<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON , 1997
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM F-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BAAN COMPANY N.V.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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THE NETHERLANDS 7372 NOT APPLICABLE
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) NUMBER)
</TABLE>
BAAN COMPANY N.V.
POST OFFICE BOX 250
6710 BG EDE
THE NETHERLANDS
011-31-318-696666
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
WIM H. HEIJTING
BAAN COMPANY N.V.
C/O BAAN USA, INC.
4600 BOHANNON DRIVE
MENLO PARK, CALIFORNIA 94025
(415) 462-4949
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES OF ALL COMMUNICATIONS SHOULD BE SENT TO:
MARK A. BERTELSEN, ESQ.
HOWARD S. ZEPRUN, ESQ.
WILSON, SONSINI, GOODRICH & ROSATI
650 PAGE MILL ROAD
PALO ALTO, CA 94304-1050
(415) 493-9300
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
OFFERING PRICE AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE PER OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED SECURITY(1) PRICE(1) FEE
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
4.5% Convertible Subordinated Notes due
2001..................................... $113,550,000 100% 113,550,000 $34,409
- -----------------------------------------------------------------------------------------------------------
Common Stock, par value NLG .01 per
share.................................... (2) -- $-- $--
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(i) under the Securities Act of 1933, as amended.
(2) Common Stock issuable upon conversion of the 4.5% Convertible Subordinated
Notes due 2001 registered hereby. Pursuant to Rule 457(i), no registration
fee is required for these shares.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A)
MAY DETERMINE.
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<PAGE> 2
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.
PROSPECTUS SUBJECT TO COMPLETION DATED MARCH 28, 1997
$113,550,000
BAAN COMPANY N.V.
4.5% CONVERTIBLE SUBORDINATED NOTES DUE 2001
This Prospectus relates to 4.5% Convertible Subordinated Notes due 2001 (the
"Notes") of Baan Company N.V. ("Baan" or the "Company") which were originally
sold by the Company in December 1996 otherwise than in reliance on Regulation S
(the "Registrable Notes") under the Securities Act of 1933, as amended (the
"Securities Act"), and the shares of the Company's common stock, par value
NLG .01 per share ("Common Stock"), issuable upon conversion of the Registrable
Notes. The Registrable Notes registered hereby were issued and sold on December
23, 1996 (the "Original Offering") in transactions exempt from the registration
requirements of the Securities Act, to persons reasonably believed by Deutsche
Morgan Grenfell Inc., as the initial purchaser the "Initial Purchaser") of the
Registrable Notes, to be "qualified institutional buyers" (as defined by Rule
144A under the Securities Act) or other institutional "accredited investors" (as
defined in Rule 501(a)(1), (2), (3) or (7) under Regulation D of the Securities
Act). An additional $86,450,000 aggregate amount of Notes were issued by the
Company in the Original Offering and sold by the Initial Purchaser in compliance
with the provisions of Regulation S under the Securities Act. The Registrable
Notes and the Common Stock issuable upon conversion thereof may be offered and
sold from time to time by the holders named herein or by their transferees,
pledgees, donees or their successors (collectively, the "Selling Holders")
pursuant to this Prospectus. The Registration Statement of which this Prospectus
is a part has been filed with the Securities and Exchange Commission pursuant to
a registration rights agreement dated as of December 15, 1996 (the "Registration
Rights Agreement") between the Company and the Initial Purchaser, entered into
in connection with the Original Offering.
The Registrable Notes are convertible into shares of Common Stock at any
time prior to the close of business on the maturity date, unless previously
redeemed or repurchased, at a conversion price of $44.00 per share (equivalent
to a conversion rate of 22.73 shares per $1,000 principal amount of Registrable
Notes), subject to adjustment in certain events. On March 27, 1997, the closing
price of the Common Stock, which is listed on the Nasdaq National Market under
the symbol "BAANF," was $46.00 per share.
Interest on the Registrable Notes is payable on June 15 and December 15 of
each year, commencing on June 15, 1997. Principal and interest payments will be
made without any deduction for withholding taxes of The Netherlands, except to
the extent described under "Description of Notes -- Payment of Additional
Amounts." The Notes are redeemable by the Company in the event of certain
developments involving withholding taxes of The Netherlands. See "Description of
Notes -- Redemption -- Redemption for Taxation Reasons." Otherwise, the Notes
are not redeemable by the Company prior to December 16, 1998. On or after
December 16, 1998 and prior to December 16, 1999, the Notes may be redeemed at
the option of the Company, in whole or, from time to time, in part, at the
then-applicable redemption price plus accrued interest, if the closing price of
the Common Shares shall have exceeded 140% of the conversion price then in
effect for 20 trading days within a period of 30 consecutive trading days ending
within five trading days prior to the notice of redemption. See
"Redemption -- Optional Redemption." On or after December 16, 1999, the Notes
will be redeemable at the option of the Company, in whole, or from time to time,
in part, at the redemption prices set forth in this Offering Memorandum, plus
accrued interest. The Registrable Notes are not entitled to any sinking fund.
The Registrable Notes will mature on December 15, 2001. The Registrable Notes
issued and sold in the Original Offering in reliance on Rule 144A have been
designated for trading on the PORTAL System of the National Association of
Securities Dealers, Inc. Registrable Notes sold pursuant to the Registration
Statement of which this Prospectus forms a part are not expected to remain
eligible for trading on the PORTAL System. The Notes and the Company's Common
Stock are also traded on the Amsterdam Stock Exchange.
In the event of a Fundamental Change, subject to certain limitations, each
holder of Registrable Notes may require the Company to repurchase its
Registrable Notes, in whole or in part, for cash, at a repurchase price equal to
the then-applicable redemption price, subject to adjustment in certain events as
described herein, plus accrued interest. See "Description of Notes -- Repurchase
at Option of Holders Upon a Fundamental Change."
The Registrable Notes are unsecured obligations, subordinated in right of
payment to all existing and future Senior Indebtedness (as defined) of the
Company and are effectively subordinated in right of payment to all indebtedness
and other liabilities of the Company's subsidiaries. See "Description of
Registrable Notes -- Subordination."
The Registrable Notes and the Common Stock issuable upon conversion of the
Registrable Notes may be sold by the Selling Holders from time to time directly
to purchasers or through agents, underwriters or dealers. See "Selling Holders"
and "Plan of Distribution." If required, the names of any such agents or
underwriters involved in the sale of the Registrable Notes and the Common Stock
issuable upon conversion of the Registrable Notes in respect of which this
Prospectus is being delivered and the applicable agent's commission, dealer's
purchase price or underwriter's discount, if any, will be set forth in an
accompanying supplement to this prospectus (the "Prospectus Supplement").
The Selling Holders will receive all of the net proceeds from the sale of
the Registrable Notes and the Common Stock issuable upon conversion of the
Registrable Notes and will pay all underwriting discounts and selling
commissions, if any, applicable to the sale of the Registrable Notes and the
Common Stock issuable upon conversion of the Registrable Notes. The Company is
responsible for payment of all other expenses incident to the offer and sale of
the Registrable Notes and the Common Stock issuable upon conversion of the
Registrable Notes.
The Selling Holders and any broker-dealers, agents or underwriters which
participate in the distribution of the Registrable Notes and the Common Stock
issuable upon conversion of the Registrable Notes may be deemed to be
"underwriters" within the meaning of the Securities Act, and any commission
received by them and any profit on the resale of the Registrable Notes and
Common Stock issuable upon conversion of the Registrable Notes purchased by them
may be deemed to be underwriting commissions or discounts under the Securities
Act. See "Plan of Distribution" for a description of indemnification
arrangements.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY INVESTORS
IN EVALUATING AN INVESTMENT IN THE SECURITIES OFFERED HEREBY, SEE "RISK FACTORS"
ON PAGE 8.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE> 3
ENFORCEABILITY OF CIVIL LIABILITIES
The Company is a Netherlands corporation and a substantial portion of the
Company's assets are located outside the United States. In addition, members of
the Management and Supervisory Boards of the Company and certain experts named
herein are residents of countries other than the United States. As a result, it
may not be possible for investors to effect service of process within the United
States upon such persons or to enforce against such persons or the Company
judgments of courts of the United States predicated upon civil liabilities under
the United States federal securities laws. Since there is no treaty between the
United States and The Netherlands providing for the reciprocal recognition and
enforcement of judgments, U.S. judgments are not automatically enforceable in
The Netherlands. However, a final judgment for the payment of money obtained in
a U.S. court and not rendered by default, which is not subject to appeal or any
other means of contestation and is enforceable in the United States, would in
principle be upheld and be regarded by a Netherlands court of competent
jurisdiction as conclusive evidence when asked to render a judgment in
accordance with such final judgment by a U.S. court, without substantive
re-examination or relitigation on the merits of the subject matter thereof,
provided that the competent Netherlands court finds that the jurisdiction of the
U.S. court has been based on grounds which are internationally acceptable, that
such judgment has been rendered in accordance with rules of proper procedure,
that it has not been rendered in proceedings of a penal or revenue nature and
that its content and possible enforcement are not contrary to public policy or
public order of The Netherlands. Notwithstanding the foregoing, there can be no
assurance that United States investors will be able to enforce against the
Company, or members of the Management or Supervisory Boards or certain experts
named herein who are residents of The Netherlands or countries other than the
United States, any judgments in civil and commercial matters, including
judgments under the federal securities laws. In addition, there is doubt as to
whether a Netherlands court would impose civil liability on the Company or on
the members of the Management or Supervisory Boards of the Company and certain
experts named herein in an original action predicated solely upon the federal
securities laws of the United States brought in a court of competent
jurisdiction in The Netherlands against the Company or such members.
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as applicable to foreign
private issuers, and in accordance therewith files reports and other information
with the Securities and Exchange Commission (the "Commission"). Such reports and
other information can be inspected and copied at the offices of the Commission
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
as well as the following regional offices of the Commission: Northwestern
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661;
and 7 World Trade Center, Suite 1300, New York, New York 10048. 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. Such
reports, proxy statements and other information concerning the Company may be
inspected at the office of the National Association of Securities Dealers, Inc.,
1735 K Street, N.W., Washington, D.C. 20006. In addition, certain of the
Company's securities are listed on the Nasdaq National Market and the Amsterdam
Stock Exchange, and the aforementioned material may also be inspected at the
offices of such exchanges. At the Amsterdam Stock Exchange, all notices in
respect of the Notes will be published in the Official Price List (De Officiele
Prijs-Courant van de Vereniging voor de Effectenhandel).
In addition, the most recently filed annual report and audited statutory
annual accounts and a copy of the current Articles of Association of the Company
are available upon request, free of charge, during normal business hours at the
offices of ABN AMRO Bank N.V., Herengracht 595, 1017 CE Amsterdam, The
Netherlands. In addition, other documents mentioned in this Prospectus are
available for inspection at the Company's offices in The Netherlands at
Zonneoordlaan 17, 6710 BG Ede, The Netherlands. The Company is registered with
the Trade Register of the Chamber of Commerce and Industry at Arnhem, The
Netherlands, under number 09048765.
The Company has agreed that if, at any time while the Notes or the Common
Shares issuable upon conversion of the Notes are "restricted securities" within
the meaning of the Securities Act, the Company is not subject to the reporting
requirements of the Exchange Act, the Company will promptly furnish or cause to
be furnished upon request of a Holder of restricted securities and to qualified
prospective purchasers designated by such Holders, the information required to
be delivered pursuant to Rule 144A(d)(4) under the Securities Act, to the extent
required to permit compliance with Rule 144A in connection with resales of Notes
and such Common Shares.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission and are
incorporated herein by reference:
1. The Company's Annual Report on Form 20-F for the year ended
December 31, 1995;
2. The Company's Report on Form 6-K for the three months ended
March 31, 1996;
3. The Company's Report on Form 6-K for the three months and
six months ended June 30, 1996;
4. The Company's Report on Form 6-K for the three months and
nine months ended September 30, 1996;
5. The Company's Report on Form 6-K dated January 15, 1997
relating to the Company's public announcement of the
Original Offering;
6. The Company's Report on Form 6-K dated March 25, 1996
relating to the Company's Annual General Meeting of
Shareholders held on April 11, 1996;
7. The Company's Report on Form 6-K dated April 25, 1996
relating to the Company's Extraordinary General Meeting of
Shareholders held on May 13, 1996;
8. The Company's Report on Form 6-K dated May 23, 1996
relating to the Company's Extraordinary General Meeting of
Shareholders held on May 29, 1996; and
9. The Company's Articles of Association and Notarial Deed of
Amendment thereto as filed with the Company's Annual Report
on Form 20-F for the year ended December 31, 1995 and
Report on Form 6-K dated May 23, 1996, respectively.
All documents filed by the Company pursuant to Section 13(a), 13(c) or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Notes shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing
such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained 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.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the request of such person, a copy of any or all
of the foregoing documents incorporated herein by reference, other than exhibits
to such documents (unless such exhibits are specifically incorporated by
reference into such documents). Requests for such documents should be directed
to the Company's headquarters in The Netherlands at Zonneoordlaan 17, 6710 BG
Ede, The Netherlands, Attention: Chief Financial Officer, or to the Company's
headquarters in the United States at 4600 Bohannon Drive, Menlo Park, CA 94025,
U.S.A., Attention: Vice President of Finance -- U.S. .
2
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SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus or incorporated herein by reference.
THE COMPANY
Baan Company N.V. is a leading provider of open systems,
client/server-based enterprise business software used by organizations worldwide
to manage company resources and coordinate enterprise-wide functions such as
sales forecasting, inventory control, procurement, distribution, finance and
project management. The Company's BAAN IV software is designed to allow
businesses of all sizes to adapt quickly to changes in the market, thereby
enabling them to maintain a competitive advantage in the management of their
critical business processes. It is also designed for rapid implementation and
easy adaptation, and reconfiguration in response to changing organizational
needs and technological advances. The Company currently has more than 2,000
customers worldwide, including Advanced Micro Devices, Inc., Asea Brown Boveri
Group, The Boeing Company, Fujitsu-ICL Systems, Inc., Gennum Corporation,
Hitachi Ltd., Honda of America Manufacturing, Inc., Mercedes Benz US
International, Inc., Northern Telecom Limited, Oki Electric Industry Co. Ltd.,
Philips Medical Systems Nederland B.V., Sensormatic and Snap-on Incorporated.
The Company sells and supports its products through direct and indirect
distribution channels in 59 countries. The Company also has developed
relationships with leading global providers of implementation and customization
services, including the systems consulting groups of major public accounting
firms such as KPMG Peat Marwick and systems integrators such as Cap Gemini and
Origin International.
THE OFFERING
Securities Offered............ $113,50,000 principal amount of 4.5%
Convertible Subordinated Notes due 2001 (the
"Notes") (of a total initial offering of
$200,000,000 principal amount of Notes
including Notes sold to non-U.S. investors
under Regulation S).
Interest Payment Dates........ June 15 and December 15, commencing June 15,
1997.
Conversion.................... The Notes are convertible into Common Shares at
any time (except that Notes being offered
outside the United States were represented by a
Temporary Global Note and may be converted only
after the receipt by the Holder of definitive
Notes) and prior to the close of business on
the maturity date, unless previously redeemed
or repurchased, at a conversion price of $44.00
per share (equivalent to a conversion rate of
approximately 22.73 shares per $1,000 principal
amount of Notes), subject to adjustment.
Subordination................. The Notes will be subordinated in right of
payment to all existing and future Senior
Indebtedness (as defined). As of September 30,
1996, the aggregate amount of outstanding
Senior Indebtedness would have been
approximately $35 million (including a notional
amount of approximately $29 million of foreign
currency forward contracts). The Notes are also
structurally subordinated to the liabilities,
including trade payables, of the Company's
subsidiaries, and the Company is a holding
company and conducts substantially all of its
operations through subsidiaries. The Indenture
will not restrict the incurrence of additional
Senior Indebtedness or other indebtedness by
the Company or any of its subsidiaries. Under
Netherlands law, in the event of an insolvency
of the Company, the Notes may be effectively
subordinated to both the Senior Indebtedness
and all other non-secured and unsubordinated
claims against the Company.
Optional Redemption........... Except as described below under "Additional
Amounts and Redemption for Taxation Reasons,"
the Notes are not redeemable by the Company
prior to December 16, 1998. On or after
December 16, 1998 and prior to December 16,
1999, the Notes may be redeemed at
3
<PAGE> 6
the option of the Company in whole, or from
time to time, in part, at the then-applicable
redemption price plus accrued interest, if the
closing price of the Common Shares shall have
exceeded 140% of the conversion price then in
effect for 20 trading days within a period of
30 consecutive trading days ending within five
trading days prior to the notice of redemption.
On or after December 16, 1999, the Notes may be
redeemed at the option of the Company in whole,
or from time to time, in part, at any time, at
the redemption prices set forth in this
Offering Memorandum, plus accrued interest.
Additional Amounts and
Redemption for Taxation
Reasons..................... The Company will pay Additional Amounts (as
defined), subject to certain exceptions, in
order that the Holders of Notes or coupons
receive the full amount of the principal,
premium, if any, and interest specified therein
(including any amount payable under a
repurchase of the Notes as described
immediately below under "Repurchase at Option
of Holders Upon a Fundamental Change") without
deduction for or on account of withholding
taxes of The Netherlands. In the event that the
Company must pay such Additional Amounts as a
result of a change in law, the affected Notes
will be redeemable at the option of the
Company, as a whole but not in part, at 100% of
the principal amount thereof, plus any accrued
interest to the redemption date and any
Additional Amounts then payable.
Repurchase at Option of
Holders Upon a Fundamental
Change...................... In the event of a Fundamental Change (as
defined), each holder of Notes may require the
Company to repurchase its Notes, in whole or in
part, for cash, at a repurchase price equal to
the then applicable redemption price, subject
to adjustment in certain events as described
herein, plus accrued interest.
Use of Proceeds...............
The proceeds of the Notes will be used
principally for general corporate purposes,
including working capital. See "Use of
Proceeds."
Form and Denomination......... The Notes offered to QIBs in reliance on Rule
144A were originally issued only in the form of
one or more global registered notes without
coupons (the "Registered Notes"), with Marine
Midland Bank as custodian for, and registered
in the name of a nominee of, The Depository
Trust Company. The Notes offered in reliance on
Regulation S were originally represented by a
temporary global Note (the "Temporary Global
Note") deposited with a common depositary for
CEDEL and Euroclear. The Temporary Global Note
is exchangeable for definitive Notes in bearer
form (the "Bearer Notes"), with coupons
attached, upon certification of non-United
States beneficial ownership as required by
United States tax laws and regulations. The
Bearer Notes will be issued only in
denominations of $5,000, $10,000 and $100,000
and the Registered Notes will be initially
issued only in denominations of $1,000 and
integral multiples of $1,000 in excess thereof.
Transfer Restrictions......... The Notes and the Common Shares issuable upon
conversion thereof have not been registered
under the Securities Act and are subject to
certain restrictions on transfer. See "Notice
to Investors."
Registration Rights........... The Company has agreed to file this
registration statement in respect of the Notes
issued and sold otherwise than in reliance on
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Regulation S (the "Restricted Notes") and the
Common Shares issuable upon conversion thereof,
pursuant to a registration rights agreement
with the Initial Purchasers (the "Registration
Rights Agreement").
Listing....................... The Registrable Notes issued in reliance on
Rule 144A have been designated for trading on
the PORTAL System. Registrable Notes sold
pursuant to the Registration Statement of which
this Prospectus is a part are not expected to
remain eligible for trading on the PORTAL
System. The Notes are also listed on the
Amsterdam Stock Exchange.
5
<PAGE> 8
THE COMPANY
Baan Company N.V. is a leading provider of open systems,
client/server-based enterprise business software used by organizations worldwide
to manage company resources and coordinate enterprise-wide functions such as
sales forecasting, inventory control, procurement, distribution, finance and
project management. The Company's BAAN IV software is designed to allow
businesses of all sizes to adapt quickly to changes in the market, thereby
enabling them to maintain a competitive advantage in the management of their
critical business processes. It is also designed for rapid implementation and
easy adaptation, and reconfiguration in response to changing organizational
needs and technological advances.
The Company believes that its software can facilitate increased
competitiveness and a higher level of customer service by enabling customers to
continually restructure business processes in response to dynamic market and
customer demands. The software is readily adapted to small, medium and large
organizations, and supports hybrid manufacturing, process manufacturing and
project manufacturing, within a single site or multiple sites and within a
single organization or across the extended enterprise of the supply/demand
chain.
The Company has undertaken several strategic initiatives to address
targeted vertical markets in which Baan believes its software provides
particular advantages, and is continuing to develop specific configurations,
templates and software functionality. These vertical markets include automotive,
electronics, aerospace and defense, heavy equipment and other project industries
as well as the process sectors in which supply chains are complex and evolving
and improved supply chain integration requires flexible, scaleable solutions.
The Company has worked closely with key customers and partners in these segments
to define business requirements and provide comprehensive software solutions
specifically tailored to these industries. The Company's customers include
Advanced Micro Devices, Inc., Asea Brown Boveri Group, The Boeing Company,
Fujitsu-ICL Systems, Inc., Gennum Corporation, Hitachi Ltd., Honda of America
Manufacturing, Inc., Mercedes Benz US International, Inc., Northern Telecom
Limited, Oki Electric Industry Co. Ltd., Philips Medical Systems Nederland B.V.,
Sensormatic and Snap-on Incorporated. The Company has more than 2,000 customers
worldwide.
An essential element of the Company's strategy is to continue to extend the
functionality of its software to enable Dynamic Enterprise Modeling ("DEM"), a
framework that allows an organization to adapt its information systems to
rapidly changing organizational structure, business practices and operational
procedures. To enhance the DEM concept, the Company has extended the
functionality of its current software release, BAAN IV, to include enhanced
implementation capabilities and development tools to streamline the software
adoption curve; new application functionality; industry specific models; greater
desktop connectivity across the enterprise; and new tools for Internet access.
Additionally, the Company was among the first enterprise business application
providers to be Microsoft BackOffice Certified with the Company's BAAN IV
application set. BAAN IV also supports expanded electronic commerce capability,
allowing enhanced interactive business-to-business communications via the
Internet or Electronic Data Interchange ("EDI").
The BAAN IV software consists of BAAN Applications, BAAN OrgWare and BAAN
Tools. BAAN Applications consist of six principal components that support the
entire business process: Manufacturing, Finance, Project, Distribution,
Transportation and Service. BAAN OrgWare is a collection of software, tools and
methodologies that facilitate rapid implementation of BAAN Applications and
support ready reconfiguration in response to changing business needs. BAAN Tools
is a fourth generation language ("4GL") software development toolset used by the
Company, its implementation providers and its end user customers to develop,
enhance and modify BAAN Applications.
The Company sells and supports its products through corporate headquarters
in Ede, The Netherlands and Menlo Park, California, Global Support Centers in
The Netherlands, the United States and India, and direct and indirect
distribution channels in 59 countries. Over the past several years, the Company
has significantly expanded its sales and service presence in North American,
Latin American, Eastern European and Asia Pacific markets. The Company also has
developed relationships with leading global providers of implementation and
customization services, including the systems consulting groups of major public
accounting firms such as KPMG Peat Marwick and systems integrators such as Cap
Gemini and Origin International.
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Baan Company N.V. is a Netherlands holding company with its statutory seat
at Barneveld, The Netherlands, and conducts business through its domestic and
international subsidiaries. The Company's business was founded in 1978 and Baan
Holding B.V., the predecessor of Baan Company N.V., was incorporated in 1983.
References in this Offering Memorandum to "Baan" or the "Company," unless the
context otherwise requires, relate to Baan Company N.V., its predecessor, Baan
Holding B.V., and its subsidiaries. The Company's headquarters are located in
Zonneoordlaan 17, 6710 BG Ede, The Netherlands, telephone number (31)318-696666,
and at 4600 Bohannon Drive, Menlo Park, California 94025 U.S.A., telephone
number (1) 415-462-4949.
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RISK FACTORS
This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Actual results could differ
materially from those projected in the forward-looking statements as a result of
the risk factors set forth below and elsewhere in this Prospectus. In addition
to the other information contained and incorporated by reference in this
Prospectus, the following factors should be carefully considered in evaluating
the Company and its business before purchasing the Notes offered hereby or the
Common Shares issuable upon conversion thereof:
LIMITED PERIOD OF PROFITABILITY
The Company has experienced substantial revenue growth in recent years, but
its profitability, as a percentage of net revenues, has varied widely on a
quarterly and annual basis. The Company was not profitable in 1993, and was only
slightly profitable in 1994 due largely to recognition of $14.8 million in
software license revenues from one large customer contract. Absent such
contract, the Company would not have been profitable in 1994. Due to the
Company's limited operating history on a significant international scale, the
rate of growth of the Company's business and the variability of operating
results in past periods, there can be no assurance that the Company's revenues
will continue at the current level or will grow, or that the Company will be
able to sustain profitability on a quarterly or annual basis. During 1996, the
Company has experienced increases in accounts receivable as revenues have
increased. Accounts receivable days sales outstanding (the ratio of the
quarter-end accounts receivable balance to quarterly revenues, multiplied by 90)
increased to 119 days at the end of the third quarter of 1996 as compared to 104
days as of December 31, 1995. These increases in accounts receivable, together
with increased investments by the Company in infrastructure and expansion of
operations, have impacted cash flow from operations. Although the Company has in
recent periods generated cash from operations, there can be no assurance that
cash flow from operations in future periods will not be further impacted.
VARIABILITY OF QUARTERLY OPERATING RESULTS
The Company's net revenues and operating results can vary, sometimes
substantially, from quarter to quarter. The Company's license revenues have in
recent periods increased as a percentage of total net revenues as a result of
the Company's focus on increasing the use of third party implementation
providers for implementation services and on reducing hardware sales. License
revenues increased from 37% of total net revenues in 1993 to 49%, 52% and 55% of
total net revenues in 1994, 1995 and in the nine month period ended September
30, 1996, respectively. The Company's revenues in general, and in particular its
license revenues, are relatively difficult to forecast due to a number of
reasons, including (i) the relatively long sales cycles for the Company's
products, (ii) the size and timing of individual license transactions, (iii) the
timing of the introduction of new products or product enhancements by the
Company or its competitors, (iv) the potential for delay or deferral of customer
implementations of the Company's software, (v) changes in customer budgets, and
(vi) seasonality of technology purchases and other general economic conditions.
In the last two years, and particularly in its U.S. operations, the Company has
made significant changes in its business focus, including greater emphasis on
sales to larger customers. As a result, the Company has realized an increasingly
high portion of total net revenues from individually large licenses, which could
contribute to greater quarterly variability. In addition, while the Company
believes that its allowance for doubtful accounts as of September 30, 1996 is
adequate, a significant portion of the Company's accounts receivable at such
date are derived from sales of large licenses, often to new customers with which
the Company does not have a payment history. Accordingly, there can be no
assurances that the allowance will be adequate to cover any receivables which
are later determined to be uncollectible, particularly if one or more large
receivables becomes uncollectible.
The Company's software products generally are shipped as orders are
received. As a result, license revenues in any quarter are substantially
dependent on orders booked and shipped in that quarter. Because the Company's
operating expenses are based on anticipated revenue levels and because a high
percentage of the Company's expenses are relatively fixed, a delay in the
recognition of revenue from a limited number of license transactions could cause
significant variations in operating results from quarter to quarter and could
result in losses. The Company plans to increase expenditures in order to fund
continued build-up of international
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operations, greater levels of research and development, a larger direct sales
and marketing staff, development of new distribution and resale channels, and
broader customer support capability, although annual expenditures will depend
upon ongoing results and evolving business needs. To the extent such expenses
precede or are not subsequently followed by increased revenues, the Company's
operating results would be materially adversely affected.
The Company believes that fourth quarter revenues have historically been
positively impacted by year-end capital purchases by some large corporate
customers. This seasonality, which the Company believes is common in the
computer software industry, is likely to increase as the Company focuses on
larger corporate accounts, and typically result in first quarter revenues in any
year being lower than revenues in the immediately preceding fourth quarter.
NORTH AMERICAN OPERATIONS
The Company commenced its investment program in North America in 1993 and
has a limited number of operational installations of its products at customer
sites in North America. Accordingly, the Company has only a limited number of
reference customers in North America. Many of these customers continue to
implement the Company's products, and some of these customers are in the early
stage of implementation. If the Company were to experience significant
implementation problems at these or other reference sites in North America (or
elsewhere), it could significantly impact future sales and operating results in
North America (and elsewhere). In addition, in order to support the anticipated
growth of the Company's business in the North American market, the Company
continues to incur significant costs to build corporate infrastructure ahead of
anticipated revenues. This includes developing experienced resources, through
both internal hiring and establishing relationships with third party
implementation providers, that are necessary to support customer installations
of Baan's software and provide other customer services. The number of employees
in North America has grown from 168 at December 31, 1993 to 180 at December 31,
1994, 309 at December 31, 1995 and 473 at September 30, 1996. In addition, the
Company's operating expenses (exclusive of general corporate expenses) in North
America have increased from $13.1 million for the year ended December 31, 1993
to $29.2 million for the year ended December 31, 1994, $44.7 million for the
year ended December 31, 1995 and $65.3 million for the nine months ended
September 30, 1996. As a result of this expansion, the Company must continue to
implement and improve its operational and financial control systems and to
expand, train and manage its employee base and relationships with third party
implementation providers, in order to provide high-quality training, product
implementation and other customer services. These factors have placed, and are
expected to continue to place, a significant strain on the Company's management
and operations. There can be no assurance that the Company's North American
operations will continue to be successful or that the Company will be able to
manage effectively an increased level of operations in North America. Any lack
of success in North American markets or inability to manage these activities
effectively would have a material adverse effect on the Company's results of
operations.
MANAGEMENT OF GROWTH
The Company's business has grown rapidly in the last five years, with total
net revenues increasing from $35.2 million in 1991 to $216.2 million in 1995 and
$264.1 million in the nine months ended September 30, 1996. The growth of the
Company's business and expansion of the Company's customer base has placed a
significant strain on the Company's management and operations. In addition, Tom
Tinsley and Jan Westerhoud joined the Company within the past 18 months as
President and Chief Operating Officer and as Chief Financial Officer,
respectively (Mr. Westerhoud previously served as a partner with Moret Ernst &
Young, the Company's independent auditors). Moreover, certain of the Company's
senior executive officers had limited or no prior management experience as
senior executives in large, public software companies prior to joining the
Company. The Company's recent expansion has resulted in substantial growth in
the number of its employees, the scope of its operating and financial systems
and the geographic area of its operations, resulting in increased responsibility
for both existing and new management personnel. The Company's ability to support
the growth of its business will be substantially dependent upon having in place
highly trained internal and third party resources to conduct pre-sales activity,
product implementation, training and other customer support services.
Accordingly, the Company's future operating results will depend on the ability
of its officers and other key employees to continue to implement and improve its
operational, customer support and financial control systems, to expand, train
and manage its employee base and to work effectively with third
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party implementation providers. There can be no assurance that the Company will
be able to manage its recent or any future expansion successfully, and any
inability to do so would have a material adverse effect on the Company's results
of operations.
LEVERAGE AND SUBORDINATION
In connection with the sale of the Notes, the Company incurred $200 million
in indebtedness, which resulted in an increase in the Company's ratio of
long-term debt to total capitalization at September 30, 1996 from approximately
1% to approximately 57% on an as adjusted basis (60% if the over-allotment
option is exercised in full). As a result of this additional indebtedness, the
Company's principal and interest obligations will increase substantially. The
degree to which the Company will be leveraged could materially adversely affect
the Company's ability to obtain additional financing for working capital,
acquisitions or other purposes and could make it more vulnerable to industry
downturns and competitive pressures. The Company's ability to meet its debt
service obligations will be dependent upon the Company's future performance,
which will be subject to financial, business and other factors affecting the
operations of the Company, many of which are beyond its control.
The Notes are unsecured and subordinated in right of payment in full to all
existing and future Senior Indebtedness of the Company. As a result of such
subordination, in the event of bankruptcy, liquidation or reorganization of the
Company or certain other events, the assets of the Company will be available to
pay obligations on the Notes only after all Senior Indebtedness has been paid in
full, and there may not be sufficient assets remaining to pay amounts due on any
or all of the Notes then outstanding. In addition, the ranking of certain claims
against the Company, including but not limited to claims to be paid out of the
proceeds of assets of the Company located in The Netherlands, will be governed
by the law of The Netherlands. Under Netherlands law, in the event of an
insolvency of the Company, there is a risk that a court of competent
jurisdiction may determine that any payment on the Senior Indebtedness must on a
pari passu basis also be made on all other non-secured and unsubordinated claims
against the Company. In such case, the Notes would be effectively subordinated
in right of payment to both the Senior Indebtedness and all other non-secured
and unsubordinated claims against the Company at the time and the Holders of the
Notes might not receive any payment until both the holders of Senior
Indebtedness and all other unsubordinated creditors had been paid in full. The
Notes are also structurally subordinated to the liabilities, including trade
payables, of the Company's subsidiaries, and the Company is a holding company
and conducts substantially all of its operations through subsidiaries. The
Indenture does not prohibit or limit the incurrence of Senior Indebtedness or
the incurrence of other indebtedness and other liabilities by the Company or its
subsidiaries, and the incurrence of any such additional indebtedness or
liabilities could adversely affect the Company's ability to pay its obligations
on the Notes. As of September 30, 1996, the Company had approximately $35
million of Senior Indebtedness outstanding (including a notional amount of
approximately $29 million of foreign currency forward contracts). In addition,
as of September 30, 1996, subsidiaries of the Company had outstanding an
aggregate of $73 million of indebtedness and other liabilities(excluding
intercompany liabilities and liabilities of a type not required to be reflected
as a liability on the balance sheet of such subsidiaries in accordance with
generally accepted accounting principles). The Company anticipates that from
time to time it will incur additional indebtedness, including Senior
Indebtedness, and that it and its subsidiaries will from time to time incur
other additional indebtedness and liabilities. See "Description of
Notes -- Subordination."
COMPETITION
The information management application software market is highly
competitive, is changing rapidly, and is significantly affected by new product
introductions and other market activities of industry participants. The
Company's products are targeted at the emerging market for open systems,
client/server, Enterprise Resource Planning ("ERP") software solutions, and the
Company's current and prospective competitors offer a variety of products and
solutions to address this market. The Company's primary competition comes from a
large number of independent software vendors and other sources including SAP AG
("SAP"), Oracle Corporation ("Oracle"), System Software Associates, Inc. and
Peoplesoft Corporation ("Peoplesoft"). In addition, the Company faces indirect
competition from suppliers of custom-developed business application software
that have focused
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mainly on proprietary mainframe and minicomputer-based systems with highly
customized software, such as the systems consulting groups of major accounting
firms and systems integrators. The Company also faces indirect competition from
systems developed by the internal MIS departments of large organizations.
Many of the Company's competitors have longer operating histories,
significantly greater financial, technical, marketing and other resources than
the Company, greater name recognition, and a larger installed base of customers.
In addition, certain competitors, including SAP, Oracle and Peoplesoft, have
well-established relationships with customers of the Company. Further, because
the Company's products run on relational database management systems ("RDBMS")
and Oracle has the largest market share for RDBMS software, Oracle may have a
competitive advantage in selling its application products to its RDBMS customer
base. The Company may also face market resistance from the large installed base
of legacy systems because of the reluctance of these customers to commit the
time and effort necessary to convert to an open systems-based client/server
software solution. Furthermore, as the client/server computing market develops,
companies with significantly greater resources than the Company could attempt to
increase their presence in this market by acquiring or forming strategic
alliances with competitors of the Company.
The Company relies on a number of systems consulting and systems
integration firms for implementation and other customer support services, as
well as recommendations of its products during the evaluation stage of the
purchase process. Although the Company seeks to maintain close relationships
with these third party implementation providers, many of these third parties
have similar, and often more established, relationships with the Company's
principal competitors. If the Company is unable to develop and retain effective,
long-term relationships with these third parties, it would adversely affect the
Company's competitive position. Further, there can be no assurance that these
third parties, many of which have significantly greater financial, technical and
marketing resources than the Company, will not market software products in
competition with the Company in the future or will not otherwise reduce or
discontinue their relationships with or support of the Company and its products.
The Company believes that its success has been due in part to its focus on
the client/server architecture of its software products. Certain of the
Company's competitors currently offer products using client/server architecture,
and the Company believes that many of its other competitors are actively
developing client/server-based products, including certain large,
well-established software companies that have announced their intent to
introduce client/server ERP products. As a result, competition (including price
competition) is likely to increase substantially, which could result in price
reductions and loss of market share. There can be no assurance that the Company
will be able to compete successfully with existing or new competitors or that
competition will not have a material adverse effect on the Company's business.
RAPID TECHNOLOGICAL CHANGE AND NEW PRODUCTS
The market for the Company's software products is characterized by rapid
technological advances, evolving industry standards in computer hardware and
software technology, changes in customer requirements, and frequent new product
introductions and enhancements. The Company's future success will depend upon
its ability to continue to enhance its current product line and to develop and
introduce new products that keep pace with technological developments, satisfy
increasingly sophisticated customer requirements and achieve market acceptance.
In particular, the Company must continue to anticipate and respond adequately to
advances in RDBMS software and desktop computer operating systems such as
Microsoft Windows and its successors. There can be no assurance that the Company
will be successful in developing and marketing, on a timely and cost-effective
basis, fully functional product enhancements or new products that respond to
technological advances by others, or that its new products will achieve market
acceptance.
Historically, the Company has issued significant new releases of its
software products approximately every two years with interim releases on a more
frequent basis. As a result of the complexities inherent in both the RDBMS and
client/server environments and the broad functionality and performance demanded
by customers for ERP products, major new product enhancements and new products
can require long development and testing periods to achieve market acceptance.
The Company has on occasion experienced delays in the scheduled introduction of
new and enhanced products. In addition, software programs as
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complex as those offered by the Company may contain undetected errors or "bugs"
when first introduced or as new versions are released that, despite testing by
the Company, are discovered only after a product has been installed and used by
customers. For example, Version 3.0 contained certain identified software errors
which required correction in Version 3.1. There can be no assurance that the
Company's most recent software release, BAAN IV, or future releases of the
Company's products, will not contain further software errors. Any such errors
could impair the market acceptance of these products and adversely affect
operating results. Problems encountered by customers installing and implementing
new releases or with the performance of the Company's products could also have a
material adverse effect on the Company's business and operating results.
Customers have only recently commenced implementation of the BAAN IV version of
the Company's software. If the Company were to experience delays in the
introduction of new and enhanced products, or if customers were to experience
significant problems with the implementation and installation of new releases or
were to be dissatisfied with product functionality or performance, it could
materially adversely affect the Company's business and operating results.
INTERNATIONAL OPERATIONS AND CURRENCY FLUCTUATIONS
The Company's products are currently marketed in the United States, The
Netherlands, Germany and 56 other countries as of December 31, 1996. Sales in
the United States, The Netherlands and Germany accounted for 33%, 21% and 15%,
respectively, of the Company's net revenues in the nine months ended September
30, 1996. The Company's operations are subject to risks inherent in
international business activities, including, in particular, general economic
conditions in each country, overlap of different tax structures, management of
an organization spread over various countries, unexpected changes in regulatory
requirements, compliance with a variety of foreign laws and regulations, and
longer accounts receivables payment cycles in certain countries. Other risks
associated with international operations include import and export licensing
requirements, trade restrictions and changes in tariff and freight rates.
A significant portion of the Company's business is conducted in currencies
other than the U.S. dollar (the currency in which its financial statements are
stated), primarily the Dutch guilder and the German mark. The Company has
historically recorded a majority of its expenses in guilders, especially
research and development expenses, and a substantial majority of its revenues
has been denominated in guilders, marks and, more recently, U.S. dollars. As a
result, appreciation in the value of the guilder relative to the value of the
U.S. dollar could adversely affect operating results. Foreign currency
transaction gains and losses arising from normal business operations are
credited to or charged against earnings in the period incurred. As a result,
fluctuations in the value of the currencies in which the Company conducts its
business relative to the U.S. dollar have caused and will continue to cause
foreign currency transaction gains and losses. In 1994, the Company incurred
$1.9 million in foreign currency transaction losses compared to a $398,000 gain
in 1993. At the end of 1994, the Company reevaluated its currency management
process, and established programs to reduce its foreign currency exposure. In
1995, the Company incurred a foreign currency transaction net loss of $253,000.
Starting in the fourth quarter of 1995, the Company established controls
regarding the use of derivative financial instruments, which it uses primarily
to offset the effects of exchange rate changes on intracompany cash flow
exposures denominated in foreign currencies. These exposures include firm trade
accounts, royalties, service fees and loans. In the first nine months of 1996,
the Company incurred a foreign currency transaction gain of $60,000. The Company
continues to evaluate its currency management policies. Notwithstanding the
measures the Company has adopted, due to the number of currencies involved, the
constantly changing currency exposures and the substantial volatility of
currency exchange rates, there can be no assurance that the Company will not
experience currency losses in the future, nor can the Company predict the effect
of exchange rate fluctuations upon future operating results.
RELIANCE ON CERTAIN RELATIONSHIPS
The Company relies on a number of consulting and systems integration firms
to enhance its marketing, sales and customer support efforts, particularly with
respect to implementation and support of its products as well as lead generation
and assistance in the sales process. As the Company continues to implement its
strategy of focusing on the licensing of its core software products, the Company
will remain dependent upon third party implementation providers for product
implementation, customization, customer support services and end user
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training. Many such firms have similar, and often more established,
relationships with the Company's principal competitors. There can be no
assurance that these third party implementation providers will provide the level
and quality of service required to meet the needs of the Company's customers,
that the Company will be able to maintain an effective, long term relationship
with these third parties, or that these parties will continue to meet the needs
of the Company's customers. If the Company is unable to develop and maintain
effective, long-term relationships with these third parties, or if these parties
fail to meet the needs of the Company's customers, the Company's business would
be adversely affected. Although the Company has agreements with certain of these
providers, these agreements are generally terminable by the third party
providers at any time and do not impose specific obligations on the part of
these third party providers. Further, there can be no assurance that these third
party implementation providers, many of which have significantly greater
financial, technical, personnel and marketing resources than the Company, will
not market software products in competition with the Company in the future or
will not otherwise reduce or discontinue their relationships with or support of
the Company and its products.
DISCRETIONARY USE OF PROCEEDS OF ORIGINAL OFFERING
The principal purposes of the Original Offering are to increase the
Company's capital base and financial flexibility. The Company expects to use the
net proceeds principally for general corporate purposes, including working
capital, and potentially to acquire complementary businesses, products or
technologies. However, the Company has no current specific plans for use of the
net proceeds of this offering. As a consequence, the Company's management will
have the ability to allocate the net proceeds of the offering at its discretion.
There can be no assurance that the proceeds will be utilized in a manner that
the Noteholders deem optimal or that the proceeds can or will be invested to
yield a significant return. Upon completion of the Original Offering, the
Company had more than $220 million of cash, cash equivalents and investments
(based on balances at September 30, 1996, after deducting the discount to the
Initial Purchaser and estimated offering expenses payable by the Company),
substantially all of which will be invested in short-term, interest bearing,
investment grade obligations for an indefinite period of time.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a significant extent upon a limited number
of members of senior management of the Company and other key employees. The
Company does not maintain key man life insurance on any personnel. The loss of
the service of one or more key employees could have a material adverse effect on
the Company. In addition, the Company believes that its future success will also
depend in large part upon its ability to attract and retain highly skilled
technical, management, sales and marketing personnel. Competition for such
personnel in the computer software industry is intense. There can be no
assurance that the Company will be successful in attracting and retaining such
personnel, and the failure to attract and retain such personnel could have a
material adverse effect on the Company's business.
ABILITY TO ENFORCE THE COMPANY'S INTELLECTUAL PROPERTY RIGHTS
The Company relies on a combination of the protections provided under
applicable copyright, trademark and trade secret laws, as well as on
confidentiality procedures and licensing arrangements, to establish and protect
its rights in its software. Despite the Company's efforts, it may be possible
for unauthorized third parties to copy certain portions of the Company's
products or to reverse engineer or obtain and use information that the Company
regards as proprietary. In addition, the laws of certain countries do not
protect the Company's proprietary rights to the same extent as do the laws of
the United States or The Netherlands. Accordingly, there can be no assurance
that the Company will be able to protect its proprietary software against
unauthorized third party copying or use, which could adversely affect the
Company's competitive position.
The Company, from time to time, receives notices from third parties
claiming infringement by the Company's products of third party proprietary
rights. The Company expects that software products will increasingly be subject
to such claims as the number of products and competitors in the Company's
industry segment grows and the functionality of products overlap. Any such
claim, with or without merit, could be
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time-consuming, result in costly litigation and require the Company to enter
into royalty and licensing agreements. Such royalty or licensing agreements, if
required, may not be available on terms acceptable by the Company, or at all. In
the event of a successful claim against the Company and the failure of the
Company to develop or license a substitute technology, the Company's business
and operating results would be materially adversely effected.
In February 1996 the Company received correspondence from counsel for The
COBRE Group, Inc. (which does not compete in the ERP market) stating their
belief that the Company's OrgWare software infringed their U.S. Patent (No.
5,321,610) issued in June 1994. The letter also impliedly threatened legal
action in the event the Company did not either provide an appropriate
explanation why there is no infringement, or obtain a license under the patent,
or discontinue offering the OrgWare software. The Company has reviewed the
claims of the patent in relation to the OrgWare software, and based upon such
review the Company does not believe that the OrgWare software infringes the
claims of the patent. Between February and August 1996, counsel for the Company
corresponded with counsel for The COBRE Group specifying the Company's bases for
denying infringement. The Company has received no further communications from
The COBRE Group since August 1996.
The Company intends to contest any claim of infringement and does not
believe that resolution of this matter, whether or not litigation is commenced,
would have a material adverse effect on its business, operating results and
financial condition. There can be no assurance, however, that legal action
claiming patent infringement will not be commenced against the Company, or that
the Company would necessarily prevail in such litigation given the complex
technical issues and inherent uncertainties in patent litigation; and in the
event a claim against the Company was successful and the Company could not
obtain a license on acceptable terms or develop or license a substitute
technology, the Company's business and operating results would be materially
adversely affected.
LEGAL PROCEEDINGS
The Company is party to legal proceedings from time to time. There is no
such proceeding currently pending which the Company believes is likely to have a
material adverse effect upon the Company's business as a whole. Any litigation,
however, involves potential risk and potentially significant litigation costs,
and therefore there can be no assurances that any litigation which is now
pending or which may arise in the future will not have such a material adverse
effect.
CONTROL BY EXISTING SHAREHOLDERS
Baan Investment B.V. owns approximately 48% of the Company's outstanding
Common Shares. Jan Baan and J.G. Paul Baan, by virtue of their positions as
managing directors of Baan Investment B.V. and the control they exercise over
the entities that own and control the shares of Baan Investment B.V.,
effectively have the power to vote the Common Shares of the Company owned by
Baan Investment B.V. Messrs. Baan and Baan will therefore also have the
effective power to influence significantly the outcome of matters submitted for
shareholder action, including the appointment of members of the Company's
Management and Supervisory Boards and the approval of significant change in
control transactions, and may be deemed to have control over the management and
affairs of the Company. This significant equity interest in the Company may have
the effect of making certain transactions more difficult absent the support of
Jan Baan and J.G. Paul Baan, and may have the effect of delaying or preventing a
change in control of the Company.
POSSIBLE VOLATILITY OF NOTES AND SHARE PRICE
The market price of the Company's Common Shares has experienced significant
fluctuations and may continue to fluctuate significantly. The market price of
the Notes and the Common Shares into which the Notes are convertible may be
significantly affected by factors such as the announcement of new products or
product enhancements by the Company or its competitors, technological innovation
by the Company or its competitors, quarterly variations in the Company's results
of operations, changes in earnings estimates by market analysts, and general
market conditions or market conditions specific to particular industries. In
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particular, the stock prices for many companies in the technology and emerging
growth sector have experienced wide fluctuations which have often been unrelated
to the operating performance of such companies. Such fluctuations may adversely
affect the market price of the Notes and the Common Shares.
LIMITATIONS ON REDEMPTION OF NOTES
Upon a Fundamental Change (as defined), each Holder of Notes will have
certain rights, at the Holder's option, to require the Company to redeem all or
a portion of such Holder's Notes. If a Fundamental Change were to occur, there
can be no assurance that the Company would have sufficient funds to pay the
redemption price for all Notes tendered by the Holders thereof. Any future
credit agreements or other agreements relating to other indebtedness (including
other Senior Indebtedness) to which the Company becomes a party may contain
restrictions and provisions which prohibit the Company from purchasing or
redeeming any Notes or provide that a Fundamental Change would constitute an
event of default thereunder. In the event a Fundamental Change occurs at a time
when the Company is prohibited from purchasing or redeeming Notes, the Company
could seek the consent of its lenders to the purchase of Notes or could attempt
to refinance the borrowings that contain such prohibition. If the Company does
not obtain such a consent or repay such borrowings, the Company would remain
prohibited from purchasing or redeeming Notes. In such case, the Company's
failure to redeem tendered Notes may constitute an Event of Default under the
Indenture, which may, in turn, constitute a further default under the Company's
existing bank facilities and may constitute a default under the terms of other
indebtedness that the Company may enter into from time to time. In such
circumstances, the subordination provisions in the Indenture would likely
restrict payments to the Holders of Notes. See "Description of
Notes -- Repurchase at Option of Holders upon a Fundamental Change."
LIMITED PUBLIC MARKET FOR THE NOTES AND RESTRICTIONS ON TRANSFER
Although Morgan Grenfell & Co. Limited and Deutsche Morgan Grenfell Inc.
have advised the Company that they currently intend to make a market in the
Notes, they are not obligated to do so and may discontinue such market making at
any time without notice. In addition, such market making activity will be
subject to the limits imposed by the Securities Act and the Exchange Act.
Accordingly, there can be no assurance that any market for the Notes will be
maintained. If an active market for the Notes fails to be sustained, the trading
price of such Notes could be materially adversely affected.
FOREIGN PERSONAL HOLDING COMPANY TAX RISK
The Company or certain of its subsidiaries may in the future be
characterized as a foreign personal holding company ("FPHC") if: (i) Jan Baan or
J.G. Paul Baan or a member of either of their families were to become a U.S.
resident or citizen, or to marry a U.S. resident or citizen and (ii) more than
60% of the gross income of the Company or a subsidiary were considered foreign
personal holding company income. If such treatment were to occur, U.S.
residents, citizens, corporations and other persons subject to U.S. taxation on
the basis of net income who hold Common Shares would be required to include in
their gross income as a dividend their pro rata portion of any undistributed
income of the Company or a subsidiary so classified as a FPHC, even if no cash
dividend were actually paid. Although neither the Company nor any subsidiary is
currently a FPHC, the Company can give no assurances that changes in ownership
of the shares currently held by Baan Investment B.V., or changes in ownership or
residency of Jan Baan or J.G. Paul Baan or members of either of their families,
will not cause the Company to be treated as a FPHC, nor is the Company
undertaking any obligation to determine or disclose at any time in the future
its status as a FPHC.
ENFORCEABILITY OF UNITED STATES JUDGMENTS AGAINST NETHERLANDS CORPORATIONS,
DIRECTORS AND OFFICERS
Judgments of United States courts, including judgments against the Company,
its directors or its officers predicated on the civil liability provisions of
the federal securities laws of the United States, are not directly enforceable
in The Netherlands. See "Enforceability of Civil Liabilities."
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OTHER MATTERS RELATED TO DUTCH COMPANIES
As a Netherlands naamloze vennootschap (N.V.), the Company is subject to
certain requirements not generally applicable to corporations organized in
United States jurisdictions. Among other things, the issuance of shares by the
Company must be submitted for resolution of the general meeting of shareholders,
except to the extent such authority to issue shares has been delegated by the
general meeting of shareholders to another corporate body. The issuance of
shares by the Company is generally subject to shareholder preemptive rights,
except to the extent that such preemptive rights have been excluded or limited
by the general meeting of shareholders (subject to a qualified majority of
two-thirds of the votes if less than 50% of the outstanding share capital is
present or represented) or, in case the authority to issue shares has been
delegated to another corporate body that has also been empowered by the general
meeting of shareholders to exclude or limit such preemptive rights, by such
corporate body. In this regard, the general meeting of shareholders has
authorized the Management Board of the Company, upon approval by the Supervisory
Board, to issue any authorized and unissued shares of the Company at any time up
to and including March 31, 2001, and has authorized the Management Board, upon
approval by the Supervisory Board, to exclude or limit shareholder preemptive
rights with respect to any issuance of such shares up to and including such
date. Such authorizations may be renewed by the general meeting of shareholders
from time to time, or by the Company's Articles of Association pursuant to an
amendment to that effect, for up to five years at a time. This authorization
would also permit the issuance of shares in an acquisition, provided that
shareholder approval is required in connection with a statutory merger (except
that, in certain limited circumstances, the management board of a surviving
company may resolve to legally merge the company). Shareholders do not have
preemptive rights with respect to shares which are issued against payment other
than in cash, shares which are issued to employees of the Company or of a group
company or shares which are issued to someone exercising a previously acquired
right to subscribe for shares. In addition, certain major corporate decisions
are subject to prior approval or advice by the Works Council established at Baan
Development B.V. and Baan Nederland B.V., two Dutch subsidiaries of the Company.
EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
Except as set forth below, there are currently no limitations under the
laws of The Netherlands to the rights of Holders from outside The Netherlands to
hold Notes or to hold or vote Common Shares. Payments of principal and interest
on the Notes will be made in U.S. dollars. Cash distributions, if any, payable
on the Common Shares in Dutch guilders may be officially transferred from The
Netherlands and converted into any other currency without Netherlands legal
restrictions, except that for recording purposes such payments and transactions
must be reported by the Company to The Netherlands Central Bank. Exceptions may
apply to the above under applicable Netherlands sanctions regulations regarding
Iraq and Libya.
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LIMITATION OF LIABILITY AND INDEMNIFICATION
The Company has entered into indemnification agreements with its directors
and executive officers, providing for indemnification by the Company against any
liability to which a director or executive officer may be subject for judgments,
settlements, penalties, fines and expenses of defense (including attorneys'
fees, bonds and costs of investigation), arising out of or in any way related to
acts or omissions as a member of the Management or Supervisory Board, or an
executive officer, or in any other capacity in which services are rendered to
the Company or its subsidiaries. The Company believes that the indemnification
agreements will assist the Company in attracting and retaining qualified
individuals to serve as directors and executive officers. The agreements provide
that a director or officer is not entitled to indemnification under such
agreements (i) if indemnification is expressly prohibited under applicable law,
(ii) for certain violations of securities laws or (iii) for certain claims
initiated by the officer or director. Generally, under Netherlands law a
director will not be held personally liable for decisions made with reasonable
business judgment, absent self dealing. In addition, indemnification may not be
available to directors or officers under Netherlands law if any act or omission
by a director or officer would qualify as willful misconduct or gross
negligence. Due to the lack of applicable case law, it is not clear whether
indemnification is available in case of a breach of securities laws of the
United States. See "Enforceability of Civil Liabilities."
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<PAGE> 20
DESCRIPTION OF NOTES
The Notes were issued under an indenture dated as of December 15, 1996 (the
"Indenture"), between the Company and Marine Midland Bank, as trustee (the
"Trustee"). A copy of the form of the Indenture and the Registration Rights
Agreement (as defined below) are available from the Trustee upon request by a
registered holder of Notes. The following summaries of certain provisions of the
Notes, the Indenture and the Registration Rights Agreement do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all of the provisions of the Notes, the Indenture and the Registration
Rights Agreement, including the definitions therein of certain terms which are
not otherwise defined in this Prospectus. Wherever particular provisions or
defined terms of the Indenture (or the form of Note which is a part thereof) or
the Registration Rights Agreement are referred to, such provisions or defined
terms are incorporated herein by reference. References in this section to the
"Company" are solely to Baan Company N.V., a Netherlands corporation, and not
its subsidiaries.
GENERAL
The Notes are unsecured subordinated obligations of the Company, will
mature on December 15, 2001 and be payable at a price of 100% of the principal
amount thereof. The Notes bear interest at the rate per annum shown on the front
cover of this Prospectus from December 23, 1996, payable semiannually on June 15
and December 15 of each year, commencing on June 15, 1997.
The Notes are convertible into Common Shares initially at the conversion
price stated on the cover page hereof, subject to adjustment upon the occurrence
of certain events described under "-- Conversion," at any time prior to the
close of business on the maturity date, unless previously redeemed or
repurchased.
The Notes are redeemable (a) in the event of certain developments involving
withholding taxes of The Netherlands as defined below under
"-- Redemption -- Redemption for Taxation Reasons" at a redemption price of 100%
of the principal amount of the Notes to be redeemed, plus accrued interest to,
but excluding, the Redemption Date (as defined) and (b) at the option of the
Company under the circumstances and at the redemption prices set forth below
under "-- Redemption -- Optional Redemption," plus accrued interest to, but
excluding, the Redemption Date.
It is expected that beneficial interests in the Notes issued and sold to
QIBs in reliance on Rule 144A ("Rule 144A Notes") will trade in the Same Day
Funds Settlement System of The Depository Trust Company ("DTC"), and that
beneficial interests in the Notes issued and sold in reliance on Regulation S
initially have traded through the facilities of CEDEL and Euroclear and
secondary market transactions in such interests will be effected pursuant to
conventional Eurobond practice, except that any such interests exchanged for
interests in the Regulation S Global Note (as defined below) will trade in the
Same Day Funds Settlement System of DTC.
FORM AND DENOMINATION
The Notes sold in offshore transactions pursuant to Regulation S were
represented initially by a temporary global Note (the "Temporary Global Note"),
without interest coupons or conversion rights, which were deposited with a
common depositary for CEDEL and for Morgan Guaranty Trust Company of New York,
Brussels Office, as operator of Euroclear, for the accounts of the subscribers
of the Notes on the date of payment for and delivery of the Notes (the
"Settlement Date"). The Temporary Global Note is exchangeable for definitive
Notes in bearer form ("Bearer Notes") only in denominations of $5,000, $10,000
or $100,000, with coupons attached. Such exchange will be made in each case only
upon certification in the form required by the Indenture that the beneficial
owners of interests in such Note are (i) Non-United States Holders (as defined),
(ii) persons described in Section 1.163-5(c)(2)(i)(D)(6) of the United States
Treasury Regulations (the "Treasury Regulations") or (iii) financial
institutions that have purchased interests in such Notes for resale and that
have purchased interests in such Notes in accordance with the limitations
referred to under "Plan of Distribution." A beneficial owner must exchange its
interest in the Temporary Global Note for definitive Bearer Notes before
interest payments or other payments will be made or conversion rights may be
exercised. A beneficial owner may take delivery of Bearer Notes only at such
paying agency outside the
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<PAGE> 21
United States as the Company may appoint from time to time. Bearer Notes will be
exchangeable for Notes in registered form without coupons ("Registered Notes")
either in certificated (i.e., non-global) form or for an interest in any Global
Registered Note (as defined below) as provided in the Indenture. Registered
Notes may not be exchanged for Bearer Notes. See "-- Transfer and Exchange."
Each Bearer Note and coupon will carry the following legend: "Any United
States person who holds this obligation will be subject to limitations under the
United States income tax laws, including the limitations provided in Sections
165(j) and 1287(a) of the Internal Revenue Code." The sections referred to in
that legend provide that a U.S. person who holds such Bearer Notes, with certain
exceptions, will not be entitled to deduct any loss on the Bearer Notes and will
not be entitled to any capital gains treatment that might otherwise be
applicable to any gain on any sale, exchange, redemption or other disposition of
the Bearer Notes.
Rule 144A Notes were initially issued only in fully registered form without
coupons and in minimum denominations of $1,000 and integral multiples thereof.
Rule 144A Notes were usually issued only in the form of a global registered note
(the "Restricted Global Note") and deposited with the Trustee as custodian for
DTC and registered in the name of a nominee of DTC. Bearer Notes may be
exchanged, at the option of the Holders thereof, for any Registered Note,
including interests in a Regulation S Note in registered global form without
coupons (the "Regulation S Global Note" and, together with the Restricted Global
Note, the "Global Registered Notes"). Each Global Registered Note will be
deposited with the Trustee as custodian for DTC and registered in the name of a
nominee of DTC. Beneficial interests in the Restricted Global Note may not be
exchanged for beneficial interests in the Regulation S Global Note at any time
except in the limited circumstances described below. See "-- Transfer and
Exchange."
Owners of beneficial interests in any Global Registered Note will hold such
interests pursuant to the procedures and practices of DTC and must exercise any
rights in respect of their interests (including any right to convert, exchange,
redemption or repurchase of their interests) in accordance with those procedures
and practices. Such beneficial owners will not be Holders, and will not be
entitled to any rights under any Note or the Indenture, with respect to any
Global Registered Note, and the Company and the Trustee, and any of their
respective agents, may treat DTC as the Holder and owner of any Global
Registered Note.
Rule 144A Notes (including beneficial interests in the Restricted Global
Note) are subject to restrictions on resale, and will bear a legend regarding
those restrictions, as provided in the Indenture. Transfer or exchange of any
such Notes will be subject to certification by the Holder as to compliance with
such restrictions on transfer.
As long as DTC, or its nominee, is the registered Holder of a Global
Registered Note, DTC or such nominee, as the case may be, will be considered the
sole owner and Holder of the Notes represented by such Global Registered Note
for all purposes under the Indenture and the Notes. Unless DTC notifies the
Company that it is unwilling or unable to continue as depository for a Global
Registered Note (other than as set forth below in this paragraph), or ceases to
be a "Clearing Agency" registered under the Exchange Act, or announces an
intention permanently to cease business or does in fact do so, or an Event of
Default has occurred and is continuing with respect to a Global Registered Note,
owners of beneficial interests in a Global Registered Note will not be entitled
to have any portions of such Global Registered Note registered in their names,
will not receive or be entitled to receive physical delivery of Notes in
definitive form and will not be considered the owners or Holders of the Global
Registered Note (or any Notes represented thereby) under the Indenture or the
Notes. No beneficial owner of an interest in a Global Registered Note will be
able to transfer that interest except in accordance with DTC's applicable
procedures (in addition to those under the Indenture referred to herein). In
addition, beneficial interests in the Regulation S Global Note may be exchanged
for Registered Notes in certificated (i.e., non-global) form upon timely request
given to the Trustee by or on behalf of DTC in accordance with its customary
procedures. In all cases, Registered Notes in certificated form delivered in
exchange for the Regulation S Global Note or beneficial interests therein will
be registered in the names, and issued in any approved denominations, requested
by or on behalf of DTC as the Depositary (in accordance with its customary
procedures) and may be subject to restrictions on resale. In the event that
owners of beneficial interests in a Global Registered Note become entitled to
receive Notes in
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<PAGE> 22
definitive form, such Notes will be issued only as Registered Notes in
denominations of $1,000 and integral multiples thereof.
Subject to the following considerations, beneficial interests in the
Restricted Global Notes will trade in DTC's Same-Day Funds Settlement System,
and secondary market trading activity in such interests will therefore settle in
immediately available funds. Transfers of beneficial interests in the Regulation
S Global Note between participants in Euroclear and CEDEL will be effected in
the ordinary way in accordance with their respective rules and operating
procedures, whereas cross-market transfers of such interests (including by DTC
participants other than Euroclear and CEDEL) will be subject to considerations
described below. The Company expects that DTC or its nominee, upon receipt of
any payment of principal or interest in respect of a Global Registered Note
representing any Notes held by it or its nominee, will immediately credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global
Registered Notes for such Notes as shown on the records of DTC or its nominee.
The Company also expects that payments by participants to owners of beneficial
interests in such Global Registered Notes held through such participants will be
governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers registered in "street name".
Such payments will be the responsibility of such participants.
Subject to compliance with the transfer restrictions applicable to the
Notes described herein, cross-market transfers with respect to the Global
Registered Notes between the participants in DTC, on the one hand, and Euroclear
or CEDEL participants, on the other hand, will be effected through DTC in
accordance with DTC's rules on behalf of Euroclear or CEDEL, as the case may be,
by its respective depositary; however, such cross-market transactions will
require delivery of instructions to Euroclear or CEDEL, as the case may be, by
the counterparty in such system in accordance with the rules and procedures and
within the established deadlines (Brussels time) of such system. Euroclear or
CEDEL, as the case may be, will, if the transaction meets its settlement
requirements, deliver instructions to its respective depositary to take action
to effect final settlement on its behalf by delivering or receiving interests in
the relevant Global Registered Note in DTC, and making or receiving payment in
accordance with normal procedures for same-day funds settlement applicable to
DTC. Euroclear participants and CEDEL participants may not deliver instructions
directly to the depositaries for Euroclear or CEDEL.
Because of time zone differences, the securities account of a Euroclear or
CEDEL participant purchasing an interest in a Global Registered Note from a
participant in DTC will be credited, and any such crediting will be reported to
the relevant Euroclear or CEDEL participant, during the securities settlement
processing day (which must be a business day for Euroclear and CEDEL)
immediately following the settlement date of DTC. Cash received in Euroclear or
CEDEL as a result of sales of interests in a Global Registered Note by or
through a Euroclear or CEDEL participant to a participant in DTC will be
received with value on the settlement date of DTC but will be available in the
relevant Euroclear or CEDEL cash account only as of the business day for
Euroclear or CEDEL following DTC's settlement date.
DTC has advised the Company as follows: DTC is a limited-purpose trust
company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered pursuant to the provisions
of Section 17A of the Exchange Act. DTC holds securities that its participants
deposit with DTC. DTC also facilitates the settlement among participants of
securities transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
Direct participants include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations. DTC is owned
by a number of its direct participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks, and trust companies that clear through or
maintain a custodial relationship with a direct participant, either directly or
indirectly. The rules applicable to DTC and its participants are on file with
the Securities and Exchange Commission.
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<PAGE> 23
Investors in the Restricted Global Note may hold their interests therein
directly through DTC, if they are participants in such system, or indirectly
through organizations which are participants in such system. Investors in the
Regulation S Global Note must initially hold their interests therein through
Euroclear or CEDEL, if they are participants in such systems, or indirectly
through organizations which are participants in such systems. After the
expiration of the (but not earlier), investors may also hold interests in the
Regulation S Global Note through organizations other than Euroclear and CEDEL
that are participants in the DTC system. Euroclear and CEDEL will hold interests
in the Regulation S Global Note on behalf of their participants through
customers' securities accounts in their respective names on the books of their
respective depositaries, which are Morgan Guaranty Trust Company of New York,
Brussels office, as operator of Euroclear, and Citibank, N.A., as operator of
CEDEL. The depositaries, in turn, will hold such interests in the Regulation S
Global Note in customers' securities accounts in the depositaries' names on the
books of DTC. All interests in a Global Registered Note, including those held
through Euroclear or CEDEL, may be subject to the procedures and requirements of
DTC. Those interests held through Euroclear or CEDEL may also be subject to the
procedures and requirements of such systems.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of beneficial ownership interests in the Global Registered Notes among
participants of DTC, it is under no obligation to perform or continue to perform
such procedures, and such procedures may be discontinued at any time. None of
the Company, the Trustee nor any of their respective agents will have any
responsibility for the performance by DTC, its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations, including maintaining, supervising or reviewing the
records relating to, or payments made on account of, beneficial ownership
interests in Global Registered Notes.
CONVERSION
The Holder of any Note will have the right at the Holder's option to
convert any Bearer Note and to convert any portion of the principal amount of a
Registered Note that is an integral multiple of $1,000 into shares of Common
Shares at any time prior to the close of business on the maturity date, unless
previously redeemed or repurchased, but in the case of Notes represented by the
Temporary Global Note, only after the receipt by the Holder of definitive Notes,
at a conversion price of $44.00 per share (equivalent to a conversion rate of
approximately 22.73 shares per $1,000 principal amount of Notes). The conversion
price is subject to adjustment from time to time as described below. The right
to convert a Note called for redemption or delivered for repurchase will
terminate at the close of business on the Business Day prior to the Redemption
Date for such Note or the Repurchase Date (as defined), as the case may be.
Under Netherlands law, the issue price of each Common Share issuable upon
conversion will be the Dutch guilder equivalent of the conversion price (or
adjusted conversion price as described below), converted into Dutch guilders at
the rate of exchange of U.S. dollars into Dutch guilders prevailing in The
Netherlands at the time of conversion and such issue price may not be less than
the par value of such Common Share. In the event that at the time of any
conversion the conversion price then in effect and the prevailing exchange rate
would result in an issue price of less than the par value of a Common Share, for
purposes of such conversion, the conversion price will be deemed to be the
conversion price that results in an issue price that is as close as possible to,
but not less than, such par value.
Common Shares issuable upon conversion of Restricted Notes prior to the
third anniversary of the date of original issuance of the Restricted Notes (or
such shorter period of time as shall be set by the Company to reflect any
changes in applicable laws and regulations relating to the resale or transfer of
restricted securities generally) will bear legends substantially in the form of
those set forth under "Notice to Investors."
The right of conversion attaching to any Note may be exercised by the
Holder thereof by delivering the Note at the Corporate Trust Office of the
Trustee or at the specified office of a Conversion Agent (which in the case of a
Bearer Note will only be the office of any Conversion Agent outside the United
States; see "Payment and Conversion"), accompanied by a duly signed and
completed notice of conversion. Beneficial owners of interests in a Registered
Global Note may exercise their right of conversion by delivering to DTC the
appropriate instruction form for conversion pursuant to DTC's conversion
program. Such notice of conversion
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<PAGE> 24
can be obtained at the office of any Conversion Agent. The conversion date will
be the date on which the Note and the duly signed and completed notice of
conversion are so delivered. As promptly as practicable on or after the
conversion date, the Company will issue and deliver to the Trustee a certificate
or certificates for the number of full Common Shares issuable upon conversion,
together with payment in lieu of any fraction of a share in an amount determined
as set forth below; such certificate will be sent by the Trustee to the
appropriate Conversion Agent for delivery to the Holder. Such Common Shares
issuable upon conversion of the Notes will be fully paid and nonassessable.
Common Shares issued upon conversion of Notes delivered for conversion to the
Corporate Trust Office of the Trustee will be issued in registered form and
Common Shares issued upon conversion of Notes delivered for conversion at the
office of a Conversion Agent outside the United States will be issued in bearer
form. See "Share Certificates and Transfer." Each Bearer Note delivered for
conversion must be delivered with all coupons maturing after the date of
conversion. Coupons maturing on or before the date of conversion and not in
default will be payable against surrender thereof, and coupons so maturing but
in default will continue to be payable as set forth in the Indenture,
notwithstanding the exercise of the right of conversion by the Holder of the
Note to which the coupons appertain, but coupons maturing after the date of
conversion will not be paid. Any Registered Note surrendered for conversion
during the period from the close of business on any Regular Record Date to the
opening of business on the next succeeding Interest Payment Date (except Notes
called for redemption on a Redemption Date or to be repurchased on a Repurchase
Date during such period) must be accompanied by payment of an amount equal to
the interest payable on such Interest Payment Date on the principal amount of
Registered Notes being surrendered for conversion. In the case of any Registered
Note which has been converted after any Regular Record Date, but before the next
Interest Payment Date, interest the Stated Maturity of which is on such Interest
Payment Date shall be payable on such Interest Payment Date notwithstanding such
conversion. Such interest shall be paid to the Holder of such Registered Note on
such Regular Record Date. As a result, a Holder that surrenders Notes for
conversion on a date that is not an Interest Payment Date will not receive any
interest for the period from the Interest Payment Date next preceding the date
of conversion to the date of conversion or for any later period, even if the
Notes are surrendered after a notice of redemption (except for the payment of
interest on Registered Notes called for redemption on a Redemption Date or to be
repurchased on a Repurchase Date between a Regular Record Date and the Interest
Payment Date to which it relates). No other payment or adjustment for interest,
or for any dividends in respect of Common Shares, will be made upon conversion.
Holders of Common Stock issued upon conversion will not be entitled to receive
any dividends payable to holders of Common Shares as of any record time before
the close of business on the conversion date. No fractional shares will be
issued upon conversion but, in lieu thereof, an appropriate amount will be paid
in cash by the Company based on the market price of Common Shares on the day of
conversion.
A Holder delivering a Note for conversion will not be required to pay any
taxes or duties in respect of the issue or delivery of Common Shares on
conversion but will be required to pay any tax or duty which may be payable in
respect of any transfer involved in the issue or delivery of the Common Shares
in a name other than that of the Holder of the Note. Certificates representing
Common Shares 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 $44.00 per Common Share is subject to
adjustment (under formulae set forth in the Indenture) in certain events,
including: (i) the issuance of Common Shares as a dividend or distribution on
Common Shares of the Company; (ii) certain subdivisions and combinations of the
Common Shares; (iii) the issuance to all holders of Common Shares of certain
rights or warrants to purchase Common Shares (provided that the conversion price
will be readjusted to the extent that such rights or warrants are not exercised
prior to the expiration thereof); (iv) the distribution to all holders of Common
Shares of shares of capital stock of the Company (other than Common Shares) or
evidences of indebtedness of the Company or assets (including securities, but
excluding those rights, warrants, dividends and distributions referred to above
or paid in cash and excluding distributions pursuant to a split-up except as
otherwise provided by the second succeeding paragraph below); (v) distributions
consisting of cash, excluding any semiannual cash dividend on the Common Shares
to the extent that the aggregate cash dividend per Common Share in any
semiannual period does not exceed the greater of (x) the amount per Common Share
of the next preceding semiannual cash dividend on the Common Shares to the
extent that such preceding semiannual dividend did not require an adjustment of
the conversion price pursuant to this clause (v), and (y) 7.5% of the average of
the daily Closing
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Prices (as defined in the Indenture) of the Common Shares for the ten
consecutive Trading Days (as defined in the Indenture) immediately prior to the
date of declaration of such dividend, and excluding any dividend or distribution
in connection with the liquidation, dissolution or winding up of the Company;
(vi) payment in respect of a tender or exchange offer by the Company or any
subsidiary of the Company for the Common Shares to the extent that the cash and
value of any other consideration included in such payment per Common Share
exceeds the Current Market Price (as defined in the Indenture) per Common Share
on the Trading Day next succeeding the last date on which tenders or exchanges
may be made pursuant to such tender or exchange 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 date of the offer,
the Supervisory Board is not recommending rejection of the offer. If an
adjustment is required to be made as set forth in clause (v) above as a result
of a distribution that is a semiannual dividend, such adjustment would be based
upon the amount by which such distribution exceeds the amount of semiannual cash
dividend permitted to be excluded pursuant to such clause (v). If an adjustment
is required to be made as set forth in clause (v) above as a result of a
distribution that is not a semiannual dividend, such adjustment would be based
upon the full amount of the distribution. 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 Shares to more than 25%
of the total Common Shares outstanding and if the cash and value of any other
consideration included in such payment per Common Share, exceeds the Current
Market Price per Common Share on the business day next succeeding the last date
on which tenders or exchanges may be made pursuant to such tender or exchange
offer. 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
a consolidation or merger of the Company or a sale of all or substantially all
of the Company's assets.
The Company reserves the right to make such reductions in the conversion
price in addition to those required in the foregoing provisions as it considers
to be advisable in order that any event treated for federal income tax purposes
as a dividend of stock or stock rights will not be taxable to the recipients. No
adjustment of the conversion price will be required to be made until the
cumulative adjustments amount to 1.0% or more of the conversion price. No
adjustment of the conversion price will result in zero or in a negative number.
In the event that at the time of any conversion of a Note the conversion price
then in effect and the prevailing exchange rate would result in an effective per
share issue price (expressed in Dutch guilders) of less than the par value of a
Common Share, for purposes of such conversion, the conversion price will be
deemed to be the conversion price that results in an issue price that is as
close as possible to, but not less than, such par value.
In case of any consolidation or merger of the Company with or into another
Person or any merger of another Person into the Company (other than a merger
which does not result in any reclassification, conversion, exchange or
cancellation of the Common Shares), or in case of any sale or transfer of all or
substantially all of the assets of the Company, or in the case of a split-up of
the Company pursuant to which the assets and liabilities of the Company are
transferred to one or more Persons and the Company ceases to exist, each Note
then outstanding will, without the consent of the Holder of any Note or coupon,
become convertible only into the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, sale, transfer or split-up
by a holder of the number of Common Shares into which such Note was convertible
immediately prior thereto (assuming such holder of Common Shares failed to
exercise any rights of election and that such Note was then convertible). In the
event of a split-up of the Company pursuant to which all or a portion of the
assets and liabilities of the Company are transferred to one or more Persons and
the Company continues to exist, such split-up shall be treated as a distribution
to all holders of Common Shares to which clause (iv) of the second preceding
paragraph above shall apply.
The Company from time to time may reduce the conversion price 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 Supervisory Board has made a
determination that such reduction would be in the best interests of the Company,
which determination shall be conclusive.
If at any time the Company makes a distribution of property to its
shareholders which would be taxable to such shareholders as a dividend for
United States federal income tax purposes (e.g., distributions of evidences of
indebtedness or assets of the Company, but generally not stock dividends on
Common Shares or rights to subscribe for Common Shares) and, pursuant to the
anti-dilution provisions of the Indenture, the number of
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<PAGE> 26
shares into which Notes are convertible is increased, such increase may be
deemed for United States federal income tax purposes to be the payment of a
taxable dividend to Holders of Notes.
SUBORDINATION
The indebtedness evidenced by the Notes is subordinated in right of payment
to the extent provided in the Indenture to the prior payment in full of all
Senior Indebtedness (as defined). Upon any distribution of assets of the Company
upon any dissolution, winding up, liquidation or reorganization (including any
of the foregoing as a result of bankruptcy or moratorium of payment), 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 cash of all Senior Indebtedness. In the event of any
acceleration of the Notes because of an Event of Default (as defined in the
Indenture), the holders of any Senior Indebtedness then outstanding would be
entitled to payment in full in cash 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 Indenture will require that the Company
promptly notify holders of Senior Indebtedness if payment of the Notes is
accelerated because of an Event of Default.
The Company also may not make any payment upon or in respect of the Notes
if (i) a default in the payment of the principal of, premium, if any, interest,
rent or other obligations in respect of Senior Indebtedness occurs and is
continuing beyond any applicable period of grace or (ii) any other default
occurs and is continuing with respect to Designated Senior Indebtedness (as
defined) that permits holders of the Designated Senior Indebtedness as to which
such default relates to accelerate its maturity and the Trustee receives a
notice of such default (a "Payment Blockage Notice") from the Company or other
person permitted to give such notice under the Indenture. Payments on the Notes
may and shall be resumed (a) in case of a payment default, upon the date on
which such default is cured or waived and (b) in case of a nonpayment default,
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 and until (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 come due have been paid in full in cash. No nonpayment default that existed
or was continuing on the date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice.
By reason of the subordination provisions described above, in the event of
the Company's bankruptcy, dissolution 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 any Event of Default under the Indenture. In
addition, the ranking of certain claims against the Company, including but not
limited to claims to be paid out of the proceeds of assets of the Company
located in The Netherlands, will be governed by the law of The Netherlands.
Under Netherlands law, in the event of an insolvency of the Company, there is a
risk that a court of competent jurisdiction may determine that any payment on
the Senior Indebtedness must on a pari passu basis also be made on all other
non-secured and unsubordinated claims against the Company. In such case, the
Notes would be effectively subordinated in right of payment to both the Senior
Indebtedness and all such other non-secured and unsubordinated claims against
the Company at the time and the Holders of the Notes might not receive any
payment until both the holders of Senior Indebtedness and all other
unsubordinated creditors had been paid in full.
The term "Senior Indebtedness" means the principal of, premium, if any,
interest (including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding) and rent payable on or
in connection with, and all fees, costs, expenses and other amounts accrued or
due on or in connection with, Indebtedness (as defined) of the Company, whether
outstanding on the date of the Indenture or thereafter created, incurred,
assumed, guaranteed or in effect guaranteed by the Company (including all
deferrals, renewals, extensions or refundings of, or amendments, modifications
or supplements to, the foregoing), unless in the case of any particular
Indebtedness the instrument creating or evidencing the same or the assumption or
guarantee thereof expressly provides that such Indebtedness shall not be senior
in right of payment to the
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<PAGE> 27
Notes or expressly provides that such Indebtedness is "pari passu" or "junior"
to the Notes. Notwithstanding the foregoing, the Senior Indebtedness shall not
include any Indebtedness 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. The term "Indebtedness" means, with respect to any Person (as defined
in the Indenture), and without duplication, (a) all indebtedness, obligations
and other liabilities (contingent or otherwise) of such Person for borrowed
money (including obligations of the Company in respect of overdrafts, foreign
exchange contracts, currency exchange agreements, interest rate protection
agreements, and any loans or advances from banks, whether or not evidenced by
notes or similar instruments) or evidenced by bonds, debentures, notes or
similar instruments (whether or not the recourse of the lender is to the whole
of the assets of such Person or to only a portion thereof)(other than any
account payable or other accrued current liability or obligation incurred in the
ordinary course of business in connection with the obtaining of materials or
services), (b) all reimbursement obligations and other liabilities (contingent
or otherwise) of such Person with respect to letters of credit, bank guarantees
or bankers' acceptances, (c) all obligations and liabilities (contingent or
otherwise) in respect of leases of such Person required, in conformity with
generally accepted accounting principles, to be accounted for as capitalized
lease obligations on the balance sheet of such Person and all obligations and
other liabilities (contingent or otherwise) under any lease or related document
(including a purchase agreement) in connection with the lease of real property
which provides that such Person is contractually obligated to purchase or cause
a third party to purchase the leased property and thereby guarantee a minimum
residual value of the leased property to the landlord and the obligations of
such Person under such lease or related document to purchase or to cause a third
party to purchase such leased property, (d) all obligations of such Person
(contingent or otherwise) with respect to an interest rate or other swap, cap or
collar agreement or other similar instrument or agreement or foreign currency
hedge, exchange, purchase or similar instrument or agreement, (e) all direct or
indirect guaranties or similar agreements by such Person in respect of, and
obligations or liabilities (contingent or otherwise) of such Person to purchase
or otherwise acquire or otherwise assure a creditor against loss in respect of,
indebtedness, obligations or liabilities of another Person of the kind described
in clauses (a) through (d), (f) any indebtedness or other obligations described
in clauses (a) through (d) secured by any mortgage, pledge, lien or other
encumbrance existing on property which is owned or held by such Person,
regardless of whether the indebtedness or other obligation secured thereby shall
have been assumed by such Person and (g) any and all deferrals, renewals,
extensions and refundings of, or amendments, modifications or supplements to,
any indebtedness, obligation or liability of the kind described in clauses (a)
through (f). The term "Designated Senior Indebtedness" means the Company's
obligations under the Credit Agreement (as defined) and any particular Senior
Indebtedness in which 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 right of such Senior Indebtedness to exercise the rights of
Designated Senior Indebtedness).
The Notes are obligations exclusively of the Company. The Company is a
holding company whose principal assets are its subsidiaries. Since substantially
all of the operations of the Company are conducted through its subsidiaries, the
cash flow and the consequent ability to service debt, including the Notes, of
the Company are partially dependent upon the earnings of its subsidiaries and
the distribution of those earnings, or upon loans or other payments of funds by
those subsidiaries, to the Company. Such 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, distributions, loans or other payments. In addition, the
payment of dividends or distributions and the making of loans and advances to
the Company by any such subsidiaries could be subject to statutory or
contractual restrictions, could be contingent upon the earnings of those
subsidiaries and are subject to various business considerations. Any right of
the Company to receive any assets of any of its subsidiaries upon their
liquidation or reorganization (and the consequent right of the Holders of the
Notes to participate in those 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
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<PAGE> 28
subordinate to any security interest in the assets of such subsidiary and any
indebtedness of such subsidiary senior to that held by the Company.
As of September 30, 1996, the Company had approximately $35 million of
indebtedness outstanding that would have constituted Senior Indebtedness
(including a notional amount of approximately $29 million of foreign currency
forward contracts). As of September 30, 1996, the Company's subsidiaries had
approximately $73 million of indebtedness and other liabilities (excluding
intercompany liabilities and liabilities of a type not required to be reflected
as a liability on the balance sheet of such subsidiaries in accordance with
generally accepted accounting principles) as to which the Notes would have been
effectively subordinated. The Indenture does not prohibit or limit the
incurrence of Senior Indebtedness or the incurrence of other indebtedness and
other liabilities by the Company or its subsidiaries, and the incurrence of any
such additional indebtedness and other liabilities could adversely affect the
Company's ability to pay its obligations on the Notes. The Company expects from
time to time to incur additional indebtedness, including Senior Indebtedness,
and that it and its subsidiaries will from time to time incur additional
indebtedness and other liabilities. See "Risk Factors -- Leverage and
Subordination."
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 subordination provisions 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 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.
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.
REDEMPTION
OPTIONAL REDEMPTION
The Notes are not entitled to any sinking fund. At any time on or after
December 16, 1998, the Notes will be redeemable at the Company's option on at
least 20 and not more than 60 days' notice as a whole or, from time to time, in
part at the following prices (expressed as percentages of the principal amount),
together with accrued interest to, but excluding, the Redemption Date, except
that prior to December 16, 1999 the Notes will not be redeemable at the option
of the Company unless the closing price of the Common Shares shall have exceeded
140% of the conversion price then in effect for 20 trading days within a period
of 30 consecutive trading days ending within five trading days prior to the
notice of redemption.
If redeemed during the 12-month period beginning December 15:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
------------------------------------------------------------------ ----------
<S> <C>
1998.............................................................. 102.7%
1999.............................................................. 101.8
2000.............................................................. 100.9
</TABLE>
and 100% at December 15, 2001; provided that any semi-annual payment of interest
becoming due on the Redemption Date shall be payable to the Holders of record on
the Regular Record Date of the Notes being redeemed.
If fewer than all the Notes are to be redeemed, the Trustee will select the
Notes to be redeemed by lot. 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
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<PAGE> 29
such Holder converts a portion of such Notes, such converted portion shall be
deemed to be taken from the portion selected for redemption.
REDEMPTION FOR TAXATION REASONS
If, as a result of any change in, or amendment to, the laws or regulations
prevailing in The Netherlands or any political subdivision or taxing authority
thereof or therein, which change or amendment becomes effective on or after
December 12, 1996 or as a result of any application or official interpretation
of such laws or regulations not generally known before that date (a "Tax Law
Change") the Company is or would be required on the next succeeding Interest
Payment Date to pay Additional Amounts (as defined), and such requirement or
obligation cannot be avoided by the Company taking reasonable measures available
to it, the Company may redeem the affected Notes in whole, but not in part, at
any time, on giving not less than 20 days' notice, at a redemption price equal
to 100% of the principal amount thereof plus accrued interest to, but excluding,
the Redemption Date and any Additional Amounts then payable, provided that no
such notice of redemption shall be given earlier than 90 days prior to the
earliest date on which the Company would be obligated to withhold or pay
Additional Amounts were a payment in respect of the Notes then made.
Prior to the publication of any notice of redemption pursuant to this
paragraph, the Company shall deliver to the Trustee (a) a certificate stating
that the Company is entitled to effect such redemption and setting forth a
statement of facts showing that the conditions precedent to the right of the
Company so to redeem have occurred and (b) an opinion of counsel selected by the
Company and reasonably acceptable to the Trustee, to the effect that the Company
has or will become obligated to pay such Additional Amounts as a result of a Tax
Law Change. The Company's right to redeem the affected Notes shall continue as
long as the Company is obligated to pay Additional Amounts, notwithstanding that
the Company shall have theretofore made payments of Additional Amounts.
PAYMENT AND CONVERSION
Bearer Notes and coupons will be payable in U.S. dollars against surrender
thereof, subject to any applicable laws and regulations, at such paying agencies
outside the United States as the Company may appoint from time to time and, at
the option of the Holder, such payment will be made by dollar check drawn on a
bank in The City of New York or by transfer to a dollar account (such transfer
to be made only to Holders of an aggregate principal amount of Notes in excess
of $2,000,000) maintained by the payee with a bank outside the United States. It
will be the responsibility of the payee to establish and maintain such a dollar
account. No payment with respect to any Bearer Note or coupon will be made at
the Corporate Trust Office of the Trustee or any other Paying Agent maintained
by the Company in the United States, nor will any payment be made by transfer to
an account, or by mail to an address, in the United States. Notwithstanding the
foregoing, payments with respect to Bearer Notes and coupons may be made at an
office or agency of the Corporate Trust Office of the Trustee in The City of New
York, if payment at all Paying Agents outside the United States is illegal or
effectively precluded by exchange controls or other similar restrictions on the
full payment or receipt of such amounts in United States dollars.
The principal of Registered Notes will be payable in U.S. dollars, against
surrender thereof at the Corporate Trust Office of the Trustee in The City of
New York, or, subject to any applicable laws and regulations, at the office of
any Paying Agent, by dollar check drawn on, or by transfer to a dollar account
(such transfer to be made only to Holders of an aggregate principal amount of
Registered Notes in excess of $2,000,000) maintained by the Holder with, a bank
in The City of New York. Payment of any installment of interest on Registered
Notes will be made to the Person in whose name such Notes (or any predecessor
Note) is registered at the close of business on June 1 or December 1 (whether or
not a Business Day) immediately preceding the relevant Interest Payment Date (a
"Regular Record Date"). Payments of such interest will be made by a dollar check
drawn on a bank in The City of New York mailed to the Holder at such Holder's
registered address or, upon application by the Holder thereof to the Trustee not
later than the applicable Regular Record Date, by transfer to a dollar account
(such transfer to be made only to Holders of an aggregate principal amount of
Registered Notes in excess of $2,000,000) maintained by the Holder with a
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<PAGE> 30
bank in The City of New York. No transfer to a dollar account will be made
unless the Trustee has received written wire instructions not less than 15 days
prior to the relevant payment date.
Any payment on the Notes due on any day which is not a Business Day need
not be made on such day, but may be made on the next succeeding Business Day
with the same force and effect as if made on such due date, and no interest
shall accrue on such payment for the period from and after such date. "Business
Day," when used with respect to any place of payment, place of conversion or any
other place, as the case may be, means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in such place of
payment, place of conversion or other place, as the case may be, are authorized
or obligated by law or executive order to close; provided, however, that a day
on which banking institutions in New York, New York or Amsterdam, The
Netherlands, are authorized or obligated by law or executive order to close
shall not be a Business Day for certain purposes.
Notes may be surrendered for conversion, subject to any applicable laws and
regulations, at the office of any Conversion Agent outside the United States. In
addition, Registered Notes may be surrendered for conversion at the Corporate
Trust Office of the Trustee in The City of New York, and, if conversion at the
offices of all Conversion Agents outside the United States is illegal or
effectively precluded by exchange controls or similar restrictions, Bearer Notes
may be surrendered for conversion at such Corporate Trust Office. Notes
surrendered for conversion must be accompanied by appropriate notices, any
unmatured coupons and any payments in respect of interest or taxes, as
applicable, as described above under "-- Conversion."
The Company has initially appointed as Paying Agents and Conversion Agents
the Trustee at its Corporate Trust Office and ABN AMRO Bank N.V. in Amsterdam,
The Netherlands. The Company may at any time terminate the appointment of any
Paying Agent or Conversion Agent and appoint additional or other Paying Agents
and Conversion Agents, provided that until the Notes have been delivered to the
Trustee for cancellation, or moneys sufficient to pay the principal of, 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, it will
maintain an office or agency in The City of New York, for surrender of Notes for
conversion (but only in the circumstances described in the second sentence of
the immediately preceding paragraph, and not otherwise, with respect to Bearer
Notes), and in a Western European city for payments with respect to the Notes
and for the surrender of Notes for conversion. Notice of any such termination or
appointment and of any change in the office through which any Paying Agent or
Conversion Agent will act will be given in accordance with "-- Notices" below.
Bearer Notes should be presented for payment upon redemption or repurchase
together with all unmatured coupons, failing which the amount of any missing
unmatured coupons will be deducted from the sum due for payment. Each amount so
deducted will be paid in the manner described in the first paragraph under this
heading against surrender of the related missing coupon. Interest payable on any
Bearer Notes on any Redemption Date or Repurchase Date which is an Interest
Payment Date will be paid to the Holders of the coupons maturing on such
Interest Payment Date. Interest payable on Registered Notes on any Redemption
Date or Repurchase Date that is an Interest Payment Date will be paid to the
Holders of record as of the immediately preceding Regular Record Date.
All moneys deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of principal of, premium, if any, or
interest on any Notes which remain unclaimed at the end of two years after such
payment has become due and payable will be repaid to the Company, and the Holder
of such Note or any coupon appertaining thereto 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 coupon appertaining
thereto 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, after deduction or 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 Netherlands or any political subdivision or taxing authority
thereof or therein, will not be less than the amount
28
<PAGE> 31
provided for in such Note or in such coupon to be then due and payable; provided
however, that the foregoing obligation to pay Additional Amounts will not apply
to:
(a) any tax, assessment or other governmental charge which would not
have been so imposed but for the existence of any present or former
connection between such Holder (or between a fiduciary, settlor,
beneficiary, member, shareholder of or possessor of a power over such
Holder, if such Holder is an estate, a partnership or a corporation) and
The Netherlands or any political subdivision or taxing authority thereof or
therein, including, without limitation, such Holder (or such fiduciary,
settlor, beneficiary, member, shareholder or possessor) being or having
been a citizen, domiciliary or resident of The Netherlands or treated as a
resident thereof, or being or having been engaged in trade or business or
present therein, or having or having had a permanent establishment therein;
(b) any tax, assessment or other governmental charge which would not
have been so imposed but for the presentation by the Holder of such Notes
or any coupon appertaining thereto for payment on a date more than 15 days
after the date on which such payment became due and payable or the date on
which payment thereof is duly provided for, whichever occurs later;
(c) any estate, inheritance, gift, sales, transfer, personal property
or similar tax, assessment or governmental charge;
(d) in the case of Notes other than Bearer Notes, any tax, assessment
or other governmental charge which would not have been imposed but for the
failure of such Holder (or such fiduciary, settlor, beneficiary, member,
shareholder or possessor) of such Note to comply with a request by the
Company addressed to such Holder (or such fiduciary, settlor, beneficiary,
member, shareholder or possessor) (A) to provide information concerning the
nationality, residence or identity of such Holder (or such fiduciary,
settlor, beneficiary, member, shareholder or possessor) or (B) to make any
declaration or other similar claim or satisfy any information or reporting
requirement, which, in the case of (A) or (B), is required or imposed by a
statute, treaty, regulation or administrative practice of the taxing
jurisdiction as a precondition to exemption from all or part of 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,
premium, if any, or interest on such Note;
(f) any tax, assessment or other governmental charge imposed on a
Holder that is a partnership or a fiduciary or other than the sole
beneficial owner of such payment, but only to the extent that any
beneficial owner or member of the partnership or beneficiary or settlor
with respect to the fiduciary would not have been entitled to the payment
of Additional Amounts had the beneficial owner, member, beneficiary or
settlor directly been the Holder of the Note or coupon; or
(g) any combination of items (a), (b), (c), (d), (e) and (f).
Notwithstanding the foregoing, the Company shall not be obligated to pay
Additional Amounts in respect of payments becoming due on the Notes more than 15
days after the Redemption Date with respect to any redemption of the Notes
described in the first paragraph under "Redemption -- Redemption for Taxation
Reasons" to the extent that the Company's obligation to pay such Additional
Amounts arises from the Tax Law Change that resulted in such redemption.
REPURCHASE AT OPTION OF HOLDERS UPON A FUNDAMENTAL CHANGE
If a Fundamental Change (as defined) occurs, each Holder of Notes shall
have the right, at the Holder's option, to require the Company to repurchase all
of such Holder's Notes, or any portion of a Registered Note that is $5,000 or an
integral multiple of $1,000 in excess thereof, on the date (the "Repurchase
Date") that is 45 days after the date of the Company Notice (as defined), at a
price (the "Repurchase Price") (expressed as a percentage of the principal
amount) equal to (i) 104.5% if the Repurchase Date is during the 12-month period
beginning December 15, 1996, (ii) 103.6% if the Repurchase Date is during the
12-month period beginning December 15, 1997 and (iii) thereafter at the
redemption price set forth under "-- Redemption -- Optional Redemption" which
would be applicable to a redemption at the option of the Company on the
Repurchase Date; provided that, if the Applicable Price (as defined) is less
than the Reference Market Price
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<PAGE> 32
(as defined), the Company shall repurchase such Notes at a price equal to the
foregoing redemption price multiplied by the fraction obtained by dividing the
Applicable Price by the Reference Market Price. In each case, the Company shall
also pay accrued interest on the redeemed Notes to, but excluding, the
Repurchase Date.
Within 30 days after the occurrence of a Fundamental Change, the Company is
obligated to give to all Holders of the Notes notice, as provided in the
Indenture (the "Company Notice"), of the occurrence of such Fundamental Change
and of the repurchase right arising as a result thereof. The Company must also
deliver a copy of the Company Notice to the Trustee. To exercise the repurchase
right, a Holder of Notes must deliver on or before the 30th day after the date
of the Company Notice irrevocable written notice to the Trustee or any Paying
Agent of the Holder's exercise of such right, together with the Notes, and, in
the case of Bearer Notes, any coupons maturing after the Repurchase Date, with
respect to which the right is being exercised; provided, however, that a Holder
of Bearer Notes must deliver such Bearer Notes to a Paying Agent outside the
United States, unless such delivery for repurchase at the offices of all Paying
Agents outside the United States is illegal or effectively precluded by exchange
controls or similar restrictions. Beneficial owners of an interest in a
Registered Global Note may exercise the repurchase right by delivering the
appropriate instruction form for repurchases at the election of Holders pursuant
to the DTC book-entry repurchase program.
The term "Fundamental Change" means the occurrence of any transaction or
event in connection with which all or substantially all of the Common Shares
shall be exchanged for, converted into, acquired for or constitute solely the
right to receive, consideration (whether by means of an exchange offer,
liquidation, tender offer, consolidation, merger, split-up, combination,
reclassification, recapitalization or otherwise) which is not all or
substantially all common stock or shares which are (or, upon consummation of or
immediately following such transaction or event, will be) listed on a United
States or Western European securities exchange or approved for quotation on the
Nasdaq National Market or any similar United States or Western European
system of automated dissemination of quotations of securities prices. The term
"Applicable Price" means (i) in the event of a Fundamental Change in which the
holders of Common Shares receive only cash, the amount of cash received by the
holder of one Common Share and (ii) in the event of any other Fundamental
Change, the average of the last reported sale price for the Common Shares during
the ten Trading Days prior to the record date for the determination of the
holders of Common Shares entitled to receive cash, securities, property or other
assets in connection with such Fundamental Change or, if no such record date
exists, the date upon which the holders of the Common Shares shall have the
right to receive such cash, securities, property or other assets in connection
with the Fundamental Change. The term "Reference Market Price" shall initially
mean $22.83 (which is equal to 66 2/3% of the last sale price of the Common
Shares reported on the Nasdaq National Market on December 12, 1996, as reflected
on the cover page of this Offering Memorandum) and in the event of any
adjustment to the conversion price described above pursuant to the provisions of
the Indenture, the Reference Market Price shall also be adjusted so that the
ratio of the Reference Market Price to the conversion price after giving effect
to any such adjustment shall always be the same as the ratio of $22.83 to the
conversion price specified on the cover page of this Offering Memorandum
(without regard to any adjustment thereto).
Rule 13e-4 under the Exchange Act requires 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
the Notes. The Company will comply with this rule to the extent applicable at
that time.
Upon a Fundamental Change (as defined), each Holder of Notes will have
certain rights, at the Holder's option, to require the Company to repurchase all
or a portion of such Holder's Notes. If a Fundamental Change were to occur,
there can be no assurance that the Company would have sufficient funds to pay
the Repurchase Price for all Notes tendered by the Holders thereof. Any future
credit agreements or other agreements relating to other indebtedness (including
other Senior Indebtedness) to which the Company becomes a party may contain
restrictions and provisions which prohibit the Company from purchasing or
redeeming any Notes or provide that a Fundamental Change would constitute an
event of default thereunder. In the event a Fundamental Change occurs at a time
when the Company is prohibited from purchasing or redeeming Notes, the Company
could seek the consent of its lenders to the purchase of Notes or could
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attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain such a consent or repay such borrowings, the Company
would remain prohibited from purchasing or redeeming Notes. In such case, the
Company's failure to repurchase tendered Notes would constitute an Event of
Default under the Indenture, which would, in turn, constitute a further default
under the Company's then existing bank facilities and may constitute a default
under the terms of other indebtedness that the Company may enter into from time
to time. In such circumstances, the subordination provisions in the Indenture
would likely restrict payments to the Holders of Notes.
The Company may, to the extent permitted by applicable law, at any time
purchase Notes in the open market or by tender at any price or by private
agreement. Any Note so purchased by the Company may, to the extent permitted by
applicable law, be re-issued or resold or may, at the Company's option, be
surrendered to the Trustee for cancellation. Any Notes surrendered as aforesaid
and all unmatured coupons attached to them or surrendered with them may not be
re-issued or resold and will be cancelled promptly.
The foregoing provisions would not necessarily afford Holders of the Notes
protection in the event of highly leveraged or other transactions involving the
Company that may adversely affect Holders.
MERGERS AND SALES OF ASSETS BY THE COMPANY
The Company may not consolidate with or merge into any other Person (in a
transaction in which the Company is not the surviving entity) or transfer or
lease its properties and assets substantially as an entirety to any Person
unless the Person formed by such merger or into which the Company is merged or
the Person to which the properties and assets of the Company are so transferred
or leased shall expressly assume the payment of the principal of, premium, if
any, and interest on the Notes and coupons and the performance of the other
covenants of the Company under the Indenture. The Company also may not
consummate a split-up unless, following conclusion of the split-up, there would
be at least one obligor that is fully liable for the payment of the principal
of, premium, if any, and interest on the Notes and coupons and the performance
of the other covenants of the Company under the Indenture.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture: (a) failure to
pay principal of or premium, if any, on any Note when due; (b) failure to pay
any interest on any Note or coupon when due, continuing for 30 days; (c) failure
to perform any other covenant of the Company in the Indenture, continuing for 60
days after written notice as provided in the Indenture; and (d) certain events
of bankruptcy, insolvency or reorganization. Subject to the provisions of the
Indenture relating to the duties of the Trustee in case an Event of Default
shall occur and be continuing, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request or
direction of any of the Holders, unless such Holders shall have offered to the
Trustee reasonable indemnity. Subject to such provisions for the indemnification
of the Trustee, the Holders of a majority in aggregate principal amount of the
Outstanding Notes will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee.
If an Event of Default (other than as specified in clause (d) above) shall
occur and be continuing, either the Trustee or the Holders of at least 25%
principal amount of the Outstanding Notes may accelerate the maturity of all
Notes; provided, however, that after such acceleration, but before a judgment or
decree based on acceleration, the Holders of a majority in aggregate principal
amount of Outstanding Notes may, under certain circumstances, rescind and annul
such acceleration if all Events of Default, other than the non-payment of
accelerated principal, have been cured or waived as provided in the Indenture.
If an Event of Default as specified in clause (d) above occurs and is
continuing, then the principal of, and accrued interest on, all the Notes shall
ipso facto become immediately due and payable without any declaration or other
act on the part of the Holders of the Notes or the Trustee. For information as
to waiver of defaults, see "-- Meetings, Modification and Waiver."
No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder shall
have previously given to the Trustee written notice of a
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continuing Event of Default and the Holders of at least 25% in aggregate
principal amount of the Outstanding Notes shall have made written request, and
offered reasonable indemnity, to the Trustee to institute such proceeding as
trustee, and the Trustee shall not have received from the Holders of a majority
in aggregate principal amount of the Outstanding Notes a direction inconsistent
with such request and shall have failed to institute such proceeding within 60
days. However, such limitations do not apply to a suit instituted by a Holder of
a Note or coupon for the enforcement of payment of the principal of, premium, if
any, or interest on such Note or such coupon on or after the respective due
dates expressed in such Note or coupon or of the right to convert such Note in
accordance with the Indenture.
The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance.
MEETINGS, MODIFICATION AND WAIVER
The Indenture contains provisions for convening meetings of the Holders of
Notes to consider matters affecting their interests.
Modifications and amendments of the Indenture may be made, and certain past
defaults by the Company may be waived, either (i) with the written consent of
the Holders of not less than a majority in aggregate principal amount of the
Notes at the time Outstanding or (ii) by the adoption of a resolution, at a
meeting of Holders of the Notes at which a quorum is present, by the Holders of
at least the lesser of a majority in aggregate principal amount of the Notes at
the time Outstanding and 66 2/3% of the aggregate principal amount of the Notes
represented and entitled to vote at such meeting. However, no such modification
or amendment may, without the consent of the Holder of each Outstanding Note or
coupon affected thereby, (a) change the Stated Maturity of the principal of, or
any installment of interest on, any Note or coupon, (b) reduce the principal
amount of, or the premium, if any, or interest on, any Note or coupon, (c)
reduce the amount payable upon a redemption or mandatory repurchase, (d) modify
the provisions with respect to the repurchase right of the Holders in a manner
adverse to the Holders, (e) change the obligation of the Company to pay
Additional Amounts described above in a manner adverse to the Holders, (f)
change the place or currency of payment of principal of, or premium, if any, or
interest on, any Note or coupon, (g) impair the right to institute suit for the
enforcement of any payment on or with respect to any Note or coupon, (h) modify
the obligation of the Company to maintain an office or agency in The City of New
York and in a Western European city, (i) adversely affect the right to convert
Notes, (j) modify the subordination provisions in a manner adverse to the
Holders of the Notes, (k) reduce the above-stated percentage of Outstanding
Notes necessary to modify or amend the Indenture, (l) reduce the percentage of
aggregate principal amount of Outstanding Notes necessary for waiver of
compliance with certain provisions of the Indenture or for waiver of certain
defaults, (m) reduce the percentage in aggregate principal amount of Outstanding
Notes required for the adoption of a resolution or the quorum required at any
meeting of Holders of Notes at which a resolution is adopted, or (n) modify the
obligation of the Company to deliver information required under Rule 144A to
permit resales of Notes and Common Shares issuable upon conversion thereof in
the event the Company ceases to be subject to certain reporting requirements
under the United States securities laws. The quorum at any meeting called to
adopt a resolution will be persons holding or representing a majority in
aggregate principal amount of the Notes at the time Outstanding and, at any
reconvened meeting adjourned for lack of a quorum, 25% of such aggregate
principal amount.
The Holders of a majority in aggregate principal amount of the Outstanding
Notes may waive compliance by the Company with certain restrictive provisions of
the Indenture by written consent. The Holders of a majority in aggregate
principal amount of the Outstanding Notes also may waive any past default under
the Indenture, except a default in the payment of principal, premium, if any, or
interest, by written consent.
REGISTRATION RIGHTS
The Company has entered into a registration rights agreement with the
Initial Purchasers (the "Registration Rights Agreement") pursuant to which the
Company, at the Company's expense for the benefit of the holders of the Notes
issued and sold otherwise than in reliance upon Regulation S (the "Restricted
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Notes") and the Common Shares issuable upon conversion thereof (together, the
"Registrable Securities"), (i) has filed with the Commission this registration
statement (the "Shelf Registration Statement") covering resales of the
Registrable Securities, (ii) will use its reasonable efforts to cause the Shelf
Registration Statement to be declared effective under the Securities Act within
180 days after the date of original issuance of the Notes and (iii) will use its
reasonable efforts to keep effective the Shelf Registration Statement until the
third anniversary of the last date of original issuance of Notes or such earlier
date as all Registrable Securities shall have been disposed of or on which all
Registrable Securities held by persons that are not affiliates of the Company
may be resold without registration pursuant to Rule 144(k) under the Securities
Act (the "Effectiveness Period"). The Company will be permitted to suspend the
use of the prospectus which is part of the Shelf Registration Statement in
connection with the sales of the Registrable Securities during certain periods
of time under certain circumstances relating to pending corporate developments,
public filings with the Commission and other events. The Company will provide to
each holder of Registrable Securities copies of the prospectus that is a part of
the Shelf Registration Statement, notify each holder when the Shelf Registration
Statement has become effective and take certain other actions as are required to
permit public resales of the Registrable Securities. A holder of Registrable
Securities that sells such Registrable Securities pursuant to the Shelf
Registration Statement will be required to be named as a selling security holder
in the related prospectus and to deliver a prospectus to purchasers, will be
subject to certain of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions of the
Registration Rights Agreement, including certain indemnification obligations.
If (i) on or prior to 90 days following the date of original issuance of
the Notes a Shelf Registration Statement has not been filed with the Commission
or (ii) on or prior to the 180th day following the date of original issuance of
the Notes, such Shelf Registration Statement is not declared effective (each, a
"Registration Default"), additional interest ("Liquidated Damages") will accrue
on the Restricted Notes, from and including the day following such Registration
Default until such time as such Shelf Registration Statement is filed or such
Shelf Registration Statement is declared effective, as the case may be.
Liquidated Damages will be paid semi-annually in arrears, with the first
semi-annual payment due on the first Interest Payment Date following the date on
which such Liquidated Damages begin to accrue, and will accrue at a rate per
annum equal to an additional one-quarter of one percent (0.25%) of the principal
amount, to and including the 90th day following such Registration Default and
one-half of one percent (0.50%) thereof from and after the 91st day following
such Registration Default. In the event that during the Effectiveness Period the
Shelf Registration Statement ceases to be effective for more than 90 days or the
Company suspends the use of the prospectus which is a part thereof for more than
90 days, whether or not consecutive, during any 12-month period, then the
interest rate borne by Restricted Notes will increase by an additional one-half
of one percent (0.50%) per annum from the 91st day of the applicable 12-month
period such Shelf Registration Statement ceases to be effective or the Company
suspends the use of the prospectus which is a part thereof, as the case may be,
until the earlier of such time as (i) the Shelf Registration Statement again
becomes effective, (ii) the use of the related prospectus ceases to be suspended
or (iii) the Effectiveness Period expires. The Company has agreed in the
Registration Rights Agreement to use its reasonable efforts to cause such Common
Shares issuable upon conversion of the Restricted Notes to be quoted on the
Nasdaq National Market, or, if the Common Shares are not then quoted on the
Nasdaq National Market, to be listed on such exchange or market in the United
States as the Common Shares are then listed, upon effectiveness of the Shelf
Registration Statement.
The summary of certain provisions of the Registration Rights Agreement does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, all the provisions of the Registration Rights Agreement, a copy of
the form of which will be made available to prospective investors in the Notes
upon request to the Company.
TRANSFER AND EXCHANGE
At the option of the Holder upon request confirmed in writing, and subject
to the terms of the Indenture, Bearer Notes (with all unmatured coupons, except
as provided below) will be exchangeable at any time after the Exchange Date into
an equal aggregate principal amount of Registered Notes, and Registered Notes
will
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be exchangeable at any time into an equal aggregate principal amount of
Registered Notes of different authorized denominations. See "-- Form and
Denomination." Bearer Notes surrendered in exchange for Registered Notes between
a Regular Record Date or Special Record Date and the relevant Interest Payment
Date or date on which Defaulted Interest will be paid, as the case may be, will
not be required to be surrendered with the coupons relating to such Interest
Payment Date or payment date, as the case may be. Registered Notes may not be
exchanged for Bearer Notes.
Bearer Notes may be presented for exchange at the office of any transfer
agent outside the United States. Registered Notes may be presented for
registration of transfer (with the form of transfer endorsed thereon duly
executed) or exchange, at the office of any transfer agent or at the office of
the security registrar, without service charge but, in the case of a transfer,
upon payment of any taxes and other governmental charges as described in the
Indenture. Any registration of transfer or exchange will be effected upon the
transfer agent or the security registrar, as the case may be, being satisfied
with the documents of title and identity of the person making the request, and
subject to such reasonable regulations as the Company may from time to time
agree upon with the transfer agents and the security registrar, all as described
in the Indenture. Registered Notes may be transferred in whole or in part in
authorized denominations.
The Company has initially appointed the Trustee as security registrar and
transfer agent, acting through its Corporate Trust Offices in The City of New
York, and has appointed ABN AMRO Bank N.V., in Amsterdam, The Netherlands, as
transfer agent. The Company reserves the right to vary or terminate the
appointment of the security registrar or of any transfer agent or to appoint
additional or other transfer agents or to approve any change in the office
through which any security registrar or any transfer agent acts, provided that
there will at all times be a security registrar in and a transfer agent in a
Western European city.
In the event of a redemption of less than all of the Notes for any of the
reasons set forth above under "-- Redemption," the Company will not be required
(a) to register the transfer or exchange of Registered Notes or to exchange
Bearer Notes for Registered Notes for a period of 15 days immediately preceding
the date notice is given identifying the serial numbers of the Notes called for
such redemption, (b) to register the transfer of or exchange any Registered
Note, or portion thereof, called for redemption, or (c) to exchange any Bearer
Note called for redemption; provided, however that a Bearer Note called for
redemption may be exchanged for a Registered Note which is simultaneously
surrendered to the registrar or transfer agent making such exchange with written
instructions for conversion consistent with the provisions described under
"-- Conversion" and "-- Payment and Conversion" above.
Prior to the expiration of the , beneficial interests in the Regulation S
Global Note may be exchanged for beneficial interests in the Restricted Global
Note only if such exchange occurs in connection with a transfer of the Notes
pursuant to Rule 144A and the transferor first delivers to the Trustee a written
certificate (in the form provided in the Indenture) to the effect that the Notes
are being transferred to a person who the transferor reasonably believes is a
qualified institutional buyer within the meaning of Rule 144A under the
Securities Act, purchasing for its own account or the account of a qualified
institutional buyer in a transaction meeting the requirements of Rule 144A and
in accordance with all applicable securities laws of the states of the United
States and other jurisdictions.
Beneficial interests in the Restricted Global Note may be transferred to a
person who acquires the same in the form of a beneficial interest in the
Regulation S Global Note, whether before or after the expiration of the , only
if the transferor first delivers to the Trustee a written certificate (in the
form provided in the Indenture) to the effect that such transfer is being made
in accordance with Rule 903 or 904 of Regulation S or Rule 144 (if available)
and that, if such transfer occurs prior to the expiration of the , the interest
transferred will be held immediately thereafter through Euroclear or CEDEL.
Any beneficial interest in one of the Global Registered Notes that is
transferred to a person who takes delivery in the form of an interest in the
other Global Registered Note will, upon transfer, cease to be an interest in
such Global Registered Note and will become an interest in the other Global
Registered Note and, accordingly, will thereafter be subject to all transfer
restrictions and other procedures applicable to beneficial interests in such
other Global Registered Note for so long as it remains such an interest.
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Transfers involving an exchange of a beneficial interest in the Regulation
S Global Note for a beneficial interest in the Restricted Global Note or vice
versa will be effected in DTC by means of an instruction originated by the
Trustee through the DTC/Deposit Withdrawal at Custodian (DWAC) system.
Accordingly, appropriate adjustments will be made to reflect a decrease in the
principal amount of the Regulation S Global Note and a corresponding increase in
the principal amount of the Restricted Global Note or vice versa, as applicable.
TITLE
Subject to applicable law, title to the Temporary Global Note, the Bearer
Notes and the coupons will pass by delivery. Subject to applicable law, the
Company, the Trustee, any Paying Agent and any Conversion Agent may treat the
Holder of any Bearer Note, the Holder of any coupon and the registered owner (as
reflected in the Security Register) of any Registered Note as the absolute owner
thereof (whether or not such Note or coupon shall be overdue) for the purpose of
making payment and for all other purposes.
NOTICES
Notice to Holders of the Notes will be given by publication in Authorized
Newspapers (as set forth in the Indenture) in Amsterdam or, if publication in
Amsterdam is not practical, in a Western European city. Notices to Holders of
Registered Notes will also be given by mail to the addresses of such Holders as
they appear in the Security Register. Such notices will be deemed to have been
given on the date of such publication or, if published in such Authorized
Newspapers on different dates, on the date of the first such publication or on
the date of such mailing, as the case may be.
Notice of a redemption of Notes will be given at least once not less than
20 nor more than 60 days prior to the Redemption Date (which notice shall be
published in accordance with the procedures described in the preceding
paragraph, and shall be irrevocable except as otherwise provided in the second
paragraph under "-- Redemption -- Redemption for Taxation Reasons") and will
specify the Redemption Date.
REPLACEMENT OF NOTES AND COUPONS
Notes (including any coupons appertaining to Bearer Notes) that become
mutilated, destroyed, stolen or lost will be replaced by the Company at the
expense of the Holder upon delivery to the Trustee or to a transfer agent
outside the United States of the mutilated Notes and coupons or evidence of the
loss, theft or destruction thereof satisfactory to the Company and the Trustee.
In the case of a lost, stolen or destroyed Note or coupon, indemnity
satisfactory to the Trustee and the Company may be required at the expense of
the Holder of such Note or coupon before a replacement Note (with the relevant
coupons appertaining thereto, if any) or coupon will be issued.
PAYMENT OF STAMP AND OTHER TAXES
The Company will pay all stamp and other duties, if any, which may be
imposed by the United States or The Netherlands or any political subdivision
thereof or taxing authority thereof or therein with respect to the issuance of
the Notes or the issuance of Common Shares upon any conversion of Notes. Except
as described under "-- Payment of Additional Amounts," the Company will not be
required to make any payment with respect to any other tax, assessment or
governmental charge imposed by any government or any political subdivision
thereof or taxing authority thereof or therein.
GOVERNING LAW
The Indenture, the Notes, the coupons and the Registration Rights Agreement
are governed by and construed in accordance with the laws of the State of New
York, United States of America (except to the extent that the law of companies
of The Netherlands applies).
THE TRUSTEE
In case an Event of Default shall occur (and shall not be cured or waived
in a timely manner), the Trustee will be required to use the degree of care of a
prudent person in the conduct of his own affairs in the
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exercise of its powers. Subject to such provisions, the Trustee will be 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 reasonable security or indemnity.
SHARE CERTIFICATES AND TRANSFER
The Common Shares are issuable in registered form or bearer form.
Registered Shares may consist of either Common Shares registered with the
Company's transfer agent and registrar in New York, New York ("New York Registry
Shares"), Citibank, N.A. (the "New York Transfer Agent") or Common Shares
registered at the Company's offices in Barneveld, The Netherlands (the
"Barneveld Register"). New York Registry Shares may be evidenced by certificates
printed in the English language and are registered in book-entry form, while
Common Shares registered in the Barneveld Register are registered in book-entry
form. Bearer Shares are represented by certificates printed in the Dutch
language with a dividend sheet attached ("CF-certificates"). CF-certificates
must remain deposited with an authorized custodian and may only be transferred
through the book-entry transfer systems maintained by NECIGEF (Nederlands
Centraal Instituut voor Giraal Effectenverkeer, the Netherlands Central
Institute for Giro Securities), Cedel Bank, S.A. or Euroclear.
The transfer of Registered Shares requires an instrument intended for such
purpose and, except when the Company itself is a party to such legal act, the
written acknowledgement of the transfer by the Company or, in the case of the
New York Registry Shares, the New York Transfer Agent (in the name of the
Company), and submission of the share certificates, if any, to the Company or
(in the name of the Company) to the New York Transfer Agent. The transfer of
Registered Shares requires the permission of the Management Board, unless the
instrument of transfer is in the form supplied by the Company (which the Company
makes available free of charge).
The Common Shares are listed on the Nasdaq National Market and on the
Amsterdam Stock Exchange. Only New York Registry Shares may be traded on the
Nasdaq National Market and only Bearer Shares may be traded on the Amsterdam
Stock Exchange.
Bearer Shares may be converted into Registered Shares at the request of the
holder and vice versa. A holder may convert Bearer Shares to New York Registry
Shares by providing a written request for such exchange and surrendering the
Bearer Shares at the principal office of ABN AMRO Bank N.V., Herengracht 595,
1017 CE Amsterdam, The Netherlands, the Dutch exchange agent (the "CF Agent").
The CF Agent will instruct the New York Transfer Agent to issue New York
Registry Shares and to deliver the corresponding share certificates. Similarly,
a holder may convert New York Registry Shares to Bearer Shares by presenting a
written request for such exchange and surrendering the New York Registry Shares
to the New York Transfer Agent. The New York Transfer Agent will then instruct
the CF Agent in The Netherlands to issue and deliver Bearer Shares for the same
number of shares. Bearer Shares and New York Registry Shares registered with the
New York Transfer Agent and Registrar may upon cancellation also be exchanged
into Common Shares in registered form registered upon the Barneveld Register and
vice versa. Share certificates for New York Registry Shares may be exchanged at
the office of the New York Transfer Agent for certificates of other authorized
denominations. A fee will be charged to shareholders for the exchange of New
York Registry Shares for Bearer Shares or Common Shares of the Barneveld
Register (and for each other such conversion).
Bearer Shares have been accepted for clearance through Cedel Bank, S.A. and
Euroclear (Common Code 5740223 and ISIN NL0000 336337). The Fonds Code for the
Common Shares on the Amsterdam Stock Exchange is 33633.
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TAXATION
GENERAL
The following is a summary of certain Netherlands and U.S. federal income
tax consequences relating to the purchase, ownership and disposition of the
Notes (including conversion of the Notes into Common Shares) and of the Common
Shares into which the Notes may be converted. It does not address the tax
treatment of certain types of investors (e.g., individual retirement and other
tax deferred accounts, life insurance companies, tax-exempt organizations,
dealers in securities and holders of Notes or the Common Shares as part of a
straddle, hedging or conversion transaction for U.S. federal income tax
purposes) all of whom may be subject to tax rules that differ significantly from
those set forth below. This summary does not address any laws other than the tax
laws of The Netherlands and U.S. federal income tax law as currently in effect (
all of which could change at any time, possibly with retroactive effect) and is
for general information purposes only. It is not intended as tax advice, and it
does not consider any investor's particular circumstances. PROSPECTIVE INVESTORS
SHOULD CONSULT THEIR OWN TAX ADVISERS AS TO THE NETHERLANDS, U.S. AND OTHER TAX
CONSEQUENCES OF AN INVESTMENT IN THE NOTES AND THE COMMON SHARES.
NETHERLANDS TAXATION
NETHERLANDS WITHHOLDING TAX
All payments made by the Company with respect to the Notes, including any
Additional Amounts, will be made free of withholding or deduction, for or on
account of any taxes of whatsoever nature imposed, levied, withheld, or assessed
by The Netherlands or any political subdivision or taxing authority thereof or
therein.
The Company does not expect to pay dividends on the Common Shares in the
foreseeable future. To the extent that dividends are distributed by the Company,
such dividends would be subject under Netherlands tax law to withholding tax at
a rate of 25%. Dividends include dividends in cash or in kind, constructive
dividends and liquidation proceeds in excess of, for Netherlands tax purposes,
recognized paid-in capital. Stock dividends are also subject to withholding tax
unless distributed out of the Company's paid-in share premium as recognized for
Netherlands tax purposes.
A non-resident shareholder can be eligible for a reduction or a refund of
Netherlands dividend withholding tax under a tax convention which is in effect
between the country of residence of the non-resident shareholder and The
Netherlands. The Netherlands has concluded such conventions with, among others,
the United States, all member states of the European Union except Portugal,
Canada, Switzerland and Japan. Under most of these conventions, Netherlands
dividend withholding tax is reduced to a rate of 15% or less unless the
recipient shareholder has a permanent establishment in The Netherlands to which
the Notes or the Common Shares are attributable.
No withholding tax applies on the sale or disposition of Common Shares to
persons other than the Company and affiliates of the Company.
TAXES ON INCOME AND CAPITAL GAINS
A holder of Notes or of Common Shares will not be subject to any
Netherlands taxes on income or capital gains in respect of any payments under
the Note or dividends on the Common Shares or in respect of any gain realized on
the disposal of the Note (including any gain realized upon conversion of a Note)
or the Common Shares provided that:
(i) such holder is neither resident nor deemed to be resident in The
Netherlands;
(ii) such holder does not have an enterprise or an interest in an
enterprise that is, in whole or in part, carried on through a permanent
establishment or a permanent representative in The Netherlands and to which
enterprise or part of an enterprise, as the case may be, the Notes or the
Common Shares are attributable; and
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(iii) such holder does not have a substantial interest or a deemed
substantial interest in the share capital of the Company or, if such holder
does have such an interest, it forms part of the assets of an enterprise.
As of January 1, 1997, a holder of Notes or Common Shares will generally
not have a substantial interest if he, his spouse, certain other relatives
(including foster children) or certain persons sharing his household, do not
hold, alone or together, whether directly or indirectly, the ownership of, or
certain other rights over, shares representing five per cent or more of the
total issued and outstanding capital (or the issued and outstanding capital of
any class of shares) of the Company. A deemed substantial interest is present if
(part of) a substantial interest has been disposed of, or is deemed to have been
disposed of, on a non-recognition basis.
NET WEALTH TAX
A holder of Notes or of Common Shares will not be subject to Netherlands
net wealth tax in respect of the Notes or the Common Shares provided that such
holder is not an individual or, if he is an individual, the conditions described
in clauses (i) and (ii) of the proviso under "-- Taxes on Income and Capital
Gains" are satisfied.
GIFT, ESTATE OR INHERITANCE TAXES
No gift, estate or inheritance taxes will arise in The Netherlands with
respect to an acquisition of Notes or Common Shares by way of a gift by, or on
the death of, a holder of Notes or Common Shares who is neither resident nor
deemed to be resident in The Netherlands unless (i) such holder at the time of
the gift has or at the time of his death had an enterprise or an interest in an
enterprise that is or was, in whole or in part, carried on through a permanent
establishment or a permanent representative in The Netherlands and to which
enterprise or part of an enterprise, as the case may be, the Notes or the Common
Shares are or were attributable, or (ii) in the case of a gift of Notes or the
Common Shares by an individual who at the date of the gift was neither resident
nor deemed to be resident in The Netherlands, such individual dies within 180
days after the date of the gift while being resident or deemed to be resident in
The Netherlands.
CAPITAL TAX
No Netherlands capital tax will be payable in respect of or in connection
with the execution, delivery and/or enforcement by legal proceedings (including
the enforcement of any foreign judgment in the Courts of The Netherlands) of the
Notes or the performance by the Company of its obligations thereunder.
OTHER TAXES AND DUTIES
No Netherlands registration tax, customs duty, stamp duty or any other
similar documentary tax or duty other than court fees is payable in The
Netherlands by a holder of Notes or Common Shares in respect of or in connection
with the execution and, delivery of the Notes and/or enforcement by legal
proceedings (including the enforcement of any foreign judgment in the Courts of
The Netherlands) of the Notes, or the performance by the Company of its
obligations thereunder, or consummation of the transactions contemplated
thereby.
TURNOVER TAX
No Netherlands turnover tax arises in respect of payments in consideration
of the issue of Notes or of the Common Shares or with respect to payments by the
Company or principal or premium or redemption price or repurchase price of, or
interest on, a Note.
U.S. FEDERAL INCOME TAXATION
For purposes of this summary, a "U.S. Holder" is any holder of the Notes or
of the Common Shares that is (i) a citizen or resident of the United States,
(ii) a corporation, partnership, or other entity created or organized in or
under the laws of the United States (or any State thereof, including the
District of Columbia), or (iii) an estate or trust the income of which is
subject to United States federal income taxation regardless of
38
<PAGE> 41
its source. A "Non-U.S. Holder" is any holder of Notes or of the Common Shares
that is not a U.S. Holder. This summary is addressed to original purchasers who
will hold the Notes and the Common Shares as capital assets and whose functional
currency is the U.S. dollar.
TAXATION OF INTEREST
Interest paid on a Note (including Additional Amounts) generally will be
includible in the income of a U.S. Holder in accordance with the U.S. Holder's
regular method of tax accounting. A U.S. Holder will be required to include in
income any amounts paid in respect of withholding taxes (if any) withheld on
payments on the Notes. Similar principles would apply if, due to a change in
applicable law, Netherlands taxes were imposed. Interest on a Note will be
income from sources outside the United States for foreign tax credit limitation
purposes. Under the Code, the limitation on foreign taxes eligible for credit is
calculated separately with respect to specific classes of income. Interest paid
on a Note generally will be either "passive" income or "financial services"
income, depending on the particular U.S. Holder's circumstances. Foreign tax
credits allowable with respect to each class of income cannot exceed the U.S.
federal income tax otherwise payable with respect to such class of income.
Payments of interest on a Note to a Non-U.S. Holder generally will not be
subject to U.S. federal income tax unless such income is effectively connected
with the conduct by such Non-U.S. Holder of a trade or business in the United
States.
CONVERSION OF THE NOTES
In general, no gain or loss will be recognized for U.S. federal income tax
purposes on a conversion of the Notes into Common Shares. Cash paid in lieu of a
fractional share, however, will likely result in taxable gain (or loss), which
will be capital gain (or loss), to the extent that the amount of such cash
exceeds (or is exceeded by) the portion of the adjusted basis of the Note
allocable to such fractional share. The adjusted basis of the Common Shares
received on conversion will equal the adjusted basis of the Note converted,
reduced by the portion of adjusted basis allocated to any fractional share
exchanged for cash. The holding period of an investor in the Common Shares
received on conversion will include the period during which the converted Notes
were held.
TAXATION OF DIVIDENDS
The gross amount (before reduction for withholding taxes) of a distribution
with respect to the Common Shares will be a dividend to a U.S. Holder, taxable
as ordinary income, to the extent of the Company's current or accumulated
earnings and profits (as determined under U.S. federal income tax principles).
Distributions paid by the Company in excess of current or accumulated earnings
and profits will be treated as a tax-free return of capital to the extent of the
U.S. Holder's adjusted tax basis in his or her Common Shares, and thereafter as
gain from the sale or exchange of a capital asset. These dividends are generally
not eligible for the dividends-received deduction otherwise allowed to U.S.
corporate shareholders on dividends from U.S. domestic corporations. The amount
of any distribution paid in guilders will be equal to the U.S. dollar value of
the guilders on the date of receipt, regardless of whether the U.S. Holder
converts the payment into U.S. dollars. Gain or loss, if any, recognized by a
U.S. Holder on the sale or disposition of guilders will be U.S. source ordinary
income or loss. A U.S. Holder may elect annually either to deduct The
Netherlands withholding tax (see "-- Netherlands Taxation") against its income
or take the withholding taxes as a credit against its U.S. tax liability,
subject to U.S. foreign tax credit limitation rules discussed above. Dividend
income will be income from sources outside the United States for foreign tax
credit limitation purposes. Dividend income generally will be either "passive"
income or "financial services" income, depending on the particular U.S. Holder's
circumstances.
Payments of dividends on the Common Shares to a Non-U.S. Holder generally
will not be subject to U.S. federal income tax unless such income is effectively
connected with the conduct by such Non-U.S. Holder of a trade or business in the
United States.
39
<PAGE> 42
DISPOSITIONS OF THE NOTES OR COMMON SHARES
A U.S. Holder will recognize gain or loss for U.S. federal income tax
purposes upon the sale or other disposition of the Notes (other than as a result
of conversion into Common Shares, as discussed above) or the Common Shares in an
amount equal to the difference between the amount realized (other than accrued
but unpaid interest which will constitute ordinary income) and the U.S. Holder's
tax basis in the Notes or Common Shares. Such gain or loss will be capital gain
or loss and will be long-term capital gain or loss if the Notes or Common Shares
have been held (or deemed held) for more than one year. Gain generally will be
income from U.S. sources for foreign tax credit limitation purposes. Loss may be
treated as foreign source loss by reference to the source of interest on the
Notes.
Gain realized by a Non-U.S. Holder upon the sale or other disposition of a
Note or of a Common Shares generally will not be subject to U.S. federal income
tax unless (i) the gain is effectively connected with the conduct by such
Non-U.S. Holder of a trade or business in the United States or (ii) the holder
is an individual who was present in the United States for at least 183 days in
the taxable year of such sale, exchange or retirement and certain other
conditions are met.
PASSIVE FOREIGN INVESTMENT COMPANIES
The Company may be classified as a "passive foreign investment company"
("PFIC") for U.S. federal income tax purposes if certain tests are met. The
Company will be a PFIC with respect to a U.S. Holder if for any taxable year in
which the U.S. Holder held the Notes or Common Shares, either (i) 75% or more of
the gross income of the Company for the taxable year is passive income; or (ii)
the average value during the taxable year of its passive assets (i.e., assets
that produce passive income or which are held for the production of passive
income) is at least 50% of the average fair market value of all of the Company's
assets for such year. Passive income generally includes dividends, interest,
royalties, rents (other than rents and royalties derived in the active conduct
of a trade or business and not derived from a related person), annuities, and
gains from assets which would produce such income other than sales of inventory.
For the purpose of the PFIC tests, if a foreign corporation owns directly or
indirectly at least 25% by value of the stock of another corporation, the
foreign corporation is treated as owning its proportionate share of the assets
of the other corporation and as if it had received directly its proportionate
share of the income of such other corporation. The effect of this special
provision with respect to the Company and its direct and indirect ownership of
its subsidiaries is that the Company, for purposes of the income and assets
tests described above, will be treated as owning directly its proportionate
share of the assets of the subsidiaries and of receiving directly its
proportionate share of each of those companies' income, if any, so long as the
Company owns, directly or indirectly, at least 25% by value of the particular
company's stock. Active business income of the Company's subsidiaries will be
treated as active business income of the Company, rather than as passive income.
If the Company were to be classified as a PFIC, a U.S. Holder would be
subject to various adverse U.S. tax consequences. Such adverse consequences
would generally include an interest charge on taxes deemed deferred by them on
receipt of certain "excess" distributions by the Company to the U.S. Holder and
on realization of gain on disposition of the Notes or Common Shares (all of
which distributions and gains would be taxable as ordinary income at the highest
marginal rate). However, the foregoing interest charge could be avoided if a
U.S. Holder were to make a qualified electing fund ("QEF") election and the
Company were to agree to comply with certain reporting requirements. If a QEF
election were made, the U.S. Holder would be currently taxable on the U.S.
Holder's pro rata share of the Company's ordinary earnings and profits and long-
term capital gains for each year (at ordinary income or capital gains rates,
respectively), even if no dividend distributions were received. Based on the
nature of the Company's expected income and assets, management does not expect
that the Company should be classified as a PFIC in the foreseeable future.
FOREIGN PERSONAL HOLDING COMPANIES
The Company or any of its non-U.S. subsidiaries may be classified as a
"foreign personal holding company" ("FPHC") if in any taxable year five or fewer
persons who are U.S. citizens or residents own (directly or constructively
through certain attribution rules) more than 50% of the Company's stock (a "U.S.
40
<PAGE> 43
group") and more than 60% of the gross income of the Company or the subsidiary
consists of passive income for purposes of the FPHC rules. Because substantially
all of the Company's income is likely to consist of dividends from subsidiaries,
which generally is passive income for purposes of the FPHC rules, it is likely
to meet the income test. Similarly, if more than 60% of the gross income of a
non-U.S. subsidiary of the Company were to consist of dividends, interest,
royalties (other than active business computer software royalties) or other
types of passive income, the subsidiary would meet the FPHC income test.
If the Company or any of its subsidiaries is or becomes an FPHC, each U.S.
Holder of Common Shares (including a U.S. corporation) who held stock in the
Company in the last day of the taxable year of the Company, or, if earlier, the
last day of its taxable year on which a U.S. group existed with respect to the
Company would be required to include in gross income as a dividend such
shareholder's pro rata portion of the undistributed income of the Company or the
subsidiary, even if no cash dividend were actually paid. In such case, if the
Company were an FPHC, a U.S. Holder would be entitled to increase its tax basis
in the shares of the Company by the amount of a deemed dividend from the
Company. If a subsidiary of the Company were an FPHC, a U.S. Holder in the
Company should be afforded similar relief, although the law is unclear as to the
form of the relief.
If either Jan Baan or J.G. Paul Baan were to become a U.S. citizen or
resident, or marry a U.S. citizen or resident, a U.S. group might then exist
based upon the shares considered owned by him (or such U.S. citizen or resident
spouse). Moreover, if a member of either Jan or J.G. Paul Baan's family were to
own one or more shares in the Company and become a U.S. citizen or resident,
shares owned by such Baan brother could be considered owned by such family
member so as to create a U.S. group. Although the Company believes that at the
present time no U.S. group exists, and that no U.S. group will exist on
completion of the offering, the Company can give no assurances regarding future
ownership of Company Shares by members of the Baan family, or future changes in
citizenship or residence of Baan family members which could result in the
creation of a U.S. group and thus cause the Company to be treated as an FPHC.
Moreover, the Company can give no assurance that it will have timely knowledge
of the formation of a U.S. group. In this regard, the Company does not assume
any obligation to make timely disclosure with respect to such status.
If the Company becomes an FPHC, a U.S. person who acquires shares from a
decedent would be denied the step-up of tax basis of such shares to fair market
value or the decedent's basis.
As noted above, certain U.S. tax consequences depend on the composition of
the income of the Company and its subsidiaries. The tax law is not entirely
clear as to the proper classification of all relevant types of income which the
Company and its subsidiaries may realize. Accordingly, there can be no assurance
that management's expectations described in the preceding section will be
fulfilled.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Payments in respect of Notes or the Common Shares may be subject to
information reporting to the U.S. Internal Revenue Service and to a 31% U.S.
backup withholding tax. Backup withholding will not apply, however, to a holder
who furnishes a correct taxpayer identification number or certificate of foreign
status or who is otherwise exempt from backup withholding. Generally, a U.S.
Holder will provide such certification on Form W-9 (Request for Taxpayer
Identification Number and Certification) and a Non-U.S. Holder will provide such
certification on Form W-8 (Certificate of Foreign Status). The United States
Treasury Department recently proposed regulations that, if finalized, would
change the requirements for establishing an exemption from information reporting
and backup withholdings.
STATE AND LOCAL TAXES
State and local treatment may differ from federal income tax treatment.
Each U.S. Holder should seek tax advice with respect to applicable state and
local taxes.
41
<PAGE> 44
PLAN OF DISTRIBUTION
The Registrable Notes and Common Stock offered hereby may be sold from time
to time to purchasers directly by the Selling Holders. Alternatively, the
Selling Holders may from time to time offer the Registrable Notes and Common
Stock to or through underwriters, broker/dealers or agents, who may receive
compensation in the form of underwriting discounts, concessions or commissions
from the Selling Holders or the purchasers of Registrable Notes and Common Stock
for whom they may act as agents. The Selling Holders and any underwriters,
broker/dealers or agents that participate in the distribution of Registrable
Notes and Common Stock may be deemed to be "underwriters" within the meaning of
the Securities Act and any profit on the sale of Registrable Notes and Common
Stock by them and any discounts, commissions, concessions or other compensation
received by any such underwriter, broker/dealer or agent may be deemed to be
underwriting discounts and commissions under the Securities Act.
The Registrable Notes and Common Stock 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, any varying prices determined at the time of sale or at
negotiated prices. The sale of the Registrable Notes and the Common Stock
issuable upon conversion thereof may be effected in transactions (which may
involve crosses or block transactions) (i) on any national or international
securities exchange or quotation service on which the Registrable Notes or the
Common Stock may be listed or quoted at the time of sale, (ii) in the
over-the-counter market, (iii) in transactions otherwise than on such exchanges
or in the over-the-counter market or (iv) through the writing of options. At the
time a particular offering of the Registrable Notes and the Common Stock is
made, a Prospectus Supplement, if required, will be distributed which will set
forth the aggregate amount and type of Registrable Notes and Common Stock being
offered and the terms of the offering, including the name or names of any
underwriters, broker/dealers or agents, any discounts, commissions and other
terms constituting compensation from the Selling Holders and any discounts,
commissions or concessions allowed or reallowed or paid to broker/dealers.
To comply with the securities laws of certain jurisdictions, if applicable,
the Registrable Notes and Common Stock will be offered or sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain jurisdictions the Registrable Notes and Common Stock may
not be offered or sold unless they have been registered or qualified for sale in
such jurisdictions or any exemption from registration or qualification is
available and is complied with.
The Selling Holders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the Registrable Notes and
Common Stock by the Selling Holders. The foregoing may affect the marketability
of the Registrable Notes and the Common Stock.
Pursuant to the Registration Agreement, all expenses of the registration of
the Registrable Notes and Common Stock will be paid by the Company, including,
without limitation, Commission filing fees and expenses of compliance with state
securities or "blue sky" laws; provided, however, that the Selling Holders will
pay all underwriting discounts and selling commissions, if any. The Selling
Holders will be indemnified by the Company against certain civil liabilities,
including certain liabilities under the Securities Act, or will be entitled to
contribution in connection therewith.
42
<PAGE> 45
LEGAL MATTERS
The validity of the Notes and the Common Shares issuable on conversion
thereof have been passed upon for the Company by Wilson Sonsini Goodrich &
Rosati, Professional Corporation, Palo Alto, California, solely as to matters of
U.S. law, and by De Brauw Blackstone Westbroek, Amsterdam, The Netherlands,
solely as to matters of Netherlands law.
INDEPENDENT AUDITORS
The consolidated financial statements of the Company at December 31, 1994
and 1995, and for each of the three years in the period ended December 31, 1995,
incorporated by reference in this Prospectus, have been audited by Moret Ernst &
Young Accountants, independent auditors, as set forth in their report thereon
incorporated herein by reference.
43
<PAGE> 46
- --------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS 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. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
- --------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Enforceability of Civil Liabilities... 1
Available Information................. 1
Incorporation of Certain Documents
by Reference........................ 2
Summary............................... 3
The Company........................... 6
Risk Factors.......................... 8
Exchange Controls and Other
Limitations Affecting Security
Holders............................. 16
Limitation of Liability and
Indemnification..................... 17
Description of Notes.................. 18
Share Certificates and Transfer....... 36
Taxation.............................. 37
Plan of Distribution.................. 42
Legal Matters......................... 43
Independent Auditors.................. 43
</TABLE>
- --------------------------------------------------------
[BAAN LOGO]
U.S. $200,000,000
4.5% CONVERTIBLE SUBORDINATED
NOTES DUE 2001
Prospectus
, 1997
<PAGE> 47
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF REGISTRATION AND DISTRIBUTION.
The following table sets forth the estimated expenses of the Registrant in
connection with the offering described in this Registration Statement.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $34,409
Accountants' fees and expenses................................... *
Legal fees and expenses.......................................... *
Printing and engraving expenses.................................. *
Blue Sky fees and expenses....................................... *
Trustee's fees and expenses...................................... *
Miscellaneous.................................................... *
--------
Total.................................................. *
========
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company has entered into indemnification agreements with its directors
and executive officers, providing for indemnification by the Company against any
liability to which a director or executive officer may be subject for judgments,
settlements, penalties, fines and expenses of defense (including attorneys'
fees, bonds and costs of investigation), arising out of or in any way related to
acts or omissions as a member of the Management or Supervisory Board, or an
executive officer, or in any other capacity in which services are rendered to
the Company or its subsidiaries. The Company believes that the indemnification
agreements will assist the Company in attracting and retaining qualified
individuals to serve as directors and executive officers. The agreements provide
that a director or officer is not entitled to indemnification under such
agreements (i) if indemnification if expressly prohibited under applicable law,
(ii) for certain violations of securities laws or (iii) for certain claims
initiated by the officer or director. Generally, under Netherlands law a
director will not be held personally liable for decisions made with reasonable
business judgment, absent self dealing. In addition, indemnification may not be
available to directors or officers under Netherlands law if any act or omission
by a director or officer would qualify as willful misconduct or gross
negligence. Due to the lack of applicable case law, it is not clear whether
indemnification if available in case of a breach of securities laws of the
United States. See 'Enforceability of Civil Liabilities.'
II-1
<PAGE> 48
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -------------------------------------------------------------------------------------
<C> <S>
1.1* Purchase Agreement dated December 15, 1996 among the Company and Morgan Grenfell &
Co., Limited, Deutsche Morgan Grenfell Inc., and AMRO Rothschild, and Banque
Indosuez.
4.1* Indenture, dated as of December 15, 1996, between the Company and Marine Midland
Bank, as Trustee, relating to the Notes.
4.2* Form of Notes included in Exhibit 4.1.
4.3* Specimen Certificate of Common Stock of Baan Company N.V.
4.4* Articles of Association
4.8* Registration Rights Agreement, dated December 15, 1996 among the Company and Morgan
Grenfell & Co. Limited, Deutsche Morgan Grenfell Inc., ABN AMRO Rothschild, and
Banque Indosuez.
5.1* Opinion of DeBrauw Blackstone Westbroek.
23.1 Consent of Moret Ernst & Young Accountants, independent auditors.
23.2 Consent of Counsel (contained in Exhibit 5.1 hereto).
24.1* Power of Attorney.
25.1* Form T-1 Statement of Eligibility and Qualification of Trustee exhibits).
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price, set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
provided, however, that paragraphs (a) (1) (i) and (a) (1) (ii) do not
apply if the registration statement is on Form S-3, Form S-8 or Form F-3,
and the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed with or
furnished to the Commission pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference into the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities
II-2
<PAGE> 49
offered therein, and the offering of such securities at that time shall be
deemed to be the initial BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that such a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in Act and will be
governed by the final adjudication of such issue.
II-3
<PAGE> 50
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF CUPERTINO, STATE OF
CALIFORNIA, ON THE 28TH DAY OF MARCH, 1997.
BAAN COMPANY N.V.
By: /s/ JAN BAAN B.V.
------------------------------------
Managing Director, Chairman and
Chief
Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ----------------------------- -------------------
<C> <S> <C>
/s/ JAN BAAN B.V. Managing Director, Chairman March 28, 1997
- ------------------------------------------ and Chief Executive Officer
(Jan Baan B.V.) (Principal Executive Officer
* Supervisory Director and Vice March 28, 1997
- ------------------------------------------ Chairman
(J.G. Paul Baan B.V.)
* Managing Director, President March 28, 1997
- ------------------------------------------ and Chief Operating Officer
(Thomas C. Tinsley)
/s/ JAN WESTERHOUD Vice President, Finance March 28, 1997
- ------------------------------------------ (Principal Financial and
(Jan Westerhoud) Accounting Officer)
* Supervisory Director March 28, 1997
- ------------------------------------------
(William O. Grabe)
* Supervisory Director March 28, 1997
- ------------------------------------------
(David C. Hodgson)
* Supervisory Director March 28, 1997
- ------------------------------------------
(Graham J. Sharman)
* Supervisory Director March 28, 1997
- ------------------------------------------
(J.C. (Hans) Wostmann)
*By: /s/ JAN BAAN
- ------------------------------------------
Attorney in Fact
</TABLE>
II-4
<PAGE> 51
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ----------------------------------------------------------------------------
<C> <S> <C>
1.1* Purchase Agreement dated December 15, 1996 among the Company and Morgan
Grenfell & Co., Limited, Deutsche Morgan Grenfell Inc., and AMRO Rothschild,
and Banque Indosuez.
4.1* Indenture, dated as of December 15, 1996, between the Company and Marine
Midland Bank, as Trustee, relating to the Notes.
4.2* Form of Notes included in Exhibit 4.1.
4.3* Specimen Certificate of Common Stock of Baan Company N.V.
4.4* Articles of Association
4.8* Registration Rights Agreement, dated December 15, 1996 among the Company and
Morgan Grenfell & Co. Limited, Deutsche Morgan Grenfell Inc., ABN AMRO
Rothschild, and Banque Indosuez.
5.1* Opinion of DeBrauw Blackstone Westbroek.
23.1 Consent of Moret Ernst & Young Accountants, independent auditors.
23.2 Consent of Counsel (contained in Exhibit 5.1 hereto).
24.1* Power of Attorney.
25.1* Form T-1 Statement of Eligibility and Qualification of Trustee exhibits).
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
Exhibit 23.1
CONSENT OF MORET ERNST & YOUNG ACCOUNTANTS, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form F-3) and related Prospectus of Baan Company N.V.
for the registration of 4.5% Convertible Subordinated Notes due 2001 and shares
of common stock issuable on conversion thereof and to the incorporation by
reference therein of our report dated January 30, 1996, with respect to the
consolidated financial statements of Baan Company N.V. included in its Annual
Report (Form 20-F) for the year ended December 31, 1995, filed with the
Securities and Exchange Commission.
/s/ Moret Ernst & Young
MORET ERNST & YOUNG ACCOUNTANTS
Utrecht, The Netherlands
March __, 1997
