
business and in its staff, and the Company's future results could be affected by
its ability to manage growth and integrate acquisitions effectively.
UNCERTAINTIES RELATED TO CHANGING HEALTHCARE ENVIRONMENT
The healthcare industry has experienced substantial changes in recent years.
Although managed care has yet to become a major factor in occupational
healthcare, the Company anticipates that managed care programs, including case
rate and capitation plans, may play an increasing role in the delivery of
occupational healthcare services, and that competition in the occupational
healthcare industry may shift from individual practitioners to specialized
provider groups such as those managed by the Company, insurance companies,
health maintenance organizations ("HMOs") and other significant providers of
managed care products. To facilitate the Company's managed care strategy, the
Company is developing risk-sharing products for the workers' compensation
industry that will be marketed to employers, insurers and managed care
organizations. No assurance can be given that the Company will prosper in the
changing healthcare environment or that the Company's strategy to develop
managed care programs will succeed in meeting employers' and workers'
occupational healthcare needs.
There have been numerous initiatives at the federal and state levels for
comprehensive reforms affecting the payment for and availability of healthcare
services. The Company believes that such initiatives will continue during the
foreseeable future. Aspects of certain of these reforms as proposed in the past
could, if adopted, adversely affect the Company.
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GOVERNMENT REGULATION
The provision of healthcare services is heavily regulated at both the state
and federal levels. State and federal workers' compensation laws control many
aspects of providing medical services to the individuals covered by such laws
(including, in many cases, the amounts that may be charged for those services).
Approximately 60% of the Company's revenues in the year ended December 31, 1996
were subject to state-mandated fee schedules prescribing maximum reimbursable
amounts for designated medical procedures. Although recent changes in such fee
schedules have not adversely affected the Company, there can be no assurances
that prospective changes will not have such an effect. State laws generally
prohibit anyone other than a licensed physician from engaging in acts that
constitute the practice of medicine and also prohibit physicians from
"splitting" their fees with other persons. The Company is also subject to
various other federal and state laws. Many of the applicable laws are enforced
by regulatory authorities with broad discretion to interpret the laws and
promulgate corresponding regulations, and violations of these laws and
regulations may result in substantial penalties. The Company believes that its
operations are in material compliance with currently applicable laws and
regulations. There can be no assurance, however, that a court or regulatory
authority will not determine that the Company's operations are not in compliance
with any applicable law or regulation or that any such determination will not
have a material adverse effect on the Company.
SUBORDINATION
The Notes are subordinated in right of payment to all existing and future
Senior Indebtedness, including OccuSystems, Inc.'s guarantee of borrowings under
the loan agreement (the "Loan Agreement") among OccuCenters, Inc., a wholly-
owned subsidiary of OccuSystems, Inc., as borrower, OccuSystems, Inc., as
guarantor, and Creditanstalt-Bankverein ("Creditanstalt"), and will be
structurally subordinated to all liabilities (including trade payables) of the
Company's subsidiaries. The Indenture will not restrict the incurrence of
Senior Indebtedness or other indebtedness by the Company or its subsidiaries.
By reason of such subordination, in the event of the insolvency, bankruptcy,
liquidation, reorganization, dissolution or winding up of the business of the
Company, the assets of the Company will be available to pay the amounts due on
the Notes only after all Senior Indebtedness has been paid in full and,
therefore, there may not be sufficient assets remaining to pay amounts due on
any or all of the Notes then outstanding. As of March 31, 1997, the Company had
no Senior Indebtedness outstanding. See "Description of Notes--Subordination."
The Company's ability to meet its cash obligations in the future will be
dependent upon the ability of its subsidiaries to make cash distributions to the
Company. The ability of its subsidiaries to make distributions to the Company
is and will continue to be restricted by, among other limitations, applicable
provisions of state law and contractual provisions (including a guarantee by a
wholly-owned subsidiary of the Company of certain indebtedness issued by
Concentra Development Corp.). The Indenture will not limit the ability of the
Company's subsidiaries to incur such restrictions in the future. The right of
the Company to participate in the assets of any subsidiary (and thus the ability
of holders of the Notes to benefit indirectly from such assets) is generally
subject to the prior claims of creditors, including trade creditors, of that
subsidiary except to the extent that the Company is recognized as a creditor of
such subsidiary, in which case the Company's claims would still be subject to
any security interest of other creditors of such subsidiary. The Notes,
therefore, will be structurally subordinated to creditors, including trade
creditors, of subsidiaries of the Company with respect to the assets of the
subsidiaries against which such creditors have a claim.
RISKS INHERENT IN PROVISION OF MEDICAL SERVICES
The physician groups with which the Company is affiliated (the "Physician
Groups"), and certain employees of the Company, are involved in the delivery of
healthcare services to the public and, therefore, are exposed to the risk of
professional liability claims. Claims of this nature, if successful, could
result in substantial damage awards to the claimants which may exceed the limits
of any applicable insurance coverage. Insurance against losses related to
claims of this type can be expensive and varies widely from state to state. The
Company is indemnified under its management agreements with the Physician Groups
for claims against them, maintains liability insurance for itself and negotiates
liability insurance for the physicians in the Physician Groups. Successful
malpractice claims asserted against the Physician Groups or the Company,
however, could have a material adverse effect on the Company's financial
condition and profitability.
4
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COMPETITION
The market to provide healthcare services within the workers' compensation
system is highly fragmented and competitive. The Company's primary competitors
have typically been independent physicians, hospital emergency departments and
hospital-owned or -affiliated medical facilities. The Company believes that,
due to the emergence of managed care, its competitors will increasingly consist
of specialized provider groups, insurance companies, HMOs and other significant
providers of managed care products. Many of the Company's current and potential
competitors are significantly larger and have greater financial and marketing
resources than the Company. There can be no assurance that the Company will be
able to compete effectively against those competitors in the future.
LIMITATIONS ON REPURCHASE OF NOTES UPON CHANGE OF CONTROL
Upon the occurrence of a Change of Control, unless waived by holders of in
excess of two-thirds in aggregate principal amount of the then outstanding
Notes, each holder of Notes may require the Company to repurchase all or a
portion of such holder's Notes. If a Change of Control were to occur, there can
be no assurance that the Company would have sufficient financial resources, or
would be able to arrange financing, to pay the repurchase price for all Notes
tendered by holders thereof. In addition, the Company's repurchase of the Notes
as a result of a Change of Control may be prohibited or limited by, or create an
event of default under, the terms of agreements related to borrowings which the
Company may enter into from time to time, including the Loan Agreement and other
agreements relating to indebtedness. Failure of the Company to purchase tendered
Notes would constitute an Event of Default under the Indenture. See
"Description of Notes--Repurchase of Notes at the Option of the Holder Upon a
Change of Control."
DEPENDENCE UPON KEY PERSONNEL
The Company is dependent to a substantial extent upon the continuing efforts
and abilities of certain key management personnel. In addition, the Company
faces strong competition for experienced employees with technical expertise in
the workers' compensation and managed care areas. The Company has obtained a
"key man" life insurance policy on the life of John K. Carlyle, the Company's
Chief Executive Officer. This policy provides benefits of $1 million upon the
death of Mr. Carlyle and names the Company as sole beneficiary. Nevertheless,
the loss of, or the inability to attract, qualified employees could have a
material adverse effect on the Company's business.
VOLATILITY OF STOCK PRICE
The market price of the Company's Common Stock has been volatile and may be
volatile in the future. Future developments concerning the Company or its
competitors, including developments related to governmental regulations,
acquisitions, operating results and general market and economic conditions, may
have a significant impact on the market price of the Company's Common Stock.
DIVIDEND POLICY AND RESTRICTIONS
The Company does not intend to pay cash dividends on the Common Stock in the
foreseeable future and anticipates that future earnings will be retained to
finance future operations and expansion. The Loan Agreement prohibits the
Company from paying dividends and making other distributions on its Common
Stock.
ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Certificate of Incorporation and certain
provisions of the Delaware General Corporation Law may make it difficult to
change control of the Company and replace incumbent management. For example,
the Company's Certificate of Incorporation provides for a staggered Board of
Directors and permits the Board of Directors, without stockholder approval, to
issue additional shares of Common Stock or establish one or more series of
Preferred Stock having such number of shares, designations, relative voting
rights, dividend rates, liquidation and other rights, preferences and
limitations as the Board of Directors may determine.
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In addition, the terms of certain indebtedness of the Company (including the
Notes) may require prepayment upon a change of control of the Company and
therefore may have an anti-takeover effect. See "Description of Notes--Change
of Control."
ABSENCE OF EXISTING MARKET FOR NOTES
The Notes constitute a new issue of securities. The Company has applied to
trade the Notes on the Nasdaq SmallCap Market (the "Nasdaq") and has listed the
underlying Common Stock on the Nasdaq National Market. Donaldson, Lufkin &
Jenrette Securities Corporation, Alex. Brown & Sons Incorporated and Piper
Jaffray Inc., the initial purchasers of the Notes (the "Initial Purchasers"),
informed the Company at the time of such purchase that they may make a market in
the Notes and the underlying Common Stock. However, the Initial Purchasers are
not obligated to make such a market and may discontinue any market-making
activities at any time without notice.
Prior to the effectiveness of the Registration Statement, the Notes were
designated for trading in the Private Offerings, Resales and Trading through
Automated Linkages ("PORTAL") market; however, the Notes sold hereunder will no
longer be eligible for trading through PORTAL, and no assurance can be given
that an active trading market for the Notes will develop on the Nasdaq or
otherwise or, if such market develops, as to the liquidity or sustainability of
such market. If an active trading market does not develop or is not maintained,
holders of the Notes may experience difficulty in reselling, or an inability to
sell, the Notes. The Company may discontinue the listing of the Notes on the
Nasdaq or otherwise at any time. If an active public trading market develops
for the Notes, future trading prices of the Notes will depend on many factors,
including, among other things, prevailing interest rates, the Company's
operating results and the market for similar securities. Depending on such
factors, the Notes may trade at a discount from their principal amount.
RECENT DEVELOPMENTS
MERGER WITH CRA MANAGED CARE, INC.
On April 21, 1997, the Company executed an Agreement and Plan of
Reorganization (the "Merger Agreement") among the Company, CRA Managed Care,
Inc., a Massachusetts corporation ("CRA"), and Concentra Management Care, Inc.,
a Delaware corporation ("Concentra"), pursuant to which OccuSystems would merge
with and into Concentra (the "OccuSystems Merger") and a wholly-owned subsidiary
of Concentra would merge with and into CRA. Under the Merger Agreement, each
share of the Company's Common Stock will be exchanged for one share of common
stock in Concentra and each share of CRA's common stock, par value $.01 per
share, will be exchanged for 1.786 shares of common stock in Concentra.
Additionally, as a result of the OccuSystems Merger, Concentra will succeed to,
and assume by operation of law, all of the Company's obligations under the
Indenture and the Notes and the Notes will thereafter be convertible into shares
of common stock of Concentra on the same basis as they would have been
convertible into Common Stock of the Company. The consummation of the
OccuSystems Merger will not constitute a Change of Control under the Indenture.
1995 LONG TERM INCENTIVE PLAN
The Company intends to submit to its stockholders for approval at the
Company's 1997 annual meeting of stockholders a proposal to increase the number
of shares of Common Stock authorized for issuance under the Company's 1995 Long
Term Incentive Plan from 1,000,000 to 2,000,000.
DRCA MEDICAL CORPORATION ACQUISITION
Effective December 31, 1996, the Company agreed to acquire the occupational
medicine business of DRCA Medical Corporation ("DRCA") for $7.7 million in cash.
DRCA operates four occupational healthcare centers and a mobile testing service
in Houston, Texas, and three centers in Little Rock, Arkansas, a new market for
the Company.
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RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
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PRO FORMA
1994 1995 1996 1996(1) 1996 1997
---- ---- ---- ------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges(2)................ 1.0x 2.7x 5.8x 2.9x 3.0x 3.0x
</TABLE>
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(1) The pro forma data give effect to the following pro forma adjustments as if
they had occurred on January 1, 1995: (a) consummation of the Company's
acquisitions (the "Recent Acquisitions") of Medical Plaza Industrial
Clinic, Corporate Health Services, Inc., Medical and Surgical Clinic
Association, P.A., Occupational Health Resources, Inc., Flagstaff Urgent
Care, Deer Park Clinic and Austin Regional Clinic; and (b) sale of the
Notes and use of proceeds therefrom. All of the Recent Acquisitions were
effective on or before July 1, 1996.
(2) Computed by dividing the sum of net earnings, before deducting provisions
for income taxes and fixed charges, by total fixed charges. Fixed charges
consist of interest on debt, including amortization of debt issuance costs,
and one-fourth of rent expense, estimated by management to be the interest
component of such rentals. The adjusted ratio of earnings to fixed charges
gives effect to the net change in interest expense resulting from the sale
of the principal amount of Notes and application of the estimated net
proceeds therefrom.
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DESCRIPTION OF NOTES
Set forth below is a summary of certain provisions of the Notes. The Notes
were issued pursuant to an indenture (the "Indenture") dated as of December 24,
1996, by and between the Company and United States Trust Company of New York, as
trustee (the "Trustee"). The following summary of the Notes, the Indenture and
the Registration Rights Agreement (herein so called) among the Company and the
Initial Purchasers does not purport to be complete and is subject to, and is
qualified in its entirety by, reference to all of the provisions of the
Indenture and the Registration Rights Agreement, including the definitions
therein of certain terms. Copies of the Indenture and the Registration Rights
Agreement have been filed as exhibits to the Registration Statement.
Capitalized terms used herein without definition have the meanings ascribed to
them in the Indenture or the Registration Rights Agreement, as appropriate. As
used in this section, the "Company" refers to OccuSystems, Inc., exclusive of
its subsidiaries. Wherever particular provisions or defined terms of the
Indenture (or the form of Note which is part thereof) or the Registration Rights
Agreement are referred to in this summary, such provisions or defined terms are
incorporated by reference as a part of the statements made and such statements
are qualified in their entirety by such reference. Certain definitions of terms
used in the following summary are set forth under "--Certain Definitions" below.
GENERAL
The Notes are unsecured, subordinated, general obligations of the Company,
limited in aggregate principal amount to $97,750,000. The Notes are
subordinated in right of payment to all Senior Indebtedness of the Company, as
described under "--Subordination" below. The Notes have been issued only in
fully registered form, without coupons, in denominations of $1,000 and integral
multiples thereof.
The Notes will mature on December 15, 2001. The Notes bear interest at the
rate per annum stated on the cover page of this Prospectus from December 24,
1996 or from the most recent Interest Payment Date to which interest has been
paid or provided for, payable semiannually on June 15 and December 15 of each
year, commencing June 15, 1997, to the persons in whose names such Notes are
registered at the close of business on the June 1 or December 1 immediately
preceding such Interest Payment Date. Principal of, premium, if any, and
interest on, and liquidated damages with respect to, the Notes will be payable,
the Notes will be convertible and the Notes may be presented for registration of
offer or exchange, at the office or agency of the Company maintained for such
purpose, which office or agency shall be maintained in the Borough of Manhattan,
The City of New York (which initially will be the office of the Trustee).
Interest will be calculated on the basis of a 360-day year consisting of twelve
30-day months.
At the option of the Company, payment of interest and liquidated damages may
be made by check mailed to the Holders of the Notes at the addresses set forth
upon the registry books of the Company. No service charge will be made for any
registration of transfer or exchange of Notes, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
The Indenture does not contain any financial covenants or any restrictions on
the payment of dividends, the repurchase of securities of the Company or the
incurrence of Senior Indebtedness. The Indenture contains no covenants or other
provisions to afford protection to holders of Notes in the event of a highly-
leveraged transaction or a change of control of the Company, except to the
limited extent described under "--Repurchase of Notes at the Option of the
Holder Upon a Change of Control" below.
CONVERSION RIGHTS
Each Holder of Notes will have the right at any time on or after the 90th day
following the latest date of initial issuance of the Notes and prior to the
close of business on the Stated Maturity of the Notes, unless previously
redeemed or repurchased, at the Holder's option, to convert any portion of the
principal amount thereof that is an integral multiple of $1,000 into shares of
Common Stock at any time at the Conversion Price set forth on the cover page of
this Offering Memorandum (subject to adjustment as described below). The right
to convert a Note called for redemption or delivered for repurchase and not
withdrawn will terminate at the close of business on the Business Day,
respectively, immediately prior to the Redemption Date or Repurchase Date for
such Note, unless the Company subsequently fails to pay the applicable
Redemption Price or Repurchase Price, as the case may be.
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In the case of any Note that has been converted after any Record Date, but on
or before the next Interest Payment Date, interest, the stated due date of which
is on such Interest Payment Date, shall be payable on such Interest Payment Date
notwithstanding such conversion, and such interest shall be paid to the Holder
of such Note who is a Holder on such Record Date. Any Note converted after any
Record Date but before the next Interest Payment Date must be accompanied by
payment of an amount equal to the interest payable on such Interest Payment Date
on the principal amount of Notes being surrendered for conversion; provided no
such payment shall be required with respect to interest payable on December 15,
1999. No fractional shares will be issued upon conversion but, in lieu thereof,
an appropriate amount will be paid in cash by the Company based on the market
price of Common Stock (determined in accordance with the Indenture) at the close
of business on the day 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.
The Conversion Price will be subject to adjustment in certain events,
including (a) any payment of a dividend (or other distribution) payable in
Common Stock on any class of Capital Stock of the Company, (b) any issuance to
all holders of Common Stock of rights, options or warrants entitling them to
subscribe for or purchase Common Stock at less than the then current market
price of Common Stock (determined in accordance with the Indenture), provided,
however, that if such rights, options or warrants are only exercisable upon the
occurrence of certain triggering events, then the Conversion Price will not be
adjusted until such triggering events occur, (c) certain subdivisions,
combinations or reclassifications of Common Stock, (d) any distribution to all
holders of Common Stock of evidences of indebtedness, shares of Capital Stock
other than Common Stock, cash or other assets (including securities, but
excluding those dividends, rights, options, warrants and distributions referred
to above and excluding dividends and distributions paid exclusively in cash and
in mergers and consolidations to which the third succeeding paragraph applies),
(e) any distribution 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 third succeeding paragraph applies) to all holders of
Common Stock in an aggregate amount that, combined together with (i) all other
such all-cash distributions made within the then preceding 12 months in respect
of which no adjustment has been made and (ii) any cash and the fair market value
of other consideration paid or payable in respect of any tender or exchange
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 15% of the Company's market capitalization (defined as being the product
of the then current market price of the Common Stock times the number of shares
of Common Stock then outstanding) on the record date of such distribution, and
(f) the completion of a tender or exchange offer made by the Company or any of
its subsidiaries for Common Stock that involves an aggregate consideration that,
together with (i) any cash and other consideration payable in a tender or
exchange offer by the Company or any of its subsidiaries for Common Stock
expiring within the 12 months preceding the expiration of such tender or
exchange 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 or exchange offer in respect of which no adjustments have been made,
exceeds 15% of the Company's market capitalization on the expiration of such
tender offer. No adjustment of the Conversion Price will be required to be made
until the cumulative adjustments amount to 1.0% or more of the Conversion Price
as last adjusted.
In the event of a taxable distribution to holders of Common Stock (or other
transaction) which results in any adjustment of the Conversion Price, the
Holders of Notes may, in certain circumstances, be deemed to have received a
distribution subject to United States federal income tax as a dividend; in
certain other circumstances, the absence of such an adjustment may result in a
taxable dividend to the holders of Common Stock.
The Company, from time to time and to the extent permitted by law, may reduce
the Conversion Price by any amount for any period of at least 20 Business Days,
in which case the Company shall give at least 15 days notice of such reduction,
if the Board of Directors has made a determination that such reduction would be
in the best interests of the Company, which determination shall be conclusive.
The Company may, at its option, make such reductions in the Conversion Price, in
addition to those set forth above, as the Board of Directors deems advisable to
avoid or diminish any income tax to holders of Common Stock resulting from any
dividend or distribution of stock (or rights to acquire stock) or from any event
treated as such for United States federal income tax purposes. See "Certain
Federal Income Tax Consequences."
In case of any consolidation or merger of the Company with or into another
Person or any merger of another Person with or into the Company (with certain
exceptions), or in case of any sale, transfer or conveyance of all or
substantially all of the assets of the Company, each Note then outstanding will,
without the consent of any Holder of Notes, become
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<PAGE>
convertible only into the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, sale, transfer or conveyance by a
holder of the number of shares of Common Stock into which such Note was
convertible immediately prior thereto, after giving effect to any adjustment
event, who failed to exercise any rights of election and received per share the
kind and amount received per share by a plurality of non-electing shares.
The Company will cause all registrations with, and will obtain any approvals
by, any governmental authority under any Federal or state law of the United
States that may be required in connection with the conversion of the Notes into
Common Stock.
EFFECT OF THE MERGER AGREEMENT ON CONVERSION RIGHTS
Upon consummation of the Merger Agreement, the Notes will be convertible into
shares of common stock of Concentra on the same basis as they would have been
convertible into shares of Common Stock of the Company.
SUBORDINATION
The Notes are general, unsecured obligations of the Company, subordinated in
right of payment to all existing and future Senior Indebtedness of the Company.
The Notes are structurally subordinated in right of payment to all liabilities
(including trade payables) of the Company's subsidiaries. At March 31, 1997, on
a pro forma basis after giving effect to the sale of the Notes and the use of
the proceeds therefrom, the Company would have had no Senior Indebtedness
outstanding. The Indenture does not restrict the incurrence of Senior
Indebtedness or other indebtedness by the Company or its subsidiaries or the
ability of the Company to transfer assets or business operations to its
subsidiaries, subject to the provisions described under "--Repurchase of Notes
at the Option of the Holder Upon a Change of Control" and "--Limitation on
Merger, Sale or Consolidation" below.
The Indenture provides that no payment may be made by the Company on account
of the principal of, premium, if any, interest on, or liquidated damages with
respect to, the Notes, or to acquire any of the Notes (including repurchases of
Notes at the option of the Holder) for cash or property (other than Junior
Securities), or on account of the redemption provisions of the Notes, (i) upon
the maturity of any Senior Indebtedness of the Company by lapse of time,
acceleration (unless waived) or otherwise, unless and until all principal of,
premium, if any, and interest on such Senior Indebtedness are first paid in full
(or such payment is duly provided for), or (ii) in the event of default in the
payment of any principal of, premium, if any, or interest on any Senior
Indebtedness of the Company when it becomes due and payable, whether at maturity
or at a date fixed for prepayment or by declaration or otherwise (a "Payment
Default"), unless and until such Payment Default has been cured or waived or
otherwise has ceased to exist. The payment of cash, property or securities
(other than Junior Securities) upon conversion of a Note will constitute payment
on a Note and therefore will be subject to the subordination provisions in the
Indenture.
Upon (i) the happening of an event of default (other than a Payment Default)
that permits, or would permit with (a) the passage of time, (b) the giving of
notice, (c) the making of any payment of the Notes then required to be made or
(d) any combination thereof (collectively, a "Non-Payment Default"), the holders
of Senior Indebtedness having a principal amount then outstanding in excess of
$3 million (or with respect to which Senior Indebtedness the holders are
obligated to lend in excess of $3 million principal amount) or their
representative immediately to accelerate its maturity and (ii) written notice of
such Non-Payment Default given to the Company and the Trustee by the holders of
an aggregate of at least $3 million outstanding principal amount (or commitments
to lend up to $3 million in Senior Indebtedness) of such Senior Indebtedness or
their representative (a "Payment Notice"), then, unless and until such Non-
Payment Default has been cured or waived or otherwise has ceased to exist, no
payment (by setoff or otherwise) may be made by or on behalf of the Company on
account of the principal of, premium, if any, interest on, or liquidated damages
with respect to, the Notes, or to acquire or repurchase any of the Notes for
cash or property, or on account of the redemption provisions of the Notes, in
any such case other than payments made with Junior Securities. Notwithstanding
the foregoing, unless (i) the Senior Indebtedness in respect of which such Non-
Payment Default exists has been declared due and payable in its entirety within
179 days after the Payment Notice is delivered as set forth above (the "Payment
Blockage Period"), and (ii) such declaration has not been rescinded or waived,
at the end of the Payment Blockage Period, the Company shall be required to pay
all sums not paid to the Holders of the Notes during the Payment Blockage Period
due to the foregoing prohibitions and to resume all other payments as and when
due on the Notes. Not more than one Payment Notice may be given in any
consecutive 365-day period, irrespective of the number of defaults with respect
to Senior Indebtedness
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<PAGE>
during such period. However, if any Payment Notice within such 365-day period
is given by or on behalf of any holders of Senior Indebtedness other than under
the Loan Agreement, the agent under the Loan Agreement may give another Payment
Notice within such period. In no event, however, may the total number of days
during which any Payment Blockage Period or Payment Blockage Periods are in
effect exceed 179 days in the aggregate during any consecutive 365-day period.
In the event that, notwithstanding the foregoing, any payment or distribution
of assets of the Company (other than Junior Securities) shall be received by the
Trustee or the Holders at a time when such payment or distribution is prohibited
by the foregoing provisions, such payment or distribution shall be held in trust
for the benefit of the holders of Senior Indebtedness of the Company, and shall
be paid or delivered by the Trustee or such Holders, as the case may be, to the
holders of the Senior Indebtedness of the Company remaining unpaid or unprovided
for or their representative or representatives, or to the trustee or trustees
under any indenture pursuant to which any instruments evidencing any of such
Senior Indebtedness of the Company may have been issued, ratably according to
the aggregate amounts remaining unpaid on account of the Senior Indebtedness of
the Company held or represented by each, for application to the payment of all
Senior Indebtedness of the Company remaining unpaid, to the extent necessary to
pay or to provide for the payment of all such Senior Indebtedness in full after
giving effect to any concurrent payment or distribution, or provision therefor,
to the holders of such Senior Indebtedness.
Upon any distribution of assets of the Company upon any dissolution, winding
up, total or partial liquidation or reorganization of the Company, whether
voluntary or involuntary, in bankruptcy, insolvency, receivership or a similar
proceeding or upon assignment for the benefit of creditors or any marshaling of
assets or liabilities (i) the holders of all Senior Indebtedness of the Company
will first be entitled to receive payment in full (or have such payment duly
provided for) before the Holders are entitled to receive any payment on account
of the principal of, premium, if any, interest on, and liquidated damages with
respect to, the Notes (other than Junior Securities) and (ii) any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities (other than Junior Securities) to which the Holders or
the Trustee on behalf of the Holders would be entitled (by setoff or otherwise),
except for the subordination provisions contained in the Indenture, will be paid
by the liquidating trustee or agent or other person making such a payment or
distribution directly to the holders of Senior Indebtedness of the Company or
their representative to the extent necessary to make payment in full of all such
Senior Indebtedness remaining unpaid, after giving effect to any concurrent
payment or distribution, or provision therefor, to the holders of such Senior
Indebtedness.
No provision contained in the Indenture or the Notes will affect the
obligation of the Company, which is absolute and unconditional, to pay, when
due, principal of, premium, if any, interest on, and liquidated damages with
respect, to the Notes. The subordination provisions of the Indenture and the
Notes will not prevent the occurrence of any Default or Event of Default under
the Indenture or limit the rights of the Trustee or any Holder, subject to the
preceding paragraphs, to pursue any other rights or remedies with respect to the
Notes.
As a result of these subordination provisions, in the event of the
liquidation, bankruptcy, reorganization, insolvency, receivership or similar
proceeding or an assignment for the benefit of the creditors of the Company or
any of its subsidiaries or a marshalling of assets or liabilities of the Company
and its subsidiaries, Holders of Notes may receive ratably less than other
creditors.
The Company's ability to meet its cash obligations in the future will be
dependent upon the ability of its subsidiaries to make cash distributions to the
Company. The ability of its subsidiaries to make distributions to the Company
is and will continue to be restricted by, among other limitations, applicable
provisions of state law and contractual provisions. The Indenture will not limit
the ability of the Company's subsidiaries to incur such restrictions in the
future. The right of the Company to participate in the assets of any subsidiary
(and thus the ability of holders of the Notes to benefit indirectly from such
assets) is generally subject to the prior claims of creditors, including trade
creditors, of that subsidiary except to the extent that the Company is
recognized as a creditor of such subsidiary, in which case the Company's claims
would still be subject to any security interest of other creditors of such
subsidiary. The Notes, therefore, will be structurally subordinated to
creditors, including trade creditors, of subsidiaries of the Company with
respect to the assets of the subsidiaries against which such creditors have a
claim.
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<PAGE>
REDEMPTION AT THE COMPANY'S OPTION
The Notes will not be subject to redemption prior to December 15, 1999 and
will be redeemable thereafter at the option of the Company, in whole or in part,
upon not less than 30 nor more than 60 days' notice to each Holder, at the
following redemption prices (expressed as percentages of the principal amount)
if redeemed during the 12-month period commencing December 15 of the years
indicated below, in each case (subject to the right of Holders of record on a
Record Date to receive interest due on an Interest Payment Date that is on or
prior to such Redemption Date) together with accrued and unpaid interest and
liquidated damages, if any, to, but excluding, the Redemption Date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- -----------
<S> <C>
1999......... 102.4%
2000......... 101.2
</TABLE>
In the case of a partial redemption, the Trustee shall select the Notes or
portions thereof for redemption on a pro rata basis, by lot or in such other
manner it deems appropriate and fair. The Notes may be redeemed in part in
multiples of $1,000 only.
The Notes will not have the benefit of any sinking fund.
Notice of any redemption will be sent, by first-class mail, at least 30 days
and not more than 60 days prior to the date fixed for redemption, to the Holder
of each Note to be redeemed to such Holder's last address as then shown upon the
registry books of the Registrar. The notice of redemption must state the
Redemption Date, the Redemption Price and the amount of accrued interest and
liquidated damages, if any, to be paid. Any notice that relates to a Note to be
redeemed in part only must state the portion of the principal amount equal to
the unredeemed portion thereof and must state that on and after the Redemption
Date, upon surrender of such Note, a new Note or Notes in principal amount equal
to the unredeemed portion thereof will be issued. On and after the Redemption
Date, interest will cease to accrue on the Notes or portions thereof called for
redemption, unless the Company defaults in its obligations with respect thereto.
REPURCHASE OF NOTES AT THE OPTION OF THE HOLDER UPON A CHANGE OF CONTROL
The Indenture provides that in the event that a Change of Control has
occurred, each Holder of Notes will have the right, at such Holder's option,
pursuant to an irrevocable and unconditional (except as set forth below) offer
by the Company (the "Repurchase Offer"), to require the Company to repurchase
all or any part of such Holder's Notes (provided that the principal amount of
such Notes must be $1,000 or an integral multiple thereof) on the date (the
"Repurchase Date") that is no later than 50 Business Days after the occurrence
of such Change of Control at a cash price (the "Repurchase Price") equal to 100%
of the principal amount thereof, together with accrued and unpaid interest and
liquidated damages, if any, to (but excluding) the Repurchase Date. The
Repurchase Offer shall be made within 25 Business Days following a Change of
Control and shall remain open for 20 Business Days following its commencement
except to the extent that a longer period is required by applicable law (the
"Repurchase Offer Period"). Upon expiration of the Repurchase Offer Period, the
Company shall purchase all Notes tendered in response to the Repurchase Offer.
If required by applicable law, the Repurchase Date and the Repurchase Offer
Period may be extended as so required; however, if so extended, it shall
nevertheless constitute an Event of Default if the Repurchase Date does not
occur within 60 Business Days of the Change of Control.
On or before the Repurchase Date, the Company will (i) accept for payment
Notes or portions thereof properly tendered pursuant to the Repurchase Offer,
(ii) deposit with the Paying Agent cash sufficient to pay the Repurchase Price
(together with accrued and unpaid interest and liquidated damages, if any) of
all Notes so tendered and (iii) deliver to the Trustee the Notes so accepted,
together with an Officers' Certificate listing the Notes or portions thereof
being purchased by the Company. The Paying Agent will promptly mail to the
Holders of Notes so accepted payment in an amount equal to the Repurchase Price
(together with accrued and unpaid interest and liquidated damages, if any), and
the Trustee will promptly authenticate and mail or deliver to such Holders a new
Note or Notes equal in principal amount to any unpurchased portion of the Notes
surrendered. Any Notes not so accepted will be promptly mailed or delivered
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<PAGE>
by the Company to the Holder thereof. The Company will publicly announce the
results of the Repurchase Offer on or as soon as practicable after the
Repurchase Date.
The phrase "all or substantially all" of the assets of the Company, as
included in the definition of Change of Control, is likely to be interpreted by
reference to applicable state law at the relevant time, and will be dependent on
the facts and circumstances existing at such time. As a result, there may be a
degree of uncertainty in ascertaining whether a sale or transfer of "all or
substantially all" of the assets of the Company has occurred.
The Change of Control purchase feature of the Notes may make more difficult or
discourage a takeover of the Company, and, thus, the removal of incumbent
management. The Change of Control purchase feature resulted from negotiations
between the Company and the Initial Purchasers.
The provisions of the Indenture relating to a Change of Control may not afford
the Holders protection in the event of a highly leveraged transaction,
reorganization, restructuring, merger, spin-off or similar transaction that may
adversely affect Holders, if such transaction does not constitute a Change of
Control. Moreover, certain events with respect to the Company which may involve
an actual change of control of the Company may not constitute a Change of
Control for purposes of the Indenture.
The Company may not have sufficient financial resources available to fulfill
its obligation to repurchase the Notes upon a Change of Control or to repurchase
other debt securities of the Company or its subsidiaries providing similar
rights to the holders thereof. The right to require the Company to repurchase
Notes as a result of the occurrence of a Change of Control could create an event
of default under Senior Indebtedness as a result of which any repurchase could,
absent a waiver, be blocked by the subordination provision of the Notes.
Failure of the Company to repurchase the Notes when required would result in an
Event of Default with respect to the Notes whether or not such repurchase is
permitted by the subordination provisions. Any such default may, in turn, cause
a default under Senior Indebtedness of the Company. Moreover, the Change of
Control may cause an event of default under Senior Indebtedness of the Company.
As a result, in each case, any repurchase of the Notes could, absent a waiver,
be blocked by the subordination provisions of the Notes. See "--Subordination"
above.
Except as described herein, no modification of the Indenture regarding the
provisions on repurchase at the option of any Holder of a Note upon a Change of
Control is permissible without the consent of the Holder of the Note so
affected. In the event of a Change of Control, if Holders of in excess of two-
thirds of the outstanding aggregate principal amount of the Notes so determine
at any time following the occurrence of such Change of Control and before the
close of business on the Business Day immediately preceding the Repurchase Date,
such event shall not be treated as a Change of Control for purposes of the
Indenture. In such event, (i) the Company shall not be required to make the
Repurchase Offer, (ii) to the extent the Repurchase Offer has already been made,
such Repurchase Offer shall be deemed revoked, and (iii) to the extent any Notes
have been tendered in response to any such revoked Repurchase Offer, such tender
shall be rescinded and the Notes so tendered shall be promptly returned to the
Holders thereof. For purposes of any such determination by the Holders of the
outstanding Notes, Notes held by the Company or an Affiliate of the Company
(including any Person that would become an Affiliate of the Company (or its
successor) as a consequence of the event or series of events that otherwise
would be treated as a Change of Control for purposes of the Indenture) shall be
disregarded.
To the extent applicable, the Company will comply with the provisions of Rule
13e-4 or any other tender offer rules, and will file a Schedule 13E-4 or any
other schedule required under such rules, in connection with any offer by the
Company to repurchase Notes at the option of the Holders upon a Change of
Control.
LIMITATION ON MERGER, SALE OR CONSOLIDATION
The Indenture provides that the Company may not, directly or indirectly,
consolidate with or merge with or into another person or sell, lease, convey or
transfer all or substantially all of its assets (other than to its wholly-owned
subsidiaries), whether in a single transaction or a series of related
transactions, to another Person or group of affiliated Persons, unless (i)
either (a) in the case of a merger or consolidation the Company is the surviving
entity or (b) the resulting, surviving or transferee entity is a corporation
organized under the laws of the United States, any state thereof or the District
of Columbia and expressly assumes by supplemental indenture all of the
obligations of the Company in
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<PAGE>
connection with the Notes and the Indenture; and (ii) no Default or Event of
Default shall exist or shall occur immediately after giving effect to such
transaction.
Upon any consolidation or merger or any transfer of all or substantially all
of the assets of the Company in accordance with the foregoing, the successor
corporation formed by such consolidation or into which the Company is merged or
to which such transfer is made, shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under the Indenture with the
same effect as if such successor corporation had been named therein as the
Company, and the Company will be released from its obligations under the
Indenture and the Notes, except as to any obligations that arise from or as a
result of such transaction.
REPORTS
Whether or not the Company is subject to the reporting requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the Company shall deliver to the Trustee, within 15 days after it is or
would have been required to file such with the SEC, annual and quarterly
consolidated financial statements substantially equivalent to financial
statements that would have been included in reports filed with the SEC if the
Company were subject to the requirements of Section 13 or 15 (d) of the Exchange
Act, including, with respect to annual information only, a report thereon by the
Company's certified independent public accountants as such would be required in
such reports to the SEC and, in each case, together with a management's
discussion and analysis of financial condition and results of operations as such
would be so required.
EVENTS OF DEFAULT AND REMEDIES
The Indenture defines an Event of Default as (i) the failure by the Company to
pay any installment of interest on, or liquidated damages with respect to, the
Notes as and when due and payable and the continuance of any such failure for 30
days, (ii) the failure by the Company to pay all or any part of the principal
of, or premium, if any on the Notes when and as the same become due and payable
at maturity, redemption, by acceleration or otherwise, including, without
limitation, pursuant to any Repurchase Offer or otherwise, (iii) the failure of
the Company to perform any conversion of Notes required under the Indenture and
the continuance of any such failure for 30 days, (iv) the failure by the Company
to observe or perform any other covenant or agreement contained in the Notes or
the Indenture and subject to certain exceptions, the continuance of such failure
for a period of 60 days after written notice is given to the Company by the
Trustee or to the Company and the Trustee by the Holders of at least 25% in
aggregate principal amount of the Notes outstanding, (v) certain events of
bankruptcy, insolvency or reorganization in respect of the Company or any of its
Significant Subsidiaries (as defined), (vi) failure of the Company or any
Significant Subsidiary to make any payment at maturity, including any applicable
grace period, in respect of Indebtedness (other than nonrecourse obligations) in
an amount in excess of $10 million and continuance of such failure for 30 days
after written notice is given to the Company by the Trustee or to the Company
and the Trustee by the Holders of at least 25% in aggregate principal amount of
Notes outstanding, (vii) default by the Company or any Significant Subsidiary
with respect to any Indebtedness (other than non-recourse obligations), which
default results in the acceleration of Indebtedness in an amount in excess of
$10 million without such Indebtedness having been discharged or such
acceleration having been rescinded or annulled for 30 days after written notice
is given to the Company by the Trustee or to the Company and the Trustee by the
Holders of at least 25% in aggregate principal amount of Notes outstanding and
(vii) final unsatisfied judgments not covered by insurance aggregating in excess
of $10 million, at any one time rendered against the Company or any of its
Significant Subsidiaries and not stayed, bonded or discharged within 60 days.
The Indenture provides that if a default occurs and is continuing, the Trustee
must, within 90 days after the occurrence of such default, give to the Holders
notice of such default, but the Trustee shall be protected in withholding such
notice if it in good faith determines that the withholding of such notice is in
the best interest of the Holders, except in the case of a default in the payment
of the principal of, premium, if any, or interest on or liquidated damages with
respect to, any of the Notes when due or in the payment of any redemption or
repurchase obligation.
The Indenture provides that if an Event of Default occurs and is continuing
(other than an Event of Default specified in clause (v) above with respect to
the Company), then in every such case, unless the principal of all of the Notes
shall have already become due and payable, either the Trustee or the Holders of
25% in aggregate principal amount of the Notes then outstanding, by notice in
writing to the Company (and to the Trustee if given by Holders) (an
"Acceleration Notice"), may declare all principal and accrued interest and
liquidated damages, if any, thereon to be due and payable
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<PAGE>
immediately. If an Event of Default specified in clause (v) above with respect
to the Company occurs, all principal and accrued interest and liquidated
damages, if any, will be immediately due and payable on all outstanding Notes
without any declaration or other act on the part of the Trustee or the Holders.
The Holders of no less than a majority in aggregate principal amount of Notes
generally are authorized to rescind such acceleration if all existing Events of
Default, other than the non-payment of the principal of, premium, if any, and
interest on, and liquidated damages with respect to, the Notes that have become
due solely by such acceleration, have been cured or waived.
Prior to the declaration of acceleration of the maturity of the Notes, the
Holders of a majority in principal amount of the Notes at the time outstanding
may waive on behalf of all the Holders any default, except a default in the
payment of principal of or interest on, or liquidated damages with respect to,
any Note not yet cured, or a default with respect to any covenant or provision
that cannot be modified or amended without the consent of the Holder of each
outstanding Note affected. Subject to the provisions of the Indenture relating
to the duties of the Trustee, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request, order
or direction of any of the Holders, unless such Holders have offered to the
Trustee reasonable security or indemnity. Subject to all provisions of the
Indenture and applicable law, the Holders of a majority in aggregate principal
amount of the Notes at the time outstanding 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.
The Indenture provides that no Holder may pursue any remedy under the
Indenture, except for a default in the payment of principal, premium, if any, or
interest or liquidated damages, if any, on the Notes, unless the Holder gives to
the Trustee written notice of a continuing Event of Default, the Holders of at
least 25% in principal amount of the outstanding Notes make a written request to
the Trustee to pursue the remedy, such Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense, the Trustee
does not comply with the request within 60 days after receipt of the request and
the offer of indemnity, and the Trustee shall not have received a contrary
direction from the Holders of a majority in principal amount of the outstanding
Notes.
AMENDMENTS AND SUPPLEMENTS
The Indenture contains provisions permitting the Company and the Trustee to
enter into a supplemental indenture for certain limited purposes without the
consent of the Holders. With the consent of the Holders of not less than a
majority in aggregate principal amount of the Notes at the time outstanding, the
Company and the Trustee are permitted to amend or supplement the Indenture or
any supplemental indenture or modify the rights of the Holders; provided, that
no such modification may, without the consent of each Holder affected thereby:
(i) change the Stated Maturity of any Note or reduce the principal amount
thereof or the rate (or extend the time for payment) of interest thereon or any
premium payable upon the redemption thereof, or change the place of payment
where, or the coin or currency in which, any Note or any premium or the interest
thereon is payable, or impair the right to institute suit for the conversion of
any Note or the enforcement of any such payment on or after the due date thereof
(including, in the case of redemption, on or after the Redemption Date), or
reduce the Repurchase Price, or alter the Repurchase Offer (other than as set
forth herein) or redemption provisions in a manner adverse to the Holders, or
(ii) reduce the percentage in principal amount of the outstanding Notes, the
consent of whose Holders is required for any such amendment, supplemental
indenture or waiver provided for in the Indenture, or (iii) adversely affect the
right of such Holder to convert Notes. A supplemental indenture entered into in
compliance with the "Limitation on Merger, Sale or Consolidation" covenant would
not require the consent of the Noteholders.
NO PERSONAL LIABILITY OF STOCKHOLDERS, OFFICERS, DIRECTORS AND EMPLOYEES
The Indenture provides that no stockholder, employee, officer or director, as
such, past, present or future of the Company or any successor corporation shall
have any personal liability in respect of the obligations of the Company under
the Indenture or the Notes by reason of his, her or its status as such
stockholder, employee, officer or director.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange the Notes in accordance with the Indenture.
The Company or Trustee may require a Holder, among other things, to furnish
appropriate endorsements, legal opinions and transfer documents, and
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<PAGE>
to pay any taxes and fees required by law or permitted by the Indenture. The
Company is not required to transfer or exchange any Notes selected for
redemption. Also, the Company is not required to transfer or exchange any Notes
for a period of 15 days before (i) the mailing of a notice of an offer to
repurchase as a result of a Change of Control or (ii) a selection of Notes to be
redeemed.
The registered holder of a Note may be treated as the owner of it for all
purposes.
BOOK-ENTRY, DELIVERY AND FORM
Notes initially held by "qualified institutional buyers," as defined in Rule
144A under the Securities Act ("QIBs"), are evidenced by one or more global
Notes (the "144A Global Note") which were deposited on the date of the closing
of the sale of the Notes to the Initial Purchasers (the "Closing Date") with, or
on behalf of, The Depository Trust Company, New York, New York (the
"Depositary") and registered in the name of Cede & Co. ("Cede") as the
Depositary's nominee. Notes held by persons who acquired such Notes in
compliance with Regulation S under the Securities Act (a "Non-U.S. Person") were
initially evidenced by one or more global Notes (the "Regulation S Global
Note"), which was deposited on the Closing Date with, or on behalf of, the
Depositary and registered in the name of Cede as the Depositary's nominee, for
the accounts of the Euroclear System ("Euroclear") and Cedel, S.A. ("Cedel").
Beneficial interests in the Regulation S Global Note may only be held through
Euroclear or Cedel, and any resale or transfer of such interests to U.S. persons
shall only be permitted as described below. The 144A Global Note and the
Regulation S Global Note are hereinafter collectively referred to as the "Global
Note." Except as set forth below, the Global Note may be transferred, in whole
or in part, only to another nominee of the Depositary or to a successor of the
Depositary or its nominee.
QIBs may hold their interests in the 144A Global Note directly through the
Depositary if such holder is a participant in the Depositary, or indirectly
through organizations which are participants in the Depositary (the
"Participants"). Transfers between Participants will be effected in the ordinary
way in accordance with the Depositary's rules and will be settled in Federal
funds.
Non-U.S. Persons may hold their interest in the Regulation S Global Note
directly through Cedel or Euroclear, or indirectly through organizations that
are participants in Cedel or Euroclear. Cedel and Euroclear will hold interests
in the Regulation S Global Note on behalf of their participants through the
Depositary. Transfers between participants in Euroclear and Cedel will be
effected in the ordinary way in accordance with their respective rules and
operating procedures.
Notes that were originally issued to or transferred to institutional
"accredited investors," as defined in Rule 501(a) (1), (2), (3) or (7) under the
Securities Act, who were not QIBs or Non-U.S. Persons or to any other persons
who were not QIBs or Non-U.S. Persons were issued in the form of registered
definitive securities ("Certificated Notes"). Upon the transfer to a QIB or
Non-U.S. Person of Certificated Notes, such Certificated Notes will, unless the
Global Note has previously been exchanged for Certificated Notes, be exchanged
for an interest in the Global Note representing the principal amount of Notes
being transferred.
The Depositary has advised the Company that it is a limited-purpose trust
company that was created to hold securities for its participating organizations
(collectively, the "Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants (including
Euroclear and Cedel). The Depositary's Participants include securities brokers
and dealers (including the Initial Purchasers), banks and trust companies,
clearing corporations and certain other organizations. Access to the
Depositary's system is also available to other entities such as banks, brokers,
dealers and trust companies (collectively, "Indirect Participants") that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly. QIBs may elect to hold Notes purchased by them through the
Depositary. QIBs who are not Participants may beneficially own securities held
by or on behalf of the Depositary only through Participants or Indirect
Participants. Persons that are not QIBs or Non-U.S. Persons may not hold Notes
through the Depositary.
Pursuant to procedures established by the Depositary, (i) upon deposit of the
Global Notes, the Depositary credited the accounts of Participants designated by
the Initial Purchasers with an interest in the Global Note and (ii) ownership of
the Notes evidenced by the Global Note are shown on, and the transfer of
ownership thereof will be effected only through, records maintained by the
Depositary (with respect to the interests of Participants), the Participants and
the
16
<PAGE>
Indirect Participants. The laws of some states require that certain persons
take physical delivery in definitive form of securities that they own and that
security interests in negotiable instruments can only be perfected by delivery
of certificates representing the instruments. Consequently, the ability to
transfer Notes evidenced by the Global Note will be limited to such extent. For
certain other restrictions on the transferability of the Notes, see "Notice to
Investors."
So long as the Depositary or its nominee is the registered owner of a Note,
the Depositary or such nominee, as the case may be, will be considered the sole
owner or holder of the Notes represented by the Global Note for all purposes
under the Indenture. Except as provided below, owners of beneficial interests
in a Global Note will not be entitled to have Notes represented by such Global
Note registered in their names, will not receive or be entitled to receive
physical delivery of Certificated Notes, and will not be considered the owners
or holders thereof under the Indenture for any purpose, including with respect
to the giving of any directions, instructions or approvals to the Trustee
thereunder. As a result, the ability of a person having a beneficial interest
in Notes represented by a Global Note to pledge such interest to persons or
entities that do not participate in the Depositary's system, or to otherwise
take actions with respect to such interest, may be affected by the lack of a
physical certificate evidencing such interest.
Neither the Company nor the Trustee will have any responsibility or liability
for any aspect of the records relating to or payments made on account of Notes
by the Depositary, or for maintaining, supervising or reviewing any records of
the Depositary relating to such Notes.
Payments with respect to the principal of, premium, if any, interest on, and
liquidated damages with respect to, any Note represented by a Global Note
registered in the name of the Depositary or its nominee on the applicable record
date will be payable by the Trustee to or at the direction of the Depositary or
its nominee in its capacity as the registered Holder of the Global Note
representing such Notes under the Indenture. Under the terms of the Indenture,
the Company and the Trustee may treat the persons in whose names the Notes,
including the Global Notes, are registered as the owners thereof for the purpose
of receiving such payments and for any and all other purposes whatsoever.
Consequently, neither the Company nor the Trustee has or will have any
responsibility or liability for the payment of such amounts to beneficial owners
of Notes (including, principal, premium, if any, interest, or liquidated damages
with respect thereto), or to immediately credit the accounts of the relevant
Participants with such payment, in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the Global Note as shown
on the records of the Depositary. Payments by the Participants and the Indirect
Participants to the beneficial owners of Notes will be governed by standing
instructions and customary practice and will be the responsibility of the
Participants or the Indirect Participants.
Holders who desire to convert their Notes into Common Stock pursuant to the
terms of the Notes should contact their brokers or other Participants or
Indirect Participants to obtain information on procedures, including proper
forms and cut-off times, for submitting such requests.
If (i) the Company notifies the Trustee in writing that the Depositary is no
longer willing or able to act as a depositary and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of Notes in
definitive form under the Indenture, then, upon surrender by the Depositary of
the Global Notes, Certificated Notes will be issued to each person that the
Depositary identifies as the beneficial owner of the Notes represented by Global
Notes. In addition, subject to certain conditions, any person having a
beneficial interest in a Global Note may, upon request to the Trustee, exchange
such beneficial interest for Notes in the form of Certificated Notes. Upon any
such issuance, the Trustee is required to register such Certificated Notes in
the name of such person or persons (or the nominee of any thereof), and cause
the same to be delivered thereto.
Neither the Company nor the Trustee shall be liable for any delay by the
Depositary or any Participant or Indirect Participant in identifying the
beneficial owners of the Notes, and the Company and the Trustee may conclusively
rely on, and shall be protected in relying on, instructions from the Depositary
for all purposes (including with respect to the registration and delivery, and
the respective principal amounts, of the Notes to be issued).
17
<PAGE>
CERTAIN DEFINITIONS
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday that
is not a day on which banking institutions in New York, New York are authorized
or obligated by law or executive order to close.
"Capitalized Lease Obligation" means, as to any Person, the obligation of such
Person to pay rent or other amounts under a lease to which such Person is a
party that is required to be classified and accounted for as a capital lease
obligation under GAAP.
"Capital Stock" means, with respect to any corporation, any and all shares,
interests, rights to purchase (other than convertible or exchangeable
indebtedness), warrants, options, participations or other equivalents of or
interests (however designated) in stock issued by that corporation.
"Change of Control" means (i) an event or series of events as a result of
which any "person" or "group" (as such terms are used in Sections 13(d)(3) and
14(d) of the Exchange Act) (excluding the Company or any wholly-owned subsidiary
thereof) is or becomes, directly or indirectly, the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, whether or not
applicable) of more than 50% of the combined voting power of the then
outstanding securities entitled to vote generally in elections of directors,
managers or trustees, as applicable, of the Company or any successor entity
("Voting Stock"), (ii) the completion of any consolidation with or merger of the
Company into any other Person, or conveyance, transfer or lease by the Company
of all or substantially all of its assets to any Person, or any merger of any
other Person into the Company in a single transaction or series of related
transactions, and, in the case of any such transaction or series of related
transactions, the outstanding Common Stock of the Company is changed or
exchanged as a result, unless the stockholders of the Company immediately before
such transaction own, directly or indirectly, immediately following such
transaction, at least a majority of the combined voting power of the outstanding
voting securities of the Person resulting from such transaction in substantially
the same proportion as their ownership of the Voting Stock immediately before
such transaction, or (iii) such time as the Continuing Directors (as defined) do
not constitute a majority of the Board of Directors of the Company (or, if
applicable, a successor corporation to the Company); provided that a Change of
Control shall not be deemed to have occurred if either (x) the last sale price
of the Common Stock for any five trading days during the 10 trading days
immediately preceding the Change of Control is at least equal to 105% of the
Conversion Price in effect on such day, or (y) with respect to a merger or
consolidation otherwise constituting a Change of Control described in clause
(ii) above, at least 90% of the consideration in such transaction or
transactions consists of common stock or securities convertible into common
stock that are, or upon issuance will be, traded on a United States national
securities exchange or approved for quotation on the Nasdaq National Market.
"Continuing Director" means at any date a member of the Company's Board of
Directors (i) who was a member of such board on the date of initial issuance of
the Notes or (ii) who was nominated or elected by at least a majority of the
directors who were Continuing Directors at the time of such nomination or
election or whose election to the Company's Board of Directors was recommended
or endorsed by at least a majority of the directors who were Continuing
Directors at the time of such nomination or election.
"Disqualified Capital Stock" means, with respect to the Company, Capital Stock
of the Company that, by its terms or by the terms of any security into which it
is convertible, exercisable or exchangeable, is, or upon the happening of an
event or the passage of time would be, required to be redeemed or repurchased
(including at the option of the holder thereof) by the Company, in whole or in
part, on or prior to the Stated Maturity of the Notes, provided that only the
portion of such Capital Stock which is so convertible, exercisable, exchangeable
or redeemable or subject to repurchase prior to such Stated Maturity shall be
deemed to be Disqualified Capital Stock.
"Indebtedness" of any person means, without duplication, (a) all liabilities
and obligations, contingent or otherwise, of any such person, (i) in respect of
borrowed money (whether or not the lender has recourse to all or any portion of
the assets of such person), (ii) evidenced by credit or loan agreements, bonds,
notes, debentures or similar instruments (including, without limitation, notes
or similar instruments given in connection with the acquisition or any business,
properties or assets of any kind), (iii) evidenced by bankers' acceptances or
similar instruments issued or accepted by banks, (iv) for the payment of money
relating to a Capitalized Lease Obligation, or (v) evidenced by a letter of
credit or a reimbursement obligation of such person with respect to any letter
of credit; (b) all obligations of such person issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business); (c) all net
obligations of such person under Interest Swap and
18
<PAGE>
Hedging Obligations; (d) all liabilities of others of the kind described in the
preceding clauses (a), (b) or (c) that such person has guaranteed or that is
otherwise its legal liability, or which is secured by a lien on property of such
person, and all obligations to purchase, redeem or acquire any Capital Stock;
and (e) any and all deferrals, renewals, extensions, modifications,
replacements, restatements, refinancings and refundings (whether direct or
indirect) of, or any indebtedness or obligation issued in exchange for, any
liability of the kind described in any of the preceding clauses (a), (b), (c) or
(d), or this clause (e), whether or not between or among the same parties.
"Interest Swap and Hedging Obligations" means the obligations of any Person
under any interest rate protection agreement, interest rate future agreement,
interest rate option agreement, interest rate swap agreement, interest rate cap
agreement or other interest rate hedge agreement, interest rate collar agreement
or other similar agreement or arrangement to which such Person is a party or
beneficiary.
"Junior Securities" means any Qualified Capital Stock (as defined) and any
Indebtedness of the Company that is fully subordinated in right of payment to
the Notes and has no scheduled installment of principal due, by redemption,
sinking fund payment or otherwise, on or prior to the Stated Maturity of the
Notes.
"Loan Agreement" means the Amended and Restated Loan and Security Agreement,
dated as of January 3, 1995, among OccuCenters, Inc., the Company, the lenders
from time to time party thereto and Creditanstalt-Bankverein, as agent for the
lenders thereunder, as the same may from time to time be amended, modified,
supplemented, restated, renewed, refunded, restructured, refinanced, replaced or
extended, in whole or in part, whether with same or different agents or lenders
thereunder.
"Qualified Capital Stock" means any Capital Stock of the Company that is not
Disqualified Capital Stock.
"Senior Indebtedness" means all obligations of the Company to pay the
principal of, premium, if any, interest (including all interest accruing
subsequent to the commencement of any bankruptcy or similar proceeding, whether
or not a claim for post-petition interest is allowable as a claim in any such
proceeding) and rent payable on or in connection with, and all fees, costs,
expenses and other amounts accrued or due on or in connection with, any
Indebtedness of the Company, whether outstanding on the date of the Indenture or
thereafter created, incurred, assumed, guaranteed or in effect guaranteed by the
Company, unless the instrument creating or evidencing such Indebtedness provides
that such Indebtedness is not senior or superior in right of payment to the
Notes or which is pari passu with, or subordinated to, the Notes; provided that
in no event shall Senior Indebtedness include (a) Indebtedness of the Company
owed or owing to any subsidiary of the Company or any officer, director or
employee of the Company or any subsidiary of the Company, (b) Indebtedness
representing or with respect to any account payable or other accrued current
liability or obligation incurred in the ordinary course of business in
connection with the obtaining of materials or services or (c) any liability for
taxes owed or owing by the Company or any subsidiary of the Company.
"Significant Subsidiary" means any Subsidiary which is a "significant
subsidiary" of the Company within the meaning of Rule 1.02(w) of Regulation S-X
promulgated by the Commission as in effect as of the date of the Indenture.
"Stated Maturity," when used with respect to any Note, means December 15,
2001.
"Subsidiary" with respect to any person, means (i) a corporation a majority of
whose Capital Stock with voting power normally entitled to vote in the election
of directors is at the time, directly or indirectly, owned by such person, by
such person and one or more Subsidiaries of such person or by one or more
Subsidiaries of such person, (ii) a partnership in which such person or a
Subsidiary of such person is, at the time, a general partner and owns alone or
together with one or more Subsidiaries of such person a majority of the
partnership interests, or (iii) any other person (other than a corporation) in
which such person, one or more Subsidiaries of such person, or such person and
one or more Subsidiaries of such person, directly or indirectly, at the date of
determination thereof, has at least a majority ownership interest.
19
<PAGE>
SELLING SECURITYHOLDERS
The following table sets forth the name of each Selling Securityholder and
relationship, if any, with the Company and (i) the amount of Notes owned by each
Selling Securityholder as of March 27, 1997 (assuming no Notes have been sold
under this Prospectus as of such date), (ii) the maximum amount of Notes which
may be offered for the account of such Selling Securityholder under this
Prospectus, (iii) the amount of Common Stock owned by each Selling
Securityholder as of March 27, 1997, and (iv) the maximum amount of Common Stock
which may be offered for the account of such Selling Securityholder under this
Prospectus.
<TABLE>
<CAPTION>
COMMON
PRINCIPAL PRINCIPAL COMMON STOCK STOCK
NAME OF SELLING AMOUNT OF AMOUNT OF NOTES OWNED PRIOR TO OFFERED
SECURITYHOLDER NOTES OWNED OFFERED HEREBY OFFERING (1) HEREBY (2)
-------------- ----------- --------------- --------------- ----------
<S> <C> <C> <C> <C>
Baron Asset Fund $ 500,000 $ 500,000 16,835 16,835
Bear Stearns Securities Corp.................. 3,950,000 3,950,000 132,997 132,997
CFW-C., L.P................................... 6,000,000 6,000,000 202,020 202,020
CM Converts Fund.............................. 350,000 350,000 11,785 11,785
Commonwealth Life Insurance -
(TEAMSTERS/ Camden Non-
Enhanced).................................... 2,250,000 2,250,000 75,758 75,758
Commonwealth Life Insurance - Stock
TRAC (TEAMSTERS I).......................... 2,250,000 2,250,000 75,758 75,758
(The) David and Lura Lovell Foundation........ 100,000 100,000 3,367 3,367
Deutsche Bank, AG London...................... 8,150,000 8,150,000 274,411 274,411
Deutsche Morgan Grenfell Arbitrage,
Ltd......................................... 375,000 375,000 12,626 12,626
Dillon, Read & Co. Inc........................ 150,000 150,000 5,051 5,051
Donaldson Lufkin & Jenrette Securities
Corp........................................ 6,045,000 6,045,000 203,535 203,535
Glen Eagles Fund L.P.......................... 500,000 500,000 16,835 16,835
Hick Investment, L.P.......................... 500,000 500,000 16,835 16,835
Intermarket Fund S.A.......................... 1,000,000 1,000,000 33,670 33,670
Laterman Strategies 90's LLC.................. 250,000 250,000 8,418 8,418
LDG Limited Fund.............................. 250,000 250,000 8,418 8,418
Lincoln Investment Management, Inc............ 6,595,000 6,595,000 222,054 222,054
Lincoln National Convertible Securities
Fund........................................ 1,855,000 1,855,000 62,458 62,458
Lincoln National Life Insurance............... 4,740,000 4,740,000 159,596 159,596
Stephen Lovell................................ 100,000 100,000 3,367 3,367
Lovell Family GST Exempt Trust................ 100,000 100,000 3,367 3,367
Lovell Family Limited Partnership............. 500,000 500,000 16,835 16,835
Lura M. Lovell Trust.......................... 500,000 500,000 16,835 16,835
Mainstay Convertible Fund..................... 5,000,000 5,000,000 168,350 168,350
Massachusetts Mutual Life Insurance
Company..................................... 870,000 870,000 29,293 29,293
MassMutual Corporate Investors................ 415,000 415,000 13,973 13,973
MassMutual Corporate Value Partners
Limited..................................... 695,000 695,000 23,401 23,401
MassMutual High Yield Partners LLC............ 820,000 820,000 27,609 27,609
Merrill Lynch Capital Markets Plc............. 3,600,000 3,600,000 121,212 121,212
Merrill Lynch Pierce Fenner & Smith
Inc......................................... 1,700,000 1,700,000 57,239 57,239
Millennium Trading Co., L.P................... 2,000,000 2,000,000 67,340 67,340
Ann L. Moushey................................ 100,000 100,000 3,367 3,367
Off-Shore Strategies, LTD..................... 750,000 750,000 25,253 25,253
Palladin Partners, L.P........................ 500,000 500,000 16,835 16,835
Public Institute for Social Security
(PIFSS)..................................... 1,000,000 1,000,000 33,670 33,670
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Ramius Fund, L.P.......................... 500,000 500,000 16,835 16,835
Robertson Stephens & Co., L.L.P........... 500,000 500,000 16,835 16,835
Societe Generale Securities Corporation... 1,000,000 1,000,000 33,670 33,670
Swiss Bank Corporation-London Branch
c/o SBC Warburg Inc..................... 1,000,000 1,000,000 33,670 33,670
The TCW Group, Inc........................ 7,230,000 7,230,000 243,434 243,434
TQA Arbitrage Fund, L.P................... 1,000,000 1,000,000 33,670 33,670
TQA Leverage Fund, L.P.................... 250,000 250,000 8,418 8,418
TQA Vantage Fund, Ltd..................... 1,000,000 1,000,000 33,670 33,670
Trust FBO Sharon Kerr Klinger............. 50,000 50,000 1,684 1,684
Trust FBO Paul S. Kerr III................ 50,000 50,000 1,684 1,684
United National Life Insurance............ 95,000 95,000 3,199 3,199
Walker Art Center......................... 300,000 300,000 10,101 10,101
Weirton Trust............................. 510,000 510,000 17,172 17,172
----------- ----------- --------- ---------
Subtotal.................................. $77,945,000 $77,945,000 2,624,415 2,624,415
Unnamed holders of Notes or any future
transferees, pledgees, donees or
successors of or from any such unnamed
holders (3).............................. $19,805,000 $19,805,000 666,831(4) 666,831
----------- ----------- --------- ---------
Total..................................... $97,750,000 $97,750,000 3,291,246 3,291,246
=========== =========== ========= =========
</TABLE>
- -----------------
(1) Comprises the shares of Common Stock into which the Notes held by such
Selling Securityholder are convertible at the initial conversion rate. The
Conversion Rate and the number of shares of Common Stock issuable upon
conversion of the Notes are subject to adjustment under certain
circumstances. See "Description of Note--Conversion Rights." Accordingly,
the number of shares of Common Stock issuable upon conversion of the Notes
may increase or decrease from time to time.
(2) Assumes conversion into Common Stock of the full amount of Notes held by
the Selling Securityholder at the initial conversion rate and the offering
of such shares by such Selling Securityholder pursuant to this Prospectus.
The Conversion Rate and the number of shares of Common Stock issuable upon
conversion of the Notes is subject to adjustment under certain
circumstances. See "Description of Notes--Conversion Rights."
Accordingly, the number of shares of Common Stock issuable upon conversion
of the Notes may increase or decrease from time to time. Fractional shares
will not be issued upon conversion of the Notes; rather, cash will be paid
in lieu of fractional shares, if any.
(3) No such holder may offer Notes pursuant to this Prospectus until such
holder is included as a Selling Securityholder in a supplement to this
Prospectus in according with the Registration Rights Agreement (as
defined).
(4) Assumes that the unnamed holders of Notes 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.
Because the Selling Securityholders may, pursuant to this Prospectus, offer
all or some portion of the Notes and Common Stock they presently hold or, with
respect to Common Stock, have the right to acquire upon conversion of such
Notes, no estimate can be given as to the amount of the Notes and Common Stock
that will be held by the Selling Securityholders upon termination of any such
sales. In addition, the Selling Securityholders identified above may have sold,
transferred or otherwise disposed of all or a portion of their Notes and Common
Stock since the date on which they provided the information regarding their
Notes and Common Stock, in transactions exempt from the registration
requirements of the Securities Act. See "Plan of Distribution."
Only Selling Securityholders identified above who beneficially own the Notes
and Common Stock set forth opposite each such Selling Securityholder's name in
the foregoing table on the effective date of the Registration Statement may sell
such Notes and Common Stock pursuant to this Prospectus. The Company may from
time to time, in accordance with the Registration Rights Agreement, include
additional Selling Securityholders in supplements to this Prospectus.
The Company will pay the expenses of registering the Notes and Common Stock
being sold hereunder.
21
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain material United States federal income
and estate tax considerations relating to the purchase, ownership and
disposition of the 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 the provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), the applicable Treasury
Regulations promulgated or proposed thereunder ("Treasury Regulations"),
judicial authority and current administrative rulings and practice, all of which
are subject to change, possibly on a retroactive basis. This summary deals only
with holders that will hold Notes and Common Stock into which Notes may be
converted as "capital assets" (within the meaning of Section 1221) and does not
address tax considerations applicable to investors that may be subject to
special tax rules, such as banks, tax-exempt organizations, insurance companies,
dealers in securities or currencies, persons that will hold 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. 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 the 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 that is subject
to United States federal income taxation on a net income basis in respect of the
Notes or Common Stock. For taxable years beginning after December 31, 1996, a
trust will be a "United States Holder" of a Note only if the trust is subject to
the supervision of a court within the United States and the control of a United
States fiduciary as described in Section 7701(a)(30) 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. The Notes will not have original issue discount.
AMORTIZABLE BOND PREMIUM
If a United States Holder of a Note acquires the Note at a cost that is in
excess of the amount payable at maturity (which, under certain proposed Treasury
Regulations, will be determined by reference to an earlier call date if the call
price would increase a United States Holder's yield on the Note), the United
States Holder may elect under Section 171 of the Code to amortize the excess
cost (as an offset to interest income) on a constant interest rate basis over
the term of such Note. If the United States Holder makes an election to
amortize bond premium, the tax basis of all of such United States Holder's Notes
will be reduced by the allowable bond premium amortization. The amortization
election would apply to all debt instruments held or subsequently acquired by
the electing purchaser and cannot be revoked without permission from the
Service. On conversion of a Note into shares of Common Stock, no additional
amortization of any bond premium would be allowed, and any remaining premium
would be added to the United States Holder's basis in the Common Stock received.
MARKET DISCOUNT
Investors acquiring Notes pursuant to this Prospectus should consider that the
resale of those Notes may be adversely affected by the market discount
provisions of Sections 1276 through 1278 of the Code. Except as described
below, gain recognized on the disposition of a Note that has accrued market
discount will be treated as ordinary income, and not capital gain, to the extent
of the accrued market discount. "Market discount" is defined generally as the
excess, if any, of (i) the
22
<PAGE>
principal amount of the Note over (ii) the tax basis of the Note in the hands of
the United States Holder immediately after its acquisition.
Under a de minimis exception, there is no market discount if the excess of the
principal amount of the obligation over the United States Holder's tax basis in
the obligation is less than 0.25% of the principal amount multiplied by the
number of complete years after the acquisition date to the obligation's date of
maturity. Unless the United States Holder elects otherwise, the accrued market
discount generally would be the amount calculated by multiplying the market
discount by a fraction, the numerator of which is the number of days the
obligation has been held by the United States Holder and the denominator of
which is the number of days after the United States Holder's acquisition of the
obligation up to and including its maturity date.
If a United States Holder of a Note acquired with market discount disposes of
such Note in any transaction other than a sale, exchange or involuntary
conversion, such United States Holder will be deemed to have realized an amount
equal to the fair market value of the Note and will be required to recognize as
ordinary income any accrued market discount. See the discussion below under "--
Sale, Exchange or Redemption of the Notes" for the tax consequences of a sale or
exchange. A partial principal payment (if any) on a Note will be includable as
ordinary income upon receipt to the extent of any accrued market discount
thereon. Any accrued market discount not previously taken into income prior to
a conversion of a Note into shares of Common Stock, however, should (under
Treasury Regulations not yet issued) carry over to the Common Stock received on
conversion and be treated as ordinary income upon a subsequent disposition of
such Common Stock, to the extent of any gain recognized on such disposition. A
United States Holder of a Note acquired at a market discount also may be
required to defer the deduction of all or a portion of the interest on any
indebtedness incurred or maintained to purchase or carry the Note until it is
disposed of in a taxable transaction.
A United States Holder of a Note acquired at a market discount may elect to
include the market discount in income as it accrues. This election would apply
to all market discount obligations as acquired by the electing United States
Holder on or after the first day of the first year to which the election
applies. The election may be revoked only with the consent of the Service. If
a United States Holder of a Note elects to include market discount in income
currently, the rules discussed above regarding (i) ordinary income recognition
resulting from a sale and certain other disposition transactions and (ii)
deferral of interest deductions would not apply.
SALE, EXCHANGE OR REDEMPTION OF THE NOTES
Upon the sale, exchange or redemption of a Note, subject to the market
discount rules discussed above, 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 not previously recognized by such Holder, 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.
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 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.
Cash received in lieu of a fractional share of Common Stock upon conversion
should 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 should 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).
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<PAGE>
DIVIDENDS
The amount of any distribution by the Company in respect of the Common Stock
will be equal to the amount of cash and the fair market value, on the date of
distribution, of any property distributed. Generally, distributions will be
treated as a dividend, subject to tax as ordinary income, to the extent of the
Company's current or accumulated earnings and profits, then as a tax-free return
of capital to the extent of the Holder's tax basis in the Common Stock and
thereafter as gain from the sale of exchange of such stock.
In general, a dividend distribution to a corporate United States Holder will
qualify for the 70% dividends received deduction if the Holder owns less than
20% of the voting power and value of the Company's stock (other than any non-
voting, non-convertible, non-participating preferred stock). A corporate United
States Holder that owns 20% or more of the voting power and value of the
Company's stock (other than any non-voting, non-convertible, non-participating
preferred stock) generally will qualify for an 80% dividends received deduction.
The dividends received deduction is subject, however, to certain holding period,
taxable income and other limitations.
If at any time (i) the Company makes a distribution of cash or property to its
stockholders or purchases Common Stock and such distribution or purchase would
be taxable to such stockholders as a dividend for United States federal income
tax purposes (e.g., distributions of evidences of indebtedness or assets of the
Company, but generally not stock dividends or rights to subscribe for Common
Stock) and, pursuant to the antidilution provisions of the Indenture, the
conversion price of the Notes is decreased, or (ii) the conversion price of the
Notes is decreased at the discretion of the Company, such decrease in conversion
price may be deemed to be the payment of a taxable dividend to United States
Holders of Notes (pursuant to Section 305 of the Code). Such Holders of Notes
could therefore have taxable income as a result of an event pursuant to which
they received no cash or 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 upon the sale
or exchange and (ii) such Holder's adjusted tax basis in the Common Stock. Such
capital gain or loss will be long-term if the United States Holder's holding
period in the Common Stock is more than one year at the time of the sale or
exchange. A United States Holder's basis and holding period in Common Stock
received upon conversion of a Note are determined as discussed above under "--
Conversion of the Notes."
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
In general, information reporting requirements will apply to payments of
principal, 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. The payor will be required to withhold backup withholding tax at the
rate of 31% if (a) the payee fails to furnish a taxpayer identification number
("TIN) to the payor or establish an exemption from backup withholding, (b) the
IRS notifies the payor that the TIN furnished by the payee is incorrect, (c)
there has been a notified payee underreporting with respect to interest,
dividends or original issue discount described in Section 3406(c)of the Code or
(d) there has been a failure of the payee to certify under the penalty of
perjury that the payee is not subject to backup withholding under the Code. Any
amounts withheld under the backup withholding rules from a payment to a United
States Holder will be allowed as a credit against such Holder's United States
federal income tax and may entitle the Holder to a refund, provided that the
required information is furnished to the IRS.
NON-UNITED STATES HOLDERS
As used herein, the term "Non-United States Holder" means any beneficial owner
of a Note or Common Stock that is not a United States Holder.
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<PAGE>
PAYMENT OF INTEREST
Generally, interest income of a Non-United States Holder that is not
effectively connected with a United States trade or business will be subject to
a withholding tax at a 30% rate (or, if applicable, a lower treaty rate).
However, interest paid on a Note by the Company or any Paying Agent to a Non-
United States Holder will qualify for the "portfolio interest exemption" and
therefore will not be subject to United States federal income tax or withholding
tax, provided that such interest income is not effectively connected with a
United States trade or business of the Non-United States Holder and provided
that the Non-United States Holder (i) does not actually or constructively own
(pursuant to the conversion feature of the Notes or otherwise) 10% or more of
the combined voting power of all classes of stock of the Company entitled to
vote, (ii) is not a controlled foreign corporation related to the Company
actually or constructively through stock ownership, (iii) is not a bank which
acquired the Notes in consideration for an extension of credit made pursuant to
a loan agreement entered into in the ordinary course of business and (iv) either
(a) provides a Form W-8 (or a suitable substitute form) signed under penalties
of perjury that includes its name and address and certifies as to its non-United
States status in compliance with applicable law and regulations, or (b) a
securities clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business 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.
Proposed Treasury Regulations would provide alternative methods for satisfying
the certification requirement described in clause (iv) above. The proposed
Treasury Regulations also would require, in the case of Notes held by a foreign
partnership, that (i) the certification described in clause (iv) above be
provided by the partners rather than by the foreign partnership and (ii) 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 Treasury Regulations are proposed to be effective
for payments made after December 31, 1997. There can be no assurance that the
proposed Treasury 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 that an applicable treaty otherwise provides, a Non-
United States Holder generally will be taxed in the same manner as a United
States Holder with respect to interest if the interest income is effectively
connected with a United States trade or business of the Non-United States
Holder. Effectively connected interest received by a corporate Non-United
States Holder may also, under certain circumstances, be subject to an additional
"branch profits tax" at a 30% rate (or, if applicable, a lower treaty rate).
Even though such effectively connected interest is subject to income tax, and
may be subject to the branch profits tax, it is not subject to withholding tax
if the Holder delivers a properly executed IRS Form 4224 to the payor.
SALE, EXCHANGE OR REDEMPTION OF THE 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 the Note (including the receipt of cash in lieu of
fractional shares upon conversion of a Note into Common Stock) unless (1) the
gain is effectively connected with a United States trade or business of the Non-
United States Holder, (2) in the case of a Non-United States Holder who is an
individual, such Holder is present in the United States for a period or periods
aggregating 183 days or more during the taxable year of the disposition or (3)
the Holder is subject to tax pursuant to the provisions of the Code applicable
to certain United States expatriates.
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 of the
conditions described above under "Non-United States Holders--Sale, Exchange or
Redemption of the Notes" is satisfied.
25
<PAGE>
SALE OR EXCHANGE OF COMMON STOCK
A Non-United States Holder generally will not be subject to United States
federal income tax or withholding tax on the sale or exchange of Common Stock
unless any of the conditions described above under "Non-United States Holders--
Sale, Exchange or Redemption of the Notes" is satisfied.
DIVIDENDS
Distributions by the Company with respect to the Common Stock that are treated
as Dividends paid (or deemed paid), as described above under "United States
Holders--Dividends" to a Non-United States Holder (excluding dividends that are
effectively connected with the conduct of a trade or business in the United
States by such Holder and are taxable as described below) will be subject to
United States federal withholding tax at a 30% rate (or lower rate provided
under any applicable income tax treaty). Except to the extent that an
applicable tax treaty otherwise provides, a Non-United States Holder will be
taxed in the same manner as a United States Holder on dividends paid (or deemed
paid) that are effectively connected with the conduct of a trade or business in
the United States by the Non-United States Holder. If such Non-United States
Holder is a foreign corporation, it may also be subject to a United States
branch profits tax on such effectively connected income at a 30% rate or such
lower rate as may be specified by an applicable income tax treaty. Even though
such effectively connected dividends are subject to income tax, and may be
subject to the branch profits tax, they will not be subject to U.S. withholding
tax if the Holder delivers IRS Form 4224 to the payor.
Under current United States Treasury regulations, dividends paid to an address
in a foreign country are presumed to be paid to a resident of that country
(unless the payor has knowledge to the contrary) for purposes of the withholding
discussed above and, under the current interpretation of the Treasury
Regulations, for purposes of determining the applicability of a tax treaty rate.
Under Treasury Regulations that are proposed to be effective for distributions
after 1997, however, a non-U.S. 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 Treasury
Regulations, in the case of common stock held by a foreign partnership, the
certification requirement would generally be applied to the partners of the
partnership and the partnership would be required to provide certain
information, including a United States taxpayer identification number. The
proposed Treasury Regulations also provide look-through rules for tiered
partnerships. It is not certain whether, or in what form, the proposed Treasury
Regulations will be adopted as final regulations.
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 (other than through a foreign
corporation) 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
United States information reporting requirements and backup withholding tax
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.
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
26
<PAGE>
foreign office of a "broker" (as defined in applicable Treasury Regulations),
unless such broker is (i) a United States person, (ii) a foreign person that
derives 50% or more of its gross income for certain periods from the conduct of
a trade or business in the United States or (iii) a controlled foreign
corporation for United States federal income tax purposes. Payment of the
proceeds of any such sale effected outside the United States by a foreign office
of any broker that is described in (i), (ii) or (iii) of the preceding sentence
will not be subject to backup withholding tax, but will be subject to
information reporting requirements unless such broker has documentary evidence
in its records that the beneficial owner is a Non-United States Holder and
certain other conditions are met, or the beneficial owner otherwise establishes
an exemption. Payment of the proceeds of any such sale to or through the United
States office of a broker is subject to information reporting and backup
withholding requirements, unless the beneficial owner of the Note provides the
statement described in "Non-United States Holders--Payment of Interest" or
otherwise establishes an exemption.
If paid to an address outside the United States, dividends on Common Stock
held by a Non-United States Holder will generally not be subject to the
information reporting and backup withholding requirements described in this
section. However, under the proposed Treasury Regulations, dividend payments
will be subject to information reporting and backup withholding unless
applicable certification requirements are satisfied. See the discussion above
with respect to rules applicable to foreign partnerships under the proposed
Treasury Regulations.
THE COMPANY
Under Section 279 of the Code, interest paid or incurred by a corporation with
respect to certain convertible, subordinated indebtedness that is utilized to
provide consideration for the acquisition of stock in another corporation (or a
substantial portion of the assets of another corporation) is not deductible for
federal income tax purposes to the extent interest on such "corporate
acquisition indebtedness" as defined in Section 279 exceeds $5 million per year,
reduced by the interest paid on certain other indebtedness that does not
constitute "corporate acquisition indebtedness" for purposes of Section 279, but
is used to fund corporate acquisitions. The Notes may constitute "corporate
acquisition indebtedness" for purposes of Section 279 of the Code, which could
result in all or a portion of the interest payments under the Notes not being
deductible for federal income tax purposes. Although there can be no assurance,
the Company does not anticipate that any significant portion of the interest
deductions with respect to the Notes will be disallowed pursuant to Section 279.
PLAN OF DISTRIBUTION
The Notes were issued to the Selling Securityholders in connection with an
underwritten private placement and are convertible into Common Stock as
described in "Description of Notes--Conversion Rights." The Company entered
into the Registration Rights Agreement with the Initial Purchasers for the
benefit of holders of the Notes to register their Notes and such Common Stock
under the Securities Act under certain circumstances and at certain times. The
Registration Rights Agreement provides for cross-indemnification of the Selling
Securityholders and the Company for losses, claims, damages, liabilities and
expenses arising, under certain circumstances, out of the registration of the
Notes and such Common Stock.
The Notes and such Common Stock may be sold from time to time by the Selling
Securityholders. The Selling Securityholders may from time to time sell all or
a portion of the Notes and such Common Stock in transactions on the Nasdaq or
the Nasdaq National Market, as the case may be, in the over-the-counter market,
in negotiated transactions, or a combination of such methods of sale, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. The Notes and such Common Stock may be
sold directly or through underwriters or broker-dealers. If the Notes or shares
of Common Stock are sold through underwriters or broker-dealers, the Selling
Securityholders may pay underwriting discounts or brokerage commissions and
charges. The methods by which the Notes and such Common Stock may be sold
include (i) a block trade in which the broker or dealer so engaged will attempt
to sell the securities as agent but may position and resell a portion of the
block as principal to facilitate the transaction, (ii) purchases by a broker or
dealer as principal and resale by such broker or dealer for its own account
pursuant to this Prospectus, (iii) exchange distributions and/or secondary
distributions in accordance with the rules of the Nasdaq or the Nasdaq National
Market, as the case may be, (iv) ordinary brokerage transactions and
transactions in which the broker solicits purchasers, and (v) privately
negotiated transactions.
Pursuant to the provisions of the Registration Rights Agreement, the Company
will pay the costs and expenses incident to its registration and qualification
of the Notes and Common Stock offered hereby, including registration and
27
<PAGE>
filing fees. In addition, the Company has agreed to indemnify the Selling
Securityholders against certain liabilities, including liabilities arising under
the Securities Act.
The Selling Securityholders and any underwriter or broker-dealer participating
in the distribution of the Notes and Common Stock may be deemed to be
"underwriters" within the meaning of the Securities Act, and any profits,
discounts, commissions or concessions paid or allowed to any such underwriter or
broker-dealer may be deemed to be underwriting discounts and commissions under
the Securities Act. The Selling Securityholders may indemnify any broker-dealer
that participates in transactions involving the sale of Notes and Common Stock
against certain liabilities, including liabilities under the Securities Act.
In addition, any securities covered by this Prospectus that qualify for sale
pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under Rule
144 or Rule 144A rather than pursuant to this Prospectus. There can be no
assurance that any Selling Securityholder will sell any or all of the Notes or
Common Stock described herein, and any Selling Securityholder may transfer,
devise or gift such securities by other means not described herein.
LEGAL MATTERS
The validity of the Notes and Common Stock offered hereby will be passed upon
by Vinson & Elkins L.L.P., Dallas, Texas.
EXPERTS
The consolidated financial statements of the Company as of December 31, 1994
and 1995, and for each of the three years in the period ended December 31, 1995,
incorporated by reference in this Prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in giving said reports.
The combined financial statements of Prizm Environmental & Occupational
Health, Inc. incorporated by reference in this Prospectus have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are incorporated herein by reference in
reliance upon the authority of said firm as experts in giving said reports.
28
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===============================================================================
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, ANY SELLING SECURITYHOLDER OR UNDERWRITER. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
_____________________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information............................................... 2
Incorporation of Certain Information
by Reference...................................................... 2
Risk Factors........................................................ 3
Recent Developments................................................. 6
Ratio of Earnings to Fixed Charges.................................. 7
Description of Notes................................................ 8
Selling Securityholders............................................. 20
Certain Federal Income Tax Consequences............................. 22
Plan of Distribution................................................ 27
Legal Matters....................................................... 28
Experts............................................................. 28
</TABLE>
$97,750,000
OCCUSYSTEMS, INC.
6% CONVERTIBLE SUBORDINATED
NOTES DUE 2001
--------------------------
PROSPECTUS
--------------------------
MAY 16, 1997
===============================================================================
