<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
[LOGO]
$86,250,000
5 1/2% CONVERTIBLE SUBORDINATED NOTES DUE 2003
1,819,620 SHARES
COMMON STOCK
---------------------
This Prospectus relates to the offering by the selling securityholders named
herein (the "Selling Securityholders") of 5 1/2% Convertible Subordinated Notes
due 2003 (the "Notes") of U.S. Office Products Company (the "Company" or "U.S.
Office Products") in the aggregate principal amount of up to $86.25 million (the
"Offered Notes"). In addition, this Prospectus relates to the offering by the
Selling Securityholders of 1,819,620 shares (subject to adjustment under certain
circumstances) of common stock, par value $.001 per share (the "Common Stock"
and, together with the Offered Notes, the "Securities"), issued or issuable upon
conversion of the Offered Notes. This Prospectus does not cover the initial
issuance of shares of Common Stock upon conversion of the Offered Notes.
The Offered Notes were issued and sold in May and June 1996 in transactions
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"), to persons reasonably believed by the managers
who placed the Offered Notes (the "Managers") to be "qualified institutional
buyers" (as defined in Rule 144A under the Securities Act) or institutional
accredited investors. In connection with the original issuance of the Offered
Notes, an additional $143.75 million aggregate principal amount of Notes (not
offered hereby) were issued to persons in offshore transactions in reliance upon
Regulation S under the Securities Act.
The Offered Notes are convertible into shares of Common Stock of the
Company, prior to redemption or maturity, at a conversion price of $47.40 per
share, subject to adjustment under certain conditions. See "Description of the
Notes -- Conversion." The Notes are listed on the Luxembourg Stock Exchange and,
prior to their resale pursuant to this Prospectus, the Offered Notes were
eligible for trading on the Private Offerings, Resales and Trading through
Automated Linkages ("PORTAL") Market. The Offered Notes resold pursuant to this
Prospectus will no longer be eligible for trading on the PORTAL Market. The
Common Stock is traded on the Nasdaq National Market under the symbol "OFIS." On
September 27, 1996, the last reported sale price for the Common Stock on the
Nasdaq National Market was $35.88 per share.
Interest on the Offered Notes is payable semi-annually in arrears on May 15
and November 15 of each year, commencing on November 15, 1996 and ending on May
15, 2003. Payments will be made without deduction for United States withholding
taxes, to the extent described herein. The Offered Notes will mature on May 15,
2003 and are redeemable, in whole or in part, at the option of the Company, on
or after May 22, 1998, at the redemption prices set forth herein, plus accrued
and unpaid interest to the date of redemption. The Offered Notes are not
redeemable at the option of the Company prior to May 22, 1998. At any time on or
after such date, the Offered Notes will be redeemable on at least 20 days'
notice at the option of the Company, in whole or in part at any time, initially
at 103.929% and thereafter at prices declining to 100% at maturity, together
with accrued and unpaid interest, except that the Offered Notes may not be
redeemed prior to May 15, 1999 unless the closing price of the Common Stock is
at least 150% of the conversion price for at least 20 trading days within a
period of 30 consecutive trading days ending on the fifth trading day prior to
the notice of redemption. Upon the occurrence of a Designated Event (as defined
herein), each holder of Notes will have the right to cause the Company to
repurchase the holder's Notes, in whole but not in part, at a price equal to
100% of the principal amount thereof plus accrued and unpaid interest to the
repurchase date. See "Description of Notes -- Optional Redemption by the
Company" and "-- Repurchase at Option of Holders Upon a Designated Event."
The Offered Notes are general unsecured obligations of the Company, and are
subordinated in right of payment to all existing and future Senior Indebtedness
(as defined herein) of the Company. The term Senior Indebtedness does not
include the indebtedness of the Company's subsidiaries unless such indebtedness
is secured by the subsidiary and guaranteed by the Company; however,
indebtedness of the Company's subsidiaries decreases the amount of cash flow
available to the Company to service its debt, including the Offered Notes. See
"Description of Notes -- Subordination." As of August 24, 1996, the Company had
approximately $75.0 million of Senior Indebtedness and $201.6 million of
indebtedness of its subsidiaries that is not considered Senior Indebtedness. The
Company expects to refinance approximately $180.0 million of indebtedness
(including $35.0 million of the $75.0 million of Senior Indebtedness) using its
$500 million revolving credit facility (the "Credit Facility"). If the Company
had refinanced such indebtedness as of August 24, 1996, the Company would have
had $220.0 million of pro forma aggregate Senior Indebtedness. Neither the
Indenture (as defined herein) nor the Notes limit the amount of Senior
Indebtedness or other indebtedness that the Company or its subsidiaries may
incur. The Company expects to incur additional debt under the Credit Facility in
connection with acquisitions and for working capital. As of July 27, 1996, the
Company had $230.0 million of Notes outstanding, including the $86.25 million of
Offered Notes, and $143.75 million of 5 1/2% Convertible Subordinated Notes due
2001 outstanding that were sold in a registered offering completed in February
and March 1996 (the "February Notes").
The Company will not receive any of the proceeds from the sale of the
Securities offered hereby. The Selling Securityholders directly, through agents
designated from time to time, or through dealers or underwriters to be
designated, may sell the Securities from time to time on terms to be determined
at the time of sale. To the extent required, the specific amount of Securities
to be sold, the respective purchase price and public offering price, the names
of any such agent, dealer or underwriter, and any applicable commission or
discount with respect to the particular offer will be set forth in a Prospectus
Supplement. U.S. Office Products has agreed to bear all expenses of registration
of the Securities under federal and state securities laws and to indemnify the
Selling Securityholders against certain liabilities under the Securities Act.
See "Plan of Distribution."
The Selling Securityholders and any broker-dealer, agents or underwriters
that participate with the Selling Securityholders in the distribution of the
Securities may be deemed to be "underwriters" within the meaning of the
Securities Act, and any commissions received by them and any profits on the
resale of the Securities purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
------------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 9.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS OCTOBER 3, 1996
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents of the Company filed with the Securities and
Exchange Commission (the "Commission") (File No. 0-25372) are incorporated
herein by reference:
(a) Historical financial statements required by Rule 3-05 of Regulation S-X
of the following companies acquired by the Company: Copenhaver Holdings, Inc.,
MISSCO Commercial Division, Oak Brook Office Supply and Equipment Corporation,
and Blue Star Group Limited, included in the Company's Amendment No. 1 to
Registration Statement on Form S-4 (File No. 333-1928) filed on March 28, 1996;
and U-Bix Business Machines Limited, included in the Company's Current Report on
Form 8-K, dated March 7, 1996;
(b) The Company's Annual Report on Form 10-K for the fiscal year ended April
30, 1996 filed with the Commission on July 16, 1996;
(c) The Company's Quarterly Report on Form 10-Q for the interim period ended
July 27, 1996 filed with the Commission on September 10, 1996;
(d) The Company's Current Reports on Form 8-K dated September 23, 1996,
August 20, 1996, July 26, 1996 (as amended), July 23, 1996, July 16, 1996, and
May 2, 1996 (as amended); and
(d) The description of the Company's Common Stock under the caption
"Description of Registrant's Securities to be Registered" in the Company's
Amendment No. 1 to Registration Statement on Form 8-A, dated February 13, 1995,
and the Company's Quarterly Report on Form 10-Q for the interim period ended
July 27, 1996 disclosing, among other things, an amendment to the Company's
Amended and Restated Certificate of Incorporation.
In addition, all reports and other documents filed by the Company with the
Commission pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), subsequent to the date of
effectiveness of the Registration Statement of which this Prospectus is a part
and prior to the termination of the offering made hereby, shall be deemed to be
incorporated by reference into this Prospectus. Any statement contained herein
or incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
THE COMPANY BY CONTACTING MARK D. DIRECTOR, 1440 NEW YORK AVENUE, N.W., SUITE
310, WASHINGTON, D.C. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY
REQUEST SHOULD ALLOW AT LEAST FIVE (5) BUSINESS DAYS FOR DELIVERY.
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE
OFFERINGS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER
TO, OR SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Incorporation of Certain Information by Reference.......................................................... 2
Available Information...................................................................................... 3
The Company................................................................................................ 4
The Offering............................................................................................... 7
Risk Factors............................................................................................... 9
Price Range of Common Stock................................................................................ 14
Dividend Policy............................................................................................ 14
Description of Notes....................................................................................... 15
Description of Capital Stock............................................................................... 29
Certain Federal Tax Considerations......................................................................... 31
Selling Securityholders.................................................................................... 33
Plan of Distribution....................................................................................... 34
Legal Matters.............................................................................................. 35
Experts.................................................................................................... 35
</TABLE>
AVAILABLE INFORMATION
The Company has filed with the Commission in Washington, D.C. a Registration
Statement on Form S-3 under the Securities Act, with respect to the securities
offered hereby. This Prospectus, which constitutes part of the Registration
Statement, omits certain of the information contained in the Registration
Statement and the exhibits and schedules thereto on file with the Commission
pursuant to the Securities Act and the rules and the regulations of the
Commission thereunder. Statements contained in this Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete and in each instance reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement, and each such
statement is qualified in all respects by such reference. The Company is subject
to the informational requirements of the Exchange Act, and, in accordance
therewith, files reports, proxy statements, and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following Regional Offices of the Commission: Seven World
Trade Center, Suite 1300, New York, New York 10048; and 500 West Madison Avenue,
Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained
from the public reference section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates, or from the Commission's internet
web site at http://www.sec.gov. In addition, such materials also may be
inspected and copied at the offices of the Nasdaq National Market, 1735 K
Street, N.W., Washington, D.C. 20006.
3
<PAGE>
THE COMPANY
THE FOLLOWING IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE FINANCIAL STATEMENTS AND
RELATED NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS OR INCORPORATED BY
REFERENCE HEREIN. SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN RISKS
ASSOCIATED WITH AN INVESTMENT IN THE SECURITIES. UNLESS THE CONTEXT OTHERWISE
REQUIRES, THE TERMS "U.S. OFFICE PRODUCTS" OR THE "COMPANY" REFER TO U.S. OFFICE
PRODUCTS COMPANY, A DELAWARE CORPORATION, AND ITS SUBSIDIARIES AND PREDECESSORS.
ALL REFERENCES TO YEARS, UNLESS OTHERWISE NOTED, REFER TO THE COMPANY'S FISCAL
YEAR, WHICH ENDED ON APRIL 30 OF EACH YEAR UNTIL YEARS BEGINNING WITH THE 1997
FISCAL YEAR WHICH END ON THE LAST SATURDAY IN APRIL. THIS PROSPECTUS IS BEING
USED BY THE SELLING SECURITYHOLDERS TO OFFER $86.25 MILLION AGGREGATE PRINCIPAL
AMOUNT OF OFFERED NOTES AND THE UNDERLYING 1,819,620 SHARES OF COMMON STOCK
(SUBJECT TO ADJUSTMENT UNDER CERTAIN CIRCUMSTANCES) ISSUED OR ISSUABLE UPON
CONVERSION OF THE OFFERED NOTES (THE "OFFERING"). STATEMENTS CONTAINED HEREIN OR
IN THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE MAY BE DEEMED TO BE FORWARD
LOOKING. ACTUAL RESULTS MAY DIFFER FROM THOSE DISCUSSED IN SUCH FORWARD LOOKING
STATEMENTS, WHICH ARE INHERENTLY UNCERTAIN, FOR THE REASONS, AMONG OTHERS, SET
FORTH UNDER THE HEADING "RISK FACTORS," AS MODIFIED OR SUPERSEDED BY STATEMENTS
CONTAINED IN DOCUMENTS THAT ARE SUBSEQUENTLY FILED AND INCORPORATED BY REFERENCE
HEREIN.
U.S. Office Products is one of the world's largest and fastest growing
suppliers of a broad range of office products to corporate, commercial,
industrial and educational customers. From its inception through September 17,
1996, the Company had acquired 91 companies (the "Completed Acquisitions"). In
addition, as of September 17, 1996, the Company believed that the acquisition of
an additional 20 companies that sell a variety of office supplies, office
furniture, and coffee and breakroom supplies and services was probable (the
"Pending Acquisitions"). The Company's objective is to be the leading single
source supplier of a broad array of office and educational products and services
for its corporate, commercial, industrial and educational customers. The Company
generally has acquired and seeks to acquire companies with established sales
presences and brand names in given geographic markets, and seeks to achieve
operating efficiencies through consolidated purchasing of products and services
and implementation of operational improvements. Currently, the Company sells a
full range of over 28,000 office and educational products to customers in the
United States, New Zealand and Australia.
The Company operates with a decentralized management strategy rather than a
standardized national model in an effort to provide superior customer service
and retain the historical customers of acquired businesses while achieving the
operating efficiencies of a large organization. The Company believes that many
customers purchase office products based on an established long-term business
relationship with one primary supplier. The Company seeks to foster such
long-term relationships by preserving the authority of the local, experienced
management who have the responsibility to provide customers with superior
customer service. The Company believes that its decentralized management
strategy, coupled with operating efficiencies, enables it to compete effectively
in its target markets. The Company has initiated strategies designed to achieve
operating efficiencies by: (i) generating cost savings through volume purchasing
of office products; (ii) combining certain general and administrative functions
at the corporate level and eliminating redundant facilities; (iii) implementing
improved technology and operating systems; (iv) producing a Company-wide
proprietary catalog in order to increase the percentage of office supplies
purchased directly from manufacturers; and (v) increasing sales opportunities by
broadening the complement of products and services it offers.
The Company has an aggressive acquisition program utilizing a "hub and
spoke" strategy for expansion into and around its targeted metropolitan areas.
This strategy involves the acquisition of (i) a larger established, high quality
local company, or hub, and (ii) additional smaller companies, or spokes, in
secondary markets surrounding the hubs. Where possible, the operations of the
acquired spokes are integrated into the operations of existing hubs, thereby
eliminating a portion of the operating expenses of the acquired spokes. The
Company also has begun to develop regional consolidation and integration plans
to enable certain operational activities, such as warehousing, to be shared
among the hubs and spokes that are located within a specific geographic area.
The Company expects
4
<PAGE>
this regional approach to permit the elimination of duplicative facilities and
costs. The Company believes that its decentralized management strategy, which
includes the retention of local management, sales personnel and the names of the
acquired companies, and other operating strategies described above, facilitate
the identification of acquisition candidates and make it an attractive acquiror.
As of September 17, 1996, the following are the principal markets that are
served by the Company:
-DOMESTIC OFFICE SUPPLIES. The Company sells office and related supplies
and equipment in the domestic office contract stationer market from
locations in 27 states. The Pending Acquisitions include five companies
that sell supplies in this market.
-OFFICE COFFEE SERVICES. The Company sells coffee, food, beverages and
related supplies for breakrooms. The Pending Acquisitions include nine
companies serving this market. Certain of these Pending Acquisitions will
provide the Company with the right to distribute
Starbucks-Registered Trademark- coffee to the corporate office market in
certain geographic regions.
-OFFICE FURNITURE. The Company sells contract, remanufactured and catalog
furniture to the office furniture market. The Pending Acquisitions include
one company that focuses on the furniture market.
-SCHOOL SUPPLIES AND SCHOOL FURNITURE. The Company sells school and office
supplies and school furniture to the kindergarten through 12th grade
educational market through its School Specialty, Inc. subsidiary, which
recently acquired five companies in this market.
-INTERNATIONAL OFFICE PRODUCTS. In addition to its domestic operations, the
Company sells office and educational products and equipment and certain
other products and services in New Zealand and Australia through Blue Star
Group Limited ("Blue Star"), acquired by the Company in February and June
1996, and Whitcoulls Group Limited ("Whitcoulls"), which Blue Star acquired
in July 1996. See "Recent Developments." Through its subsidiaries,
Whitcoulls also operates numerous retail book and stationery stores
throughout New Zealand and Australia and manufactures commercial,
scholastic and household stationery products. The Pending Acquisitions
include five companies that are located in New Zealand and Australia.
The Company is a Delaware corporation. Its executive offices are located at
1440 New York Avenue, N.W., Suite 310, Washington, D.C. 20005, and its telephone
number is 202-628-9500.
5
<PAGE>
RECENT DEVELOPMENTS
ACQUISITION ACTIVITY. From the beginning of fiscal 1997 through September
17, 1996, the Company had acquired 43 businesses, of which 23 are contract
stationers, six are office coffee services companies, five are furniture
companies, six are school supplies and school furniture companies and three are
office product and equipment companies in New Zealand and Australia. On July 26,
1996, the Company completed its largest acquisition since its inception when it
purchased all of the outstanding stock of New Zealand-based Whitcoulls for total
cash consideration of $220 million. Whitcoulls operates nine principal
subsidiaries that it has acquired during the past six years. Through its
subsidiaries, Whitcoulls sells a broad array of office, educational and printing
products and services to the commercial, retail, government and school supply
markets throughout New Zealand. In addition, Whitcoulls operates numerous
stationery and book stores (including franchised stores) in New Zealand and
Australia and manufactures commercial, scholastic and household stationery
products. Whitcoulls had revenues of U.S. $450 million and earnings before
interest and taxes of approximately U.S. $31.5 million for its fiscal year ended
June 30, 1996.
CREDIT FACILITY. In August 1996, the Company entered into an agreement with
Bankers Trust Company (the "Bank") whereby the Bank, or a syndicate of financial
institutions including the Bank, will provide the $500 million Credit Facility
bearing interest, at the Company's option, at the Bank's base rate plus an
applicable margin of up to 1.25%, or a eurodollar rate plus an applicable margin
of up to 2.5%. The availability under the Credit Facility is subject to certain
sub-limits including $100 million for working capital loans and $400 million for
acquisition loans, with $180 million of the acquisition loan sub-limit available
and expected to be used to refinance certain outstanding indebtedness of the
Company in Australia and New Zealand. The Credit Facility is secured by a
majority of the assets of the Company and contains customary covenants,
including financial covenants with respect to the Company's leverage and
interest coverage ratios, capital expenditures, payment of dividends and
purchases and sales of assets, and customary default provisions, including
provisions related to non-payment of principal and interest, default under other
debt agreements and bankruptcy.
SALE OF COMMON STOCK. In September 1996, the Company sold, in a privately
negotiated transaction, 1,250,000 shares of Common Stock for $38.1 million to
Quantum Partners LDC, a Cayman Islands-based investment vehicle advised by Soros
Fund Management. The proceeds from the sale were used to reduce outstanding
indebtedness and to fund acquisitions.
6
<PAGE>
THE OFFERING
THIS PROSPECTUS RELATES TO THE OFFERING BY THE SELLING SECURITYHOLDERS OF
BOTH THE OFFERED NOTES AND, TO THE EXTENT THE OFFERED NOTES HAVE BEEN, OR ARE,
CONVERTED, THE COMMON STOCK. THE FOLLOWING SUMMARY OF CERTAIN TERMS OF THE
OFFERED NOTES IS NOT COMPLETE AND IS QUALIFIED BY ALL OF THE TERMS AND
CONDITIONS CONTAINED IN THE OFFERED NOTES AND IN THE INDENTURE (AS DEFINED
HEREIN). FOR A MORE DETAILED DESCRIPTION OF THE TERMS OF THE OFFERED NOTES, SEE
"DESCRIPTION OF NOTES."
THE COMMON STOCK
<TABLE>
<S> <C>
Common Stock outstanding as of September 17, 1996.................. 41,726,449 shares (1)
Common Stock to be outstanding assuming conversion of the Notes, 53,045,239 shares
including the Offered Notes, the conversion of the February Notes (1)(2)
and consummation of the Pending Acquisitions......................
Nasdaq National Market Symbol...................................... OFIS
</TABLE>
- ------------------------
(1) Excludes 266,517 shares of Common Stock subject to options exercisable as of
September 17, 1996.
(2) Assumes no adjustment to the conversion price of the Notes and the February
Notes.
THE OFFERED NOTES
<TABLE>
<S> <C>
Securities Offered.................. $86,250,000 principal amount of 5 1/2% Convertible
Subordinated Notes due 2003.
Interest Payment Dates.............. May 15 and November 15, beginning November 15, 1996.
Maturity............................ May 15, 2003.
Conversion.......................... The Offered Notes will be convertible at any time
prior to redemption or maturity at the holder's
option into shares of the Company's Common Stock at
an initial conversion price of $47.40 per share
(equivalent to approximately 21.10 shares of Common
Stock for each $1,000 principal amount of Notes)
(the "Conversion Price").
Optional Redemption................. The Offered Notes are not redeemable at the option of
the Company prior to May 22, 1998. At any time on or
after such date, the Offered Notes will be
redeemable on at least 30 days notice at the option
of the Company, in whole or in part at any time,
initially at 103.929% and thereafter at prices
declining to 100% of the principal amount of the
Offered Notes at maturity, together with accrued and
unpaid interest, except that the Offered Notes may
not be redeemed prior to May 15, 1999 unless the
closing price of the Common Stock is at least 150%
of the Conversion Price for at least 20 trading days
within a period of 30 consecutive trading days
ending on the fifth trading day prior to the notice
of redemption. See "Description of Notes -- Optional
Redemption by the Company."
Repurchase at Option of Holders Upon
a Designated Event................. In the event of a Designated Event (as defined
herein), each holder may require the Company to
repurchase all or a portion of such holder's Offered
Notes at 100% of the principal amount thereof plus
accrued and unpaid
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
interest to the repurchase date. See "Risk Factors
-- Limitations on Repurchase of Notes Upon a
Designated Event" and "Description of the Notes --
Repurchase at Option of Holders Upon a Designated
Event."
Subordination....................... The Offered Notes are subordinate to all existing and
future Senior Indebtedness of the Company. As of
August 24, 1996, the Company had approximately $75.0
million of Senior Indebtedness and $201.6 million of
indebtedness of its subsidiaries that is not
considered Senior Indebtedness. The Company expects
to refinance approximately $180.0 million of
indebtedness (including $35.0 million of the $75.0
million of Senior Indebtedness) using its $500
million Credit Facility. If the Company had
refinanced such indebtedness as of August 24, 1996,
the Company would have had $220.0 million of pro
forma aggregate Senior Indebtedness. The Indenture
contains no limitations on the incurrence of
additional Senior Indebtedness or other indebtedness
by the Company and its subsidiaries. See
"Description of Notes -- Subordination."
Trading............................. The Notes are traded on the Luxembourg Stock Exchange
and, prior to their resale pursuant to this
Prospectus, the Offered Notes were eligible for
trading on the PORTAL Market. The Offered Notes sold
pursuant to this Prospectus will no longer be
eligible for trading on the PORTAL Market.
Risk Factors........................ An investment in the Securities involves a high
degree of risk. See "Risk Factors" for a discussion
of certain factors that should be considered in
evaluating an investment in the Securities.
</TABLE>
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Securities offered hereby.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the Company and its consolidated subsidiaries for the periods shown. The ratios
were derived from the audited consolidated financial statements of the Company
for the years ended April 30, 1994, 1995 and 1996, and from the unaudited
consolidated financial statements of the Company for the years ended April 30,
1992 and 1993 and for the three months ended July 27, 1996.
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30, THREE MONTHS
----------------------------------------------------- ENDED
1992 1993 1994 1995 1996 JULY 27, 1996
--------- --------- --------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges.......................... 2.4 1.8 2.4 2.5 1.9 2.5
</TABLE>
In computing the ratio of earnings to fixed charges: (i) earnings are based
on income before taxes and fixed charges, and (ii) fixed charges consist of
interest expense, amortization of deferred financing costs and the estimated
interest component of rent expense.
8
<PAGE>
RISK FACTORS
PROSPECTIVE PURCHASERS OF THE SECURITIES OFFERED HEREBY SHOULD CONSIDER
CAREFULLY THE FOLLOWING RISK FACTORS, AS WELL AS THE OTHER INFORMATION IN THIS
PROSPECTUS OR INCORPORATED HEREIN BY REFERENCE, IN EVALUATING AN INVESTMENT IN
THE SECURITIES.
RISKS RELATED TO THE COMPANY'S ACQUISITION STRATEGY
One of the Company's strategies is to increase its revenues and the markets
it serves through the acquisition of additional businesses offering a broad
array of office and educational products, equipment and services. From its
inception through September 17, 1996, the Company made 91 acquisitions. The
Company intends to continue to make additional acquisitions, including the 20
Pending Acquisitions. There can be no assurance that acquisitions will occur at
the same pace or be available to the Company on favorable terms, if at all. For
example, if the price of a share of Common Stock declines over a sustained
period, the owners of potential acquisition targets may not be willing to
receive shares of Common Stock in exchange for their businesses, thereby
adversely affecting the pace of the Company's acquisition program. Such an
effect on the pace of the Company's acquisition program could further reduce the
price of a share of Common Stock, to the further detriment of the Company's
acquisition strategy. In addition, the consolidation of the domestic contract
stationer industry has reduced the number of larger companies available for
sale, which could lead to higher prices being paid to acquire the remaining
domestic, independent companies.
The Company's ability to manage an aggressive consolidation program in
markets other than the domestic contract stationer market, including furniture,
office coffee services and school supplies and school furniture, has not yet
been fully tested. In addition, there can be no assurance that companies that
have been acquired or that may be acquired in the future will achieve sales and
profitability that justify the investment therein. Acquisitions may involve a
number of special risks that could have a material adverse effect on the
Company's operations and financial performance, including adverse short-term
effects on the Company's reported operating results; diversion of management's
attention; difficulties with the retention, hiring and training of key
personnel; risks associated with unanticipated problems or legal liabilities;
and amortization of acquired intangible assets.
There can be no assurance that definitive agreements for the Pending
Acquisitions will be executed or that the Pending Acquisitions will be
consummated. The Company is in discussions with additional acquisition
candidates and expects that it will enter into agreements with respect to the
acquisition of such businesses from time to time.
INTEGRATION OF ACQUISITIONS AND LIMITED COMBINED OPERATING HISTORY
U.S. Office Products was founded in October 1994 and conducted no operations
prior to the acquisition of its founding companies in February 1995. From its
inception through September 17, 1996, U.S. Office Products acquired 91
companies, and it intends to continue to make acquisitions. In most cases, the
managers of the acquired companies have continued to operate their companies
after being acquired by U.S. Office Products. There can be no assurance that the
Company will be able to successfully integrate these companies within U.S.
Office Products' operations without substantial costs, delays or other problems.
In addition, there can be no assurance that the Company's executive management
group will be able to oversee the combined entity and effectively implement the
Company's operating or growth strategies in each of the markets that the Company
serves. Finally, there can be no assurance that the pace of the Company's
acquisitions will not adversely affect the Company's efforts to integrate
acquisitions and manage those acquisitions profitably.
INTERNATIONAL EXPANSION
As of September 17, 1996, the Company's international operations were in New
Zealand and Australia. The Company recently expanded its international
operations significantly with the acquisition of the remaining 49% of Blue Star
in June 1996 and the acquisition of Whitcoulls in July 1996. In addition to
their contract stationery, office furniture, and school supply and school
furniture operations, Blue Star and its subsidiaries, including Whitcoulls, have
other operations that the Company's
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domestic operations currently do not have, including retail book and stationery
stores, printing operations, office product manufacturing and the sale, leasing,
maintenance and design of telecommunications and office automation equipment and
products. If the Company had acquired Whitcoulls as well as the other Completed
Acquisitions and the Pending Acquisitions at the beginning of fiscal 1996, the
Company's international operations would have accounted for approximately 33.1%
of the Company's fiscal 1996 pro forma revenues of $2.2 billion. In fiscal 1996,
international operations constituted approximately 6% of actual 1996 revenues.
The Company is making additional acquisitions in New Zealand and Australia, both
directly and through Blue Star, and plans to enter other international markets,
including England. The Company intends to focus significant attention and
resources on international expansion in the future and expects foreign sales to
represent a significant proportion of the Company's total sales. Expansion into
international markets involves additional risks relating to currency exchange
rates, new and different legal, regulatory and competitive requirements,
difficulties in staffing and managing foreign operations, different business
lines and other factors.
DEPENDENCE ON IMPLEMENTATION AND OPERATION OF SYSTEMS
The Company believes that the successful operation of the businesses that it
has acquired and intends to acquire depends in part on the implementation of
inventory management and financial systems. The Company may experience delays,
complications or expenses in implementing, integrating and operating these
systems, any of which could have a material adverse effect on the Company's
results of operations and financial performance. In addition, interruptions or
disruptions in systems operations could adversely affect the financial results
of particular locations. Finally, while the Company believes that its operating
and technology systems will be adequate for its current needs, such systems will
require modification, improvement or replacement as the Company expands or as
new technologies make the Company's systems obsolete. Such modifications,
improvements or replacements may require substantial expenditures to design and
implement and may require interruptions in operations during periods of
implementation, any of which could have a material adverse effect on the
Company's results of operations and financial performance.
SUBSTANTIAL COMPETITION
The Company operates in a highly competitive environment. In the markets in
which the Company operates, the Company competes with a large number of smaller,
independent companies, many of which are well-established in their markets. In
addition, in the contract stationer market, the Company competes with five large
office products companies, each of which has significant financial resources.
Several of the Company's large competitors operate in many of the Company's
geographic and product markets, and other competitors may choose to enter the
Company's geographic and product markets in the future. In addition, as a result
of this competition, the Company may lose customers or have difficulty acquiring
new customers. As a result of competitive pressures on the pricing of products,
the Company's revenues and/or margins may decline.
INCREASES IN PRICES OF PAPER AND COFFEE
The prices of paper and coffee fluctuate. Although the Company believes
that, to date, it generally has been able to increase its prices to its
customers to reflect increases in paper and coffee costs, it may not be able to
do so in the future. In addition, timing differences between increases in paper
and coffee prices paid by the Company and the implementation of price increases
to the Company's customers may have an adverse effect on the Company's operating
margins.
CONSIDERATION FOR OPERATING COMPANIES EXCEEDS ASSET VALUE
The purchase prices of the Company's acquisitions have not been established
by independent appraisals, but generally have been determined through
arm's-length negotiations between the Company and representatives of such
companies. The consideration for each such company has been based primarily on
the value of such company as a going concern and not on the value of the
acquired assets. Valuations of these companies determined solely by appraisals
of the acquired assets would have been less than the consideration paid (or to
be paid) for the companies. No assurance can be given that the
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<PAGE>
future performance of such companies will be commensurate with the consideration
paid. Moreover, the Company has incurred and expects to continue to incur
significant amortization charges resulting from consideration paid in excess of
the fair value of the net assets of the companies acquired in business
combinations accounted for under the purchase method of accounting.
EFFECT OF QUARTERLY FLUCTUATIONS IN OPERATING RESULTS ON PRICE OF COMMON STOCK
The Company's business is subject to seasonal influences. The Company's
historical sales and profitability in its core office products business have
been lower in the first two quarters of its fiscal year, primarily due to the
lower level of business activity in North America during the summer months. The
seasonality of the core office products business, however, is expected to be
impacted by the seasonality of its other operations, which have been expanding
through acquisitions. For example, the sales and profitability of the Company's
school supplies and school furniture business have been higher during the
Company's first and second quarters and significantly lower in its third and
fourth quarters, and the sales and profitability of the Company's operations in
New Zealand and Australia have generally been higher in the Company's third
quarter. As the Company's mix of businesses evolves through future acquisitions,
these seasonal fluctuations may continue to change. In addition, quarterly
results also may be materially affected by the timing of acquisitions, the
timing and magnitude of costs related to such acquisitions, variations in the
prices paid by the Company for the products it sells, the mix of products sold
and general economic conditions. Therefore, results for any quarter are not
necessarily indicative of the results that the Company may achieve for any
subsequent fiscal quarter or for a full fiscal year. Fluctuations caused by
variations in quarterly operating results may adversely affect the market price
of the Common Stock.
NEED FOR ADDITIONAL FINANCING TO CONTINUE ACQUISITION STRATEGY
The Company has financed most acquisitions, and intends to finance future
acquisitions in the United States, by using cash and shares of Common Stock. The
Company has filed a shelf registration statement with the Commission relating to
the registration of 19,174,575 shares of Common Stock to be used as
consideration for acquisitions by the Company, of which approximately 9,711,320
shares will remain available assuming consummation of the Pending Acquisitions
on their original terms. In addition, the Company expects to register additional
shares of Common Stock to be used in acquisitions. The Company also has sold
debt and equity securities to raise cash proceeds for acquisitions. In May and
June 1996, the Company completed the sales of $230 million in aggregate
principal amount of Notes. The proceeds from the sale of the Notes were used for
general corporate purposes, including to pay the cash consideration ($220
million) for the acquisition of Whitcoulls. In addition, in September 1996, the
Company sold, in a privately negotiated transaction, 1,250,000 shares of Common
Stock for $38.1 million. The proceeds from such sale were used to reduce
outstanding indebtedness and to fund acquisitions. The Company expects that
future acquisitions outside the United States may be for cash consideration. See
"Recent Developments."
Assuming that the current pace of the Company's acquisitions continues, the
Company will need additional debt or equity financing in order to continue its
acquisition program. There can be no assurance that the Company will be able to
obtain such financing if and when it is needed or that any such financing will
be available on terms the Company deems acceptable. In August 1996, the Company
entered into the $500 million Credit Facility. The amount available to be
borrowed under the Credit Facility for acquisitions will vary from time to time
depending on the level of, on a pro forma basis reflecting consummated
acquisitions, the Company's consolidated earnings before interest, taxes,
depreciation and amortization ("EBITDA") and the Company's total indebtedness
and related interest expense. If the Company does not have sufficient cash
resources to pay the cash consideration for acquisitions, or if potential
acquisition candidates are unwilling to accept the Common Stock as part of the
consideration for the sale of their businesses because the Common Stock does not
maintain sufficient value or for other reasons, the Company may be unable to
continue the current pace of its aggressive acquisition program, which could
have a material adverse impact on the Company and the market price of its Common
Stock.
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<PAGE>
RELIANCE ON KEY PERSONNEL
The Company's operations depend on the continued efforts of Jonathan J.
Ledecky, its Chairman of the Board and Chief Executive Officer, Timothy J.
Flynn, its President and Chief Operating Officer, its other executive officers
and the senior management of its subsidiaries. Furthermore, the Company will
likely depend on the senior management of companies that may be acquired in the
future. If any of these people become unable to continue in their present roles,
or if the Company is unable to attract and retain other skilled employees, the
Company's business would be adversely affected. The Company currently does not
intend to obtain key man life insurance covering any of its executive officers
or other members of senior management.
CONTROL BY MANAGEMENT AND STOCKHOLDERS
As of September 17, 1996, officers and directors of the Company and its
subsidiaries beneficially own approximately 28.4% of the outstanding shares of
Common Stock. Assuming consummation of all of the Pending Acquisitions and the
issuance of the expected number of shares of Common Stock in such acquisitions,
the officers and directors of the Company and its subsidiaries will beneficially
own 27.5% of the outstanding shares of Common Stock. These stockholders acting
together may be able to elect a sufficient number of directors to control the
Board of Directors and to approve or disapprove any matter submitted to a vote
of stockholders.
RISKS RELATED TO UNIONIZED EMPLOYEES
A small number of the Company's employees are members of labor unions. If
unionized employees were to engage in a strike or other work stoppage, or if
other employees were to become unionized, the Company could experience a
disruption of operations or higher labor costs.
POTENTIAL EFFECT OF SHARES ISSUED IN ACQUISITIONS ON PRICE OF COMMON STOCK
As of September 17, 1996, there were 41,726,449 shares of Common Stock of
the Company outstanding, of which approximately 4,900,328 shares are subject to
contractual restrictions on the transfer thereof (other than restrictions
relating to shares issued in transactions accounted for under the
pooling-of-interests method of accounting, described below). These contractual
restrictions expire at various times, generally up to two years from the date of
issuance of the shares. The contractual restrictions on 2,321,800 shares will
expire at various dates up to February 23, 1997.
The Company has an aggressive acquisition program under which it
periodically makes, and expects to continue to make, acquisitions that are
accounted for under the pooling-of-interests method of accounting. Under the
pooling-of-interests method of accounting, the affiliates of acquired companies
must be free to sell or otherwise transfer shares of the Common Stock received
in the acquisition, subject to their compliance with federal securities laws, as
soon as the Company releases results of operations that reflect the combined
operations of the Company and the acquired company for a minimum of 30 days. For
example, the Company has issued, and expects to issue, approximately 3,829,431
million shares of Common Stock in connection with acquisitions that were
recently completed or are Pending Acquisitions expected to be completed in the
near future and that were or will be accounted for under the
pooling-of-interests method of accounting. Such shares will become freely
transferable at the time the Company publicly announces results of operations
for the second quarter of fiscal 1997, subject to certain volume and other
restrictions of Rule 145(d) of the Securities Act applicable to affiliates of
the acquired companies. In addition, the Company expects to complete additional
acquisitions in the future that will be accounted for under the
pooling-of-interests method. If a significant number of shares of Common Stock
are issued in acquisitions that are consummated in close proximity to each
other, such shares will become freely transferable at the same time. If a large
number of shares are sold by stockholders in the market as soon as their shares
became freely transferable, the price of the Common Stock could be adversely
affected.
ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS
The Board of Directors of the Company is empowered to issue preferred stock
without stockholder action. The existence of this "blank-check" preferred stock
could render more difficult or discourage an attempt to obtain control of the
Company by means of a tender offer, merger, proxy contest or otherwise.
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SUBORDINATION OF NOTES AND ABSENCE OF FINANCIAL COVENANTS
The indebtedness evidenced by the Offered Notes is subordinate to the prior
payment in full of all Senior Indebtedness (as defined herein). As of August 24,
1996, the Company had approximately $75.0 million of Senior Indebtedness and
$201.6 million of indebtedness of its subsidiaries that is not Senior
Indebtedness. The Company expects to refinance approximately $180.0 million of
indebtedness (including $35.0 million of the $75.0 million of Senior
Indebtedness) using its $500 million Credit Facility. If the Company had
refinanced such indebtedness as of August 24, 1996, the Company would have had
$220.0 million of pro forma aggregate Senior Indebtedness. The Indenture does
not limit the amount of future indebtedness, including Senior Indebtedness,
which the Company or any of its subsidiaries can create, incur, assume or
guarantee. The Company expects to incur additional debt under the Credit
Facility in connection with acquisitions and for working capital. Upon any
distribution of assets of the Company upon any dissolution, winding up,
liquidation or reorganization, the payment of the principal and interest on the
Offered Notes is subordinated to the extent provided in the Indenture to the
prior payment in full of all Senior Indebtedness. The Company also may not make
any payment upon or in respect of the Offered Notes (i) if a default in the
payment of the principal of, premium, if any, interest or other payment due on
Senior Indebtedness occurs and is continuing beyond any applicable period of
grace or (ii) for 180 days if any other default occurs and is continuing with
respect to Designated Senior Indebtedness (as defined herein) that permits
holders of the Designated Senior Indebtedness as to which such default relates
to accelerate its maturity and the Trustee (as defined herein) and the Company
receive a notice of such default from a holder of at least $5 million in
outstanding principal amount of Designated Senior Indebtedness. By reason of the
subordination, in the event of the Company's liquidation or dissolution, holders
of Senior Indebtedness may receive more, ratably, and holders of the Offered
Notes may receive less, ratably, than the other creditors of the Company. In
addition, the Offered Notes are obligations exclusively of the Company and not
of any of its subsidiaries. The Company's cash flow and ability to service debt,
including the Offered Notes, may be dependent upon the earnings of its
subsidiaries and the distribution of those earnings to, or upon the payment of
royalties, license fees, loans or other funds by those subsidiaries to, the
Company. The subsidiaries are separate and distinct legal entities and have no
obligation, contingent or otherwise, to pay any amounts due pursuant to the
Offered Notes or to make any funds available therefor, whether by dividends,
loans or other payments. In addition, the payment of dividends and the making of
loans and advances to the Company by its subsidiaries may be subject to
statutory, contractual or other restrictions and are dependent upon the earnings
of those subsidiaries. See "Description of Notes -- Subordination."
LIMITATIONS ON REPURCHASE OF NOTES UPON A DESIGNATED EVENT
Although the Indenture provides each holder of Offered Notes with certain
rights, at the holder's option, to require the Company to repurchase all or a
portion of such holder's Offered Notes upon the occurrence of a Designated Event
(as defined herein), the Company may not be able to repurchase such Offered
Notes. If a Designated Event were to occur, the Company's repurchase of Offered
Notes would be prohibited by the Company's Credit Facility, and may be
prohibited or limited by, or create an event of default under, the terms of
agreements relating to borrowings which the Company may enter into from time to
time, including agreements relating to Senior Indebtedness. In addition, there
can be no assurance that the Company would have sufficient funds to pay the
repurchase price for Offered Notes tendered by the holders thereof. Failure of
the Company to repurchase Offered Notes at the option of the holder upon a
Designated Event would result in an Event of Default with respect to the Offered
Notes. No Offered Notes may be redeemed at the option of holders upon a
Designated Event if there has occurred and is continuing an Event of Default
(other than a default in payment of the repurchase price with respect to such
Offered Notes on the repurchase date). See "Description of Notes -- Repurchase
at Option of Holders Upon a Designated Event."
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ABSENCE OF EXISTING MARKET FOR NOTES
The Notes are listed on the Luxembourg Stock Exchange and, prior to their
resale pursuant to this Prospectus, the Offered Notes were eligible for trading
on the PORTAL Market. The Offered Notes sold pursuant to this Prospectus will no
longer be eligible for trading on the PORTAL Market. There can be no assurance
that an active trading market for the Offered Notes will develop or, if such a
market develops, that the market will be liquid. The Managers have advised the
Company that they currently intend to make a market in the Offered Notes, but
they are not obligated to do so and may discontinue such market making at any
time. There can be no assurance that an active market for the Offered Notes will
develop and continue upon completion of this Offering or that the market price
of the Offered Notes will not decline. Various factors and events such as
increased competition, quarter-to-quarter variations in financial results,
changes in prevailing interest rates, changes in perceptions of the Company's
creditworthiness, or a decline in the market price of the Common Stock could
cause the market price of the Offered Notes to fluctuate significantly.
PRICE RANGE OF COMMON STOCK
The Common Stock has traded on the Nasdaq National Market since February 15,
1995. On September 27, 1996, the last sale price of the Common Stock was $35.88
per share. On September 17, 1996, there were approximately 423 shareholders of
record of the Company's Common Stock. The following table sets forth the range
of high and low sale prices for the Common Stock, as reported on the Nasdaq
National Market, for the period from February 15, 1995, the date of the
Company's initial public offering, through September 27, 1996.
<TABLE>
<CAPTION>
HIGH LOW
--------- ------------
<S> <C> <C>
FISCAL YEAR 1995
Fourth fiscal quarter.............................................. $ 15.50 $ 10.00(1)
FISCAL YEAR 1996
First fiscal quarter............................................... $ 15.875 $ 10.50
Second fiscal quarter.............................................. $ 18.125 $ 13.50
Third fiscal quarter............................................... $ 26.375 $ 16.25
Fourth fiscal quarter.............................................. $ 40.00 $ 22.00
FISCAL YEAR 1997
First fiscal quarter............................................... $ 45.50 $ 24.50
Second fiscal quarter through September 27, 1996................... $ 36.00 $ 24.75
</TABLE>
- ------------------------
(1) Represents the initial public offering price.
DIVIDEND POLICY
The Company does not anticipate paying any cash dividends on its shares of
Common Stock in the foreseeable future, because it intends to retain its
earnings, if any, to finance the expansion of its business and for general
corporate purposes. Any payment of future dividends will be at the discretion of
the Board of Directors and will depend upon, among other things, the Company's
earnings, financial condition, capital requirements, level of indebtedness,
contractual restrictions with respect to the payment of dividends and other
factors that the Company's Board of Directors deems relevant. Further, the
Company's Credit Facility prohibits the payment of dividends without the
lender's consent.
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DESCRIPTION OF NOTES
The Notes, including the Offered Notes, were issued under an indenture dated
as of May 22, 1996 (the "Indenture"), between the Company and The Chase
Manhattan Bank, N.A., as trustee (the "Trustee"). The terms of the Notes include
those stated in the Indenture and those made a part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (the "TIA"), as in
effect on the date of the Indenture. The following is a summary of important
terms of the Notes, including the Offered Notes (except as otherwise provided),
and does not purport to be complete. Reference should be made to all provisions
of the Indenture, including the definitions therein of certain terms and all
terms made a part of the Indenture by reference to the TIA, a copy of which is
filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal
year ended April 30, 1996. As used in this "Description of Notes," the "Company"
refers only to U.S. Office Products Company and does not, unless the context
otherwise indicates, include any of its subsidiaries.
GENERAL
In May and June 1996, the Company issued an aggregate principal amount of
$230 million of 5 1/2% Convertible Subordinated Notes due 2003.
The Notes are general unsecured obligations of the Company subordinate in
right of payment to certain other obligations of the Company as described under
"-- Subordination," and convertible into Common Stock as described under "--
Conversion." The Notes were issued only in denominations of $1,000, $10,000 or
any integral multiple thereof and will mature on May 15, 2003, unless earlier
redeemed at the option of the Company or repurchased by the Company at the
option of the holder upon a Designated Event (as defined herein).
The Notes bear interest from May 22, 1996 at the annual rate of 5 1/2%,
payable semi-annually on May 15 and November 15, commencing on November 15,
1996, to holders at the close of business on the preceding April 30 and October
31, respectively (other than with respect to a Note or portion thereof called
for redemption on a redemption date, or repurchased in connection with a
Designated Event on a repurchase date, at any time during the period from a
record date, but excluding the next succeeding interest payment date in which
case accrued interest shall be payable (unless such Note or portion thereof is
converted) to the holder of the Note or portion thereof redeemed or
repurchased). Interest is computed on the basis of a 360-day year comprised of
twelve 30-day months.
No service charge will be made for any registration or 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 Company is
not required to register the transfer of or exchange (i) any Note for a period
of 15 days next preceding any selection of Notes to be redeemed, (ii) any Note
or portion thereof selected for redemption, (iii) any Note or portion thereof
surrendered for conversion or (iv) any Note or portion thereof surrendered for
repurchase in connection with a Designated Event.
The Indenture does not contain any restrictions on the payment of dividends
or the repurchase of securities of the Company or any financial covenants. 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 in
control of the Company except to the extent described under "-- Repurchase at
Option of Holders Upon a Designated Event" below.
EXCHANGE AND TRANSFER
At the option of the holder thereof and subject to the terms of the Notes
and of the Indenture, the Notes will be exchangeable for an equal aggregate
principal amount of Notes of different authorized denominations, in each case
without service charge (other than the cost of delivery) and upon payment of any
taxes and other governmental charges. The Notes (other than Notes issued
pursuant to Regulation S under the Securities Act in bearer form ("Bearer
Notes")) shall be registered as provided in the Indenture. The registered holder
of a Note will be treated by the Company, the Trustee and their respective
agents for all purposes as the owner of such Note.
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The transfer of the Notes (other than Bearer Notes) may be registered, and
the Notes may be presented in exchange for other Notes of different authorized
denominations, at the office of the Trustee in The City of New York, without
service charge (other than the cost of delivery) and upon payment of any taxes
or other governmental charges. The Notes may also be presented for purposes of
transfer (other than Bearer Notes) or such exchange at the offices of the paying
agents in London (which will initially be The Chase Manhattan Bank, N.A.) or the
transfer agent in Luxembourg (which will initially be Chase Manhattan Bank
Luxembourg, S.A.), or such other paying agents as may be specified in notices to
the holders of the Notes.
The Company will not be required in the event of a redemption in part, (i)
to register the transfer of the Notes for a period of 15 days immediately
preceding the date on which notice is given identifying the serial numbers of
the Notes called for such redemption; or (ii) to register the transfer of or
exchange any such Notes, or portion thereof, called for redemption.
CONVERSION
The holders of the Notes will be entitled at any time before the close of
business on the last trading day prior to the final maturity date of the Notes,
subject to prior redemption or repurchase, to convert any Notes or portions
thereof (in a $1,000 denomination or multiples thereof) into Common Stock of the
Company, at the conversion price of $47.40 per share, subject to adjustment as
described below. Except as described below, no adjustment will be made on
conversion of any Note for interest accrued thereon or for dividends on any
Common Stock issued. If Notes are converted after a record date for the payment
of interest and prior to the next succeeding interest payment date, such Notes,
other than Notes called for redemption during such period, must be accompanied
by funds equal to the interest payable on such succeeding interest payment date
on the principal amount so converted. The Company is not required to issue
fractional shares of Common Stock upon conversion of Notes and, in lieu thereof,
will pay a cash adjustment based upon the market price of the Common Stock
during the last 10 trading days prior to the date of conversion. In the case of
Notes called for redemption, conversion rights will expire at the close of
business on the trading day preceding the date fixed for redemption, unless the
Company defaults in payment of the redemption price in which case the conversion
right will terminate at the close of business on the date such default is cured.
In the event any holder exercises its repurchase right upon a Designated Event,
such holder's conversion right will terminate upon submission of written notice
of exercise of such repurchase right together with the Notes as to which such
right is being exercised. See "-- Repurchase at Option of Holders Upon a
Designated Event."
The right of conversion attaching to any Note may be exercised by the holder
by delivering the Note at the specified office of a conversion agent,
accompanied by a duly signed and completed notice of conversion, together with
any funds that may be required as described in the preceding paragraph. The
conversion date shall be the date on which the Note, the duly signed and
completed notice of conversion, and any funds that may be required as described
in the preceding paragraph shall have been so delivered. A holder delivering a
Note for conversion will not be required to pay any taxes or duties payable with
respect to the issue or delivery of Common Stock on conversion, but will be
required to pay any tax or duty which may be payable with respect to any
transfer involved in the issue or delivery of the Common Stock in a name other
than the holder of the Note. Certificates representing shares of Common Stock
will not be issued or delivered unless all taxes and duties, if any, payable by
the holder have been paid.
The initial conversion price of $47.40 per share of Common Stock is subject
to adjustment (under formulae set forth in the Indenture) in certain events,
including: (i) the issuance of Common Stock as a dividend or distribution on
Common Stock of the Company; (ii) certain subdivisions and combinations of the
Common Stock; (iii) the issuance to all holders of Common Stock of certain
rights or warrants to purchase Common Stock at less than the current market
price of the Common Stock; (iv) dividends or other distribution to all holders
of Common Stock of shares of capital stock of the Company (other than Common
Stock) or evidences of indebtedness of the Company, cash or other assets
(including securities, but excluding those rights, warrants, dividends and
distributions referred
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to in clauses (i) and (iii) above and dividends and distributions paid
exclusively in cash); (v) dividends or other distributions consisting
exclusively of cash (excluding any cash portion of distributions referred to in
clause (iv)) to all holders of Common Stock in an aggregate amount that,
combined together with (A) all other such all-cash distributions made within the
preceding 12 months with respect to which no adjustment has been made plus (B)
any cash and the fair market value of other consideration payable with respect
to any tender offers by the Company or any of its subsidiaries for Common Stock
concluded within the preceding 12 months with respect to which no adjustment has
been made, exceeds 10% of the Company's market capitalization (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 for such distribution; (vi)
the purchase of Common Stock pursuant to a tender offer made by the Company or
any of its subsidiaries which involves an aggregate consideration that, together
with (X) any cash and the fair market value of any other consideration payable
in any other tender offer by the Company or any of its subsidiaries for Common
Stock expiring within the 12 months preceding such tender offer with respect to
which no adjustment has been made plus (Y) the aggregate amount of any such
all-cash distributions referred to in clause (v) above to all holders of Common
Stock within the 12 months preceding the expiration of such tender offer in
respect of which no adjustments have been made, exceeds 10% of the Company's
market capitalization on the expiration of such tender offer; and (vii) payment
in respect of a tender offer or exchange offer by a person other than the
Company or any subsidiary of the Company in which, as of the closing of the
offer, the Board of Directors is not recommending rejection of the offer. The
Company is entitled, in lieu of making certain adjustments under clause (v)
above, to provide that, subject to satisfying certain conditions, upon
conversion of the Notes, the holders of the Notes will receive, in addition to
the Common Stock issuable upon conversion of such Notes, the amount of such
distribution referred to in clause (v). The adjustment referred to in clause
(vii) above will only be made if the tender offer or exchange offer is for an
amount which increases that person's ownership of Common Stock to more than 25%
of the total shares of Common Stock outstanding and if the cash and value of any
other consideration included in such payment per share of Common Stock exceeds
the current market price per share of Common Stock on the trading day next
succeeding the last date on which tenders or exchanges may be made pursuant to
such tender or exchange. The adjustment referred to in clause (vii) above will
not be made, however, if, as of the closing of the offer, the offering documents
with respect to such offer disclose a plan or an intention to cause the Company
to engage in any transaction of the type described in "-- Consolidation, Merger
or Assumption."
No adjustment in the conversion price will be required unless such
adjustment would require a change of at least 1% in the conversion price then in
effect; PROVIDED that any adjustment that would otherwise be required to be made
shall be carried forward and taken into account in any subsequent adjustment.
Except as stated above, the conversion price will not be adjusted for the
issuance of Common Stock or any securities convertible into or exchangeable for
Common Stock or carrying the right to purchase any of the foregoing.
Subject to the rights of holders of Notes described below under "--
Repurchase at Option of Holders Upon a Designated Event," in the case of (i) any
reclassification or change of the outstanding Common Stock (other than changes
in par value or resulting from a subdivision or combination of Common Stock) or
(ii) a consolidation, merger or combination involving the Company or a sale or
conveyance to another corporation of the property and assets of the Company as
an entirety or substantially as an entirety, in each case as a result of which
holders of Common Stock shall be entitled to receive stock, other securities,
other property or assets (including cash) with respect to or in exchange for
such Common Stock, the holders of the Notes then outstanding will be entitled
thereafter to convert such Notes into the kind and amount of shares of stock,
other securities or other property or assets which they would have owned or been
entitled to receive upon such reclassification, change, consolidation, merger,
combination, sale or conveyance had such Notes been converted into Common Stock
immediately prior to such reclassification, change, consolidation, merger,
combination, sale or conveyance (assuming, in a case in which the Company's
stockholders may exercise rights of election, that a holder of Notes would not
have exercised any rights of election as to the stock, other
17
<PAGE>
securities or other property or assets receivable in connection therewith and
would have received per share the kind and amount received per share by a
plurality of non-electing shares). If the provisions of this paragraph apply to
any reclassification, change of Common Stock, consolidation, merger,
combination, sale or conveyance, then the adjustments to the conversion price
described above will not be made with respect to such reclassification, change
of Common Stock, consolidation, merger, combination, sale or conveyance.
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 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. See "Certain Federal Tax
Considerations."
The Company from time to time may, to the extent permitted by law, reduce
the conversion price of the Notes by any amount for any period of at least 20
days, in which case the Company shall give at least 15 days' notice of such
reduction, if the Board of Directors has made a determination that such a
decrease would be in the best interests of the Company, which determination
shall be conclusive. The Company also 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 or rights to purchase Common Stock resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any event treated as
such for income tax purposes. See "Certain Federal Tax Considerations."
OPTIONAL REDEMPTION BY THE COMPANY
The Notes are not redeemable at the option of the Company prior to May 22,
1998. At any time on or after that date the Notes may be redeemed in full at the
Company's option upon notice of a redemption given once not less than 45 and not
more than 60 days prior to such redemption or in part upon notice of a
redemption given twice, the first such notice given not less than 45 and not
more than 60 days prior to such redemption and the second such notice to be
given not less than 30 and not more than 45 days prior to such redemption, at
the following prices (expressed in percentages of the principal amount),
together with accrued interest to, but excluding, the date fixed for redemption;
PROVIDED, HOWEVER, that the Company may not redeem the Notes prior to May 15,
1999 unless the closing price of the Common Stock on the principal stock
exchange or market on which the Common Stock is then quoted or admitted to
trading equals or exceeds 150% of the conversion price for at least 20 trading
days within a period of 30 consecutive trading days ending on the fifth trading
day prior to the date the notice of redemption is first mailed to the holders of
the Notes, and PROVIDED FURTHER, that if a redemption date is an interest
payment date, the semi-annual payment of interest becoming due on such date
shall be payable to the holder of record as of the relevant record date.
If redeemed during the period beginning May 22, 1998 and ending May 14,
1999, the redemption price shall be 103.929%. Thereafter, for the 12-month
period beginning May 15:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ----------------------------------------------------------------------- -----------
<S> <C>
1999................................................................... 103.143%
2000................................................................... 102.357%
2001................................................................... 101.571%
2002................................................................... 100.786%
</TABLE>
and 100% at May 15, 2003.
If fewer than all the Notes are to be redeemed, the Trustee will select the
Notes to be redeemed in principal amounts of $1,000, or multiples thereof, by
lot or, in its sole discretion, on a pro rata basis. If any Note is to be
redeemed in part only, a new Note or Notes in principal amount equal to the
unredeemed principal portion thereof will be issued. If a portion of a holder's
Notes is selected for partial redemption and such holder converts a portion of
such Notes, such converted portion shall be deemed to be taken from the portion
selected for redemption.
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<PAGE>
No sinking fund is provided for the Notes.
MANDATORY REDEMPTION OF CERTAIN REGULATION S NOTES. Except as set forth in
the next succeeding paragraph, the Company will be required to redeem the Bearer
Notes, in whole but not in part, at 100% of their principal amount, together
with accrued and unpaid interest to the date fixed for redemption, less
applicable withholding taxes, if any, plus any applicable Additional Amounts (as
defined herein) payable in the event the Company determines that payment of
principal, premium, if any, or interest on Bearer Notes or related coupons
outside the United States by the Company or any paying agent would, under any
present or future laws or regulations of the United States, be subject to any
certification, identification or information reporting requirement with regard
to the nationality, residence or identity of the beneficial owner of such Bearer
Notes or coupon who is a United States Alien Holder (as defined herein) (other
than such a requirement (a) that would not be applicable to a payment made by
the Company or any one of its paying agents (i) directly to the beneficial owner
or (ii) to any custodian, nominee or other agent of the beneficial owner, or (b)
that can be satisfied by the custodian, nominee or other agent certifying that
the beneficial owner is a United States Alien Holder, provided that in each case
referred to in clauses (a)(ii) and (b), payment by such custodian, nominee or
other agent of such beneficial owner is not otherwise subject to any such
requirement). The Company shall not so redeem the Bearer Notes, however, if the
Company, based on a written opinion of independent counsel, determines, not less
than 30 days prior to the date fixed for redemption, that no such payment would
be subject to any such requirement, in which case the Company shall notify the
Trustee, which shall give prompt notice of that determination, and any earlier
redemption notice shall thereupon be revoked and of no further effect.
Notwithstanding the immediately preceding paragraph, if and so long as the
certification, identification or information reporting requirement referred to
in the preceding paragraph would be fully satisfied by payment of United States
withholding, backup withholding or similar taxes, the Company may elect, prior
to publication of the notice of redemption and in lieu of redemption of the
Bearer Notes, to pay as Additional Amounts such amounts as are necessary in
order that every net payment made outside the United States by the Company or a
paying agent of the principal of, premium, if any, and interest on the Bearer
Notes or related coupon to a United States Alien Holder (without regard to such
certification, identification or information reporting requirement), after
deduction for United States withholding, backup withholding or similar taxes
(other than a tax (a) that would not be applicable in the circumstances referred
to in the parenthetical clause of the first sentence of the immediately
preceding paragraph or (b) imposed as a result of the presentation of such
Bearer Note or coupon for payment more than 10 days after the date on which such
payment becomes due and payable or on which payment thereof is duly provided
for, whichever occurs later), will not be less than the amount provided in such
Bearer Note or the related coupon to be then due and payable. If the Company
elects to pay such Additional Amounts and as long as it is obligated to pay such
Additional Amounts, the Company may subsequently redeem the Bearer Note, at any
time, in whole but not in part, at 100% of their principal amount, plus accrued
interest to the date fixed for redemption and Additional Amounts, if any.
REPURCHASE AT OPTION OF HOLDERS UPON A DESIGNATED EVENT
The Indenture provides that if a Designated Event (as defined herein)
occurs, each holder of Notes shall have the right, at the holder's option, to
require the Company to repurchase all of such holder's Notes, or any portion
thereof that is a multiple of $1,000, on the date (the "repurchase date") that
is 40 days after the date of the Company Notice (as defined herein), for cash at
a price equal to 100% of the principal amount of the Notes, together with
accrued interest, if any (the "repurchase price"), PROVIDED, HOWEVER, that if a
repurchase date is an interest payment date, the semi-annual payment of interest
becoming due on such date shall be payable to the holder of record as of the
relevant record date.
Within 15 days after the occurrence of a Designated Event, the Company is
obligated to mail to all holders of record of the Notes a notice (the "Company
Notice") of the occurrence of such Designated Event and of the repurchase right
arising as a result thereof. The Company must deliver a copy of the
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<PAGE>
Company Notice to the Trustee and cause a copy or a summary of such notice to be
published in a newspaper of general circulation in The City of New York. To
exercise the repurchase right, a holder of such Notes must deliver, on or before
the 30th day after the date of the Company Notice, irrevocable written notice to
the Company (or an agent designated by the Company for such purpose) and the
Trustee of the holder's exercise of such right, together with the Notes with
respect to which the right is being exercised, duly endorsed for transfer. The
submission of such notice together with such Notes pursuant to the exercise of a
repurchase right will be irrevocable on the part of the holder (unless the
Company fails to repurchase the Notes on the repurchase date) and the right to
convert such Notes will expire upon such submission.
"Designated Event" means a Change in Control (as defined herein) or a
Termination of Trading (as defined herein).
"Change in Control" means an event or series of events as a result of which
(i) any "person" or "group" (as such terms are used in Sections 13(d)(3) and
14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act) of shares representing more than
50% of the combined voting power of the then outstanding securities entitled to
vote generally in elections of directors of the Company ("Voting Stock"); (ii)
approval by stockholders of the Company of any plan or proposal for the
liquidation, dissolution or winding up of the Company; (iii) the Company
consolidates with or merges into any other corporation, or conveys, transfers or
leases all or substantially all of its assets to any person, or any other
corporation merges into the Company, and, in the case of any such transaction,
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 51% of
the combined voting power of the outstanding voting securities of the
corporation resulting from such transaction in substantially the same proportion
as their ownership of the Voting Stock immediately before such transaction; or
(iv) any time Continuing Directors (as defined herein) 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 in 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 in Control is at least equal to 105% of the conversion price in
effect on such day or (y) at least 90% of the consideration (excluding cash
payments for fractional shares) in the transaction or transactions constituting
the Change in Control 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 trading on an established automated
over-the-counter trading market in the United States.
A Change in Control shall not be deemed to have occurred if Jonathan J.
Ledecky, the Chairman of the Board and Chief Executive Officer of the Company,
or a group that includes Jonathan J. Ledecky (a "Permitted Investor") becomes
the beneficial owner of more than 50% of the voting stock, PROVIDED that, if as
a consequence of any transaction involving a Permitted Investor, or in which a
Permitted Investor has an interest, less than 30% of the shares of Common Stock
outstanding upon the issuance of the Offered Notes are neither listed for
trading upon a national securities exchange nor approved for trading on an
established over-the-counter trading market in the United States, then a Change
in Control shall be deemed to have occurred upon the consummation of such
transaction.
"Continuing Director" means at any date a member of the Company's Board of
Directors (i) who was a member of such board on May 22, 1996 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. (Under this definition, if the current Board of Directors of the
Company were to approve a new director or directors and then resign, no Change
in Control would occur even though the current Board of Directors would
thereafter cease to be in office.).
20
<PAGE>
A "Termination of Trading" shall have occurred if the Common Stock of the
Company (or other common stock into which the Notes are then convertible) is
neither listed for trading on a United States national securities exchange nor
approved for trading on an established automated over-the-counter trading market
in the United States.
No quantitative or other established meaning has been given to the phrase
"all or substantially all" (which appears in the definition of Change in
Control) by courts which have interpreted this phrase in various contexts. In
interpreting this phrase, courts, among other things, make a subjective
determination as to the portion of assets conveyed, considering such factors as
the value of assets conveyed, the proportion of an entity's income derived from
the assets conveyed and the significance of those assets to the ongoing business
of the entity. To the extent the meaning of such phrase is uncertain,
uncertainty will exist as to whether or not a Change in Control may have
occurred (and, accordingly, as to whether or not the holders of Notes will have
the right to require the Company to repurchase their Notes).
In the event of a Designated Event, any repurchase of the Notes could be
prevented by the subordination provisions of the Indenture. See "--
Subordination" below. The Company's repurchase of Notes as a result of the
occurrence of a Designated Event is currently prohibited, absent a waiver, under
the terms of the Credit Facility. As a result, the Company will be precluded
from making payment of the repurchase price unless such provisions are waived by
the lenders or unless the Credit Facility has been repaid in full and
terminated. Repurchase may also be prohibited or limited by the subordination
provisions applicable to the Notes or be prohibited or limited by, or create an
event of default under, the terms of other agreements relating to borrowings
which constitute Senior Indebtedness which may be entered into, amended,
supplemented or replaced from time to time. Failure of the Company to repurchase
Notes at the option of the holder upon a Designated Event would result in an
Event of Default with respect to the Notes whether or not such repurchase is
prohibited by the subordination provisions or the terms of Senior Indebtedness.
No Notes may be repurchased at the option of holders upon a Designated Event if
there has occurred and is continuing an Event of Default described under "--
Events of Default and Remedies" below (other than a default in the payment of
the repurchase price with respect to such Notes on the repurchase date).
Certain leveraged transactions sponsored by the Company's management or an
affiliate of the Company could constitute a Change in Control that would give
rise to the repurchase right. The Indenture does not provide the Company's Board
of Directors with the right to limit or waive the repurchase right in the event
of any such leveraged transaction. Conversely, the Company could, in the future,
enter into certain transactions, including certain recapitalizations of the
Company, that would not constitute a Change in Control but that would increase
the amount of Senior Indebtedness (or other indebtedness) outstanding at such
time. There are no restrictions in the Indenture or the Notes on the creation of
additional Senior Indebtedness (or any other indebtedness) of the Company or any
of its subsidiaries and the incurrence of significant amounts of additional
indebtedness could have an adverse impact on the Company's ability to service
its debt, including the Notes. The Notes are subordinate in right of payment to
all existing and future Senior Indebtedness as described under "Subordination"
below.
The right to require the Company to repurchase Notes as a result of a
Designated Event could have the effect of delaying, deferring or preventing a
Change in Control or other attempts to acquire control of the Company unless
arrangements have been made to enable the Company to repurchase all of the Notes
at the repurchase date. Consequently, such right may render more difficult or
discourage a merger, consolidation or tender offer (even if such transaction is
supported by the Company's Board of Directors or is favorable to the
stockholders), the assumption of control by a holder of a large block of the
Company's shares and the removal of incumbent management.
No modification of the Indenture regarding the provisions on repurchase at
the option of any holder of a Note is permissible without the consent of the
holder of the Note so affected.
21
<PAGE>
Rule 13e-4 under the Exchange Act requires, among other things, the
dissemination of certain information to security holders in the event of an
issuer tender offer and may apply in the event that the repurchase option
becomes available to holders of Notes. The Company will comply with this rule to
the extent applicable at that time.
SUBORDINATION
The indebtedness evidenced by the Notes is, to the extent provided in the
Indenture, subordinate to the prior payment in full of all Senior Indebtedness
(as defined herein). During the continuance beyond any applicable grace period
of any default in the payment of principal, premium, interest or any other
payment due on any Senior Indebtedness, no payment of principal of, or premium,
if any, or interest on the Notes (including, but not limited to, the redemption
price or repurchase price with respect to the Offered Notes) may be made by the
Company. In addition, upon any distribution of assets of the Company upon any
dissolution, winding up, liquidation or reorganization of the Company, the
payment of the principal of, or premium, if any, and interest on the Notes is to
be subordinated to the extent provided in the Indenture in right of payment to
the prior payment in full of all Senior Indebtedness. Moreover, in the event of
any acceleration of the Notes because of an Event of Default, the holders of any
Senior Indebtedness then outstanding would be entitled to payment in full of all
obligations in respect of such Senior Indebtedness before the holders of the
Notes are entitled to receive any payment or distribution in respect thereof.
The Company also may not make any payment upon or in respect of the Notes if
any default, other than a payment default, occurs and is continuing with respect
to Designated Senior Indebtedness (as defined herein) that permits holders of
the Designated Senior Indebtedness as to which such default relates to
accelerate its maturity, and the Trustee and the Company receive a notice of
such default (a "Payment Blockage Notice") under its existing line of credit or
from a holder of at least $5 million in outstanding principal amount of
Designated Senior Indebtedness. Payments of the Notes may and shall be resumed
(a) in case of payment default, on the date on which such default is cured or
waived, and (b) in case of nonpayment default, on the earlier of the date on
which such nonpayment default is cured or waived or 179 days after the date on
which the applicable Payment Blockage Notice is received. No new period of
payment blockage may be commenced pursuant to a Payment Blockage Notice unless
(i) 365 days have elapsed since the effectiveness of the immediately prior
Payment Blockage Notice and (ii) all scheduled payments of principal, premium,
if any, and interest on the Notes that have become due have been paid in cash or
the Trustee or the Holders shall not have instituted proceedings to enforce the
holders' right to receive such payments. No nonpayment default that existed or
was continuing on the date of delivery of any Payment Blockage Notice shall be,
or shall be made, the basis for a subsequent Payment Blockage Notice.
By reason of the subordination, in the event of the Company's bankruptcy,
dissolution, liquidation or reorganization, holders of Senior Indebtedness may
receive more, ratably, and holders of the Notes may receive less, ratably, than
the other creditors of the Company. Such subordination will not prevent the
occurrence of an Event of Default under the Indenture.
Subject to the qualifications described below, the term "Senior
Indebtedness" means the principal of, premium, if any, interest on, and any
other payment due pursuant to, any of the following, whether outstanding on the
date of the Indenture or thereafter incurred or created:
(a) All secured indebtedness of the Company for money borrowed
(including any indebtedness secured by a security interest, mortgage,
conditional sales contract or other lien on the assets of the Company which
is (i) given to secure all or part of the purchase price of property subject
thereto, whether given to the vendor of such property or to another, or (ii)
existing on property at the time of acquisition thereof);
(b) All secured indebtedness of the Company evidenced by notes,
debentures, bonds or other securities (including, but not limited to, those
which are convertible or exchangeable for securities of the Company);
22
<PAGE>
(c) All secured indebtedness of the Company due and owing with respect
to letters of credit and bank guarantees (including, but not limited to,
reimbursement obligations with respect thereto);
(d) All secured indebtedness or other secured obligations of the Company
due and owing with respect to interest rate and currency swap agreements,
cap, floor and collar agreements, currency spot and forward contracts and
other similar agreements and arrangements;
(e) All secured indebtedness consisting of commitment or standby fees
due and payable to lending institutions with respect to credit facilities or
letters of credit available to the Company;
(f) All secured indebtedness of others of the kinds described in any of
the preceding clauses (a), (b), (c), (d) or (e) assumed by or guaranteed in
any manner by the Company or in effect guaranteed by the Company through an
agreement to purchase, contingent or otherwise; and
(g) All secured renewals, extensions, refunding, deferrals, amendments
or modifications of secured indebtedness of the kinds described in any of
the preceding clauses (a), (b), (c), (d), (e) or (f);
unless in the case of any particular indebtedness, obligation, renewal,
extension, refunding, amendment or modification the instrument or other document
creating or evidencing the same or the assumption or guarantee of the same
expressly provides that such indebtedness, obligation, renewal, extension,
refunding, amendment or modification is subordinate to, is PARI PASSU with, or
is not superior to, the Notes. Notwithstanding the foregoing, Senior
Indebtedness shall not include (i) any indebtedness of any kind of the Company
to any subsidiary of the Company, a majority of the voting stock of which is
owned, directly or indirectly, by the Company and (ii) indebtedness for trade
payables or constituting the deferred purchase price of assets or services
incurred in the ordinary course of business.
The term "Designated Senior Indebtedness" means the Credit Facility or any
other Senior Indebtedness if the instrument creating or evidencing the same or
the assumption or guarantee thereof (or related agreements or documents to which
the Company is a party) expressly provides that such indebtedness shall be
"Designated Senior Indebtedness" for purposes of the Indenture (provided that
such instrument, agreement or other document may place limitations and
conditions on the rights of holders of such Senior Indebtedness to exercise the
rights of Designated Senior Indebtedness).
In the event that, notwithstanding the foregoing, the Trustee or any holder
of Notes receives any payment or distribution of assets of the Company of any
kind in contravention of any of the terms of the Indenture, whether in cash,
property or securities, including, without limitation, by way of set-off or
otherwise, in respect of the Notes before all Senior Indebtedness is paid in
full, then such payment or distribution will be held by the recipient in trust
for the benefit of the holders of Senior Indebtedness of the Company, and will
be immediately paid over or delivered to the holders of Senior Indebtedness of
the Company or their representative or representatives to the extent necessary
to make payment in full of all Senior Indebtedness of the Company remaining
unpaid, after giving effect to any concurrent payment or distribution, or
provision therefor, to or for the holders of Senior Indebtedness of the Company.
23
<PAGE>
The Notes are obligations exclusively of the Company. As all of the
Company's operations are conducted through subsidiaries, the cash flow and the
consequent ability to service debt, including the Notes, of the Company, is
dependent upon the earnings of its subsidiaries and the distribution of those
earnings to, or upon loans, royalties, license fees, or other payments of funds
by those subsidiaries to, the Company. The subsidiaries are separate and
distinct legal entities and have no obligation, contingent or otherwise, to pay
any amounts due pursuant to the Notes or to make any funds available therefor,
whether by dividends, loans or other payments. In addition, the payment of
dividends and the making of loans and advances to the Company by its
subsidiaries may be subject to statutory or contractual restrictions and are
dependent upon the earnings of those subsidiaries.
Any right of the Company to receive assets of any of its subsidiaries upon
their liquidation or reorganization (and the consequent right of the holders of
the Notes to participate in these assets) will be effectively subordinated to
the claims of that subsidiary's creditors (including trade creditors), except to
the extent that the Company is itself recognized as a creditor of such
subsidiary, in which case the claims of the Company would still be subordinate
to any security interests in the assets of such subsidiary and any indebtedness
of such subsidiary senior to that held by the Company.
As of August 24, 1996, the Company had approximately $75.0 million of Senior
Indebtedness and $201.6 million of indebtedness of its subsidiaries that is not
Senior Indebtedness. The Company expects to refinance approximately $180.0
million of indebtedness (including $35.0 million of the $75.0 million of Senior
Indebtedness) using its $500 million Credit Facility. If the Company had
refinanced such indebtedness as of August 24, 1996 the Company would have had
$220.0 million of pro forma aggregate Senior Indebtedness. The Indenture does
not limit the amount of future indebtedness, including Senior Indebtedness,
which the Company or any of its subsidiaries can create, incur, assume or
guarantee. The Company expects to incur additional debt under the Credit
Facility in connection with acquisitions and for working capital.
The Company is obligated to pay reasonable compensation to the Trustee and
to indemnify the Trustee against any losses, liabilities or expenses incurred by
it in connection with its duties relating to the Notes. The Trustee's claims for
such payments will be senior to those of holders of the Notes in respect of all
funds collected or held by the Trustee.
EVENTS OF DEFAULT AND REMEDIES
An Event of Default is defined in the Indenture as being default in payment
of the principal of, or premium, if any, on the Notes whether or not such
payment is prohibited by the subordination provisions of the Indenture; default
for 30 days in payment of any installment of interest on the Notes whether or
not such payment is prohibited by the subordination provisions of the Indenture;
default in the payment of the repurchase price in respect of any Note on the
repurchase date therefor whether or not such payment is prohibited by the
subordination provisions of the Indenture; failure by the Company to comply with
any of its other agreements in the Notes or the Indenture upon the receipt by
the Company of notice of such default by the Trustee or by holders of not less
than 25% in aggregate principal amount of the Notes then outstanding and the
Company's failure to cure such default within 45 days after receipt by the
Company of such notice (which period may be extended for an additional 45 days
if the Company is contesting in good faith the existence of such default);
default by the Company under and acceleration of the maturity of, or failure to
pay at maturity, certain other indebtedness of the Company for money borrowed
aggregating in excess of $5 million and continuance of such default for 30 days
after notice; or certain events involving bankruptcy, insolvency or
reorganization of the Company or any Significant Subsidiary (as defined herein).
The Indenture provides that the Trustee shall, within 90 days after the
occurrence of a default, give to the registered holders of the Notes notice of
all defaults known to it unless such defaults have been cured or waived before
the giving of such notice, 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 such registered holders, except in the case of a
default in the payment of the principal of, or premium, if any, or interest on,
any of the Notes.
24
<PAGE>
The Indenture provides that if any Event of Default shall have occurred and
be continuing, the Trustee or the holders of not less than 25% in principal
amount of the Notes then outstanding may declare the principal of and premium,
if any, and accrued interest on the Notes to be due and payable immediately, but
if the Company shall cure all defaults (except the nonpayment of interest on,
premium, if any, and principal of any Notes which shall have become due by
acceleration) and certain other conditions are met, such declaration may be
canceled and past defaults may be waived by the holders of a majority in
principal amount of Notes then outstanding. If an Event of Default resulting
from certain events of bankruptcy, insolvency or reorganization were to occur,
all unpaid principal of, premium, if any, and accrued interest on the
outstanding Notes will become due and payable immediately without any
declaration or other act on the part of the Trustee or any holders of Notes,
subject to certain limitations.
The Indenture provides that the holders of a majority in principal amount of
the outstanding Notes may 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, subject to certain limitations specified in the
Indenture. Before proceeding to exercise any right or power under the Indenture
at the direction of such holders, the Trustee shall be entitled to receive from
such holders reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in complying with any such direction.
The right of a holder to institute a proceeding with respect to the Indenture is
subject to certain conditions precedent, including the written notice by such
holder of an Event of Default and an offer to indemnify the Trustee, along with
the written request by the holders of not less than 25% in principal amount of
the outstanding Notes that such a proceeding be instituted, but the holder has
an absolute right to institute suit (i) for the enforcement of payment of the
principal of, and premium, if any, and interest on, such holder's Notes when due
and (ii) to enforce such holder's right to convert such Notes.
The holders of not less than a majority in principal amount of the
outstanding Notes may on behalf of the holders of all Notes waive any past
defaults, except (i) a default in payment of the principal of, or premium, if
any, or interest on, any Note when due, (ii) a failure by the Company to convert
any Notes into Common Stock or (iii) in respect of certain provisions of the
Indenture which cannot be modified or amended without the consent of the holders
of all Notes then outstanding.
The Company is required to annually furnish to the Trustee a statement of
certain officers of the Company stating whether or not, to the best of their
knowledge, the Company is in default in the performance and observation of
certain terms of the Indenture and, if they have knowledge that the Company is
in default, describing such default and its status.
PAYMENTS, PAYING AGENTS AND CONVERSION AGENTS
The principal of and premium on the Offered Notes will be made against
surrender of the Offered Notes at the corporate trust office of the Trustee in
The City of New York or, subject to any applicable laws and regulations, by
United States dollar check drawn on, or wire transfer to a United States dollar
account maintained by the holder with, a bank located in The City of New York.
Payments of any installment of interest on the Offered Notes will be made by a
United States dollar check drawn on a bank in The City of New York mailed to the
holder at such holder's registered address or (if arrangements satisfactory to
the Company and the Trustee are made) by wire transfer to a dollar account
maintained by the holder with a bank in The City of New York. Payment of such
interest on any Interest Payment Date will be made to the person in whose name
such Note is registered at the close of business on the Interest Record Date
prior to the relevant Interest Payment Date. Accrued interest payable on any
Offered Note that is redeemed will be payable against surrender of such Offered
Note in the manner described above with respect to payments of principal on
Offered Notes, except Offered Notes that are redeemed on a date after the close
of business on the Interest Record Date immediately preceding such Interest
Payment Date and on or before the Interest Payment Date, on which interest will
be paid to the holder of record on the Interest Record Date.
25
<PAGE>
The Offered Notes may be surrendered for conversion or exchange at the
corporate trust office of the Trustee in The City of New York, or, at the option
of the holder and subject to applicable laws and regulations, at the office of
any of the conversion agents.
The Company has initially appointed the Trustee as paying agent and
conversion agent. These appointments may be terminated at any time and
additional or other paying and conversion agents may be appointed, PROVIDED that
until the Offered Notes have been delivered for cancellation, or monies
sufficient to pay the principal of and premium, if any, and interest on the
Notes have been made available for payment and either paid or returned to the
Company as provided in the Indenture, a paying, conversion and transfer agent
will be maintained in The City of New York for the payment of the principal of
and premium, if any, and interest on the Offered Notes only and for the
surrender of Notes for conversion.
All monies paid by the Company to a paying agent for the payment of
principal of, premium, if any, or interest on any Note that remain unclaimed at
the end of two years after such principal, premium or interest shall have become
due and payable will be repaid to the Company, and the holder of such Note or
any related coupon will thereafter look only to the Company for payment thereof.
PAYMENT OF ADDITIONAL AMOUNTS
The Company will pay to the holder of any Note or any related coupon who is
a United States Alien Holder (as defined herein) such additional amounts
("Additional Amounts") as may be necessary in order that every net payment of
the principal of, premium, if any, and interest on such Note, and any cash
payments made in lieu of issuing shares of Common Stock upon conversion of a
Note, after withholding for or on account of any present or future tax,
assessment or governmental charge imposed upon or as a result of such payment by
the United States or any political subdivision or taxing authority thereof or
therein, will not be less than the amount provided for in such Note or in such
coupon to be then due and payable; PROVIDED, HOWEVER, that the foregoing
obligations to pay Additional Amounts shall not apply to any one or more of the
following:
(a) any tax, assessment or other governmental charge which would not
have been so imposed but for (i) the existence of any present or former
connection between such holder (or between a fiduciary, settlor,
beneficiary, member or stockholder of, or a person holding a power over,
such holder, if such holder is an estate, trust, partnership or corporation)
and the United States, including, without limitation, such holder (or such
fiduciary, settlor, beneficiary, member, stockholder or person holding a
power) being or having been a citizen or resident or treated as a resident
thereof or being or having been engaged in a trade business therein or being
or having been present therein or having or having had a permanent
establishment therein, (ii) such holder's present or former status as a
person holding company, foreign personal holding company, passive foreign
investment company, foreign private foundation or other foreign tax-exempt
entity, or controlled foreign corporation for United States federal income
tax purposes or a corporation which accumulates earnings to avoid United
States federal income tax, or (iii) such holder's status as a bank extending
credit pursuant to a loan agreement entered into in the ordinary course of
business;
(b) any tax, assessment or other governmental charge which would not
have been so imposed but for the presentation by the holder of such Note or
any related coupon for payment on a date more than 10 days after the date on
which such payment became due and payable or on the date on which payment
thereof is duly provided, whichever occurs later;
(c) any estate, inheritance, gift, sales, transfer or personal or
intangible property tax or any similar tax, assessment or other governmental
charge;
(d) any tax, assessment or other governmental charge which would not
have been imposed but for the failure to comply with certification,
information, documentation or other reporting requirements concerning the
nationality, residence, identity or present or former connection with the
United States of the holder or beneficial owner of such Note if such
compliance is required by
26
<PAGE>
statute, regulation or ruling of the United States or any political
subdivision or taxing authority thereof or therein as a precondition to
relief or exemption from such tax, assessment or other governmental charge;
(e) any tax, assessment or other governmental charge which is payable
otherwise than by deduction or withholding from payments of principal of and
premium, if any, or interest on such Note;
(f) any tax, assessment or other governmental charge imposed on interest
received by a person holding, actually or constructively, 10% or more of the
total combined voting power of all classes of stock of the Company entitled
to vote; or
(g) any tax, assessment or other governmental charge required to be
withheld by any paying agent from any payment of principal of, or premium,
if any, or interest on any Note or interest on any coupon appertaining
thereto if such payment can be made without such withholding by any other
paying agent; nor will Additional Amounts be paid with respect to payment of
the principal of, premium, if any, or interest on any such Note (or cash in
lieu of issuance of shares of Common Stock upon conversion) to a person
other than the sole beneficial owner of such payment, or that is a
partnership or a fiduciary to the extent such beneficial owner, member of
such partnership or beneficiary or settlor with respect to such fiduciary
would not have been entitled to the Additional Amounts had such beneficial
owner, member, beneficiary or settlor been the holder of such Note or any
related coupon.
A "United States Alien Holder" means any holder of a Note that is not a U.S.
Holder. For the purposes of this discussion, a "U.S. Holder" means any holder of
a Note that is (a) a citizen or resident of the United States, (b) a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any state thereof or (c) an estate or trust the
income of which is subject to United States federal income taxation regardless
of its source.
CONSOLIDATION, MERGER OR ASSUMPTION
The Company may, without the consent of the holders of Notes, consolidate
with, merge into, or transfer all or substantially all of its properties to any
other corporation organized under the laws of the United States or any political
subdivision thereof or therein, PROVIDED that the successor corporation assumes
all obligations of the Company under the Indenture and the Notes and that
certain other conditions are met.
MODIFICATIONS OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than a majority in principal amount
of the Notes at the time outstanding, to modify the Indenture or any
supplemental indenture or the rights of the holders of the Notes, except that no
such modification shall (i) extend the fixed maturity of any Note, reduce the
rate or extend the time of payment of interest thereon, reduce the principal
amount thereof or premium, if any, thereon, reduce any amount payable upon
redemption or repurchase thereof, change or impair the obligation of the Company
to repurchase any Note upon the happening of a Designated Event, impair or
affect the right of a holder to institute suit for the payment thereof, change
the currency in which the Notes are payable, or change or impair the right to
convert the Notes into Common Stock subject to the terms set forth in the
Indenture or modify the provisions of the Indenture with respect to the
subordination of the Notes in a manner adverse to the holders of the Notes,
without the consent of the holder of each Note so affected, or (ii) reduce the
aforesaid percentage of Notes, without the consent of the holders of all of the
Notes then outstanding.
REGISTRATION RIGHTS
This Prospectus is a part of a shelf registration statement filed by the
Company with the Commission (the "Shelf Registration Statement") with respect to
the resale of the Offered Notes and the shares of the Common Stock issued or
issuable upon conversion of the Offered Notes. The Company has agreed to keep
such Shelf Registration Statement effective until three years from the
27
<PAGE>
latest date of original issuance of the Offered Notes or until the Shelf
Registration Statement is no longer required for transfer of the Offered Notes
or the shares of the Common Stock. The Company will be required to pay
liquidated damages to the holders of the Offered Notes or the Common Stock
issuable upon conversion of the Offered Notes, as the case may be, under certain
circumstances if the Company is not in compliance with its registration
obligations.
TAXATION OF NOTES
See "Certain Federal Tax Considerations" for a discussion of certain federal
tax aspects which will apply to holders of Offered Notes.
NOTICES
Notices to holders of the Notes will be given by publication in a leading
daily newspaper in the English language of general circulation in The City of
New York and in London and, so long as the Notes are listed on the Luxembourg
Stock Exchange, in a daily newspaper of general circulation in Luxembourg or, if
publication in either London or Luxembourg is not practical, in Europe. In
addition, notices to holders of Notes will be given by mail to the addresses of
such holders as they appear in the register maintained by the Trustee on the
fifteenth day prior to such mailing. Such notices will be deemed to have been
given on the date of such publication or mailing or, if published in such
newspaper on different dates, on the date of the first such publication.
SATISFACTION AND DISCHARGE
The Company may discharge its obligations under the Indenture while Notes
remain outstanding if (i) all outstanding Notes will become due and payable at
their scheduled maturity within one year or (ii) all outstanding Notes are
scheduled for redemption within one year, and, in either case, the Company has
deposited with the Trustee an amount sufficient to pay and discharge all
outstanding Notes on the date of their scheduled maturity or the scheduled date
of redemption.
GOVERNING LAW
The Indenture and Notes will be governed by and construed in accordance with
the laws of the State of New York.
CONCERNING THE TRUSTEE
The Chase Manhattan Bank, N.A., the Trustee under the Indenture, has been
appointed by the Company as the initial paying agent, conversion agent and
registrar with regard to the Notes. The Company and its subsidiaries may
maintain deposit accounts and conduct other banking transactions with the
Trustee or its affiliates in the ordinary course of business, and the Trustee
and its affiliates may from time to time in the future provide banking and other
services to the Company in the ordinary course of their business.
During the existence of an Event of Default, the Trustee will be required to
exercise such rights and powers vested in it under the Indenture and use the
same degree and care and skill in its exercise as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
Subject to such provisions, the Trustee is under no obligation to exercise any
of its rights or powers under the Indenture at the request of any of the holders
of Notes, unless they shall have offered to the Trustee security and indemnity
satisfactory to it.
The Indenture and the TIA contain certain limitations on the rights of the
Trustee, should it become a creditor of the Company, to obtain payment of claims
in certain cases or to realize on certain property received in respect of any
such claim as security or otherwise. Subject to the TIA, the Trustee will be
permitted to engage in other transactions, PROVIDED, HOWEVER, that if it
acquires any conflicting interest (as described in the TIA), it must eliminate
such conflict or resign.
28
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
As of September 17, 1996, the Company's authorized capital stock consists of
500,000,000 shares of Common Stock, par value $.001 per share, and 500,000
shares of preferred stock, par value $.001 per share (the "Preferred Stock"). As
of September 17, 1996, the Company had outstanding approximately 41,726,449
shares of Common Stock and no shares of Preferred Stock. As of September 17,
1996, there were approximately 423 record holders of Common Stock.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share on all
matters voted upon by stockholders, including the election of directors.
Subject to the rights of any then outstanding shares of Preferred Stock, the
holders of the Common Stock are entitled to such dividends as may be declared in
the discretion of the Board of Directors out of funds legally available
therefor. See "Dividend Policy." The holders of Common Stock are entitled to
share ratably in the net assets of the Company upon liquidation after payment or
provision for all liabilities and any preferential liquidation rights of any
Preferred Stock then outstanding. The holders of Common Stock have no preemptive
rights to purchase shares of stock of the Company. Shares of Common Stock are
not subject to any redemption provisions and are not convertible into any other
securities of the Company. All outstanding shares of Common Stock are, and the
shares of Common Stock to be issued by the Company upon conversion of the
Offered Notes will be, upon payment therefor, fully paid and non-assessable.
PREFERRED STOCK
The Preferred Stock may be issued from time to time by the Board of
Directors as shares of one or more classes or series. Subject to the provisions
of the Company's Restated Certificate of Incorporation and limitations
prescribed by law, the Board of Directors is expressly authorized to adopt
resolutions to issue the shares, to fix the number of shares and to change the
number of shares constituting any series, and to provide for or change the
voting powers, designations, preferences and relative, participating, optional
or other special rights, qualifications, limitations or restrictions thereof,
including dividend rights (including whether dividends are cumulative), dividend
rates, terms of redemption (including sinking fund provisions), redemption
prices, conversion rights and liquidation preferences of the shares constituting
any class or series of the Preferred Stock, in each case without any further
action or vote by the stockholders. The Company has no current plans to issue
any shares of Preferred Stock of any class or series.
One of the effects of undesignated Preferred Stock may be to enable the
Board of Directors to render more difficult or to discourage an attempt to
obtain control of the Company by means of a tender offer, proxy contest, merger
or otherwise, and thereby to protect the continuity of the Company's management.
The issuance of shares of the Preferred Stock pursuant to the Board of
Directors' authority described above may adversely affect the rights of the
holders of Common Stock. For example, Preferred Stock issued by the Company may
rank prior to the Common Stock as to dividend rights, liquidation preference or
both, may have full or limited voting rights and may be convertible into shares
of Common Stock. Accordingly, the issuance of shares of Preferred Stock may
discourage bids for the Common Stock or may otherwise adversely affect the
market price of the Common Stock.
STATUTORY BUSINESS COMBINATION PROVISION
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law ("Section 203"). Section 203 provides, with certain
exceptions, that a Delaware corporation may not engage in any of a broad range
of business combinations with a person or an affiliate, or associate of such
person, who is an "interested stockholder" for a period of three years from the
date that such person became an interested stockholder unless: (i) the
transaction resulting in a person becoming an interested stockholder, or the
business combination, is approved by the board of directors of the corporation
before the person becomes an interested stockholder; (ii) the interested
stockholder
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<PAGE>
acquired 85% or more of the outstanding voting stock of the corporation in the
same transaction that makes such person an interested stockholder (excluding
shares owned by persons who are both officers and directors of the corporation,
and shares held by certain employee stock ownership plans); or (iii) on or after
the date the person becomes an interested stockholder, the business combination
is approved by the corporation's board of directors and by the holders of at
least 66 2/3% of the corporation's outstanding voting stock at an annual or
special meeting, excluding shares owned by the interested stockholder. Under
Section 203, an "interested stockholder" is defined as any person who is: (i)
the owner of 15% or more of the outstanding voting stock of the corporation; or
(ii) an affiliate or associate of the corporation if such affiliate or associate
was the owner of 15% or more of the outstanding voting stock of the corporation
at any time within the three-year period immediately prior to the date on which
it is sought to be determined whether such person is an interested stockholder.
A corporation may, at its option, exclude itself from the coverage of
Section 203 by amending its certificate of incorporation or bylaws, by action of
its stockholders, to exempt itself from coverage, provided that such bylaws or
certificate of incorporation amendment shall not become effective until 12
months after the date it is adopted. The Company has not adopted such an
amendment to its Amended and Restated Certificate of Incorporation or Amended
and Restated Bylaws.
LIMITATION ON DIRECTORS' LIABILITIES
Pursuant to the Company's Restated Certificate of Incorporation and under
Delaware law, directors of the Company are not liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty, except for
liability in connection with a breach of duty of loyalty, for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, for dividend payments or stock repurchases illegal under Delaware law or
any transaction in which a director has derived an improper personal benefit.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company.
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<PAGE>
CERTAIN FEDERAL TAX CONSIDERATIONS
The following is a general discussion, based upon present law, of certain
United States federal income and estate tax consequences of the purchase,
ownership and disposition of the Offered Notes to the initial purchasers thereof
and the ownership and disposition of shares of Common Stock received upon the
conversion of the Offered Notes.
This discussion does not deal with all aspects of United States federal
income taxation that may be relevant to holders of the Offered Notes or shares
of Common Stock and does not deal with tax consequences arising under the laws
of any foreign, state or local jurisdiction. Further, this discussion is based
upon the provisions of the Internal Revenue Code (the "Code") and regulations,
rulings and judicial decisions thereunder as of the date hereof, and such
authorities may be repealed, revoked or modified so as to result in tax
consequences different from those discussed herein. This discussion assumes that
each holder holds the Offered Notes and the shares of Common Stock received upon
conversion thereof as capital assets. Moreover, this discussion is for general
information only, and does not address all of the tax consequences that may be
relevant to particular purchasers in light of their personal circumstances, or
to certain types of purchasers (such as certain financial institutions,
insurance companies, tax-exempt entities, dealers in securities, persons who
hold the Offered Notes or Common Stock in connection with a straddle, foreign
corporations and individuals who are not citizens or residents of the United
States).
PROSPECTIVE PURCHASERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES TO THEM OF THE ACQUISITION, HOLDING AND DISPOSITION
OF THE OFFERED NOTES OR THE SHARES OF COMMON STOCK, INCLUDING THE APPLICABILITY
OF ANY FEDERAL ESTATE OR GIFT TAX LAWS, ANY STATE, LOCAL OR FOREIGN TAX LAWS, OR
CHANGES IN APPLICABLE TAX LAWS.
INTEREST ON OFFERED NOTES
Interest paid on an Offered Note will be taxable to a holder as ordinary
interest income in accordance with the holder's method of tax accounting at the
time that such interest is accrued or (actually or constructively) received.
PREMIUM AND MARKET DISCOUNT
A holder of an Offered Note purchased at a premium (I.E., a cost greater
than its principal amount, reduced by any amount attributable to the conversion
privilege), may amortize such premium. Special rules may require the amount of
premium and the amortization thereof to be determined with reference to the
optional redemption price and date.
If a holder of an Offered Note purchases the Offered Note at an amount that
is less than its principal amount, the Offered Note generally will be considered
to bear "market discount" in the hands of such holder. In such case, gain
realized by the holder on the sale, exchange or retirement, and unrealized
appreciation on certain nontaxable dispositions, of the Offered Note generally
will be treated as ordinary interest income to the extent of the market discount
that accrued on the Offered Note while held by such holder and to the extent it
has not previously been included in income (pursuant to an election by the
holder to include such market discount in income as it accrues). In general
terms, market discount on an Offered Note will be treated as accruing on a
straight-line basis over the term of such Offered Note, or, at the election of
the holder, under a constant yield method. However, market discount is deemed
not to exist if the market discount is less than a statutorily defined DE
MINIMIS amount.
CONVERSION OF OFFERED NOTES
A holder of an Offered Note will not recognize gain or loss on the
conversion of the Offered Note into shares of Common Stock, except with respect
to cash received in lieu of a fractional share of Common Stock. Gain or loss
recognized on the receipt of cash paid in lieu of a fractional share will equal
the difference between the amount of cash received and the amount of tax basis
allocable to such fractional share. The holding period of the shares of Common
Stock received by the holder upon
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<PAGE>
conversion of the Offered Note will include the period during which it held the
Offered Note prior to the conversion. The Holder's aggregate tax basis in the
shares of Common Stock received upon conversion of the Offered Note will be
equal to the Holder's aggregate basis in the Offered Note exchanged therefor
(less any portion thereof allocable to cash received in lieu of a fractional
share).
CONSTRUCTIVE DIVIDEND
If at any time the Company makes a distribution of property to stockholders
that would be taxable to such stockholders as a dividend for federal income tax
purposes and, in accordance with the anti-dilution provisions of the Offered
Notes, the conversion price of the Offered Notes is decreased, such decrease may
be deemed to be the payment of a taxable dividend to holders of the Offered
Notes. For example, a decrease in the conversion price in the event of
distributions of evidences of indebtedness or assets of the Company will
generally result in deemed dividend treatment to holders of the Offered Notes,
but generally a decrease in the event of stock dividends or the distribution of
rights to subscribe for Common Stock will not.
BACKUP WITHHOLDING TAX
In general, information reporting requirements will apply to certain
payments of principal, interest and premium paid on Offered Notes and to the
proceeds of sale of an Offered Note made to holders other than certain exempt
recipients (such as corporations or foreign persons). A 31% backup withholding
tax will apply to such payments if the holder fails to provide a taxpayer
identification number or certification of foreign or other exempt status or
fails to report in full dividend and interest income. Any amounts withheld under
the backup withholding rules will be allowed as a refund or a credit against
such holder's United States federal income tax liability provided the required
information is furnished to the Internal Revenue Service.
NON-U.S. HOLDERS
Interest paid to a non-U.S. alien individual, foreign corporation or other
non-United States person should constitute "portfolio interest" within the
meaning of 871(h)(3) of the Code; accordingly, if such interest is not
effectively connected with the conduct of a trade or business in the United
States, and, subject to certain exceptions, such holder certifies as to his or
its status as a non-United States person, no United States federal income tax
will be withheld from payments to such holders.
The foregoing is only a brief summary of the United States federal tax
considerations concerning the Offered Notes and the Common Stock underlying the
Offered Notes, and does not address state, local or foreign tax considerations
or all the tax considerations that may apply to a particular holder.
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<PAGE>
SELLING SECURITYHOLDERS
The Offered Notes were originally issued by the Company in transactions
exempt from the registration requirements of the Securities Act to persons
believed by the Managers to be "qualified institutional buyers" (as defined in
Rule 144A under the Securities Act) or to institutional accredited investors.
The Selling Securityholders (which term includes their transferees, pledgees,
donees and their successors) may from time to time offer and sell pursuant to
this Prospectus any or all of the Offered Notes and the shares of Common Stock
initially issued or issuable upon conversion of the Offered Notes (the
"Conversion Shares").
The following table sets forth information, with respect to the Selling
Securityholders and the respective principal amount of Notes beneficially owned
by each Selling Securityholder, the principal amount of Offered Notes and the
number of Conversion Shares that may be offered by the Selling Securityholders
pursuant to this Prospectus. None of the Selling Securityholders has, or within
the past three years, has had, any position, office or other material
relationship with the Company or any of its predecessors or affiliates except as
set forth below. Because the Selling Securityholders may offer all or some
portion of the Offered Notes or the Conversion Shares pursuant to this
Prospectus, no estimate can be given as to the amount of Offered Notes or the
Conversion Shares that will be held by the Selling Securityholders upon
termination of any such sales. The table has been prepared based upon
information furnished to the Company by the Selling Securityholders.
<TABLE>
<CAPTION>
PRINCIPAL PERCENT OF NUMBER OF
AMOUNT OF PRINCIPAL OUTSTANDING SHARES OF
NOTES AMOUNT OF NOTES AFTER COMMON STOCK
BENEFICIALLY NOTES OFFERED CONSUMMATION OFFERED
NAME(1) OWNED HEREBY OF OFFERING HEREBY(2)
- ---------------------------------------------------- ------------- ------------- ----------------- --------------
<S> <C> <C> <C> <C>
Allstate Insurance Company.......................... $ 1,000,000 $ 1,000,000 -- 21,097
Cincinnati Bell Telephone Convertible Value Fund.... 635,000 635,000 -- 13,396
CFW-C, L.P.......................................... 14,680,000 8,500,000 4.3% 179,324
Dean Witter Convertible Securities Trust............ 3,500,000 3,500,000 -- 73,839
Dean Witter Income Builder Fund..................... 3,000,000 3,000,000 -- 63,290
Delta Airlines Master Trust......................... 2,995,000 2,995,000 -- 63,185
General Motors Salaried Employees Convertible Fund.. 5,665,000 5,665,000 -- 119,514
Kapiolani Medical Services/First Hawaiian Bank...... 100,000 100,000 -- 2,109
Massachusetts Mutual Life Insurance Company......... 575,000 575,000 -- 12,130
Medical Malpractice Insurance Assocation............ 130,000 130,000 -- 2,742
NB Convertible Arbitrage Partners, L.P.............. 500,000 500,000 -- 10,548
Northwestern Mutual Life Insurance Company (4)...... 9,150,000 9,150,000 -- 193,037
OCM Convertible Trust............................... 5,045,000 5,045,000 -- 106,434
OCM Convertible Limited Partnership................. 250,000 250,000 -- 5,274
Oppenheimer Growth & Income Fund.................... 275,000 275,000 -- 5,801
Oregon Equity Fund/FIB Oregon Wells Fargo........... 1,500,000 1,500,000 -- 31,645
Queen's Health Systems/Bank of New York............. 50,000 50,000 -- 1,054
Robertson Stephens & Co, LLP (3).................... 4,459,000 2,986,000 1.0% 62,995
State of Connecticut Combined Investment Funds...... 3,100,000 3,100,000 -- 65,400
State of Michigan Employees Retirement Fund......... 1,445,000 1,445,000 -- 30,485
TCW Convertible Securities Fund..................... 3,280,000 3,280,000 -- 69,198
TCW Convertible Value Fund.......................... 2,755,000 490,000 1.6% 10,337
TCW/DW Income & Growth Fund......................... 425,000 425,000 -- 8,996
WAFRA Discretionary/Bank of Bermuda................. 150,000 150,000 -- 3,164
Other Beneficial Holders............................ 158,536,000 31,504,000 -- 664,641
------------- ------------- ----- --------------
Total........................................... $ 230,000,000 $86,250,000 100.0% 1,816,620
</TABLE>
- ------------------------------
(1) The information set forth herein is as of September 27, 1996 and will be
updated as required.
(2) Assumes conversion of the full amount of Offered Notes held by such holder
at the initial rate of $47.40 in principal amount of Offered Notes per
share of Common Stock. Under the terms of the Indenture, fractional shares
will not be issued upon conversion of the Offered Notes; cash will be paid
in lieu of any fractional shares.
(3) Robertson, Stephens & Company LLC served as one of the Managers who placed
the Notes in May and June 1996. In addition, Robertson, Stephens & Company
LLC served as an underwriter in the following public offerings by the
Company: (i) the sales by the Company in the Company's initial public
offering in February and March 1995 of 3,737,500 shares of Common Stock;
(ii) the sales by the Company in August 1995 of 4,025,000 shares of Common
Stock and (iii) the sales by the Company in February and March 1996 of
5,543,045 shares of Common Stock and 5 1/2% Convertible Subordinated Noted
due 2001 in the principal amount of $143,750,000 and the sales by certain
selling stockholders of 1,356,955 shares of Common Stock.
(4) Includes $250,000 in principal amount of Notes held in the Northwestern
Mutual Life Insurance Company Group Annuity Separate Account.
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<PAGE>
Information concerning the Selling Securityholders may change from time to
time and will be set forth in Prospectus Supplements. In addition, the per share
Conversion Price and, therefore, the number of shares of Common Stock are
subject to adjustment under certain circumstances. Accordingly, the number of
shares of Common Stock offered hereby may increase or decrease. As of the date
of this Prospectus, the aggregate principal amount of Offered Notes is $86.25
million and the number of shares of Common Stock into which the Offered Notes
may be converted is 1,819,620 shares.
It is not possible to predict the principal amount of Offered Notes or the
number of shares of Common Stock that will be sold hereby. Consequently, it is
not possible to predict the amount of Offered Notes or the number of shares of
Common Stock that will be owned by the Selling Securityholders following
completion of the Securities offered hereby.
PLAN OF DISTRIBUTION
U.S. Office Products will not receive any of the proceeds of the sale of the
Securities offered hereby. The Securities may be sold from time to time to
purchasers directly by the Selling Securityholders. Alternatively, the Selling
Securityholders may from time to time offer the Securities through underwriters,
dealers or agents who may receive compensation in the form of underwriting
discounts, concession or commissions from the Selling Securityholders and/or the
purchasers of the Securities for whom they may act as agent. The Selling
Securityholders and any such underwriters who participate in the distribution of
the Securities may be deemed to be underwriters, and any profits on the sale of
the Securities by them and any discounts, commissions or concessions received by
any such underwriters, dealers or agents might be deemed to be underwriting
discounts and commissions under the Securities Act. To the extent the Selling
Securityholders may be deemed to be underwriters, the Selling Securityholders
may be subject to certain statutory liabilities of the Securities Act,
including, but not limited to, Sections 11, 12 and 17 of the Securities Act and
Rule 10b-5 under the Exchange Act.
The Securities offered hereby may be sold from time to time in one or more
transactions at fixed prices, at prevailing market prices at the time of sale,
at varying prices determined at the time of sale or at negotiated prices. The
Securities may be sold by one or more of the following methods, without
limitation: (a) 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; (b) purchases by a broker
or dealer as principal and resale by such broker or dealer for its account
pursuant to this Prospectus; (c) ordinary brokerage transactions and
transactions in which the broker solicits purchasers; (d) an exchange
distribution in accordance with the rules of such exchange; and (e) face-to-face
transactions between sellers and purchasers without a broker-dealer. At any time
a particular offer of the Securities is made, a Prospectus Supplement, if
required, will be distributed which will set forth the aggregate amount of
Securities being offered and the terms of the offering, including the name or
names of any underwriters, dealers or agents, any discounts, commissions and
other items constituting compensation from the Selling Securityholders and any
discounts, commissions or concessions allowed or reallowed or paid to dealers.
Such Prospectus Supplement and, if necessary, post-effective amendments to the
registration statement of which this Prospectus is a part will be filed with the
Commission to reflect the disclosure of additional information with respect to
the distribution of the Securities. In addition, the Securities covered by this
Prospectus may be sold in private transactions or under Rule 144 rather than
pursuant to this Prospectus.
The Selling Securityholders and any other persons participating in such
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation, Rules 10b-6
and 10b-7, which may limit the timing or purchases and sales of any of the
Securities by the Selling Securityholders and any other such person.
Furthermore, under Rule 10b-6 under the Exchange Act, any person engaged in the
distribution of the Securities may not simultaneously engage in market making
activities with respect to the particular Securities being distributed for a
period of nine business days prior to the commencement of such distribution. All
of the foregoing may affect the marketability of the Securities and the ability
of any person or entity to engage in market-making activities with respect to
the Securities.
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<PAGE>
The Company has agreed to pay substantially all of the expenses incidental
to the registration, offering and sale of the Securities to the public other
than commissions, fees and discounts of underwriters, dealers and agents and has
agreed to indemnify the Selling Securityholders against certain liabilities
under the Securities Act.
LEGAL MATTERS
The validity of the issuance of the Securities offered by this Prospectus
has been passed upon for the Company by Morgan, Lewis & Bockius LLP.
EXPERTS
The consolidated financial statements of the Company as of April 30, 1996
and 1995, and for each year in the three year period ended April 30, 1996,
except as they relate to School Specialty, Inc. and Re-Print Corporation, wholly
owned subsidiaries of the Company, have been audited by Price Waterhouse LLP,
independent accountants, whose report relies upon the reports of Ernst & Young,
LLP and BDO Seidman, LLP, and is incorporated herein by reference together with
the reports of Ernst & Young LLP and BDO Seidman LLP. Such financial statements
have been incorporated by reference in reliance on the reports of such
independent accountants given on the authority of such firms as experts in
auditing and accounting. The consolidated financial statements of Copenhaver
Holdings, Incorporated as of and for the year ended September 30, 1994; the
financial statements of Emmons-Napp Office Products, Inc. as of December 31,
1995 and December 31, 1994 and for the years then ended; the financial
statements of McWhorter Stationery Co. as of March 31, 1996 and for the year
then ended; the financial statements of Mark's Office Furniture as of March 31,
1996 and for the year then ended; the financial statements of David's Office
Supply and Furniture Company, Inc. as of May 31, 1996 and for the year then
ended; the financial statements of Carolina Office Equipment Company as of March
31, 1996 and for the year then ended; the financial statements of WBT Holdings,
Inc. (d.b.a. Office Furniture Distributors) as of December 31, 1995 and for the
year then ended; the financial statements of Mile High Office Supply, Inc. as of
December 31, 1995 and 1994 and for the years then ended; the financial
statements of The Office Furniture Store, Inc. as of December 31, 1995 and for
the year then ended and the financial statements of Raleigh Office Supply
Company, Inc. as of August 31, 1995 and for the year then ended, have been
incorporated herein by reference in reliance on the reports of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The financial statements of Blue Star as of March 31, 1995 and for the year
then ended have been incorporated herein by reference in reliance on the report
of Price Waterhouse (Auckland, New Zealand), independent accountants, given on
the authority of such firm as experts in auditing and accounting.
The financial statements of the MISSCO Commercial Division as of March 31,
1995 and 1994, and for the year ended March 31, 1995, the nine-month period
ended March 31, 1994 and the year ended June 30, 1993 have been incorporated
herein by reference in reliance on the reports of KPMG Peat Marwick LLP,
independent certified public accountants, also incorporated herein by reference,
and upon the authority of said firm as experts in auditing and accounting.
The financial statements of Oak Brook Office Supply and Equipment
Corporation as of August 31, 1995 and 1994 and for each of the years then ended
have been incorporated herein by reference in reliance on the report of Crowe,
Chizek and Company LLP, independent accountants, given on the authority of such
firm as experts in auditing and accounting.
The financial statements of U-Bix Business Machines Limited as of June 30,
1995 and 1994 and for the years then ended, have been incorporated herein by
reference in reliance on the report of KPMG (Auckland, New Zealand), independent
accountants, given on the authority of such firm as experts in auditing and
accounting.
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<PAGE>
The financial statements of New Office Plus, Inc as of December 31, 1995 and
for the year then ended, have been incorporated herein by reference in reliance
on the report of Shinners, Hucovski & Co., independent accountants, given on the
authority of such firm as experts in auditing and accounting.
The financial statements of American Loose Leaf/Business Products, Inc. as
of September 30, 1995 and for the year then ended, have been incorporated herein
by reference in reliance on the report of Swink, Fiehler and Hoffman, PC,
independent accountants, given on the authority of such firm as experts in
auditing and accounting.
The financial statements of Re-Print Corporation as of December 31, 1995 and
1994 and for the years then ended, have been incorporated herein by reference in
reliance on the report of BDO Seidman, LLP, independent accountants, given on
the authority of such firm as experts in auditing and accounting
The financial statements of Pear Commercial Interiors as of December 31,
1995 and for the year then ended, have been incorporated herein by reference in
reliance on the report of Ehrhardt Keefe Steiner & Hottman P.C., independent
accountants, given on the authority of such firm as experts in auditing and
accounting.
The financial statements of Arbuckle Foods Inc. as of August 31, 1995 and
for the year then ended, have been incorporated herein by reference in reliance
on the report of Thorne Little, independent accountants, given on the authority
of such firm as experts in auditing and accounting.
The financial statements of Prudential of Florida, Inc. as of December 31,
1995 and for the year then ended, have been incorporated herein by reference in
reliance on the report of Joel S. Baum P.A., independent accountant, given on
the authority of such firm as experts in auditing and accounting.
The financial statements of Wang of New Zealand as of June 30, 1995 and for
the year then ended, have been incorporated herein by reference in reliance on
the report of Ernst & Young (Auckland, New Zealand), independent accountants,
given on the authority of such firm as experts in auditing and accounting.
The financial statements of Whitcoulls Group Limited as of June 30, 1995,
1994, and 1993 and for the years then ended incorporated in this prospectus by
reference from the U.S. Products Company's Current Report on Form 8-K dated July
23, 1996 have been audited by Deloitte Touche Tohmatsu (Auckland, New Zealand),
independent auditors, as stated in their reports, which are incorporated herein
by reference, and have been so incorporated in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
The balance sheet of Thompson Book and Supply Company as of December 31,
1995 has been incorporated herein by reference in reliance on the report of
Hamilton & Associates, independent accountants, given on the authority of such
firm in auditing and accounting.
The financial statements of International Interiors, Inc. as of September
30, 1995 and 1994 and for the years then ended have been incorporated herein by
reference in reliance on the report of Petherbridge, Davis & Company, PA,
independent accountants, given on the authority of such firm as experts in
auditing and accounting.
The financial statements of Ausdoc Office Pty Ltd as of June 30, 1996 and
1995 and for the years then ended; the financial statements of Canberra
Wholesale Stationers Pty Ltd as of June 30, 1996 and 1995 and for the years then
ended; the financial statements of H & P Stationery Pty Ltd as of June 30, 1996
and 1995 and for the years then ended; and the financial statements Perth
Stationery Supplies Pty Ltd as of June 30, 1996 and 1995 and for the years then
ended, have been included herein in reliance upon the report of Day Neilson,
independent accountants, given on the authority of such firm as experts in
auditing and accounting.
36
