AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 24, 2004
REGISTRATION NO. 333-110938
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT
NO. 2 TO THE
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
OSI PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
<Table>
DELAWARE 13-3159796
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
organization)
</Table>
58 SOUTH SERVICE ROAD, SUITE 110, MELVILLE, NEW YORK 11747, (631) 962-2000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------------
ROBERT L. VAN NOSTRAND
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
OSI PHARMACEUTICALS, INC.
58 SOUTH SERVICE ROAD, SUITE 110, MELVILLE, NEW YORK 11747, (631) 962-2000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES OF ALL COMMUNICATIONS TO:
SPENCER W. FRANCK, JR., ESQUIRE
SAUL EWING LLP
1200 LIBERTY RIDGE DRIVE, SUITE 200, WAYNE, PENNSYLVANIA 19087-5055, (610)
251-5082
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
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, other than securities offered only in connection with dividend or interest
reinvestment plans, 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. [ ]
EXPLANATORY NOTE
This Post-Effective Amendment No. 2 to the Registration Statement on Form
S-3 (Registration No. 333-110938) declared effective by the Securities and
Exchange Commission on April 6, 2004, is being filed to update the selling
securityholder table.
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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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING SECURITYHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING
OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY , 2004
$150,000,000
OSI PHARMACEUTICALS, INC.
3 1/4% CONVERTIBLE SENIOR SUBORDINATED NOTES DUE 2023
AND 2,998,800 SHARES OF COMMON STOCK ISSUABLE UPON
CONVERSION OF THE NOTES
In September 2003, we issued and sold $150,000,000 aggregate principal
amount of our 3 1/4% Convertible Senior Subordinated Notes due 2023 in a private
placement. This prospectus will be used by selling securityholders to resell the
notes and the common stock issuable upon conversion of the notes.
The notes are convertible, at the option of the holder, at any time on or
prior to maturity into shares of our common stock. The notes are convertible at
a conversion price of approximately $50.02 per share which is equal to a
conversion rate of 19.9925 shares per $1,000 principal amount of notes, subject
to adjustment. On Tuesday, May 18, 2004, the closing bid price of our common
stock as reported on the Nasdaq National Market was $79.31 per share.
We will pay interest on the notes on March 8 and September 8 of each year,
beginning March 8, 2004. The notes will mature on September 8, 2023. On or after
September 8, 2008, we may at our option redeem the notes, in whole or in part,
for cash, at a redemption price of $1,000 per $1,000 principal amount of the
notes to be redeemed plus accrued and unpaid interest, if any, to but excluding
the redemption date.
Holders may require us to purchase all or a portion of their notes on
September 8, 2008, September 8, 2013 and September 8, 2018, in each case, at a
purchase price of $1,000 per $1,000 principal amount of the notes to be
purchased plus accrued and unpaid interest, if any, to but excluding the
purchase date. In addition, in the event of a change in control, as defined in
this offering memorandum, holders may require us to purchase all or a portion of
their notes at a change in control purchase price of $1,000 per $1,000 principal
amount of the notes to be purchased plus accrued and unpaid interest, if any, to
but excluding the change in control purchase date. We may choose to pay the
purchase price or change in control purchase price in cash or common stock.
The notes are unsecured (except to the extent described in this prospectus)
and subordinated to our existing and future senior indebtedness. The notes rank
equally with our existing and future senior subordinated indebtedness.
We have pledged a portfolio of U.S. government securities as security for
the notes in an amount sufficient to pay the first six scheduled interest
payments on the notes.
The notes originally issued in the private placement are eligible for
trading on the PORTAL market. However, notes sold pursuant to this prospectus
will no longer be eligible for trading on the PORTAL market. We do not intend to
list the notes on any national securities exchange. Our common stock is quoted
on the Nasdaq National Market under the symbol "OSIP."
INVESTING IN THE NOTES INVOLVES RISKS THAT ARE DESCRIBED IN THE "RISK
FACTORS" SECTION BEGINNING ON PAGE 6 OF THIS PROSPECTUS.
We will not receive any of the proceeds from the sale of the notes or the
shares of common stock by any of the selling securityholders. The notes and the
shares of common stock may be offered in negotiated transactions or otherwise at
market prices prevailing at the time of sale or at negotiated prices. The timing
and amount of any sale are within the sole discretion of the selling
securityholders. In addition, the shares of common stock may be offered from
time to time through ordinary brokerage transactions on the Nasdaq National
Market. See "Plan of Distribution." The selling securityholders may be deemed to
be "underwriters" as defined in the Securities Act of 1933, as amended. Any
profits realized by the selling securityholders may be deemed to be underwriting
commissions. If the selling securityholders use any broker-dealers, any
commission paid to broker-dealers and, if broker-dealers purchase any notes or
shares of common stock as principals, any profits received by such broker-
dealers on the resale of the notes or shares of common stock may be deemed to be
underwriting discounts or commissions under the Securities Act.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is May , 2004
TABLE OF CONTENTS
<Table>
AVAILABLE INFORMATION....................................... i
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. i
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS........... ii
SUMMARY..................................................... 1
THE OFFERING................................................ 4
RISK FACTORS................................................ 6
RATIO OF EARNINGS TO FIXED CHARGES.......................... 16
USE OF PROCEEDS............................................. 16
DIVIDEND POLICY............................................. 16
DESCRIPTION OF THE NOTES.................................... 17
SELLING SECURITYHOLDERS..................................... 37
DESCRIPTION OF CAPITAL STOCK................................ 41
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS..... 43
PLAN OF DISTRIBUTION........................................ 50
LEGAL MATTERS............................................... 52
EXPERTS..................................................... 52
</Table>
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In this prospectus, "OSI," "our company," "we," "us," and "our" refer to
OSI Pharmaceuticals, Inc. and subsidiaries, except as otherwise noted.
AVAILABLE INFORMATION
We are subject to the information and reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), under which we
file periodic reports, proxy statements and other information with the SEC.
Copies of the reports, proxy statements and other information may be examined
without charge at the Public Reference Section of the SEC, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549 or on the Internet at
http://www.sec.gov. Copies of all or a portion of such materials can be obtained
from the Public Reference Section of the SEC upon payment of prescribed fees.
Please call the SEC at 800-SEC-0330 for further information about the Public
Reference Room. We also maintain our own website which is located at
www.osip.com.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we provide
in documents filed with the SEC, which means that we can disclose important
information by referring to those documents. The information incorporated by
reference is an important part of this prospectus. Any statement contained in a
document which is incorporated by reference in this prospectus is automatically
updated and superseded if information contained in this prospectus, or
information that we later file with the SEC, modifies and replaces this
information.
We are "incorporating by reference" specified documents that we file with
the SEC, which means:
- incorporated documents are considered part of this prospectus;
- we are disclosing important information to you by referring you to those
documents; and
- information that we file in the future with the SEC automatically will
update and supersede earlier information in or incorporated by reference
in this prospectus.
i
We incorporate by reference the following documents filed with the SEC:
- our annual report on Form 10-K for the fiscal year ended September 30,
2003 filed on December 2, 2003;
- our quarterly reports on Forms 10-Q for the quarter ended December 31,
2003 filed on February 3, 2004 and for the quarter ended March 31, 2004
filed on May 14, 2004;
- our current reports on Forms 8-K filed on October 2, 2003 and April 26,
2004; and
- our definitive proxy statement on Schedule 14A filed on January 28, 2004.
All documents we file with the SEC under Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act after the date of this prospectus and prior to the end of
the offering of the notes under this prospectus will become a part of this
prospectus. To receive a free copy of any of the documents incorporated by
reference in this prospectus call or write Robert L. Van Nostrand, Vice
President and Chief Financial Officer, OSI Pharmaceuticals, Inc., 58 South
Service Road, Suite 110, Melville, New York 11747, telephone (631) 962-2000. We
will not send exhibits to the documents unless those exhibits have been
specifically incorporated by reference in this prospectus.
You should rely only on the information incorporated by reference or
included in this prospectus. We have not authorized anyone else to provide you
with different information. The selling securityholders are offering these
securities only in states where the offer is permitted. You should not assume
that the information in this prospectus is accurate as of any date other than
the dates set forth on the front of these documents.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference herein include
forward-looking statements. We have based these forward-looking statements on
our current expectations and projections about future events. These
forward-looking statements include, among other things, statements relating to:
- our anticipated business strategies;
- our pending and anticipated clinical trials;
- our intention to introduce new product candidates;
- our relationships with third parties, including manufacturers, clinical
research organizations, collaborative partners, contract sales
organizations and suppliers;
- our integration of acquired businesses, assets and liabilities;
- anticipated trends in our businesses;
- sufficiency of resources to fund operating and capital requirements;
- operating cash burn rates;
- future capital expenditures; and
- our ability to conduct clinical trials and obtain regulatory approval.
The forward-looking statements included in this prospectus or in the
documents incorporated by reference herein are subject to risks, uncertainties
and assumptions about us. Our actual results of operations may differ materially
from the forward-looking statements as a result of, among other things, the
success or failure of our clinical trials, the speed at which our clinical
trials progress, the success of our competitors in developing products equal or
superior to ours and the timing of their development of such products, the
success of our collaborative relationships and the other reasons described under
"Risk Factors." Except for our ongoing obligations to disclose material
information under the federal securities laws, we undertake no obligation to
publicly update or revise any forward-looking statement, whether as a result of
new information, future events or otherwise, except as required by law. In light
of these risks, uncertainties and assumptions, the forward-looking events
discussed in this prospectus might not occur.
For these forward-looking statements, we claim the protection of the safe
harbor for forward-looking statements contained in Section 21E of the Exchange
Act and Section 27A of the Securities Act.
ii
SUMMARY
The following is a short summary of our business. This summary may not
contain all of the information that you should consider before investing in the
notes or the shares of common stock issuable upon their conversion. You should
carefully read the entire prospectus and the documents incorporated by reference
into the prospectus.
OSI PHARMACEUTICALS, INC.
We are a leading biotechnology company focused on the discovery,
development and commercialization of high-quality oncology products that both
extend life and improve the quality-of-life for cancer patients worldwide. We
have established a balanced pipeline of oncology drug candidates around our
flagship product, Tarceva(TM) (erlotinib HCl), that includes both novel
mechanism based, targeted therapies in the areas of signal transduction and
apoptosis and next-generation cytotoxic chemotherapy agents. We also market and
promote Novantrone(R) (mitoxantrone concentrate for injection) for approved
oncology indications in the United States and market and distribute Gelclair(R)
Bioadherent Oral Gel in North America.
Tarceva(TM) is an oral once-a-day small molecule drug designed to
specifically block the activity of the epidermal growth factor receptor, or
HER1/EGFR, protein. The protein product of the HER1/EGFR gene is a receptor
tyrosine kinase that is over expressed or mutated in many major solid tumors. We
believe HER1/EGFR inhibitors represent an exciting new class of relatively safe
and relatively well tolerated anti-cancer agents that may have utility in
treating a wide range of cancer patients. We are developing Tarceva(TM) in a
global alliance with Genentech, Inc. and Roche. On April 26, 2004, we announced
that Tarceva(TM) met its primary endpoint of improving survival in a
731-patient, double blind, randomized Phase III trial, or the BR.21 trial, which
tested the drug as a single agent against placebo in relapsed non-small cell
lung cancer, or NSCLC, patients. Tarceva(TM) also met its key secondary
endpoints including time to symptom deterioration, progression-free survival and
response rate. The results of this trial represent the first time that an
HER1/EGFR targeted agent has demonstrated a survival benefit in a controlled
study in any disease setting. Additionally, the BR.21 trial represents the first
time that an agent which is not a chemotherapy drug has demonstrated a survival
benefit in a randomized study in relapsed NSCLC patients.
In January 2004, we initiated the "rolling" submission of our New Drug
Application, or NDA, with the Food and Drug Administration, or FDA, for the use
of Tarceva(TM). The "rolling" submission is an FDA provision, available to drug
candidates which have received Fast Track designation, that allows for completed
sections of an NDA to be submitted on an ongoing basis before knowing the
results of the pivotal clinical trial. Fast Track status for Tarceva(TM) in the
2nd/3rd line NSCLC indication was granted by the FDA in September 2002. Although
the FDA has no obligation to begin reviewing sections of the NDA until the final
sections of the complete NDA are submitted, the FDA may begin the review of the
submitted sections, if resources permit. Such a review can be advantageous to
the overall product assessment timelines. The Fast Track designation is limited
to a new drug that is intended for the treatment of a serious and
life-threatening condition for which there is an unmet medical need. We are
continuing to work with the FDA to complete our NDA filing which we anticipate
will occur over the summer. We estimate that we will launch Tarceva(TM) in the
United States, together with our marketing partner Genentech, early in the first
quarter of calendar 2005, assuming a successful six-month priority review of our
NDA by the FDA. We anticipate that Roche will launch Tarceva(TM) in Europe,
assuming an approval by the European Agency for the Evaluation of Medicinal
Products, or EMEA, at the end of calendar 2005. Beyond the launch of
Tarceva(TM), our other high priority goals for Tarceva(TM) include moving the
drug as a monotherapy into earlier stage and adjuvant settings in NSCLC,
expanding it to other disease indications, combining it with other targeted
therapies like Avastin(TM) (bevacizumab) and exploring it with other all-oral
regimens. In addition to meeting its endpoints in the Phase III single agent
NSCLC trial, Tarceva(TM) has also demonstrated encouraging indications of
anti-cancer activity in single-agent, open label Phase I and Phase II trials in
bronchioloalveolar cell carcinoma, or BAC (a form of lung cancer),
1
glioblastoma multiforme, head and neck cancer, hepatocellular carcinoma and
ovarian cancer. Tarceva(TM) is also in a Phase III trial for pancreatic cancer
where it is being tested in combination with gemcitabine versus gemcitabine plus
placebo. We expect top line data for this Phase III trial in the second half of
2004. We continue to view a positive outcome from the pancreatic study to be
considered high risk.
Behind Tarceva(TM), we are developing a pipeline of other oncology drug
candidates. In order to effectively manage the risks inherent in biotechnology
research and development and to complement our internal research efforts, we
believe it is essential that we continue to aggressively manage our pipeline and
continue to explore licensing and acquisition initiatives designed to add
oncology products and clinical candidates to our pipeline. OSI-7904L is a
liposomal formulation of a potent thymidylate synthase, or TS inhibitor. It is
being developed as a potential competitor to 5-fluorouracil, or 5-FU, and
capecitabine (Xeloda(R)). The OSI-7904L clinical program includes an ongoing
Phase II trial in gastric and gastric esophageal junction cancers and two
ongoing combination Phase I trials with cisplatin (Platinol(R)) and oxaliplatin
(Eloxatin(TM)), respectively. We recently advanced OSI-7904L to the second stage
of the gastric and gastric esophageal junction cancers Phase II study based upon
having exceeded the initial requirements of the study achieving at least three
partial responses in the first 18 evaluable patients. We also have advanced
OSI-930 through pre-clinical development to Investigational New Drug, or IND,
track. OSI-930 is an oral, small molecule kinase inhibitor that primarily
targets two receptor tyrosine kinases, namely c-KIT and VEGFR. As a dual
c-KIT/VEGFR inhibitor, OSI-930 has the potential to inhibit tumor proliferation
and angiogenesis, two important processes in the progression of cancer. It is
the first candidate advanced to the IND track stage since our decision to focus
our core business on oncology in early fiscal 2003. Aptosyn(R) (exisulind) was
added to our pipeline with the acquisition of Cell Pathways, Inc. in June 2003
and is currently in a Phase III trial in combination with docetaxel
(Taxotere(R)) for the treatment of advanced NSCLC. Although Cell Pathways had
advanced Aptosyn(R) to Phase III trials, we consider it to be a higher risk
prototype drug candidate arising from the apoptosis platform acquired from Cell
Pathways. OSI-461 (formerly CP461), the second drug candidate acquired from Cell
Pathways, is currently being evaluated in a dose ranging Phase I study and a
series of exploratory Phase II studies in chronic lymphocytic leukemia, renal
cell carcinoma and prostate cancer. Three molecules, CP-547,632 (targeting the
vascular endothelial growth factor receptor gene), CP-724,714 (targeting the
HER2 gene) and CP-868,596 (targeting the platelet derived growth factor receptor
gene) that were discovered as part of our historical alliance with Pfizer Inc.
are currently in clinical trials conducted by Pfizer. We will receive royalty
payments on the Pfizer candidates if they are successfully commercialized.
In order to support our clinical pipeline, we have established (through
acquisition and internal investment) a high quality oncology clinical
development and regulatory affairs capability and a pilot scale chemical
manufacturing and process chemistry group. Behind our clinical pipeline, we have
an extensive, fully integrated small molecule drug discovery organization
designed to generate a pipeline of high quality oncology drug candidates to move
into clinical development. This research operation has been built upon our
historical strengths in high throughput screening, chemical libraries, medicinal
and combinatorial chemistry, and automated drug profiling technology platforms
and is focused in the areas of signal transduction inhibitors (targeting the
uncontrolled cell growth exhibited by many cancers) and apoptosis (targeting the
ability of many cancer cells to avoid the tightly regulated process of
programmed cell death or apoptosis).
In addition to Tarceva(TM) and our clinical pipeline, we have the exclusive
right to market and promote Novantrone(R) for approved oncology indications in
the United States under a Co-Promotion Agreement with Serono, S.A. Novantrone(R)
is approved by the FDA for the treatment of acute nonlymphocytic leukemia which
includes myelogenous, promyelocytic, monocytic and erythroid acute leukemias,
and the relief of pain associated with advanced hormone-refractory prostate
cancer. The drug is also approved for certain advanced forms of multiple
sclerosis. These exclusive rights to a high quality marketed oncology product
have allowed us to establish a commercial organization and begin to build a
revenue base. To that end, we have built a core commercial operation of sales,
marketing, medical affairs, commercial planning and other support personnel. We
believe that the tangible and intangible benefits of this commercial capability
are significant in that it allows us to pursue additional in-licensing and
co-promotion
2
arrangements for other marketed products, enables us to directly market our
future pipeline products in the United States, and further validates OSI as a
quality development and commercialization partner for oncology development
candidates. In addition, it allows us to pursue our co-promotion rights for
Tarceva(TM) in the United States with our partner, Genentech. The exclusive
marketing and distribution rights to Gelclair(R) in North America acquired as
part of the Cell Pathways transaction have provided us with an additional
product that provides relief for the treatment of pain associated with oral
mucositis, a debilitating side effect often seen in cancer patients undergoing
radiation treatment or chemotherapy.
As we look to longer-term value creation for our company, we consider it
prudent to explore the expansion into another disease area in order to enhance
growth. In this respect, we have chosen to expand our investment in our
majority-owned diabetes and obesity subsidiary, Prosidion Ltd. Prosidion was
created in January 2003 when we transferred our diabetes assets into this
U.K.-based majority-owned subsidiary as part of our effort to focus our core
business on oncology. Since its inception, Prosidion has made significant
progress and throughout this period we have continued to invest in the
subsidiary. Two small molecule drug candidates, one targeting the activation of
the enzyme glucokinase and the other targeting the inhibitor of the enzyme
glycogen phosphorylase, have progressed to the IND track stage of development
and these drug candidates are scheduled to enter clinical trials in early 2005.
Based on this progress, we believe that Prosidion represents a potentially
valuable asset for long-term growth and a means to eventually broaden our
interest to a second disease area beyond our core oncology business. As a
result, we have chosen to continue funding Prosidion in the near term rather
than seek overly dilutive third-party financing or premature partnering and have
committed an additional investment of up to $40.0 million based on progress of
the subsidiary, with an initial commitment of $10.0 million.
---------------------
We were incorporated in the State of Delaware in March 1983. Our corporate
headquarters are located at 58 South Service Road, Suite 110, Melville, New York
11747 and our telephone number is (631) 962-2000.
3
THE OFFERING
The following is a brief summary of the terms of this offering. For a more
complete description of the notes, see "Description of the Notes" in this
prospectus.
Issuer........................ OSI Pharmaceuticals, Inc.
Notes Offered................. $150,000,000 aggregate principal amount of
3 1/4% Convertible Senior Subordinated Notes
due 2023.
Maturity...................... September 8, 2023.
Interest...................... 3 1/4% per year on the principal amount,
payable semiannually in arrears in cash on
March 8 and September 8 of each year, beginning
March 8, 2004.
Ranking....................... The notes are our unsecured (except to the
extent described under "Description of the
Notes -- Security") senior subordinated
obligations. They rank junior in right of
payment to all of our existing and future
"Senior Indebtedness" (as defined herein), and
rank equally with all of our existing and
future senior subordinated indebtedness. The
notes will also effectively be subordinated to
all existing and future indebtedness and other
liabilities of our subsidiaries. We had
approximately $24,300 of Senior Indebtedness
and $310.0 million of senior subordinated
indebtedness outstanding (including the notes
registered herein), and our subsidiaries had no
indebtedness outstanding, as of March 31, 2004.
See "Description of the
Notes -- Subordination."
Conversion Rights............. The notes are convertible at the option of the
holder at any time on or prior to maturity into
shares of our common stock at a conversion
price of approximately $50.02 per share, which
is equal to a conversion rate of 19.9925 shares
per $1,000 principal amount of notes. The
conversion price is subject to adjustment. See
"Description of the Notes -- Conversion
Rights."
Security...................... We have purchased and pledged to the trustee
under the indenture, as security for the notes
and for the exclusive benefit of the holders of
the notes, approximately $14.2 million of U.S.
government securities which will be sufficient
upon receipt of scheduled interest and
principal payments thereon to provide for
payment in full of the first six scheduled
interest payments on the notes when due. The
notes will not otherwise be secured. See
"Description of the Notes -- Security."
Optional Redemption........... On or after September 8, 2008, we may, at our
option, redeem for cash all or a portion of the
notes, at any time and from time to time for a
price equal to 100% of the principal amount of
the notes to be redeemed, plus any accrued and
unpaid interest to, but excluding, the
redemption date. See "Description of the
Notes -- Optional Redemption by OSI."
Purchase of the Notes by OSI
at the Option of the Holder... Holders have the right to require us to
purchase all or a portion of their notes on
September 8, 2008, September 8, 2013 and
September 8, 2018. In each case, the purchase
price payable will be equal to 100% of the
principal amount of the notes to be
4
purchased plus accrued and unpaid interest, if
any, to but excluding the purchase date. We may
choose to pay the purchase price in cash or in
shares of our common stock. See "Description of
the Notes -- Purchase of Notes by OSI at the
Option of the Holder."
Purchase at the Option of the
Holder Upon a Change in
Control....................... Upon a change in control of OSI, the holders
may require us to purchase all or a portion of
their notes at a change in control purchase
price equal to 100% of the principal amount of
the notes to be purchased plus accrued and
unpaid interest, if any, to but excluding the
change in control purchase date. We may choose
to pay the change in control purchase price in
cash or in shares of our common stock. See
"Description of the Notes -- Purchase at the
Option of the Holder Upon a Change in Control."
DTC Eligibility............... The notes were issued in fully registered
book-entry form and are represented by one or
more permanent global notes without coupons.
Global notes have been deposited with a
custodian for and registered in the name of a
nominee of The Depository Trust Company ("DTC")
in New York, New York. Beneficial interests in
global notes are shown on, and transfers
thereof are effected only through, records
maintained by DTC and its direct and indirect
participants, and your interest in any global
note may not be exchanged for certificated
notes, except in limited circumstances
described herein. See "Description of the
Notes -- Book-Entry Form."
Use of Proceeds............... We will not receive any proceeds from the sale
by any securityholder of the notes or shares of
common stock offered under this prospectus. See
"Use of Proceeds."
Trading....................... The notes sold to qualified institutional
buyers are eligible for trading in the PORTAL
market; however, the notes resold pursuant to
this prospectus will no longer trade on the
PORTAL market. We do not intend to list the
notes on any national securities exchange or
the Nasdaq National Market under the symbol
"OSIP." The notes are new securities for which
there is currently no public market.
Nasdaq Symbol for Our Common
Stock......................... Our common stock is quoted on the Nasdaq
National Market under the symbol "OSIP."
Common Stock.................. As of May 18, 2004, there were 39,791,682
shares of our common stock issued and
outstanding. See "Description of Capital
Stock -- Common Stock."
Risk Factors.................. See "Risk Factors" and other information in
this prospectus for a discussion of factors you
should carefully consider before deciding to
invest in the notes.
5
RISK FACTORS
You should carefully consider the following risk factors together with the
other information contained in or incorporated into this prospectus before you
decide to buy our notes or the common stock issuable upon conversion of the
notes. If any of these risks actually occur, our business, financial condition,
operating results or cash flows could be harmed. This could cause the trading
price of the notes or our common stock to decline and you may lose part or all
of your investment.
RISKS RELATING TO OUR BUSINESS
WE HAVE INCURRED LOSSES SINCE OUR INCEPTION, AND WE EXPECT TO INCUR LOSSES OVER
THE NEXT FEW YEARS, WHICH MAY CAUSE THE VALUE OF OUR COMMON STOCK TO DECREASE.
We have had net operating losses since our inception in 1983. At March 31,
2004, our accumulated deficit was $595.4 million. Our net losses were $49.7
million and $89.8 million for the three and six months ended March 31, 2004,
respectively, and $27.2 million and $57.3 million for the three and six months
ended March 31, 2003, respectively. Our net losses were $181.4 million, $218.5
million, and $23.8 million for fiscal years 2003, 2002 and 2001, respectively.
The net loss for fiscal 2003 included an in-process research and development
charge of $31.5 million related to the acquisition of Cell Pathways, Inc. in
June 2003. The net loss for fiscal 2002 included an in-process research and
development charge of $130.2 million related to the acquisition of certain
assets from Gilead Sciences, Inc. in December 2001. Our losses have resulted
principally from costs incurred in research and development, acquired in-process
research and development, selling, general and administrative costs and from
amortization expense associated with our operations. These costs have exceeded
our revenues, and we expect them to continue to do so until we generate
significant sales from marketed products. We expect to continue to incur
operating losses over the next couple years as a result of our expenses for the
continued development of Tarceva(TM) and our other clinical products and
research programs and the expansion of our commercial operations. These expenses
include enhancements in our drug discovery technologies and increases in the
resources we will devote to our internally funded proprietary projects. We do
not expect to achieve profitability until approximately 24 months after a
successful launch of Tarceva(TM).
OUR ABILITY TO PENETRATE THE MARKET FOR SALES IN THE HER1/EGFR FIELD IS
CHALLENGED BY THE FACT THAT OUR COMPETITORS HAVE RECEIVED FDA APPROVAL AND HAVE
COMMENCED MARKETING OF THEIR HER1/EGFR DRUGS SIGNIFICANTLY IN ADVANCE OF OUR
LAUNCH OF TARCEVA(TM); SUCH ABILITY MAY ALSO BE CHALLENGED IF OUR COMPETITORS
PRODUCE DATA INDICATING THAT THEIR PRODUCTS ARE AS EFFECTIVE OR MORE EFFECTIVE
THAN TARCEVA(TM).
On May 5, 2003, AstraZeneca plc received FDA approval for Iressa(R), its
anti-EGFR drug, as a monotherapy for the treatment of advanced NSCLC. Another
competitor, Bristol Myers Squibb Company/ImClone Systems Incorporated, received
FDA approval to treat refractory colorectal cancer for their product,
Erbitux(TM), on February 12, 2004. Because some of our competitors have greater
resources than we do and received FDA approval for their drugs and began
marketing their products significantly in advance of our launch of Tarceva(TM),
it may be a challenge for us to penetrate the market and generate sales to the
extent projected. In addition, if our competitors succeed in developing drugs
similar to Tarceva(TM) that are as effective or more effective than our product,
the market for our product may be impaired.
IF OUR COMPETITORS SUCCEED IN DEVELOPING PRODUCTS AND TECHNOLOGIES THAT ARE MORE
EFFECTIVE THAN OUR OWN, OUR PRODUCTS AND TECHNOLOGIES MAY BE RENDERED LESS
COMPETITIVE.
We face significant competition from industry participants that are
pursuing similar products and technologies as we are and are developing
pharmaceutical products that are competitive with our potential products. Where
we are developing products independently, some of the organizations competing
with us have greater capital resources, larger overall research and development
staffs and facilities, and more extensive experience in drug discovery and
development, obtaining regulatory approval and pharmaceutical
6
product manufacturing and marketing. With these additional resources, our
competitors may be able to respond to the rapid and significant technological
changes in the biotechnology and pharmaceutical industries faster than we can.
Our future success will depend in large part on our ability to maintain a
competitive position with respect to these technologies. Rapid technological
development may result in our compounds, products or processes becoming obsolete
before we can recover any of the expenses incurred to develop them.
IF WE DO NOT MAINTAIN OUR CO-DEVELOPMENT AND MARKETING ALLIANCE WITH GENENTECH,
INC. AND ROCHE FOR TARCEVA(TM), OUR ABILITY TO PROCEED WITH THE TIMELY AND
PROFITABLE MANUFACTURE AND SALE OF TARCEVA(TM) MAY BE COMPROMISED OR DELAYED.
Tarceva(TM) is being developed in an alliance with Genentech, Inc. and
Roche. The development program is managed by the three parties under a global
development committee. If Tarceva(TM) receives regulatory approval, Genentech
will lead the marketing effort in the United States and Roche will market the
drug in the rest of the world. We have entered into agreements with both
Genentech and Roche with respect to the alliance. The term of the OSI/Genentech
agreement continues until the date on which neither we nor Genentech is entitled
to receive a share of the operating profits or losses on any products resulting
from the collaboration, that is, until the date that we and Genentech mutually
agree to terminate the collaboration or until either party exercises early
termination rights as described as follows. The OSI/ Genentech agreement is
subject to early termination in the event of certain customary defaults, such as
material breach of the agreement and bankruptcy. In addition, since January 8,
2003, Genentech has had the right to terminate the OSI/Genentech agreement with
six months prior written notice. The term of the OSI/Roche agreement continues
until the date on which we are no longer entitled to receive a royalty on
products resulting from the development of Tarceva(TM), that is, until the date
of expiration or revocation or complete rejection of the last to expire patent
covering Tarceva(TM) or, in countries where there is no valid patent covering
Tarceva(TM), on the 10th anniversary of the first commercial sale of Tarceva(TM)
in that country. The OSI/Roche agreement is subject to early termination in the
event of certain customary defaults, such as material breach of the agreement
and bankruptcy. In addition, since July 31, 2003, Roche has had the right to
terminate the agreement on a country-by-country basis with six months prior
written notice. After such time we also have had the right to terminate the
agreement on a country-by-country basis if Roche has not launched or marketed a
product in such country under certain circumstances. If we do not maintain a
successful collaborative partnership with Genentech and Roche for the
co-development and commercialization of Tarceva(TM), we may be forced to focus
our efforts internally to commercialize Tarceva(TM). This situation would
require a greater expenditure of financial resources and may cause a delay in
launch and market penetration while we continue to build our own commercial
operation or seek alternative partners. Although we manage the manufacturing of
Tarceva(TM) for the U.S. market through third party providers, we may need to
replace Roche's manufacturing role in markets outside of the United States.
THE PHARMACEUTICAL INDUSTRY IS SUBJECT TO EXTENSIVE GOVERNMENT REGULATION WHICH
POSES SEVERAL RISKS FOR US.
We intend to file a New Drug Application, or NDA, covering Tarceva(TM),
with the Food and Drug Administration, or FDA, in the third calendar quarter of
2004. A drug candidate cannot be marketed in the United States until it has been
approved by the FDA. Once approved, the drug can only be marketed for the
indications and claims approved by the FDA. The FDA also has the authority, when
approving a product, to impose significant limitations on the product in the
nature of warnings, precautions and contra-indications that could negatively
affect the profitability of a drug. The ability to market and sell a drug
product outside of the United States is also subject to stringent, and in some
cases equally complex, regulatory processes which vary depending on the
jurisdiction.
There is a risk that the FDA or a foreign regulatory authority will not
approve our NDA for Tarceva(TM), or any other drug candidate which we develop,
in a timely manner. Delays or rejections may be encountered during any stage of
the regulatory process based upon the failure of the clinical or other data to
demonstrate compliance with, or upon the failure of the product to meet, a
regulatory agency's
7
requirement for safety, efficacy and quality. Any such delay could have a
negative effect on our business. Even once approved, drugs, as well as their
manufacturers, are subject to continuing and ongoing review, and discovery of
previously unknown problems with these products or the failure to adhere to
manufacturing or quality control requirements may result in restrictions on
their manufacture, sale or use, or their withdrawal from the market.
Furthermore, once a product is approved, the FDA may not permit us to market
that product for broader applications or different indications. Finally, once a
drug is approved, if we fail to comply with FDA regulations prohibiting
promotion of off-label uses and the promotion of products for which marketing
clearance has not been obtained, the FDA, or the Office of the Inspector General
of the Department of Health and Human Services, or state Attorneys General could
bring an enforcement action against us that would inhibit our marketing
capabilities as well as result in significant penalties.
IF ANY OF OUR MARKETED PRODUCTS WERE TO BECOME THE SUBJECT OF PROBLEMS, OR IF
NEW, MORE EFFECTIVE TREATMENTS SHOULD BE INTRODUCED, OUR SALES REVENUES FROM
SUCH MARKETED PRODUCTS COULD DECREASE.
We currently market two products, Novantrone(R) and Gelclair(R). If these
marketed products become the subject of problems including, among others:
- efficacy or safety concerns with the products, even if not justified;
- unexpected side effects;
- regulatory proceedings subjecting the products to potential recall;
- publicity affecting doctor prescription or patient use of the product;
and
- pressure from competitive products
or if new, more effective treatments are introduced, our sales revenues from
such products could decrease. For example, efficacy or safety concerns may
arise, whether or not justified, that could lead to the recall or withdrawal of
either or both products. In the event of a recall or withdraw of a product such
as Novantrone(R), our sales revenues would significantly decline.
IF WE ARE UNABLE TO MAINTAIN A SUCCESSFUL COMMERCIAL INFRASTRUCTURE FOR THE
MARKETING OF NOVANTRONE(R) AND GELCLAIR(R) OR FOR OUR POTENTIAL ONCOLOGY
PRODUCTS OTHER THAN TARCEVA(TM), WE WILL NEED TO ENTER INTO AND MAINTAIN
ARRANGEMENTS WITH THIRD PARTIES FOR COMMERCIALIZATION OF THESE PRODUCTS THAT
COULD SUBSTANTIALLY DIMINISH OUR SHARE OF THE REVENUES FROM THE SALES OF THESE
PRODUCTS.
In order to successfully commercialize our other product candidates, we
must be able to:
- manufacture our products in commercial quantities at reasonable costs;
- obtain reimbursement coverage for our products;
- compete favorably against other products; and
- market our products successfully.
In order to continue to generate sales of Novantrone(R) and Gelclair(R), we
will need to maintain a successful commercial infrastructure. If we are
unsuccessful maintaining this infrastructure, we would need to enter into and
successfully maintain additional commercialization agreements. This could result
in our receipt of decreased revenues from sales of Novantrone(R) for oncology
indications and Gelclair(R) and potential oncology products other than
Tarceva(TM).
THE MEDICARE PRESCRIPTION DRUG IMPROVEMENT AND MODERNIZATION ACT OF 2003
MATERIALLY CHANGES THE MEDICARE REIMBURSEMENT GUIDELINES FOR INTRAVENOUS AND
ORAL ONCOLOGY PRODUCTS WHICH MAY IMPACT OUR SALES REVENUES.
The formula by which Medicare reimbursement for intravenous oncology
products is rendered to the oncologist was vigorously debated by Congress. The
new Act will lower the reimbursement to oncologists
8
for intravenous oncology products like Novantrone(R), effective January 2004,
while providing increased reimbursement for oral drugs like Tarceva(TM) (if
approved by the FDA) in 2006, which are not currently covered by Medicare. These
changes in Medicare reimbursement could have a negative impact on our sales
revenues of Novantrone(R).
IF SERONO S.A. OR HELSINN HEALTHCARE, S.A. DO NOT FULFILL THEIR OBLIGATIONS OF
MANUFACTURING AND SUPPLYING NOVANTRONE(R) AND GELCLAIR(R), RESPECTIVELY, WE MAY
NOT BE ABLE TO CONTINUE THE MARKETING AND/OR DISTRIBUTION OF THE PRODUCT WHICH
COULD CAUSE OUR REVENUES TO DECREASE.
Under the terms of our agreements with Serono and Helsinn, we do not have
the obligation nor the right to manufacture Novantrone(R) or Gelclair(R). These
obligations and rights are held solely by Serono and Helsinn. If either of the
parties are delayed in and/or restricted from supplying the product, we would be
directly affected. Any delay or restrictions would impede us from selling the
product. Without the sales of Novantrone(R) and Gelclair(R), our revenues would
decrease.
ALTHOUGH WE HAVE POTENTIAL ONCOLOGY PRODUCTS THAT APPEAR TO BE PROMISING AT
EARLY STAGES OF DEVELOPMENT AND IN CLINICAL TRIALS, NONE OF OUR POTENTIAL
ONCOLOGY PRODUCTS MAY REACH THE COMMERCIAL MARKET FOR A NUMBER OF REASONS.
Successful research and development of pharmaceutical products is high
risk. Most projects and development candidates fail to reach the market. Our
success depends on the discovery of new drugs that we can commercialize. It is
possible that our potential oncology products, including Tarceva(TM), may never
reach the market for a number of reasons. They may be found ineffective or cause
harmful side effects during pre-clinical testing or clinical trials or fail to
receive necessary regulatory approvals. We may find that certain products cannot
be manufactured on a commercial scale basis and, therefore, they may not be
economical to produce. Our products could also fail to achieve market acceptance
or be precluded from commercialization by proprietary rights of third parties.
We have a number of oncology product candidates in various stages of development
and do not expect them to be commercially available for a number of years, if at
all. Our candidates that are in clinical trials will still require significant
research and development and regulatory approvals before we or our collaborative
partners will be able to market them.
IF GOVERNMENT AGENCIES DO NOT GRANT US OR OUR COLLABORATIVE PARTNERS REQUIRED
APPROVALS FOR ANY OF OUR POTENTIAL PRODUCTS, WE OR OUR COLLABORATIVE PARTNERS
WILL NOT BE ABLE TO MANUFACTURE AND SELL OUR PRODUCTS.
All of our potential products must undergo an extensive regulatory approval
process in the United States and other countries. This regulatory process, which
includes pre-clinical testing and clinical trials of each compound to establish
our safety and efficacy, can take many years and requires the expenditure of
substantial resources. Moreover, data obtained from pre-clinical and clinical
activities are susceptible to varying interpretations that could delay, limit or
prevent regulatory approval. The FDA and the other regulatory agencies (i.e.,
the European Union Health Authorities and the Japanese Ministry of Health) in
additional markets, which are material to us and our collaborative partners, may
delay or deny the approval of our proposed products. None of our proposed
products has yet received governmental approval, and none may ever do so. If we
do not receive the required regulatory approvals, we or our collaborative
partners will not be able to manufacture and sell our products. Even if we
obtain regulatory approval, a marketed product and our manufacturer are subject
to continuing regulatory oversight, including post-marketing surveillance. We
may be required to withdraw our product from the market if previously unknown
problems are discovered. Violations of regulatory requirements at any stage may
result in various unfavorable consequences to us, including the FDA's imposition
of criminal penalties against the manufacturer and the holder of the new drug
application.
IF OUR COLLABORATIVE PARTNERS OR OTHER THIRD PARTY CONTRACTORS GIVE OTHER
PRODUCTS GREATER PRIORITY THAN OUR PRODUCTS OR FAIL TO PERFORM THEIR OBLIGATIONS
UNDER THE AGREEMENTS, OUR PRODUCTS MAY BE SUBJECT TO DELAYS IN RESEARCH AND
DEVELOPMENT, MANUFACTURE AND COMMERCIALIZATION THAT MAY IMPEDE OUR ABILITY TO
TAKE THEM TO
9
MARKET BEFORE OUR COMPETITORS OR COMPETE EFFECTIVELY IN THE MARKET. THIS MAY
RENDER OUR PRODUCTS OBSOLETE OR MAY RESULT IN LOWER THAN ANTICIPATED REVENUES
FOR US.
We rely on some of our collaborative partners and certain third party
contractors to assist with commercialization, research and development as well
as the manufacture of our potential products in their FDA-approved manufacturing
facilities. Some of our collaborative agreements allow these parties significant
discretion in electing whether or not to pursue the activities that they have
agreed to pursue for us. We cannot control the amount and timing of resources
these parties devote to our programs or potential products. Our potential
products may be in competition with other products for priority of access to
these parties' research and development and manufacturing facilities. If these
parties do not give significant priority to the commercialization, research and
development or manufacture of our potential products in an effective or timely
manner, the clinical development of our product candidates or their submission
for regulatory approval could be delayed, and our ability to deliver products to
the market on a timely basis could be impaired. Furthermore, we may not be able
to enter into any necessary third-party commercialization, research and
development or manufacturing arrangements on acceptable terms, if at all.
OUR RELIANCE ON THIRD PARTIES SUCH AS MANUFACTURERS, CLINICAL DISTRIBUTORS, AND
CLINICAL RESEARCH ORGANIZATIONS, OR CROS, MAY RESULT IN DELAYS IN COMPLETING, OR
A FAILURE TO COMPLETE, CLINICAL TRIALS IF THEY FAIL TO PERFORM UNDER OUR
AGREEMENTS WITH THEM.
From time to time, in the course of product development, we engage
manufacturers, clinical distributors, and/or CROs to manufacture and distribute
the product candidate, to conduct and manage clinical studies and to assist us
in guiding products through the FDA review and approval process. For example, we
collaborate with the National Cancer Institute of Canada's Clinical Trial Group
in connection with our Tarceva(TM) Phase III trials. Because we have engaged and
intend to engage manufacturers, clinical distributors, and CROs to help us
obtain market approval for our drug candidates, many important aspects of this
process have been and will be out of our direct control. If the manufacturers,
clinical distributors, and CROs fail to perform their obligations under our
agreements with them or fail to manufacture and distribute the product candidate
and to perform clinical trials in a satisfactory manner, we may face delays in
completing our clinical trials, as well as commercialization of any drug
candidate. Furthermore, any loss or delay in obtaining contracts with such
entities may also delay the completion of our clinical trials and the market
approval of drug candidates.
THE USE OF ANY OF OUR POTENTIAL PRODUCTS IN CLINICAL TRIALS AND THE SALE OF ANY
APPROVED PRODUCTS MAY EXPOSE US TO LIABILITY CLAIMS RESULTING FROM THE USE OF
PRODUCTS OR PRODUCT CANDIDATES.
The nature of our business exposes us to potential liability risks inherent
in the testing, manufacturing and marketing of drug discovery candidates and
products. Using our drug candidates in clinical trials may expose us to product
liability claims. These risks will expand with respect to drugs, if any, that
receive regulatory approval for commercial sale. While we currently maintain
product liability insurance that we believe is adequate, such insurance may not
be available at reasonable rates, if at all, in the future. If we do not or
cannot maintain adequate insurance coverage, we may incur significant liability
if a product liability claim arises.
IF WE OR OUR COLLABORATIVE PARTNERS ARE REQUIRED TO OBTAIN LICENSES FROM THIRD
PARTIES, OUR REVENUES AND ROYALTIES ON ANY COMMERCIALIZED PRODUCTS COULD BE
REDUCED.
The development of some of our products may require the use of technology
developed by third parties. The extent to which efforts by other researchers
have resulted or will result in patents and the extent to which we or our
collaborative partners are forced to obtain licenses from others, if available,
on commercially reasonable terms is currently unknown. If we or our
collaborative partners must obtain licenses from third parties, fees must be
paid for such licenses. These fees would reduce the revenues and royalties we
may receive on commercialized products.
10
IF WE CANNOT SUCCESSFULLY PROTECT, EXPLOIT OR ENFORCE OUR INTELLECTUAL PROPERTY
RIGHTS, OUR ABILITY TO DEVELOP AND COMMERCIALIZE OUR PRODUCTS WILL BE SEVERELY
LIMITED.
As of December 31, 2003, we held 91 U.S. patents, 151 foreign patents, 104
pending applications for U.S. patents, four of which have been allowed, and 205
applications for foreign patents, six of which have been allowed. Moreover, we
jointly own with Pfizer Inc. rights to numerous issued U.S. and foreign patents
and pending U.S. and foreign patent applications and we jointly own, with North
Carolina State University, two issued U.S. patent and certain U.S. and foreign
pending patent applications. Further, we jointly hold, with the University of
Arizona, 11 issued U.S. patents, three U.S. pending patent applications, 17
foreign patents, and 25 pending foreign patent applications. We intend to
continue to seek patent protection for or maintain as trade secrets all of the
commercially promising product candidates that we have discovered, developed or
acquired. Our success depends, in part, on our ability and our collaborative
partners' ability to obtain patent protection for new product candidates,
maintain trade secret protection and operate without infringing the proprietary
rights of third parties. As with most biotechnology and pharmaceutical
companies, our patent position is highly uncertain and involves complex legal
and factual questions. Without patent and other similar protection, other
companies could offer substantially identical products for sale without
incurring the sizable discovery and development costs that we have incurred. Our
ability to recover these expenditures and realize profits upon the sale of
products could be diminished. The process of obtaining patents can be time
consuming and expensive with no certainty of success. Even if we spend the
necessary time and money, a patent may not issue or it may insufficiently
protect the technology it was intended to protect. We can never be certain that
we were first to develop the technology or that we were the first to file a
patent application for the particular technology because most U.S. patent
applications are confidential until a patent issues, and publications in the
scientific or patent literature lag behind actual discoveries. If our pending
patent applications are not approved for any reason or if we are unable to
develop additional proprietary technologies that are patentable, the degree of
future protection for our proprietary rights will remain uncertain. Furthermore,
third parties may independently develop similar or alternative technologies,
duplicate some or all of our technologies, design around our patented
technologies or challenge our issued patents.
We license to other companies rights to use our patented "gene
transcription estate" which consists of drug discovery assays that provide a way
to identify novel product candidates that can control the activity of genes. To
date, we have granted seven licenses to use our gene transcription patents. If
other pharmaceutical and biotechnology companies which we believe are using our
patented technology are not willing to negotiate license arrangements with us on
reasonable terms, we may have to choose between abandoning our licensing
strategy or initiating legal proceedings against those companies. Legal action,
particularly patent infringement litigation, is extremely costly.
In a legal action to enforce our gene transcription patents or other
patents, courts may find that the scope of our patents is not sufficiently broad
enough to cover our products or competitors infringing on our products. Further,
courts may find that our patents are invalid or unenforceable. This would lessen
our ability to enforce or license our patents and would lessen our ability to
prevent competitors from marketing similar products.
IF OTHER COMPANIES CLAIM THAT WE INFRINGE ON THEIR INTELLECTUAL PROPERTY RIGHTS,
WE MAY BE SUBJECT TO COSTLY AND TIME-CONSUMING LITIGATION AND DELAYS IN PRODUCT
INTRODUCTION.
Our processes and potential products may conflict with patents that have
been or may be granted to competitors, academic institutions or others. As the
biotechnology and pharmaceutical industries expand and more patents are filed
and issued, the risk increases that our product candidates may give rise to a
declaration of interference by the U.S. Patent and Trademark Office, to
administrative proceedings in foreign patent offices or to claims of patent
infringement by other companies, institutions or individuals. These entities or
persons could bring legal proceedings against us seeking substantial damages or
seeking to enjoin us from testing, manufacturing or marketing our products. If
any of these actions were successful, we may also be required to cease the
infringing activity or obtain the requisite licenses or rights to use the
11
technology that may not be available to us on acceptable terms, if at all. Any
litigation, regardless of the outcome, could be extremely costly to us.
IF WE CANNOT OBTAIN ADEQUATE FUNDING FOR OUR RESEARCH AND DEVELOPMENT EFFORTS OR
OUR PROJECTED FUTURE SALES ARE DELAYED OR DIMINISHED, WE MAY HAVE TO LIMIT THE
SCOPE OF OUR PROPRIETARY PRODUCT DEVELOPMENT IN FUTURE YEARS OR ENTER INTO MORE
RESTRICTIVE ARRANGEMENTS WITH COLLABORATIVE PARTNERS.
As of March 31, 2004, our cash reserves, consisting of cash, cash
equivalents, restricted short and long-term investments, and unrestricted
short-term investments, aggregated approximately $335.3 million. We estimate
that our fiscal 2004 cash burn will be between $120 million and $125 million
depending upon the timing of certain milestone payments that we will receive
upon the successful filing and approval of the NDA submission for Tarceva(TM) in
the United States and in Europe. Our future capital requirements will depend on
many factors, including the size and complexity of our research and development
programs, the progress of pre-clinical testing and early stage clinical trials,
the time and costs involved in obtaining regulatory approvals for our product
candidates, the costs of manufacturing arrangements and the costs of
commercialization activities. Although we believe our current cash reserves are
sufficient for our near-term operating needs, we may choose to raise additional
funds through public or private sales of our securities, including equity and
debt securities, as well as from collaborative partners in order to further our
growth. We may not be able to obtain adequate funding from the sale of our
securities or from collaborative partners on reasonable or acceptable terms, if
at all. Furthermore, any additional equity financings may dilute the value of
the common stock held by our stockholders. If adequate funds are not available,
we may be required to significantly curtail one or more of our research and
development programs or obtain funds through arrangements with collaborative
partners or others that may require us to relinquish certain of our rights to a
number of our technologies or product candidates.
IF THE MARKET PRICE OF OUR COMMON STOCK, SIMILAR TO OTHER BIOTECHNOLOGY
COMPANIES, REMAINS HIGHLY VOLATILE, THEN OUR STOCKHOLDERS MAY NOT BE ABLE TO
SELL THEIR STOCK WHEN DESIRED OR AT DESIRABLE PRICES.
When the stock prices of companies in the Nasdaq Biotechnology Index fall,
our stock price will most likely fall as well. The market price of the common
stock of biotechnology and pharmaceutical companies and our common stock has
been volatile and may remain volatile for the foreseeable future. From October
1, 2000 through September 30, 2001, the range of our stock price was between
$86.38 and $30.19, and the range of the Nasdaq Biotechnology Index was between
$1,323.41 and $608.24. From October 1, 2001 through September 30, 2002, the
range of our stock price was between $50.94 and $11.50, and the range of the
Nasdaq Biotechnology Index was between $978.42 and $397.36. From October 1, 2002
through September 30, 2003, the range of our stock price was between $38.34 and
$12.84, and the range of the Nasdaq Biotechnology Index was between $801.40 and
$442.09. From October 1, 2003 through May 18, 2004, the range of our stock price
was between $98.70 and $24.47, and the range of the Nasdaq Biotechnology Index
was between $851.44 and $661.13. The following factors, among others, some of
which are beyond our control, may also cause our stock price to decline:
- fluctuations in operating results;
- announcements of technological innovations or new therapeutic products by
others;
- negative or neutral clinical trial results;
- developments concerning strategic alliance agreements;
- negative clinical or safety results from our competitors' products;
- changes in government regulation including pricing controls;
- delays with the FDA in the approval process for Tarceva(TM) and other
clinical candidates;
- developments in patent or other proprietary rights;
- public concern as to the safety of our products;
12
- future sales of substantial amounts of our common stock by existing
stockholders; and
- comments by securities analysts and general market conditions.
If our stock price falls, our stockholders may not be able to sell their
stock when desired or at desirable prices.
OUR GOVERNANCE DOCUMENTS AND STATE LAW PROVIDE CERTAIN ANTI-TAKEOVER MEASURES
WHICH WILL DISCOURAGE A THIRD PARTY FROM SEEKING TO ACQUIRE US AND MAY IMPEDE
THE ABILITY OF STOCKHOLDERS TO REMOVE AND REPLACE OUR BOARD OF DIRECTORS AND,
THEREFORE, OUR MANAGEMENT.
We have had a shareholder rights plan, commonly referred to as a "poison
pill," since January 1999. The purpose of the shareholder rights plan is to
protect stockholders against unsolicited attempts to acquire control of us that
do not offer a fair price to our stockholders as determined by our board of
directors. Under the plan, the acquisition of 17.5% or more of our outstanding
common stock by any person or group, unless approved by our board of directors,
will trigger the right by our stockholders to acquire additional shares of our
common stock (and in certain cases the stock of the potential acquiror) at a
bargain purchase price, thus significantly increasing the acquisition cost to a
potential acquiror. The shareholder rights plan may have the effect of
dissuading a potential hostile acquiror from making an offer for our common
stock at a price that represents a premium to the then current trading price.
Our certificate of incorporation and by-laws contain certain additional
anti-takeover protective devices. For example,
- no stockholder action may be taken without a meeting, without prior
notice and without a vote; solicitations by consent are thus prohibited;
- special meetings of stockholders may be called only by our board of
directors;
- nominations by stockholders of candidates for election to the board of
directors at our annual meeting of stockholders must be made at least 45
days prior to the date on which we first mailed our proxy materials for
the prior year's annual meeting of stockholders; and
- our board of directors has the authority, without further action by the
stockholders, to fix the rights and preferences, and issue shares of,
preferred stock.
An issuance of preferred stock with dividend and liquidation rights senior
to the common stock and convertible into a large number of shares of common
stock could prevent a potential acquiror from gaining effective economic or
voting control. Further, we are subject to Section 203 of the Delaware General
Corporation Law which, subject to certain exceptions, restricts certain
transactions and business combinations between a corporation and a stockholder
owning 15% or more of the corporation's outstanding voting stock for a period of
three years from the date the stockholder becomes a 15% stockholder. In addition
to discouraging a third party from acquiring control of us, the foregoing
provisions could impair the ability of existing stockholders to remove and
replace our management and/or our board of directors.
RISKS RELATED TO THE NOTES
THE NOTES ARE SUBORDINATED TO ANY EXISTING AND FUTURE SENIOR INDEBTEDNESS AND
RANK BELOW OUR SECURED DEBT AND THE LIABILITIES OF OUR SUBSIDIARIES.
The notes are contractually subordinated in right of payment to our
existing and future Senior Indebtedness (defined herein). This means that the
payment of the principal and interest on the notes is subordinated to the prior
payment in full of all of our existing and future Senior Indebtedness. The notes
are and will be effectively subordinated to all existing and future indebtedness
and other liabilities of our subsidiaries. However, payment from the money or
the proceeds from the U.S. government securities pledged to the trustee as
security for the exclusive benefit of the holders of the notes, as described
under "Description of the Notes -- Security" or amounts deposited with the
trustee to pay and discharge all
13
outstanding notes, as described under "Description of the Notes -- Satisfaction
and Discharge," is not subordinated to any Senior Indebtedness or subject to the
subordination restrictions described in this prospectus. We had approximately
$24,300 of Senior Indebtedness and $310.0 million of senior subordinated
indebtedness outstanding (including the notes registered herein), and our
subsidiaries had no indebtedness outstanding, as of March 31, 2004.
The indenture does not limit the creation of additional indebtedness. Any
significant additional indebtedness incurred may adversely affect our ability to
service our debt, including the notes. Due to the subordination provisions, in
the event of our insolvency, funds which we would otherwise use to pay the
holders of the notes will be used to pay the holders of Senior Indebtedness to
the extent necessary to pay the Senior Indebtedness in full. As a result of
these payments, our general creditors may recover more, ratably, than the
holders of the notes. In addition, the holders of our Senior Indebtedness may
restrict or prohibit us from making payments on the notes.
OUR OUTSTANDING INDEBTEDNESS INCREASED SUBSTANTIALLY WITH THE ISSUANCE OF
CONVERTIBLE SENIOR SUBORDINATED NOTES IN FEBRUARY 2002 AND SEPTEMBER 2003, AND
WE MAY NOT BE ABLE TO MAKE THE REQUIRED PAYMENTS ON THESE NOTES WHEN DUE.
As a result of the issuance of our 4% Convertible Senior Subordinated notes
due 2009 in February 2002 and the issuance of our 3.25% Convertible Senior
Subordinated Notes due 2023 in September 2003, our long-term debt represented by
these notes was $310.0 million as of March 31, 2004. Our Convertible Senior
Subordinated Notes due 2009 and 2023 significantly increased our interest
expense and related debt service costs. Interest on these notes accrues at the
rate of 4% and 3.25% per annum, respectively. This amounts to interest payments
of $3.2 million due and payable on the 2002 notes semi-annually on February 1
and August 1 of each year and $2.4 million due and payable on the 2003 notes
semi-annually on March 8 and September 8 of each year on the outstanding amount
of the notes. Cumulative interest payments of $32.0 million are scheduled to be
paid between August 1, 2004 and February 1, 2009 on the 2009 notes and $95.1
million between September 8, 2004 and September 8, 2023 on the 2023 notes. This
long-term debt may:
- make it more difficult for us to obtain any necessary financing in the
future for working capital, capital expenditures, debt service
requirements or other purposes; and
- make us more vulnerable in the event of a down turn in our business.
We currently are not generating sufficient cash flow to satisfy the annual
debt service payments on the notes. This may require us to use a portion of the
proceeds from the sale of the notes to pay interest or borrow additional funds
or sell additional equity to meet our debt service obligations after the first
three years when the payment of interest on the notes is no longer secured. If
we are unable to satisfy our debt service requirements, we will default on our
2002 notes and our 2003 notes, and we would face liquidity problems as a result.
OUR ABILITY TO REPAY THE NOTES DEPENDS ON OUR CONTINUED FINANCIAL SUCCESS, WHICH
MAY BE ADVERSELY AFFECTED BY EXTERNAL FACTORS, SOME OF WHICH ARE BEYOND OUR
CONTROL.
At maturity, the entire outstanding principal amount of the notes offered
hereby will become due and payable by us. In addition, holders of the notes will
have the right to require us to purchase all or a portion of their notes on
September 8, 2008, September 8, 2013 and September 8, 2018, or if a "change in
control" (as defined in the indenture) occurs.
Because the notes are debt obligations only of OSI, payments of principal
and interest on the notes largely depend on the financial success of OSI. Our
financial success in turn depends on a variety of factors, some of which are
beyond our control, including:
- the success of our research and development and clinical trials;
- obtaining regulatory approvals for our oncology products, including
Tarceva(TM);
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- our ability to market, commercialize and generate revenues from our
products;
- the success of products developed by our competitors;
- our reliance on third parties, such as clinical distributors,
manufacturers, clinical research organizations, contract sales
organizations and collaborative partners;
- our ability to protect our intellectual property rights and enforce our
patents; and
- our ability to obtain adequate funding for our research and development
efforts.
We may not have sufficient financial resources at such time or be able to
arrange for additional financing to pay the principal amount at maturity,
purchase price or change in control purchase price on the notes when due.
Further, our ability to purchase the notes in any such event may be limited
by law, the indenture, by the terms of other agreements relating to our Senior
Indebtedness as such indebtedness and agreements may be entered into, replaced,
supplemented or amended from time to time. We also may be required to refinance
our Senior Indebtedness in order to make such payments.
AN ACTIVE TRADING MARKET FOR THE NOTES MAY NOT DEVELOP.
The notes are a new issue of securities for which there is currently no
trading market. The notes will not be listed on any securities exchange or
included in any automated quotation system. We cannot assure you that an active
trading market for the notes will develop or be sustained. If an active trading
market for the notes fails to develop or be sustained, the notes could trade at
prices that may be lower than the initial offering price of the notes. Further,
you may not be able to sell your notes easily or at prices that provide you with
a yield comparable to similar investments that have a developed secondary
market. Whether or not the notes will trade at lower prices depends on many
factors, including:
- prevailing interest rates and the markets for similar securities;
- the market price of our common stock;
- general economic conditions; and
- our financial condition, financial performance and future prospects.
The market price of the notes is expected to be affected significantly by
the market price of our common stock. This may result in greater volatility in
the trading value of the notes than would be expected for any nonconvertible
debt securities that we issue.
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RATIO OF EARNINGS TO FIXED CHARGES
The ratios of earnings to fixed charges for the fiscal years indicated are
stated below. For purposes of computing the ratios, earnings represent income
(loss) from continuing operations before fixed charges and taxes, and fixed
charges represent gross interest expense and a portion of rental expense, which
is deemed to be representative of the interest factor.
<Table>
<Caption>
FISCAL YEAR RATIO DEFICIENCY(2)
- ----------- ----- -------------
2003........................................................ (1) $181,357,335
2002........................................................ (1) $218,479,106
2001........................................................ (1) $ 20,886,979
2000........................................................ (1) $ 15,999,749
1999........................................................ (1) $ 9,598,437
</Table>
- ---------------
(1) For the fiscal years ended September 30, 2003, 2002, 2001, 2000 and 1999 and
six months ended March 31, 2004, earnings were insufficient to cover fixed
charges of $10.0 million, $7.9 million, $745,678, $688,935, $535,370 and
$7.5 million, respectively. For this reason, no ratios are provided.
(2) The deficiency for the six months ended March 31, 2004 was $89,837,010.
USE OF PROCEEDS
We will not receive any proceeds from the sale by any selling
securityholders of the notes or shares of common stock offered under this
prospectus.
DIVIDEND POLICY
We have never paid cash dividends and do not anticipate paying any
dividends in the foreseeable future.
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DESCRIPTION OF THE NOTES
We issued $150,000,000 aggregate principle amount of notes in a private
placement in September 2003. The notes were issued under an indenture between us
and The Bank of New York, as trustee, dated September 8, 2003. The terms of the
notes include those provided in the indenture and those provided in the
registration rights agreement, which we entered into with the initial
purchasers. As used in this description, the words "we," "us," "our" or "OSI" do
not include any current or future subsidiary of OSI Pharmaceuticals, Inc.
The following description of provisions of the notes is not complete and is
subject to, and qualified in its entirety by reference to, the notes, the
indenture and the registration rights agreement, which we urge you to read
because they define your rights as a note holder.
GENERAL
The notes represent general unsecured (except to the extent described under
"-- Security") obligations of OSI and rank junior in right of payment to all of
our existing and future senior debt. This means that the payment of the
principal, premium, if any, and interest on the notes is subordinated to the
prior payment in full of all of our existing and future Senior Indebtedness (as
defined below). The notes are also effectively subordinated to all existing and
future indebtedness and other liabilities of our subsidiaries. However, payment
from the money or the proceeds from the U.S. government securities pledged to
the trustee as security for the notes and for the exclusive benefit of the
holders of the notes, as described under "-- Security," or amounts deposited
with the trustee to pay and discharge all outstanding notes, as described under
"-- Satisfaction and Discharge," are not subordinated to any Senior Indebtedness
or subject to the subordination restrictions described in this prospectus. The
notes rank equally with all of our existing and future senior subordinated
indebtedness. We had approximately $24,300 of Senior Indebtedness and $310.0
million of senior subordinated indebtedness outstanding (including the notes
registered herein), and our subsidiaries had no indebtedness outstanding, as of
March 31, 2004. See "-- Subordination."
The notes are convertible into shares of our common stock as described
under "-- Conversion Rights." The notes are limited to $150,000,000 aggregate
principal amount and mature on September 8, 2023.
The notes bear interest from September 8, 2003 at the rate of 3 1/4% per
year. Interest is payable semi-annually on March 8 and September 8 of each year
to holders of record at the close of business on the immediately preceding
February 24 and August 24, respectively, beginning March 8, 2004.
The indenture does not contain any financial covenants or any restrictions
on the payment of dividends, the repurchase of our securities or the incurrence
of additional Senior Indebtedness or any other indebtedness. The indenture also
does not contain any covenants or other provisions that afford protection to
holders of notes in the event of a highly leveraged transaction or a change in
control of OSI except to the extent described under "-- Purchase at the Option
of the Holder Upon a Change in Control" below.
SAME-DAY SETTLEMENT AND PAYMENT
The indenture requires that payments in respect of the notes represented by
global securities be made by wire transfer of immediately available funds to the
accounts specified by holders of the global securities. With respect to notes in
certificated form, we make all payments by wire transfer of immediately
available funds to the accounts specified by the holders thereof or, if no such
account is specified, by mailing a check to each holder's registered address.
Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months. Principal will be payable, and the notes may be presented
for conversion, registration of transfer and exchange, without service charge,
at our office or agency in New York City, which shall initially be the office or
agency of the trustee in New York, New York.
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EXCHANGE OF GLOBAL SECURITIES
Notes represented by a global security will be exchangeable for
certificated securities with the same terms only if:
- DTC is unwilling or unable to continue as depositary or if DTC ceases to
be a clearing agency registered under the Exchange Act and a successor
depositary is not appointed by us within 90 days;
- we decide to discontinue use of the system of book-entry transfer through
DTC (or any successor depositary); or
- a default under the indenture occurs and is continuing.
DTC has advised us 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 Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
facilitates the settlement of transactions among its participants through
electronic computerized book-entry changes in participants' accounts,
eliminating the need for physical movement of securities certificates. DTC's
participants include securities brokers and dealers, including the initial
purchasers, banks, trust companies, clearing corporations and other
organizations, some of whom and/or their representatives own DTC. Access to
DTC's book-entry system is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
SECURITY
In September 2003, we purchased and pledged to the trustee as security for
the notes and for the exclusive benefit of the holders of the notes (and not for
the benefit of our other creditors), $14.2 million of U.S. government
securities. These securities when held by the trustee in accordance with the
terms of the pledge agreement that we entered into with the trustee, will be
sufficient upon receipt of scheduled interest and principal payments of such
securities to provide for payment in full of the first six scheduled interest
payments due on the notes when due.
The U.S. government securities were pledged by us to the trustee for the
exclusive, ratable benefit of the holders of the notes and are being held by the
trustee in a pledge account. On the due date of each of the first six scheduled
interest payments on the notes, the trustee will release from the pledge account
proceeds sufficient to pay interest then due on the notes. We may also make
additional payments to the trustee to ensure that sufficient funds are available
to pay interest then due on the notes, if necessary.
The pledged U.S. government securities and the pledge account also secure,
to the extent available, the repayment of the principal amount on the notes. If
prior to September 8, 2006:
- an Event of Default under the notes or the indenture occurs and is
continuing; and
- the trustee or the holders of 25% in aggregate principal amount of the
notes accelerate payment on the notes by declaring the principal amount
of the notes to be immediately due and payable (by written consent, at a
meeting of note holders or otherwise), or an Event of Default relating to
our bankruptcy, insolvency or reorganization occurs, upon which payment
on the notes will be accelerated automatically, then the proceeds from
the pledged U.S. government securities will be promptly released for
payment to note holders, subject to the automatic stay provisions of
bankruptcy law, if applicable. Distributions from the pledge account will
be applied:
- first, to any accrued and unpaid interest on the notes; and
- the remainder, to the extent available, to the repayment of a portion of
the principal amount of the notes.
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If any Event of Default is not cured prior to the acceleration of the notes
by the trustee or holders of the notes referred to above, the trustee and the
holders of the notes will be able to accelerate the notes as a result of that
Event of Default.
For example, if the first two interest payments were made when due but the
third interest payment was not made when due and the note holders promptly
exercised their right to declare the principal amount of the notes to be
immediately due and payable, then, assuming automatic stay provisions of
bankruptcy law are inapplicable and the proceeds of the pledged U.S. government
securities are promptly distributed from the pledge account,
- an amount equal to the interest payment due on the third interest payment
would be distributed from the pledge account as accrued interest; and
- the balance of the proceeds of the pledge account would be distributed as
a portion of the principal amount of the notes.
In addition, note holders would have an unsecured claim against us for the
remainder of the principal amount of their notes.
Once we make the first six scheduled interest payments on the notes, all of
the remaining pledged U.S. government securities and cash, if any, will be
released to us from the pledge account and thereafter the notes will be
unsecured.
CONVERSION RIGHTS
The holders of notes may, at any time prior to the close of business on the
final maturity date of the notes, convert any outstanding notes (or portions
thereof) into shares of our common stock, initially at the conversion price of
$50.02 per share, subject to adjustment as described below. Holders may convert
notes only in denominations of $1,000 and whole multiples of $1,000. Except as
described below, no adjustment will be made to the conversion price of any notes
for interest accrued thereon.
On conversion of a note, a holder will not receive any cash payment
representing accrued and unpaid interest, if any, on the notes. Delivery to the
holder of the full number of shares of common stock into which the note is
convertible, together with any cash payment for such holder's fractional shares,
will be deemed to satisfy our obligation to pay the principal amount of the
notes, and to satisfy our obligation to pay accrued and unpaid interest, if any,
on the notes attributable to the period from the most recent interest payment
date through the conversion date. As a result, accrued and unpaid interest, if
any, on the notes through the conversion date is deemed paid in full rather than
cancelled, extinguished or forfeited.
If a note is converted between a record date for the payment of interest
and prior to the next succeeding interest payment date, notes submitted for
conversion must be accompanied by funds equal to the accrued and unpaid
interest, if any, payable to the registered holder on the interest payment date
on the principal amount of such notes submitted for conversion. We will then
make the interest payment due on the interest payment date to the registered
holder of the note on the record date. Notwithstanding anything to the contrary
in this paragraph, any note submitted for conversion need not be accompanied by
any payment if (1) we have specified a redemption date that is after a record
date for an interest payment but on or prior to the corresponding interest
payment date, (2) we have specified a purchase date following a change in
control that is after a record date for an interest payment but on or prior to
the corresponding interest payment date or (3) any overdue interest exists at
the time of conversion with respect to the notes converted, but only to the
extent of the amount of such overdue interest. Accordingly, under these
circumstances, holders of notes who choose to convert their notes between a
record date for the payment of interest and prior to the next succeeding
interest payment date will not be required to pay us, at the time such holders
surrender their notes for conversion, the amount of interest they will receive
on the interest payment date.
19
We are not required to issue fractional shares of our common stock upon
conversion of the notes. Instead, we will pay a cash adjustment based upon the
sale price of our common stock on the last business day before the date of the
conversion.
The sale price of our common stock on any trading day means the closing per
share sale price (or if no closing sale price is reported, the average of the
bid and ask prices or, if more than one in either case, the average of the
average bid and the average ask prices) on such date on the principal national
securities exchange on which the common stock is listed or, if our common stock
is not listed on a national securities exchange, as reported on the Nasdaq
National Market or otherwise as provided in the indenture.
In the case of notes called for redemption, conversion rights will expire
at the close of business on the date fixed for redemption. A note for which a
holder has delivered a purchase notice or a change in control purchase notice
requiring us to purchase the note may be surrendered for conversion only if such
notice is withdrawn in accordance with the indenture.
The holders of the notes may exercise their conversion rights by delivering
the note to be converted to the specified office of a conversion agent, with a
completed notice of conversion, together with any funds that may be required
relating to interest on the note to be converted to which the holder is not
entitled, as described above, and any taxes or duties, as described in this
prospectus. The conversion date will be the date on which the note, the notice
of conversion and any required funds have been so delivered and received by the
trustee. The notes will be deemed converted immediately prior to the close of
business on the conversion date. A holder will not be entitled to any rights as
a holder of our common stock, including, among other things, the right to vote
and receive dividends and notice of stockholder meetings, until the conversion
is effective.
Holders delivering their notes for conversion will not be required to pay
any taxes or duties relating to the issuance or delivery of the common stock for
such conversion, but will be required to pay any tax or duty that may be payable
relating to any transfer involved in the issuance or delivery of the common
stock in a name other than that of the holder of the note. Certificates
representing shares of common stock will be issued or delivered only after all
applicable taxes and duties payable by the holder, if any, have been paid. If
any note is converted within two years after its original issuance, the common
stock issuable upon conversion will not be issued or delivered in a name other
than that of the holder of the note unless the applicable restrictions on
transfer have been satisfied.
As soon as practicable following the conversion date, we will deliver
through the conversion agent a certificate for the number of full shares of
common stock into which any note is converted, together with any cash payment
for fractional shares. For a discussion of the tax treatment of a holder
receiving shares of our common stock upon surrendering their notes for
conversion, see "Certain United States Federal Income Tax Considerations."
CONVERSION RATE ADJUSTMENTS
The initial conversion price will be subject to adjustment upon the
occurrence of:
- the payment of dividends or distributions on shares of our common stock
payable exclusively in shares of our common stock or other capital stock;
- cash dividends or distributions to all or substantially all holders of
our common stock;
- subdivisions, combinations or certain reclassifications of our common
stock;
- distributions to all holders of common stock of certain rights or
warrants entitling them to purchase common stock or securities
convertible into or exchangeable or exercisable for shares of our common
stock, which rights or warrants are exercisable for not more than 60 days
from the date of distribution, at less than the market price on the
record date for the determination of stockholders entitled to receive the
rights or warrants; and
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- distributions to all holders of our common stock of our assets, debt
securities or rights or warrants to purchase our securities if these
distributions, aggregated on a rolling twelve-month basis, have a per
share value exceeding 15% of the market price of our common stock as of
the trading day immediately preceding the declaration of the
distribution. In cases where (a) the fair market value per share of
common stock of the assets, debt securities or rights or warrants to
purchase our securities distributed to shareholders equals or exceeds the
market price of our common stock on the record date for the determination
of stockholders entitled to receive such distribution, or (b) the market
price of our common stock exceeds the fair market value per share of
common stock of the assets, debt securities or rights or warrants so
distributed by less than $1.00, rather than being entitled to an
adjustment in the conversion rate, the holders will be entitled to
receive, upon conversion of their notes, in addition to the shares of our
common stock issuable upon conversion of their notes, the kind and amount
of assets, debt securities, rights or warrants compromising the
distribution that the holder would have received if the holder had
converted the holder's notes immediately prior to the record date for
determining the shareholders entitled to receive the distribution.
If we distribute cash in accordance with the second bullet point above,
then the conversion rate will be adjusted so that it equals the rate determined
by multiplying the conversion rate in effect on the record date of the cash
distribution by a fraction, the numerator of which is the market price of a
share of our common stock on the record date relating to the distribution and
the denominator of which is the same price per share on the record date less the
amount of the distribution per share.
The "market price" of our common stock means the average of the per share
closing sale prices of our common stock for the 20 consecutive trading days
immediately prior to the date of determination, subject to certain adjustments
as described in the indenture.
We will not adjust the conversion rate, however, if holders of the notes
are to participate in the transaction without conversion, or in certain other
cases.
We may from time to time, to the extent permitted by law, reduce the
conversion price of the notes by any amount for any period of at least 20 days.
In that case, we will give at least 15 days' notice of such decrease. We may
make such reductions in the conversion price, in addition to those set forth
above, as our board of directors deems advisable to avoid or diminish any income
tax to holders of our common stock resulting from any dividend or distribution
of capital stock (or rights to acquire capital stock) or from any event treated
as such for income tax purposes.
No adjustment in the conversion price will be required unless such
adjustment would require a change of at least 1% in the conversion price then in
effect at such time. However, any adjustment that would otherwise be required to
be made but for the fact that such 1% threshold has not been met shall be
carried forward and taken into account for the purposes of any subsequent
adjustments. Except as stated above, the conversion price will not be adjusted
for the issuance of our common stock or any securities convertible into or
exchangeable for our common stock or carrying the right to purchase any of the
foregoing.
Notwithstanding anything in this prospectus to the contrary, no adjustment
to the conversion rate will be made in respect of any payment, distribution or
other transaction referred to above if we make proper provision so that each
holder who thereafter converts notes is entitled to receive, upon that
conversion, the same amount and kind of assets or other property that the holder
would have received if the holder had converted notes into common stock at the
relevant time.
The conversion rate will not be adjusted:
- for the issuance of any shares of our common stock pursuant to any
present or future plan providing for the reinvestment of dividends or
interest payable on our securities or the investment of additional
optional amounts in shares of our common stock under any plan;
21
- for the issuance of any shares of our common stock or options or rights
to purchase those shares pursuant to any of our or our subsidiaries'
present or future employee, director or consultant benefit plan or
program;
- for the issuance of any shares of our common stock pursuant to any
option, warrant, right or exercisable, exchangeable or convertible
security not described in the preceding bullet and outstanding as of the
date the notes were originally issued;
- for or with respect to any purchase of shares of our common stock,
including, without limitation, purchases with the proceeds of this
offering;
- in connection with the exercise of shareholder rights by holders thereof
and for the issuance of securities as a consequence thereof;
- for any detachment of shareholder rights from the shares of our common
stock such that they become separately tradable;
- for a change in the par value of our common stock; or
- for the payment of accrued and unpaid interest, if any, or liquidated
damages, if any.
In the event that we pay a dividend or make a distribution on shares of our
common stock consisting of capital stock of, or similar equity interests in, a
subsidiary or other business unit of ours, the conversion rate will be adjusted
based on the market value of the securities so distributed relative to the
market value of our common stock, in each case, based on the average closing
prices of those securities for the 10 trading days commencing on and including
the fifth trading day after the date on which the "ex-dividend trading"
commences for such dividend or distribution on the principal United States
securities exchange or market on which the securities are then listed or quoted.
In the case of:
- any reclassification of or change in our common stock (other than changes
resulting from a subdivision or combination); or
- a consolidation, merger or combination involving us or a sale or
conveyance to another corporation of all or substantially all of our
property and assets,
in each case, as a result of which holders of our common stock are entitled to
receive stock, other securities, other property or assets (including cash or any
combination thereof) with respect to or in exchange for our common stock, the
holders of the notes then outstanding will be entitled thereafter to convert
those notes into the kind and amount of shares of stock, other securities or
other property or assets (including cash or any combination thereof) which they
would have owned or been entitled to receive upon such reclassification, change,
consolidation, merger, combination, sale or conveyance had such notes been
converted into our common stock immediately prior to such reclassification,
change, consolidation, merger, combination, sale or conveyance. We may not
become a party to any such transaction unless its terms are consistent with the
foregoing. If such transaction also constitutes a "change in control," as
defined below, holders may require us to purchase all or a portion of their
notes as described under "-- Purchase at the Option of the Holder Upon a Change
in Control."
If a taxable distribution to holders of our common stock or other
transaction occurs which results in any adjustment of the conversion price, the
holders of notes may, in certain circumstances, be deemed to have received a
distribution subject to United States federal income tax as a dividend. In
certain other circumstances, the absence of an adjustment may result in a
taxable dividend to the holders of common stock. See "Certain United States
Federal Income Tax Considerations."
OPTIONAL REDEMPTION BY OSI
At any time on or after September 8, 2008, we may redeem for cash some or
all of the notes on at least 30 days but not more than 60 days notice, at a
price equal to $1,000 per $1,000 principal amount,
22
plus accrued and unpaid interest to, but excluding, the redemption date.
However, if a redemption date is an interest payment date, the semi-annual
payment of interest becoming due on such date will be payable to the holder of
record as of the relevant record date, and the redemption price will not include
such interest payment.
The optional redemption date will be the date specified in our optional
redemption notice as such date that the notes will be redeemed. If we do not
redeem all of the notes, the trustee will select the notes to be redeemed in
principal amounts of $1,000 or whole multiples of $1,000 by lot or on a pro rata
basis. If any notes are 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
the holder thereafter converts a portion of its notes, the converted portion
will be deemed to be taken from the portion selected for redemption.
PURCHASE OF THE NOTES BY OSI AT THE OPTION OF THE HOLDER
Holders have the right to require us to purchase their notes on September
8, 2008, September 8, 2013 and September 8, 2018 (each, a "purchase date"), at a
purchase price equal to 100% of the principal amount of the notes to be
purchased plus accrued and unpaid interest, if any, to but excluding the
purchase date, subject to the proper delivery of a written purchase notice that
has not been withdrawn and certain additional conditions. The purchase price is
payable in cash or, at our option, subject to certain conditions, in shares of
our common stock. If we elect to pay the purchase price in shares of our common
stock, the number of shares of common stock deliverable by us will be equal to
the purchase price divided by the market value per share of our common stock. We
will pay cash on the market value of all fractional shares of common stock in
the event we elect to deliver common stock in payment of the purchase price.
However, we may not pay any purchase price in shares of our common stock unless
we satisfy certain conditions prior to the purchase date, as set forth in the
indenture relating to the notes.
The "market value" of our common stock with respect to any purchase date
shall be 95% of the average of the sale prices of our common stock for the
five-trading-day period ending on the third business day prior to the relevant
purchase date. We will appropriately adjust the market value to take into
account the occurrence during the period commencing the first of such trading
days and ending on the purchase date of certain events that would result in a
conversion rate adjustment with respect to the common stock.
Because the market value of the common stock is determined prior to the
purchase date, holders of notes bear the market risk with respect to the value
of the common stock to be received from the date such market value is determined
to the relevant purchase date. We may pay the purchase price in common stock
only if the information necessary to calculate the market value of our common
stock is published in a daily newspaper of national circulation. Upon
determination of the actual number of shares of common stock to be issued for
each $1,000 principal amount of notes in accordance with the foregoing
provisions, we will publish such information on our web site.
In addition to the above conditions, our right to purchase notes with
common stock on any purchase date is subject to our satisfying various
conditions, including:
- listing such common stock on the principal United States securities
exchange on which our common stock is then listed or, if not so listed,
on the Nasdaq National Market;
- the registration of the common stock under the Securities Act and the
Exchange Act, if required; and
- obtaining any necessary qualification or registration under applicable
state securities law or the availability of an exemption from such
qualification and registration.
If such conditions are not satisfied with respect to a holder prior to the
close of business on the relevant purchase date, we will pay the purchase price
of the notes to the holder entirely in cash.
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Holders may submit their written purchase notice to the paying agent at any
time from the opening of business on the date that is 20 business days prior to
such purchase date until the close of business on the business day immediately
preceding such purchase date.
We will be required to give notice on a date not less than 20 business days
prior to each purchase date to all holders at their addresses shown in the
register of the registrar, and to beneficial owners as required by applicable
law, stating among other things:
- the amount of the purchase price in respect of the relevant purchase
date;
- whether we will elect to pay the purchase price of the notes in cash or
common stock and the method of calculating the number of shares of common
stock deliverable as payment for the purchase price; and
- the procedures that holders must follow to require us to purchase their
notes.
The purchase notice given by each holder electing to require us to purchase
notes shall state:
- the certificate numbers of the holder's notes to be delivered for
purchase;
- the portion of the principal amount of notes to be purchased, which must
be $1,000 or an integral multiple of $1,000;
- that the notes are to be purchased by us pursuant to the applicable
provisions of the notes; and
- in the event we elect, pursuant to the notice that we are required to
give, to pay the purchase price in common stock, but the purchase price
is ultimately to be paid to the holder entirely in cash because any of
the conditions to the payment of the purchase price in shares of our
common stock is not satisfied prior to the close of business on the
relevant purchase date, as described below, whether the holder elects:
(1) to withdraw its purchase notice with respect to some or all of the
notes to which it relates; or
(2) to receive cash in respect of the entire purchase price for all
notes subject to such purchase notice.
If the holder fails to indicate the holder's choice with respect to the
election described in the final bullet point above, the holder shall be deemed
to have elected to receive cash in respect of the entire purchase price for all
notes subject to the purchase notice in these circumstances.
Any purchase notice may be withdrawn by the holder by a written notice of
withdrawal delivered to the paying agent prior to the close of business on the
business day prior to the purchase date.
The notice of withdrawal shall state:
- the principal amount of notes being withdrawn;
- the certificate numbers of the notes being withdrawn; and
- the principal amount, if any, of the notes that remain subject to the
purchase notice.
In connection with any purchase offer, we will, to the extent applicable at
that time:
- comply with the provisions of Rule 13e-4, Rule 14e-1 and any other tender
offer rules under the Exchange Act which may then be applicable; and
- file Schedule TO or any other required schedule under the Exchange Act.
If your notes are not held in certificated form, your purchase notice must
comply with the appropriate DTC procedures.
Payment of the purchase price for a note for which a purchase notice has
been delivered and not validly withdrawn is conditioned upon delivery of the
note, together with necessary endorsements, to the
24
paying agent at any time after delivery of the purchase notice. Payment of the
purchase price for the note will be made promptly following the later of the
purchase date or the time of delivery of the note.
If the paying agent holds money sufficient to pay the purchase price of the
note on the business day following the purchase date in accordance with the
terms of the indenture, then, immediately after the purchase date, the note will
cease to be outstanding and interest on such note will cease to accrue, whether
or not the note is delivered to the paying agent. Thereafter, all other rights
of the holder shall terminate, other than the right to receive the purchase
price upon delivery of the note.
No notes may be purchased for cash at the option of holders if there has
occurred and is continuing an event of default with respect to the notes, other
than a default in the payment of the purchase price with respect to such notes.
PURCHASE AT THE OPTION OF THE HOLDER UPON A CHANGE IN CONTROL
In the event of a change in control, each holder will have the right, at
the holder's option, subject to the terms and conditions of the indenture, to
require us to purchase all or any portion of the holder's notes. However, the
principal amount of notes submitted for purchase by a holder must be $1,000 or
an integral multiple of $1,000.
We will be required to purchase the notes as of a date no later than 30
business days after the occurrence of such change in control at a change in
control purchase price equal to 100% of the principal amount of the notes to be
purchased plus accrued and unpaid interest, if any, to but excluding the change
in control purchase date.
The change in control purchase price is payable in cash or, at our option,
subject to certain conditions, in shares of our common stock. If we elect to pay
the change in control purchase price in shares of our common stock, the number
of shares of common stock deliverable by us will be equal to the change in
control purchase price divided by the market value per share of common stock. We
will pay cash on the market value of all fractional shares of common stock in
the event we elect to deliver common stock in payment of the change in control
purchase price. However, we may not pay any change in control price in shares of
our common stock unless we satisfy certain conditions prior to the change in
control purchase date, as set forth in the indenture relating to the notes.
The "market value" of our common stock with respect to any purchase of
notes following a change in control shall be 95% of the average of the sale
prices of our common stock for the five-trading-day period ending on the third
business day prior to the change in control purchase date. We will appropriately
adjust the market value to take into account the occurrence during the period
commencing the first of such trading days and ending on the change in control
purchase date of certain events that would result in a conversion rate
adjustment with respect to the common stock.
Because the market value of the common stock is determined prior to the
change in control purchase date, holders of notes bear the market risk with
respect to the value of the common stock to be received from the date such
market value is determined to the change in control purchase date. We may pay
the change in control purchase price or any portion of the change in control
purchase price in common stock only if the information necessary to calculate
the market value of our common stock is published in a daily newspaper of
national circulation. Upon determination of the actual number of shares of
common stock to be issued for each $1,000 principal amount of notes in
accordance with the foregoing provisions, we will publish such information on
our web site.
In addition to the above conditions, our right to pay the change in control
purchase price with common stock is subject to our satisfying various
conditions, including:
- listing such common stock on the principal United States securities
exchange on which our common stock is then listed or, if not so listed,
on the Nasdaq National Market;
- the registration of the common stock under the Securities Act and the
Exchange Act, if required; and
25
- obtaining any necessary qualification or registration under applicable
state securities law or the availability of an exemption from such
qualification and registration.
If such conditions are not satisfied with respect to a holder prior to the
close of business on the change in control purchase date, we will pay the change
in control price of the notes to the holder entirely in cash.
Within 15 days after the occurrence of a change in control, we are
obligated to mail to the trustee and to all holders of notes at their addresses
shown in the register of the registrar and to beneficial owners as required by
applicable law a notice regarding the change in control, which notice shall
state, among other things:
- the events causing a change in control;
- the date of such change in control;
- the last date on which the purchase right may be exercised;
- the change in control purchase price;
- the change in control purchase date;
- the name and address of the paying agent and the conversion agent;
- the conversion rate then in effect and any adjustments to the conversion
rate resulting from such change in control;
- that notes with respect to which a change in control purchase notice is
given by the holder may be converted only if the change in control
purchase notice has been withdrawn in accordance with the terms of the
indenture; and
- the procedures that holders must follow to exercise these rights.
To exercise this right, the holder must deliver a written notice to the
paying agent prior to the close of business on the business day prior to the
change in control purchase date. The required change in control purchase notice
shall state:
- the certificate numbers of the notes to be delivered by the holder;
- the portion of the principal amount of notes to be purchased, which
portion must be $1,000 or an integral multiple of $1,000; and
- that we are to purchase such notes pursuant to the applicable provisions
of the notes.
Any such change in control purchase notice may be withdrawn by the holder
by a written notice of withdrawal delivered to the paying agent prior to the
close of business on the business day prior to the change in control purchase
date.
The notice of withdrawal shall state:
- the principal amount of notes being withdrawn;
- the certificate numbers of the notes being withdrawn; and
- the principal amount, if any, of the notes that remain subject to a
change in control purchase notice.
If your notes are not held in certificated form, your change in control
purchase notice must comply with the appropriate DTC procedures.
Payment of the change in control purchase price for a note for which a
change in control purchase notice has been delivered and not validly withdrawn
is conditioned upon delivery of the note, together with necessary endorsements,
to the paying agent at any time after the delivery of such change in control
26
purchase notice. Payment of this change in control purchase price for such note
will be made promptly following the later of the change in control purchase date
or the time of delivery of such note.
If the paying agent holds money sufficient to pay the change in control
purchase price of the note on the business day following the change in control
purchase date in accordance with the terms of the indenture, then immediately
after the change in control purchase date, interest on the note will cease to
accrue, whether or not the note is delivered to the paying agent. Thereafter,
all other rights of the holder shall terminate, other than the right to receive
the change in control purchase price upon delivery of the note.
Under the indenture, a "change in control" of OSI will be deemed to have
occurred at such time after the original issuance of the notes when the
following has occurred:
- the acquisition by any person of beneficial ownership, directly or
indirectly, through a purchase, merger or other acquisition transaction
or series of transactions of shares of our capital stock entitling that
person to exercise 50% or more of the total voting power of all shares of
our capital stock entitled to vote generally in elections of directors,
other than any acquisition by us, any of our subsidiaries or any of our
employee benefit plans;
- our consolidation or merger with or into any other person, any merger of
another person into us, or any conveyance, transfer, sale, lease or other
disposition of all or substantially all of our properties and assets to
another person, other than:
(1) any transaction (A) that does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of our capital
stock and (B) pursuant to which holders of our capital stock immediately
prior to the transaction have the entitlement to exercise, directly or
indirectly, 50% or more of the total voting power of all shares of our
capital stock entitled to vote generally in the election of directors of
the continuing or surviving person immediately after the transaction; or
(2) any merger solely for the purpose of changing our jurisdiction of
incorporation and resulting in a reclassification, conversion or exchange
of outstanding shares of common stock solely into shares of common stock
of the surviving entity;
- during any consecutive two-year period, individuals who at the beginning
of that two-year period constituted our board of directors (together with
any new directors whose election to our board of directors, or whose
nomination for election by our stockholders, was approved by a vote of a
majority of the directors then still in office who were either directors
at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of our board of directors then in office; or
- we are liquidated or dissolved or our stockholders pass a resolution
approving a plan of liquidation or dissolution.
The beneficial owner shall be determined in accordance with Rule 13d-3
promulgated by the SEC under the Exchange Act. The term "person" includes any
syndicate or group that would be deemed to be a "person" under Section 13(d)(3)
of the Exchange Act.
Rule 13e-4 under the Exchange Act, as amended, requires the dissemination
of information to securityholders if an issuer tender offer occurs and may apply
if the purchase option becomes available to holders of the notes. We will comply
with this rule to the extent applicable at that time.
The foregoing provisions would not necessarily protect holders of the notes
if highly leveraged or other transactions involving us occur that may adversely
affect holders.
Our ability to purchase notes upon the occurrence of a change in control is
subject to important limitations. The occurrence of a change in control could
cause an Event of Default under, or be prohibited or limited by, the terms of
our existing or future senior debt. As a result, any purchase of the notes
would, absent a waiver, be prohibited under the subordination provisions of the
indenture until all of our senior
27
debt is paid in full. Further, we cannot assure you that we would have the
financial resources, or would be able to arrange financing, to pay the change in
control purchase price for all the notes that might be delivered by holders of
notes seeking to exercise the purchase right. Any failure by us to purchase the
notes when required following a change in control would result in an event of
default under the indenture, whether or not such purchase is permitted by the
subordination provisions of the indenture. Any such default may, in turn, cause
a default under our existing or future senior debt. See "-- Subordination"
below.
SINKING FUND
No sinking fund is provided for the notes.
SUBORDINATION
The payment of principal of, premium, if any, and interest on the notes
(other than payments derived from the U.S. government securities pledged by us
to the trustee for the exclusive benefit of the holders of the notes
(hereinafter referred to as "Permitted Payments")) will be subordinated in right
of payment, as set forth in the indenture, to the prior payment in full in cash
or cash equivalents of all Senior Indebtedness (as defined below), whether
outstanding on the date of the indenture or thereafter incurred. The notes will
also be effectively subordinated to all existing and future indebtedness of our
subsidiaries. Any right that we have to receive assets of our existing
subsidiaries or any future subsidiaries in the event of any liquidation or
reorganization of any of such subsidiaries (and the consequent right of the
holders of the notes to participate in the assets of such subsidiaries), will be
effectively subordinated to the claims of such subsidiaries' creditors, except
to the extent that we are ourselves recognized as a creditor of such
subsidiaries, in which case, our claims would still be subordinate to any
security interests in the assets of that subsidiary and any indebtedness of that
subsidiary senior to that held by us. As of March 31, 2004, our subsidiaries had
no indebtedness outstanding.
In the event of any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding in
connection therewith, relating to OSI or to its assets, or any liquidation,
dissolution or other winding-up of OSI, whether voluntary or involuntary, or any
assignment for the benefit of creditors or other marshaling of assets or
liabilities of OSI (except in connection with the consolidation or merger of OSI
or its liquidation or dissolution following the conveyance, transfer or lease of
all or substantially all of its properties and assets upon the terms and
conditions described under "-- Mergers and Sales of Assets" below), the holders
of Senior Indebtedness will be entitled to receive payment in full in cash or
cash equivalents of all Senior Indebtedness, or provision shall be made for such
payment in full, before the holders of notes will be entitled to receive any
payment or distribution of any kind or character (other than Permitted Payments
and other than any payment or distribution in the form of equity securities or
subordinated securities of OSI or any successor obligor that, in the case of any
such subordinated securities, are subordinated in right of payment to all Senior
Indebtedness that may at the time be outstanding to at least the same extent as
the notes are so subordinated (such equity securities or subordinated securities
hereinafter being "Permitted Junior Securities")) on account of principal of, or
premium, if any, or interest on the notes; and any payment or distribution of
assets of OSI of any kind or character, whether in cash, property or securities
(other than a payment or distribution in the form of Permitted Junior
Securities), by set-off or otherwise, to which the holders of the notes or the
trustee would be entitled but for the provisions of the indenture relating to
subordination shall be paid by the liquidating trustee or agent or other person
making such payment or distribution directly to the holders of Senior
Indebtedness or their representatives ratably according to the aggregate amounts
remaining unpaid on account of the Senior Indebtedness to the extent necessary
to make payment in full of all Senior Indebtedness remaining unpaid, after
giving effect to any current payment or distribution to the holders of such
Senior Indebtedness.
No payment or distribution of any assets of OSI of any kind or character,
whether in cash, property or securities (other than Permitted Payments and
Permitted Junior Securities), may be made by or on behalf of OSI on account of
principal of, premium, if any, or interest on the notes or on account of the
28
purchase, redemption or other acquisition of notes upon the occurrence of any
default in payment (whether at scheduled maturity, upon scheduled installment,
by acceleration or otherwise) of principal of, premium, if any, or interest on
Designated Senior Indebtedness (as defined below) beyond any applicable grace
period (a "Payment Default") until such Payment Default shall have been cured or
waived in writing or shall have ceased to exist or such Designated Senior
Indebtedness shall have been discharged or paid in full in cash or cash
equivalents.
No payment or distribution of any assets of OSI of any kind or character,
whether in cash, property or securities (other than Permitted Payments and
Permitted Junior Securities), may be made by or on behalf of OSI on account of
principal of, premium, if any, or interest on the notes or on account of the
purchase, redemption or other acquisition of notes during the period specified
below (a "Payment Blockage Period") upon the occurrence of any default or event
of default with respect to any Designated Senior Indebtedness other than any
Payment Default, pursuant to which the maturity thereof may be accelerated (a
"Non-Payment Default"), and receipt by the trustee of written notice thereof
from OSI or the representative of holders of the Designated Senior Indebtedness
or the trustee for any such holder.
The Payment Blockage Period will commence upon the date of receipt by the
trustee of written notice from OSI or the representative of the holders of the
Designated Senior Indebtedness in respect of which the Non-Payment Default
exists, or the trustee for any such holder, and shall end on the earliest of:
- 179 days thereafter (provided that any Designated Senior Indebtedness as
to which such written notice was given shall not theretofore have been
accelerated);
- the date on which such Non-Payment Default is cured, waived or ceases to
exist; the date on which such Designated Senior Indebtedness is
discharged or paid in full; or
- the date on which such Payment Blockage Period shall have been terminated
by written notice to the trustee or OSI from the trustee or such other
representative initiating such Payment Blockage Period,
after which OSI will resume making any and all required payments in respect of
the notes, including any missed payments. In any event, not more than one
Payment Blockage Period may be commenced during any period of 365 consecutive
days. No Non-Payment Default that existed or was continuing on the date of the
commencement of any Payment Blockage Period will be, or can be made, the basis
for the commencement of a subsequent Payment Blockage Period, unless such
Non-Payment Default has been cured or waived for a period of not less than 90
consecutive days subsequent to the commencement of such initial Payment Blockage
Period.
In the event that, notwithstanding the provisions of the preceding four
paragraphs, if any payment or distribution shall be received by the trustee or
any holder of the notes that is prohibited by such provisions, then and in such
event such payment shall be paid over and delivered by such trustee or holder to
the trustee or any other representative of holders of Senior Indebtedness, as
their interest may appear, for application toward our Senior Indebtedness. Until
all of our Senior Indebtedness is paid in full, holders of the notes shall be
subrogated (equally and ratably with all other indebtedness that is equal in
right of payment to the notes) to the rights of holders of Senior Indebtedness
to receive distributions.
Failure by OSI to make any required payment in respect of the notes when
due or within any applicable grace period, whether or not occurring during a
Payment Blockage Period, will result in an Event of Default (as defined below)
and, thereafter, holders of the notes will have the right to accelerate the
maturity thereof. See "-- Events of Default."
By reason of such subordination, in the event of liquidation, receivership,
reorganization or insolvency of OSI, our general creditors may recover less,
ratably, than holders of senior debt and such general creditors may recover
more, ratably, than holders of notes.
"Designated Senior Indebtedness" means any Senior Indebtedness which, at
the time of determination, has an aggregate principal amount outstanding of at
least $20.0 million and that has been specifically
29
designated in the instrument evidencing such Senior Indebtedness as "Designated
Senior Indebtedness" of OSI.
"indebtedness" means, with respect to any person, without duplication:
- all liabilities of such person for borrowed money (including overdrafts)
or for the deferred purchase price of property or services, excluding any
trade payables and other accrued current liabilities incurred in the
ordinary course of business, but including, without limitation, all
obligations, contingent or otherwise, of such person in connection with
any letters of credit and acceptances issued under letter of credit
facilities, acceptance facilities or other similar facilities;
- all obligations of such person evidenced by bonds, notes, debentures or
other similar instruments;
- indebtedness of such person created or arising under any conditional sale
or other title retention agreement with respect to property acquired by
such person (even if the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession
or sale of such property), but excluding trade payables arising in the
ordinary course of business;
- all capitalized lease obligations of such person;
- all obligations of such person under or in respect of interest rate
agreements or currency agreements;
- all indebtedness referred to in (but not excluded from) the preceding
clauses of other persons and all dividends of other persons, the payment
of which is secured by (or for which the holder of such indebtedness has
an existing right, contingent or otherwise, to be secured by) any lien or
with respect to property (including, without limitation, accounts and
contract rights) owned by such person, even though such person has not
assumed or become liable for the payment of such indebtedness (the amount
of such obligation being deemed to be the lesser of the value of such
property or asset or the amount of the obligation so secured);
- all guarantees by such person of indebtedness referred to in this
definition of any other person;
- all Redeemable Capital Stock of such person valued at the greater of its
voluntary or involuntary maximum fixed repurchase price plus accrued and
unpaid dividends; and
- the present value of the obligation of such person as lessee for net
rental payments (excluding all amounts required to be paid on account of
maintenance and repairs, insurance, taxes, assessments, water, utilities
and similar charges to the extent included in such rental payments)
during the remaining term of the lease included in any sale and leaseback
transaction including any period for which such lease has been extended
or may, at the option of the lessor, be extended. Such present value
shall be calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with accounting
principles generally accepted in the United States of America.
"Redeemable Capital Stock" means any class of our capital stock that,
either by its terms, by the terms of any securities into which it is convertible
or exchangeable or by contract or otherwise, is, or upon the happening of an
event or passage of time would be, required to be redeemed (whether by sinking
fund or otherwise) prior to the date that is 91 days after the final scheduled
maturity of the notes or is redeemable at the option of the holder thereof at
any time prior to such date, or is convertible into or exchangeable for debt
securities at any time prior to such date (unless it is convertible or
exchangeable solely at our option).
"Senior Indebtedness" or "senior debt" means:
- all indebtedness of OSI, now or hereafter existing, under or in respect
of the documents and instruments executed in connection therewith,
whether for principal, premium, if any, interest (including interest
accruing after the filing of, or which would have accrued but for the
filing of, a petition by or against OSI under bankruptcy law, whether or
not such interest is allowed as a claim
30
after such filing in any proceeding under such law) and other amounts due
in connection therewith (including, without limitation, any fees,
premiums, expenses, reimbursement obligations with respect to letters of
credit and indemnities), whether outstanding on the date of the indenture
or thereafter created, incurred or assumed; and
- the principal of, premium, if any, and interest on all other indebtedness
of OSI (other than the notes), whether outstanding on the date of the
indenture or thereafter created, incurred or assumed,
unless, in the case of any particular indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such indebtedness shall not be senior in right of payment to the
notes.
Notwithstanding the foregoing, "Senior Indebtedness" and "senior debt"
shall not include:
- indebtedness evidenced by the notes offered hereby;
- indebtedness of OSI that is expressly subordinated in right of payment to
Senior Indebtedness of OSI;
- indebtedness or other obligations of OSI that by its terms ranks equal or
junior in right of payment to the notes;
- indebtedness of OSI that by operation of law is subordinate to any
general unsecured obligations of OSI;
- any liability for federal, state or local taxes or other taxes, owed or
owing by OSI;
- accounts payable or other liabilities owed or owing by OSI to trade
creditors (including guarantees thereof or instruments evidencing such
liabilities);
- amounts owed by OSI for compensation to employees or for services
rendered to OSI;
- indebtedness of OSI to any subsidiary or any other affiliate of OSI or
any of such affiliate's subsidiaries;
- capital stock of OSI;
- indebtedness evidenced by any guarantee of any indebtedness ranking equal
or junior in right of payment to the notes; or
- indebtedness which, when incurred and without respect to any election
under Section 1111(b) of Title 11 of the United States Code, is without
recourse to OSI.
EVENTS OF DEFAULT
Each of the following constitutes an "Event of Default" under the
indenture:
(1) our failure to pay when due the principal of any of the notes at
maturity, upon redemption or exercise of a purchase right or otherwise, whether
or not such payment is prohibited by the subordination provisions of the
indenture;
(2) our failure to pay an installment of interest (including liquidated
damages, if any) on any of the notes that continues for 30 days after the date
when due, whether or not such payment is prohibited by the subordination
provisions of the indenture; provided that a failure to make any of the first
six scheduled interest payments on the notes within three business days of the
applicable interest payment dates will constitute an Event of Default with no
additional grace or cure period;
(3) our failure to deliver shares of common stock, together with cash in
lieu of fractional shares, when such common stock or cash in lieu of fractional
shares is required to be delivered upon conversion of a note, purchase of a note
upon exercise by holders of their right to require us to purchase their notes,
or following a change in control;
31
(4) our failure to perform or observe any other term, covenant or agreement
contained in the notes or the indenture for a period of 60 days after written
notice of such failure, requiring us to remedy the same, shall have been given
to us by the trustee, or to us and the trustee by the holders of at least 25% in
aggregate principal amount of the notes then outstanding;
(5) (A) one or more defaults in the payment of principal of any of our
indebtedness aggregating $5 million or more, when the same becomes due and
payable at the scheduled maturity thereof, and such default or defaults shall
have continued after any applicable grace period and shall not have been cured
or waived within a thirty day period after the date of such default, or (B) any
of our indebtedness aggregating $5 million or more shall have been accelerated
or otherwise declared due and payable, or required to be prepaid or purchased
(other than by regularly scheduled required prepayment) prior to the scheduled
maturity thereof and such acceleration is not rescinded or annulled within a
thirty-day period after the date of such acceleration;
(6) certain events of our bankruptcy, insolvency or reorganization or that
of any significant subsidiaries;
(7) our filing of a voluntary petition seeking liquidation, reorganization
arrangement, readjustment of debts or for any other relief under the federal
bankruptcy code; and
(8) the agreement made by us in favor of the trustee governing the
disbursements of funds from the pledge account, as such agreement may be
amended, restated, supplemented or otherwise modified from time to time, shall
cease to be in full force and effect or enforceable in accordance with its
terms, other than in accordance with its terms.
The indenture provides that the trustee shall, within 90 days of the
occurrence of a default, give to the registered holders of the notes notice of
all uncured defaults known to it, but the trustee shall be protected in
withholding such notice if it, in good faith, determines that the withholding of
such notice is in the best interest of such registered holders, except in the
case of a default in the payment of the principal of, or premium, if any, or
interest on any of the notes when due or in the payment of any redemption or
purchase obligation.
If an Event of Default specified in clause (6) or clause (7) above occurs
and is continuing, then, automatically, the principal of all the notes and the
interest thereon shall become immediately due and payable. If an Event of
Default shall occur and be continuing, other than with respect to clause (6) or
clause (7) above (such default not having been cured or waived as provided under
"-- Modifications and Waiver" below), the trustee or the holders of at least 25%
in aggregate principal amount of the notes then outstanding may declare the
notes due and payable at their principal amount together with accrued interest,
and thereupon the trustee may, at its discretion, proceed to protect and enforce
the rights of the holders of notes by appropriate judicial proceedings. Such
declaration may be rescinded or annulled with the written consent of the holders
of a majority in aggregate principal amount of the notes then outstanding upon
the conditions provided in the indenture.
The indenture contains a provision entitling the trustee, subject to the
duty of the trustee during default to act with the required standard of care, to
be indemnified by the holders of notes before proceeding to exercise any right
or power under the indenture at the request of such holders. The indenture
provides that the holders of a majority in aggregate principal amount of the
notes then outstanding through their written consent may direct the time, method
and place of conducting any proceeding for any remedy available to the trustee
or exercising any trust or power conferred upon the trustee.
We will be required to furnish annually to the trustee a statement as to
the fulfillment of our obligations under the indenture.
32
CERTAIN COVENANTS
The indenture provides that we will not, and will not permit our
subsidiaries or other business units to, incur, create, assume, guarantee or in
any other manner become directly or indirectly liable with respect to or
responsible for, or permit to remain outstanding (other than if required by
law), any indebtedness that is subordinate or junior in right of payment to
Senior Indebtedness unless such indebtedness ranks equal or junior in right of
payment to the notes.
MERGERS AND SALES OF ASSETS
We may, without the consent of the holders of notes, consolidate with,
merge into or transfer all or substantially all of our assets to any other
corporation organized under the laws of the United States or any of its
political subdivisions provided that:
- the surviving corporation assumes all our obligations under the indenture
and the notes;
- at the time of such transaction, no Event of Default, and no event which,
after notice or lapse of time, would become an Event of Default, shall
have happened and be continuing; and
- certain other conditions are met.
MODIFICATIONS AND WAIVER
The indenture (including the terms and conditions of the notes) may be
modified or amended by us and the trustee, without the consent of the holder of
any note, for the purposes of, among other things:
- adding to our covenants for the benefit of the holders of notes;
- surrendering any right or power conferred upon us;
- providing for conversion rights of holders of notes if any
reclassification or change of our common stock or any consolidation,
merger or sale of all or substantially all of our assets occurs;
- providing for the assumption of our obligations to the holders of notes
in the case of a merger, consolidation, conveyance, transfer or lease;
- reducing the conversion price, provided that the reduction will not
adversely affect the interests of holders of notes in any material
respect;
- complying with the requirements of the SEC in order to effect or maintain
the qualification of the indenture under the Trust Indenture Act of 1939,
as amended;
- making any changes or modifications to the indenture necessary in
connection with the registration of the notes under the Securities Act,
as contemplated by the registration rights agreement, provided that this
action does not adversely affect the interests of the holders of the
notes in any material respect;
- curing any ambiguity or correcting or supplementing any defective
provision contained in the indenture; provided that such modification or
amendment does not, in the good faith opinion of our board of directors
and the trustee, adversely affect the interests of the holders of the
notes in any material respect;
- adding or modifying any other provisions which we and the trustee may
deem necessary or desirable and which will not adversely affect the
interests of the holders of notes in any material respect; or
- to evidence and provide for the appointment of a successor trustee.
Modifications and amendments to the indenture or to the terms and
conditions of the notes may also be made, and past default by us may be waived,
with the written consent of the holders of at least a majority in aggregate
principal amount of the notes at the time outstanding.
33
However, no such modification, amendment or waiver may, without the written
consent of the holder of each note affected thereby:
- change the maturity of the principal of or any installment of interest on
any note (including any payment of liquidated damages);
- reduce the principal amount of or interest on (including any payment of
liquidated damages) any note;
- change the currency of payment of such note or interest thereon;
- impair the right to institute suit for the enforcement of any payment on
or with respect to any note;
- modify our obligations to maintain an office or agency in New York City;
- except as otherwise permitted or contemplated by provisions concerning
corporate reorganizations, adversely affect the holders' purchase option,
the purchase option of holders upon a change in control or the conversion
rights of holders of the notes;
- modify the subordination provisions of the notes in a manner adverse to
the holders of notes; or
- reduce the percentage in aggregate principal amount of notes outstanding
necessary to modify or amend the indenture or to waive any past default.
SATISFACTION AND DISCHARGE
We may discharge our obligations under the indenture while notes remain
outstanding, subject to certain conditions, if:
- all outstanding notes have become due and payable or will become due and
payable at their scheduled maturity within one year; or
- all outstanding notes are scheduled for redemption within one year; and
- in either case, we have deposited with the trustee an amount sufficient
to pay and discharge all outstanding notes on the date of their scheduled
maturity or the scheduled date of redemption; provided that we shall
remain obligated to issue shares upon conversion of the notes.
CALCULATIONS IN RESPECT OF NOTES
We are responsible for making all calculations called for under the notes.
These calculations include, but are not limited to, determination of the market
prices of our common stock. We will make all these calculations in good faith
and, absent manifest error, our calculations will be final and binding on
holders of notes. We will provide a schedule of our calculations to the trustee,
and the trustee is entitled to rely upon the accuracy of our calculations
without independent verification.
GOVERNING LAW
The indenture and the notes will be governed by, and construed in
accordance with, the law of the State of New York.
INFORMATION CONCERNING THE TRUSTEE
The Bank of New York, as trustee under the indenture, has been appointed by
us as paying agent, conversion agent, registrar and custodian with regard to the
notes. The Bank of New York also is the registrar, paying agent and conversion
agent with respect to our 4% Convertible Senior Subordinated Notes due 2009. The
trustee or its affiliates may from time to time provide other services to us in
the ordinary course of their businesses. The Bank of New York is also the
transfer agent and registrar for our common stock. The trustee or its affiliates
may from time to time in the future provide other services to us in the ordinary
course of their business.
34
REGISTRATION RIGHTS
We entered into a registration rights agreement with the initial purchasers
of the notes. If you sell the notes or shares of common stock issued upon
conversion of the notes under this registration statement, you generally will be
required to be named as a selling securityholder in this prospectus, deliver
this prospectus to purchasers and be bound by applicable provisions of the
registration rights agreement, including some indemnification provisions.
In the registration rights agreement, we agreed to use our reasonable best
efforts to keep the registration statement effective until the earlier of (1)
September 8, 2005; (2) the date when, in the written opinion of our counsel, all
outstanding registrable securities held by persons which are not our affiliates
may be resold without registration under the Securities Act pursuant to Rule
144(k) under the Securities Act or any successor provision thereto; or (3) the
sale pursuant to this shelf registration statement of all securities registered
hereunder.
We may suspend the use of this prospectus under certain circumstances
relating to pending corporate developments, public filings with the SEC and
similar events for a period not to exceed 30 days in any three-month period and
not to exceed an aggregate of 90 days in any 12-month period. We also agreed to
pay liquidated damages to holders of the notes and shares of common stock issued
upon conversion of the notes if this registration statement is not timely filed
or made effective or if the prospectus is unavailable for periods in excess of
those permitted above. You should refer to the registration rights agreement for
a description of these liquidated damages.
BOOK-ENTRY SYSTEM
The notes were originally issued in the form of a global security issued in
reliance on Rule 144A. Upon the issuance of a global security, DTC (referred to
as the depository) or its nominee credited the accounts of persons holding
through it with the respective principal amounts of the notes represented by
such global security. Such accounts were designated by the initial purchasers
with respect to notes placed by the initial purchasers for us. The notes that
are sold under this prospectus will be represented by a new unrestricted global
security. Upon issuance of this new unrestricted global security, the depository
or its nominee will credit the accounts of persons holding through it with the
respective principal amounts of the notes represented by the new unrestricted
global security. Ownership of beneficial interests in a global security is
limited to persons that have accounts with the depository ("participants") or
persons that may hold interests through participants. Ownership of beneficial
interests by participants in a global security is shown on, and the transfer of
that ownership interest will be effected only through, records maintained by the
depository for such global security. Ownership of beneficial interests in such
global security by persons that hold through participants will be shown on, and
the transfer of those ownership interests through such participant will be
effected only through, records maintained by such participant. The foregoing may
impair the ability to transfer beneficial interests in a global security.
We will make payment of principal, premium, if any, and interest on notes
represented by any such global security to the depository or its nominee, as the
case may be, as the sole holder of the notes represented thereby for all
purposes under the indenture. None of OSI, the trustee, any agent of OSI, or the
trustee or the initial purchasers will have any responsibility or liability for
any aspect of the depository's records relating to or payments made on account
of beneficial ownership interests in global security representing any notes or
for maintaining, supervising or reviewing any of the depository's records
relating to such beneficial ownership interests. We have been advised by the
depository that, upon receipt of any payment of principal, premium, if any, or
interest on any global security, the depository will immediately credit, on its
book-entry registration and transfer system, the accounts of participants with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such global security as shown on the records of the
depository. Payments by participants to owners of beneficial interests in a
global security held through such participants will be governed by standing
instructions and customary practices as is now the case with securities held for
customer accounts registered in "street name," and will be the sole
responsibility of such participants. A global security may not be transferred
35
except as a whole by the depository for such global security to a nominee of
such depository or by a nominee of such depository to such depository or another
nominee of such depository or by such depository or any such nominee to a
successor of such depository or a nominee of such successor. If the depository
is at any time unwilling or unable to continue as depository and a successor
depository is not appointed by us or the depository within 90 days, we will
issue notes in definitive form in exchange for the global security. In either
instance, an owner of a beneficial interest in the global security will be
entitled to have notes equal in principal amount to such beneficial interest
registered in its name and will be entitled to physical delivery of such notes
in definitive form. Notes so issued in definitive form will be issued in
denominations of $1,000 and integral multiples thereof and will be issued in
registered form only, without coupons. We will pay principal, premium, if any,
and interest on the notes and the notes may be presented for registration of
transfer or exchange, at the offices of the trustee.
So long as the depository for a global security, or its nominee, is the
registered owner of such global security, such depository or such nominee, as
the case may be, will be considered the sole holder of the notes represented by
such global security for the purposes of receiving payment on the notes,
receiving notices and for all other purposes under the indenture and the notes.
Beneficial interests in notes will be evidenced only by, and transfers thereof
will be effected only through, records maintained by the depository and its
participants. The depository has nominated Cede & Co. as the nominee. Except as
provided above, owners of beneficial interests in a global security will not be
entitled to have the notes represented by the global security registered in
their name, will not be entitled to receive physical delivery of certificated
notes and will not be considered the holders thereof for any purposes under the
indenture. Accordingly any such person owning a beneficial interest in such a
global security must rely on the procedures of the depository, and, if any such
person is not a participant, on the procedures the participant through which
such person owns its interest, to exercise any rights of a holder under the
indenture. The indenture provides that the depository may grant proxies and
otherwise authorize participants to give or take any request, demand,
authorization, direction, notice, consent, waiver or other action which a holder
is entitled to give or take under the indenture. We understand that under
existing industry practices, in the event that we request any action of holders
or that an owner of a beneficial interest in such a global security desires to
give or take any action which a holder is entitled to give or take under the
indenture, the depository would authorize the participants holding the relevant
beneficial interest to give or take such action and such participants would
authorize beneficial owners owning through such participants to give or take
such action or would otherwise act upon the instructions of beneficial owners
owning through them.
The depository has advised us that the depository is a limited-purpose
trust company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and a "clearing agency" registered under the
Exchange Act. The depository was created to hold the securities of its
participants and to facilitate the clearance and settlement of securities
transactions among its participants in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the need
for physical movement of securities certificates. The depository's participants
include securities brokers and dealers (including the initial purchasers),
banks, trust companies, clearing corporations and certain other organizations,
some of whom (and/or their representatives) own the depository. Access to the
depository's book-entry system is also available to others, such as banks,
brokers, dealers and trust companies, that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
36
SELLING SECURITYHOLDERS
We originally issued the notes in a private placement in September 2003.
The notes were resold by the initial purchasers to persons reasonably believed
by the initial purchasers to be "qualified institutional buyers" as defined by
Rule 144A under the Securities Act. The selling securityholders may from time to
time offer and sell pursuant to this prospectus any or all of the notes listed
below and the shares of common stock issued upon conversion of such notes. When
we refer to the "selling securityholders" in this prospectus, we mean those
persons listed in the table below, as well as the pledgees, donees, assignees,
transferees, successors and others who later hold any of the selling
securityholders' interests. The table below sets forth the name of each selling
securityholder, the principal amount of notes that each selling securityholder
beneficially owns and may offer pursuant to this prospectus, the number of
shares of common stock into which such notes are convertible, the number of
shares of common stock offered, and the number of shares of common stock and the
principal amount of notes owned by the selling securityholders after the
completion of the offering. Unless set forth below, to our knowledge, none of
the selling securityholders has, or within the past three years has had, any
material relationship with us or any of our predecessors or affiliates or
beneficially owns in excess of 1% of the outstanding common stock. The principal
amounts of the notes provided in the table below is based on information
provided to us by each of the selling securityholders. The number of shares of
common stock that may be sold is calculated based on the current conversion
price of $50.02 per share. Since the date on which each selling securityholder
provided this information, each selling securityholder identified below may have
sold, transferred or otherwise disposed of all or a portion of its notes in a
transaction exempt from the registration requirements of the Securities Act.
Information concerning the selling securityholders may change from time to time
and any changed information will be set forth in supplements or amendments to
this prospectus to the extent required. In addition, the conversion ratio, and
therefore the number of shares of our common stock issuable upon conversion of
the notes, is subject to adjustment. Accordingly, the number of shares of common
stock issuable upon conversion of the notes may increase or decrease.
The selling securityholders may from time to time offer and sell any or all
of the securities under this prospectus. Because the selling securityholders are
not obligated to sell the notes or the shares of common stock issuable upon
conversion of the notes, we cannot estimate the amount of the notes or how many
shares of common stock that the selling securityholders will hold upon
consummation of any such sales.
<Table>
<Caption>
NUMBER OF SHARES
OF COMMON STOCK
PRINCIPAL AMOUNT OF ISSUABLE UPON
NOTES BENEFICIALLY PERCENTAGE OF CONVERSION OF THE PERCENTAGE OF
OWNED THAT MAY BE NOTES NOTES THAT MAY BE COMMON STOCK
SELLING SECURITYHOLDER OFFERED** OUTSTANDING(1) OFFERED(2) OUTSTANDING(3)
- ---------------------- ------------------- ------------------- ------------------- --------------
Alta Partners Holdings LDC.... $10,000,000 6.67% 199,920 *
AIG DKR SoundShore Holdings
Ltd. ....................... $ 1,172,000 * 23,430 *
AIG DKR SoundShore Oasis
Holding Fund Ltd. .......... $ 2,500,000 1.67% 49,980 *
AIG DKR SoundShore Opportunity
Holding Fund Ltd. .......... $ 824,000 * 16,473 *
AIG DKR SoundShore Strategic
Holding Fund Ltd. .......... $ 3,004,000 2.00% 60,055 *
Alexandra Global Master Fund,
Ltd. ....................... $10,000,000 6.67% 199,920 *
Argent Classic Convertible
Arbitrage Fund (Bermuda)
Ltd. ....................... $ 5,860,000 3.91% 117,153 *
Argent Classic Convertible
Arbitrage Fund, L.P. ....... $ 1,590,000 1.06% 31,787 *
Argent Classic Convertible
Arbitrage Fund II, L.P. .... $ 230,000 * 4,598 *
</Table>
37
<Table>
<Caption>
NUMBER OF SHARES
OF COMMON STOCK
PRINCIPAL AMOUNT OF ISSUABLE UPON
NOTES BENEFICIALLY PERCENTAGE OF CONVERSION OF THE PERCENTAGE OF
OWNED THAT MAY BE NOTES NOTES THAT MAY BE COMMON STOCK
SELLING SECURITYHOLDER OFFERED** OUTSTANDING(1) OFFERED(2) OUTSTANDING(3)
- ---------------------- ------------------- ------------------- ------------------- --------------
Argent LowLev Convertible
Arbitrage Fund Ltd. ........ $ 3,000,000 2.00% 59,976 *
Argent LowLev Convertible
Arbitrage Fund LLC.......... $ 607,000 * 12,135 *
Argent LowLev Convertible
Arbitrage Fund II LLC....... $ 93,000 * 1,859 *
Barclays Global Investors
Diversified Alpha Plus
Funds....................... $ 416,000 * 8,316 *
Cheyne Fund L.P. ............. $ 5,092,000 3.39% 101,799 *
Cheyne Leveraged Fund L.P. ... $ 4,560,000 3.04% 91,163 *
CIP Limited Duration
Company..................... $ 224,000 * 4,478 *
Class C Trading Company,
Ltd. ....................... $ 300,000 * 5,997 *
CNH CA Master Account, L.P. .. $ 2,000,000 1.33% 39,984 *
Context Convertible Arbitrage
Fund, LP(5)................. $ 2,500,000 1.67% 49,980 *
Context Convertible Arbitrage
Offshore, Ltd. ............. $ 2,350,000 3.33% 99,960 *
Credit Suisse First Boston
LLC(5)...................... $ 2,500,000 1.57% 46,981 *
CS Alternative Strategy
Ltd. ....................... $ 124,000 * 2,479 *
DB Equity Opportunities Master
Portfolio Ltd. ............. $ 800,000 * 15,993 *
DBAG London(4)................ $11,400,000 7.60% 227,908 *
D.E. Shaw Investment Group,
LLC(4)...................... $ 400,000 * 7,996 *
D.E. Shaw Valence Portfolios,
LLC(4)...................... $ 2,600,000 1.73% 51,979 *
Deutsche Bank Securities
Inc.(5)..................... $10,250,000 6.83% 204,918 *
DKR Saturn Event Driven
Holding Fund Ltd. .......... $ 8,750,000 5.83% 174,930 *
DKR Saturn Multi-Strategy
Holding Fund Ltd. (formerly
DKR Saturn Holding Fund
Ltd.) ...................... $ 8,750,000 5.83% 174,930 *
Dodeca Fund, L.P. ............ $ 975,000 * 19,492 *
Excelsior Master Fund L.P. ... $ 1,700,000 1.13% 33,986 *
Forest Global Convertible
Fund, Ltd., Class A-5....... $ 4,441,000 2.96% 88,784 *
Forest Fulcrum Fund LP(5)..... $ 936,000 * 18,712 *
Forest Multi-Strategy Master
Fund SPC.................... $ 3,608,000 2.41% 72,131 *
Geode U.S. Convertible
Arbitrage Fund.............. $ 5,000,000 3.33% 99,960 *
GLG Market Neutral Fund....... $ 8,000,000 5.33% 159,936 *
HFR RVA Select Performance
Master Trust................ $ 78,000 * 1,559 *
Inflective Convertible
Opportunity Fund I, L.P. ... $ 25,000 * 499 *
JP Morgan Securities
Inc.(5)..................... $12,000,000 8.00% 239,904 *
</Table>
38
<Table>
<Caption>
NUMBER OF SHARES
OF COMMON STOCK
PRINCIPAL AMOUNT OF ISSUABLE UPON
NOTES BENEFICIALLY PERCENTAGE OF CONVERSION OF THE PERCENTAGE OF
OWNED THAT MAY BE NOTES NOTES THAT MAY BE COMMON STOCK
SELLING SECURITYHOLDER OFFERED** OUTSTANDING(1) OFFERED(2) OUTSTANDING(3)
- ---------------------- ------------------- ------------------- ------------------- --------------
KBC Financial Products USA
Inc.(5)..................... $ 2,300,000 1.53% 45,981 *
KBC Financial Products (Cayman
Islands) Ltd.(4)............ $ 5,000,000 3.33% 99,960 *
LDG Limited................... $ 843,000 * 16,853 *
Lexington Vantage Fund........ $ 25,000 * 499 *
LLT Limited................... $ 372,000 * 7,437 *
Lyxor Context Funds LTD(4).... $ 100,000 * 1,999 *
Lyxor/Forest Fund Limited..... $ 2,013,000 1.34% 40,243 *
Lyxor Master Fund, Ltd. ...... $ 500,000 * 9,996 *
McMahan Securities Co.
LP(5)....................... $ 100,000 * 1,999 *
Mellon HBU Master Multi-
Strategy Fund L.P.(4)....... $ 500,000 * 9,996 *
Merrill Lynch Pierce Fenner &
Smith(5).................... $ 500,000 * 9,996 *
Morgan Stanley Convertible
Securities Trust(4)......... $ 1,000,000 * 19,992 *
National Bank of Canada....... $ 200,000 * 3,998
Polygon Global Opportunities
Master Fund................. $ 5,000,000 3.33% 99,960 *
Pyramid Equity Strategies
Fund........................ $ 200,000 * 3,998 *
Quattro Fund Ltd. ............ $ 3,850,000 2.57% 76,969 *
Quattro Multi Strategy Master
Fund LP..................... $ 825,000 * 16,493 *
Relay 11 Holding Co. ......... $ 263,000 * 5,257 *
Royal Bank of Canada(4)....... $ 200,000 * 3,998 *
Satellite Convertible
Arbitrage Master Fund,
LLC......................... $ 5,000,000 3.33% 99,960 *
Sphinx Convertible Arbitrage
SPC......................... $ 176,000 * 3,518 *
Sphinx Fund................... $ 41,000 * 819 *
Sunrise Partners Limited
Partnership(4).............. $ 3,500,000 2.33% 69,972 *
TQA Master Fund, Ltd. ........ $ 1,082,000 * 21,631 *
TQA Master Plus Fund, Ltd. ... $ 1,541,000 1.03% 30,807 *
UBS O'Connor LLC.............. $ 500,000 * 9,996 *
Univest Convertible Arbitrage
Fund II LTD (Norshield)..... $ 100,000 * 1,999 *
US Bancorp Piper Jaffray(5)... $ 3,000,000 2.00% 59,976 *
WPG MSA Convertible Arbitrage
Fund(4)..................... $ 100,000 * 1,999 *
Xavex Convertible Arbitrage 10
Fund........................ $ 320,000 * 6,397 *
Xavex Convertible Arbitrage 7
Fund........................ $ 262,000 * 5,237 *
Xavex Convertible Arbitrage 4
Fund........................ $ 197,000 * 3,938 *
Zurich Institutional
Benchmarks Management
Fund........................ $ 825,000 * 16,493 *
</Table>
39
<Table>
<Caption>
NUMBER OF SHARES
OF COMMON STOCK
PRINCIPAL AMOUNT OF ISSUABLE UPON
NOTES BENEFICIALLY PERCENTAGE OF CONVERSION OF THE PERCENTAGE OF
OWNED THAT MAY BE NOTES NOTES THAT MAY BE COMMON STOCK
SELLING SECURITYHOLDER OFFERED** OUTSTANDING(1) OFFERED(2) OUTSTANDING(3)
- ---------------------- ------------------- ------------------- ------------------- --------------
Zurich Institutional
Benchmarks Master Fund,
Ltd......................... $ 164,000 * 3,278 *
</Table>
- ---------------
* Represents less than one percent.
** Amounts indicated may be in excess of the total amount registered due to
sales or transfers exempt from the registration requirements of the
Securities Act of 1933, as amended, since the date upon which the selling
securityholders provided to us the information regarding their notes.
(1) Based upon $150,000,000 of 3 1/4% Convertible Senior Subordinated Notes
outstanding.
(2) Assumes conversion of all of the securityholders' notes at a conversion
price of $50.02 per share. This conversion price is subject to adjustment,
however, as described under "Description of the Notes - Conversion Rights."
As a result, the number of shares of common stock issuable upon conversion
of the notes may increase or decrease in the future.
(3) Based upon 39,791,682 shares of common stock which is the number of shares
of common stock outstanding as of May 18, 2004.
(4) With respect to selling securityholders that are affiliates of
broker-dealers, such entities have represented to us that they acquired
their notes or underlying common stock in the ordinary course of business
and, at the time of the purchase of the notes or the underlying common
stock, such selling securityholders had no agreements or understandings,
directly or indirectly, with any person to distribute the notes or
underlying common stock. To the extent that we become aware that such
entities did not acquire their notes or underlying common stock in the
ordinary course of business or did have such an agreement or understanding,
we will file a post-effective amendment to the registration statement of
which this prospectus forms a part to designate such affiliate as an
"underwriter" within the meaning of the Securities Act of 1933.
(5) This selling securityholder has identified itself as a registered
broker-dealer and, accordingly, it is deemed to be, under the
interpretations of the Securities and Exchange Commission, an "underwriter"
within the meaning of the Securities Act of 1933. Please see "Plan of
Distribution" for required disclosure regarding these selling
securityholders.
(6) Information about other selling securityholders will be set forth in
post-effective amendments or, if permissible, prospectus supplements.
(7) Assumes that any other holders of the notes or any future pledges, donees,
assignees, transferees or successors of or from any other such holders of
the notes, do not beneficially own any shares of common stock other than the
common stock issuable upon conversion of the notes at the initial conversion
rate.
40
DESCRIPTION OF CAPITAL STOCK
GENERAL
The following description of our capital stock and certain provisions of
our certificate of incorporation and bylaws is a summary and is qualified in its
entirety by the provisions of our certificate of incorporation and bylaws.
Our authorized capital stock consists of 200,000,000 shares of common stock
and 5,000,000 shares of preferred stock.
COMMON STOCK
As of May 18, 2004, there were 39,791,682 shares of our common stock
outstanding. The holders of common stock are entitled to one vote for each share
held of record on all matters submitted to a vote of the stockholders. The
holders of common stock are not entitled to cumulative voting rights with
respect to the election of directors, and as a consequence, minority
stockholders are not able to elect directors on the basis of their votes alone.
Subject to preferences that may be applicable to any shares of preferred stock
issued in the future, holders of common stock are entitled to receive ratably
such dividends as may be declared by our board of directors out of funds legally
available therefor. In the event of a liquidation, dissolution or winding up of
our company, holders of the common stock are entitled to share ratably in all
assets remaining after payment of liabilities and the liquidation preference of
any then outstanding preferred stock. Holders of common stock have no preemptive
rights and no right to convert their common stock into any other securities.
There are no redemption or sinking fund provisions applicable to the common
stock.
PREFERRED STOCK
Our board of directors has the authority, without further action by the
stockholders, to issue up to 5,000,000 shares of preferred stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences, sinking fund terms and the number of shares
constituting any series or the designation of such series, without any further
vote or action by stockholders. The issuance of preferred stock could adversely
affect the voting power of holders of common stock and the likelihood that such
holders will receive dividend payments and payments upon liquidation and could
have the effect of delaying, deferring or preventing a change in control. We
have no present plan to issue any shares of preferred stock.
REGISTRATION RIGHTS OF CERTAIN HOLDERS
Certain of our stockholders have registration rights. Under the agreements
between us and the holders of registration rights we are required to maintain
the effectiveness of certain registration statements covering their shares.
RIGHTS PLAN
Our board of directors adopted a shareholder rights plan, pursuant to which
one Series SRPA Junior Participating Preferred Stock Purchase Right was issued
as a dividend for each outstanding share of common stock.
These rights entitle the holder to buy one one-thousandth of a share of
Series SRPA Junior Participating Preferred Stock upon a triggering event as
discussed below.
The rights become exercisable upon the occurrence of a triggering event,
such as the announcement by a potential acquirer of the intention to initiate a
tender offer that would result in the acquisition of 17.5% or more of the
outstanding shares of our company or the actual acquisition of 17.5% or more of
the outstanding shares of our company by any person or group of affiliated or
associated persons.
41
Upon the actual acquisition of 17.5% or more of the outstanding common
stock of our company by a person or group, the rights held by all holders other
than the acquiring person or group will be modified automatically to be rights
to purchase shares of common stock (instead of rights to purchase preferred
stock) at 50% of the then market value of such common stock. Furthermore, such
rightholders will have the further right to purchase shares of common stock at
the same discount if our company merges with, or sells 50% or more of its assets
or earning power to, the acquiring person or group or any person acting for or
with the acquiring person or group. If the transaction takes the form of a
merger of our company into another corporation, these rightholders will have the
right to acquire at the same percentage discount shares of common stock of the
acquiring person or other ultimate parent of such merger party.
We can redeem the rights at any time before (but not after) a person has
acquired 17.5% or more of our common stock, with certain exceptions. The rights
will expire on August 31, 2010 if not redeemed prior to such date.
Our rights agreement may have anti-takeover effects. The rights may cause
substantial dilution to a person or group that attempts to acquire us.
Accordingly, the existence of the rights may deter acquirors from making
takeover proposals or tender offers. However, the rights are not intended to
prevent a takeover, but rather are designed to enhance the ability of our board
to negotiate with an acquiror on behalf of all of the stockholders. In addition,
the rights should not interfere with a proxy contest.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF OUR CHARTER AND BYLAWS
Our certificate of incorporation and bylaws discourage certain types of
transactions involving an actual or potential change in control of our company
which might be beneficial to our company or its stockholders. Our certificate of
incorporation requires that any action required or permitted to be taken by our
stockholders must be effected at a duly called annual or special meeting of the
stockholders and may not be effected by a consent in writing. Our bylaws allow
special meetings of stockholders to be called only by a majority vote of our
board of directors and impose advance notice requirements and procedures for the
submission by stockholders of nominations for our board of directors and
stockholder proposals.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for our common stock is The Bank of New
York. The address is Stock Transfer Administration, 63 Madison Avenue, 8th
Floor, New York, NY 10016, and its telephone number is (212) 503-4294.
42
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain U.S. federal income tax consequences
with respect to the purchase, ownership and disposition of notes or our common
stock acquired upon conversion of a note, and is for general information
purposes only. This summary is based on the U.S. federal income tax law now in
effect, which is subject to change, possibly retroactively. This summary does
not discuss all aspects of U.S. federal income taxation which may be important
to particular holders in light of their individual investment circumstances or
to certain types of holders subject to special tax rules, such as financial
institutions, broker-dealers, insurance companies, tax-exempt organizations,
persons holding notes in connection with a hedging, straddle, conversion or
other integrated transaction, holders subject to the U.S. federal alternative
minimum tax, U.S. holders (as defined below) whose "functional currency" is not
the U.S. dollar, securities traders that elect to use a mark-to-market method of
accounting or persons who have ceased to be U.S. citizens or to be taxed as
resident aliens, nor does it address state, local or foreign tax consequences or
estate and gift tax consequences. This summary assumes that holders will hold
the notes and the shares of common stock into which the notes are convertible as
"capital assets" (generally, property held for investment) under Section 1221 of
the Internal Revenue Code of 1986, as amended (the "Code"). We have not sought
any ruling from the Internal Revenue Service (the "IRS") with respect to
statements made and conclusions reached in this discussion, and there can be no
assurance that the IRS will agree with such statements and conclusions. Each
holder is urged to consult his own tax advisor regarding the specific U.S.
federal, state, local and foreign income and other tax consequences of the
purchase, ownership and disposition of the notes or our common stock acquired
upon conversion of a note.
For purposes of this summary, a "U.S. holder" is a beneficial owner of
notes that is, for U.S. federal income tax purposes, (i) an individual who is a
citizen or resident of the United States, (ii) a corporation created in or
organized under the law of the United States or any State or political
subdivision thereof, (iii) an estate the income of which is includible in gross
income for U.S. federal income tax purposes regardless of its source or (iv) a
trust (A) the administration of which is subject to the primary supervision of a
U.S. court and which has one or more U.S. persons who have the authority to
control all substantial decisions of the trust or (B) that was in existence on
August 20, 1996, was treated as a U.S. person under the Code on the previous day
and elected to continue to be so treated.
If a partnership (including an entity treated as a partnership for United
States federal income tax purposes) holds the notes or our common stock, the tax
treatment of a partner in the partnership will generally depend upon the status
of the partner and the activities of the partnership. A prospective holder that
is a partner of a partnership holding the notes or our common stock should
consult its tax advisors with respect to the purchase, ownership and disposition
of the notes or our common stock. A "non-U.S. holder" is a beneficial owner of
the notes that is not a U.S. holder.
Based on currently applicable authorities, we believe that the notes
constitute indebtedness for U.S. federal income tax purposes. We also believe
that the possibility of our making certain payments (other than stated principal
and interest) with respect to the notes is remote and therefore does not result
in the notes being treated as "contingent payment debt obligations." These
determinations are not, however, binding on the IRS. Persons considering the
purchase of a note should consult their own tax advisors as to the foregoing.
Except as otherwise noted, the remainder of this discussion assumes that the
notes will constitute indebtedness for U.S. federal income tax purposes.
PROSPECTIVE PURCHASERS OF THE NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS
WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR
PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE U.S.
FEDERAL ESTATE OR GIFT TAX RULES OR UNDER THE LAWS OF ANY STATE, LOCAL OR
FOREIGN TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.
43
CONSEQUENCES OF AN INVESTMENT IN THE NOTE, INCLUDING THE POTENTIAL APPLICATION
OF U.S. FEDERAL WITHHOLDING TAXES
TAX CONSEQUENCES TO U.S. HOLDERS
REGISTRATION OF NOTES
The registration of the notes will not constitute a taxable event to U.S.
holders. Consequently, no gain or loss will be recognized upon such
registration. The holding period of a registered note in the hands of a U.S.
holder will include its holding period in the hands of such U.S. holder prior to
registration. A U.S. holder's tax basis in a registered note will be the same as
the U.S. holder's tax basis in the note immediately prior to the registration of
such note.
INTEREST
A U.S. holder will be required to recognize as ordinary income any interest
paid or accrued on the notes, in accordance with such holder's regular method of
tax accounting. Such income will be U.S.-source income. In certain
circumstances, we may be obligated to pay a U.S. holder amounts in excess of
stated interest or principal. For example, as more fully described under
"Description of the Notes-Registration Rights" we may be required to pay
liquidated damages to holders under certain circumstances. We intend to treat
the possibility that we will pay any such excess amounts as a remote or
incidental contingency, within the meaning of applicable Treasury regulations
and, therefore, in the unlikely event an additional amount becomes due on the
notes, we believe U.S. holders will be taxable on such amount only at the time
it accrues or is received in accordance with each such holder's method of tax
accounting. Our determination that there is a remote likelihood of paying
additional amounts on the notes is binding on each U.S. holder unless the U.S.
holder explicitly discloses in the manner required by applicable Treasury
regulations that its determination is different from ours. Our determination is
not, however, binding on the IRS. In the event that any such additional amounts
are paid, however, it would affect the timing or amount of the income that must
be recognized by the U.S. holder.
If a U.S. holder purchases a note at a price above or below the principal
amount of such note, the amount includible as interest is subject to the next
three sections, as applicable.
NOTES PURCHASED AT A PREMIUM
A U.S. holder that purchases a note for a price in excess of its principal
amount may have bond premium. For this purpose, the purchase price allocable to
the note is deemed to be the total purchase price reduced by an amount equal to
the value of the conversion option on the note. If the purchase price, after
giving effect to this reduction, exceeds the principal amount of the note, the
U.S. holder will have premium with respect to the note in the amount of such
excess. Such U.S. holder may elect under section 171 of the Code to treat the
premium as "amortizable bond premium." If such an election is made, the amount
of interest such U.S. holder must include in income for each remaining accrual
period is reduced by the portion of the premium allocable to such period based
on the note's yield to maturity. If the amortizable bond premium exceeds the
interest allocable to the accrual period, the excess is treated as a bond
premium deduction for the accrual period. However, the amount treated as a bond
premium deduction is limited to the amount by which such U.S. holder's total
interest income on the note in prior accrual periods exceeds the total amount of
bond premium deducted or used to offset interest on the note by such U.S. holder
in prior accrual periods, and any excess is carried forward to the next accrual
period. The U.S. holder's basis in the note is reduced by any bond premium
deducted or used to offset interest by such U.S. holder. The election to
amortize bond premium applies to all debt instruments the interest on which is
not excludible from gross income ("fully taxable bonds") that such U.S. holder
holds at the beginning of the first taxable year to which the election applies
and to all fully taxable bonds such U.S. holder later acquires, and may be
revoked only with the consent of the IRS. U.S. holders should consult their own
tax advisors before making this election.
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If a U.S. holder does not make this election, such U.S. holder must include
the full amount of each interest payment in income as described in "Interest"
above. However, the amount of premium will be included in the U.S. holder's tax
basis in the note, and will therefore decrease the gain or increase the loss
recognized by the U.S. holder upon the sale or other disposition or retirement
of the note.
NOTES PURCHASED AT A DISCOUNT
A U.S. holder that purchases a note for an amount that is less than its
principal amount will have market discount with respect to the note in the
amount of the difference (unless the market discount is less than a de minimis
amount). Such U.S. holder is required to treat any principal payments on, or any
gain realized on the disposition or retirement of such note, as ordinary
interest income to the extent of the market discount that accrued while such
U.S. holder held the note, unless the U.S. holder elects to include the market
discount in income on a current basis (see "Accrual Method Election" below).
"Accrued" market discount is determined on a straight-line basis or, at the U.S.
holder's election, on a constant-yield basis. Market discount is considered to
be a de minimis amount if it is less than one-quarter of one percent of the
note's principal amount multiplied by the number of complete years to maturity
after the U.S. holder acquired the note. If a U.S. holder disposes of a note
with market discount in a nontaxable transaction (other than certain
transactions described in section 1276(c) and (d) of the Code, such as
conversion or repurchase of the notes for common stock), such U.S. holder
generally must include the accrued market discount in income as if such U.S.
holder had disposed of such note in a taxable transaction at the note's fair
market value. Upon conversion or repurchase with our common stock of the notes
with market discount that has not been previously included in income, a ratable
portion of such market discount will be allocable to each share of common stock.
The amount of market discount allocable to such common stock may be taxable as
ordinary interest income upon a sale or other disposition of such common stock.
If a U.S. holder acquires a note at a market discount and does not make the
accrual method election described below, such U.S. holder may be required to
defer the deduction of all or a portion of the interest expense on any
indebtedness incurred or continued to purchase or carry the note until the
deferred income is realized.
ACCRUAL METHOD ELECTION
A U.S. holder that purchases a note with market discount may elect to
include market discount in gross income currently as it accrues, on either a
straight-line basis or a constant-yield basis. The U.S. holder's tax basis in
the note will be increased by any amount included in income as a result of this
election. This election to include market discount applies to all market
discount obligations acquired during or after the first taxable year to which
the election applies, and may be revoked only with the consent of the IRS. If
this election is made, the rules under "Notes Purchased at a Discount" treating
certain payments and gain as interest income and requiring deferral of certain
interest deductions will not apply. U.S. holders should consult their own tax
advisors before making this election.
CONVERSION OR REPURCHASE FOR COMMON STOCK
A U.S. holder generally will not recognize income, gain or loss upon
conversion of the notes solely into our common stock, or the repurchase of the
notes solely for our common stock except (i) with respect to cash received in
lieu of fractional shares and (ii) with respect to accrued interest on the notes
which will be treated as paid as a result of conversion. The U.S. holder's tax
basis in the common stock received on conversion of a note for common stock will
be the same as the U.S. holder's adjusted tax basis in the notes exchanged
therefor at the time of conversion (reduced by any basis allocable to a
fractional share and increased for cash method U.S. holder by any accrued and
unpaid interest that is required to be recognized by such U.S. holder upon
conversion), and the holding period for the common stock received on conversion
will generally include the holding period of the notes that were converted.
45
Cash received in lieu of a fractional share of common stock upon conversion
of the notes into common stock will generally be treated as a payment in
exchange for the fractional share of common stock rather than as a dividend.
Accordingly, the receipt of cash in lieu of a fractional share of common stock
generally will result in gain or loss measured by the difference between the
cash received for the fractional share and the U.S. holder's adjusted tax basis
allocable to the fractional share. Such gain or loss will generally be capital
gain or loss, except as set forth above under "Notes Purchased at a Discount."
DIVIDENDS ON COMMON STOCK
Distributions, if any, on our common stock will constitute dividends for
U.S. federal income tax purposes to the extent of our current or accumulated
earnings and profits as determined under U.S. federal income tax principles and
will be included in a U.S. holder's income as ordinary income as they are paid.
Dividends on our common stock paid to certain U.S. holders (including
individuals) may qualify for preferential U.S. federal income tax rates to the
extent they are classified as "qualified dividend income." Dividend income that
is not qualified dividend income will be taxed at ordinary income rates. You are
urged to consult your tax advisor to determine whether a dividend, if any, would
be treated as qualified dividend income. To the extent that a U.S. holder
receives distributions on shares of common stock that exceed our current and
accumulated earnings and profits, such distributions will be treated first as a
non-taxable return of capital reducing the U.S. holder's tax basis in the shares
of common stock (but not below zero). Any such distributions in excess of the
U.S. holder's tax basis in the shares of common stock will generally be treated
as gain. Such gain will generally be capital gain, except as set forth above
under "Notes Purchased at a Discount." Subject to applicable limitations,
dividends paid to U.S. holders that are U.S. corporations will qualify for the
dividends-received deduction so long as we have sufficient earnings and profits.
SALE, REDEMPTION OR OTHER TAXABLE DISPOSITION OF NOTES OR COMMON STOCK
Except as set forth above under "Conversion or Repurchase for Common
Stock", U.S. holders generally will recognize a capital gain or loss upon the
sale, redemption (including a repurchase by us for cash pursuant to the
repurchase right) or other taxable disposition of the notes or common stock in
an amount equal to the difference between the amount realized on the
disposition, other than amounts attributable to accrued and unpaid interest on
the notes not previously included in income (which amounts will be taxable as
ordinary income), and the U.S. holder's adjusted tax basis in such notes. A U.S.
holder's initial tax basis in a note generally will be equal to the amount paid
therefor and will thereafter be increased by any previously included market
discount described above under "Accrual Method Election" and reduced by any
previously deducted bond premium described above under "Notes Purchased at a
Premium." Such gain or loss will generally be capital gain or loss, except as
set forth above under "Notes Purchased at a Discount." Any capital gain or loss
will be long-term if the notes have been held for more than one year and will
generally be U.S. source gain or loss to a U.S. holder. Capital gain that is not
long-term capital gain will be taxed at ordinary income tax rates. The claim of
a deduction in respect of a capital loss, for U.S. federal income tax purposes,
is subject to limitations.
ADJUSTMENT OF CONVERSION PRICE
The conversion rate of the notes will be adjusted if we distribute cash
with respect to shares of our common stock and in certain other circumstances.
See "Description of the Notes -- Conversion Rate Adjustments." Under Section
305(c) of the Code and the applicable Treasury Regulations, an increase in the
conversion rate as a result of a taxable distribution to our common stockholders
generally will result in a deemed distribution to U.S. holders holding our
notes. Other adjustments in the conversion rate (or failures to make such
adjustments) that have the effect of increasing your proportionate interest in
our assets or earnings may have the same result. Any such adjustment would
result in dividend income (subject to a possible dividends received deduction in
the case of corporate holders) to the extent of our current or accumulated
earnings and profits, if, and to the extent that, it increases the proportionate
interest of a holder of notes in the fully diluted common stock, whether or not
such holder ever exercises
46
its conversion privilege. Moreover, if there is not a full adjustment to the
conversion ratio of the notes to reflect a stock dividend or other event
increasing the proportionate interest of the holders of outstanding common stock
in our assets or earnings and profits, then such increase in the proportionate
interest of the holders of the common stock generally will be treated as a
distribution to such holders, taxable as dividend income (subject to a possible
dividends received deduction in the case of corporate holders) to the extent of
our current or accumulated earnings and profits. Therefore, U.S. holders may
recognize income in the event of a deemed distribution even though they may not
receive any cash or property. Holders of notes are advised to consult with their
tax advisors with respect to the potential tax consequences of such constructive
distributions.
TAX CONSEQUENCES TO NON-U.S. HOLDERS
INTEREST
Subject to the discussion below concerning backup withholding, no United
States federal income or withholding tax generally will apply to a payment of
interest (including additional amounts as described under "Tax Consequences to
U.S. Holders -- Interest" on a note to a non-U.S. holder, provided (i) such
interest is not effectively connected with the conduct of a trade or business in
the United States by the non-U.S. holder and (ii) such non-U.S. holder (A) does
not own, actually or constructively, 10% or more of the total combined voting
power of all classes of our stock entitled to vote, (B) is not a controlled
foreign corporation (as defined in the Code) related to us, directly or
indirectly, through stock ownership, and (C) satisfies certain certification
requirements. Such certification requirements will be met if (x) the non-U.S.
holder provides its name and address, and certifies on IRS Form W-8BEN (or a
substantially similar form), under penalties of perjury, that it is not a United
States person or (y) a securities clearing organization or certain other
financial institutions holding the note on behalf of the non-U.S. holder
certifies on IRS Form W-8IMY, under penalties of perjury, that such
certification has been received by it, and furnishes us or our paying agent with
a copy thereof. In addition, we or our paying agent must not have actual
knowledge or reason to know that the beneficial owner of the note is a United
States person. If all of the foregoing requirements are not met, payments of
interest on a note generally will be subject to United States federal
withholding tax at a 30% rate (or a lower applicable treaty rate, provided
certain certification requirements are met).
CONVERSION OR REPURCHASE FOR COMMON STOCK
A non-U.S. holder will generally not be subject to United States federal
income tax on the conversion of a note solely into our common stock or the
repurchase of the notes solely for our common stock. Any gain recognized as a
result of the receipt of cash, including any cash received in lieu of a
fractional share of common stock generally will be treated as a sale of the note
or the fractional share. See "Sale, Redemption or Other Taxable Disposition of
Notes or Common Stock" below.
DIVIDENDS ON COMMON STOCK
Dividends, if any, paid on the common stock to a non-U.S. holder generally
will be subject to a 30% U.S. federal withholding tax (or, if applicable, a
lower treaty rate).
SALE, REDEMPTION OR OTHER DISPOSITION OF NOTES OR COMMON STOCK
Subject to the discussion below concerning backup withholding, a non-U.S.
holder generally will not be subject to United States federal income or
withholding tax on the receipt of payments of principal on a note, or on any
gain recognized on a sale, redemption or other disposition of a note or common
stock unless in the case of gain (i) such gain is effectively connected with the
conduct by such non-U.S. holder of a trade or business within the United States
or, if a treaty applies (and the non-U.S. holder complies with applicable
certification and other requirements to claim treaty benefits), is attributable
to a permanent establishment maintained by the non-U.S. holder within the United
States, (ii) such non-U.S. holder is an individual who is present in the United
States for 183 days or more in the taxable year of disposition, and
47
certain other conditions are met, or (iii) we are treated as a U.S. real
property holding corporation ("USRPHC") for United States federal income tax
purposes.
We believe that we are not, and will not become a USRPHC; however, no
assurance can be given in this regard. In general, if it is determined that we
are a USRPHC, then non-U.S. holders may be subject to United States federal
income tax on the sale or other disposition of a note or our common stock, and,
possibly, withholding up to a rate of 10% on any such disposition. However, a
non-U.S. holder will not be subject to these special rules even if we are
determined to be a USRPHC provided that such non-U.S. holder did not at any time
during the five years ending on the date of sale or disposition actually or
constructively own more than 5% of our common stock (including any common stock
that may be received on the conversion or repurchase of a note).
ADJUSTMENT OF CONVERSION PRICE
The conversion rate of the notes will be adjusted if we distribute cash
with respect to shares of our common stock and in certain other circumstances.
See "Description of the Notes -- Conversion Rate Adjustments." Under Section
305(c) of the Code and the applicable Treasury Regulations, an increase in the
conversion rate as a result of a taxable distribution to our common stockholders
generally will result in a deemed distribution to non-U.S. holders holding our
notes. Other adjustments in the conversion rate (or failures to make such
adjustments) that have the effect of increasing your proportionate interest in
our assets or earnings may have the same result. Any such adjustment would
result in dividend income to the extent of our current or accumulated earnings
and profits, if, and to the extent that, it increases the proportionate interest
of a holder of notes in the fully diluted common stock, whether or not such
holder ever exercises its conversion privilege. Moreover, if there is not a full
adjustment to the conversion ratio of the notes to reflect a stock dividend or
other event increasing the proportionate interest of the holders of outstanding
common stock in our assets or earnings and profits, then such increase in the
proportionate interest of the holders of the common stock generally will be
treated as a distribution to such holders, taxable as dividend income to the
extent of our current or accumulated earnings and profits. In such a case,
non-U.S. holders generally will be subject to a 30% U.S. federal withholding tax
(or, if applicable, a lower treaty rate) as a result of an event pursuant to
which they receive no cash or other property that could be used to pay the
related tax. Non-U.S. holders of notes are advised to consult with their tax
advisors with respect to the potential tax consequences of such constructive
distributions.
UNITED STATES BUSINESS
If a non-U.S. holder is engaged in a trade or business in the United
States, and if interest or gain on the note or dividends or gain on our common
stock is effectively connected with the conduct of such trade or business or, if
a treaty applies, is attributable to a permanent establishment maintained by the
non-U.S. holder within the United States, the non-U.S. holder generally will be
subject to United States federal income tax on the receipt or accrual of such
interest or dividends or the recognition of gain on the sale or other taxable
disposition of the note or common stock in the same manner as if such holder
were a U.S. holder, as set forth above under "Tax Consequences to U.S. Holders."
Such interest and dividend income received or gain recognized by a corporate
non-U.S. holder may also be subject to an additional United States federal
branch profits tax at a 30% rate (or, if applicable, a lower treaty rate). In
addition, any such interest and dividend income will not be subject to
withholding tax if the non-U.S. holder delivers to us a properly executed IRS
Form W-8ECI in order to claim an exemption from withholding tax. Non-U.S.
holders should consult their tax advisors with respect to other United States
tax consequences of the ownership and disposition of notes and common stock into
which the notes may be converted.
INFORMATION REPORTING AND BACKUP WITHHOLDING
A holder of notes or common stock may be subject to "backup withholding"
(currently at a rate of 28%) with respect to certain "reportable payments",
including interest payments, dividend payments, proceeds from the disposition of
the notes or common stock to or through a broker and, under certain
48
circumstances, principal payments on the notes. These backup withholding rules
apply, if, among other things, (i) the holder fails to furnish a social security
number or other taxpayer identification number ("TIN") certified under penalties
of perjury within a reasonable time after the request therefor, (ii) the holder
fails to report properly interest or dividends, (iii) under certain
circumstances, the holder fails to provide a certified statement, signed under
penalties of perjury, that the TIN furnished is the correct number and that such
holder is not subject to backup withholding or (iv) the IRS provides
notification that the U.S. holder has furnished us an incorrect TIN. Any amount
withheld from a payment to a holder under the backup withholding rules is
allowed as a refund or a credit against the holder's U.S. federal income tax
liability, provided that the required information is timely furnished to the
IRS. Backup withholding will not apply, however, with respect to payments made
to certain holders, including corporations, tax exempt organizations and
non-U.S. holders, provided their exemptions from backup withholding are properly
established.
We will report to the U.S. holders of notes and common stock and to the IRS
the amount of our "reportable payments" for each calendar year and the amount of
tax withheld, if any, with respect to such payments. In addition we must report
annually to the IRS and to each non-U.S. holder the amount of any dividends paid
to and the tax withheld, if any, with respect to such non-U.S. holder. Copies of
these information returns may also be made available under the provisions of a
specific treaty or agreement to the tax authorities of the country in which the
non-U.S. holder resides.
49
PLAN OF DISTRIBUTION
The selling securityholders will be offering and selling all of the
securities offered and sold under this prospectus. We will not receive any of
the proceeds from the offering of the notes or the underlying shares of common
stock by the selling securityholders. In connection with the initial offering of
the notes, we entered into a registration rights agreement dated September 8,
2003 with the initial purchasers of the notes. Securities may only be offered or
sold under this prospectus pursuant to the terms of the registration rights
agreement. However, selling securityholders may resell all or a portion of the
securities in open market transactions in reliance upon Rule 144 or Rule 144A
under the Securities Act, provided they meet the criteria and conform to the
requirements of one of these rules. We are registering the notes and shares of
common stock covered by this prospectus to permit holders to conduct public
secondary trading of these securities from time to time after the date of this
prospectus. We have agreed, among other things, to bear all expenses, other than
underwriting discounts and selling commissions, in connection with the
registration and sale of the notes and the shares of common stock covered by
this prospectus.
The selling securityholders and any such broker-dealers or agents who
participate in the distribution of the notes and the underlying common stock may
be deemed to be "underwriters." As a result, any profits on the sale of the
underlying common stock by selling securityholders and any discounts,
commissions or concessions received by any such broker-dealers or agents may be
deemed to be underwriting discounts and commissions under the Securities Act. If
the selling securityholders are deemed to be underwriters, the selling
securityholders may be subject to statutory liabilities including, but not
limited to, those of Section 11, 12 and 17 of the Securities Act and Rule 10b-5
under the Exchange Act.
If the notes and the underlying common stock are sold through underwriters
or broker-dealers, the selling securityholders will be responsible for
underwriting discounts or commission or agent's commission.
The selling securityholders may sell all or a portion of the notes and
shares of common stock beneficially owned by them and offered hereby from time
to time:
- directly; or
- through underwriters, broker-dealers or agents, who may receive
compensation in the form of discounts, commissions or concessions from
the selling securityholders and/or from the purchasers of the notes and
shares of common stock for whom they may act as agent.
The notes and the shares of common stock may be sold from time to time in
one or more transactions at:
- fixed prices, which may be changed;
- prevailing market prices at the time of sale;
- varying prices determined at the time of sale; or
- negotiated prices.
These prices will be determined by the holders of the securities or by
agreement between these holders and underwriters or dealers who may receive fees
or commissions in connection with the sale. The aggregate proceeds to the
selling securityholders from the sale of the notes or shares of common stock
offered by them hereby will be the purchase price of the notes or shares of
common stock less discounts and commissions, if any.
The sales described in the preceding paragraph may be effected in
transactions:
- on any national securities exchange or quotation service on which the
notes or shares of common stock may be listed or quoted at the time of
sale, including the Nasdaq National Market in the case of the shares of
common stock;
- in the over-the counter market;
50
- in transactions otherwise than on such exchanges or services or in the
over-the-counter market; or
- through the writing of options.
These transactions may include block transactions or crosses. Crosses are
transactions in which the same broker acts as an agent on both sides of the
trade.
In connection with sales of the notes and shares of common stock or
otherwise, the selling securityholders may enter into hedging transactions with
broker-dealers. These broker-dealers may in turn engage in short sales of the
notes and shares of common stock in the course of hedging their positions. The
selling securityholders may also sell the notes and shares of common stock short
and deliver the notes and shares of common stock to close out short positions,
or loan or pledge notes and shares of common stock to broker-dealers that in
turn may sell the notes and shares of common stock.
To our knowledge, there are currently no plans, arrangements or
understandings between any selling securityholders and any underwriter,
broker-dealer or agent regarding the sale of the notes and the shares of common
stock by the selling securityholders. Selling securityholders may not sell any,
or may not sell all, of the notes and the shares of common stock offered by them
pursuant to this prospectus. In addition, we cannot assure you that a selling
securityholder will not transfer, devise or gift the notes and the shares of
common stock by other means not described in this prospectus. In addition, any
securities covered by this prospectus which qualify for sale pursuant to Rule
144 or Rule 144A of the Securities Act may be sold under Rule 144 or Rule 144A
rather than pursuant to this prospectus.
The notes were issued and sold in September 2003 in a private placement.
The notes were resold by the initial purchasers to persons reasonably believed
by the initial purchasers to be "qualified institutional buyers," as defined in
Rule 144A under the Securities Act. Pursuant to the registration rights
agreement, we have agreed to indemnify the initial purchasers and each selling
securityholder, and each selling securityholder has agreed to indemnify us
against specified liabilities arising under the Securities Act. The selling
securityholders may also agree to indemnify any broker-dealer or agent that
participates in transactions involving sales of the securities against some
liabilities, including liabilities that arise under the Securities Act.
The selling securityholders and any other person participating in such
distribution will be subject to the Exchange Act. The Exchange Act rules
include, without limitation, Regulation M, which may limit the timing of
purchases and sales of any of the notes and the underlying shares of common
stock by the selling securityholders and any such other person. In addition,
Regulation M of the Exchange Act may restrict the ability of any person engaged
in the distribution of the notes and the underlying shares of common stock to
engage in market-making activities with respect to the particular notes and the
underlying shares of common stock being distributed for a period of up to five
business days prior to the commencement of distribution. This may affect the
marketability of the notes and the underlying shares of common stock and the
ability of any person or entity to engage in market-making activities with
respect to the notes and the underlying shares of common stock.
Under the registration rights agreement, we are obligated to use our
reasonable best efforts to keep the registration statement of which this
prospectus is a part effective until the earlier of:
- September 8, 2005;
- the date when the notes and the shares of common stock issuable upon
conversion of the notes (i) may be resold immediately without restriction
pursuant to the volume limitation provisions of Rule 144(k) under the
Securities Act or (ii) cease to be outstanding; and
- the sale, pursuant to the registration statement to which this prospectus
relates, of all the securities registered thereunder.
- Our obligation to keep the registration statement to which this
prospectus relates effective is subject to specified, permitted
exceptions set forth in the registration rights agreement. In these
cases, we
51
may prohibit offers and sales of the notes and shares of common stock
pursuant to the registration statement to which this prospectus relates.
We may suspend the use of this prospectus if we learn of any event that
causes this prospectus to include an untrue statement of a material fact
required to be stated in the prospectus or necessary to make the statements in
the prospectus not misleading in light of the circumstances then existing. If
this type of event occurs, a prospectus supplement or post-effective amendment,
if required, will be distributed to each selling securityholder. Each selling
securityholder has agreed not to trade securities from the time the selling
securityholder receives notice from us of this type of event until the selling
securityholder receives a prospectus supplement or amendment. This time period
will not exceed 30 days in any three-month period and will not exceed an
aggregate of 90 days in any 12 month-period.
LEGAL MATTERS
Saul Ewing LLP, Philadelphia, Pennsylvania, will pass upon the validity of
the notes and the shares of common stock into which those notes are convertible
for OSI.
EXPERTS
The consolidated financial statements of OSI Pharmaceuticals, Inc. and
subsidiaries as of September 30, 2003 and 2002 and for each of the years in the
three-year period ended September 30, 2003 is incorporated by reference herein
and in the registration statement in reliance upon the report of KPMG LLP,
independent accountants, incorporated by reference herein, and upon the
authority of KPMG LLP as experts in accounting and auditing. The audit report
covering the September 30, 2003 consolidated financial statements refers to the
full adoption of the provisions of Statement of Financial Accounting Standards
("SFAS") No. 142, "Goodwill and Other Intangible Assets" in 2003 and adopted
provisions of SFAS No. 141, "Business Combinations" and SFAS No. 142, for
acquisitions consummated on or after July 1, 2001; and the early adoption of the
provisions of Statement of Financial Accounting Standards No. 145 "Rescission of
FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and
Technical Corrections" relating to the classification of the effect of early
debt extinguishments in 2002.
52
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
You should rely only on the information contained in this prospectus or
incorporated by reference. OSI has not authorized anyone to provide you with
additional or different information. OSI is not making an offer of these
securities in any jurisdiction where the offer or sale is not permitted. You
should not assume that the information contained in or incorporated by reference
in this prospectus is accurate as of any date other than the date on the front
cover of this prospectus, regardless of the date of delivery of this prospectus
or the date of any sale of the securities.
$150,000,000
[OSI LOGO]
3 1/4% CONVERTIBLE SENIOR SUBORDINATED NOTES DUE 2023
AND 2,998,800 SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES
-------------------------
PROSPECTUS
-------------------------
MAY , 2004
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following expenses incurred in connection with the sale of the
securities being registered will be borne by OSI. Other than the SEC
registration fee, the amounts stated are estimates.
<Table>
SEC registration fee........................................ $12,135
Accounting fees and expenses................................ $35,000
Legal fees and expenses..................................... $52,500
-------
Total....................................................... $99,635
</Table>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of Delaware empowers a
corporation to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he or she is or was a director, officer, employee or agent of the
corporation or another enterprise if serving such enterprise at the request of
the corporation. Depending on the character of the proceeding, a corporation may
indemnify against expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred in connection with
such action, suit or proceeding if the person indemnified acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
In the case of an action by or in the right of the corporation, no
indemnification may be made in respect to any claim, issue or matter as to which
such person shall have been adjudged to be liable to the corporation unless and
only to the extent that the Court of Chancery or the court in which such action
or suit was brought shall determine that despite the adjudication of liability,
but in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses that the court shall deem
proper. Section 145 further provides that to the extent a director or officer of
a corporation has been successful in the defense of any action, suit or
proceeding referred to above, or in defense of any claim, issue or matter
therein, he or she shall be indemnified against expenses (including attorney's
fees) actually and reasonably incurred by him or her in connection therewith.
OSI's Certificate of Incorporation provides that OSI shall, to the fullest
extent authorized by the General Corporation Law of Delaware, indemnify any
person, or the legal representative of any person, who is or was a director,
officer, employee or agent of OSI or another enterprise if said person served
such enterprise at the request of OSI. The Certificate of Incorporation also
provides that any amendment to the General Corporation Law of Delaware shall
only be applicable to the extent any such amendment permits OSI to provide
broader indemnification rights than said law permitted OSI to provide prior to
such amendment. The Certificate of Incorporation further provides that in the
case of an action, suit or proceeding initiated by the indemnified person, OSI
shall indemnify the person only if such action, suit or proceeding was
authorized by OSI's Board of Directors. The Certificate of Incorporation also
contains a provision eliminating the liability of directors of OSI to OSI or its
stockholders for monetary damages for breach of fiduciary duty except under
certain specified circumstances. The Certificate of Incorporation also permits
OSI to maintain insurance to protect itself and any director, officer, employee
or agent against any liability with respect to which OSI would have the power to
indemnify such persons under the General Corporation Law of Delaware. OSI
maintains an insurance policy insuring its directors and officers against
certain liabilities.
II-1
ITEM 16. EXHIBITS.
The following is a list of exhibits filed as part of the Registration
Statement:
<Table>
4.1 Indenture, by and between OSI Pharmaceuticals, Inc. and The
Bank of New York, dated as of September 8, 2003, filed by
OSI Pharmaceuticals as an exhibit to the Form 10-K for the
fiscal year ended September 30, 2003 (file no. 000-15190),
and incorporated herein by reference.
4.2 Form of 3 1/4% Convertible Senior Subordinated Note Due 2023
(included in Exhibit 4.1), filed by OSI Pharmaceuticals as
an exhibit to the Form 10-K for the fiscal year ended
September 30, 2003 (file no. 000-15190), and incorporated
herein by reference.
4.3 Registration Rights Agreements, by and among OSI
Pharmaceuticals, Inc., Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co.
Incorporated, dated as of September 8, 2003, filed by OSI
Pharmaceuticals as an exhibit to the Form 10-K for the
fiscal year ended September 30, 2003 (file no. 000-15190),
and incorporated herein by reference.
4.4 Collateral Pledge and Security Agreement, by and between OSI
Pharmaceuticals, Inc. and the Bank of New York, dated
September 8, 2003, filed by OSI Pharmaceuticals as an
exhibit to the Registration Statement on Form S-3 (file no.
333-110938) filed on December 5, 2003, and, incorporated
herein by reference.
4.5 Account Control Agreement, by and among OSI Pharmaceuticals,
Inc., The Bank of New York, as Trustee and The Bank of New
York, as securities intermediary and depository bank, dated
as of September 8, 2003, filed by OSI Pharmaceuticals as an
exhibit to the Registration Statement on Form S-3 (file no.
333-110938) filed on December 5, 2003, and, incorporated
herein by reference.
5.1 Opinion of Saul Ewing LLP as to the legality of the
securities registered hereunder, filed by OSI
Pharmaceuticals as an exhibit to the Registration Statement
on Form S-3 (file no. 333-110938) filed on December 5, 2003,
and, incorporated herein by reference.
12.1 Computation of Ratios of Earnings to Fixed Charges, filed
herewith.
23.1 Consent of KPMG LLP, Independent Accountants, filed
herewith.
23.2 Consent of Saul Ewing LLP (included in Exhibit 5.1), filed
by OSI Pharmaceuticals as an exhibit to the Registration
Statement on Form S-3 (file no. 333-110938) filed on
December 5, 2003, and, incorporated herein by reference.
24.1 Power of Attorney (included on Signature Page of this
Registration Statement), filed by OSI Pharmaceuticals as an
exhibit to the Registration Statement on Form S-3 (file no.
333-110938) filed on December 5, 2003, and, incorporated
herein by reference.
25.1 A Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939, as amended, of The Bank of New York,
trustee under the Indenture filed by OSI Pharmaceuticals as
an exhibit to the Registration Statement on Form S-3 (file
no. 333-110938) filed on December 5, 2003, and, incorporated
herein by reference.
</Table>
ITEM 17. UNDERTAKINGS.
A. Rule 415 Offering
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 as amended;
(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
II-2
registered) and any deviation from the low or high end 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 a 20% 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 (1)(i) and (1)(ii) above do not apply if
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 by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in 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 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. Filing Incorporating Subsequent Exchange Act Documents By Reference.
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 section 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 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. Request for Acceleration of Effective Date
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 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 the Act and will be governed by the final adjudication of
such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this
Post-Effective Amendment No. 2 to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Melville, State of New York, on May
24, 2004.
OSI PHARMACEUTICALS, INC.
By: /s/ COLIN GODDARD, PH.D.
------------------------------------
Colin Goddard, Ph.D.
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
* Chairman of the Board May 24, 2004
------------------------------------------------
Robert A. Ingram
/s/ COLIN GODDARD, PH.D. Director and Chief Executive Officer May 24, 2004
------------------------------------------------ (principal executive officer)
Colin Goddard, Ph.D.
/s/ ROBERT L. VAN NOSTRAND Vice President and Chief Financial May 24, 2004
------------------------------------------------ Officer (principal financial and
Robert L. Van Nostrand accounting officer)
* Director May 24, 2004
------------------------------------------------
Michael Atieh
* Director May 24, 2004
------------------------------------------------
G. Morgan Browne
* Director May 24, 2004
------------------------------------------------
Edwin A. Gee, Ph.D.
* Director May 24, 2004
------------------------------------------------
Daryl K. Granner, M.D.
* Director May 24, 2004
------------------------------------------------
Walter M. Lovenberg, Ph.D.
* Director May 24, 2004
------------------------------------------------
Viren Mehta
</Table>
II-4
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
* Director May 24, 2004
------------------------------------------------
Sir Mark Richmond, Ph.D.
* Director May 24, 2004
------------------------------------------------
John P. White, Esquire
*By: /s/ ROBERT L. VAN NOSTRAND
----------------------------------------
Robert L. Van Nostrand
Attorney-in-Fact
</Table>
II-5
EXHIBIT INDEX
<Table>
<Caption>
EXHIBIT
NO. EXHIBIT
- ------- -------
4.1 Indenture, by and between OSI Pharmaceuticals, Inc. and The
Bank of New York, dated as of September 8, 2003, filed by
OSI Pharmaceuticals as an exhibit to the Form 10-K for the
fiscal year ended September 30, 2003 (file no. 000-15190),
and incorporated herein by reference.
4.2 Form of 3 1/4% Convertible Senior Subordinated Note Due 2023
(included in Exhibit 4.1), filed by OSI Pharmaceuticals as
an exhibit to the Form 10-K for the fiscal year ended
September 30, 2003 (file no. 000-15190), and incorporated
herein by reference.
4.3 Registration Rights Agreements, by and among OSI
Pharmaceuticals, Inc., Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co.
Incorporated, dated as of September 8, 2003, filed by OSI
Pharmaceuticals as an exhibit to the Form 10-K for the
fiscal year ended September 30, 2003 (file no. 000-15190),
and incorporated herein by reference.
4.4 Collateral Pledge and Security Agreement, by and between OSI
Pharmaceuticals, Inc. and the Bank of New York, dated
September 8, 2003, filed by OSI Pharmaceuticals as an
exhibit to the Registration Statement on Form S-3 (file no.
333-110938) filed on December 5, 2003, and, incorporated
herein by reference.
4.5 Account Control Agreement, by and among OSI Pharmaceuticals,
Inc., The Bank of New York, as Trustee and The Bank of New
York, as securities intermediary and depository bank, dated
as of September 8, 2003, filed by OSI Pharmaceuticals as an
exhibit to the Registration Statement on Form S-3 (file no.
333-110938) filed on December 5, 2003, and, incorporated
herein by reference.
5.1 Opinion of Saul Ewing LLP as to the legality of the
securities registered hereunder, filed by OSI
Pharmaceuticals as an exhibit to the Registration Statement
on Form S-3 (file no. 333-110938) filed on December 5, 2003,
and, incorporated herein by reference.
12.1 Computation of Ratios of Earnings to Fixed Charges, filed
herewith.
23.1 Consent of KPMG LLP, Independent Accountants, filed
herewith.
23.2 Consent of Saul Ewing LLP (included in Exhibit 5.1), filed
by OSI Pharmaceuticals as an exhibit to the Registration
Statement on Form S-3 (file no. 333-110938) filed on
December 5, 2003, and, incorporated herein by reference.
24.1 Power of Attorney (included on Signature Page of this
Registration Statement), filed by OSI Pharmaceuticals as an
exhibit to the Registration Statement on Form S-3 (file no.
333-110938) filed on December 5, 2003, and, incorporated
herein by reference.
25.1 A Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939, as amended, of The Bank of New York,
trustee under the Indenture, filed by OSI Pharmaceuticals as
an exhibit to the Registration Statement on Form S-3 (file
no. 333-110938) filed on December 5, 2003, and, incorporated
herein by reference.
</Table>