As filed with the Securities and Exchange Commission on April (27), (2007)
Registration No. 333-_____________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. (20549)
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF (1933)
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GREATBATCH, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 16-1531026
(State or other jurisdiction of (I.R.S. employer identification number)
incorporation or organization)
9645 WEHRLE DRIVE
CLARENCE, NEW YORK 14031
(716) 759-6901
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
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THOMAS J. MAZZA
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
9645 WEHRLE DRIVE
CLARENCE, NEW YORK 14031
(716) 759-5607
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPY TO:
JOHN J. ZAK, ESQ.
RONALD J. BATTAGLIA JR., ESQ.
HODGSON RUSS LLP
THE GUARANTY BUILDING
140 PEARL STREET, SUITE 100
BUFFALO, NEW YORK 14202-4040
(716) 848-1699
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after this Registration Statement becomes effective.
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 earliest 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 number of the earlier effective registration statement for the same
offering. [ ] _____________
If this Form is a registration statement pursuant to General Instruction 1.D. or
a post-effective amendment thereto that shall become effective upon filing with
the Commission pursuant to Rule 462(e) under the Securities Act, check the
following box. [ ]
If this Form is a post-effective amendment to a registration statement filed
pursuant to General Instruction 1.D. filed to register additional securities or
additional classes of securities pursuant to Rule 413(b) under the Securities
Act, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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Title of Class of Security to Amount to be Registered Proposed Maximum Proposed Maximum Amount of
be Registered Offering Price Per Aggregate Offering Registration Fee
Share (1) Price (1)
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2 1/4% Convertible
Subordinated Debentures
due 2013 $197,782,000 100% $197,782,000 $6,072
Common Stock, par value
$.001 per share 5,700,453 shares (2) -- -- (3)
(1) Equals the aggregate principal amount of the debentures being
registered. Estimated solely for the purpose of calculating the
registration fee pursuant to Rule 457(o) under the Securities Act of
1933, as amended.
(2) Represents the number of shares of common stock that are initially
issuable upon conversion of the 2 1/4% convertible subordinated
debentures due 2013 at an initial conversion price of approximately
$34.70 per share. The debentures are convertible into shares of our
common stock, par value $.001 per share, per $1,000 principal amount
of debentures, subject to adjustment in certain circumstances.
Pursuant to Rule 416 under the Securities Act, we are also
registering an indeterminate number of shares of common stock as may
be issued from time to time upon conversion of the debentures as a
result of the anti-dilution provisions thereof.
(3) Pursuant to Rule 457(i), there is no additional filing fee with
respect to the shares of common stock issuable upon conversion of the
debentures because no additional consideration will be received by
the registrant.
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, or until the Registration 8(a) of the Securities Act, or until
the Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
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, nor is it soliciting offers
to buy securities, in any state where the offer or sale is not permitted.
Subject to Completion, Dated April 27, 2007
Prospectus
$197,782,000
Greatbatch, Inc.
2 1/4% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2013 AND
SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION THEREOF
------------------------
On March 28, 2007 and April 2, 2007, we issued and sold $197,782,000
aggregate principal amount of our 2 1/4% Convertible Subordinated Debentures
due 2013, which we refer to as the "debentures", in two separate private
offerings to persons believed to be "qualified institutional purchasers" under
Rule 144A promulgated under the Securities Act, or "accredited investors" under
Regulation D promulgated pursuant to the Securities Act in transactions exempt
from the registration requirements of the Securities Act. Holders of our 2 1/4%
Convertible Subordinated Debentures due 2013, issued under an indenture between
us and Manufacturers and Traders Trust Company dated May 28, 2003, which we
refer to as the "2003 debentures", exchanged $117,782,000 of 2003 debentures for
an equivalent principal amount of the debentures and such holders and other
purchasers purchased an additional $80,000,000 aggregate principal amount of the
debentures. Selling securityholders will use this prospectus to resell the
debentures and the shares of our common stock issuable upon conversion of the
debentures. The debentures mature on June 15, 2013, unless earlier converted,
redeemed or repurchased.
Interest on the debentures is payable on June 15 and December 15 of each
year beginning on June 15, 2007. The debentures are convertible by holders into
shares of our common stock at an initial conversion price of approximately
$34.70 per share (subject to adjustment in certain events) upon the occurrence
of certain events specified in the indenture. The debentures contain provisions
known as net share settlement, which require that, upon conversion of the
debentures, we will pay holders in cash for up to the principal amount of the
converted debentures. Any amounts in excess of this cash amount will be settled
in shares of our common stock, or, at our option, in cash. At any time prior to
June 15, 2013, we may make an irrevocable physical settlement election to
provide, upon conversion of outstanding debentures, in lieu of providing cash
and shares, shares of our common stock equal to the conversion rate for each
$1,000 principal amount of debentures converted and the amount of any cash in
lieu of fractional shares.
Beginning with the six-month interest period commencing June 15,
2012, we will pay additional contingent interest during any six-month interest
period if the trading price of the debentures for each of the five trading days
immediately preceding the first day of the interest period equals or exceeds
120% of the principal amount of the debentures.
Beginning June 20, 2012 and prior to maturity, we may redeem any of the
debentures at a redemption price of 100% of their principal amount, plus accrued
interest. Holders of the debentures may require us to repurchase their
debentures at any time prior to their maturity following a fundamental change at
a repurchase price of 100% of their principal amount, plus accrued interest.
The debentures are subordinated in right of payment to all of our senior
indebtedness, including our senior credit facility, and effectively subordinated
to all debts and other liabilities of our subsidiaries. As of April 23, 2007, we
had no indebtedness outstanding under our senior credit facility and the ability
to incur $50 million in additional debt under this revolving line of credit. Our
subsidiaries had $42.3 million of other liabilities outstanding. The debentures
also rank pari passu with the 2003 debentures.
------------------------
For U.S. federal income tax purposes, the debentures are subject to U.S.
federal income tax rules applicable to contingent payment debt instruments. See
"Certain United States Federal Income Tax Considerations" beginning on page 42.
Our common stock is listed on The New York Stock Exchange under the
symbol "GB." On April 25, 2007, the last reported sale price of our common stock
was $28.65 per share.
For a more detailed description of the debentures, see "Description of
Debentures" beginning on page 19.
Investing in the debentures and our common stock issuable upon
conversion of the debentures involves risks. See "Risk Factors" on page 5.
------------------------
We are filing the registration statement of which this prospectus is a
part pursuant to contractual obligations. We will not receive any of the
proceeds from the sale by the selling securityholders of the debentures or the
common stock issuable upon conversion of the debentures.
------------------------
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 _____________, 2007.
TABLE OF CONTENTS
Page
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SUMMARY 1
RISK FACTORS 5
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 16
USE OF PROCEEDS 16
PRICE RANGE OF COMMON STOCK 17
RATIO OF EARNINGS TO FIXED CHARGES 18
DESCRIPTION OF DEBENTURES 19
DESCRIPTION OF OTHER INDEBTEDNESS 36
DESCRIPTION OF CAPITAL STOCK 38
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS 42
SELLING STOCKHOLDERS 47
PLAN OF DISTRIBUTION 51
LEGAL MATTERS 53
EXPERTS 53
WHERE YOU CAN FIND MORE INFORMATION 53
INCORPORATION OF DOCUMENTS BY REFERENCE 53
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You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information or make representations that are different. This document may only
be used where it is legal to sell these securities. The information in this
prospectus is accurate only as of the date of this prospectus, regardless of the
time of delivery of this prospectus or any sale of the securities.
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As used in this prospectus, " Greatbatch," "company," "we," "our,"
"ours" and "us" refer to Greatbatch, Inc., except where the context otherwise
requires or as otherwise indicated.
---------
-i-
SUMMARY
This summary contains basic information about us and this offering.
Because it is a summary, it does not contain all of the information that you
should consider before investing in the debentures or the common stock issuable
upon conversion of the debentures. You should read this entire prospectus and
the documents we have incorporated by reference carefully, including the section
entitled "Risk Factors" and our financial statements and the notes thereto
incorporated by reference into this prospectus before making an investment
decision. We have a 52 or 53 week fiscal year that ends on the Friday closest
to December 31. The fiscal years ended December 29, 2006, December 30, 2005 and
December 31, 2004, included 52 weeks. For 52 week years, each quarter contains
13 weeks. For 53 week years, the first, second and third quarters each have 13
weeks and the fourth quarter has 14 weeks.
Greatbatch
We are a leading developer and manufacturer of batteries, capacitors,
feedthroughs, enclosures, and other components used in implantable medical
devices, or IMDs, through our Implantable Medical Components, or IMC, business.
We offer technologically advanced, highly reliable and long lasting products and
services for IMDs and enable our customers to introduce IMDs that are
progressively smaller, longer lasting, more efficient and more functional. We
also leverage our core competencies in technology and manufacturing through our
Electrochem Commercial Power, or ECP, business to develop and produce cells and
battery packs for commercial applications that demand high performance and
reliability, including oil and gas exploration, pipeline inspection, telematics,
oceanographic equipment, seismic, communication, military and aerospace
applications.
We were incorporated in Delaware in 1997 in connection with a leveraged
buyout of Wilson Greatbatch Ltd., which was founded in 1970 and is now our
wholly owned subsidiary. Our principal executive offices are located at 9645
Wehrle Drive, Clarence, New York 14031, and our telephone number is (716)
759-6901. We maintain a worldwide web site at www.greatbatch.com. The reference
to our web site does not constitute incorporation by reference of the
information contained at the web site.
-1-
THE OFFERING
Debentures Offered $197,782,000 aggregate principal amount of 2 1/4%
Convertible Subordinated Debentures due 2013.
Maturity Date June 15, 2013
Interest 2 1/4% per annum on the principal amount, from March
28, 2007 payable semi-annually in arrears in cash on
June 15 and December 15 of each year, beginning June
15, 2007.
Contingent Interest Beginning with the six-month interest period commencing
June 15, 2012, we will pay additional contingent
interest during any six-month interest period if the
trading price of the debentures for each of the five
trading days immediately preceding the first day of the
applicable six-month interest period equals or exceeds
120% of the principal amount of debentures. During any
interest period when contingent interest shall be
payable, the contingent interest payable per $1,000
principal amount of debentures will equal 0.25% of the
average trading price of $1,000 principal amount of
debentures during the five trading days immediately
preceding the first day of the applicable six-month
interest period.
Conversion Holders of debentures may convert the debentures into
shares of our common stock at a conversion rate of
28.8219 shares per $1,000 principal amount of
debentures (a conversion price of approximately
$34.70), subject to adjustment, prior to the close of
business on the final maturity date only under the
following circumstances:
o during any fiscal quarter commencing after June
30, 2007 if the closing sale price of our common
stock exceeds 150% of the conversion price for at
least 20 trading days in the 30 consecutive
trading day period ending on the last trading day
of the preceding fiscal quarter;
o during the five business days after any five
consecutive trading day period in which the
trading price per $1,000 principal amount of
debentures for each day of that period was less
than 98% of the product of the closing sale price
of our common stock and the number of shares
issuable upon conversion of $1,000 principal
amount of the debentures;
o if the debentures have been called for redemption;
o upon the occurrence of specified corporate events
described under "Description of Debentures
Conversion of Debentures- Conversion Upon
Specified Corporate Transactions";
o upon the occurrence or approval by our Board of
Directors of a fundamental change described under
"Description of Debentures - Conversion of
Debentures - Conversion Upon a Fundamental
Change"; or
o at any time during the period beginning 60 days
prior to, but excluding, June 15, 2013.
If the debentures are converted upon occurrence or
approval by our Board of Directors of a fundamental
change, as described below opposite the caption "Make
Whole Premium Upon a Fundamental Change," we will also
pay a make whole premium.
Payment Upon Conversion Upon conversion, we will deliver to holders in respect
of each $1,000 principal amount of debentures being
converted:
o cash in an amount equal to the lesser of (1)
$1,000 and (2) the conversion value of the
debentures to be converted; and,
o if the conversion value is greater than $1,000, a
number of shares of our common stock equal to the
sum of the daily share amounts for each of the 20
trading days during the conversion reference
period.
-2-
In no event shall the aggregate number of shares per
$1,000 principal amount of debentures exceed 37.0219.
We may at our option, in lieu of delivery of some or
all of the shares of common stock otherwise issuable
upon conversion of the debentures, pay holders of the
debentures in cash for all or a portion of the
principal amount of the converted debentures and any
amounts in excess of the principal amount which are
due.
Make Whole Premium If a holder of the debentures elects to convert its
Upon a Fundamental debentures upon the occurrence of a change of control,
Change in certain circumstances, the conversion rate will be
increased by an additional number of shares of our
common stock. The amount of such increase, otherwise
referred to as the "make whole premium," if any, will
be based on the stock price and the effective date for
such change of control. A description of how the make
whole premium will be determined and a table showing
the make whole premium that would apply at various
stock prices and change of control effective dates is
set forth on pages 24 and 25 of this prospectus. No
make whole premium will be paid if the relevant stock
price is less than $26.98 per share or greater than
$90.00 per share (subject to adjustment). Additionally,
in no event shall the aggregate number of shares per
$1,000 principal amount of debentures exceed 37.0219.
Subordination The debentures will be subordinated to all of our
existing and future senior indebtedness, including our
senior credit facility, and are effectively
subordinated to all debt and other liabilities of our
subsidiaries. As of April 23, 2007, we had no
indebtedness outstanding under our senior credit
facility and the ability to incur $50 million in
additional debt under this revolving line of credit.
Our subsidiaries had $42.3 million of other liabilities
outstanding. Neither we nor any of our subsidiaries are
prohibited from incurring debt, including senior
indebtedness, under the indenture.
Sinking Fund None.
Optional Redemption We may redeem any of the debentures beginning June 20,
2012 and prior to maturity, by giving holders of
debentures at least 30 days' notice.
We may redeem the debentures either in whole or in part
at a redemption price equal to 100% of their principal
amount, plus accrued and unpaid interest, including
contingent interest, if any, to, but excluding, the
redemption date.
Fundamental Change If a fundamental change (as described under
"Description of Debentures-Redemption at Option of the
Holder Upon Fundamental Change") occurs prior to
maturity, holders of debentures may require us to
purchase all or part of their debentures at a
redemption price equal to 100% of their principal
amount, plus accrued and unpaid interest, including
contingent interest, if any, to, but excluding, the
redemption date.
Use of Proceeds We will not receive any of the proceeds from the sale
by the selling securityholders of the debentures or the
common stock issuable upon conversion of the
debentures.
Registration Rights We have filed a registration statement, of which
this prospectus is a part, pursuant to a registration
rights agreement with the initial purchasers of the
debentures. We have also agreed to use our reasonable
best efforts to have the registration statement
declared effective by June 26, 2007 and to use our
reasonable best efforts to keep the shelf registration
statement effective until the earliest of the following
has occurred:
o all of the securities covered by this registration
statement have been sold;
o the expiration of the applicable holding period
with respect to the debentures and the common
stock issuable upon conversion of the debentures
under Rule 144(k) under the Securities Act, or any
successor provision;
o all securities covered by this registration
statement have been sold to the public pursuant
to Rule 144 (or any similar provision then in
force, but not Rule 144A) under the Securities
Act;
-3-
and as a result of the event or circumstance
described in any of the above, the legend with
respect to transfer restrictions under the
indenture is removed or removable in accordance
with the terms of the indenture or such legend, as
the case may be.
U.S. Federal Income Taxation The debentures will be characterized as contingent
payment debt instruments for U.S. federal income
tax purposes, and will be subject to U.S. federal
income tax rules applicable to contingent payment
debt instruments. Based on that treatment,
holders of the debentures generally will be
required to accrue interest income on the
debentures in the manner described in this
prospectus, regardless of whether the holder uses
the cash or accrual method of tax accounting.
Holders of debentures will be required, in
general, to include interest in income based on
the rate at which we would issue a noncontingent,
nonconvertible, fixed-rate debt instrument with
terms and conditions otherwise similar to those of
the debentures, which rate will exceed the stated
interest on the debentures. Accordingly, holders
will be required to include interest in taxable
income in excess of the stated interest on the
debentures. Furthermore, upon a sale, purchase by
us at their option, exchange, conversion or
redemption of the debentures, holders will
recognize gain or loss equal to the difference
between their amount realized and their adjusted
tax basis in the debentures. The amount realized
by holders will include the fair market value of
any common stock they receive. Any gain on a sale,
purchase by us at their option, exchange,
conversion or redemption of the debentures will be
treated as ordinary interest income. Holders
should consult their tax advisers as to the U.S.
federal, state, local or other tax consequences,
as well as any foreign tax consequences, of
acquiring, owning and disposing of the debentures.
See "Certain United States Federal Income Tax
Considerations."
New York Stock Exchange "GB"
Symbol
-4-
RISK FACTORS
You should carefully consider and evaluate all of the
information in or incorporated by reference in this prospectus, including the
risk factors listed below. Any of these risks could materially and adversely
affect our business, results of operations and financial condition, which in
turn could materially and adversely affect the market price of the debentures
offered by this prospectus and the trading price of our common stock into which
the debentures may be converted.
Keep these risk factors in mind when you read forward-looking
statements contained elsewhere or incorporated by reference in this prospectus.
Risks Related To Our Business
We depend heavily on a limited number of customers, and if we lose any of them
or they reduce their business with us, we would lose a substantial portion of
our revenues.
A substantial portion of our business is conducted with a limited
number of customers, including Biotronik, Boston Scientific, Medtronic, the
Sorin Group and St. Jude Medical. In 2006, Boston Scientific, Medtronic and St.
Jude Medical collectively accounted for approximately 67% of our revenues. Our
supply agreements with these customers might not be renewed. Furthermore, many
of our supply agreements do not contain minimum purchase level requirements and
therefore there is no guaranteed source of revenue that we can depend upon under
these agreements. The loss of any large customer or a reduction of business with
that customer for any reason would harm our business, financial condition and
results of operations.
If we do not respond to changes in technology, our products may become obsolete
and we may experience a loss of customers and lower revenues.
We sell our products to customers in several industries that are
characterized by rapid technological changes, frequent new product introductions
and evolving industry standards. Without the timely introduction of new products
and enhancements, our products and services will likely become technologically
obsolete over time and we may lose a significant number of our customers. In
addition, other new products introduced by our customers may require fewer of
our batteries or components. We dedicate a significant amount of resources to
the development of our products and technologies and we would be harmed if we
did not meet customer requirements and expectations. Our inability, for
technological or other reasons, to successfully develop and introduce new and
innovative products could result in a loss of customers and lower revenues.
If we are unable to successfully market our current or future products, our
business will be harmed and our revenues and operating results will be reduced.
The market for our medical products has been growing in recent
years. If the market for our products does not grow as rapidly as forecasted by
industry experts, our revenues could be less than expected. In addition, it is
difficult to predict the rate at which the market for our products will grow or
at which new and increased competition will result in market saturation. Slower
growth in the pacemaker, ICD and CRT markets in particular would negatively
impact our revenues. In addition, we face the risk that our products will lose
widespread market acceptance. Our customers may not continue to utilize the
products we offer and a market may not develop for our future products. We may
at times determine that it is not technically or economically feasible for us to
continue to manufacture certain products and we may not be successful in
developing or marketing them. Additionally, new technologies that we develop may
not be rapidly accepted because of industry-specific factors, including the need
for regulatory clearance, entrenched patterns of clinical practice and
uncertainty over third party reimbursement. If this occurs, our business will be
harmed and our revenues and operating results will be negatively affected.
We are subject to pricing pressures from customers, which could harm operating
results.
We have given price reductions to some of our large customers in
recent years and we expect customer pressure for pricing reductions will
continue. Price concessions or reductions may cause our operating results to
suffer. In addition, any delay or failure by a large customer to make payments
due to us would harm our operating results and financial condition.
We rely on third party suppliers for raw materials, key products and
subcomponents and if we are unable to obtain these materials, products and
subcomponents on a timely basis or on terms acceptable to us, our ability to
manufacture products will suffer.
-5-
Our business depends on a continuous supply of raw materials. The
principal raw materials used in our business include lithium, iodine, tantalum,
platinum, ruthenium, gallium trichloride, tantalum pellets, vanadium pentoxide,
iridium, and titanium. Raw materials needed for our business are susceptible to
fluctuations due to transportation, government regulations, price controls,
economic climate or other unforeseen circumstances. Increasing global demand for
some of the raw materials we need for our business, including platinum, iridium,
gallium trichloride, tantalum, and titanium has caused the prices of these
materials to increase significantly. In addition, there are a limited number of
worldwide suppliers of several raw materials needed to manufacture our products,
including lithium, gallium trichloride, carbon monofluoride, and tantalum. We
may not be able to continue to procure raw materials critical to our business or
to procure them at acceptable price levels.
We rely on third party manufacturers to supply many of our raw
materials. Manufacturing problems may occur with these and other outside
sources, as a supplier may fail to develop and supply products and subcomponents
to us on a timely basis, or may supply us with products and subcomponents that
do not meet our quality, quantity and cost requirements. If any of these
problems occur, we may be unable to obtain substitute sources for these products
and subcomponents on a timely basis or on terms acceptable to us, which could
harm our ability to manufacture our own products and components profitably or on
time. In addition, to the extent the processes that our suppliers use to
manufacture products and subcomponents are proprietary, we may be unable to
obtain comparable subcomponents from alternative suppliers.
We may never realize the full value of our intangible assets, which represent a
significant portion of our total assets.
At December 29, 2006, we had $211.4 million of net intangible
assets, representing 39% of our total assets. These intangible assets consist
primarily of goodwill, trademarks, tradenames and patented technology arising
from our acquisitions. Goodwill and other intangible assets with indefinite
lives are not amortized but are tested annually or upon the occurrence of
certain events that indicate that the assets may be impaired. We may not receive
the recorded value for our intangible assets if we sell or liquidate our
business or assets. In addition, the material concentration of intangible assets
increases the risk of a large charge to earnings in the event that the
recoverability of these intangible assets is impaired, and in the event of such
a charge to earnings, the market price of our common stock could be adversely
affected. In addition, intangible assets with definite lives, which represent
$28.1 million of our net intangible assets at December 29, 2006, will continue
to be amortized. We incurred total amortization expenses relating to these
intangible assets of $3.8 million in 2006. These expenses will reduce our future
earnings or increase our future losses.
Quality problems with our products could harm our reputation for producing high
quality products, erode our competitive advantage and result in claims against
us.
Our products are held to high quality and performance standards.
In the event that our products fail to meet these standards, our reputation for
producing high quality products could be harmed, which would damage our
competitive advantage and could result in lower revenues. Product quality or
performance issues may also result in product liability or other legal claims
against us, which could harm our operating results or financial condition.
Quality problems with our products could result in warranty claims and
additional costs.
We allow customers to return defective or damaged products for credit,
replacement, or exchange. We generally warrant that our products will meet
customer specifications and will be free from defects in materials and
workmanship. Additionally, we carry a safety stock of inventory for our
customers which may be impacted by warranty claims. We accrue for our exposure
to warranty claims based upon recent historical experience and other specific
information as it becomes available. However, such reserves may not be adequate
to cover future warranty claims and additional warranty costs and/or inventory
write-offs may be incurred which could harm our operating results or financial
condition.
If we become subject to product liability claims, our operating results and
financial condition could suffer.
The manufacturing and sale of our products expose us to potential
product liability claims and product recalls, including those that may arise
from failure to meet product specifications, misuse or malfunction of, or design
flaws in, our products, or use of our products with components or systems not
manufactured or sold by us. Many of our products are components and function in
interaction with our customers' medical devices. For example, our batteries are
produced to meet various electrical performance, longevity and other
specifications, but the actual performance of those products is dependent on how
they are in fact utilized as part of the customers' devices over the lifetime of
the products. Product performance and device interaction from time to time have
been, and may in the future be, different than expected for a number of reasons.
Consequently, it is possible that customers may experience problems with their
medical devices that could require device recall or other corrective action,
where our batteries met the specification at delivery, and for reasons that are
not related primarily or at all to any failure by our product to perform in
accordance with specifications. It is possible that our customers (or end-users)
may in the future assert that our products caused or contributed to device
failure where our product was not the primary cause of the device performance
issue. Even if these assertions do not lead to product liability or contract
claims, they could harm our reputation and our customer relationships.
-6-
Provisions contained in our agreements with key customers
attempting to limit our damages, including provisions to limit damages to
liability for gross negligence, may not be enforceable in all instances or may
otherwise fail to protect us from liability for damages. Product liability
claims or product recalls, regardless of their ultimate outcome, could require
us to spend significant time and money in litigation or require us to pay
significant damages. The occurrence of product liability claims or product
recalls could adversely affect our operating results and financial condition.
We carry product liability insurance coverage that is limited in
scope and amount. We may not be able to maintain this insurance or to do so at a
reasonable cost or on reasonable terms. This insurance may not be adequate to
protect us against a product liability claim that arises in the future.
Our operating results may fluctuate, which may make it difficult to forecast our
future performance and may result in volatility in our stock price.
Our operating results have fluctuated in the past and are likely
to fluctuate significantly from quarter to quarter due to a variety of factors,
including but not limited to the following:
o the fixed nature of a substantial percentage of
our costs, which results in our operations being
particularly sensitive to fluctuations in revenue;
o changes in the relative portion of our revenue
represented by our various products and customers,
which could result in reductions in our profits if
the relative portion of our revenue represented by
lower margin products increases;
o timing of orders placed by our principal customers
who account for a significant portion of our
revenues; and
o increased costs of raw materials or supplies.
If we are unable to protect our intellectual property and proprietary rights,
our business could be adversely affected.
We rely on a combination of patents, licenses, trade secrets and
know-how to establish and protect our proprietary rights to our technologies and
products. As of December 29, 2006, we held 329 active U.S. patents. However, the
steps we have taken or will take to protect our proprietary rights may not be
adequate to deter misappropriation of our intellectual property. In addition to
seeking formal patent protection whenever possible, we attempt to protect our
proprietary rights and trade secrets by entering into confidentiality and
non-compete agreements with employees, consultants and third parties with which
we do business. However, these agreements can be breached and, if they are,
there may not be an adequate remedy available to us and we may be unable to
prevent the unauthorized disclosure or use of our technical knowledge, practices
or procedures. If our trade secrets become known, we may lose our competitive
advantages.
If third parties infringe or misappropriate our patents or other
proprietary rights, our business could be seriously harmed. We may be required
to spend significant resources to monitor our intellectual property rights, we
may not be able to detect infringement of these rights and may lose our
competitive advantages associated with our intellectual property rights before
we do so. In addition, competitors may design around our technology or develop
competing technologies that do not infringe on our proprietary rights.
We may be subject to intellectual property claims, which could be costly and
time consuming and could divert our management and key personnel from our
business operations.
In producing our batteries and other components for IMDs, third
parties may claim that we are infringing on their intellectual property rights,
and we may be found to have infringed those intellectual property rights. We may
be unaware of intellectual property rights of others that may be used in our
technology and products. In addition, third parties may claim that our patents
have been improperly granted and may seek to invalidate our existing or future
patents. If any claim for invalidation prevailed, the result could be greatly
expanded opportunities for third parties to manufacture and sell products that
compete with our products and our revenues from any related license agreements
would decrease accordingly. We also typically do not receive significant
indemnification from parties which license technology to us against third party
claims of intellectual property infringement. Any litigation or other challenges
regarding our patents or other intellectual property could be costly and time
consuming and could divert our management and key personnel from our business
operations. The complexity of the technology involved in producing our power
sources and other components for IMDs, and the uncertainty of intellectual
property litigation increases these risks. Claims of intellectual property
infringement might also require us to enter into costly royalty or license
agreements. However, we may not be able to obtain royalty or license agreements
on terms acceptable to us, or at all. We also may be subject to significant
damages or injunctions against development and sale of our products.
Infringement claims, even if not substantiated, could result in significant
legal and other costs and may be a distraction to management.
-7-
We are dependent upon our senior management team and key personnel and the loss
of any of them could significantly harm us.
Our future performance depends to a significant degree upon the
continued contributions of our senior management team and key technical
personnel. Our products are highly technical in nature. In general, only highly
qualified and trained scientists have the necessary skills to develop our
products. The loss or unavailability to us of any member of our senior
management team or a key technical employee could significantly harm us. We face
intense competition for these professionals from our competitors, customers and
companies operating in our industry. To the extent that the services of members
of our senior management team and key technical personnel would be unavailable
to us for any reason, we would be required to hire other personnel to manage and
operate our company and to develop our products and technology. We may not be
able to locate or employ such qualified personnel on acceptable terms.
We may not be able to attract, train and retain a sufficient number of qualified
employees to maintain and grow our business.
Our success will depend in large part upon our ability to
attract, train, retain and motivate highly-skilled employees and management.
There is currently aggressive competition for employees who have experience in
technology and engineering. We compete intensely with other companies to recruit
and hire from this limited pool. The industries in which we compete for
employees are characterized by high levels of employee attrition. Although we
believe we offer competitive salaries and benefits, we may have to increase
spending in order to attract, train and retain personnel.
We may make acquisitions that could subject us to a number of operational risks
and we may not be successful in integrating companies we acquire into our
existing operations.
We have made and expect to make in the future acquisitions that
complement our core competencies in technology and manufacturing to enable us to
manufacture and sell additional products to our existing customers and to expand
our business into related markets. Implementation of our acquisition strategy
entails a number of risks, including:
o inaccurate assessments of potential liabilities
associated with the acquired businesses;
o the existence of unknown and/or undisclosed
liabilities associated with the acquired
businesses;
o diversion of our management's attention from our
core businesses;
o potential loss of key employees or customers of
the acquired businesses;
o difficulties in integrating the operations and
products of an acquired business or in realizing
projected revenue growth, efficiencies and cost
savings; and
o increases in our indebtedness and a limitation in
our ability to access additional capital when
needed.
If we are not successful in making acquisitions to expand and develop our
business, our operating results may suffer.
A component of our strategy is to make acquisitions that
complement our core competencies in technology and manufacturing to enable us to
manufacture and sell additional products to our existing customers and to expand
our business into related markets. Our continued growth will depend on our
ability to identify and acquire companies that complement or enhance our
business on acceptable terms. We may not be able to identify or complete future
acquisitions. Some of the risks that we may encounter include expenses
associated with, and difficulties in identifying, potential targets, the costs
associated with unsuccessful acquisitions and higher prices for acquired
companies because of competition for attractive acquisition targets. Our failure
to acquire additional companies could cause our operating results to suffer.
We may face competition from our principal medical customers that could harm our
business and we may be unable to compete successfully against new entrants and
established companies with greater resources.
Competition in connection with the manufacturing of our products
may intensify in the future. One or more of our customers may undertake
additional vertical integration initiatives and begin to manufacture some or all
of their components that we currently supply them which could cause our
operating results to suffer.
The market for commercial power sources is competitive,
fragmented and subject to rapid technological change. Many other commercial
power source suppliers are larger and have greater financial, operational,
personnel, sales, technical and marketing resources than our company. These and
other companies may develop products that are superior to ours, which could
result in lower revenues and operating results.
-8-
Accidents at one of our facilities could delay production and adversely affect
our operations.
Our business involves complex manufacturing processes and
hazardous materials that can be dangerous to our employees. Although we employ
safety procedures in the design and operation of our facilities, there is a risk
that an accident or death could occur in one of our facilities. Any accident,
such as a chemical spill, could result in significant manufacturing delays or
claims for damages resulting from injuries, which would harm our operations and
financial condition. The potential liability resulting from any such accident or
death, to the extent not covered by insurance, could cause our business to
suffer. Any disruption of operations at any of our facilities could harm our
business.
We intend to expand into new markets and our proposed expansion plans may not be
successful, which could harm our operating results.
We intend to expand into new markets through the development of
new product applications based on our existing component technologies. These
efforts have required, and will continue to require us to make substantial
investments, including significant research, development and engineering
expenditures and capital expenditures for new, expanded or improved
manufacturing facilities. We may not be able to successfully manage expansion
into new markets and products and these efforts may harm our operating results.
Specific risks in connection with expanding into new markets include the
inability to transfer our quality standards into new products, the failure of
customers in new markets to accept our products, and competition.
Our failure to obtain licenses from third parties for new technologies or the
loss of these licenses could impair our ability to design and manufacture new
products and reduce our revenues.
We occasionally license technologies from third parties rather
than depending exclusively on our own proprietary technology and developments.
For example, we license a capacitor patent from another company. Our ability to
license new technologies from third parties is and will continue to be critical
to our ability to offer new and improved products. We may not be able to
continue to identify new technologies developed by others and even if we are
able to identify new technologies, we may not be able to negotiate licenses on
favorable terms, or at all. Additionally, we could lose rights granted under
licenses for reasons beyond our control. For example, the licensor could lose
patent protection for a number of reasons, including invalidity of the licensed
patent.
Our international operations and sales are subject to a variety of risks and
costs that could adversely affect our profitability and operating results.
Our sales to countries outside the U.S., which accounted for 49% of net
sales for fiscal year 2006, and our Tijuana, Mexico operations are subject to
certain foreign country risks. Our international operations are, and will
continue to be, subject to a number of risks and potential costs, including:
o changes in foreign medical reimbursement programs
and policies;
o changes in foreign regulatory requirements;
o local product preferences and product
requirements;
o longer-term receivables than are typical in the
U.S.;
o less protection of intellectual property in some
countries outside of the U.S.;
o trade protection measures and import and export
licensing requirements;
o work force instability;
o political and economic instability; and
o complex tax and cash management issues.
Our sales to countries outside of the U.S. are primarily to customers whose
corporate offices are located and headquartered in the U.S. All supply contracts
to customers outside the U.S. are denominated in U.S. dollars. We incur certain
expenses related to our Tijuana operations that are denominated in a foreign
currency. Historically, foreign currency fluctuations have not had a material
effect on our consolidated financial statements. However, fluctuations in
foreign currency exchange rates could have a significant negative impact on our
profitability and operating results if the volume of transactions denominated in
foreign currencies increases.
-9-
Risks Related To Our Industries
The health care industry is subject to various political, economic and
regulatory changes that could force us to modify how we develop and price our
products.
The healthcare industry is highly regulated and is influenced by
changing political, economic and regulatory factors. Several of our product
lines are subject to international, federal, state and local health and safety,
packaging and product content regulations. In addition, IMDs produced by our
medical customers are subject to regulation by the U.S. Food and Drug
Administration and similar governmental agencies. These regulations govern a
wide variety of product activities from design and development to labeling,
manufacturing, promotion, sales and distribution. Compliance with these
regulations may be time consuming, burdensome and expensive and could negatively
affect our customers' abilities to sell their products, which in turn would
adversely affect our ability to sell our products. This may result in higher
than anticipated costs or lower than anticipated revenues.
These regulations are also complex, change frequently and have
tended to become more stringent over time. Federal and state legislatures have
periodically considered programs to reform or amend the U.S. healthcare system
at both the federal and state levels. In addition, these regulations may contain
proposals to increase governmental involvement in healthcare, lower
reimbursement rates or otherwise change the environment in which healthcare
industry participants operate. We may be required to incur significant expenses
to comply with these regulations or remedy past violations of these regulations.
Any failure by our company to comply with applicable government regulations
could also result in cessation of portions or all of our operations, impositions
of fines and restrictions on our ability to carry on or expand our operations.
In addition, because many of our products are sold into regulated industries, we
must comply with additional regulations in marketing our products.
Our business is subject to environmental regulations that could be costly for
our company to comply with.
Federal, state and local regulations impose various environmental
controls on the manufacturing, transportation, storage, use and disposal of
batteries and hazardous chemicals and other materials used in, and hazardous
waste produced by, the manufacturing of power sources and components. Conditions
relating to our historical operations may require expenditures for clean-up in
the future and changes in environmental laws and regulations may impose costly
compliance requirements on us or otherwise subject us to future liabilities.
Additional or modified regulations relating to the manufacture, transportation,
storage, use and disposal of materials used to manufacture our batteries and
components or restricting disposal of batteries may be imposed. In addition, we
cannot predict the effect that additional or modified regulations may have on us
or our customers.
Consolidation in the healthcare industry could result in greater competition and
reduce our IMC revenues and harm our business.
Many healthcare industry companies are consolidating to create
new companies with greater market power. As the healthcare industry
consolidates, competition to provide products and services to industry
participants will become more intense. These industry participants may try to
use their market power to negotiate price concessions or reductions for our
products. If we are forced to reduce our prices because of consolidation in the
healthcare industry, our revenues would decrease and our operating results would
suffer.
Our IMC business is indirectly subject to healthcare industry cost containment
measures that could result in reduced sales of our products.
Our healthcare customers rely on third party payors, such as
government programs and private health insurance plans, to reimburse some or all
of the cost of the procedures in which our products are used. The continuing
efforts of government, insurance companies and other payors of healthcare costs
to contain or reduce those costs could lead to patients being unable to obtain
approval for payment from these third party payors. If that occurred, sales of
IMDs may decline significantly, and our customers may reduce or eliminate
purchases of our products. The cost containment measures that healthcare
providers are instituting, both in the United States and internationally, could
reduce our revenues and harm our operating results.
Our ECP revenues are dependent on conditions in the oil and natural gas
industry, which historically have been volatile.
Sales of our commercial products depend to a great extent upon
the condition of the oil and gas industry and, specifically, the exploration and
production expenditures of oil and gas companies, which comprise approximately
10% of ECP sales. In the past, oil and natural gas prices have been volatile and
the oil and gas exploration and production industry has been cyclical, and it is
likely that oil and natural gas prices will continue to fluctuate in the future.
The current and anticipated prices of oil and natural gas influence the oil and
gas
-10-
exploration and production business and are affected by a variety of political
and economic factors beyond our control, including worldwide demand for oil and
natural gas, worldwide and domestic supplies of oil and natural gas, the ability
of the Organization of Petroleum Exporting Countries, or OPEC, to set and
maintain production levels and pricing, the level of production of non-OPEC
countries, the price and availability of alternative fuels, political stability
in oil producing regions and the policies of the various governments regarding
exploration and development of their oil and natural gas reserves. An adverse
change in the oil and gas exploration and production industry or a reduction in
the exploration and production expenditures of oil and gas companies could cause
our revenues from commercial products to suffer.
Risks Related to the Debentures and the Common Stock
We are dependent on cash from our subsidiaries to service the debentures.
The debentures are obligations of Greatbatch, which is a holding
company. Because we derive substantially all of our revenues and earnings before
interest, taxes, depreciation and amortization, or EBITDA, from our operating
subsidiaries and do not have significant operations of our own, we are dependent
upon our subsidiaries to provide us with cash, in the form of dividends or
intercompany credits, loans or otherwise, to meet our obligations, including our
obligations under the debentures. Our subsidiaries will have no obligation to
pay any amounts due on the debentures or to make any funds available to us for
payment of the debentures, whether by dividends, loans, distributions or other
payments. As of December 29, 2006, our subsidiaries held 99.6% of our total
assets, which percentage gives effect to intercompany eliminations and excludes
investment in subsidiaries.
Our indebtedness must be serviced from our cash flow which could adversely
affect our business and our ability to make full payment on the debentures.
Our aggregate level of indebtedness increased in connection with
the private offering of our debentures. As of December 29, 2006, after giving
effect to the issuance and sale of the debentures, we would have had $250
million of outstanding indebtedness and would have had the ability to incur $50
million in additional debt under the revolving line of credit portion of our
senior credit facility. For the fiscal year ended December 29, 2006, our pro
forma interest expense on our pro forma outstanding indebtedness, which gives
effect to the issuance and sale of the debentures as if each had occurred at the
beginning of 2006, would have been $8.2 million, assuming the indebtedness was
outstanding for the entire year.
Our aggregate level of indebtedness poses risks to our business
and could have important consequences to investors, including the risks that:
o we could use a substantial portion of our
consolidated cash flow from operations to pay
principal and interest on our debt, thereby
reducing the funds available for working capital,
capital expenditures and other general corporate
purposes, including executing our business
strategy of diversifying our product offerings in
the implantable medical device market;
o insufficient cash flow from operations may force
us to sell assets, or seek additional capital,
which we may be unable to do at all or on terms
favorable to us;
o our level of indebtedness may make us more
vulnerable to economic or industry downturns; and
o our debt service obligations increase our
vulnerabilities to competitive pressures, because
many of our competitors are less leveraged than we
are.
Because the debentures are subordinated to our senior debt and effectively
subordinated to the debt and other liabilities of our subsidiaries, you may not
receive full payment on your debentures.
The debentures will be subordinated unsecured obligations of
Greatbatch and will be junior to all of our existing and future indebtedness,
other than any future indebtedness that expressly provides that it ranks equal
with, or is subordinated in right of payment to, the debentures. In addition,
the debentures rank pari passu with our 2 1/4% Convertible Subordinated
Debentures due 2013, issued under an indenture between us and Manufacturers and
Traders Trust Company dated May 28, 2003, which we refer to as the "2003
debentures". As a result, upon any distribution to our creditors in a
bankruptcy, liquidation, reorganization or similar proceeding, the holders of
our senior debt will be entitled to be paid in full before any payment will be
made on the debentures. Holders of the debentures may receive less ratably than
holders of trade payables and holders of our other indebtedness in any such
proceeding. In any of these cases, holders of the debentures may not be paid in
full.
-11-
As of December 29, 2006, after giving effect to the private
offering of our debentures as if it had occurred on December 29, 2006, there
would have been no senior debt outstanding, $50 million would have been
available for borrowing under our senior credit facility, and $52,218,000
aggregate principal amount of 2003 debentures outstanding. Holders of the 2003
debentures may require us to repurchase their 2003 debentures on June 15, 2010,
at a repurchase price equal to 100% of their principal amount plus accrued and
unpaid interest, including contingent interest, if any. The indenture governing
the debentures does not restrict the amount of indebtedness, including senior
debt, that we may borrow in the future. We have entered into a commitment letter
and term sheet with Manufacturers and Traders Trust Company, as administrative
agent, providing for a replacement senior secured facility to Greatbatch, Ltd.,
our wholly owned subsidiary, in the original principal amount of $235,000,000
(which may be increased at our option to $335,000,000).
In addition, the debentures are effectively subordinated in right
of payment to all debt and other liabilities, including trade payables and other
accrued liabilities, of our subsidiaries. As of December 29, 2006, our
subsidiaries had total liabilities of approximately $42.3 million, excluding
intercompany liabilities.
We are prohibited from, and may not have the financial resources to, repurchase
the debentures upon a fundamental change, which would cause defaults under the
senior credit facility and other indebtedness we may incur in the future.
The holders of the debentures may require us to repurchase all or
portion of their debentures upon a fundamental change as defined in the
indenture for the debentures. If a fundamental change were to occur, we may not
have enough funds to pay the repurchase price for all tendered debentures. We
are prohibited under our senior credit facility, and may be prohibited under
indebtedness we may incur in the future, from purchasing any debentures prior to
their stated maturity. In such circumstances, we will be required to repay all
of the outstanding principal of, and pay any accrued and unpaid interest on,
indebtedness under the senior credit facility and any such other future
indebtedness or to obtain the requisite consent from the lenders under the
senior credit facility and the holders of any such other future indebtedness to
permit the repurchase of the debentures. If we are unable to repay all of such
indebtedness or are unable to obtain the necessary consents, we will be unable
to offer to repurchase the debentures, which would constitute an event of
default under the indenture for the debentures, which itself would also
constitute a default under the senior credit facility and could constitute a
default under the terms of any future indebtedness that we may incur. In
addition, the events that constitute a fundamental change under the indenture
for the debentures may also be events of default under the senior credit
facility or other indebtedness we may incur in the future. Our obligation to
offer to repurchase the debentures upon a fundamental change would not
necessarily afford holders of debentures protection in the event of a highly
leveraged transaction, reorganization, merger or similar transaction because
those transactions could be structured in a manner whereby they would not be
considered a "fundamental change" for purposes of the indenture for the
debentures.
No public market exists for the debentures, and the resale of the debentures is
subject to significant restrictions as well as uncertainties regarding the
existence of any trading market for the debentures.
Neither the debentures nor the shares of common stock issuable
upon conversion of the debentures have been registered under the Securities Act
or any state securities laws. As a result, until this registration statement is
declared effective by the SEC, they may only be offered or sold if an applicable
exemption from the registration requirements of the Securities Act and
applicable state laws applies to the circumstances of the sale.
The debentures are a new issue of securities for which there is
currently no public market. We do not intend to list the debentures on any
national securities exchange or automated quotation system. We cannot assure you
that an active or sustained trading market for the debentures will develop or
that the holders will be able to sell their debentures.
Moreover, even if the holders are able to sell their debentures,
we cannot assure you as to the price at which any sales will be made. Future
trading prices of the debentures will depend on many factors, including, among
other things, prevailing interest rates, our operating results, the price of our
common stock and the market for similar securities. Historically, the market for
convertible debt has been subject to disruptions that have caused volatility in
prices. It is possible that the market for the debentures will be subject to
disruptions which may have a negative effect on the holders of the debentures,
regardless of our prospects or financial performance.
Under the registration rights agreement applicable to the
debentures, which has been filed with the registration statement of which this
prospectus is a part, we are using our reasonable best efforts to have this
shelf-registration statement declared effective to register the debentures and
the common stock issuable upon the conversion of the debentures. However, we
cannot assure you that we will be successful in having this registration
statement declared effective.
The possible volatility of our common stock price could adversely affect the
ability of holders to resell the debentures or common stock issuable upon
conversion of the debentures.
-12-
Market prices of the securities of technology companies have been
volatile in the recent past. This market volatility, as well as general
economic, market or political conditions, could reduce the market price of our
common stock in spite of our operating performance. In addition, our operating
results or prospects could be below the expectations of public market analysts
and investors, and in response, the market price of our common stock could
decrease significantly. For example, our stock price declined from a closing
price of $44.69 per share on January 13, 2004 to a closing price of $14.57 on
August 13, 2004. Investors may be unable to resell their shares of our common
stock received upon conversion of the debentures at or above the conversion
price. In the past, companies that have experienced volatility in the market
price of their common stock have been the object of securities class action
litigation. If we were to become the object of securities class action
litigation, we may face substantial costs and our management's attention and
resources may be diverted, which could harm our business.
The conditional conversion features of the debentures could result in holders of
debentures receiving less than the value of the common stock into which a
debenture is convertible.
The debentures are convertible into common stock only if
specified conditions are met. If the specific conditions for conversion are not
met, holders may not be able to receive the value of the common stock into which
the debentures would otherwise be convertible.
Conversion of the debentures will dilute the ownership interest of existing
stockholders, including holders who had previously converted their debentures.
The conversion of some or all of the debentures will dilute the
ownership interests of existing stockholders. Any sales in the public market of
the common stock issuable upon such conversion could adversely affect prevailing
market prices of our common stock. In addition, the existence of the debentures
may encourage short selling by market participants because the conversion of the
debentures could depress the price of our common stock.
Upon conversion of the debentures, we will pay a settlement amount consisting of
cash and, at our option, cash or shares of our common stock or a combination of
cash and shares of our common stock, if any, based upon a specified conversion
reference period and you may receive less proceeds than expected.
Generally, we will satisfy our conversion obligation to holders by
paying cash equal to the principal amount of a debenture and by delivering, at
our option, cash or shares of our common stock or a combination of cash and
shares of our common stock based on a daily conversion value calculated on a
proportionate basis for each day of the 20 trading-day conversion reference
period. Accordingly, upon conversion of a debenture, holders might not receive
any shares of our common stock, or they might receive fewer shares of common
stock relative to the conversion value of the debenture as of the conversion
date. In addition, because of the 20 trading-day conversion reference period,
settlement will be delayed until at least the 23rd trading day following the
related conversion date. See "Description of Debentures-Payment Upon
Conversion." Upon conversion of the debentures, you may receive less proceeds
than expected because the value of our common stock may decline (or not
appreciate as much as you may expect) between the conversion date and the day
the settlement amount of your debentures is determined.
There can be no assurance that we will have sufficient funds to satisfy
our conversion obligation. Further, the terms of existing and future financing
or other agreements relating to indebtedness, including senior debt may prohibit
us from satisfying our conversion obligation. Our failure to convert the
debentures into cash or a combination of cash and shares of our common stock
upon exercise of a holder's conversion right in accordance with the provisions
of the indenture would constitute a default under the indenture. In addition, a
default under the indenture could lead to a default under existing and future
agreements governing our indebtedness. If, due to a default, the repayment of
related indebtedness were to be accelerated after any applicable notice or grace
periods, we may not have sufficient funds to repay such indebtedness and the
debentures.
The adjustment to the conversion rate for debentures converted in connection
with a specified corporate transaction may not adequately compensate you for any
lost value of your debentures as a result of such transaction.
In the event that a specified corporate transaction that constitutes a
designated event occurs or is anticipated to occur or an event occurs or is
anticipated to occur that would have been a fundamental change but is deemed not
to be a fundamental change because at least 95% of the consideration (excluding
cash payments for fractional shares) in the transaction or transactions
constituting a fundamental change consists of shares of common stock that are,
or upon issuance will be, traded on a U.S. national securities exchange or
approved for trading on an established automated over-the-counter trading market
in the U.S., under certain circumstances, we will increase the conversion rate
by a number of additional shares of our common stock for debentures converted in
connection with such fundamental change. The increase in the conversion rate
will be determined based on the date on which the specified corporate
transaction becomes effective and the price paid per share of our common stock
in such transaction, as described below under "Description of Debentures--Make
Whole Premium." The adjustment to the conversion rate for debentures converted
in connection with a fundamental change may not adequately compensate you for
any lost value of your debentures as a result of such transaction. In addition,
in no event will the total number of shares of common stock issuable upon
conversion as a result of this adjustment exceed 37.0219 per $1,000 principal
amount of debentures, subject to proportional adjustments.
Our obligation to increase the conversion rate in connection with any
such fundamental change transaction could be considered a penalty, in which case
the enforceability thereof would be subject to general principles of
reasonableness of economic remedies.
-13-
If you hold debentures, you are not entitled to any rights with respect to our
common stock, but you are subject to all changes made with respect to our common
stock.
If you hold debentures, you are not entitled to any rights with respect
to our common stock (including, without limitation, voting rights and rights to
receive any dividends or other distributions on our common stock), but you are
subject to all changes affecting the common stock. You will only be entitled to
rights on the common stock if and when we deliver shares of common stock to you
in exchange for your debentures and in limited cases under the anti-dilution
adjustments of the debentures. For example, in the event that an amendment is
proposed to our certificate of incorporation or by-laws requiring stockholder
approval and the record date for determining the stockholders of record entitled
to vote on the amendment occurs prior to delivery of the common stock, you will
not be entitled to vote on the amendment, although you will nevertheless be
subject to any changes in the powers, preferences or special rights of our
common stock.
Holders of debentures should consider the U.S. federal income tax consequences
of owning the debentures.
The debentures will be characterized as indebtedness for U.S.
federal income tax purposes. Accordingly, you will be required to include, in
your income, interest with respect to the debentures.
The debentures will be characterized as contingent payment debt
instruments for U.S. federal income tax purposes, and will be subject to U.S.
federal income tax rules applicable to contingent payment debt instruments.
Under that characterization and treatment, holders will be required to include
amounts in income, as ordinary income, in advance of your receipt of the cash or
other property attributable to the debentures. The amount of interest income
required to be included by holders in income for each year will be in excess of
the stated interest that is paid on the debentures. Holders will recognize gain
or loss on the sale, exchange or conversion of a debenture in an amount equal to
the difference between the amount realized, including the fair market value of
any of our common stock received, and their adjusted tax basis in the debenture.
Any gain recognized by holders on the sale, exchange or conversion of a
debenture generally will be treated as ordinary interest income. A discussion of
the U.S. federal income tax consequences of ownership of the debentures is
contained in this offering memorandum under the heading "Certain United States
Federal Income Tax Considerations."
The IRS may challenge our ability to claim interest deductions with respect to
the debentures.
Section 279 of the Internal Revenue Code disallows the deduction
of interest paid or accrued on certain convertible debt instruments if the
convertible debt is used, directly or indirectly, to finance a corporate
acquisition and certain other conditions are met. Although we do not currently
anticipate using the proceeds of this offering to finance any specific
acquisition, our ability to consummate strategic acquisitions is a component of
our operating strategy, and there is a possibility that a portion of the
proceeds from the offering could be used to finance a strategic corporate
acquisition in the future. Although we do not believe that Section 279 would
apply to disallow our interest deduction with respect to the debentures even if
we were to consummate such a strategic acquisition, there is no assurance that
Section 279 would not apply. If we were not entitled to deduct interest on the
debentures, our after-tax operating results could be adversely affected.
We have various mechanisms in place to discourage takeover attempts, which may
reduce or eliminate our stockholder's ability to sell their shares for a premium
in a change of control transaction.
Various provisions of our restated certificate of incorporation
and bylaws and of Delaware corporate law may discourage, delay or prevent a
change in control or takeover attempt of our company by a third party which is
opposed to by our management and board of directors. Public stockholders who
might desire to participate in such a transaction may not have the opportunity
to do so. These anti-takeover provisions could substantially impede the ability
of public stockholders to benefit from a change of control or change in our
management and board of directors. These provisions include:
o authorizing the issuance of "blank check"
preferred stock that could be issued by our board
of directors to increase the number of outstanding
shares and thwart a takeover attempt;
o establishing a fixed size for our board of
directors;
o requiring that only the board of directors may
call special meetings of our stockholders;
o mandatory specific procedures for stockholders to
take any action by written consent; and
o establishing advance notice requirements for
nominations of candidates for election to our
board of directors or for proposing matters that
can be acted upon by our stockholders at
stockholder meetings.
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We also have a stockholder rights plan that provides for, among
other things, distributions to our stockholders upon an actual or prospective
change in control of our company. The plan has an anti-takeover effect because a
distribution under the plan may cause a substantial dilution to a person or a
group that attempts to acquire a substantial number of our shares of common
stock without the approval of our board of directors.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements contained in this prospectus or
incorporated by reference in this prospectus and other written and oral
statements made from time to time by us and our representatives, are not
statements of historical or current fact. As such, they are "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We
have based these forward-looking statements on our current expectations, which
are subject to known and unknown risks, uncertainties and assumptions.
They include statements relating to:
o future sales, expenses and profitability;
o the future development and expected growth of our
business and the IMD industry;
o our ability to execute our business model and our
business strategy;
o our ability to identify trends within the IMD,
medical component, and commercial power source
industries and to offer products and services that
meet the changing needs of those markets;
o projected capital expenditures; and
o trends in government regulation.
You can identify forward-looking statements by terminology such as "may,"
"will," "should," "could," "expects," "intends," "plans," "anticipates,"
"believes," "estimates," "predicts," "potential" or "continue" or the negative
of these terms or other comparable terminology. These statements are only
predictions. Actual events or results may differ materially from those suggested
by these forward-looking statements. In evaluating these statements and our
prospects generally, you should carefully consider the factors set forth below.
All forward-looking statements attributable to us or persons acting on our
behalf are expressly qualified in their entirety by these cautionary factors and
to others contained throughout this report. We are under no duty to update any
of the forward-looking statements after the date of this report or to conform
these statements to actual results.
Although it is not possible to create a comprehensive list of all factors that
may cause actual results to differ from the results expressed or implied by our
forward-looking statements or that may affect our future results, some of these
factors include the following: dependence upon a limited number of customers,
product obsolescence, inability to market current or future products, pricing
pressure from customers, reliance on third party suppliers for raw materials,
products and subcomponents, fluctuating operating results, inability to maintain
high quality standards for our products, challenges to our intellectual property
rights, product liability claims, inability to successfully consummate and
integrate acquisitions, unsuccessful expansion into new markets, competition,
inability to obtain licenses to key technology, regulatory changes or
consolidation in the healthcare industry, and other risks and uncertainties that
arise from time to time and are described in our periodic filings with the
Securities and Exchange Commission and under "Risk Factors" beginning on page 5
of this prospectus.
USE OF PROCEEDS
The selling stockholders will receive all of the proceeds from
the sale of the debentures and the common stock issuable upon conversion of the
debentures offered by this prospectus. We will not receive any proceeds.
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PRICE RANGE OF COMMON STOCK
Our common stock is listed on the New York Stock Exchange, or
NYSE, under the symbol "GB." Our common stock began trading on the NYSE on
September 29, 2000 following our initial public offering.
The table below shows, for the periods indicated, the high and
low reported sale prices per share of our common stock on the NYSE.
Common Stock Price
-----------------------------
High Low
---- ---
Fiscal 2004
First Quarter $45.15 $34.60
Second Quarter 37.42 23.10
Third Quarter 27.10 14.41
Fourth Quarter 22.94 15.30
Fiscal 2005
First Quarter $22.43 $15.76
Second Quarter 25.19 17.30
Third Quarter 27.45 21.96
Fourth Quarter 30.40 24.03
Fiscal 2006
First Quarter $28.02 $20.49
Second Quarter 24.92 19.10
Third Quarter 25.24 20.36
Fourth Quarter 27.78 21.40
As of April 23, 2007, there were approximately 242 holders of
record of our common stock.
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RATIO OF EARNINGS TO FIXED CHARGES
Our ratios of earnings to fixed charges for each of the periods
indicated are as follows:
Fiscal Year Ended
----------------------------------------------------------------------------------------------------
Dec. 29, Dec. 30, Dec. 31, Jan. 2, Jan. 3,
2006 2005 2004 2004 2003
----------------------------------------------------------------------------------------------------
5.5x 4.0x 5.9x 8.4x 6.2x
For purposes of determining the ratio of earnings to fixed
charges, earnings represent income from continuing operations plus fixed charges
and amortization of capitalized interest, less capitalized interest. Fixed
charges represent interest on indebtedness whether expensed or capitalized,
deferred financing fees amortization and estimated interest within rent expense.
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DESCRIPTION OF DEBENTURES
The debentures were issued under an indenture dated March 28,
2007, between Greatbatch, as issuer, and Manufacturers and Traders Trust
Company, as trustee. On April 2, 2007, the original indenture was supplemented
and amended by a supplemental indenture executed by us and the trustee. We refer
to the indenture, as modified by the supplemental indenture, as the indenture.
We issued the debentures to persons believed to be "qualified institutional
purchasers" under Rule 144A promulgated under the Securities Act, or "accredited
investors" under Regulation D promulgated pursuant to the Securities Act in
transactions exempt from the registration requirements of the Securities Act.
The debentures and the shares of common stock issuable upon conversion of the
debentures are also covered by a registration rights agreement. The original
indenture and the registration rights agreement were filed as exhibits to our
Form 8-K filed on March 29, 2007, and the supplemental indenture was filed as an
exhibit to our Form 8-K filed on April 4, 2007.
The following description is a summary of the material provisions
of the debentures, the indenture and the registration rights agreement. It does
not purport to be complete. This summary is subject to and is qualified by
reference to all the provisions of the indenture, including the definitions of
certain terms used in the indenture, and to all provisions of the registration
rights agreement. Wherever particular provisions or defined terms of the
indenture or form of debenture are referred to, these provisions or defined
terms are incorporated into this prospectus by reference. We urge you to read
the indenture because it, and not this description, defines the rights of a
holder of the debentures.
As used in this "Description of Debentures" section, references
to " Greatbatch," "we," "our" or "us" refer solely to Greatbatch and not to our
subsidiaries.
General
The debentures are general unsecured obligations of Greatbatch.
Our payment obligations under the debentures are subordinated to our senior
indebtedness and effectively subordinated to all debts and other liabilities of
our subsidiaries as described under "-Subordination of Debentures." The
debentures will be convertible into common stock as described under "-Conversion
of Debentures."
On March 28, 2007, holders of our 2 1/4% Convertible Subordinated
Debentures due 2013, issued under an indenture between us and Manufacturers and
Traders Trust Company dated May 28, 2003, which we refer to as the "2003
debentures", exchanged $50,000,000 aggregate principal amount of 2003 debentures
for an equivalent principal amount of the debentures and such holders and other
purchasers purchased an additional $80,000,000 aggregate principal amount of the
debentures in a private offering.
The indenture permits us to, from time to time after the execution of
the original indenture, execute and deliver to the trustee for authentication
additional debentures, and the trustee shall authenticate and deliver those
additional debentures, if each of the following conditions are met:
o the additional debentures and the debentures issued under the
original indenture are dated as part of the same issue of debt
instruments for the purposes of U.S. federal income taxes;
o the additional debentures have the same CUSIP number as the
debentures issued under the original indenture; and
o the trustee receives certain opinions and certificates from our
counsel and us, respectively, that the issuance of the
additional debentures comply with the terms of the indenture.
On April 2, 2007, holders of our 2003 debentures exchanged $67,782,000
aggregate principal amount of 2003 debentures for an equivalent principal amount
of additional debentures in a private offering, so that the aggregate principal
amounts of the debentures equals $197,782,000. We entered into the supplemental
indenture in connection with the issuance of the referenced additional
debentures.
The debentures have been issued only in denominations of $1,000 and
multiples of $1,000. The debentures will mature on June 15, 2013 unless earlier
converted, redeemed or repurchased.
The debentures are obligations of Greatbatch, which is a holding
company. Because we derive substantially all of our revenues from our operating
subsidiaries and do not have significant operations of our own, we are dependent
upon the ability of our subsidiaries to provide us with cash, in the form of
dividends or intercompany credits, loans or otherwise, to meet our obligations
under the debentures. Our subsidiaries will have no obligation to pay any
amounts due on the debentures or to make any funds available to us for payment
of the debentures upon maturity or upon a redemption or purchase of the
debentures as described below.
Holders of the debentures are not afforded protection under the
indenture in the event of a highly leveraged transaction or a change in control
of us, except to the extent described below under "-Redemption at Option of the
Holder Upon Fundamental Change."
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The debentures bear interest at a rate of 2 1/4% per annum.
Interest will be calculated on the basis of a 360-day year consisting of twelve
30-day months and will accrue from March 28, 2007, or from the most recent date
to which interest has been paid or duly provided for. We will pay contingent
interest under certain circumstances as described under "-Contingent Interest."
We will pay interest, including contingent interest, if any, on June 15 and
December 15 of each year, beginning June 15, 2007, to record holders at the
close of business on the preceding June 1 and December 1, as the case may be.
Interest payable upon redemption or repurchase, including contingent interest,
if any, will be paid to the person to whom principal is payable, unless the
redemption date or repurchase date is an interest payment date. Payment of cash
interest on the debentures will include interest accrued through the day before
the applicable interest payment date or redemption date, as the case may be,
except as described under "-Redemption at Option of the Holder Upon Fundamental
Change."
The debentures are debt instruments that are subject to the
contingent payment debt regulations. Therefore, the debentures were issued with
original issue discount for U.S. federal income tax purposes, which we refer to
as tax original issue discount. In general, beneficial owners of the debentures
will be required to accrue interest income on the debentures for U.S. federal
income tax purposes in the manner described herein, regardless of whether such
owners use the cash or accrual method of tax accounting. Beneficial owners will
be required, in general, to accrue interest each year, as tax original issue
discount, based on the rate at which we would issue a noncontingent,
nonconvertible fixed-rate debt instrument with terms and conditions otherwise
similar to the debentures, rather than at a lower rate based on the accruals on
the debentures for non-tax purposes (i.e., in excess of the stated semi-annual
interest payments and any contingent interest payments). Accordingly, owners of
debentures will be required to include interest in taxable income in each year
in excess of the accruals on the debentures for non-tax purposes. Furthermore,
upon a sale, exchange or conversion of a debenture, holders of the debentures
will recognize gain or loss equal to the difference between the amount realized
by the holder and a holder's adjusted tax basis in the debenture. The amount
realized by the holder will include, in the case of a conversion, the fair
market value of the stock received. Any gain on a sale, exchange or conversion
of a debenture will be treated as ordinary interest income. Holders of the
debentures are expected to consult their own tax advisors as to the United
States federal, state, local or other tax consequences of acquiring, owning and
disposing of the debentures.
We are maintaining an office in the Borough of Manhattan, The
City of New York, where we will pay the principal and premium, if any, on the
debentures and a holder of debentures may present the debentures for conversion,
registration of transfer or exchange for other denominations, which shall
initially be an office or agency of the trustee. We may pay interest by check
mailed to a holder's address as it appears in the debenture register, provided
that any holder with an aggregate principal amount in excess of $2.0 million
will be paid, at their written election, by wire transfer of immediately
available funds.
However, payments to The Depository Trust Company, New York, New
York, which we refer to as DTC, will be made by wire transfer of immediately
available funds to the account of DTC or its nominee.
Conversion of Debentures
Holders of debentures may convert any of their debentures, in
whole or in part, into shares of our common stock prior to the close of business
on the final maturity date of the debentures, subject to prior redemption or
repurchase of the debentures, only under the following circumstances:
o upon satisfaction of a market price condition;
o upon satisfaction of a trading price condition;
o upon notice of redemption;
o upon specified corporate transactions;
o upon a fundamental change; or
o within 60 days of final maturity date.
The number of shares of common stock to be received upon conversion of the
debentures will be determined by multiplying the number of $1,000 principal
amount debentures converted by an individual holder by the conversion rate on
the date of conversion. The initial conversion rate for the debentures is
28.8219 shares of common stock per $1,000 principal amount of debentures,
subject to adjustment as described below, which represents an initial conversion
price of approximately $34.70 per share. If we call debentures for redemption, a
holder may convert the debentures only until the close of business on the
business day prior to the redemption date unless we fail to pay the redemption
price. If a holder submitted their debentures for redemption upon a fundamental
change, such holder may convert their debentures only if such holder withdraws
their redemption election. Similarly, if a holder exercises their option to
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require us to redeem their debentures other than upon a fundamental change,
those debentures may be converted only if a holder withdraws their election to
exercise their option in accordance with the terms of the indenture. A holder
may convert their debentures in part so long as such part is $1,000 principal
amount or an integral multiple of $1,000. Upon conversion, a holder will not
receive any cash payment of interest, including contingent interest, if any,
unless such conversion occurs between a regular record date and the interest
payment date to which it relates. We will not issue fractional common shares
upon conversion of debentures. Instead, we will pay cash in lieu of fractional
shares based on the last reported sale price of the common stock on the trading
day prior to the conversion date. Our delivery to the holder of the full number
of shares of our common stock into which a debenture is convertible, together
with any cash payment for such holder's fractional shares, will be deemed to
satisfy our obligation to pay:
o the principal amount of the debenture; and
o accrued but unpaid interest, including contingent
interest, if any, and accrued tax original issue
discount, attributable to the period from the
most recent interest payment date to the
conversion date.
As a result, accrued but unpaid interest, including contingent interest, if any,
and accrued tax original issue discount to the conversion date is deemed to be
paid in full rather than cancelled, extinguished or forfeited. For a discussion
of the tax treatment upon receipt of our common stock upon conversion, see
"Certain United States Federal Income Tax Considerations."
Notwithstanding the preceding paragraph, if debentures are
converted after a record date but prior to the next interest payment date,
holders of such debentures at the close of business on the record date will
receive the interest, including contingent interest, if any, payable on such
debentures on the corresponding interest payment date notwithstanding the
conversion. Such debentures, upon surrender for conversion, must be accompanied
by funds equal to the amount of interest, including contingent interest, if any,
payable on the debentures so converted; provided that no such payment need be
made (1) if we have specified a redemption date that is after a record date and
prior to the next interest payment date, (2) if we have specified a redemption
date following a fundamental change that is during such period or (3) to the
extent of any overdue interest or overdue contingent interest, if any overdue
interest or overdue contingent exists at the time of conversion with respect to
such debenture.
Conversion Upon Satisfaction of Market Price Condition
A holder of debentures may surrender debentures for conversion
into our common stock prior to the close of business on the maturity date during
any fiscal quarter commencing after June 30, 2007 if the closing sale price of
our common stock exceeds 150% of the conversion price for at least 20 trading
days in the 30 consecutive trading days ending on the last trading day of the
preceding fiscal quarter and that the debentures are not convertible pursuant to
the satisfaction of a market price condition prior to July 1, 2007.
The "closing sale price" of our common stock on any date 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 closing bid and the average closing ask prices) on such
date as reported in composite transactions for the principal United States
securities exchange on which our common stock is traded or, if our common stock
is not listed on a United States national or regional securities exchange, as
reported by Nasdaq or by the National Quotation Bureau Incorporated. In the
absence of such a quotation, we will determine the closing sale price on the
basis we consider appropriate. The "closing sale price" will be determined
without reference to extended or after hours trading. The "conversion price" as
of any day will equal $1,000 divided by the number of shares of common stock
issuable upon conversion of $1,000 principal amount of debentures.
Conversion Upon Satisfaction of Trading Price Condition
A holder of debentures may surrender debentures for conversion
into our common stock prior to maturity during the five business days
immediately following any five consecutive trading day period in which the
trading price per $1,000 principal amount of debentures (as determined following
a request by a holder of the debentures in accordance with the procedures
described below) for each day of such period was less than 98% of the product of
the closing sale price of our common stock and the number of shares issuable
upon conversion of $1,000 principal amount of the debentures (the "98% Trading
Exception").
The "trading price" of the debentures on any date of
determination means the average of the secondary market bid quotations per
$1,000 principal amount of debentures obtained by the trustee for $10,000,000
principal amount of the debentures at approximately 3:30 p.m., New York City
time, on such determination date from three independent nationally recognized
securities dealers we select, provided that if three such bids cannot reasonably
be obtained by the trustee, but two such bids are obtained, then the average of
the two bids shall be used, and if only one such bid can reasonably be obtained
by the trustee, this one bid shall be used. If the trustee cannot reasonably
obtain at least one bid for $10,000,000 principal amount of the debentures from
a nationally recognized securities dealer, then the trading price per $1,000
principal amount of the debentures will be deemed to be less than 98% of the
product of the "closing sale price" of our common stock on such determination
date and the number of shares issuable upon conversion of $1,000 principal
amount of the debentures.
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The trustee does not have an obligation to determine the trading
price of the debentures unless we have requested such determination; and we do
not have any obligation to make such request unless a holder of debentures
provides us with reasonable evidence that the trading price per $1,000 principal
amount of the debentures would be less than 98% of the product of the closing
sale price of our common stock and the number of shares issuable upon conversion
of $1,000 principal amount of the debentures; at which time, we shall instruct
the trustee to determine the trading price of the debentures beginning on the
next trading day and on each successive trading day until the trading price is
greater than or equal to 98% of the product of the closing sale price of our
common stock and the number of shares issuable upon conversion of $1,000
principal amount of the debentures.
Conversion Upon Notice of Redemption
If we call debentures for redemption, a holder of debentures may
convert the debentures until the close of business on the business day
immediately preceding the redemption date, after which time such holder's right
to convert will expire unless we default in the payment of the redemption price.
Conversion Upon Specified Corporate Transactions
If we elect to:
o distribute to all holders of our common stock
certain rights or warrants; or
o distribute to all holders of our common stock,
assets, debt securities or rights to purchase our
securities, which distribution has a per share
value exceeding 5% of the closing sale price of
our common stock on the day preceding the
declaration date for such distribution;
we must notify the holders of our debentures at least 20 days prior to the
ex-dividend date for such distribution. Once we have given such notice, the
holders of our debentures may surrender debentures for conversion at any time
until the earlier of the close of business on the business day prior to the
ex-dividend date or any announcement by us that such distribution will not take
place. No adjustment to the conversion price or a holders' ability to convert
will be made if a holder of debentures will otherwise participate in the
distribution without conversion.
In addition, if we are a party to a consolidation, merger,
binding share exchange or sale of all or substantially all of our assets, in
each case pursuant to which our common stock would be converted into cash,
securities or other property, a holder of debentures may surrender debentures
for conversion at any time from and after the date which is 15 days prior to the
anticipated effective date of the transaction until and including the date which
is 15 days after the actual date of such transaction. If we are a party to a
consolidation, merger, binding share exchange or sale of all or substantially
all of our assets, in each case pursuant to which our common stock is converted
into cash, securities, or other property, then at the effective time of the
transaction, a holder's right to convert a debenture into our common stock will
be changed into a right to convert it into the kind and amount of cash,
securities and other property which such holder would have received if such
holder had converted debentures immediately prior to the transaction. If the
transaction also constitutes a fundamental change, a holder of debentures can
require us to redeem all or a portion of their debentures as described under
"Redemption At Option of the Holder Upon Fundamental Change."
Conversion Upon a Fundamental Change
If any fundamental change occurs (as defined under "-Redemption at
Option of the Holder Upon Fundamental Change"), a holder of debentures may
surrender debentures for conversion into our common stock.
Conversion Within 60 Days of Final Maturity Date
A holder of debentures may surrender debentures for conversion into our
common stock at any time during the period beginning 60 days prior to, but
excluding, June 13, 2013.
Conversion Procedures
To convert debentures into common stock a holder of debentures
must do the following:
o complete and manually sign the conversion notice
on the back of the debenture or facsimile of the
conversion notice and deliver this notice to the
conversion agent;
o surrender the debenture to the conversion agent;
o if required, furnish appropriate endorsements and
transfer documents;
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o if required, pay all transfer or similar taxes;
and
o if required, pay funds equal to interest payable
on the next interest payment date.
The date that each individual holder of debentures complies with these
requirements is the conversion date under the indenture. If an interest is a
beneficial interest in a global debenture, to convert, a holder must comply with
the last three requirements listed above and comply with the depositary's
procedures for converting a beneficial interest in a global debenture.
We will adjust the conversion rate if any of the following events occurs:
o we issue common stock as a dividend or
distribution on our common stock;
o we issue to all holders of common stock certain
rights or warrants to purchase our common stock;
o we subdivide or combine our common stock;
o we distribute to all holders of our common stock,
shares of our capital stock, evidences of
indebtedness or assets, including securities but
excluding: rights or warrants specified above;
dividends or distributions specified above; and
cash distributions;
o If we distribute capital stock of, or similar
equity interests in, a subsidiary or other
business unit of ours, then 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 sales prices of those
securities (where such closing prices are
available) for the 10 trading days commencing on
and including the fifth trading day after the
date on which "ex-dividend trading" commences for
such distribution on the Nasdaq National Market
or such other national or regional exchange or
market on which the securities are then listed or
quoted;
o we distribute cash, excluding any dividend or
distribution in connection with our liquidation,
dissolution or winding up or any quarterly cash
dividend on our common stock to the extent that
the aggregate cash dividend per share of common
stock in any quarter does not exceed the greater
of: the amount per share of common stock of the
next preceding quarterly cash dividend on the
common stock to the extent that the preceding
quarterly dividend did not require an adjustment
of the conversion rate pursuant to this clause,
as adjusted to reflect subdivisions or
combinations of the common stock; and 1.25% of
the average of the last reported sale price of
the common stock during the ten trading days
immediately prior to the declaration date of the
dividend, calculated at the time of each
distribution.
If an adjustment is required to be made under this clause as a result of a
distribution that is a quarterly dividend, the adjustment would be based upon
the amount by which the distribution exceeds the amount of the quarterly cash
dividend permitted to be excluded pursuant to this clause. If an adjustment is
required to be made under this clause as a result of a distribution that is not
a quarterly dividend, the adjustment would be based upon the full amount of the
distribution;
o we or one of our subsidiaries makes a payment in
respect of a tender offer or exchange offer for
our common stock to the extent that the cash and
value of any other consideration included in the
payment per share of common stock exceeds the
closing sale price per share of common stock on
the trading day next succeeding the last date on
which tenders or exchanges may be made pursuant
to such tender or exchange offer; and
o someone other than us or one of our subsidiaries
makes a payment in respect of a tender offer or
exchange offer in which, as of the closing date
of the offer, our board of directors is not
recommending rejection of the offer. The
adjustment referred to in this clause will only
be made if:
o the tender offer or exchange offer is for an
amount that increases the offeror's ownership of
common stock to more than 25% of the total shares
of common stock outstanding; and
o the cash and value of any other consideration
included in the payment per share of common stock
exceeds the closing sale price per share of
common stock on the business day next succeeding
the last date on which tenders or exchanges may
be made pursuant to the tender or exchange offer.
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o However, the adjustment referred to in this
clause will generally not be made if as of the
closing of the offer, the offering documents
disclose a plan or an intention to cause us to
engage in a consolidation or merger or a sale of
all or substantially all of our assets.
If the rights provided for in our stockholder rights agreement
dated March 18, 2002 or in any future rights plan adopted by us have separated
from our common stock in accordance with the provisions of the applicable
stockholder rights agreement so that the holders of the debentures would not be
entitled to receive any rights in respect of the common stock issuable upon
conversion of the debentures, the conversion rate will be adjusted as if we
distributed to all holders of our common stock, evidences of indebtedness or
assets as described under the fourth bullet point above, subject to readjustment
in the event of the expiration, termination or redemption of the rights. In lieu
of any such adjustment, we may amend such applicable stockholder rights
agreement to provide that upon conversion of the debentures the holders will
receive, in addition to the common stock issuable upon such conversion, the
rights which would have attached to such shares of common stock if the rights
had not become separated from the common stock under such applicable stockholder
rights agreement. See "Description of Capital Stock Preferred Stock Stockholder
Rights Plan."
In the event of:
o any reclassification of our common stock;
o a consolidation, merger or combination involving
us; or
o a sale or conveyance to another person or entity
of all or substantially all of our property and
assets;
in which holders of our common stock would be entitled to receive stock, other
securities, other property, assets or cash for their common stock, upon
conversion of their debentures, a holder of debentures will be entitled to
receive the same type of consideration which such holder would have been
entitled to receive if such holder had converted the debentures into our common
stock immediately prior to any of these events.
A holder of debentures may in certain situations be deemed to
have received a distribution subject to U.S. federal income tax as a dividend in
the event of any taxable distribution to holders of common stock or in certain
other situations requiring a conversion rate adjustment. See "Certain United
States Federal Tax Considerations."
We may, from time to time, increase the conversion rate if our
board of directors has made a determination that this increase would be in our
best interests. Any such determination by our board will be conclusive. In
addition, we may increase the conversion rate if our board of directors deems it
advisable to avoid or diminish any income tax to holders of common stock
resulting from any stock or rights distribution. See "Certain United States
Federal Tax Considerations."
We will not be required to make an adjustment in the conversion
rate unless the adjustment would require a change of at least 1% in the
conversion rate. However, we will carry forward any adjustments that are less
than 1% of the conversion rate. Except as described above in this section, we
will not adjust the conversion rate for any issuance of our common stock or
convertible or exchangeable securities or rights to purchase our common stock or
convertible or exchangeable securities.
Make Whole Premium
If you elect to convert your debentures upon the occurrence of a
fundamental change (as defined under "-Redemption at Option of the Holder Upon
Fundamental Change"), in certain circumstances described below, the conversion
rate will be increased by an additional number of shares of our common stock, or
the additional shares, as described below.
The number of additional shares by which the conversion rate will be
increased will be determined by reference to the table below, based on the date
on which the fundamental change occurs or becomes effective, or the effective
date, and the price paid per share of our common stock in the corporate
transaction. If the holders of our common stock receive only cash in the
corporate transaction, the stock price shall be the cash amount paid per share
of our common stock in connection with the corporate transaction. Otherwise, the
stock price shall be the volume weighted average price of our common stock over
the ten trading-day period ending on the trading day preceding the effective
date of the fundamental change.
The stock prices set forth in the first row of the table below (i.e.,
column headings) will be adjusted as of any date on which the conversion rate of
the debentures is otherwise adjusted. The adjusted stock prices will equal the
stock prices applicable immediately prior to such adjustment, multiplied by a
fraction, the numerator of which is the conversion rate immediately prior to the
adjustment giving rise to the closing sale price adjustment and the denominator
of which is the conversion rate as so adjusted. The number of additional shares
will be adjusted in the same manner as the conversion rate as set forth above.
-24-
The following table sets forth the hypothetical stock price and the
number of additional shares to be received per $1,000 principal amount of
debentures:
Share Price
Effective Date $26.98 $30.00 $35.00 $40.00 $45.00 $50.00 $55.00 $60.00 $70.00 $80.00 $90.00
-------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
March 28, 2007 8.2 6.7 4.9 3.7 2.9 2.3 1.9 1.5 1.1 0.8 0.5
June 15, 2007 8.2 6.7 4.9 3.7 2.8 2.2 1.8 1.5 1.0 0.7 0.5
June 15, 2008 8.2 6.6 4.6 3.4 2.6 2.0 1.6 1.3 0.9 0.6 0.4
June 15, 2009 7.7 6.0 4.1 2.9 2.1 1.6 1.3 1.0 0.6 0.4 0.3
June 15, 2010 7.4 5.5 3.6 2.4 1.6 1.2 0.9 0.7 0.4 0.3 0.2
June 15, 2011 7.0 4.8 2.7 1.6 1.0 0.6 0.4 0.3 0.2 0.1 0.1
June 15, 2012 6.3 3.3 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
June 15, 2013 6.3 3.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
In the event that the exact stock price and effective dates may not be
set forth on the table above, in which case:
o if the stock price on the effective date is between two stock
prices on the table or the actual effective date is between
two effective dates on the table, the adjustment to the
conversion rate will be determined by straight-line
interpolation between the make whole premium amounts set
forth for the higher and lower stock prices and the two
effective dates, as applicable, based on a 365-day year;
o if the stock price on the effective date equals or exceeds
$90.00 per share (subject to adjustment), no adjustment of
the conversion rate will be made; and
o if the stock price on the effective date is less than $26.98
per share (subject to adjustment), no adjustment of the
conversion rate will be made.
Notwithstanding anything discussed above, in no event will the total
number of shares of our common stock issuable upon conversion of the debentures
exceed 37.0219 per $1,000 principal amount of debentures, other than on account
of proportional adjustments to the conversion rate as discussed above.
Our obligation to pay the make whole premium could be considered a
penalty, in which case the enforceability thereof would be subject to general
principles of reasonableness of economic remedies.
Payment Upon Conversion
In lieu of delivery of some or all of the shares of our common stock
otherwise issuable upon conversion of the debentures, at our option the holders
shall receive for each $1,000 principal amount of debentures being surrendered
for conversion (a) cash in an amount equal to the lesser of (1) $1,000 and (2)
the conversion value (as defined below); and, in addition to amounts distributed
pursuant to (a), (b) if the conversion value is greater than $1,000, a number of
shares of our common stock equal to the sum of the daily share amounts (as
defined below) for each of the 20 trading days during the conversion reference
period (as defined below, subject to our right to deliver cash in lieu of all or
a portion of those shares as discussed below).
In the event that we elect to pay cash in lieu of all or a portion of
the common stock offered issuable pursuant to the preceding paragraph, then on
any day prior to the first trading day of the applicable conversion reference
period, we may specify a percentage of the daily share amount that will be
settled in cash, or the cash percentage, and the amount of cash that we will
deliver in respect of each trading day in the applicable conversion reference
period will equal the product of: (1) the cash percentage, (2) the daily share
amount for such trading day and (3) the closing price of the common stock for
such trading day (provided that after the consummation of a fundamental change
in which the consideration is comprised entirely of cash, the amount used in
this clause (3) will be the cash price per share received by holders of our
common stock in such fundamental change). The number of shares deliverable in
respect of each trading day in the applicable conversion reference period will
be a percentage of the daily share amount equal to 100% minus the cash
percentage. If we do not specify a cash percentage by the start of the
applicable conversion reference period, we must settle 100% of the daily share
amount for each trading day in the applicable conversion reference period with
shares of our common stock; provided, however, that we will pay cash in lieu of
fractional shares otherwise issuable upon conversion of the debentures.
"Daily share amount," means, for each of the 20 trading days during
the conversion reference period (as defined below), a number of shares (but in
no event less than zero) equal to (i) the amount of (a) the volume weighted
average price (as defined below) for such trading day multiplied by the
applicable conversion rate (as defined below), less (b) $1,000; divided by (ii)
the volume weighted average price (as defined below) for such trading day
multiplied by 20.
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"Conversion rate" per $1,000 principal amount of debentures as of any
day means the result obtained by diving (i) $1,000 by (ii) the then applicable
conversion price.
"Conversion value" means for each $1,000 principal amount of
debentures, the average of the product of (1) the applicable conversion rate and
(2) the average of the daily volume weighted average prices of our common stock
for the 20 consecutive trading days during the conversion reference period (as
defined below).
"Conversion reference period" with respect to debentures converted
during the 60 days prior to but excluding, any change in control payment date or
the maturity date of the debentures, the 20 consecutive trading days beginning
on the third trading day following the relevant change in control payment date
or maturity date and in all other instances, the twenty consecutive trading days
beginning on the third trading day following the date of the conversion.
"Trading price" of the debentures means the average of the secondary
bid quotations per $1,000 principal amount of debentures obtained for $10,000,
principal amounts of debentures at a specified time.
"Volume weighted average price" per share of our common stock on any
trading day means such price as displayed on Bloomberg (or any successor
service) page "GB EQUITY VAP" in respect of the period from 9:30 a.m. to 4:00
p.m., New York City time, on such trading day; or, if such price is not
available, the volume weighted average price means the market value per share of
common stock on such day as determined by a nationally recognized independent
investment banking firm retained by us for this purpose.
At any time prior to June 15, 2013, we may make an irrevocable physical
settlement election to provide, upon conversion of outstanding debentures, in
lieu of providing cash and shares as described in this section "-Payment Upon
Conversion", shares of our common stock equal to the conversion rate for each
$1,000 principal amount of debentures converted and the amount of any cash in
lieu of fractional shares. You will be informed if we make an irrevocable
physical settlement election. We may irrevocably waive our right to make an
irrevocable physical settlement election at any time, so long as we have not
previously made an irrevocable physical settlement election.
Contingent Interest
Beginning with the six-month interest period commencing June 15,
2012, we will pay contingent interest to the holders of debentures if the
trading price of the debentures, as defined above, for each of the five trading
days immediately preceding the first day of the applicable six-month period
equals 120% or more of the principal amount of the debentures.
During any period when contingent interest shall be payable, the
contingent interest payable per $1,000 principal amount of debentures will equal
0.25% of the average trading price of $1,000 principal amount of debentures
during the five trading days immediately preceding the first day of the
applicable six-month interest period.
We will notify the holders upon determination that they will be
entitled to receive contingent interest during a six-month interest period.
Optional Redemption by Greatbatch
Beginning June 20, 2012, we may redeem the debentures in whole or
in part at a redemption price equal to 100% of the principal amount of
debentures being redeemed and accrued and unpaid interest, including contingent
interest, if any, to, but excluding, the redemption date. If the redemption date
is an interest payment date, interest, including contingent interest, if any,
shall be paid on such interest payment date to the record holder on the relevant
record date. We are required to give notice of redemption by mail to holders not
more than 60 but not less than 30 days prior to the redemption date.
If less than all of the outstanding debentures are to be
redeemed, the trustee will select the debentures to be redeemed in principal
amounts of $1,000 or multiples of $1,000 by lot, pro rata or by another method
the trustee considers fair and appropriate. If a portion of a holder's
debentures is selected for partial redemption and such holder converts a portion
of their debentures, the converted portion will be deemed to be of the portion
selected for redemption.
We may not redeem the debentures if we have failed to pay any
interest on the debentures and such failure to pay is continuing. We will notify
the holders if we redeem the debentures.
Redemption at Option of the Holder Upon Fundamental Change
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If a fundamental change of Greatbatch occurs at any time prior to
the maturity of the debentures, holders of our debentures may require us to
redeem their debentures, in whole or in part, on a redemption date that is 30
days after the date of our notice of the fundamental change. The debentures will
be redeemable in integral multiples of $1,000 principal amount.
We will redeem the debentures at a price equal to 100% of the
principal amount to be redeemed, plus accrued and unpaid interest, including
contingent interest, if any, to, but excluding, the redemption date, unless the
redemption date falls after a record date and on or prior the corresponding
interest payment date, in which case we will pay the full amount of accrued and
unpaid interest payment, including contingent interest, if any, on such interest
payment date to the holder of record at the close of business on the
corresponding record date.
We will mail to all record holders a notice of a fundamental
change within 10 days after it has occurred. We are also required to deliver to
the trustee a copy of the fundamental change notice. If a debenture holder
elects to redeem debentures, such holder must deliver to us or our designated
agent, on or before the redemption date specified in our fundamental change
notice, a redemption notice and any debentures to be redeemed, duly endorsed for
transfer. We will promptly pay the redemption price for debentures surrendered
for redemption following the redemption date.
A fundamental change will be deemed to have occurred if any of the
following occurs after March 5, 2007:
o any "person" (as defined below) or "group" (as defined below)
is or becomes the "beneficial owner" (as defined below),
directly or indirectly, of shares of our voting stock (as
defined below) representing 50% or more of the total voting
power of all our outstanding voting stock normally entitled
to vote in the election of our directors or has the power,
directly or indirectly, to elect a majority of the members of
our board of directors;
o we consolidate with, or merge with or into, another person or
we sell, assign, convey, transfer, lease or otherwise dispose
of all or substantially all of our assets, or any person
consolidates with, or merges with or into, us, in any such
event other than pursuant to a transaction in which the
persons that "beneficially owned" (as defined below),
directly or indirectly, the shares of our voting stock
immediately prior to such transaction "beneficially own" (as
defined below), directly or indirectly, shares of our voting
stock representing at least a majority of the total voting
power of all outstanding voting stock of the surviving or
transferee person; or
o the holders of our capital stock approve any plan or proposal
for the liquidation or dissolution of us (whether or not
otherwise in compliance with the indenture); or
o shares of our common stock are neither listed for trading on
a U.S. national securities exchange nor approved for trading
on an established automated over-the-counter trading market
in the U.S.; or
o any time the "continuing directors" do not constitute a
majority of our board of directors. The indenture defines a
continuing director on any date of determination as any
individual who on March 28, 2007 was a member of our board of
directors, together with any directors whose election, or,
solely to fill the vacancy of a continuing director,
appointment by our board of directors or whose nomination for
election by our stockholders is duly approved by the vote of
a majority of our directors on the board of directors (or
such lesser number comprising a majority of a nominating
committee if authority for such nominations or elections has
been delegated to a nominating committee whose authority and
composition have been approved by at least a majority of the
directors who were continuing directors at the time such
committee was formed) then still in office who were either
directors on March 28, 2007 or whose election, appointment
(in the case of a vacancy of a continuing director), or
nomination for election was previously approved by a majority
of the continuing directors, either by specific vote or by
approval of the proxy statement issued by us in which such
individual is named as a nominee for director).
However, a change in control will not be deemed to have occurred if in
the case of a merger or consolidation, at least 95% of the consideration
(excluding cash payments for fractional shares and cash payments pursuant to
dissenters' appraisal rights) in the merger or consolidation constituting the
change in control consists of common stock traded on a U.S. national securities
exchange or approved for trading on an established automated over-the-counter
trading market in the U.S. (or which will be so traded or quoted when issued or
exchanged in connection with such change in control) and as a result of such
transaction or transactions the debentures become convertible solely into such
common stock.
For purposes of this change in control definition:
o "person" and "group" have the meanings given to them for
purposes of Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934 as amended (the "Exchange Act") or any
successor provisions, and the term "group" includes any group
acting for the purpose of acquiring, holding or disposing of
securities within the meaning of Rule 13d-5(b)(1) under the
Exchange Act, or any successor provision;
-27-
o a "beneficial owner" will be determined in accordance with
Rule 13d-3 under the Exchange Act, as in effect on the date
of the indenture, except that the number of shares of our
voting stock will be deemed to include, in addition to all
outstanding shares of our voting stock and unissued shares
deemed to be held by the "person" or "group" or other person
with respect to which the change in control determination is
being made, all unissued shares deemed to be held by all
other persons;
o "beneficially own" and "beneficially owned" have meanings
correlative to that of beneficial owner;
o "unissued shares" means shares of voting stock not
outstanding that are subject to options, warrants, rights to
purchase or conversion privileges exercisable within 60 days
of the date of determination of a change in control; and
o "voting stock" means any class or classes of capital stock or
other interests then outstanding and normally entitled
(without regard to the occurrence of any contingency) to vote
in the election of the directors, managers or trustees.
The term "all or substantially all" as used in the definition of change
in control will likely be interpreted under applicable state law and will be
dependent upon particular facts and circumstances. There may be a degree of
uncertainty in interpreting this phrase. As a result, we cannot assure you how a
court would interpret this phrase under applicable law if you elect to exercise
your rights following the occurrence of a transaction which you believe
constitutes a transfer of "all or substantially all" of our assets.
We will comply with any applicable provisions of Rule 13e-4 and
any other tender offer rules under the Exchange Act, as amended, in the event of
a fundamental change.
These fundamental change redemption rights could discourage a
potential acquirer of Greatbatch. However, this fundamental change redemption
feature is not the result of management's knowledge of any specific effort to
obtain control of us by means of a merger, tender offer or solicitation, or part
of a plan by management to adopt a series of anti-takeover provisions. The term
"fundamental change" is limited to specified transactions and may not include
other events that might adversely affect our financial condition or business
operations. Our obligation to offer to redeem the debentures upon a fundamental
change would not necessarily afford a holder of our debentures protection in the
event of a highly leveraged transaction, reorganization, merger or similar
transaction involving us.
We may be unable to redeem the debentures in the event of a
fundamental change. If a fundamental change were to occur, we may not have
enough funds to pay the redemption price for all tendered debentures. Any future
credit agreements or other agreements relating to our indebtedness may contain
provisions prohibiting redemption of the debentures under certain circumstances,
or expressly prohibit our redemption of the debentures upon a fundamental change
or may provide that a fundamental change constitutes an event of default under
that agreement. If a fundamental change occurs at a time when we are prohibited
from purchasing or redeeming debentures, we could seek the consent of our
lenders to redeem the debentures or attempt to refinance this debt. If we do not
obtain consent, we would not be permitted to purchase or redeem the debentures.
Our failure to redeem tendered debentures would constitute an event of default
under the indenture, which might constitute a default under the terms of our
other indebtedness. If a fundamental change would constitute an event of default
under our senior indebtedness, the subordination provisions of the indenture
would restrict payments to the holders of debentures.
Subordination of Debentures
Payment on the debentures will, to the extent provided in the
indenture, be subordinated in right of payment to the prior payment in full of
all of our senior indebtedness. The debentures also are effectively subordinated
to all debt and other liabilities, including trade payables and lease
obligations, if any, of our subsidiaries. In addition, the debentures rank pari
passu with our 2003 debentures of which $52,218,000 aggregate principal amount
are outstanding. Holders of the 2003 debentures may require us to repurchase
their 2003 debentures on June 15, 2010, at a purchase price equal to 100% of
their principal amount plus accrued and unpaid interest, including contingent
interest, if any.
Upon any distribution of our assets upon any dissolution, winding
up, liquidation or reorganization, the payment of the principal of, or premium,
if any, interest, including contingent interest, if any, and liquidated damages,
if any, on the debentures will be subordinated in right of payment to the prior
payment in full in cash or other payment satisfactory to the holders of senior
indebtedness of all senior indebtedness. In the event of any acceleration of the
debentures because of an event of default, the holders of any outstanding senior
indebtedness would be entitled to payment in full in cash or other payment
satisfactory to the holders of senior indebtedness of all senior indebtedness
obligations before the holders of the debentures are entitled to receive any
payment or distribution. We are required under the indenture to promptly notify
holders of senior indebtedness, if payment of the debentures is accelerated
because of an event of default.
We may not make any payment on the debentures if:
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o a default in the payment of designated senior
indebtedness occurs and is continuing beyond any
applicable period of grace (called a "payment
default"); or
o a default other than a payment default on any
designated senior indebtedness occurs and is
continuing that permits holders of designated
senior indebtedness to accelerate its maturity, or
in the case of a lease, a default occurs and is
continuing that permits the lessor to either
terminate the lease or require us to make an
irrevocable offer to terminate the lease following
an event of default under the lease, and the
trustee receives a notice of such default (called
"payment blockage notice") from us or any other
person permitted to give such notice under the
indenture (called a "non-payment default").
We may resume payments and distributions on the debentures:
o in case of a payment default, upon the date on which
such default is cured or waived or ceases to exist;
and
o in case of a non-payment default, the earlier of the
date on which such nonpayment default is cured or
waived or ceases to exist or 179 days after the date
on which the payment blockage notice is received, if
the maturity of the designated senior indebtedness
has not been accelerated, or in the case of any
lease, 179 days after notice is received if we have
not received notice that the lessor under such lease
has exercised its right to terminate the lease or
require us to make an irrevocable offer to terminate
the lease following an event of default under the
lease.
No new period of payment blockage may be commenced pursuant to a
payment blockage notice unless 365 days have elapsed since the initial
effectiveness of the immediately prior payment blockage notice. No non-payment
default that existed or was continuing on the date of delivery of any payment
blockage notice shall be the basis for any later payment blockage notice.
If the trustee or any holder of the debentures receives any
payment or distribution of our assets in contravention of the subordination
provisions on the debentures before all senior indebtedness is paid in full in
cash or other payment satisfactory to holders of senior indebtedness, then such
payment or distribution will be held in trust for the benefit of holders of
senior indebtedness or their representatives to the extent necessary to make
payment in full cash or payment satisfactory to the holders of senior
indebtedness of all unpaid senior indebtedness.
Because of the subordination provisions discussed above, in the
event of our bankruptcy, dissolution or reorganization, holders of senior
indebtedness may receive more, ratably, and holders of the debentures may
receive less, ratably, than our other creditors. This subordination will not
prevent the occurrence of any event of default under the indenture.
The debentures are exclusively obligations of us. A substantial
portion of our operations are conducted through our subsidiaries. As a result,
our cash flow and our ability to service our debt, including the debentures, is
dependent upon the earnings of our subsidiaries. In addition, we are dependent
on the distribution of earnings, loans or other payments from our subsidiaries.
In addition, any payment of dividends, distributions, loans or advances by our
subsidiaries to us could be subject to statutory or contractual restrictions.
Payments to us by our subsidiaries will also be contingent upon our
subsidiaries' earnings and business considerations.
Our right to receive any assets of any of our subsidiaries upon their
liquidation or reorganization, and therefore the right of the holders to
participate in those assets, will be effectively subordinated to the claims of
that subsidiary's creditors, including trade creditors. In addition, even if we
were a creditor to any of our subsidiaries, our rights as a creditor would be
subordinate to any security interest in the assets of our subsidiaries and any
indebtedness of our subsidiaries senior to that held by us.
The term "senior indebtedness" is defined in the indenture and
includes principal, premium, interest, rent, fees, costs, expenses and other
amounts accrued or due on our existing or future indebtedness, as defined below,
or any existing or future indebtedness guaranteed or in effect guaranteed by us,
subject to certain exceptions. The term does not include:
o any indebtedness that by its express terms is not
senior to the debentures or is pari passu or
junior to the debentures; or
o any indebtedness we owe to any of our
majority-owned subsidiaries; or
o the debentures.
The term "indebtedness" is also defined in the indenture and
includes, in general terms, our liabilities in respect of borrowed money, notes,
bonds, debentures, letters of credit, bank guarantees, bankers' acceptances,
capital and certain other leases, interest rate and foreign currency derivative
contracts or similar arrangements, guarantees and certain other obligations
described in the indenture, subject to certain exceptions. The term does not
include, for example, any account payable or other accrued current liability or
obligation incurred in the ordinary course of business in connection with the
obtaining of materials or services.
-29-
The term "designated senior indebtedness" is defined in the
indenture and includes, in general terms, our senior credit facility (or any
such future senior credit facility) and any other senior indebtedness that by
its terms expressly provides that it is "designated senior indebtedness" for
purposes of the indenture. We have entered into a commitment letter and term
sheet with Manufacturers and Traders Trust Company, as administrative agent,
providing for a replacement senior secured facility to Greatbatch, Ltd., our
wholly owned subsidiary, in the original principal amount of $235,000,000 (which
may be increased at our option to $335,000,000).
As of April 23, 2007, after giving effect to the issuance of the
debentures and the application of the proceeds therefrom, we had $250 million of
indebtedness outstanding and our subsidiaries had no significant indebtedness.
Neither we nor our subsidiaries are prohibited from incurring debt, including
senior indebtedness, under the indenture. We may from time to time incur
additional debt, including senior indebtedness. Our subsidiaries may also from
time to time incur additional debt and liabilities.
We are obligated to pay reasonable compensation to the trustee
and to indemnify the trustee against certain losses, liabilities or expenses
incurred by the trustee in connection with its duties relating to the
debentures. The trustee's claims for these payments will generally be senior to
those of debenture holders in respect of all funds collected or held by the
trustee.
Merger and Sale of Assets by Greatbatch
The indenture provides that we may not consolidate with or merge
with or into any other person or sell, convey, transfer or lease its properties
and assets substantially as an entirety to another person, unless among other
items:
o we are the surviving person, or the resulting,
surviving or transferee person, if other than us
is organized and existing under the laws of the
United States, any state thereof or the District
of Columbia;
o the successor person assumes all of our
obligations under the debentures and the
indenture;
o after giving effect to such transaction, there is
no event of default, and no event which, after
notice or passage of time or both, would become
an event of default; and
o we have delivered to the trustee an officers'
certificate and an opinion of counsel each
stating that such consolidation, merger, sale,
conveyance, transfer or lease complies with these
requirements.
When such a person assumes our obligations in such circumstances,
subject to certain exceptions, we shall be discharged from all obligations under
the debentures and the indenture.
Events of Default; Notice and Waiver
The following will be events of default under the indenture:
o we fail to pay principal or premium, if any, when
due upon redemption, repurchase or otherwise on
the debentures, whether or not the payment is
prohibited by subordination provisions;
o we fail to pay any interest, including contingent
interest, if any, and liquidated damages, if any,
on the debentures, when due and such failure
continues for a period of 30 days, whether or not
the payment is prohibited by subordination
provisions of the indenture;
o we fail to provide notice of the occurrence of a
fundamental change on a timely basis;
o we fail to deliver all cash and any shares of
common stock, if any, required to be delivered
upon conversion of a debenture;
o we fail to perform or observe any of the
covenants in the indenture for 60 days after
written notice; provided that we will have up to
120 days after receipt of a written notice to
remedy, or receive a waiver for, our failure to
file annual or quarterly reports in accordance
with the Indenture or to comply with Section
314(a)(1) of the Trust Indenture Act, so long as
we elect to pay the holders an extension fee
within 60 days of the date of notice of such
failure; or
o certain events involving our bankruptcy,
insolvency or reorganization.
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The trustee may withhold notice to the holders of the debentures
of any default, except defaults in payment of principal, premium, interest,
including contingent interest, if any, or liquidated damages, if any, on the
debentures. However, the trustee must consider it to be in the interest of the
holders of the debentures to withhold this notice.
If an event of default occurs and continues, the trustee or the
holders of at least 25% in principal amount of the outstanding debentures may
declare the principal, premium, if any, and accrued and unpaid interest,
including contingent interest, if any, and liquidated damages, if any, on the
outstanding debentures to be immediately due and payable. In case of certain
events of bankruptcy or insolvency involving us, the principal, premium, if any,
and accrued and unpaid interest, including contingent interest, if any, and
liquidated damages, if any, on the debentures will automatically become due and
payable. However, if we cure all defaults, except the nonpayment of principal,
premium, if any, interest, including contingent interest, if any, or liquidated
damages, if any, that became due as a result of the acceleration, and meet
certain other conditions, with certain exceptions, this declaration may be
cancelled and the holders of a majority of the principal amount of outstanding
debentures may waive these past defaults.
Payments of principal, premium, if any, or interest, including
contingent interest, if any, or liquidated damages, if any, on the debentures
that are not made when due will accrue interest at the annual rate of 1% above
the then applicable interest rate from the required payment date.
The holders of a majority of outstanding debentures will have the
right to direct the time, method and place of any proceedings for any remedy
available to the trustee, subject to limitations specified in the indenture.
No holder of the debentures may pursue any remedy under the
indenture, except in the case of a default in the payment of principal, premium,
if any, or interest, including contingent interest, if any, or liquidated
damages, if any, on the debentures, unless:
o the holder has given the trustee written
notice of an event of default;
o the holders of at least 25% in principal
amount of outstanding debentures make a
written request, and offer reasonable
indemnity, to the trustee to pursue the
remedy;
o the trustee does not receive an inconsistent
direction from the holders of a majority in
principal amount of the debentures;
o the holder or holders have offered reasonable
security or indemnity to the trustee against
any costs, liability or expense of the
trustee; and
o the trustee fails to comply with the request
within 60 days after receipt of the request
and offer of indemnity.
Modification and Waiver
The consent of the holders of a majority in principal amount of
the outstanding debentures is required to modify or amend the indenture.
However, a modification or amendment requires the consent of the holder of each
outstanding debenture if it would:
o extend the fixed maturity of any debenture;
o reduce the rate or extend the time for payment
of interest, including contingent interest, if
any, or liquidated damages, if any, of any
debenture;
o reduce the principal amount or premium of any
debenture;
o reduce any amount payable upon redemption of
any debenture;
o adversely change our obligation to redeem any
debentures on a redemption date;
o adversely change our obligation to redeem any
debenture upon a fundamental change;
o change the right of holders of debentures who
have elected to convert their debentures upon
the occurrence of a fundamental change to
receive a make whole premium (as described in
"Description of Debentures - Make Whole
Premium");
o impair the right of a holder to institute suit
for payment on any debenture;
o change the currency in which any debenture is
payable;
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o impair the right of a holder to convert any
debenture or reduce the number of common shares
or any other property receivable upon
conversion;
o adversely modify, in any material respect, the
subordination provisions of the indenture;
o reduce the quorum or voting requirements under
the indenture;
o change any obligation of ours to maintain an
office or agency in the places and for the
purposes specified in the indenture;
o subject to specified exceptions, modify certain
of the provisions of the indenture relating to
modification or waiver of provisions of the
indenture; or
o reduce the percentage of debentures required
for consent to any modification of the
indenture.
We are permitted to modify certain provisions of the indenture
without the consent of the holders of the debentures.
Form, Denomination and Registration
The debentures will be issued:
o in fully registered form;
o without interest coupons; and
o in denominations of $1,000 principal amount and
integral multiples of $1,000.
Global Debenture, Book-Entry Form
Debentures are evidenced by one or more global debentures. The
global debenture or debentures have been deposited with DTC and we have
registered the global debentures in the name of Cede & Co. as DTC's nominee.
Except as set forth below, a global debenture may be transferred, in whole or in
part, only to another nominee of DTC or to a successor of DTC or its nominee.
Beneficial interests in a global debenture may be held through
organizations that are participants in DTC (called "participants"). Transfers
between participants will be effected in the ordinary way in accordance with DTC
rules and will be settled in clearing house funds. The laws of some states
require that certain persons take physical delivery of securities in definitive
form. As a result, the ability to transfer beneficial interests in the global
debenture to such persons may be limited.
Beneficial interests in a global debenture held by DTC may be
held only through participants, or certain banks, brokers, dealers, trust
companies and other parties that clear through or maintain a custodial
relationship with a participant, either directly or indirectly (called "indirect
participants"). So long as Cede & Co., as the nominee of DTC, is the registered
owner of a global debenture, Cede & Co. for all purposes will be considered the
sole holder of such global debenture. Except as provided below, owners of
beneficial interests in a global debenture will:
o not be entitled to have certificates registered in
their names;
o not receive physical delivery of certificates in
definitive registered form; and
o not be considered holders of the global debenture.
We will pay interest, including contingent interest, if any, on
and the redemption price and the repurchase price of a global debenture to Cede
& Co., as the registered owner of the global debenture, by wire transfer of
immediately available funds on each interest payment date or the redemption or
repurchase date, as the case may be. Neither we, the trustee nor any paying
agent will be responsible or liable:
o for the records relating to, or payments made on
account of, beneficial ownership interests in a
global debenture; or
o for maintaining, supervising or reviewing any
records relating to the beneficial ownership
interests.
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Neither we, the trustee, registrar, paying agent nor conversion
agent will have any responsibility for the performance by DTC or its
participants or indirect participants of their respective obligations under the
rules and procedures governing their operations. DTC has advised us that it will
take any action permitted to be taken by a holder of debentures, including the
presentation of debentures for conversion, only at the direction of one or more
participants to whose account with DTC interests in the global debenture are
credited, and only in respect of the principal amount of the debentures
represented by the global debenture as to which the participant or participants
has or have given such direction.
DTC has advised us that it is:
o a limited purpose trust company organized under
the laws of the State of New York, and a member of
the Federal Reserve System;
o a "clearing corporation" within the meaning of the
Uniform Commercial Code; and
o a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act.
DTC was created to hold securities for its participants and to
facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes to the accounts of its
participants. Participants include securities brokers, dealers, banks, trust
companies and clearing corporations and other organizations. Some of the
participants or their representatives, together with other entities, own DTC.
Indirect access to the DTC system is 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.
DTC has agreed to the foregoing procedures to facilitate
transfers of interests in a global debenture among participants. However, DTC is
under no obligation to perform or continue to perform these procedures, and may
discontinue these procedures at any time. If DTC is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
us within 90 days, we will issue debentures in certificated form in exchange for
global debentures. In addition, we may at any time and in our sole discretion
determine not to have debentures represented by global debentures and in such
event will issue certificates in definitive form in exchange for the global
debentures.
Restrictions on Transfer, Legends
The debentures will be subject to transfer restrictions as
described below under "Transfer Restrictions" and certificates for the
debentures will bear a legend to this effect.
Registration Rights of the Debenture Holders
On March 28, 2007, we entered into a registration rights
agreement with the purchasers of the debentures that requires us, among other
things, to file within 30 days and to use our reasonable best efforts to cause
to become effective within 90 days after that date a shelf registration
statement with the SEC covering the resale of the debentures and the common
stock issuable upon conversion of the debentures. We have filed with the SEC a
registration statement, of which this prospectus is a part, to satisfy this
obligation under the registration rights agreement. A holder who sells
debentures or common stock pursuant to the registration statement generally will
be required to be named as a selling stockholder in this prospectus or a related
prospectus supplement and to deliver a prospectus to the subsequent purchasers,
and will be bound by the provisions of the registration rights agreement, which
are applicable to that holder (including certain indemnification provisions).
We will use our reasonable best efforts to keep the shelf
registration statement effective until the earlier
of:
o all of the registrable securities have been sold
pursuant to the shelf registration statement or
pursuant to Rule 144 under the Securities Act or
any similar provision then in force; or
o the expiration of the holding period with respect
to the registrable securities under Rule 144(k)
under the Securities Act, or any successor
provision.
When we use the term "registrable securities" in this section, we
are referring to the debentures and the common stock issuable upon conversion of
the debentures until the earliest of:
o the effective registration under the Securities
Act and the resale of the registrable securities
in accordance with the registration statement;
o the expiration of the holding period with respect
to the registrable securities under Rule 144(k)
under the Securities Act; and
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o the sale of the registrable securities to the
public pursuant to Rule 144 under the Securities
Act.
We may suspend the use of the prospectus under certain
circumstances relating to pending corporate developments, public filings with
the SEC and similar events. Any suspension period shall not:
o exceed 30 days in any three-month period; or
o an aggregate of 90 days for all periods in any
12-month period.
Notwithstanding the foregoing, we will be permitted to suspend
the use of the prospectus for up to 60 days in any 3-month period under certain
circumstances, relating to possible acquisitions, financings or other similar
transactions.
We will pay predetermined liquidated damages on any interest
payment date if the shelf registration statement is not timely filed or made
effective or if the prospectus included in the registration statement is
unavailable for periods in excess of those permitted above:
o on the debentures at an annual rate equal to 0.5%
of the aggregate principal amount of the
debentures outstanding until the registration
statement is filed or made effective or during
the additional period the prospectus is
unavailable; and
We will not pay liquidated damages with respect to debentures that have
been converted into common stock or the principal amount of debentures that have
been converted into common stock.
A holder who elects to sell registrable securities pursuant to
the shelf registration statement will be required to:
o be named as a selling stockholder in the related
prospectus;
o deliver a prospectus to purchasers; and
o be subject to the provisions of the registration
rights agreement, including indemnification
provisions.
Under the registration rights agreement we will:
o pay all expenses of the shelf registration
statement;
o provide each registered holder copies of the
prospectus;
o notify holders when the shelf registration
statement has become effective; and
o take other reasonable actions as are required to
permit unrestricted resales of the registrable
securities in accordance with the terms and
conditions of the registration rights agreement.
The plan of distribution of the shelf registration statement will
permit resales of registrable securities by selling security holders though
brokers and dealers.
We have given notice to all holders of the filing and will give
notice of the effectiveness of the shelf registration statement by issuing a
press release to Reuters Economic Services and Bloomberg Business News. We have
included as Annex A to this offering memorandum a form of notice and
questionnaire to be completed and delivered by a holder interested in selling
its registrable securities pursuant to the shelf registration statement. In
order to be named as a selling stockholder in the prospectus at the time of
effectiveness of the shelf registration statement, each holder must complete and
deliver the questionnaire to us on or prior to the tenth business day before the
effectiveness of the registration statement. Upon receipt of a completed
questionnaire after that time, together with any other information we may
reasonably request following the effectiveness, we will, within 15 business
days, file any amendments to the shelf registration statement or supplements to
the related prospectus as are necessary to permit each holder to deliver a
prospectus to purchasers of registrable securities, subject to our right to
suspend the use of the prospectus. We will pay the predetermined liquidated
damages described above to the holder if we fail to make the filing in the time
required or, if such filing is a post-effective amendment to the shelf
registration statement required to be declared effective under the Securities
Act, if such amendment is not declared effective within 45 days of the filing.
If any holder does not complete and deliver a questionnaire or provide the other
information we may request, such a holder will not be named as a selling
stockholder in the prospectus and will not be permitted to sell registrable
securities pursuant to the shelf registration statement. This summary of the
registration rights agreement is not complete. This summary is subject to, and
is qualified in its entirety by reference to, all the provisions of the
registration rights agreement.
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Rule 144A Information Request
We will furnish to the holders or beneficial holders of the
debentures or the underlying common stock and prospective purchasers, upon their
request, the information, if any, required under Rule 144A(d)(4) under the
Securities Act until such time as such securities are no longer "restricted
securities" within the meaning of Rule 144 under the Securities Act, assuming
these securities have not been owned by an affiliate of ours.
Information Concerning the Trustee
We have appointed Manufacturers and Traders Trust Company, the
trustee under the indenture, as paying agent, conversion agent, debenture
registrar and custodian for the debentures. The trustee is also the
administrative agent and a lender under the Second Amended and Restated Credit
Agreement dated as of May 31, 2005, as amended, among our subsidiary, Greatbatch
Ltd., and the lenders party thereto. The trustee or its affiliates may also
provide other services to us in the ordinary course of their business.
The indenture contains certain limitations on the rights of the
trustee, if it or any of its affiliates is then our creditor, to obtain payment
of claims in certain cases or to realize on certain property received on any
claim as security or otherwise. The trustee and its affiliates will be permitted
to engage in other transactions with us. However, if the trustee or any
affiliate continues to have any conflicting interest and a default occurs with
respect to the debentures, the trustee must eliminate such conflict or resign.
Governing Law
The debentures and the indenture shall be governed by, and
construed in accordance with, the laws of the State of New York.
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DESCRIPTION OF OTHER INDEBTEDNESS
Senior Credit Facility
General. As of April 23, 2007, after giving effect to this offering and the
application of the net proceeds therefrom, we had no indebtedness outstanding
under our senior credit facility and the ability to incur $50.0 million in
additional debt under this revolving line of credit. The borrower under the
senior credit facility is Greatbatch Ltd., our wholly owned subsidiary. We have
entered into a commitment letter and term sheet with Manufacturers and Traders
Trust Company, as administrative agent, providing for a replacement senior
secured facility to Greatbatch, Ltd., in the original principal amount of
$235,000,000 (which may be increased at our option to $335,000,000). In
addition, the debentures rank pari passu with our 2 1/4% Convertible
Subordinated Debentures due 2013, issued under an indenture between us and
Manufacturers and Traders Trust Company dated May 28, 2003, which we refer to as
the "2003 debentures". Holders of the 2003 debentures may require us to
repurchase their 2003 debentures on June 15, 2010, at a repurchase price equal
to 100% of their principal amount plus accrued and unpaid interest, including
contingent interest, if any.
Interest Rates; Fees. The interest rate under the revolving line of credit
varies with our leverage. At April 23, 2007, the applicable interest rates for
the line of credit were the administrative agent bank's publicly announced prime
rate, or the London Interbank Offered Rate, or LIBOR, plus 1.00% - 2.25% at our
option, depending on leverage.
We are required to pay the lenders under the senior credit
facility a commitment fee of between .125% and .250% per annum, payable
quarterly in arrears, on the unused portion of the revolving line of credit
depending on our leverage. We are also required to pay letter of credit fees to
each participating bank for outstanding letters of credit of between .125% and
..250% per annum of the bank's share of the drawn and undrawn amounts on
outstanding letters of credit, depending on leverage.
Collateral and Guarantees. The senior credit facility is secured by liens on all
of the assets of our subsidiaries, other than real estate, our guarantee as
corporate parent and by guarantees of our other subsidiaries. The credit
facility is also secured by a pledge of the capital stock of our operating
subsidiaries, other than Greatbatch Ltd., and a negative pledge on any of our
other assets.
Covenants. The terms of the senior credit facility require us to comply with
various financial covenants, including maximum quarterly leverage, and minimum
quarterly fixed charge and interest coverage ratios, in relation to EBITDA. In
addition, we agreed to covenants that, among other things, limit our ability to
incur additional indebtedness, grant liens, sell and transfer assets, make loans
or investments, engage in mergers, consolidations or acquisitions, pay dividends
or other distributions to stockholders, redeem capital stock, and engage in
other matters customarily restricted in senior secured credit facilities. These
covenants are subject to qualifications and exceptions.
Events of Default. The senior credit facility contains customary events of
default, including payment defaults, breach of representations and warranties,
covenant defaults, cross-defaults, certain events of bankruptcy and insolvency,
certain ERISA-related events, judgment defaults, failure of any guaranty or
security agreement supporting our obligations under the senior credit facility
to be in full force and effect, and change of control transactions.
2003 Debentures
General. On May 28, 2003, we issued and sold $170,000,000 aggregate principal
amount of our 2 1/4% Convertible Subordinated Debentures due 2013, issued under
an indenture between us and Manufacturers and Traders Trust Company dated May
28, 2003, which we refer to as the "2003 debentures," in a private offering to
persons believed to be "qualified institutional purchasers" under Rule 144A
promulgated under the Securities Act. On March 28, 2007 and April 2, 2007,
holders of our 2003 debentures exchanged $117,782,000 of 2003 debentures for an
equivalent amount of the debentures in two separate private offerings. Interest
on the 2003 debentures is payable on June 15 and December 15 of each year,
beginning December 15, 2003. The 2003 debentures mature on June 15, 2013, unless
earlier converted, redeemed or repurchased.
Interest. Beginning with the six-month interest period commencing June 15, 2010,
we will pay additional contingent interest during any six-month interest period
if the trading price of the 2003 debentures for each of the five trading days
immediately preceding the first day of the interest period equals or exceeds
120% of the principal amount of the 2003 debentures.
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Conversion. Holders may convert the 2003 debentures into shares of our common
stock at a conversion rate of 24.8219 shares per $1,000 principal amount of the
2003 debentures, subject to adjustment, before the close of business on June 15,
2013 only under the following circumstances: (1) during any fiscal quarter
commencing after July 4, 2003, if the closing sale price of our common stock
exceeds 120% of the conversion price for at least 20 trading days in the 30
consecutive trading day period ending on the last trading day of the preceding
fiscal quarter; (2) subject to certain exceptions, during the five business days
after any five consecutive trading day period in which the trading price per
$1,000 principal amount of the 2003 debentures for each day of such period was
less than 98% of the product of the closing sale price of our common stock and
the number of shares issuable upon conversion of $1,000 principal amount of the
2003 debentures; (3) if the 2003 debentures have been called for redemption; or
(4) upon the occurrence of certain corporate events.
Redemption. Beginning June 20, 2010, we may redeem any of the 2003 debentures at
a redemption price of 100% of their principal amount, plus accrued interest.
Holders of the 2003 debentures may require us to repurchase their 2003
debentures on June 15, 2010 or at any time prior to their maturity following a
fundamental change at a repurchase price of 100% of their principal amount, plus
accrued interest.
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DESCRIPTION OF CAPITAL STOCK
As of the date of this prospectus, our certificate of
incorporation authorizes us to issue 100,000,000 shares of common stock, par
value $.001 per share and 100,000,000 shares of preferred stock, par value $.001
per share. As of April 23, 2007, 22,326,335 shares of common stock were
outstanding and no shares of preferred stock were outstanding.
Common Stock
Voting. Holders of our common stock are entitled to one vote per share on all
matters to be voted upon by our stockholders. Because holders of common stock do
not have cumulative voting rights, the holders of a majority of the shares of
our common stock can elect all of the members of our board of directors.
Dividends and Other Distributions. Subject to preferences of any preferred stock
that may be issued in the future, the holders of our common stock are entitled
to receive dividends as may be declared by our board of directors.
Distribution on Dissolution. Subject to any preferences of any preferred stock
that may be issued in the future, in the event of our liquidation, dissolution
or winding up, holders of our common stock are entitled to share ratably in the
assets remaining after payment of liabilities and the liquidation preferences of
any outstanding preferred stock.
Other Aspects of Our Common Stock. There are no redemption or sinking fund
provisions applicable to our common stock. All outstanding shares of our common
stock are fully paid and non-assessable.
Preferred Stock
Under our restated certificate of incorporation, our board of
directors has the authority, without further action by stockholders, to
designate up to 100,000,000 shares of preferred stock in one or more series and
to fix the rights, preferences, privileges and limitations of each series,
including voting rights, dividend rights, conversion rights, redemption
privilege and liquidation preferences, any or all of which may be greater than
the rights of the common stock. Satisfaction of any dividend preference of
outstanding shares of preferred stock would reduce the amount of funds available
for the payment of dividends on shares of common stock. In some circumstances,
the issuance of shares of preferred stock may render more difficult or tend to
discourage a merger, tender offer or proxy contest, the assumption of control by
a holder of a large block of our securities or the removal of incumbent
management.
Stockholder Rights Plan. Each outstanding share of our common stock has attached
to it one preferred share purchase right, which we refer to as a right. Each
right, once exercisable, entitles the registered holder of our common stock to
purchase from us one one-hundredth of a share of Series A Junior Participating
Preferred Stock, which we refer to as participating preferred shares, at a price
of $160.00 per one one-hundredth of a participating preferred share, subject to
adjustment. Each one one-hundredth of a share of participating preferred shares
has designations and powers, preferences and rights, and the qualifications,
limitations and restrictions which make its value approximately equal to the
value of a share of our common stock. The description and terms of the rights
are set forth in a Stockholders Rights Agreement, dated as of March 18, 2002,
between us and Mellon Investor Services LLC, as rights agent.
Until the distribution date described below, we will not issue
separate certificates evidencing the rights. Until that date, the rights will be
evidenced, with respect to any common stock certificate, by that common stock
certificate. The rights, unless earlier redeemed by our board of directors, will
detach from the common stock and a distribution date will occur upon the earlier
of the following dates:
o the tenth day following a public announcement
that an "acquiring person," which may include an
entity or group of affiliated or associated
persons, has acquired beneficial ownership of 15%
or more of the total of our outstanding common
stock and any other outstanding shares of our
capital stock with voting rights similar to our
common stock, or
o the tenth business day following the commencement
of, or the first public announcement by any
person or group of an intention to commence, a
tender offer that would result in any person or
entity, including a group of affiliated or
associated persons, acquiring beneficial
ownership of 15% or more of our outstanding
common stock.
Our board of directors may postpone the distribution date by determining a later
distribution date before the time any person or group becomes an acquiring
person.
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The term "acquiring person" does not include us, any of our
subsidiaries, any of our or our subsidiaries' employee benefit plans or any
entity holding our common stock for or under any of our or our subsidiaries'
employee benefit plans. In addition, a person who would otherwise be an
acquiring person will not be considered an acquiring person if our board of
directors determines in good faith that such person inadvertently became the
beneficial owner of 15% or more of our common stock and such person divests
itself, as promptly as practicable, of beneficial ownership of a sufficient
number of shares of our common stock so that it would no longer otherwise
qualify as an acquiring person.
In addition, except under limited circumstances, no person or
entity shall become an acquiring person as the result of any action or
transaction approved by our board of directors before such person or entity
became an acquiring person or by a reduction in the number of issued and
outstanding shares of our common stock in a transaction approved by our board of
directors which, by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such person or entity to
15% or more of out outstanding common stock.
The rights agreement provides that, until the distribution date,
or earlier redemption or expiration of the rights, the rights will be
transferred only with our common stock. The rights will be evidenced, with
respect to any common stock certificate outstanding as of April 30, 2002, by
that common stock certificate with a summary of the rights attached to it. Until
the distribution date, or earlier redemption, exchange or expiration of the
rights, new common stock certificates issued after April 30, 2002 will contain a
legend incorporating the rights agreement by reference. Until the distribution
date, the surrender for transfer of any certificates for common stock, even
without a summary of the rights attached to it, also will constitute the
transfer of the rights associated with the common stock represented by that
certificate. As soon as practicable after the distribution date, separate
certificates evidencing the rights will be mailed to holders of record of our
common stock as of the close of business on the distribution date, and the
separate right certificates alone will evidence the rights. Only our common
stock issued before the distribution date will be issued with rights.
The rights are not exercisable until the distribution date. The
rights will expire on March 18, 2012 unless the rights are earlier redeemed or
exchanged by us, in each case, as described below.
The exercise price payable for the participating preferred
shares, and the number of participating preferred shares or other securities or
property issuable, upon exercise of the rights, as well as the number of rights
outstanding, are subject to adjustment from time to time to prevent dilution in
the following circumstances:
o in the event of a stock dividend on, or a
subdivision, split, combination or consolidation
of the participating preferred shares,
o upon the grant to holders of our common stock of
rights, options or warrants to subscribe for or
purchase common stock at a price, or securities
convertible into participating preferred shares
with a conversion price, less than the current
market price of the participating preferred
shares, or
o upon the distribution to holders of our common
stock of evidences of indebtedness, cash,
securities or assets, excluding regular quarterly
cash dividends not in excess of 150% of previous
regular quarterly cash dividends, dividends
payable in common stock or options, rights or
warrants, other than those referred to above.
The number of outstanding rights and the number of one
one-hundredths of a participating preferred share issuable upon exercise of each
right are also subject to adjustment in the event of a dividend or other
distribution on the common stock payable in common stock or subdivisions,
consolidations or combinations of our common stock occurring, in any of those
cases, before the distribution date.
Participating preferred shares purchasable upon exercise of the
rights will be non-redeemable and, unless otherwise provided in connection with
the creation of a subsequent series of preferred stock, will be subordinate to
any other series of our preferred stock. We may not issue the participating
preferred stock except upon the exercise of the rights.
Each share of participating preferred stock will receive the
following dividends, when, as and if declared by our board of directors:
o cash dividends in an amount per share (rounded
to the nearest cent) equal to 100 times the
aggregate per share amount of all cash dividends
declared or paid on our common stock; and
o a preferential cash dividend, if any, in
preference to the holders of our common stock,
on the first business day of each quarter, which
we refer to as a quarterly dividend payment
date, commencing on the first quarter following
the first issuance of a share of participating
preferred stock, payable in an amount equal to
$.10 per share of participating preferred stock
less the per share amount of all cash dividends
declared on the participating preferred stock
since the immediately preceding quarterly
payment date or, with respect to the first
quarterly dividend payment date, since the first
issuance of any share or fraction of a share of
participating preferred stock.
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The preferential cash dividends will begin to accrue on
outstanding shares of our participating preferred stock from the quarterly
dividend payment date next preceding the date of issuance of any shares of
participating preferred stock. Any accrued but unpaid preferential dividends
will cumulate but will not bear interest. Preferential dividends paid on the
shares of our participating preferred stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares will be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding.
In addition, the holders of our participating preferred stock are
entitled to receive 100 times any non-cash dividends, other than dividends
payable in equity securities, declared on our common stock, in like kind. If
there is a liquidation, the holders of our participating preferred stock will be
entitled to receive, for each share of participating preferred stock, a payment
in an amount equal to the greater of the exercise price for the participating
preferred stock, plus any accrued and unpaid dividends and distributions in
respect of the participating preferred stock or 100 times the payment made per
share of our common stock.
Each share of participating preferred stock will have 100 votes,
voting together with our common stock. In the event of any merger, consolidation
or other transaction in which our common stock is exchanged, each share of
participating preferred stock will be entitled to receive 100 times the amount
received per share of common stock.
Unless the rights are earlier redeemed, in the event that a
person or entity becomes an acquiring person, each holder of record of a right,
other than rights beneficially owned by an acquiring person and certain of its
affiliates, associates and transferees, whose rights will thereupon become null
and void, will thereafter have the right to receive, upon payment of the
exercise price and in lieu of shares of participating preferred stock, that
number of shares of our common stock having a fair market value at the time of
the transaction equal to approximately two times the exercise price of the
participating preferred stock.
In addition, unless the rights are earlier redeemed or exchanged,
in the event that, after the time that a person or entity becomes an acquiring
person, we were to be acquired in a merger or other business combination in
which any shares of our common stock are changed into or exchanged for other
securities or assets or more than 50% of the assets or earning power of us and
our subsidiaries, taken as a whole, were to be sold or transferred in one or a
series of related transactions, each holder of record of a right, other than
rights beneficially owned by an acquiring person and certain of its affiliates,
associates and transferees, whose rights will thereupon become null and void,
will from and after such date have the right to receive, upon payment of the
exercise price, that number of shares of common stock of the acquiring company
having a fair market value at the time of such transaction equal to
approximately two times the exercise price of the participating preferred stock.
At any time after any person or entity becomes an acquiring
person and prior to the acquisition by such person or entity of 50% or more of
our outstanding capital stock entitled to vote, our board of directors may, at
its option, exchange all or part of the then outstanding and exercisable rights,
which will not include rights that have become null and void, at an exchange
ratio of one share of our common stock per right, appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring after
the date of the Stockholder Rights Agreement.
Fractions of shares of participating preferred stock, other than
fractions which are integral multiples of one one-hundredth of a share, may, at
our election, be evidenced by depositary receipts. We may also issue cash in
lieu of fractional shares which are not integral multiples of one one-hundredth
of a share.
At any time prior to the close of business on the tenth day after
there has been a public announcement that a person or entity has become an
acquiring person, we may redeem the rights in whole, but not in part, at a price
of $.001 per right. Immediately upon the effective time of the action of our
board of directors authorizing redemption of the rights, the right to exercise
the rights will terminate and the only right of the holders of the rights will
be to receive the redemption price stated above.
For as long as the rights are then redeemable, we may, except
with respect to the amount of the redemption price, amend the rights in any
manner, including an amendment to extend the time period in which the rights may
be redeemed. At any time when the rights are not then redeemable, we may amend
the rights in any manner that does not materially adversely affect the interests
of holders of the rights as such.
Until a right is exercised, the holder of the right will not have
any of the rights of our stockholders, including, without limitation, the right
to vote or to receive dividends.
The rights have certain anti-takeover effects. The rights will
cause substantial dilution to a person or group that attempts to acquire us on
terms not approved by our board of directors. The rights should not interfere
with any merger or other business combination approved by the board of directors
since the rights may be amended to permit such an acquisition or they can be
redeemed by us at $.001 per right prior to the earliest of the time that a
person or group has acquired beneficial ownership of 15% or more of our common
stock or the final expiration date of the rights.
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Limitation Of Liability Of Officers And Directors
Our certificate of incorporation limits the liability of
directors to the fullest extent permitted by Delaware law. The effect of these
provisions is to eliminate the rights of our company and our stockholders,
through stockholders' derivative suits on behalf of our company, to recover
monetary damages against a director for breach of fiduciary duty as a director,
including breaches resulting from grossly negligent behavior. However, our
directors will be personally liable to us and our stockholders for monetary
damages if they acted in bad faith, knowingly or intentionally violated the law,
authorized illegal dividends or redemptions or derived an improper benefit from
their actions as directors. In addition, our certificate of incorporation
provides that we will indemnify our directors and officers to the fullest extent
permitted by Delaware law. We have entered into indemnification agreements with
our current directors and executive officers. We also maintain directors and
officers insurance.
Anti-Takeover Provisions
Delaware Law. We are governed by the provisions of Section 203 of the Delaware
General Corporation Law. In general, Section 203 prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless before
the date that the person became an "interested stockholder," the board of
directors approved either the "business combination" or the transaction which
makes the person an "interested stockholder," or after the date that the person
became an "interested stockholder," the business combination is approved by our
board of directors and the vote of at least 66 2/3% of our outstanding voting
stock that is not owned by the "interested stockholder." Generally, a "business
combination" includes a merger, asset sale or other transaction resulting in a
financial benefit to the stockholder. An "interested stockholder" is a person
who either owns 15% or more of our outstanding stock or, together with
affiliates and associates, owns or, within three prior years, did own, 15% or
more of our outstanding voting stock. The statute could have the effect of
delaying, deferring or preventing a change in our control.
Certificate of Incorporation and Bylaw Provisions. Our certificate of
incorporation authorizes the issuance of "blank check" preferred stock that
could be issued by our board of directors to increase the number of outstanding
shares in order to thwart a takeover attempt. Our bylaws provide that only our
board of directors may call special meetings of our stockholders and establishes
specific procedures for stockholders to take any action by written consent. In
addition, our bylaws establish advance notice requirements for nominations of
candidates for election to our board of directors or for proposing matters that
can be acted upon by our stockholders at stockholder meetings. These and other
provisions contained in our restated certificate of incorporation and bylaws
could delay or discourage transactions involving an actual or potential change
in control of us or our management, including transactions in which stockholders
might otherwise receive a premium for their shares over then current prices.
Such provisions could also limit the ability of stockholders to remove current
management or approve transactions that stockholders may deem to be in their
best interests and could adversely affect the price of our common stock.
Transfer Agent And Registrar
The transfer agent and registrar for our common stock is Mellon
Investor Services LLC.
Quotation on The New York Stock Exchange
Our common stock is listed on The New York Stock Exchange under
the symbol "GB".
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion describes the material United States federal
income tax consequences of the exchange of outstanding debentures for new
debentures, and the ownership and disposition of the new debentures and the
common stock into which the debentures may be converted.
This discussion is based on the Internal Revenue Code of 1986, as
amended (the "Code"), administrative pronouncements, judicial decisions and
existing and proposed Treasury regulations (the "Regulations"), changes to any
of which subsequent to the date of this prospectus may affect the tax
consequences described herein, possibly with retroactive effect.
This discussion does not address any aspect of state, local or foreign
law, or the U.S. federal estate, gift or alternative minimum tax consequences of
(i) the exchange offer, (ii) the ownership or disposition of new debentures, or
(iii) the ownership or disposition of the common stock received upon a
conversion of the new debentures.
This discussion applies only to:
o the exchange of outstanding debentures for the new debentures pursuant
to the exchange offer;
o debentures purchased by those initial holders who purchase debentures
at the issue price (as defined below);
o debentures held as capital assets within the meaning of section 1221
of the Code; and
o U.S. Holders (as defined below).
This discussion does not describe the United States federal income tax
consequence of the ownership or disposition of the Company's common stock,
except as described below, nor does it describe all of the tax consequences that
may be relevant to a holder in light of its particular circumstances or to a
holder subject to special rules, including:
o a financial institution;
o an insurance company;
o a dealer in securities or foreign currencies;
o a trader in securities that elects to use the mark-to-market method of
accounting for its securities;
o a regulated investment company or real estate investment trust;
o a person holding debentures as part of a "straddle," "hedge",
"conversion," "constructive sale," or other integrated transaction;
o a U.S. Holder (as defined below) whose functional currency is not the
U.S. dollar;
o a former citizen or individual resident of the United States;
o persons deemed to sell the new debentures or common stock into which
the new debentures are convertible under constructive sale rules;
o a partnership or other entity classified as a partnership for United
States federal income tax purposes; or
o a person subject to the alternative minimum tax.
As used herein, the term "U.S. Holder" means a beneficial owner of a
outstanding debentures or new debentures that for United States federal income
tax purposes is:
o a citizen or individual resident of the United States;
o a corporation, or other entity taxable as a corporation for United
States federal income tax purposes, created or organized in or under
the laws of the United States or of any political subdivision thereof;
or
o an estate or trust the income of which is subject to United States
federal income taxation regardless of its source.
A Non-U.S. Holder is any beneficial owner of the outstanding debentures
or new debentures that is not a U.S. Holder. This discussion does not address
any U.S. federal, state, local, or foreign legal or income tax considerations
with respect to non-U.S. Holders.
Prospective purchasers of debentures and participants in the exchange
offer should consult their tax advisers with regard to the application of the
United States federal income tax laws to their particular situation as well as
the tax consequences arising under the laws of any state, local or foreign
taxing jurisdiction. If a partnership or other entity that is a "pass-through"
for United States federal income tax purposes holds a debenture, the tax
treatment of a partner generally will depend on the status of the partner and
the activities of the partnership. If you are a partner in a partnership holding
a debenture, you are expected to consult your own tax advisers.
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Circular 230 Disclosure
Any tax statement made herein regarding any U.S. federal tax is not intended or
written to be used, and cannot be used, by any taxpayer for purposes of avoiding
any penalties. Any such statement herein is written in connection with the
marketing or promotion of the transaction to which the statement relates. Each
taxpayer should seek advice based on the taxpayer's particular circumstances
from an independent tax advisor.
Characterization of the Exchange
Under current Regulations, the exchange of outstanding debentures for
new debentures will be treated as an "exchange" for U.S. federal income tax
purposes (a "Taxable Exchange") if, taking into account the differences between
the terms of the outstanding debentures and the new debentures, there is deemed
to be a "significant" modification of the outstanding debentures within the
meaning of Section 1.1001-3(e) of the Regulations. In general, the Regulations
provide that a modification of a debt instrument is a significant modification
if, based on all of the facts and circumstances, the legal rights or obligations
that are altered and the degree to which they are altered are "economically
significant." The Regulations provide several bright line rules for determining
whether there has been a significant modification, as well as a "general
significance rule." The bright line rules require an analysis of changes
affecting a debt instrument's yield, the material deferment of payments under
the instrument, changes in the obligor or security, changes in the instrument's
nature, and changes in accounting and financial covenants. There is no authority
directly on point on how to determine whether there has been a significant
modification affecting an instrument's yield in the context of instruments to
which the contingent debt Regulations (discussed below) apply, and thus it is
unclear whether this bright line test would be met. In addition, though there is
a lack of specific authority in this context, the modifications to the
outstanding debentures resulting from the exchange for new debentures probably
do not meet any of the tests for the remaining bright line rules.
The Regulations also require that the exchange of outstanding
debentures for new debentures be tested under a general significance rule to
determine if there has been a significant modification. Under this general rule,
a modification is significant if, based on all the facts and circumstances, the
legal rights or obligations being changed and the degree to which they are being
changed are economically significant. All modifications must be considered
collectively. One specific situation considered under the general significance
rule is the elimination of a put right. In the exchange offer, the outstanding
debentures contained a put right, the terms of which made it likely to be
exercised by the holder. This put right has been eliminated in the new
debentures, effectively extending the term of the debt by three years. This is
likely an economically significant modification to the outstanding debentures.
Moreover, the effective extension of the term of the debt probably alters the
instrument's annual yield, another factor considered under the general
significance test. Finally, because the terms of the put right made it highly
likely to be exercised, resulting in conversion of the holder's interest into
cash prior to maturity, at which time the holder would have received the
Company's common stock, the removal of that right is probably economically
significant in itself.
Based on an analysis of the facts and circumstances, and taking into
consideration the economic differences between the terms of the outstanding
debentures and the new debentures, the Company will take the position that the
modifications to the outstanding debentures resulting from the exchange of the
outstanding debentures for the new debentures will constitute a significant
modification of the outstanding debentures, resulting in a Taxable Exchange.
This will have a significant impact on the Company in 2007, because the Company
will be required to recognize significant income as a result of the discharge of
its indebtedness, in an amount equal to the difference between the issue price
of the outstanding debentures and the issue price of the new debentures, as
determined under the Regulations.
Classification of the Debentures
Although not free from doubt, since the Company will treat the new
debentures as issued in exchange for the outstanding debentures in a Taxable
Exchange, the Company will take the position that all of the new debentures were
issued in exchange for money or publicly traded property within the meaning of
Section 1.1273-2 of the Regulations. Debt instruments issued in exchange for
money or publicly traded property are subject to the Regulations governing
contingent payment debt instruments (the "contingent debt regulations"). Under
the indenture governing the debentures, the Company agrees, and by acceptance of
a beneficial interest in a debenture each holder of a debenture will be deemed
to have agreed, to treat the debentures as indebtedness for U.S. federal income
tax purposes that is subject to the contingent debt regulations. Pursuant to the
terms of the indenture, the Company and every holder agree (in the absence of an
administrative determination or judicial ruling to the contrary) to be bound by
the Company's application of the contingent debt regulations to the debentures,
including the Company's determination of the projected payment schedule (as
described below) and the rate at which interest will be deemed to accrue on the
debentures for U.S. federal income tax purposes.
In 2002, the IRS issued Revenue Ruling 2002-31 and Notice 2002-36,
clarifying a number of uncertainties in the contingent debt regulations as well
as other provisions of the Code that might apply to the debentures, and
concluded that the instruments addressed in that published guidance were subject
to the contingent debt regulations. However, the applicability of Revenue Ruling
2002-31 to any particular instrument, such as the debentures, is uncertain.
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No ruling has been sought from the IRS with respect to the tax treatment of the
debentures. The remainder of this discussion assumes that the debentures are
subject to the contingent debt regulations. Any treatment different from that
described herein could affect the amount, timing, character and treatment of
income, gain or loss in respect of an investment in the debentures. In
particular, a holder might be required to accrue interest income at a lower or
higher rate, might not recognize income, gain or loss on conversion of a
debenture into common stock and might recognize capital gain or loss on a
taxable disposition of a debenture. Holders should consult their tax advisers
regarding the tax treatment of the debentures.
Tax Consequences to U.S. Holders
Interest Accruals on the Debentures
Under the contingent debt regulations, a U.S. Holder, regardless of its
method of accounting for United States federal income tax purposes, is required
to accrue interest income on the debentures on a constant yield basis at an
assumed yield (the "comparable yield") determined at the time of issuance of the
debentures, subject to certain adjustments as described below. The comparable
yield is based on the yield at which the Company could issue a non-convertible,
fixed-rate debt instrument with no contingent payments, but with terms and
conditions otherwise similar to those of the debentures. The Company has
determined the comparable yield to be 8.45% compounded semi-annually, which is
currently higher than the stated yield of 2 1/4% per annum. Accordingly, in
each year, U.S. Holders will be required to include in income an amount of
interest in excess of the stated yield of the debentures.
Solely for purposes of determining the amount of interest income that a
U.S. Holder is required to accrue, the Company is required to construct a
"projected payment schedule" in respect of the debentures representing a series
of payments the amount and timing of which would produce a yield to maturity on
the debentures equal to the comparable yield. The projected payment schedule for
the debentures includes estimates for payments of interest (including contingent
interest and semi-annual interest payments) and an estimate for a payment at
maturity taking into account the conversion feature. U.S. Holders may obtain the
projected payment schedule by submitting a written request for it to the Company
at Greatbatch, Inc., 9645 Wehrle Drive, Clarence, New York 14031, Attention:
Treasurer.
Neither the comparable yield nor the projected payment schedule
constitutes a representation by the Company regarding the actual amount that
will be paid on the debentures or the value at any time of the common stock into
which the debentures may be converted. For United States federal income tax
purposes, a U.S. Holder is required to use the comparable yield and the
projected payment schedule established by the Company in determining interest
accruals and adjustments in respect of a debenture, unless such U.S. Holder
timely discloses and justifies the use of a different comparable yield and
projected payment schedule to the IRS.
Based on the comparable yield and the issue of the debentures, a U.S.
Holder of a debenture (regardless of its accounting method) will be required to
accrue as interest the sum of the daily portions of interest on the debentures
for each day in the taxable year on which the U.S. Holder held the debenture,
adjusted upward or downward to reflect the difference, if any, between the
actual and the projected amount of any contingent payments on the debentures (as
set forth below). The issue price of the debentures is the first price at which
a substantial amount of the debentures is sold to the public, excluding bond
houses, brokers or similar persons or organizations acting in the capacity as
underwriters, placement agents or wholesalers (the "issue price").
The daily portions of interest in respect of a debenture are determined
by allocating to each day in an accrual period the ratable portion of interest
on the debenture that accrues in the accrual period. The amount of interest on a
debenture that accrues in an accrual period is the product of the comparable
yield on the debenture (adjusted to reflect the length of the accrual period)
and the adjusted issue price of the debenture. The adjusted issue price of a
debenture at the beginning of the first accrual period equals its issue price.
For any accrual periods thereafter, the adjusted issue price will equal (x) the
sum of the issue price of the debenture and any interest previously accrued
thereon by a holder (disregarding any positive or negative adjustments, both as
defined below) minus (y) the amount of any projected payments on the debentures
for previous accrual periods.
In addition to the interest accrual discussed above, a U.S. Holder is
required to recognize interest income equal to the amount of the excess, if any,
of actual payments over projected payments (a "positive adjustment") in respect
of a debenture for a taxable year. For this purpose, the payments in a taxable
year include the fair market value of property received (including, as discussed
below, common stock received upon conversion of a debenture) in that year. If a
U.S. Holder receives actual payments that are less than the projected payments
in respect of a debenture for a taxable year, the U.S. Holder will incur a
"negative adjustment" equal to the amount of the difference. This negative
adjustment will (i) first reduce the amount of interest in respect of the
debenture that the U.S. Holder would otherwise be required to include in income
in the taxable year and (ii) to the extent of any excess, will give rise to an
ordinary loss equal to that portion of that excess that does not exceed the
excess of (x) the amount of all interest income previously included by the U.S.
Holder in respect of the debenture over (y) the total amount of the U.S.
Holder's negative adjustments treated as ordinary loss on the debenture in prior
taxable years. A negative adjustment is not subject to the 2% floor limitation
imposed on miscellaneous deductions under Section 67 of the Code. Any negative
adjustment in excess of the amounts described in (i) and (ii) will be carried
forward to offset future interest income accruals in respect of the debentures
or to reduce the amount realized on a sale, exchange, conversion or retirement
of the debentures.
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Sale, Exchange or Conversion of the Debentures
Upon a sale or exchange of a debenture for cash or property, a U.S.
Holder generally will recognize gain or loss equal to the difference between the
amount realized on the sale or exchange and the holder's adjusted tax basis in
the debenture. A holder's adjusted tax basis in a debenture generally will be
equal to the holder's original purchase price for the debenture, increased by
any interest income previously accrued by the U.S. Holder (determined without
regard to any adjustments to interest accruals described above) and decreased by
the amount of any projected payments on the debenture for previous accrual
periods.
The receipt of cash and common stock upon conversion of a debenture
will be treated as a contingent payment under the debentures. Under this
treatment, a conversion of a debenture into cash and common stock will also
result in taxable gain or loss to the U.S. Holder. For this purpose, the amount
realized by a U.S. Holder will equal the fair market value of the common stock
received upon conversion plus any cash received. A U.S. Holder generally will
treat any "positive adjustment" upon a conversion of the debentures as interest
income and any loss as ordinary loss to the extent of the excess of previous
interest inclusions over the total negative adjustments previously taken into
account as ordinary loss, and the balance as capital loss. The contingent
payment regulations extend this treatment to amounts received on a sale or
exchange of the debenture.
A U.S. Holder's tax basis in common stock received upon a conversion of
a debenture will equal the then current fair market value of the common stock.
The U.S. Holder's holding period for the common stock received will commence on
the day immediately following the date of conversion or repurchase.
Constructive Dividends
If at any time we make a distribution of property to the Company's
stockholders that would be taxable to the stockholders as a dividend for United
States federal income tax purposes and, in accordance with the anti-dilution
provisions of the debentures, the conversion rate of the debentures is
increased, such increase may be deemed to be the payment of a taxable dividend
to the U.S. Holders of the debentures. For example, an increase in the
conversion rate in the event of distributions of the Company's evidences of
indebtedness or the Company's assets will generally result in deemed dividend
treatment to U.S. Holders of the debentures. The tax consequences of the receipt
of a taxable distribution from the Company are described below under
"---Dividends on Common Stock."
Dividends on Common Stock
If, after a U.S. holder converts a debenture into the Company's common
stock, we make distributions on the Company's common stock, the distributions
will constitute taxable dividends for United States federal income tax purposes
to the extent of the Company's current or accumulated earnings and profits as
determined under Unite States federal income tax principles. To the extent that
the U.S. holder receives distributions on shares of common stock that would
otherwise constitute dividends for United States federal income tax purposes but
that exceed the Company's current and accumulated earnings and profits, such
distributions will be treated first as a non-taxable return of capital reducing
the holder's tax basis in the shares of common stock. Any such distributions in
excess of the U.S. holder's tax basis in the shares of common stock will
generally be treated as capital gain. Subject to applicable limitations,
distributions on the Company's common stock constituting dividends paid to
holders that are United States corporations will qualify for the dividends
received deduction, and dividends paid to non-corporate holders will qualify for
a reduced rate of taxation.
Sale or Disposition of Common Stock
A. U.S. holder generally will recognize capital gain or loss on a sale
or exchange of the Company's common stock. The U.S. holder's gain or loss will
equal the difference between the proceeds received by the holder and the
holder's tax basis in the common stock, which will generally be the fair market
value of the common stock at the time of the conversion. The proceeds received
by a U.S. Holder will include the amount of any cash and the fair market value
of any other property received for the common stock. The gain or loss recognized
by a U.S. holder on a sale or exchanged of common stock will be long-term
capital gain or loss if the holder's holding period for the common stock is more
than one year. Long-term capital gains realized by non-corporate taxpayers are
generally taxed at lower maximum marginal tax rate than the maximum marginal tax
rate applicable to ordinary income. The deductibility of net capital losses by
individuals and corporations is subject to limitations.
-45-
Backup Withholding and Information Reporting
Information returns may be filed with the IRS in connection with
payments on the debentures and payments of the proceeds of a sale or other
disposition of the debentures and the common stock into which the debentures are
converted. A U.S. Holder may be subject to United States backup withholding tax
at the rates specified in the Code on those payments if it fails to provide its
taxpayer identification number to the paying agent and comply with certain
certification procedures or otherwise establish an exemption from backup
withholding. The amount of any backup withholding from a payment will be allowed
as a credit against the holder's United States federal income tax liability and
may entitle the holder to a refund, provided that the required information is
furnished to the IRS.
-46-
SELLING STOCKHOLDERS
We issued the debentures to certain holders of our 2 1/4%
convertible subordinated debenture due 2013, issued under an indenture between
us and Manufacturers and Traders Trust Company, dated May 28, 2003, which we
refer to as the "2003 debentures", and additional purchasers in a private
placement. Holders of the 2003 debentures exchanged $117,782,000 of 2003
debentures for an equivalent principal amount of the debentures, and holders of
the 2003 debentures and additional purchasers purchased $80,000,000 aggregate
principal amount of debentures. We issued the debentures on March 28, 2007 and
April 2, 2007, to persons believed to be "qualified institutional purchasers"
under Rule 144A promulgated under the Securities Act, or "accredited investors"
under Regulation D promulgated pursuant to the Securities Act in transactions
exempt from the registration requirements of the Securities Act. Selling
securityholders, including their transferees, pledgees, donees and successors,
may from time to time offer and sell pursuant to this prospectus any or all of
the debentures and shares of common stock into which the debentures are
convertible pursuant to this prospectus or any applicable prospectus supplement.
The table below sets forth the name of each selling
securityholder, the principal amount of debentures and shares of common stock
beneficially owned by each selling securityholder and the number of shares of
common stock issuable upon conversion of those debentures that may be offered
from time to time under this prospectus by the selling securityholders named in
the table.
We have prepared the table below based on information given to us
by those selling securityholders who have supplied us with this information on
or prior to April 25, 2007 and we have not sought to verify such information. We
expect that we will update this table as we receive more information from
holders of the debentures who have not yet provided us with their information.
We will supplement or amend this prospectus to include additional selling
securityholders upon request and upon provision of all required information to
us. Information concerning the selling securityholders may change from time to
time and any changed information will be set forth in supplements to this
prospectus if and when necessary.
Because the selling securityholders may offer all or some portion
of the debentures and shares of common stock into which the debentures are
convertible listed below, we have assumed for purposes of this table that the
selling securityholders will sell all of the shares of common stock offered by
this prospectus pursuant to this prospectus. Accordingly, we cannot estimate the
amounts of debentures or shares of common stock that will be held by the selling
securityholders following the consummation of any such sales. In addition, the
selling securityholders listed in the table below may have acquired, sold or
transferred, in transactions exempt from the registration requirements of the
Securities Act, some or all of their debentures since the date on which they
provided to us the information presented in the table.
The number of shares of common stock issuable upon conversion of
the debentures shown in the table below assumes conversion of the full amount of
debentures held by each selling securityholder. The percentage of debentures
outstanding beneficially owned by each selling securityholder is based on
$197,782,000 aggregate principal amount of debentures outstanding. The number of
shares of common stock beneficially owned prior to the offering includes shares
of common stock into which the debentures may be convertible. The number of
shares of common stock that may be offered is based on a conversion rate of
28.8219 per $1,000 principal amount of debentures and a cash payment in lieu of
any fractional share. The percentage of common stock outstanding beneficially
owned and that may be offered by each selling securityholder is based on
22,326,335 shares of common stock outstanding on April 23, 2007. In addition,
the conversion rate and, therefore, the number of shares of common stock
issuable upon conversion of the debentures is subject to adjustment under
certain circumstances. Accordingly, the aggregate principal amount of debentures
and the number of shares of common stock into which the debentures are
convertible may increase or decrease.
Based upon information provided by the selling securityholders,
none of the selling securityholders nor any of their affiliates, officers,
directors or principal equity holders has held any position or office or has had
any material relationship with us within the past three years.
-47-
Common Stock Owned
Upon Completion of the
Offering
Name of Beneficial Principal Percentage of Shares of Conversion Number Percentage
Owner Amount of Debentures Common Stock Shares of of
Debentures Outstanding Owned Prior to Common Shares
Beneficially the Offering (2) Stock Offered
Owned and
Offered (1)
CNH CA Master Account, L.P. $32,800,000 16.6% 104,883 945,358 104,883 *
Oz Special Funding (OZMD), L.P. $14,823,000 7.5% - 427,227 - *
Highbridge International LLC $14,500,000 7.3% - 417,917 - *
Tenor Opportunity Master Fund, $14,100,000 7.1% - 406,388 - *
Ltd.
Peoples Benefit Life Insurance $9,000,000 4.6% - 259,397 - *
Company Teamsters
Vanguard Convertible Securities $8,285,000 4.2% - 238,789 - *
Fund, Inc.
Argentum Multi-Strategy Fund $7,210,000 3.6% - 207,805 - *
Ltd - Classic
Argent Classic Convertible $7,210,000 3.6% - 207,805 - *
Arbitrage Fund Ltd.
Argent LowLev Convertible $7,210,000 3.6% - 207,805 - *
Arbitrage Fund Ltd.
Redbourn Partners Ltd. $7,000,000 3.5% - 201,753 - *
RCG Latitude Master Fund, Ltd. $6,120,000 3.1% - 176,390 - *
CSS, LLC $5,500,000 2.8% - 158,520 - *
TQA Master Fund Ltd. $4,691,000 2.4% - 135,203 - *
Virginia Retirement System $4,560,000 2.3% - 131,427 - *
Chrysler Corporation Master $4,540,000 2.3% - 130,851 - *
Retirement Trust
Highbridge Convertible $3,500,000 1.8% - 100,876 - *
Arbitrage Master Fund Ltd.
RCG PB, Ltd. $3,450,000 1.7% - 99,435 - *
Jefferies and Company, Inc. $3,222,000 1.6% - 92,864 - *
Bank of America Pension Plan $3,000,000 1.5% - 86,465 - *
Yield Strategies Fund I, L.P. $3,000,000 1.5% - 86,465 - *
National Bank of Canada - Tenor $2,900,000 1.5% - 83,583 - *
TQA Master Plus Fund Ltd. $2,689,000 1.4% - 77,502 - *
Delaware Public Employees $2,555,000 1.3% - 73,639 - *
Retirement System
National Railroad Retirement $2,455,000 1.2% - 70,757 - *
Investment Trust
Qwest Pension Trust $1,910,000 1.0% - 55,049 - *
-48-
Daimler Chrysler Corp. Emp #1 $1,892,000 1.0% - 54,531 - *
Pension Plan, dtd 4/1/89
Zurich Institutional Benchmarks $1,545,000 * - 44,529 - *
Master Fund
OCM Convertible Trust $1,445,000 * - 41,647 - *
Argent Classic Convertible $1,330,000 * - 38,333 - *
Arbitrage Fund L.P.
BP Amoco PLC Master Trust $1,284,000 * - 37,007 - *
Harvest Master Enhanced Ltd. $1,172,000 * - 33,779 - *
ACE Tempest Reinsurance Ltd. $1,015,000 - 29,254 - *
McMahan Securities Co. L.P. $964,000 * - 27,784 - *
Argent Classic Convertible $910,000 * - 26,227 - *
Arbitrage Fund II, L.P.
F.M. Kirby Foundation, Inc. $790,000 * - 22,769 - *
Delta Airlines Master Trust - CV $780,000 * - 22,481 - *
Partner Reinsurance Company Ltd. $780,000 * - 22,481 *
LDG Limited $733,000 * - 21,126 - *
Florida Power and Light Group $729,000 * - 21,011 - *
Inc. Employee Pension Plan
Harvest Offshore Investors Ltd. $703,000 * - 20,261 - *
UnumProvident Corporation $655,000 * - 18,878 - *
OCM Global Convertible $575,000 * - 16,572 - *
Securities Fund
Delta Pilots Disability & $550,000 * - 15,852 - *
Survivorship Trust - CV
Xavex Convertible Arbitrage 10 $480,000 * - 13,834 - *
Fund
Microsoft Capital Group, L.P. $455,000 * - 13,113 - *
Class C Trading Company, Ltd. $440,000 * - 12,681 - *
International Truck & Engine $440,000 * - 12,681 - *
Corporation Non-Contributory
Retirement Plan Trust
United Technologies Corporation $437,000 * - 12,595 - *
Master Retirement Trust
Xavex Convertible Arbitrage 5 $430,000 * - 12,393 - *
Constans Healthcare Convertible $400,000 * - 11,528 - *
Arbitrage Fund
Trust for the Defined Benefit $395,000 * - 11,384 - *
Plans of ICI American Holdings,
Inc.
CASAM Argent Classic Convertible $355,000 * - 10,231 - *
Arbitrage Fund Limited
Harvest Capital L.P. $347,000 * - 10,001 - *
Rampart Enhanced Convertible $334,000 * - 9,626 - *
Investors, LLC
-49-
Qwest Occupational Health Trust $310,000 * - 8,934 - *
International Truck & Engine $265,000 * - 7,637 - *
Corporation Retiree Health
Benefit Trust
International Truck & Engine $240,000 * - 6,917 - *
Corporation Retirement Plan for
Salaried Employees Trust
Partners Group Alternative $210,000 * - 6,052 - *
Strategies PCC LTD
Xavex Convertible Arbitrage 2 $200,000 * - 5,764 - *
Fund
Goldman Sachs & Co. Profit $177,000 * - 5,101 - *
Sharing Master Trust
Hotel Union & Hotel Industry of $176,000 * - 5,072 - *
Hawaii Pension Plan Master
Trust
Lyxor Master Fund Ref: $170,000 * - 4,899 - *
Argent/LowLev CB c/o Argent
HFR CA Global Select Master $120,000 * - 3,458 - *
Trust Account
Absolute Strategies Fund $105,000 * - 3,026 - *
Viacom, Inc. Pension Plan $64,000 * - 1,844 - *
Master Trust
Franklin and Marshall College $45,000 * - 1,296 - *
Argent LowLev Convertible $30,000 * - 864 - *
Arbitrage Fund II, LLC
--------------------------------------
*Less than 1%
(1) The aggregate principal amount held by selling securityholders in this
prospectus is more than $197,782,000 because some of the selling securityholders
may have transferred debentures pursuant to Rule 144A or otherwise reduced their
positions prior to selling pursuant to the registration statement of which this
prospectus is a part. The maximum aggregate principal amount of debentures that
may be sold under this prospectus will not exceed $197,782,000.
(2) Shares in this column do not include the shares of common stock issuable
upon conversion of the debentures listed in the column to the right.
-50-
PLAN OF DISTRIBUTION
The selling securityholders and their transferees, pledgees,
donees and successors may sell the debentures and the underlying shares of
common stock directly to purchasers or through underwriters, broker-dealers or
agents, who may receive compensation in the form of discounts, concessions or
commissions from the selling securityholders or the purchasers. These discounts,
concessions or commissions as to any particular underwriter, broker-dealer or
agent may be in excess of those customary in the types of transactions involved.
To our knowledge, the selling securityholders have not entered into any
agreement, arrangement or understanding with any particular broker or market
maker with respect to the sale of the securities covered by this prospectus.
The debentures and the common stock may be sold in one or more
transactions at:
o fixed prices;
o prevailing market prices at the time of sale;
o prices related to the prevailing market prices;
o varying prices determined at the time of sale;
or
o negotiated prices.
In the case of the common stock, these sales may be effected in
transactions:
o on any national securities exchange or
quotation service on which our common stock may
be listed or quoted at the time of sale,
including the New York Stock Exchange;
o in the over-the-counter market;
o otherwise than on such exchanges or services or
in the over-the-counter market;
o through the writing of options, whether the
options are listed on an options exchange or
otherwise; or
o through the settlement of short sales.
These transactions may include block transactions or crosses. Crosses are
transactions in which the same broker acts as agent on both sides of the trade.
In connection with the sale of the debentures and the underlying
common stock or otherwise, the selling securityholders may enter into hedging
transactions with broker-dealers or other financial institutions. These
broker-dealers or financial institutions may in turn engage in short sales of
the common stock in the course of hedging the positions they assume with the
selling securityholders. The selling securityholders may also sell the
debentures and the underlying common stock short and deliver these securities to
close out such short positions, or loan or pledge the debentures or the
underlying common stock to broker-dealers that in turn may sell these
securities.
Selling securityholders may not sell any, or may not sell all, of
the debentures and shares of common stock offered by them pursuant to this
prospectus. In addition we cannot assure holders that a selling securityholder
will not transfer, devise or gift the debentures and underlying shares of common
stock by other means not described in this prospectus. Moreover, any securities
covered by this prospectus that qualify for sale pursuant to Rule 144 or Rule
144A under the Securities Act may be sold thereunder, rather than pursuant to
this prospectus.
The aggregate proceeds to the selling securityholders from the
sale of the debentures or the underlying common stock offered pursuant to this
prospectus will be the purchase price of such securities less discounts and
commissions, if any. Each of the selling securityholders reserves the right to
accept and, together with their agents from time to time, reject, in whole or in
part, any proposed purchase of debentures or common stock to be made directly or
through their agents. We will not receive any of the proceeds from this
offering.
Our common stock is listed for trading on the New York Stock
Exchange. We do not intend to list the debentures for trading on any national
securities exchange or automated quotation system and can give no assurance as
to the development of any trading market for the debentures.
-51-
In order to comply with the securities laws of some states, if
applicable, the debentures and the underlying common stock may be sold in these
jurisdictions only through registered or licensed brokers or dealers. In
addition, in some states the debentures may not be sold unless they have been
registered or qualified for sale or an exemption from registration or
qualification requirements is available and complied with.
The selling securityholders and any broker-dealers, agents or
underwriters that participate in the distribution of the debentures and the
underlying common stock may be deemed to be "underwriters" within the meaning of
the Securities Act. In this case, any profits realized by the selling
securityholders and any discounts, commissions or concessions received by these
broker-dealers, agents or underwriters may be deemed to be underwriting
discounts or commissions under the Securities Act. In addition, selling
securityholders who are deemed to be "underwriters" will be subject to the
prospectus delivery requirements of the Securities Act and may be subject to
statutory liabilities, including, but not limited to, liabilities under Sections
11, 12 and 17 of the Securities Act and Rule 10b-5 under the Exchange Act.
The selling securityholders and any other persons participating
in the distribution of the debentures and the underlying common stock will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder. Regulation M of the Exchange Act may limit the timing of
purchases and sales of the debentures and underlying common stock by the selling
securityholders and any such other person. In addition, Regulation M may
restrict the ability of any person participating in the distribution to engage
in market-making activities with respect to the particular securities being
distributed for a period of up to five business days prior to the commencement
of the distribution. This may affect the marketability of the debentures and the
underlying common stock.
With respect to a particular offering of the debentures and the
underlying common stock, to the extent required, an accompanying prospectus
supplement or, if appropriate, a post-effective amendment to the registration
statement, of which this prospectus is a part, will set forth the following
information:
o the specific debentures or common stock to be
offered or sold;
o the names of selling securityholders;
o the respective purchase prices and public
offering prices and other material terms of the
offering;
o the names of any participating agents,
broker-dealers or underwriters; and
o any applicable commissions, discounts,
concessions and other items constituting
compensation from the selling securityholders.
We entered into the registration rights agreement for the benefit
of the holders of the debentures to register their debentures and the underlying
common stock under applicable federal and state securities laws under certain
circumstances and at certain times. The registration rights agreement provides
that we and the selling securityholders will indemnify each other and our
respective directors, officers and controlling persons against specific
liabilities in connection with the offer and sale of the debentures and
underlying common stock, including liabilities under the Securities Act, or will
be entitled to contribution in connection with those liabilities. We will pay
all of our expenses and specified expenses incurred by the selling
securityholders incidental to the registration, offering and sale of the
debentures and underlying common stock to the public, but each selling
securityholder will be responsible for the payment of commissions, concessions,
fees and discounts of underwriters, broker-dealers and agents.
We will use our reasonable best efforts to keep the registration
statement, of which this prospectus is a part, effective until the earlier of:
o the sale pursuant to the registration statement or
pursuant to Rule 144 under the Securities Act, of
all of the securities registered thereunder; or
o the expiration of the holding period under Rule
144(k) under the Securities Act, or any successor
provision.
We are permitted to suspend the use of this prospectus under
specified 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, but not to exceed an aggregate of 90 days for all
periods in any 12-month period. In addition, notwithstanding the foregoing, we
are permitted to suspend the use of this prospectus for up to 60 days in any
three-month period under certain circumstances relating to an acquisition or a
probable acquisition or financing, recapitalization, business combination or
other similar transaction. We will pay predetermined liquidated damages if this
prospectus is unavailable for periods in excess of those permitted as described
above.
-52-
LEGAL MATTERS
The validity of the debentures and the shares of our common stock
issuable upon conversion of the debentures have been passed upon for us by
Hodgson Russ LLP, Buffalo, New York. Attorneys in Hodgson Russ LLP beneficially
own an aggregate of approximately 8,850 shares of our common stock.
EXPERTS
The consolidated financial statements, the related financial
statement schedule, and management's report on the effectiveness of internal
control over financial reporting incorporated in this prospectus by reference
from our Annual Report on Form 10-K have been audited by Deloitte & Touche LLP,
an independent registered public accounting firm, as stated in their reports,
which are incorporated herein by reference and have been so incorporated in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements
and other information with the Securities and Exchange Commission. Copies of
these reports, proxy statements and other information may be read and copied at
the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549.
You may also call the SEC at 1-800-SEC-0330 for further information on the
operation of the Public Reference Room. The SEC maintains a web site that
contains reports, proxy and information statements and other information
regarding registrants, including us, that file electronically with the SEC. The
address of the SEC's web site is www.sec.gov. The address of our web site is
www.greatbatch.com.
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" our publicly
filed documents into this prospectus, which means that we may disclose material
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus and any
later information that we file with the SEC will automatically update and
supersede this information. We incorporate by reference into this prospectus (i)
the documents listed below, (ii) all documents filed by us pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act") after the date
of filing of this registration statement and prior to the effectiveness of this
registration statement, and (iii) any additional documents subsequently filed by
us pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until this
offering is complete. This prospectus is part of a registration statement on
Form S-3 that we filed with the SEC and does not contain all of the information
set forth in the registration statement.
The following documents that we previously filed with the SEC are
incorporated by reference:
(1) our Annual Report on Form 10-K for the fiscal year
ended December 29, 2006, which was filed on
February 27, 2007;
(2) our Current Reports on Form 8-K dated February 28,
2007, March 19, 2007, March 22, 2007, March 28,
2007 and April 2, 2007.
We will provide any person to whom a copy of this prospectus is
delivered, on written or oral request, a copy of any or all of the documents
incorporated by reference free of charge. We will not provide copies of the
exhibits to those documents unless we specifically incorporated by reference the
exhibits in this prospectus. You should direct any requests for documents to
Greatbatch, Inc., 9645 Wehrle Drive, Clarence, New York 14031, (716) 759-6901,
Attention: Director of Investor Relations.
-53-
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth as estimate of the various costs
and expenses payable by the Registrant in connection with the sale of the shares
being registered hereby:
SEC registration fee $ 6,072
Legal fees and expenses 30,000
Accounting fees and expenses 15,000
Miscellaneous expenses 1,928
Total
$ 53,000
Item 15. Indemnification and Limitation of Liability of Directors and Officers.
Section 145 of the Delaware General Corporation Law, or the DGCL,
provides that a corporation may 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
(other than an action by or in the right of the corporation by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise), against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he 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 conduct was unlawful.
Section 145 further provides that a corporation similarly may
indemnify any such person serving in any such capacity who was or is a party or
is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its favor
by reason of the fact that he is or was a director, officer, employee or agent
of the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys' fees)
actually and reasonably incurred in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation and
except that no indemnification shall be made in respect of 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 Delaware Court of Chancery or
such other court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all of
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Delaware Court of Chancery or such other
court shall deem proper.
Our restated certificate of incorporation provides that
indemnification shall be to the fullest extent permitted by the DGCL for all
current or former directors or officers of our company.
As permitted by the DGCL, the certificate of incorporation
provides that directors of our company shall have no personal liability to our
company or our stockholders for monetary damages for breach of fiduciary duty as
a director, except (1) for any breach of the director's duty of loyalty to our
company or our stockholders, (2) for acts or omissions not in good faith or
which involve intentional misconduct or knowing violation of law, (3) under
Section 174 of the DGCL or (4) for any transaction from which a director derived
an improper personal benefit.
II-1
Item 16. Exhibits.
EXHIBIT DESCRIPTION
NUMBER -----------
-------
3.1 Amended and Restated Certificate of Incorporation
(incorporated by reference to Exhibit 3.1 to the
registrant's registration statement on Form S-1
(File No. 333-37554)).
3.2 Amended and Restated Bylaws (incorporated by
reference to Exhibit 3.2 to the registrant's
quarterly report on Form 10-Q for the quarterly
period ended March 29, 2002).
4.2 Indenture for 2 1/4% Convertible Subordinated
Debentures Due 2013 dated March 28, 2007 by and
between Greatbatch, Inc. and Manufacturers and
Traders Trust Company, as "Trustee" (incorporated
by reference to the registrant's current report on
Form 8-K filed on March 29, 2007).
4.3 First Supplemental Indenture, dated April 2, 2007,
by and between Greatbatch, Inc. and Manufacturers
and Traders Trust Company (incorporated by
reference to the registrant's current report on
Form 8-K filed on April 4, 2007).
4.4 Form of Global Debenture (included in Exhibit 4.2)
5.1* Opinion of Hodgson Russ LLP
10.1 Form of Exchange and Purchase Agreement by and
between Greatbatch, Inc. and certain other parties
thereto (incorporated by reference to the
registrant's current report on Form 8-K filed on
March 29, 2007).
10.2 Form of Registration Rights Agreement dated March
28, 2007 by and among Greatbatch, Inc. and each of
the Initial Purchasers party thereto (incorporated
by reference to the registrant's current report on
Form 8-K filed on March 29, 2007).
12.1 Statement regarding computation of ratio of
earnings to fixed charges for each year in the
five-year period ended December 29, 2006
(incorporated by reference to registrant's annual
report on Form 10-K filed on February 27, 2007).
23.1* Consent of Deloitte & Touche LLP
23.2* Consent of Hodgson Russ LLP (included in Exhibit
5.1)
24.1* Power of Attorney (included on signature page to
registration statement)
25.1* Form T-1 Statement of Eligibility of Manufacturers
and Traders Trust Company as Trustee.
----------------------
* Filed herewith.
Item 17. Undertakings.
(1) The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
registration statement:
(i) to include any prospectus required by
Section 10(a)(3) of the Securities Act
of 1933;
(ii) to reflect in the prospectus any facts
or events arising after the effective
date of this 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 this registration
statement. ;
(iii) to include any material information
with respect to the plan of
distribution not previously disclosed
in this registration statement or any
material change to such information in
this registration statement;
II-2
provided however, that the undertakings set forth in
paragraphs (a)(i), (a)(ii) and (a)(iii) 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 Securities and Exchange 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 this registration
statement.
(b) 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.
(c) To remove from registration by means of a
post-effective amendment any of the securities being
registered hereby which remain unsold at the
termination of the offering.
(2) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act that is
incorporated by reference in this registration statement shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) 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
provisions in Item 15 above, 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 Securities 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 or
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 of whether such
indemnification by it is against public policy as expressed in
the Securities 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, 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 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Buffalo, State of New York, on April 27, 2007.
GREATBATCH, INC.
By: /s/ Thomas J. Hook
----------------------------------------------
Thomas J. Hook
President & Chief Executive Officer
(Principal Executive Officer)
By: /s/ Thomas J. Mazza
----------------------------------------------
Thomas J. Mazza
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
By: /s/ Marco F. Benedetti
-----------------------------------------------
Marco F. Benedetti
Corporate Controller
(Principal Accounting Officer)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Thomas J. Hook and Thomas J. Mazza, or
any of them, his attorney-in-fact, each with the power of substitution, for him
in any and all capacities, to sign any amendments (including all post-effective
amendments) to this registration statement, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ------
_/s/ Thomas J. Hook President and Chief Executive Officer, April 27, 2007
------------------------ and Director (Principal Executive Officer)
Thomas J. Hook
_/s/ Edward F. Voboril Chairman and Director April 27, 2007
------------------------
Edward F. Voboril
_/s/ Pamela G. Bailey Director April 27, 2007
------------------------
Pamela G. Bailey
------------------------- Director
Dr. Joseph A. Miller, Jr.
II-4
------------------------- Director
Bill R. Sanford
_/s/ Peter H. Soderberg Director April 27, 2007
-----------------------
Peter H. Soderberg
_/s/ Thomas S. Summer Director April 27, 2007
------------------------
Thomas S. Summer
------------------------- Director
William B. Summers, Jr.
_/s/ John P. Wareham Director April 27, 2007
------------------------
John P. Wareham
II-5
EXHIBIT INDEX
EXHIBIT DESCRIPTION
NUMBER ------------
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3.1 Amended and Restated Certificate of Incorporation
(incorporated by reference to Exhibit 3.1 to the
registrant's registration statement on Form S-1
(File No. 333-37554)).
3.2 Amended and Restated Bylaws (incorporated by
reference to Exhibit 3.2 to the registrant's
quarterly report on Form 10-Q for the quarterly
period ended March 29, 2002).
4.2 Indenture for 2 1/4% Convertible Subordinated
Debentures Due 2013 dated March 28, 2007 by and
between Greatbatch, Inc. and Manufacturers and
Traders Trust Company, as "Trustee" (incorporated
by reference to the registrant's current report on
Form 8-K filed on March 29, 2007).
4.3 First Supplemental Indenture, dated April 2, 2007,
by and between Greatbatch, Inc. and Manufacturers
and Traders Trust Company (incorporated by
reference to the registrant's current report on
Form 8-K filed on April 4, 2007).
4.4 Form of Global Debenture (included in Exhibit 4.2).
5.1* Opinion of Hodgson Russ LLP.
10.1 Form of Exchange and Purchase Agreement by and
between Greatbatch, Inc. and certain other parties
thereto (incorporated by reference to the
registrant's current report on Form 8-K filed on
March 29, 2007).
10.2 Form of Registration Rights Agreement dated March
28, 2007 by and among Greatbatch, Inc. and each of
the Initial Purchasers party thereto (incorporated
by reference to the registrant's current report on
Form 8-K filed on March 29, 2007).
12.1 Statement regarding computation of ratio of
earnings to fixed charges for each year in the
five-year period ended December 29, 2006
(incorporated by reference to registrant's annual
report on Form 10-K filed on February 27, 2007).
23.1* Consent of Deloitte & Touche LLP.
23.2* Consent of Hodgson Russ LLP (included in Exhibit
5.1).
24.1* Power of Attorney (included on signature page to
registration statement).
25.1 Form T-1 Statement of Eligibility of Manufacturers
and Traders Trust Company as Trustee.
* Filed herewith
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