As
filed with the Securities and Exchange Commission on November 10,
2005
Registration
No. 333- 122297
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
POST-EFFECTIVE
AMENDMENT NO. 4
TO
FORM
S-3
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
EURONET
WORLDWIDE, INC.
(Exact
name of registrant as specified in its charter)
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Delaware
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74-2806888
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(State
or other jurisdiction of incorporation)
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(I.R.S.
Employer Identification No.)
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4601
College Boulevard, Suite 300
Leawood,
Kansas 66211
(913)
327-4200
(Address,
including zip code, and telephone number, including area code, of registrant’s
principal executive offices)
Daniel
R. Henry
Chief
Operating Officer and President
Euronet
Worldwide, Inc.
4601
College Boulevard, Suite 300
Leawood,
Kansas 66211
(913)
327-4200
(Name,
address, including zip code, and telephone number, including area code, of
agent
for service)
Copies
to:
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Jeffrey
B. Newman
Executive
Vice President and General Counsel
Euronet
Worldwide, Inc.
2nd
Floor, Kelting House
Southernhay,
Basildon
Essex
SS14 1NU
United
Kingdom
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Approximate
date of commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement.
If
the only securities being registered on this Form are being offered pursuant
to
dividend or interest reinvestment plans, please check the following
box. ¨
If
any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box.
x
If
this Form is filed to register additional securities for an offering pursuant
to
Rule 462(b) under the Securities Act of 1933, please check the following box
and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.
¨
If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the
Securities Act of 1933, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. ¨
If
delivery of the prospectus is expected to be made pursuant to Rule 434, please
check the following box. ¨
The
registrant hereby amends this registration statement on such date or dates
as
may be necessary to delay its effective date until the registrant shall file
a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The
information in this prospectus is not complete and may be changed. These
securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer
to sell these securities and it is not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT
TO COMPLETION, DATED NOVEMBER 10, 2005
PROSPECTUS
$140,000,000
Euronet
Worldwide, Inc.
1.625%
Convertible Senior Debentures Due 2024
Common
Stock Issuable upon Conversion of the Debentures
We
issued and sold $140,000,000 aggregate principal amount of 1.625% Convertible
Senior Debentures Due 2024 in a private offering on December 15, 2004. This
prospectus may be used by selling security holders to sell the Debentures and
common stock issuable upon conversion of the Debentures. The shares of common
stock include preferred stock purchase rights attached to the common stock
under
our stockholder rights plan. We will not receive any proceeds from the offering
of these securities by the selling security holders. The Debentures are our
senior unsecured obligations and will rank equally in right of payment with
all
of our other existing and future senior unsecured debt. The Debentures will
be
effectively subordinated to all of our existing and future secured debt and
to
the indebtedness and other liabilities of our subsidiaries.
The
Debentures bear interest at a rate of 1.625% per annum. We will pay interest
on
the Debentures on June 15 and December 15 of each year, beginning June 15,
2005.
Beginning with the period commencing on December 20, 2009 and ending on June
14,
2010, and for each of the six-month periods thereafter commencing on June 15,
2010, we will pay contingent interest during the applicable interest period
if
the average trading price of a Debenture during a five trading-day period
preceding such applicable interest period equals or exceeds 120% of the
principal amount of the Debentures. The contingent interest payable per
Debenture in respect of any applicable interest period will equal 0.30% per
annum of the average trading price of a Debenture for such five trading-day
period. The Debentures will mature on December 15, 2024.
The
Debentures will be convertible at your option into shares of our common stock,
par value $0.02 per share, if: (1) the price of our common stock reaches a
specified threshold, (2) subject to certain limitations, the trading price
for
the Debentures falls below certain thresholds, (3) we have called your
Debentures for redemption or (4) specified corporate transactions occur. Upon
conversion, we will have the right to deliver, in lieu of our common stock,
cash
or a combination of cash and shares of our common stock. Subject to the above
conditions, each $1,000 principal amount of Debentures will be convertible
into
29.7392 shares (equivalent to an initial conversion price of approximately
$33.63 per share of common stock), subject to adjustment as described in this
prospectus. If a change of control (as defined in this prospectus) occurs on
or
prior to December 15, 2009, we will increase the conversion rate by a number
of
additional shares of common stock or, in lieu thereof, we may in certain
circumstances elect to adjust the conversion rate and related conversion
obligation so that the Debentures are convertible into shares of the acquiring
or surviving company, in each case as described in this prospectus. Shares
of
our common stock are traded on the Nasdaq National Market under the symbol
“EEFT.” The last reported bid price of our common stock on March 22, 2005 was
$26.05 per share.
We
may redeem some or all of the Debentures for cash at any time on or after
December 20, 2009 at 100% of their principal amount, plus accrued and unpaid
interest, including contingent interest, if any, and liquidated damages, if
any.
You may require us to repurchase all or a portion of your Debentures on December
15, 2009, 2014 and 2019, at a price equal to the principal amount of the
Debentures to be repurchased, plus accrued and unpaid interest, including
contingent interest, if any, and liquidated damages, if any, to the repurchase
date.
You
may require us to repurchase all or a portion of your Debentures upon the
occurrence of a change of control (as defined in this prospectus).
We
do not intend to apply for listing of the Debentures on any securities exchange
or for inclusion of the Debentures in any automated quotation system. The
Debentures are expected to be eligible for trading in the Private Offerings,
Resales and Trading through Automated Linkages (PORTAL) system of the National
Association of Securities Dealers, Inc.
Investing
in the Debentures involves risks. See “Risk
Factor s”
beginning on page 11.
Neither
the Securities and Exchange Commission nor any other regulatory body has
approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
The
date of this prospectus is November __,
2005.
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This
prospectus is part of a resale registration statement that we have filed with
the Securities and Exchange Commission using a “shelf” registration process.
Under this prospectus, as it may be amended or supplemented from time to time,
the selling security holders may sell some or all of the securities described
in
this prospectus in one or more transactions from time to time.
You
should rely only on the information contained or incorporated by reference
in
this prospectus and any prospectus supplement. We have not authorized anyone
else to provide you with different information. If anyone provides you with
different or inconsistent information, you should not rely on it. You should
assume that the information appearing in this prospectus and any prospectus
supplement, as well as the information we file with the Securities and Exchange
Commission and incorporate by reference in this prospectus or any prospectus
supplement, is accurate only as of the date of the documents containing the
information. The securities covered by this prospectus are not offered in any
jurisdiction where offers to sell, or solicitations of offers to purchase,
such
securities are unlawful.
Unless
the context otherwise requires, the terms “Euronet Worldwide,
Inc.,”“Company,”“Euronet,”“we,”“us,” and “our” refer only to Euronet Worldwide,
Inc. and not our subsidiaries, except that, for purposes of the information
under “Our Business” and “Summary of Historical Consolidated Financial Data”
below and “Risk Factors—Risks Related to Our Business,” the terms “Euronet
Worldwide, Inc.,”“Company,”“we,”“us,” and “our” refer to Euronet Worldwide, Inc.
and its subsidiaries unless the context otherwise requires. Investors should
be
aware that Euronet Worldwide, Inc.’s subsidiaries will not guarantee the
Debentures. Unless otherwise indicated, all information contained herein assumes
no exercise of the initial purchaser’s option to purchase additional Debentures.
FORWARD-LOOKING
STATEMENTS
This
prospectus and the documents incorporated herein by reference may contain
“forward-looking statements,” including, but not limited to, statements of plans
and objectives, statements of future economic performance and statements of
assumptions underlying such statements, and statements of the Company’s or
management’s intentions, hopes, beliefs, expectations or predictions of the
future. You can often identify forward-looking statements by the use of
forward-looking terminology, such as “could,”“should,”“will,”“will
be,”“intended,”“continue,”“believe,”“may,”“hope,”“anticipate,”“goal,”“forecast,”“plan,”“estimate”
or variations thereof. In particular, forward-looking statements include, but
are not limited to, statements relating to the following:
| • | trends affecting our business plans and financing plans and requirements; | |||
| • | trends affecting our business; | |||
| • | the adequacy of capital to meet our capital requirements and expansion plans; | |||
1
| • | the assumptions underlying our business plans; | |||
| • | business strategy; | |||
| • | government regulatory action; | |||
| • | technological advances; and | |||
| • | projected costs and revenues. | |||
Forward-looking
statements are not guarantees of future performance or results. Forward-looking
statements are based on estimates, forecasts and assumptions involving risks
and
uncertainties that could cause actual results or outcomes to differ materially
from those expressed or implied in such forward-looking statements. The
uncertainties, risks and assumptions referred to above include, but are not
limited to, the following:
| • | technological and business developments in the local card, electronic and mobile banking and mobile phone markets affecting transaction and other fees that we are able to charge for our services; | |||
| • | foreign exchange fluctuations; | |||
| • | competition from bank-owned ATM networks, outsource providers of ATM services, software providers and providers of outsourced mobile phone prepaid services; | |||
| • | our relationships with our major customers, sponsor banks in various markets and international card organizations, including the risk of contract terminations with major customers; | |||
| • | changes in law and regulations affecting our business; | |||
| • | our ability to effectively compete for market share and generate growth; | |||
| • | retention of key executives and personnel; | |||
| • | the collectibility of receivables and adequacy of our allowance for credit losses; | |||
| • | general economic, financial and market conditions and the duration and extent of any future economic downturns; | |||
| • | the cost of borrowing, availability of credit and terms of and compliance with debt covenants; | |||
| • | renewal of sources of funding as they expire and the availability of replacement funding; | |||
| • | the outlook for markets we serve; and | |||
| • | the other risks and uncertainties as are described under “Risk Factors” in this prospectus or “Factors Affecting Future Performance” in our public filings with the Securities and Exchange Commission. | |||
All
of our forward-looking statements, whether written or oral, are expressly
qualified by these cautionary statements and any other cautionary statements
that may accompany such forward-looking statements. In addition, we disclaim
any
obligation to update any forward-looking statements to reflect events or
circumstances after the date of this prospectus.
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The
following summary is not intended to be a complete description of the matters
covered in this prospectus and is subject to and qualified in its entirety
by
the more detailed information and historical consolidated financial statements,
including the notes to those financial statements, appearing elsewhere or
incorporated by reference in this prospectus. Investors should carefully
consider the information set forth under “Risk Factors.”
Business
Summary
Euronet
Worldwide, Inc. is a leading provider of secure electronic financial transaction
solutions. In our EFT Division, we process transactions for a network of
approximately 6,841automated teller machines (“ATMs”) across Europe and provide
financial transaction processing services, network gateways, and ATM operation
outsourcing services to financial institutions, retailers and mobile phone
operators. Through our Prepaid Processing Division, we provide prepaid
processing, or top-up services, for prepaid mobile airtime and other prepaid
products as well as electronic consumer money transfer and bill payment
services. We operate a network of more than 218,000 point of sale (“POS”)
terminals providing electronic processing of prepaid mobile phone airtime top-up
services in the U.K., Australia, Poland, Ireland, New Zealand, Germany, the
U.S., Spain, Malaysia and Indonesia. Our Software Solutions Division offers
a
suite of integrated electronic financial transaction (EFT) software solutions
for electronic payment and transaction delivery systems.
Our
solutions are used in more than 70 countries around the world. As of
September 30, 2005, we had 14 principal offices in Europe, three in the United
States four in Asia-Pacific and two in the Middle East. Our headquarters office
is in Leawood, Kansas.
EFT
Processing Segment
Our
EFT Processing Segment provides services to banks and mobile phone companies
primarily in the developing markets of Central and Southern Europe (Hungary,
Poland, Czech Republic, Croatia, Romania, Slovakia, Serbia and Greece), Egypt,
Indonesia and India, as well as in the developed countries of Western Europe
(Germany and the U.K.). In most of these markets, we own small networks of
ATMs
and accept cards of our client banks or international logo’d cards on those
ATMs. We also increasingly provide ATM operation services under outsourcing
agreements with banks in a number of markets, and in the U.K., to an independent
operator of ATMs.
Transactions
on Owned Networks of ATMs
Our
agreements with banks and international card organizations generally provide
that all credit and debit cards issued by the customer bank or organization
may
be used at all ATM machines we operate in a given market. In many markets,
we
have agreements with a bank under which we are designated as a service provider
(which we refer to as “sponsorship agreements”) for the acceptance of cards
bearing international logos, such as Visa and MasterCard. These card acceptance
or sponsorship agreements allow us to receive transaction authorization directly
from the card issuing bank or international card organization. Our agreements
generally provide for a term of three to seven years and are automatically
renewed unless either party gives notice of non-renewal prior to the termination
date. In some cases, the agreements are terminable by either party upon six
months notice. We are generally able to connect a bank to our network within
30
to 90 days of signing a card acceptance agreement. Generally, the bank provides
the cash needed to complete transactions on the ATM, although we have contracted
for cash supply with a cash supply bank in the Czech Republic.
The
ATM transaction fees we charge under our card acceptance agreements vary
depending on the type of transaction (which are currently cash withdrawals,
balance inquiries, GSM airtime recharge purchases, deposits and transactions
not
completed because authorization is not given by the relevant card issuer) and
the number of transactions attributable to a particular card issuer. The fees
we
charge to the card issuers are independent of any fees charged by the card
issuers to cardholders in connection with the ATM transactions.
We
have processing centers for EFT processing in Budapest, Hungary, Mumbai, India
and Jakarta, Indonesia. Our operations centers use our own proprietary software,
the Integrated Transaction Management System. The ATMs in our networks are
able
to process transactions for holders of credit and debit cards issued by or
bearing
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the
logos of banks and international card organizations such as American Express,
Diners Club International, Visa, MasterCard and Europay.
ATM
Outsourcing
We
offer complete outsourced management services to banks and other organizations
using our processing centers’ full suite of secure electronic financial
transaction processing software. Our outsourced management services include
management of an existing bank network of ATMs, development of new ATM networks
on a complete turn-key basis (as we have done for Citibank in Greece),
management of POS networks, management of charge and debit card databases and
other financial processing services. These services include 24-hour monitoring
from our processing centers of each individual ATM’s status and cash condition,
coordinating the cash delivery and management of cash levels in the ATM and
automatic dispatch for necessary service calls. They also include real-time
transaction authorization, advanced monitoring, network gateway access, network
switching, 24-hour customer services, maintenance services, settlement and
reporting.
Our
outsourced management agreements, other than in Germany, provide for fixed
monthly management fees in addition to fees payable for each transaction.
Therefore, the transaction fees under these agreements are generally lower
than
under card acceptance agreements. The fees payable under our outsourced
management agreement in Germany are purely transaction based and include no
fixed component.
Other
Products and Services
Our
network constitutes a distribution network through which financial and other
products or services may be sold at a low incremental cost. We have developed
value-added services in addition to basic cash withdrawal and balance inquiry
transactions. These new services include bill payment, “mini-statement” and
recharge (purchasing prepaid airtime from ATMs and mobile phone devices)
transactions. We are committed to the ongoing development of innovative new
products and services to offer our processing services customers and will
implement additional services as markets develop.
Prepaid
Processing Segment
Our
Prepaid Processing Division provides networks for electronic distribution of
prepaid mobile phone time to mobile operators and electronic consumer money
transfer and bill payment services, through the maintenance of processing
centers that are connected to POS terminals or cash register systems at retail
outlets. Our principal Prepaid Processing operations are in the U.K., Germany,
Australia, the U.S., New Zealand, Poland and Spain. We have expanded this
division principally through acquisitions and are continuing to seek acquisition
opportunities in many markets.
Customers
using mobile phones pay for their usage in two ways: through “postpaid” accounts
where usage is billed at the end of each billing period, and through “prepaid”
accounts where customers must pay in advance by crediting their accounts prior
to usage. Although operators in the United States and certain European countries
have provided service principally through postpaid accounts, the trend in Europe
has shifted toward prepaid accounts because mobile operators of those accounts
do not take the credit risk with respect to payment for airtime usage. In many
developing markets, the majority of mobile phones are prepaid. Currently two
principal methods are available to credit prepaid accounts (referred to as
“top-up” of accounts). The first is through the purchase of “scratch cards”
bearing code numbers, that, when entered into a customer’s mobile phone account,
credit the account by a certain value of airtime. Scratch cards are sold
predominantly through retail outlets. The second is through various electronic
means of crediting accounts using POS terminals. Electronic top-up or “e-top-up”
methods have several advantages over scratch cards, primarily because electronic
methods do not require the creation, distribution and management of a physical
inventory of cards. Currently scratch cards are the predominant method of
crediting mobile phone accounts in many developed markets, but a shift is
occurring in such markets away from usage of scratch cards to the usage of
electronic top-up methods.
In
a typical POS top-up transaction in the UK, a consumer in a retail shop will
use
an electronic card issued by the mobile phone operator to identify the
consumer’s mobile phone number. The consumer uses this card with a specially
programmed POS terminal in the shop that is connected to our network. The
consumer will make a payment of
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a
defined amount to the retailer (in cash or by adding to the amount to a bank
card transaction for other services). Using the electronic connection we
maintain with the mobile operator, the retailer will use the POS terminal to
credit the purchased amount of airtime directly to the account of the consumer.
We receive a commission on each transaction that is withheld from the payments
made, and we share that commission with the retailers.
In
a typical POS top-up transaction in markets other than the U.K., we top-up
the
consumer’s account by issuing a voucher from the POS terminal. The voucher
includes PIN numbers used to access the mobile phone time. Depending upon market
practices, we purchase such vouchers either from the mobile operators directly
or from wholesalers of PINs. The retailers settle the transaction by paying
us
the amount received from the consumer, and we pay that amount to the mobile
phone operators. We receive a commission on each transaction that is withheld
from the payments made, and we share that commission with the retailers.
Our
agreements with major retailers for the POS business typically have two-year
terms. These agreements include terms regarding the connection of our networks
to the respective retailer’s registers or payment terminals or the maintenance
of POS terminals, and obligations concerning settlement and liability for
transactions processed. Our agreements with individual or small retailers
regarding the installation and operation of the POS terminals are short-term
agreements, typically with terms of two years, but with the ability of either
party to terminate the agreement upon three months’ notice and include
provisions similar to those with major retailers.
During
the second quarter 2005, we launched our money transfer and bill payment
services through the acquisition of TelecommUSA. TelecommUSA's patented
card-based money transfer and bill payment system allows transactions to be
initiated primarily through POS terminals and Integrated Cash Register Systems
(ICR). Transactions can also be initiated through the internet, fax or
telephone. Revenue in the money transfer and bill payment business is earned
through the charging of a transaction fee, as well as the difference between
purchasing currency at wholesale exchange rates and selling the currency to
consumers at retail exchange rates. We have origination and distribution agents
in place, which each earn a fee for the respective service. These fees are
recognized as a direct operating costs at the time of sale.
Software
Solutions Segment
Through
our subsidiary Euronet USA, we offer an integrated suite of card and retail
transaction delivery applications for the IBM i-Series (formerly AS/400)
platform and some applications on NT server environments. The core system of
this product, called “Integrated Transaction Management” (ITM), provides for
transaction identification, transaction routing, security, transaction detail
logging, network connections, authorization interfaces and settlement. Front-end
systems in this product support ATM and POS management, telephone banking,
Internet banking, mobile banking and event messaging. These systems provide
a
comprehensive solution for ATM, debit or credit card management and bill payment
facilities. We also offer increased functionality to authorize, switch and
settle transactions for multiple banks through our GoldNet module. We use
GoldNet for our own EFT requirements, processing transactions across ten
countries in Europe.
Although
our Software Solutions Segment is headquartered in the United States,
approximately 75% of our software customers are international and in particular
in developing markets. This distribution is largely because our core software
product is a relatively small and inexpensive package that is appropriate for
banks with smaller transaction processing needs. Euronet Software is the
preferred transaction-processing software for banks that operate their back
office software using the IBM iSeries platform, which is also a relatively
inexpensive, expandable hardware platform.
Software
Solutions Segment revenue is derived from three main sources: software license
fees, professional service fees and software maintenance fees. Software license
fees are the initial fees we charge for the licensing of our proprietary
application software to customers. We charge professional service fees for
customization, installation and consulting services provided to customers.
Software maintenance fees are the ongoing fees we charge to customers for the
maintenance of the software products.
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The
Offering
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Selling
Security Holders
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The
securities to be offered and sold using this prospectus will be offered
and sold by the selling security holders. See “Selling Security Holders”.
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Securities
Offered
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$140,000,000
aggregate principal amount of 1.625% Convertible Senior Debentures
Due
2024.
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Maturity
Date
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The
Debentures will mature on December 15, 2024, unless earlier converted,
redeemed or repurchased.
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Ranking
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The
Debentures are our general unsecured and unsubordinated obligations
and
rank equally in right of payment with all of our existing and future
unsecured and unsubordinated obligations and senior in right of payment
to
all of our future subordinated indebtedness. The Debentures are
effectively subordinated to any of our existing and future secured
indebtedness, including indebtedness under our credit facilities
with
respect to any collateral securing such indebtedness. At December
31,
2004, the senior unsecured indebtedness of Euronet Worldwide, Inc.
on an
unconsolidated basis totaled approximately $142.9 indebtedness (including
indebtedness under our credit facilities) totaled approximately $21.3
million. The Debentures are not be guaranteed by any of our subsidiaries
and, accordingly, the Debentures are effectively subordinated to
the
indebtedness and other liabilities of our subsidiaries, including
trade
creditors. As of December 31, 2004, our subsidiaries had liabilities
of
approximately $340.7 million, excluding intercompany indebtedness.
Neither
we nor our subsidiaries are restricted under the indenture from incurring
additional secured indebtedness or other additional indebtedness.
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Interest
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The
Debentures will bear interest at a rate of 1.625% per year. We will
pay
interest on the Debentures on June 15 and December 15 of each year,
beginning June 15, 2005. Liquidated damages are payable if we fail
to
comply with certain obligations under the registration rights agreement
as
set forth below under “Description of the Debentures—Registration
Rights.”
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Contingent
Interest
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We
will pay contingent interest to the holders of Debentures, commencing
with
the period beginning December 20, 2009 to June 14, 2010 and for any
six-month period from June 15 to December 14 and December 15 to June
14
thereafter, if the average trading price of a Debenture for the five
trading days ending on the second trading day immediately preceding
the
relevant contingent interest period equals or exceeds 120% of the
principal amount of the Debentures. The amount of contingent interest
payable per Debenture in respect of any contingent interest period
will
equal 0.30% per annum calculated on the average trading price of
a
Debenture for the five trading-day period referred to above. Such
payments
will be paid on the interest payment date immediately following the
last
day of the relevant contingent interest period.
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6
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Conversion
Rights
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Holders may convert their Debentures at any time prior to stated maturity, at their option, only under the following circumstances: | |
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•
during any fiscal quarter commencing after December 31, 2004 (and
only
during such fiscal quarter), if the closing price of our common
stock for
at least 20 trading days in the 30 trading-day period ending on
the last
trading day of the preceding fiscal quarter was 130% or more of
the
conversion price of the Debentures on that 30th trading day;
• during
the five business day period after any five consecutive trading
day period
(the “measurement period”) in which the trading price per Debenture (as
defined under “Description of the Debentures—Conversion Rights”) for each
day of such measurement period was less than 98% of the product
of the
closing price of our common stock and the conversion rate for the
Debentures; provided, however, holders may not convert their Debentures
in
reliance on this provision after December 15, 2019 if on any trading
day
during such measurement period the closing price of shares of our
common
stock was between 100% and 130% of the conversion price of the
Debentures;
• we
have called your Debentures for redemption; or
• upon
the occurrence of specified corporate transactions described under
“Description of the Debentures-Conversion Rights.”
For
each $1,000 principal amount of Debentures surrendered for conversion,
a
holder will receive 29.7392 shares, equal to an initial conversion
price
of approximately $33.63, subject to adjustment as set forth in
“Description of the Debentures—Conversion Rights—Conversion Rate
Adjustments.”
Upon
conversion, holders will not receive any cash payment representing
accrued
interest, including contingent interest, if any. Instead, any such
amounts
will be deemed paid by the common stock or cash received by holders
on
conversion. You will, however, receive any accrued and unpaid liquidated
damages to the conversion date.
Upon
conversion, we will have the right to deliver, in lieu of our common
stock, cash or a combination of cash and shares of our common stock.
If
you elect to convert your Debentures in connection with a change
of
control that occurs on or prior to December 15, 2009, we will increase
the
conversion rate by a number of additional shares of common stock
upon
conversion or, in lieu thereof, we may in certain circumstances
elect to
adjust the conversion rate and related conversion obligation so
that the
Debentures are convertible into shares of the acquiring or surviving
company, in each case as described under “ Description of
Debentures—Conversion Rights— Adjustment to Conversion Rate upon a Change
of Control.”
Debentures
called for redemption may be surrendered for conversion until the
close of
business on the business day prior to the redemption date.
|
||
7
|
Due
to new accounting rules, shares issuable upon conversion of convertible
debt instruments with contingent conversion provisions such as the
Debentures must be included in computations of diluted earnings per
share
regardless of whether the contingent conversion triggers have been
achieved. As a result, assuming the initial purchaser does not exercise
its option to purchase additional Debentures and assuming we do not
irrevocably elect to pay principal on the Debentures in cash (as
further
described in “Description of the Debentures—Conversion Rights—Payment Upon
Conversion-Conversion after Irrevocable Election to Pay Principal
in
Cash”), an additional 4,163,488 shares of our common stock, representing
approximately 11.2% of our common stock outstanding on the date of
this
prospectus, will be included in our future calculations of diluted
earnings per share beginning with the first quarter of 2005.
|
|||
|
Payment
at Maturity
|
Each
holder of $1,000 principal amount of the Debentures shall be entitled
to
receive $1,000 at maturity, plus accrued and unpaid interest, including
contingent interest, if any, and liquidated damages, if any.
|
||
|
Sinking
Fund
|
None.
|
||
|
Optional
Redemption by Us
|
We
may redeem some or all of the Debentures for cash at any time on
or after
December 20, 2009 at 100% of their principal amount, plus accrued
and
unpaid interest, including contingent interest, if any, and liquidated
damages, if any. See “Description of the Debentures—Optional Redemption by
Us.”
|
||
|
Repurchase
of Debentures by Us at the Option of
the
Holder
|
Holders
of Debentures may require us to repurchase all or a portion of their
Debentures on December 15, 2009, December 15, 2014 and December 15,
2019
at 100% of their principal amount plus accrued and unpaid interest,
including contingent interest, if any, and liquidated damages, if
any, to
but excluding the repurchase date.
|
||
|
Repurchase
of Debentures by Us at the Option of
the
Holder upon a Change of Control
|
Upon
a change of control (as defined under “Description of the
Debentures-Repurchase of the Debentures at the Option of the Holders
Upon
a Change of Control”) involving us, you may require us to repurchase all
or a portion of your Debentures. We will pay a change of control
repurchase price equal to the principal amount of such Debentures
plus
accrued and unpaid interest, including contingent interest, if any,
and
liquidated damages, if any, to but excluding the change of control
repurchase date.
|
||
|
United
States Federal Income Tax Considerations
|
We
and each holder of the Debentures agree to treat the Debentures as
contingent payment debt instruments for U.S. federal income tax purposes,
and as subject to U.S. federal income tax rules applicable to contingent
payment debt instruments. Based on that treatment, you generally
will be
required to accrue interest income on the Debentures in the manner
described in this prospectus, regardless or whether you use the cash
or
accrual method of tax accounting. You 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
be substantially in excess of the stated interest on the Debentures.
Accordingly, you will be required to include amounts in taxable income
substantially
|
8
|
in
excess of the stated interest on the Debentures. Furthermore, upon
a sale,
repurchase by us at your option, exchange, conversion or redemption
of the
Debentures, you will be required to recognize gain or loss equal
to the
difference between your amount realized and your adjusted tax basis
in the
Debentures. The amount realized by you will include the fair market
value
of any common stock you receive. Any gain on a sale, repurchase by
us at
your option, exchange, conversion or redemption of the Debentures
will be
treated as ordinary interest income rather than as capital gain (or
capital loss). You should consult your 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” in this
prospectus.
|
|||
|
Use
of Proceeds
|
The
securities to be offered and sold using this prospectus will be offered
and sold by the selling security holders. We will not receive any
proceeds
from the sale by the selling security holders of Debentures or shares
of
our common stock issued upon conversion thereof that are offered
pursuant
to this prospectus.
|
||
|
Form,
Denomination and Registration
|
The
Debentures will be issued in fully registered form. The Debentures
will be
issued in denominations of $1,000 principal amount and integral multiples
thereof. The Debentures may be sold only to “qualified institutional
buyers,” as defined in Rule 144A, and will be represented by one or more
global Debentures, deposited with the trustee as custodian for The
Depository Trust Company and registered in the name of Cede & Co.,
DTC’s nominee. Beneficial interests in the global Debentures will be
shown
on, and any transfers will be effected only through, records maintained
by
DTC and its participants. See “Description of the Debentures-Form,
Denomination and Registration.”
|
||
|
Absence
of a Public Market for the Debentures
|
The
Debentures are new securities for which there is currently no public
market. We cannot assure you that any active or liquid market will
develop
for the Debentures. See “Plan of Distribution.”
|
||
|
Trading
|
We
do not intend to list the Debentures on any national securities exchange.
The Debentures, however, are expected to be eligible for designation
on
the PORTAL market.
|
You
should read the “Risk Factors” section, beginning on page 11 of this prospectus,
to understand the risks associated with an investment in the Debentures.
Our
Address
Our
principal executive offices are located at 4601 College Boulevard, Suite 300,
Leawood, KS 66211. Our telephone number is (913) 327-4200. Our corporate website
is euronetworldwide.com. The information on our website does not constitute
part
of this prospectus.
9
Summary
of Historical Consolidated Financial Data
The
summary of historical consolidated financial data set forth below for each
of
the years in the five-year period ended December 31, 2004 are derived from
our
audited consolidated financial statements for the periods indicated which have
been included in our Annual Report on Form 10-K for each respective period.
The
summary of historical consolidated financial data set forth below as of and
for
the nine-month periods ended September 30, 2005 and 2004 are derived
from
our unaudited consolidated financial statements included in our September
30, 2005 Quarterly Report on Form 10-Q, and contain all adjustments (consisting
of normal interim closing procedures) necessary to present fairly our financial
position and results of our operations and cash flows for those periods. Results
for past periods are not necessarily indicative of results that may be expected
for any future period, and results for the nine-month period ended September
30,
2005 are not necessarily indicative of results that my be expected for the
entire year ended December 31, 2005. The summary of historical consolidated
financial data should be read in conjunction with the consolidated financial
statements and accompanying note disclosures in our Annual Report on Form 10-K
for each respective period and our Quarterly Reports on Form 10-Q for the
periods ended March 31, 2005, June 30, 2005 and September 30, 2005.
Our
historical results of operations include the results of various acquired
entities from their date of acquisition.
|
Nine Months Ended September
30
|
|
Year
Ended December 31,
|
|||||||||||||||||||||||
|
|
2005
|
|
2004
|
|
2004
|
|
2003
|
|
2002
|
2001
|
2000
|
||||||||||||||
|
|
(in
thousands, except for per share amounts and summary network data)
|
||||||||||||||||||||||||
|
Consolidated
Statement of Operations
|
|
|
|
|
|
||||||||||||||||||||
|
Revenues
|
|
|
|
|
|
||||||||||||||||||||
|
EFT
processing segment
|
|
$
|
76,245
|
|
$
|
53,872
|
|
$
|
77,600
|
|
$
|
52,752
|
|
$
|
53,918
|
$
|
45,941
|
$
|
34,201
|
||||||
|
Prepaid
processing segment
|
|
299,530
|
|
203,912
|
|
289,810
|
|
136,185
|
|
—
|
—
|
—
|
|||||||||||||
|
Total
revenues
|
|
386,841
|
|
268,001
|
|
381,080
|
|
204,407
|
|
71,048
|
60,983
|
50,028
|
|||||||||||||
|
Operating
income (loss)
|
|
38,088
|
|
23,853
|
|
35,304
|
|
13,317
|
|
(419
|
)
|
(6,050
|
)
|
(35,455
|
)
|
||||||||||
|
Gain
on sale of U.K. subsidiary
|
|
—
|
|
—
|
|
—
|
|
18,045
|
|
—
|
—
|
—
|
|||||||||||||
|
Comprehensive
income (loss)
|
|
12,704
|
|
14,217
|
|
22,623
|
|
14,660
|
|
(5,745
|
)
|
264
|
(49,551
|
)
|
|||||||||||
|
Net
income per share
|
|
0.54
|
|
0.44
|
|
0.59
|
|
0.45
|
|
(0.28
|
)
|
0.03
|
(3.00
|
)
|
|||||||||||
|
Consolidated
Balance Sheet Data:
|
|
|
|
|
|
||||||||||||||||||||
|
Assets
|
|
|
|
|
|
||||||||||||||||||||
|
Cash
and cash equivalents
|
|
$
|
52,798
|
|
$
|
36,892
|
|
124,198
|
|
$
|
19,245
|
|
$
|
12,021
|
$
|
8,820
|
$
|
6,760
|
|||||||
| Restricted cash | $ | 70,335 | $ | 57,650 | $ | 69,300 | $ | 58,280 | 4,401 | 1,877 | 2,103 | ||||||||||||||
|
Trade
accounts receivable, net
|
|
130,047
|
|
83,373
|
|
110,306
|
|
75,648
|
|
8,380
|
8,862
|
9,199
|
|||||||||||||
|
Total
current assets
|
|
308,462
|
|
207,095
|
|
344,766
|
|
167,044
|
|
39,866
|
34,694
|
29,099
|
|||||||||||||
|
Goodwill
|
|
251,505
|
|
116,222
|
|
183,668
|
|
88,512
|
|
1,834
|
1,551
|
2,060
|
|||||||||||||
|
Total
Assets
|
|
$
|
664,341
|
|
$
|
389,861
|
|
$
|
618,475
|
|
$
|
303,773
|
|
$
|
66,559
|
$
|
61,391
|
$
|
60,890
|
||||||
|
Liabilities
and stockholders’ equity
|
|
|
|
|
|
||||||||||||||||||||
|
Total
current liabilities
|
|
$
|
280,985
|
|
$
|
205,553
|
|
$
|
293,183
|
|
$
|
151,926
|
|
$
|
19,769
|
$
|
24,753
|
$
|
20,756
|
||||||
|
Notes
payable
|
|
140,000
|
|
52,711
|
|
140,000
|
|
55,792
|
|
36,318
|
38,146
|
77,191
|
|||||||||||||
|
Total
liabilities
|
|
468,045
|
|
261,246
|
|
476,561
|
|
221,904
|
|
60,388
|
69,078
|
105,691
|
|||||||||||||
|
Total
stockholders’ equity (deficit)
|
|
196,296
|
|
128,615
|
|
141,914
|
|
81,869
|
|
6,171
|
(7,687
|
)
|
(44,801
|
)
|
|||||||||||
|
Total
liabilities and stockholders’ equity (deficit)
|
|
$
|
664,341
|
|
389,861
|
|
$
|
618,475
|
|
$
|
303,773
|
|
$
|
66,559
|
$
|
61,391
|
$
|
60,890
|
|||||||
|
Summary
network data:
|
|
|
|
|
|
||||||||||||||||||||
|
Number
of operational ATMS at end of period
|
|
6,841
|
|
5,404
|
|
5,742
|
|
3,350
|
|
3,005
|
2,400
|
2,081
|
|||||||||||||
|
ATM
processing transactions during the period (millions)
|
|
258.5
|
|
159.1
|
|
232.5
|
|
114.7
|
|
79.2
|
57.2
|
43.5
|
|||||||||||||
|
Number
of operational prepaid processing terminals at end of period
|
|
218,000
|
|
167,524
|
|
175,318
|
|
126,284
|
|
—
|
—
|
—
|
|||||||||||||
|
Prepaid
processing transactions during the period (millions)
|
|
248.0
|
|
162.9
|
|
228.6
|
|
102.1
|
|
—
|
—
|
—
|
|||||||||||||
10
RISK
FACTORS
You
should carefully consider the risks described below before making an investment
decision. The risks and uncertainties described below are not the only ones
facing our company. Additional risks and uncertainties not presently known
to us
or that we currently deem immaterial may also impair our business operations.
If
any of the following risks actually occurs, our business, financial condition
or
results of operations could be materially adversely affected. In that case,
the
trading price of the Debentures and our common stock could decline
substantially.
This
prospectus also contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in the forward-looking statements as a result of a number of factors, including
the risks described below and elsewhere in this prospectus.
Risks
Related to Our Business
Investing
in shares of our common stock involves a risk of loss. Before investing in
our
common stock, you should carefully consider the risk factors described in "Risk
Factors" under "Management's Discussion and Analysis of Financial Condition
and
Results of Operations" in our periodic filings with the SEC, including, but
not
limited to, our Quarterly Report on Form 10-Q for the quarter ended September
30, 2005 and subsequent periodic filings containing updated disclosures of
such
factors, together with all of the other information included in this prospectus
and any prospectus supplement and the other information that we have
incorporated by reference. Any of these risks, as well as other fisks and
uncertainties, could harm our business and financial results and cause
the
value of our securities to decline, which in turn could cause you to lose all
or
a part of your investment. These risks are not the only ones facing our company.
Additional risks not currently known to us or that we currently deem immaterial
also may impair our business. Statements in or portions of a future document
incorporated by reference in this prospectus, including, without limitation,
those relationg to risk factors, may update and supersede statements in and
portions of this prospectus or such incorporated documents.
Risks
Related to the Debentures
Because
we operate primarily through subsidiaries, we may be unable to repay or
repurchase the Debentures if our subsidiaries are unable to pay dividends or
make advances to us.
We
are a United States holding company and conduct most of our operations through
our subsidiaries, most of which are located in other countries. Our ability
to
meet our debt service obligations will therefore be dependent upon receipt
of
dividends, interest income and loans from our direct and indirect subsidiaries.
In addition, under applicable law, our subsidiaries may be limited in the
amounts that they are permitted to pay as dividends to us on their capital
stock. In particular, there are significant tax and other legal restrictions
on
the ability of a non-U.S. subsidiary to remit money to us. As a result, our
subsidiaries may not be able to pay dividends to us. If they are not, we will
not be able to make debt service payments on the Debentures and our other
outstanding debt obligations.
At
maturity, the entire outstanding principal amount of the Debentures will become
due and payable by us. In addition, each holder of the Debentures may require
us
to repurchase all or a portion of that holder’s Debentures on December 15, of
2009, 2014 and 2019 or, if a “change of control,” as defined in the indenture,
of Euronet occurs. A “change of control” also may constitute an event of default
under, and result in the acceleration of the maturity of, indebtedness under
our
credit facilities or other indebtedness that we have or may incur in the future.
At maturity or upon a repurchase request, if we do not have sufficient funds
on
hand or available through existing borrowing facilities or through the
declaration and payment of dividends or through loans by our subsidiaries,
we
will need to seek additional financing. Additional financing may not be
available to us in the amounts necessary.
Our
existing credit facilities contain, and future borrowing arrangements or
agreements may contain, restrictions on our repayment or repurchase of the
Debentures under certain conditions. In the event that the maturity date or
repurchase request occurs at a time when we are restricted from repaying or
repurchasing the Debentures, we
12
could
attempt to obtain the consent of the lenders under those arrangements to
repurchase the Debentures or we could attempt to refinance the borrowings that
contain the restrictions. If we do not obtain the necessary consents or
refinance these borrowings, we will be unable to repay or repurchase the
Debentures. Failure by us to repay or repurchase the Debentures when required
will result in an event of default with respect to the Debentures, which would,
in turn, result in an event of default under our existing credit facilities
or
may result in an event of default under such other arrangements.
The
Debentures will be effectively subordinated to existing and future indebtedness
and other liabilities of our subsidiaries.
Because
we operate primarily through our subsidiaries, we derive most of our revenues
from and hold most of our assets through, those subsidiaries. As a result,
we
rely upon distributions and advances from our subsidiaries in order to meet
our
payment obligations under the Debentures and our other obligations. In general,
these subsidiaries are separate and distinct legal entities and will have no
obligation to pay any amounts due on our debt securities, including the
Debentures, or to provide us with funds for our payment obligations, whether
by
dividends, distributions, loans or otherwise. Our right to receive any assets
of
any subsidiary in the event of a bankruptcy or liquidation of the subsidiary,
and therefore the right of our creditors 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 of any subsidiary,
our
rights as a creditor would be subordinated to any indebtedness of that
subsidiary senior to that held by us, including secured indebtedness to the
extent of the assets securing such indebtedness. As of September 30,
2005,
our subsidiaries had outstanding liabilities of approximately $329.2 million,
excluding intercompany indebtedness.
Our
stock price, and therefore the price of the Debentures, may be subject to
significant fluctuations and volatility.
The
market price of the Debentures is expected to be significantly affected by
the
market price of our common stock. This may result in greater volatility in
the
trading value of the Debentures than would be expected for non-convertible
debt
securities that we issue. Among the factors that could affect our common stock
price are those discussed above under “-Risks Related to Our Business” as well
as:
| • | technological innovations; | |||
| • | the introduction of new products or proprietary rights; | |||
| • | changes in our product pricing policies or those of our competitors; | |||
| • | quarterly variations in our operating results; | |||
| • | changes in revenue or earnings estimates or publication of research reports by analysts; | |||
| • | speculation in the press or investment community; | |||
| • | strategic actions by us or our competitors; | |||
| • | general market conditions; and | |||
| • | domestic and international economic factors unrelated to our performance. | |||
In
addition, the stock markets have experienced extreme volatility that has often
been unrelated to the operating performance of particular companies. These
broad
market fluctuations may adversely affect the trading price of our common stock
and of the Debentures.
13
The
trading prices for the Debentures will be directly affected by the trading
prices for our common stock, which are impossible to predict.
The
price of our common stock could be affected by possible sales of our common
stock by investors who view the Debentures as a more attractive means of equity
participation in our company and by hedging or arbitrage trading activity that
may develop involving our common stock. The hedging or arbitrage could, in
turn,
affect the trading prices of the Debentures.
A
downgrade, suspension or withdrawal of the rating assigned by a rating agency
to
the Debentures, if any, would cause the liquidity or market value of the
Debentures to decline significantly.
The
Debentures have not yet been rated by a rating agency. There can be no assurance
that any rating will be assigned and if assigned will remain for any given
period of time or that a rating will not be lowered or withdrawn entirely by
a
rating agency. As a result, the market price of the Debentures could be
adversely affected.
There
may be no public market for the Debentures and initially there will be
restrictions on resale of the Debentures.
Prior
to this offering, there has been no trading market for the Debentures. We do
not
intend to apply for listing of the Debentures on any securities exchange or
any
automated quotation system. Although the initial purchaser has advised us that
it currently intends to make a market in the Debentures, it is not obligated
to
do so and may discontinue its market-making activities at any time without
notice. Consequently, we cannot be sure that any market for the Debentures
will
develop, or if one does develop, that it will be maintained. If an active market
for the Debentures fails to develop or be sustained, the trading price and
liquidity of the Debentures could be adversely affected.
The
Debentures and the common stock to be issued upon conversion of the Debentures
have not been registered under the Securities Act and are not transferable
except upon satisfaction of the conditions described under “Transfer
Restrictions.” Although we have agreed to use our commercially reasonable
efforts to have declared effective a shelf registration statement covering
the
Debentures and the common stock issuable upon conversion of the Debentures
within 180 days after the date the Debentures are originally issued, we may
not
be able to have the registration statement declared effective within that time
period, if at all. If you convert some or all of your Debentures into common
stock when there exists a default with respect to our obligation to register
the
common stock, you will not be entitled to receive liquidated damages on such
common stock, but you will receive additional shares upon conversion (except
to
the extent we elect to deliver cash upon conversion).
If
you are able to resell your Debentures, many other factors may affect the price
you receive, which may be lower than you believe to be appropriate.
If
you are able to resell your Debentures, the price you receive will depend on
many other factors that may vary over time, including:
| • | the number of potential buyers; | |||
| • | the level of liquidity of the Debentures; | |||
| • | ratings published by major credit rating agencies; | |||
| • | our financial performance; | |||
| • | the amount of indebtedness we have outstanding; | |||
| • | the level, direction and volatility of market interest rates generally; | |||
| • | the market for similar securities; | |||
| • | the redemption and repayment features of the Debentures to be sold; and | |||
| • | the time remaining to the maturity of your Debentures. | |||
14
As
a result of these factors, you may only be able to sell your Debentures at
prices below those you believe to be appropriate, including prices below the
price you paid for them.
The
conditional conversion feature of the Debentures could result in you not
receiving the value of the common stock into which the Debentures are
convertible.
The
Debentures are convertible into common stock only if specific conditions are
met. If the specific conditions for conversion are not met, you may not be
able
to receive the value of the common stock into which your Debentures would
otherwise be convertible.
The
conversion rate of the Debentures may not be adjusted for all dilutive events.
The
conversion rate of the Debentures is subject to adjustment for certain events,
including but not limited to the issuance of stock dividends on our common
stock, the issuance of rights or warrants, subdivisions or combinations of
our
common stock, distributions of capital stock, indebtedness or assets, certain
cash dividends and certain tender or exchange offers as described under
“Description of the Debentures-Conversion Rights-Conversion Rate Adjustments.”
The conversion rate will not be adjusted for other events, such as an issuance
of common stock for cash, that may adversely affect the trading price of the
Debentures or the common stock. There can be no assurance that an event that
adversely affects the value of the Debentures, but does not result in an
adjustment to the conversion rate, will not occur.
You
should consider the United States federal income tax consequences of owning
Debentures.
We
and each holder of the Debentures agree to treat the Debentures as contingent
payment debt instruments for U.S. federal income tax purposes, subject to the
contingent payment debt instrument rules applicable to such instruments for
U.S.
federal income tax purposes. The discussion below, and the discussion under
the
heading “Certain United States Federal Income Tax Considerations,” assume that
the Debentures will be so treated. However, the U.S. federal income tax
characterization of the Debentures is uncertain and, thus, no assurance can
be
given that the Internal Revenue Service will not assert that the Debentures
should be treated in a different manner. Such an alternative characterization
could affect the amount, timing and character of income, gain or loss in respect
of an investment in the Debentures.
Pursuant
to the rules applicable to contingent payment debt instruments you will
generally be required to include amounts in your taxable income, as ordinary
income, with respect to the Debentures in the manner described in certain
“Certain United States Federal Income Tax Considerations-Accrual of Interest
on
the Debentures,” regardless of whether you normally use the cash or accrual
method of tax accounting. As a result, you will generally be required to include
amounts in your taxable 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 we have
determined to be 9.05%), which rate will be substantially in excess of the
stated interest rate on the Debentures. As a result, you will be required to
include amounts in taxable income each year substantially in excess of the
stated interest payable on the Debentures. Further, upon a sale, exchange,
conversion, repurchase or redemption of a Debenture, you will be required to
recognize gain or loss equal to the difference between your amount realized
(which will include the value of our common stock if you exercise your
conversion rights) and your adjusted tax basis in the Debenture, with any such
gain (and with all or a portion of any such loss) being classified as ordinary
income (or ordinary loss) rather than as capital gain (or capital loss). See
“Certain United States Federal Income Tax Considerations.” You should consult
your tax advisor as to the United States federal, state and local (as well
as
foreign) tax consequences of acquiring, owning and disposing of the Debentures.
Our
interest deductions attributable to the Debentures may be deferred, limited
or
eliminated under certain conditions.
An
issuer of a convertible debt may not deduct any premium paid upon its repurchase
of such debt if the premium exceeds a normal call premium. This denial of an
interest deduction, however, does not apply to accruals of
15
interest
based on the comparable yield of a convertible debt instrument. Nonetheless,
the
anti-abuse regulation, set forth in Section 1.1275-2(g), grants the Commissioner
of the Internal Revenue Service authority to depart from the regulations if
a
result is achieved which is unreasonable in light of the original issue discount
provisions of the Code, including Section 163(e). The anti-abuse regulation
further provides that the Commissioner may, under this authority, treat a
contingent payment feature of a debt instrument as if it were a separate
position. If such an analysis were applied to the Debentures and ultimately
sustained, our deductions attributable to the Debentures could be limited to
the
stated interest. The scope of application of the anti-abuse regulations is
unclear. The Company, however, is of the view that application of the Contingent
Debt Regulations to the Debentures as contemplated herein is a reasonable result
such that the anti-abuse regulation should not apply. If a contrary position
were asserted and ultimately sustained, our tax deductions would be severely
diminished with a resulting adverse tax effect on our cash flow and ability
to
service the Debentures.
Under
the Code, no deduction is allowed for interest expense in excess of $5 million
on convertible subordinated acquisition indebtedness incurred to acquire stock
or assets of another corporation. If a significant portion of the proceeds
from
the issuance of the Debentures, either alone or together with other debt
proceeds, were used for a domestic acquisition and the Debentures and other
debt, if any, were deemed subordinated to certain creditors of the affiliated
group, interest deductions for tax purposes in excess of $5 million on such
debt
would be disallowed. This would adversely impact our cash flow and our ability
to pay down the Debentures. We do not currently anticipate that this limitation
will apply but there can be no assurance of that fact.
You
may have to pay taxes with respect to distributions on our common stock that
you
do not receive.
The
conversion rate of the Debentures is subject to adjustment for certain events
arising from stock splits and combinations, stock dividends, certain cash
dividends and certain other actions by us that modify our capital structure.
See
“Description of the Debentures-Conversion Rights-Conversion Rate Adjustments.”
If the conversion rate is adjusted as a result of a distribution that is taxable
to our common stock holders, such as a cash dividend, you may be required to
include an amount in income for federal income tax purposes, notwithstanding
the
fact that you do not actually receive such distribution. The amount that you
would have to include in income will generally be equal to the amount of the
distribution that you would have received if you had settled the purchase
contract and purchased our common stock. In addition, non-U.S. holders of
Debentures may, in certain circumstances, be deemed to have received a
distribution subject to U.S. federal withholding tax requirements. See “Certain
United States Federal Income Tax Considerations.”
The
Debentures do not restrict our ability to incur additional debt or to take
other
action that could negatively impact holders of the Debentures.
We
are not restricted under the terms of the indenture and the Debentures from
incurring additional indebtedness or securing indebtedness other than the
Debentures. In addition, the Debentures do not require us to achieve or maintain
any minimum financial results relating to our financial position or results
of
operations. Our ability to recapitalize, incur additional debt, secure existing
or future debt and take a number of other actions that are not limited by the
terms of the indenture and the Debentures could have the effect of diminishing
our ability to make payments on the Debentures when due. In addition, we are
not
restricted from repurchasing subordinated indebtedness or common stock by the
terms of the indenture and the Debentures.
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.
16
If
you hold Debentures, you will not be entitled to any rights with respect to
our
common stock, but you will be subject to all changes made with respect to our
common stock.
If
you hold Debentures, you will not be 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 will be
subject to all changes affecting the common stock. You will have rights with
respect to our common stock only if and when we deliver shares of common stock
to you upon conversion of your Debentures and, in limited cases, under the
conversion rate adjustments applicable to the Debentures. For example, in the
event that an amendment is proposed to our certificate of incorporation or
bylaws requiring stockholder approval and the record date for determining the
stockholders of record entitled to vote on the amendment occurs prior to
delivery of common stock to you, 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.
We
have various mechanisms in place to discourage takeover attempts, which may
reduce or eliminate our stockholders’ ability to sell their shares for a premium
in a change of control transaction.
Various
provisions of our 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 that 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:
| • | preferred stock that could be issued by our board of directors to make it more difficult for a third party to acquire, or to discourage a third party from acquiring, a majority of our outstanding voting stock; | |||
| • | classification of our directors into three classes with respect to the time for which they hold office; | |||
| • | supermajority voting requirements to amend the provision in our certificate of incorporation providing for the classification of our directors into three such classes; | |||
| • | non-cumulative voting for directors; | |||
| • | control by our board of directors of the size of our board of directors; | |||
| • | limitations on the ability of stockholders to call special meetings of stockholders; and | |||
| • | 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. | |||
We
have also approved a stockholders’ rights agreement (the “Rights Agreement”)
between Euronet and EquiServe Trust Company, N.A., as Rights Agent. Pursuant
to
the Rights Agreement, holders of our common stock are entitled to purchase
one
one-thousandth (1/1,000) of a share (a “Unit”) of Junior Preferred Stock at a
price of $57.00 per Unit upon certain events. The purchase price is subject
to
appropriate adjustment for stock splits and other similar events. Generally,
in
the event a person or entity acquires, or initiates a tender offer to acquire,
at least 15% of Euronet’s then outstanding common stock, the Rights will become
exercisable for common stock having a value equal to two times the exercise
price of the Right, or effectively at one-half of Euronet’s then-current stock
price. The existence of the Rights Plan may discourage, delay or prevent a
change of control or takeover attempt of our company by a third party that
is
opposed to by our management and board of directors.
The
securities to be offered and sold using this prospectus will be offered and
sold
by the selling security holders. We will not receive any proceeds from the
sale
by the selling security holders of Debentures or shares of our common stock
issued upon conversion thereof that are offered pursuant to this prospectus.
17
RATIO
OF EARNINGS TO FIXED CHARGES
The
following table sets forth our ratio of earnings to fixed charges for the
indicated periods.
|
Fiscal
Year Ended December 31,
|
Nine Months Ended
September 30,
|
||||||||||||||||||
|
2004
|
2003
|
2002
|
2001
|
2000
|
2005
|
2004
|
|||||||||||||
|
4.56
|
2.96
|
—
|
0.99
|
—
|
6.07
|
4.56
|
|||||||||||||
For
purposes of computing the ratios of earnings to fixed charges, earnings consist
of income before taxes plus fixed charges, and fixed charges consist of interest
expense and the portion of rental expense under operating leases representative
of an interest factor. In 2000 and 2002, our earnings were insufficient to
cover
fixed charges by $36.7 million and $1.7 million, respectively.
On
October 25, 2004, and as amended in June 2005, we and certain of our
subsidiaries entered into two new revolving credit agreements with Bank of
America, N.A. (“Bank of America”). The first agreement is a $10 million Credit
Agreement dated October 25, 2004, as amended in June 2005, (the “US Credit
Agreement”) among us, as “Borrower” and as “Borrower Agent” for our subsidiaries
PaySpot, Inc. Euronet USA, Inc., Prepaid Concepts, Inc. and Call Processing,
Inc. (collectively, the “US Borrowers”), and Bank of America, as “Agent”, and as
“Lender”, together with the other “Lenders” (as defined in the US Credit
Agreement) from time to time party thereto. The US Credit Agreement provides
the
US Borrowers with a $10 million revolving line of credit that terminates on
October 25, 2006. Borrowings under the US Credit Agreement bear interest at
the
election of the Borrower at either a Prime Rate (as defined in the US Credit
Agreement) as in effect from time to time plus an amount specified in the US
Credit Agreement or a fixed rate equal to the LIBOR Rate (as defined in the
US
Credit Agreement) for the applicable Interest Period (as defined in the US
Credit Agreement) plus an Applicable Margin, as set forth in the US Credit
Agreement, as in effect on the date of disbursement of the loan proceeds that
varies based on the Registrant’s Consolidated Funded Debt to EBITDA ratio. The
US Credit Agreement contains customary events of default and covenants related
to limitations on indebtedness, investments, dividends, assets sales and the
maintenance of certain financial ratios and covenants, including a debt to
EBITDA ratio, fixed charge coverage ratio and minimum EBITDA. Under the US
Credit Agreement, we have granted a security interest in favor of Bank of
America in 100% of the equity interests in any and all of our U.S. Subsidiaries
(as defined in the US Credit Agreement) and 66% of the share capital
of
e-pay Ltd, Euronet Services Gmbh, Transact Gmbh and Delta Euronet Gmbh.
We
also entered into a $40 million Credit Agreement dated October 25, 2004, as
amended in June 2005, (the “Euro Credit Agreement”) among the US, as
“Borrower Agent”, and our European subsidiaries e-pay Holdings Limited and Delta
Euronet GmbH (collectively, the “Euro Borrowers”), and Bank of America, as
“Agent” and as “Lender”, together with the other “Lenders” from time to time
party thereto. The Euro Credit Agreement provides the Euro Borrowers with a
$40
million revolving line of credit that terminates on October 25, 2006. Borrowings
under the Euro Credit Agreement denominated in Euros bear interest at a floating
rate equal to the EURIBOR Rate (as defined in the Euro Credit Agreement) for
the
applicable Interest Period (as defined in the Euro Credit Agreement) plus an
Applicable Margin, as set forth in the Euro Credit Agreement, as in effect
on
the date of disbursement of the loan proceeds that varies based on the
Registrant’s Consolidated Funded Debt to EBITDA ratio plus the UK Mandatory
Costs (as defined in the Euro Credit Agreement) in effect on the date of
disbursement of the proceeds of such loans. Borrowings under the Euro Credit
Agreement denominated in British Pounds Sterling bear interest at a floating
rate equal to the LIBOR Rate (as defined in the Euro Credit Agreement) plus
an
Applicable Margin, as set forth in the Euro Credit Agreement, as in effect
on
the date of disbursement of the loan proceeds that varies based on the
Registrant’s Consolidated Fund Debt to EBITDA ratio plus the UK Mandatory Costs
in effect on the date of disbursement of the proceeds of such loans. The Euro
Credit Agreement contains customary events of default and covenants related
to
limitations on indebtedness, investments, dividends, asset sales and the
maintenance of certain financial ratios and covenants. Under the Euro Credit
Agreement, we have granted a security interest in favor of Bank of America
in
100% of the equity interests in certain of our Foreign Subsidiaries (as defined
in the Euro Credit Agreement), and 100% of the equity interests in our U.S.
Subsidiaries (which shall be subordinate to any security interest granted by
such persons in connection with the US Credit Agreement).
18
Events
of default under these credit facilities are typical for credit agreements
of
these types and include, without limitation:
| • | the non-payment of amounts owed under the credit facility; | |||
| • | material breaches of representations and warranties; | |||
| • | failure to comply with the provisions of the credit agreement; | |||
| • | cross default with other indebtedness; | |||
| • | failure to pay and bond or otherwise discharge any judgment or order for the payment of money in excess of $750,000; | |||
| • | occurrence of certain events in connection with any of our defined benefit pension plans which may have a materially adverse effect on our business or financial condition; | |||
| • | certain events of bankruptcy and insolvency; and | |||
| • | a change of control. | |||
We
issued the Debentures under an indenture, dated as of December 15, 2004 between
us and US Bank, as trustee. Initially, the trustee will also act as paying
agent, conversion agent and calculation agent for the Debentures. The terms
of
the Debentures include those provided in the indenture and those provided in
the
registration rights agreement we entered into with the initial purchaser.
The
following description is only a summary of the material provisions of the
Debentures, the indenture and the registration rights agreement. We urge you
to
read these documents in their entirety because they, and not this description,
define your rights as holders of the Debentures. You may request a copy of
the
indenture and the registration rights agreement from us.
When
we refer to “Euronet,”“EEFT,”“we,”“our” or “us” in this section, we refer only
to Euronet Worldwide, Inc., a Delaware corporation, and not its subsidiaries.
Brief
Description of the Debentures
The
Debentures:
| • | bear cash interest at a rate of 1.625% per annum, payable on June 15 and December 15 of each year, beginning June 15, 2005; | |||
| • | bear contingent interest that may be payable as set forth below under “-Contingent Interest”; | |||
| • | benefit from the provisions of a registration rights agreement, including the right to receive liquidated damages if we fail to comply with certain of our obligations under such agreement as set forth below under “-Registration Rights”; | |||
| • | are issued only in denominations of $1,000 principal amount and integral multiples thereof; | |||
| • | are general unsecured obligations of Euronet, ranking equally with all of our other obligations that are unsecured and unsubordinated; as unsecured indebtedness of Euronet, the Debentures are effectively subordinated to all of our secured indebtedness, with respect to the collateral securing such indebtedness, and to all indebtedness and liabilities of our subsidiaries; | |||
19
| • | subject to our right to deliver, in lieu of common stock, cash or a combination of cash and common stock, are convertible into our common stock, at an initial conversion rate of 29.7392 shares of common stock per $1,000 principal amount of Debentures (equivalent to an initial conversion price of approximately $33.63 per share), under the conditions and subject to such adjustments as are described under “-Conversion Rights;” | |||
| • | are redeemable at our option in whole or in part for cash beginning on December 20, 2009, as set forth under “-Optional Redemption by Us;” | |||
| • | entitle the holders to require us to repurchase the Debentures on December 15, 2009, December 15, 2014 and December 15, 2019, as set forth under “-Repurchase of Debentures at the Option of the Holders;” | |||
| • | entitle the holders to require us to repurchase the Debentures upon a Change of Control as set forth under “-Repurchase of Debentures at the Option of Holders Upon a Change of Control;” | |||
| • | are entitled to an increase in the conversion rate upon the occurrence of a change of control, or in lieu thereof at our election, in certain circumstances, to an adjustment in the conversion rate and related conversion obligation so that the Debentures are convertible into shares of the acquiring or surviving company; and | |||
| • | are due on December 15, 2024, unless earlier converted, redeemed by us at our option or repurchased by us at your option. | |||
The
indenture does not contain any financial covenants and does not restrict us
from
paying dividends, incurring additional indebtedness or issuing or repurchasing
our other securities. The indenture also does not protect you in the event
of a
highly leveraged transaction or a change of control of Euronet, except to the
extent described under “-Repurchase of Debentures at the Option of Holders Upon
a Change of Control” below.
No
sinking fund is provided for the Debentures and the Debentures are not subject
to defeasance. The Debentures are issued only in registered form, without
coupons, in denominations of $1,000 principal amount and integral multiples
thereof.
Definitive
Debentures will only be issued under the limited circumstances described under
“-Form, Denomination and Registration.” You may present definitive Debentures
for conversion and registration of transfer and exchange at the office or agency
maintained by us for that purpose, which shall initially be the principal
corporate trust office of the trustee currently located at One Federal Street,
3rd Floor, Boston, Massachusetts 02110. For information regarding conversion,
registration of transfer and exchange of global Debentures, see “-Form,
Denomination and Registration.” There will not be a service charge for any
registration of transfer or exchange of Debentures, but we may require payment
of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
We
will make all payments on global Debentures to The Depository Trust Company
in
immediately available funds.
Interest
The
Debentures bear interest at a rate of 1.625% per annum from December 15, 2004.
We will also pay contingent interest on the Debentures in the circumstances
described under “-Contingent Interest.”
We
will pay interest (including contingent interest and liquidated damages, if
any)
semiannually on June 15 and December 15 of each year, beginning June 15, 2005,
to the holders of record at the close of business on the preceding June 1 and
December 1, respectively. In general, we will not pay accrued and unpaid
interest, including contingent interest, if any, on any Debentures that are
converted into our common stock. Instead, accrued interest, including contingent
interest, if any, will be deemed paid by the common stock or cash received
by
holders on
20
conversion.
You will receive, however, accrued and unpaid liquidated damages, if any, to
the
conversion date. If a holder of Debentures converts after a record date for
an
interest payment but prior to the corresponding interest payment date, the
holder will receive on that interest payment date accrued and unpaid interest,
including contingent interest, if any, on those Debentures, notwithstanding
the
holder’s conversion of those Debentures prior to that interest payment date,
because that holder will have been the holder of record on the corresponding
record date. However, at the time that a holder surrenders Debentures for
conversion, the holder must pay to us an amount equal to the interest (including
contingent interest, if any) that will be paid on the related interest payment
date. The preceding sentence does not apply, however, if (1) we have specified
a
redemption date that is after a record date for an interest payment but on
or
prior to the corresponding interest payment date, (2) we have specified a
repurchase date following a change of control that is during such period or
(3)
any overdue interest exists at the time of conversion with respect to the
Debentures converted. Accordingly, under those circumstances, a holder of
Debentures who chooses to convert those Debentures on a date that is after
a
record date but prior to the corresponding interest payment date will not be
required to pay us, at the time that holder surrenders those Debentures for
conversion, the amount of interest, including contingent interest, if any,
it
will receive on the interest payment date.
We
will pay interest, including contingent interest and liquidated damages, if
any,
on:
| • | global Debentures to The Depository Trust Company, or DTC, in immediately available funds; | |||
| • | any definitive Debentures having an aggregate principal amount of $5,000,000 or less by check mailed to the holders of those Debentures; and | |||
| • | any definitive Debentures having an aggregate principal amount of more than $5,000,000 by wire transfer in immediately available funds if requested by the holders of those Debentures at least five business days prior to the payment date. | |||
Interest
(including contingent interest and liquidated damages, if any) on the Debentures
will be computed on the basis of a 360-day year comprised of twelve 30-day
months.
If
any interest payment date (other than an interest payment date coinciding with
the stated maturity date or earlier redemption date, repurchase date or change
of control repurchase date) of a Debenture falls on a day that is not a business
day, such interest payment date will be postponed to the next succeeding
business day. If the stated maturity date, redemption date, repurchase date
or
change of control repurchase date of a Debenture would fall on a day that is
not
a business day, the required payment of interest, if any, (including contingent
interest and liquidated damages, if any) and principal will be made on the
next
succeeding business day and no interest on such payment will accrue for the
period from and after the stated maturity date, redemption date, repurchase
date
or change of control repurchase date to such next succeeding business day.
The
term “business day” means, with respect to any Debenture, any day other than a
Saturday, a Sunday or a day on which banking institutions in The City of New
York are authorized or required by law, regulation or executive order to close.
Contingent
Interest
We
will pay contingent interest to the holders of Debentures commencing with the
period beginning December 20, 2009 to June 14, 2010 and for any six-month period
from June 15 to December 14 and from December 15 to June 14 thereafter, if
the
average trading price of a Debenture for the five trading days ending on the
second trading day immediately preceding the relevant contingent interest period
equals or exceeds 120% of the principal amount of the Debenture. For any period
when contingent interest shall be payable, the contingent interest payable
per
$1,000 principal amount of Debentures will equal 0.30% per annum calculated
on
the average trading price of $1,000 principal amount of Debentures during the
five consecutive trading-day period referred to above used to determine whether
contingent interest must be paid. “Trading price” is defined below under
“-Conversion Rights-Conversion Upon Satisfaction of Trading Price
Condition.”“Trading day” is defined below under “-Conversion Rights-Conversion
Upon Satisfaction of Market Price Condition.”
Contingent
interest, if any, will accrue and be payable to holders of Debentures as of
the
regular interest record date occurring immediately prior to the end of the
relevant contingent interest period. Such payments will be
21
paid
on the regular interest payment date occurring one day after the end of the
relevant contingent interest period. Payments of contingent interest shall
be
made in the same manner, and subject to the same restrictions, including those
restrictions in respect of payments of accrued and unpaid interest on any
Debentures that are converted into our common stock, as set forth above under
“-Interest.”
Upon
determination that holders of Debentures will be entitled to receive contingent
interest, on or prior to the start of such contingent interest period, we will
issue a press release and publish the information on our website on the World
Wide Web or through another public medium we may use at that time.
Conversion
Rights
General
Subject
to the conditions and during the periods described below, holders may convert
their Debentures at any time prior to the close of business on the maturity
date
into shares of our common stock. For each $1,000 principal amount of Debentures
surrendered for conversion, a holder will receive 29.7392 shares (the
“conversion rate”), equal to an initial conversion price of approximately
$33.63, subject to adjustment as set forth in “-Conversion Rate Adjustments”
below.
Upon
conversion, we may choose to deliver, in lieu of shares of our common stock,
cash or a combination of cash and shares of our common stock, as described
below.
We
will not issue fractional shares of common stock upon conversion of the
Debentures. Instead, we will pay cash based on the closing price of our common
stock on the trading day prior to the conversion date for all fractional shares
of common stock. You may convert Debentures only in denominations of $1,000
principal amount and integral multiples thereof.
Any
Debentures called for redemption must be surrendered for conversion prior to
the
close of business on the business day prior to the redemption date.
If
you have exercised your right to require us to repurchase your Debentures as
described under “-Repurchase of Debentures at the Option of the Holders” or
“-Repurchase of Debentures at the Option of Holders Upon a Change of Control,”
you may convert your Debentures into our common stock only if you withdraw
your
repurchase notice or change of control repurchase notice, as the case may be.
To
convert your Debenture (other than a Debenture held in book-entry form through
DTC) into common stock you must:
| • | 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; | |||
| • | surrender the Debenture to the conversion agent; | |||
| • | if required, furnish appropriate endorsements and transfer documents; | |||
| • | if required, pay all transfer or similar taxes; and | |||
| • | if required, pay funds equal to interest (including contingent interest, if any) payable on the next interest payment date. | |||
Holders
of Debentures held in book-entry form through DTC must comply with the
requirements in the last three bullets above and follow DTC’s customary
practices. The date you comply with these requirements is the conversion date
under the indenture. Settlement of our obligation to deliver shares and cash
(if
any) with respect to a conversion will occur in the manner and on the dates
described under “-Payment Upon Conversion” below. Any delivery of shares will be
accomplished by delivery to the conversion agent of certificates for the
relevant number of
22
shares,
other than in the case of holders of Debentures in book-entry form with DTC,
which shares shall be delivered in accordance with DTC customary practices.
In
addition, we will pay cash for any fractional shares, as described above.
If
you deliver a Debenture for conversion, you will not be required to pay any
taxes or duties for the issuance or delivery of common stock, if any, upon
conversion. However, we will not pay any transfer tax or duty payable as result
of the issuance or delivery of the common stock in a name other than that of
the
holder of the Debenture. We will not issue or deliver common stock certificates
unless we have been paid the amount of any transfer tax or duty or we have
been
provided satisfactory evidence that the transfer tax or duty has been paid.
By
delivering to the holder the number of shares or the amount of cash, if any,
determined as set forth below under “-Payment Upon Conversion,” together with
cash in lieu of any fractional shares, we will satisfy our obligation with
respect to the Debentures. That is, accrued and unpaid interest, including
contingent interest, if any, will be deemed to be paid in full rather than
cancelled, extinguished or forfeited, except as set forth above under
“-Interest.”
Due
to new accounting rules, shares issuable upon conversion of convertible debt
instruments with contingent conversion provisions such as the Debentures must
be
included in diluted earnings per share computations regardless of whether the
contingent conversion conditions have been achieved. As a result, assuming
the
initial purchaser does not exercise its option to purchase additional Debentures
and assuming we do not irrevocably elect to pay principal on the Debentures
in
cash (as described in “-Payment Upon Conversion-Conversion after Irrevocable
Election to Pay Principal in Cash”), an additional 4,163,488 shares of our
common stock, representing approximately 12.5% of our common stock outstanding
on the date hereof, will be included in our future calculations of diluted
earnings per share beginning with the first quarter of 2005.
Payment
Upon Conversion
Conversion
on or Prior to the Final Notice Date. In
the event that we receive your notice of conversion on or prior to the day
that
is 20 days prior to either maturity or, with respect to Debentures being
redeemed, the applicable redemption date (the “final notice date”), the
following procedures will apply.
If
we choose to satisfy all or any portion of our obligation (the “conversion
obligation”) in cash, we will notify you through the trustee of the dollar
amount to be satisfied in cash (which must be expressed either as 100% of the
conversion obligation or as a fixed dollar amount) at any time on or before
the
date that is two business days following receipt of your notice of conversion
(the “cash settlement notice period”). If we timely elect to pay cash for any
portion of the shares otherwise issuable to you, you may retract the conversion
notice at any time during the two business day period beginning on the day
after
the final day of the cash settlement notice period (the “conversion retraction
period”). No such retraction can be made (and a conversion notice shall be
irrevocable) if we do not elect to deliver cash in lieu of shares (other than
cash in lieu of fractional shares). If the conversion notice has not been
retracted, then settlement (in cash and/or shares) (other than with respect
to
any additional shares you may receive, as described under “Adjustment to
Conversion Rate Upon a Change of Control”, for which settlement will occur as
described in that section of this prospectus) will occur on the third business
day following the final day of the 20 trading day period beginning on the day
after the final day of the conversion retraction period (the “cash settlement
averaging period”). Settlement amounts will be computed as follows:
| • | If we elect to satisfy the entire conversion obligation in shares, we will deliver to you a number of shares equal to (i) the aggregate principal amount of Debentures to be converted divided by 1,000, multiplied by (ii) the sum of the applicable conversion rate and the applicable number of additional shares issuable upon conversion of $1,000 principal amount of Debentures, if any, as described under “-Adjustment to Conversion Rate Upon a Change of Control”; provided that if on the date you submit your notice of conversion (x) you hold Debentures that are neither registered under the Securities Act nor immediately freely saleable pursuant to Rule 144(k) under the Securities Act and (y) there exists a registration default as defined under “-Registration Rights,” for purposes of clause (ii) (including for purposes of calculations pursuant to the second and third bullet points of this paragraph), the conversion rate (without taking into account any additional shares which may be received, as described under “-Adjustment to Conversion Rate Upon a Change of Control”) shall be | |||
23
|
multiplied
by 103%. In addition, we will pay cash for all fractional shares
of common
stock as described above under
“-General.”
|
||
| • | If we elect to satisfy the entire conversion obligation in cash, we will deliver to you cash in an amount equal to the product of: | |||
| • | a number equal to (i) the aggregate principal amount of Debentures to be converted divided by 1,000, multiplied by (ii) the number of shares calculated pursuant to clause (ii) in the first bullet point of this paragraph; and | |||
| • | the average of the closing prices of our common stock for each trading day during the cash settlement averaging period. | |||
| • | If we elect to satisfy a fixed portion (other than 100%) of the conversion obligation in cash, we will deliver to you such cash amount (the “cash amount”) and a number of shares of our common stock equal to the excess, if any, of the number of shares calculated as set forth in the first bullet point of this paragraph over the number of shares equal to the sum, for each day of the cash settlement averaging period, of (x) 5% of the cash amount (other than cash for fractional shares of common stock), divided by (y) the closing price of our common stock. In addition, we will pay cash for all fractional shares of common stock as described above under “-General.” Because, in this case, the number of shares of our common stock that we deliver on conversion will be calculated over a 20 trading day period, holders of Debentures bear the market risk that our common stock will decline in value between each day of the cash settlement averaging period and the day we deliver the shares of common stock upon conversion. | |||
Conversion
after the Final Notice Date or Following a Change of Control in connection
with
which you are Entitled to Receive Additional Shares. With
respect to conversion notices that we receive after the final notice date,
we
will not send individual notices of our election to satisfy all or any portion
of the conversion obligation in cash. Instead, at any time on or before the
final notice date, if we choose to satisfy all or any portion of the conversion
obligation with respect to conversions after the final notice date in cash,
we
will send a single notice to the trustee of the dollar amount to be satisfied
in
cash (which must be expressed either as 100% of the conversion obligation or
as
a fixed dollar amount).
Settlement
amounts will be computed and settlement dates will be determined in the same
manner as set forth above under “-Conversion on or Prior to the Final Notice
Date” except that the “cash settlement averaging period” shall be the 20 trading
day period beginning on the trading day after receipt of your notice of
conversion (or in the event we receive your notice of conversion on the business
day prior to the maturity date, the 20 trading day period beginning on the
trading day after the maturity date). Settlement (in cash and/or shares) (other
than with respect to any additional shares you may receive, as described under
“Adjustment to Conversion Rate Upon a Change of Control”, for which settlement
will occur as described in that section of this prospectus) will occur on the
third business day following the final day of such cash settlement averaging
period.
In
addition, if you elect to convert your Debentures under “-Conversion Upon
Specified Corporate Transactions” and you are entitled to additional shares, we
will not send individual notices of our election to satisfy all or any portion
of the conversion obligation in cash. Instead, if we choose to satisfy all
or
any portion of the conversion obligation in cash, unless we have previously
sent
a notice as described below under “-Conversion After Irrevocable Election to Pay
Principal in Cash,” we will send a single notice to the trustee of the dollar
amount to be satisfied in cash, (which must be expressed either as 100% of
the
conversion obligation or as a fixed dollar amount) in connection with the
announcement of the relevant corporate transaction. Settlement amounts will
be
computed and settlement dates will be determined in the same manner as set
forth
above under “-Conversion on or Prior to the Final Notice Date” except that (a)
the “cash settlement averaging period” shall be the 20 trading day period
beginning on the trading day after receipt of your notice of conversion (or
in
the event we receive your notice of conversion on the business day prior to
the
maturity date, the 20 trading day period beginning on the trading day after
the
maturity date), and (b) if the Debentures become convertible into exchange
property (as defined below under “-Conversion Upon Specified Corporate
Transactions”), the “closing price of our common stock” shall be deemed to equal
the sum
24
of
(1) 100% of the value of any exchange property consisting of cash received
per
share, (2) the closing price of any exchange property received per share
consisting of securities that are traded on a U.S. national securities exchange
or approved for quotation on the Nasdaq National Market and (3) the fair market
value of any other exchange property received per share, as determined by two
independent nationally recognized investment banks selected by the trustee
for
this purpose. Settlement (in cash and/or shares) will occur on the third
business day following the final day of such cash settlement averaging period.
Conversion
after Irrevocable Election to Pay Principal in Cash. At
any time prior to maturity, we may irrevocably elect, with respect to any
Debentures which may be converted after the date of such election, to satisfy
in
cash the lesser of (a) (i) the conversion rate, multiplied by (ii) the average
closing price of our common stock during the cash settlement averaging period
and (b) 100% of the principal amount of any such Debenture, with any remaining
amount to be satisfied in shares of our common stock. Such election shall be
in
our sole discretion without the consent of the holders of the Debentures, by
notice to the trustee and the holders of the Debentures. If we make such
election, we may not subsequently revoke this election or make any further
election hereunder.
In
the event that we receive your notice of conversion after the date of such
election, your notice of conversion will not be retractable and settlement
amounts will be computed and settlement dates will be determined in the same
manner as set forth above under “-Conversion on or Prior to the Final Notice
Date”, except that the “cash settlement averaging period” shall be the 20
trading-day period beginning on the trading day after receipt of your notice
of
conversion. However, if you elect to convert your Debentures under “-Conversion
Upon Specified Corporate Transactions” and you are entitled to additional
shares, the settlement amounts will be computed and the settlement dates will
be
determined in the same manner as set forth in the last paragraph of “-Conversion
after the Final Notice Date or Following a Change of Control in connection
with
which you are Entitled to Receive Additional Shares”.
Conditions
to Conversion
Holders
may surrender their Debentures for conversion into shares of our common stock
prior to stated maturity only under the circumstances described below. Upon
determination that holders of Debentures are or will be entitled to convert
their Debentures, we will disseminate a press release through Dow Jones &
Company, Inc. or Bloomberg Business News and publish such information on our
website or through another public medium we may use at that time as soon as
practicable.
Conversion
Upon Satisfaction of Market Price Condition. A
holder may surrender any of its Debentures for conversion into shares of our
common stock during any fiscal quarter commencing after December 31, 2004 (and
only during such fiscal quarter) if the closing price of our common stock for
at
least 20 trading days during the period of 30 consecutive trading days ending
on
the last trading day of the previous fiscal quarter is greater than or equal
to
130% of the conversion price of the Debentures as of that 30th trading day
(initially 130% of approximately $33.63, or approximately $43.71).
The
“closing price” of any security on any date means the closing sale price (or, if
no closing sale price is reported, the average of the bid and asked prices
or,
if more than one in either case, the average of the average bid and the average
asked prices) on that date as reported in composite transactions for the
principal U.S. securities exchange on which such security is traded or, if
such
security is not listed on a U.S. national or regional securities exchange,
as
reported by the Nasdaq National Market. The closing price will be determined
without reference to after-hours or extended market trading. If our common
stock
is not listed for trading on a U.S. national or regional securities exchange
and
not reported by the Nasdaq National Market on the relevant date, the “closing
price” will be the last quoted bid for our common stock in the over-the-counter
market on the relevant date as reported by the National Quotation Bureau or
similar organization. If our common stock is not so quoted, the “closing price”
will be the average of the midpoint of the last bid and ask prices for our
common stock on the relevant date from each of at least three nationally
recognized independent investment banking firms selected by us for this purpose
(or if prices are not available from three such firms, from two such firms
or,
if prices are not available from two such firms, from one such firm).
“Trading
day” means a day during which trading in securities generally occurs on the NYSE
or, if our common stock is not listed on the NYSE, on the principal other U.S.
national or regional securities exchange on
25
which
our common stock is then listed or, if our common stock is not listed on a
U.S.
national or regional securities exchange, on the Nasdaq National Market or,
if
our common stock is not reported by the Nasdaq National Market, on the principal
other market on which our common stock is then traded.
Conversion
Upon Satisfaction of Trading Price Condition. A
holder may surrender any of its Debentures for conversion into our common stock
prior to the stated 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 the Debentures (as determined following a request by a
holder of the Debentures in accordance with the procedures described below)
for
each day of that period was less than 98% of the product of the closing price
of
our common stock and the conversion rate of the Debentures on each such day;
provided, however, that a holder may not convert Debentures in reliance on
this
provision after December 15, 2019, if on any trading day during such five
consecutive trading-day period the closing price of our common stock was between
the applicable conversion price of the Debentures and 130% of the conversion
price of the Debentures.
The
“trading price” of Debentures on any date of determination means the average of
the secondary market bid quotations per $1,000 principal amount of the
Debentures obtained by the trustee for $5,000,000 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, that one
bid
shall be used. If the trustee cannot reasonably obtain at least one bid for
$5,000,000 principal amount of the Debentures from a nationally recognized
securities dealer, or in our reasonable judgment, the bid quotations are not
indicative of the secondary market value of $1,000 principal amount of the
Debentures, then:
| • | for purposes of any determination of whether contingent interest is payable or of the amount of any contingent interest, the trading price of the Debentures on any date of determination will equal the product of (i) the conversion rate for the Debentures and (ii) the average closing price of our common stock on the five trading days ending on such determination date; and | |||
| • | for purposes of any determination of whether the condition to conversion of Debentures described under “-Conversion Upon Satisfaction of Trading Price Condition” is satisfied, we may elect, in our sole discretion, to deem the trading price per $1,000 principal amount of Debentures to be less than 98% of the product of the closing price of our common stock and the applicable conversion rate. | |||
In
connection with any conversion upon satisfaction of the above trading pricing
condition, the trustee shall have no obligation to determine the trading price
of the Debentures unless we have requested such determination; and we shall
have
no obligation to make such request unless a holder provides us with reasonable
evidence that the trading price per $1,000 principal amount of Debentures would
be less than 98% of the product of the closing price of our common stock and
the
conversion rate of the Debentures. At such 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 per $1,000
principal amount of Debentures is greater than or equal to 98% of the product
of
the closing price of our common stock and the conversion rate of the Debentures.
Conversion
Upon Redemption. If
we elect to redeem Debentures, holders may convert the Debentures called for
redemption into our common stock at any time prior to the close of business
on
the business day immediately preceding the redemption date, even if the
Debentures are not otherwise convertible at such time.
Conversion
Upon Specified Corporate Transactions. If
we elect to:
| • | distribute to all holders of our common stock certain rights or warrants entitling them to purchase, for a period expiring within 60 days after the date of the distribution, shares of our common stock at a price per share of less than the closing price of a share of our common stock on the record date for the distribution, or | |||
26
| • | distribute to all holders of our common stock our assets, debt securities or certain rights to purchase our securities, which distribution has a per share value as determined by our board of directors exceeding 10% of the closing price of a share of our common stock on the trading day immediately preceding the declaration date for such distribution, | |||
we
must notify the holders of the Debentures at least 20 business days prior to
the
ex-dividend date for such distribution. Once we have given such notice, holders
may surrender their Debentures for conversion at any time until the earlier
of
the close of business on the business day immediately prior to the ex-dividend
date or our announcement that such distribution will not take place, even if
the
Debentures are not otherwise convertible at such time; provided, however, that
a
holder may not exercise this right to convert if the holder may participate
in
the distribution without conversion. The “ex-dividend date” is the first date
upon which a sale of the common stock, regular way on the relevant exchange
or
in the relevant market for our common stock, does not automatically transfer
the
right to receive the relevant dividend or distribution from the seller of the
common stock to its buyer.
In
addition, if we are party to a consolidation, merger, binding share exchange
or
transfer of all or substantially all of our assets pursuant to which our common
stock is converted into cash, securities or other property, a holder 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 15
days
after the actual effective date of such transaction (or if such transaction
constitutes a change of control, until the business day immediately preceding
the applicable change of control repurchase date). We will notify holders at
least 25 days prior to the anticipated effective date of any such transaction.
If we engage in certain reclassifications of our common stock or are a party
to
a consolidation, merger, binding share exchange or transfer of all or
substantially all of our assets pursuant to which our common stock is converted
into cash, securities or other property, then at the effective time of the
transaction, the conversion value and the settlement amounts will be based
on
the applicable conversion rate and the kind and amount of cash, securities
or
other property that a holder of one share of our common stock would have
received in such transaction, which we refer to as the “exchange property.” In
addition, if you convert your Debentures following the effective time of the
transaction, any amount to be settled in shares will be paid in such exchange
property rather than shares of our common stock. If the transaction also
constitutes a change of control, as defined below, a holder can require us
to
repurchase all or a portion of its Debentures as described below under
“-Repurchase of the Debentures at Option of the Holders Upon a Change of
Control” and will receive additional shares upon conversion as described under
“-Adjustment to Conversion Rate Upon a Change of Control.”
Conversion
Rate Adjustments
We
will adjust the conversion rate for the Debentures if any of the following
events occur:
(1)
we issue our common stock as a dividend or distribution on our common stock
in
which event the conversion rate will be adjusted by multiplying it by a
fraction,
| • | the numerator of which will be the sum of (i) the number of shares of our common stock outstanding on the record date fixed for the dividend or distribution plus (ii) the total number of shares constituting the dividend or distribution; and | |||
| • | the denominator of which is the number of shares of our common stock outstanding on the record date fixed for the dividend or distribution; | |||
(2)
we issue to all holders of common stock certain rights or warrants entitling
them to purchase, for a period expiring within 60 days after the date of the
distribution, shares of our common stock at a price per share which is less
than
the closing price of a share of our common stock on the record date for the
distribution, in which event the conversion rate will be adjusted by multiplying
it by a fraction,
| • | the numerator of which will be the sum of (i) the number of shares of our common stock outstanding on the record date fixed for the distribution plus (ii) the total number of additional shares of our common stock offered for subscription or purchase; and | |||
27
| • | the denominator of which is the sum of (i) the number of shares of our common stock outstanding on the record date fixed for the distribution plus (ii) the total number of shares of our common stock that the aggregate offering price of the total number of shares offered for subscription or purchase would purchase at the current market price of our common stock on such record date; | |||
(3)
we subdivide or combine our common stock in which event the conversion rate
will
be proportionately increased or reduced;
(4)
we distribute to all holders of our common stock shares of capital stock,
evidences of indebtedness or assets, including securities (but excluding rights
or warrants listed in (2) above, dividends or distributions listed in (1) above
and distributions consisting exclusively of cash), in which event the conversion
rate will be increased by multiplying such conversion rate by a fraction,
| • | the numerator of which will be the current market price of our common stock and | |||
| • | the denominator of which will be the current market price of our common stock minus the fair market value, as determined by our board of directors, of the portion of those assets, shares of capital stock or evidences of indebtedness so distributed applicable to one share of common stock. | |||
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 price
of
those securities (where such closing sale 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;
(5)
we distribute cash to all holders of our common stock, excluding any dividend
or
distribution in connection with our liquidation, dissolution or winding up,
in
which event the conversion rate will be increased by multiplying such conversion
rate by a fraction,
| • | the numerator of which will be the current market price of our common stock and | |||
| • | the denominator of which will be the current market price of our common stock minus the amount per share of such dividend or distribution (as determined below). | |||
(6)
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 our common stock
exceeds the closing price of our common stock on the first trading day after
the
expiration of such tender or exchange offer, the conversion rate will be
increased by multiplying such conversion rate by a fraction,
| • | the numerator of which will be the sum of (x) the fair market value, as determined by our board of directors, of the aggregate consideration payable for all shares of our common stock we purchase in such tender or exchange offer and (y) the product of the number of shares of our common stock outstanding less any such purchased shares and the closing price of our common stock on the first trading day after the expiration of the tender or exchange offer and | |||
| • | the denominator of which will be the product of the number of shares of our common stock outstanding, including any such purchased shares, and the closing price of our common stock on the first trading day after the expiration of the tender or exchange offer; and | |||
(7)
someone other than us or one of our subsidiaries makes a payment in respect
of a
tender offer or exchange offer with respect to which, as of the closing date
of
the offer, our board of directors is not recommending rejection of the offer,
in
which event the conversion rate will be increased by multiplying such conversion
rate by a fraction
28
| • | the numerator of which will be the sum of (x) the fair market value, as determined by our board of directors, of the aggregate consideration payable to our stockholders based on the acceptance (up to any maximum specified in the terms of the tender or exchange offer) of all shares validly tendered or exchanged and not withdrawn as of the expiration of the offer and (y) the product of the number of shares of our common stock outstanding less any such purchased shares and the closing price of our common stock on the first trading day after the expiration of the tender or exchange offer and | |||
| • | the denominator of which will be the product of the number of shares of our common stock outstanding, including any such purchased shares, and the closing price of our common stock on the first trading day after the expiration of the tender or exchange offer. | |||
The
adjustment referred to in this clause (7) will be made only if:
| • | 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 | |||
| • | the cash and value of any other consideration included in the payment per share of common stock exceeds the current market price per share of common stock on the first trading day after the expiration of the tender or exchange offer. | |||
However,
the adjustment referred to in this clause (7) 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.
“Current
market price” of our common stock on any day means the average of the closing
price per share of our common stock for each of the 10 consecutive trading
days
ending on the earlier of the day in question and the day before the “ex-dividend
date” with respect to the issuance or distribution requiring such computation.
To
the extent that we have a rights plan in effect upon conversion of the
Debentures into common stock, you will receive, in addition to the common stock,
the rights under the rights plan, unless prior to any conversion, the rights
have separated from the common stock, in which case each conversion rate will
be
adjusted at the time of separation as described in clause (4) above, as if
we
distributed to all holders of our common stock, shares of our capital stock,
evidences of indebtedness or assets as described above, subject to readjustment
in the event of the expiration, termination or redemption of such rights.
If
rights or warrants for which an adjustment to the conversion rate has been
made
expire unexercised, the conversion rate will be readjusted to take into account
the actual number of such rights or warrants which were exercised.
In
the event of:
| • | any reclassification of our common stock; | |||
| • | a consolidation, merger, binding share exchange or combination involving us; or | |||
| • | a sale or conveyance to another person or entity of all or substantially all of our property or assets; | |||
in
which holders of common stock would be entitled to receive exchange property
for
their common stock, upon conversion of your Debentures after the effective
date
of such event, the conversion value and the settlement amounts will be based
on
the applicable conversion rate and the exchange property. In addition, if you
convert your Debentures following the effective time of the transaction, any
amount to be settled in shares will be paid in such exchange property rather
than shares of our common stock.
29
The
conversion rate will not be adjusted:
| • | upon the issuance of any shares of our common stock pursuant to any present or future plan providing for the reinvestment of dividends or interest payable on our securities and the investment of additional optional amounts in shares of our common stock under any plan, | |||
| • | upon the issuance of any shares of our common stock or options or rights to purchase those shares pursuant to any present or future employee, director or consultant benefit plan or program of or assumed by us or any of our subsidiaries, | |||
| • | upon the issuance of any shares of our common stock pursuant to any option, warrant, right or exercisable, exchangeable or convertible security not described in the preceding bullet and outstanding as of the date the Debentures were first issued, | |||
| • | for a change in the par value of the common stock, or | |||
| • | for accrued and unpaid interest, including contingent interest or liquidated damages, if any. | |||
The
holders of the Debentures may, in certain circumstances, be deemed to have
received a distribution subject to U.S. federal income tax as a dividend. In
addition, non-U.S. holders of Debentures in certain circumstances may be deemed
to have received a distribution subject to U.S. federal withholding tax
requirements. See “Certain United States Federal Income Tax Considerations-U.S.
Holders-Adjustment of Conversion Rate” and “-Tax Consequences to Non-U.S.
Holders-Tax Consequences to Dividends”.
To
the extent permitted by law and the listing requirements of the Nasdaq National
Market and any exchange on which the common stock is then listed, we may, from
time to time, increase the conversion rate for a period of at least 20 days
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.
We
would give holders at least 15 days notice of any increase in each conversion
rate. 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 distribution.
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.
Adjustment
to Conversion Rate Upon a Change of Control
General.
If
and only to the extent you elect to convert your Debentures in connection with
a
transaction described under the definition of change of control as described
below under “-Repurchase of Debentures at Option of Holders upon a Change of
Control” that occurs on or prior to December 15, 2009, we will increase the
conversion rate for the Debentures surrendered for conversion by a number of
additional shares (the “additional shares”) as described below, subject to our
payment elections as described under “Conversion Rights-Payment Upon
Conversion.”
The
number of additional shares will be determined by reference to the table below,
based on the date on which such change of control transaction becomes effective
(the “effective date”) and the price (the “stock price”) paid per share for our
common stock in such change of control transaction. If holders of our common
stock receive only cash in such change of control transaction, the stock price
shall be the cash amount paid per share. Otherwise, the stock price shall be
the
average of the closing prices of our common stock on the five trading days
prior
to but not including the effective date of such change of control transaction.
The
additional shares will be delivered to holders who elect to convert their
Debentures on the later of (1) the fifth business day following the effective
date and (2) the third business day following the final day of the cash
settlement averaging period.
The
stock prices set forth in the first row of the table below (i.e., column
headers) will be adjusted as of any date on which the conversion rate of the
Debentures is adjusted, as described above under “-Conversion Rate Adjustments.”
The adjusted stock prices will equal the stock prices applicable immediately
prior to such adjustment,
30
multiplied
by a fraction, the numerator of which is the conversion rate immediately prior
to the adjustment giving rise to the stock 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 under
“-Conversion Rate Adjustments.”
The
following table sets forth the hypothetical stock price and number of additional
shares to be issuable per $1,000 principal amount of Debentures:
|
Stock
Price
|
||||||||||||||||||||||||||||||||||||||||||||||
|
Effective
Date
|
$
|
23.68
|
$
|
26.05
|
$
|
28.65
|
$
|
31.52
|
$
|
33.63
|
$
|
36.99
|
$
|
40.69
|
$
|
44.76
|
$
|
49.23
|
$
|
54.15
|
$
|
59.57
|
$
|
65.53
|
$
|
72.08
|
$
|
79.29
|
$
|
87.22
|
||||||||||||||||
|
December
15, 2004
|
11.87
|
9.86
|
8.12
|
6.68
|
5.77
|
4.73
|
3.78
|
3.06
|
2.42
|
1.93
|
1.51
|
1.18
|
0.91
|
0.70
|
0.53
|
|||||||||||||||||||||||||||||||
|
December
15, 2005
|
11.72
|
9.60
|
7.79
|
6.30
|
5.38
|
4.33
|
3.38
|
2.69
|
2.06
|
1.61
|
1.22
|
0.94
|
0.70
|
0.53
|
0.38
|
|||||||||||||||||||||||||||||||
|
December
15, 2006
|
11.61
|
9.36
|
7.45
|
5.89
|
4.95
|
3.88
|
2.94
|
2.27
|
1.68
|
1.28
|
0.93
|
0.70
|
0.50
|
0.37
|
0.26
|
|||||||||||||||||||||||||||||||
|
December
15, 2007
|
11.52
|
9.06
|
6.96
|
5.31
|
4.30
|
3.23
|
2.30
|
1.68
|
1.16
|
0.83
|
0.56
|
0.40
|
0.27
|
0.19
|
0.13
|
|||||||||||||||||||||||||||||||
|
December
15, 2008
|
11.48
|
8.59
|
6.08
|
4.25
|
3.11
|
2.08
|
1.21
|
0.75
|
0.39
|
0.23
|
0.12
|
0.07
|
0.04
|
0.03
|
0.02
|
|||||||||||||||||||||||||||||||
|
December
15, 2009
|
6.45
|
5.16
|
2.64
|
1.98
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
|||||||||||||||||||||||||||||||
The
exact stock prices and effective dates may not be set forth in the table above,
in which case:
| • | If the stock price is between two stock price amounts in the table or the effective date is between two effective dates in the table, the number of additional shares will be determined by a straight-line interpolation between the number of additional shares set forth for the higher and lower stock price amounts and the two dates, as applicable, based on a 365-day year. | |||
| • | If the stock price is in excess of $87.22 per share (subject to adjustment), no additional shares will be issuable upon conversion. | |||
| • | If the stock price is less than $23.68 per share (subject to adjustment), no additional shares will be issuable upon conversion. | |||
Notwithstanding
the foregoing, in no event will the total number of shares of common stock
issuable upon conversion exceed 42.2297 per $1,000 principal amount of
Debentures, subject to adjustments in the same manner as the conversion rate
as
set forth under “-Conversion Rate Adjustments.”
Our
obligation to satisfy the additional shares requirement could be considered
a
penalty, in which case the enforceability thereof would be subject to general
principles of reasonableness of economic remedies.
Conversion
After a Public Acquirer Change of Control .
Notwithstanding the foregoing, in the case of a public acquirer change of
control (as defined below), we may, in lieu of increasing the conversion rate
by
additional shares as described in “-Adjustment to Conversion Rate upon a Change
of Control-General” above, elect to adjust the conversion rate and the related
conversion obligation such that from and after the effective date of such public
acquirer change of control, holders of the Debentures will be entitled to
convert their Debentures (subject to the satisfaction of the conditions to
conversion described under “-Conditions to Conversion” above) into a number of
shares of public acquirer common stock (as defined below) by multiplying the
conversion rate in effect immediately before the public acquirer change of
control by a fraction:
| • | the numerator of which will be (i) in the case of a share exchange, consolidation, merger or binding share exchange, pursuant to which our common stock is converted into cash, securities or other property, the average value of all cash and any other consideration (as determined by our board of directors) paid or payable per share of common stock or (ii) in the case of any other public acquirer change of control, the average of the closing prices of our common stock for the five consecutive trading days prior to but excluding the effective date of such public acquirer change of control, and | |||
| • | the denominator of which will be the average of the closing prices of the public acquirer common stock for the five consecutive trading days commencing on the trading day next succeeding the effective date of such public acquirer change of control. | |||
31
A
“public acquirer change of control” means any event constituting a change of
control that would otherwise obligate us to increase the conversion rate as
described above under “-Adjustment to Conversion Rate upon a Change of
Control-General” and the acquirer (or any entity that is a directly or
indirectly wholly-owned subsidiary of the acquirer or of which the acquirer
is a
directly or indirectly wholly-owned subsidiary) has a class of common stock
traded on a national securities exchange or quoted on the Nasdaq National Market
or which will be so traded or quoted when issued or exchanged in connection
with
such change of control (the “public acquirer common stock”). Upon a public
acquirer change of control, if we so elect, holders may convert their Debentures
(subject to the satisfaction of the conditions to conversion described under
“-Conditions to Conversion” above) at the adjusted conversion rate described in
the preceding paragraph but will not be entitled to the increased conversion
rate described under “-Adjustment to Conversion Rate upon a Change of Control-
General.” We are required to notify holders of our election in our notice to
holders of such transaction. As described under “-Conditions to Conversion”
holders may convert their Debentures upon a public acquirer change of control
during the period specified therein. In addition, the holder can also, subject
to certain conditions, require us to repurchase all or a portion of its
Debentures as described under “-Repurchase of Debentures at Option of Holders
upon a Change of Control.” After the adjustment of the conversion rate in
connection with a public acquirer change of control, the conversion rate will
be
subject to further similar adjustment in the event that any of the events
described in “Conversion Rights-Conversion Rate Adjustments” above occur
thereafter.
Payment
at Maturity
Each
holder of $1,000 principal amount of Debentures shall be entitled to receive
$1,000 at maturity, plus accrued and unpaid interest, including contingent
interest, if any, and liquidated damages, if any.
We
will pay principal on:
| • | global Debentures to DTC in immediately available funds; and | |||
| • | any definitive Debentures at our office or agency maintained for that purpose, which initially will be the office or agency of the trustee located at One Federal Street, 3rd Floor, Boston, Massachusetts 02110. | |||
Optional
Redemption by Us
Prior
to December 20, 2009, the Debentures will not be redeemable at our option.
At
any time on or after December 20, 2009, we may redeem some or all of the
Debentures for cash at 100% of their principal amount, plus accrued and unpaid
interest, including contingent interest, if any, and liquidated damages, if
any,
on the Debentures to, but not including, the redemption date. If the redemption
date is on a date that is after a record date and on or prior to the
corresponding interest payment date, we will pay such interest (including
contingent interest, if any, and liquidated damages, if any) to the holder
of
record on the corresponding record date, which may or may not be the same person
to whom we will pay the redemption price and the redemption price will be 100%
of the principal amount of the Debentures redeemed.
We
will give at least 30 days but not more than 60 days notice of redemption by
mail to holders of Debentures. Debentures or portions of Debentures called
for
redemption will be convertible by the holder until the close of business on
the
business day prior to the redemption date.
If
we do not redeem all of the Debentures, the trustee will select the Debentures
to be redeemed in principal amounts of $1,000 or integral multiples thereof,
by
lot or on a pro rata basis or by such other method that the trustee considers
fair and appropriate, so long as such method is not prohibited by the rules
of
any stock exchange or quotation association on which the Debentures may then
be
traded or quoted. If any Debentures are to be redeemed in part only, we will
issue a new Debenture or Debentures with a principal amount equal to the
unredeemed principal portion thereof. If a portion of your Debentures is
selected for partial redemption and you convert a portion of your Debentures,
the converted portion will be deemed to be taken from the portion selected
for
redemption.
32
Repurchase
of Debentures at the Option of the Holders
Holders
of Debentures may require us to repurchase all or a portion of their Debentures
on December 15, 2009, December 15, 2014 and December 15, 2019.
In
each case, the repurchase price will be equal to 100% of the principal amount
of
the Debentures being repurchased, plus accrued and unpaid interest, including
contingent interest, if any, and liquidated damages, if any, to, but not
including, the repurchase date.
In
connection with any repurchase of Debentures, we will notify the holders of
Debentures, not less than 20 business days prior to any repurchase date, of
their repurchase right, the repurchase date and the repurchase procedures.
To
exercise the repurchase right, you must deliver, prior to the close of business
on the business day immediately preceding the repurchase date, written notice
to
the trustee of your exercise of your repurchase right, together with the
Debentures with respect to which your right is being exercised, if such
Debentures are in certificated form. You may withdraw this notice by delivering
to the trustee a notice of withdrawal prior to the close of business on the
business day immediately preceding the repurchase date.
Rule
13e-4 under the Exchange Act requires the dissemination of certain information
to security holders if an issuer tender offer occurs and may apply if the
repurchase option becomes available to holders of the Debentures. We will comply
with this rule and file Schedule TO (or any similar schedule) to the extent
applicable at that time.
Our
obligation to pay the repurchase price for Debentures for which a repurchase
notice has been delivered and not validly withdrawn is conditioned upon you
effecting book entry transfer of the Debentures or delivering definitive
Debentures, together with necessary endorsements, to the paying agent at any
time after delivery of the repurchase notice. We will cause the repurchase
price
for the Debentures to be paid promptly following the later of the business
day
following the repurchase date and the time of book entry transfer or delivery
of
definitive Debentures, together with such endorsement.
If
the paying agent holds money sufficient to pay the repurchase price of the
Debentures which holders have elected to require us to repurchase on the
repurchase date in accordance with the terms of the indenture, then, immediately
after the repurchase date, those Debentures will cease to be outstanding and
interest, contingent interest, if any, and liquidated damages, if any, on the
Debentures will cease to accrue, whether or not the Debentures are transferred
by book entry or delivered to the paying agent. Thereafter, all other rights
of
the holder shall terminate, other than the right to receive the repurchase
price
upon delivery or transfer by book entry of the Debentures.
No
Debentures may be repurchased by us at the option of the holders if the
principal amount of the Debentures has been accelerated, and such acceleration
has not been rescinded, on or prior to such date. Our ability to repurchase
the
Debentures may be limited by the terms of our existing credit facilities or
by
any future borrowing agreements we may enter into and by restrictions on our
ability to obtain funds for such repurchase through dividends from our
subsidiaries. In particular, because many of our subsidiaries are located
outside the United States, there may be significant tax and other legal
restrictions on the ability of those non-U.S. subsidiaries to remit money to
us.
Accordingly, we cannot assure you that we would have the financial resources,
or
would be able to arrange financing, to pay the repurchase price for all the
Debentures that might be delivered by holders of Debentures seeking to exercise
the repurchase right.
Repurchase
of Debentures at the Option of Holders Upon a Change of Control
If
a change of control, as described below, occurs, you will have the right to
require us to repurchase for cash all of your Debentures not previously called
for redemption, or any portion of those Debentures that is equal to $1,000
in
principal amount or integral multiples thereof, at a repurchase price (the
“change of control repurchase price”) equal to the principal amount of all
Debentures you require us to repurchase plus any accrued and unpaid interest,
including contingent interest, if any, and liquidated damages on those
Debentures to, but not including, the change of control repurchase date. If
the
change of control repurchase date is on a date that is after a record date
and
on or prior to the corresponding interest payment date, we will pay such
interest (including contingent interest, if any, and liquidated damages, if
any)
to the holder of record on the corresponding record date, which may or may
not
be the same person to whom we will pay the change of control repurchase price
and the repurchase price will be 100% of the principal amount of the Debentures
repurchased.
33
Within
30 days after the occurrence of a change of control, we are required to give
you
notice of such occurrence and of your resulting repurchase right and the
procedures that holders must follow to require us to repurchase their Debentures
as described below. The change of control repurchase date specified by us will
be 30 days after the date on which we give you this notice.
The
change of control repurchase notice given by each holder electing to require
us
to repurchase Debentures shall be given so as to be received by the paying
agent
no later than the close of business on the change of control repurchase date
and
must state:
| • | the certificate numbers of the holders’ Debentures to be delivered for repurchase; | |||
| • | the portion of the principal amount of Debentures to be repurchased, which must be $1,000 or an integral multiple thereof; and | |||
| • | that the Debentures are to be repurchased by us pursuant to the applicable provisions of the Debentures. | |||
A
holder may withdraw any change of control repurchase notice by delivering a
written notice of withdrawal to the paying agent prior to the close of business
on the change of control repurchase date. The notice of withdrawal shall state:
| • | the principal amount at maturity of Debentures being withdrawn; | |||
| • | the certificate numbers of the Debentures being withdrawn; and | |||
| • | the principal amount of the Debentures, if any, that remain subject to the change of control repurchase notice. | |||
A
“change of control” means any transaction or event (whether by means of an
exchange offer, liquidation, tender offer, consolidation, merger, combination,
reclassification, recapitalization or otherwise) in connection with which all
or
substantially all of our common stock or assets are exchanged for, converted
into, acquired for or constitutes solely the right to receive cash, securities
or other property; provided that a change of control will not be deemed to
occur
if at least 90% of the consideration (other than cash payments for fractional
shares and cash payments made in respect of dissenters’ appraisal rights) to be
received consists of shares of capital stock that has no preference in respect
of dividends or of amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the issuer thereof and that is traded
or scheduled to be traded immediately following such transaction or event on
a
national securities exchange or the Nasdaq National Market.
Rule
13e-4 under the Exchange Act requires the dissemination of certain information
to security holders if an issuer tender offer occurs and may apply if the
repurchase option becomes available to holders of the Debentures. We will comply
with this rule and file Schedule TO (or any similar schedule) to the extent
applicable at that time.
Our
obligation to pay the repurchase price for Debentures for which a repurchase
notice has been delivered and not validly withdrawn is conditioned upon you
effecting book entry transfer of the Debentures or delivering definitive
Debentures, together with necessary endorsements, to the paying agent at any
time after delivery of the repurchase notice. We will cause the repurchase
price
for the Debentures to be paid promptly following the later of the business
day
following the repurchase date and the time of book entry transfer or delivery
of
definitive Debentures, together with such endorsements.
If
the paying agent holds money sufficient to pay the change of control repurchase
price of the Debentures that holders have elected to require us to repurchase
on
the change of control repurchase date in accordance with the terms of the
indenture, then, immediately after the change of control repurchase date, those
Debentures will cease to be outstanding and interest, contingent interest,
if
any, and liquidated damages, if any, on the Debentures will cease to accrue,
whether or not the Debentures are transferred by book entry or delivered to
the
paying agent. Thereafter, all
34
other
rights of the holder shall terminate, other than the right to receive the change
of control repurchase price upon book entry transfer or delivery of the
Debentures.
The
foregoing provisions would not necessarily protect holders of the Debentures
if
highly leveraged or other transactions involving us occur that may affect
holders adversely. We could, in the future, enter into certain transactions,
including certain recapitalizations, that would not constitute a change of
control with respect to the change of control repurchase feature of the
Debentures but that would increase the amount of our (or our subsidiaries’)
outstanding indebtedness.
No
Debentures may be repurchased by us at the option of the holders upon a change
of control if the principal amount of the Debentures has been accelerated,
and
such acceleration has not been rescinded, on or prior to such date. Our ability
to repurchase the Debentures upon the occurrence of a change of control may
be
limited by the terms of our existing credit facilities or by any future
borrowing agreements we may enter into and by restrictions on our ability to
obtain funds for such repurchase through dividends from our subsidiaries. In
particular, because many of our subsidiaries are located outside the United
States, there may be significant tax and other legal restrictions on the ability
of those non-U.S. subsidiaries to remit money to us. In addition, the occurrence
of a change of control could cause an event of default under, or be prohibited
or limited by the terms of, our credit facilities. Finally, we may be required
to offer to repurchase other senior debt on a pro rata basis with the Debentures
upon a change of control, if similar change of control offers are required
by
such other senior debt. Accordingly, we cannot assure you that we would have
the
financial resources, or would be able to arrange financing, to pay the change
of
control repurchase price in cash for all the Debentures that might be delivered
by holders of Debentures seeking to exercise the repurchase right.
The
change of control repurchase feature of the Debentures may in certain
circumstances make more difficult or discourage a takeover of our company.
The
change of control repurchase feature, however, is not the result of our
knowledge of any specific effort:
| • | to accumulate shares of our common stock; | |||
| • | to obtain control of us by means of a merger, tender offer solicitation or otherwise; or | |||
| • | by management to adopt a series of anti-takeover provisions. | |||
Instead,
the change of control repurchase feature is a standard term contained in
securities similar to the Debentures.
Merger
and Sales of Assets
The
indenture provides that we may not consolidate with or merge into any other
person or convey, transfer, sell, lease or otherwise dispose of all or
substantially all of our properties and assets to another person unless, among
other things:
| • | the resulting, surviving or transferee person is a corporation organized and existing under the laws of the United States, any state thereof or the District of Columbia; | |||
| • | such person, if other than us, assumes all our obligations under the Debentures and the indenture; | |||
| • | if as a result of such transaction the Debentures become convertible into common stock or other securities issued by a third party, such third party assumes all of our obligations under the Debentures and the indenture or fully and unconditionally guarantees all of our or our successor’s obligations under the Debentures and the indenture; and | |||
| • | we or such successor are not then or immediately thereafter in default under the indenture. | |||
35
The
occurrence of certain of the foregoing transactions could also constitute a
change of control. See “-Repurchase of Debentures at the Option of Holders Upon
a Change of Control.”
This
covenant includes a phrase relating to the conveyance, transfer, sale, lease
or
disposition of “all or substantially all” of our assets. There is no precise,
established definition of the phrase “substantially all” under applicable law.
Accordingly, there may be uncertainty as to whether a conveyance, transfer,
sale, lease or other disposition of less than all our assets is subject to
this
covenant.
Events
of Default
Each
of the following constitutes an event of default under the indenture:
| • | default in our obligation to deliver shares of our common stock or cash in lieu thereof upon exercise of a holder’s conversion right; | |||
| • | default in our obligation to provide timely notice of a change of control; | |||
| • | default in our obligation to repurchase any Debenture at the option of holders or at the option of holders upon a change of control; | |||
| • | default in our obligation to redeem any Debenture after we have exercised our redemption option; | |||
| • | default in our obligation to pay the principal amount of any Debenture at maturity when due and payable; | |||
| • | default in our obligation to pay any interest, contingent interest or liquidated damages on any Debenture when due and payable, and continuance of such default for a period of 30 days; | |||
| • | our failure to perform or observe any other term, covenant or agreement contained in the Debentures or the indenture for a period of 60 days after written notice of such failure, provided that such notice requiring us to remedy the same shall have been given to us by the trustee or to us and the trustee by the holders of at least 25% in aggregate principal amount of the Debentures then outstanding; | |||
| • | a failure to pay when due at maturity or a default that results in the acceleration of maturity of any indebtedness for borrowed money by us or our designated subsidiaries in an aggregate amount of $10 million or more, unless the acceleration is rescinded, stayed or annulled within 30 days after written notice of default is given to us by the trustee or holders of not less than 25% in aggregate principal amount of the Debentures then outstanding; and | |||
| • | certain events of bankruptcy, insolvency or reorganization with respect to us or any of our designated subsidiaries or any group of two or more subsidiaries that, taken as a whole, would constitute a designated subsidiary. | |||
A
“designated subsidiary” shall mean any existing or future, direct or indirect,
subsidiary of ours whose assets constitute 15% or more of our total assets
on a
consolidated basis.
Our
obligations under the indenture are not intended to provide creditor rights
for
amounts in excess of par plus accrued and unpaid interest, including contingent
interest, if any, and liquidated damages, if any.
The
indenture provides that the trustee shall, within 90 days of the occurrence
of a
default known to it, give to the registered holders of the Debentures notice
of
all uncured defaults known to it, but the trustee shall be protected in
withholding such notice if it, in good faith, determines that the withholding
of
such notice is in the best interest of such registered holders, except in the
case of a default under any of the first five bullets above.
36
If
certain events of default specified in the last bullet point above shall occur
and be continuing, then automatically the principal amount of the Debentures
then outstanding plus any accrued and unpaid interest, including contingent
interest, if any, and liquidated damages, if any, through such date shall become
immediately due and payable. If any other event of default shall occur and
be
continuing (the default not having been cured or waived as provided under
“Modification and Waiver” below), the trustee or the holders of at least 25% in
aggregate principal amount of the Debentures then outstanding may declare the
Debentures due and payable at their principal amount plus any accrued and unpaid
interest, including contingent interest, if any, and liquidated damages, if
any,
through such date and thereupon the trustee may, at its discretion, proceed
to
protect and enforce the rights of the holders of Debentures by appropriate
judicial proceedings. Such declaration may be rescinded or annulled with the
written consent of the holders of a majority in aggregate principal amount
of
the Debentures then outstanding upon the conditions provided in the indenture.
The
indenture contains a provision entitling the trustee, subject to the duty of
the
trustee during default to act with the required standard of care, to be
indemnified by the holders of Debentures before proceeding to exercise any
right
or power under the indenture at the request of such holders. The indenture
provides that the holders of a majority in aggregate principal amount of the
Debentures then outstanding, through their written consent, may direct the
time,
method and place of conducting any proceeding for any remedy available to the
trustee or exercising any trust or power conferred upon the trustee.
We
will be required to furnish annually to the trustee a statement as to the
fulfillment of our obligations under the indenture.
Modification
and Waiver
Changes
Requiring Approval of Each Affected Holder
The
indenture (including the terms and conditions of the Debentures) cannot be
modified or amended without the written consent or the affirmative vote of
the
holder of each Debenture affected by such change to:
| • | change the maturity of any Debenture or the payment date of any installment of interest, contingent interest or liquidated damages payable on any Debentures; | |||
| • | reduce the principal amount of, or any interest, contingent interest or liquidated damages, redemption price, change of control repurchase price or repurchase price on, any Debenture; | |||
| • | impair or adversely affect the conversion rights of the holders of Debentures; | |||
| • | change the currency of payment of such Debentures or interest, contingent interest or liquidated damages, redemption price, change of control repurchase price or repurchase price thereon; | |||
| • | alter the manner of calculation or rate of accrual of interest, contingent interest or liquidated damages, or extend the time for payment of any such amount or the redemption price, change of control repurchase price or repurchase price of any Debenture; | |||
| • | impair the right to institute suit for the enforcement of any payment on or with respect to, or conversion of, any Debenture; | |||
| • | except as otherwise permitted or contemplated by provisions concerning corporate reorganizations, adversely affect the repurchase option (including after a change of control) or the conversion rights of the holders of the Debentures; | |||
| • | modify the redemption provisions of the indenture in a manner adverse to the holders of Debentures; | |||
37
| • | reduce the percentage in aggregate principal amount of Debentures outstanding necessary to modify or amend the indenture or to waive any past default; or | |||
| • | reduce the percentage in aggregate principal amount of Debentures outstanding required for any other waiver under the indenture. | |||
Changes
Requiring Majority Approval
The
indenture (including the terms and conditions of the Debentures) may be modified
or amended, subject to the provisions described above, with the written consent
of the holders of at least a majority in aggregate principal amount of the
Debentures at the time outstanding.
Changes
Requiring No Approval
The
indenture (including the terms and conditions of the Debentures) may be modified
or amended by us and the trustee, without the consent of the holder of any
Debenture, for the purposes of, among other things:
| • | adding to our covenants for the benefit of the holders of Debentures; | |||
| • | surrendering any right or power conferred upon us; | |||
| • | providing for conversion rights of the holders of Debentures if any reclassification or change of our common stock or any consolidation, merger or sale of all or substantially all of our assets occurs; | |||
| • | providing for the assumption of our obligations to the holders of Debentures in the case of a merger, consolidation, conveyance, transfer or lease; | |||
| • | increasing the conversion rate, provided that the increase will not adversely affect the interests of the holders of Debentures; | |||
| • | complying with the requirements of the Commission in order to effect or maintain the qualification of the indenture under the Trust Indenture Act of 1939, as amended; | |||
| • | making any changes or modifications necessary in connection with the registration of the Debentures under the Securities Act as contemplated in the registration rights agreement; provided that such change or modification does not, in the good faith opinion of our board of directors and the trustee, adversely affect the interests of the holders of Debentures in any material respect; | |||
| • | curing any ambiguity or correcting or supplementing any defective provision contained in the indenture; provided that such modification or amendment does not, in the good faith opinion of our board of directors and the trustee, adversely affect the interests of the holders of Debentures in any material respect; or | |||
| • | adding or modifying any other provisions with respect to matters or questions arising under the indenture that we and the trustee may deem necessary or desirable and which, in the good faith opinion of our board of directors and the trustee, will not adversely affect the interests of the holders of Debentures in any material respect; provided, that any addition or modification made solely to conform the provisions of the indenture to the description of the Debentures in this prospectus will not be deemed to adversely affect the interests of the holders of the Debentures. | |||
Registration
Rights
We
entered into a registration rights agreement with the initial purchaser for
the
benefit of the holders of the Debentures. Pursuant to the agreement, we have
agreed, at our expense, to:
| • | file with the Commission not later than the date 90 days after the earliest date of original issuance of any of the Debentures, a registration statement on such form as we deem appropriate covering resales by holders of all Debentures and the common stock issuable upon conversion of the Debentures; | |||
38
| • | use our commercially reasonable efforts to cause such registration statement to become effective within 180 days after the earliest date of original issuance of any of the Debentures; and | |||
| • | use our commercially reasonable efforts to keep the registration statement effective until the earlier of: | |||
(1)
two years after the last date of original issuance of any of the Debentures;
(2)
the date when all of the Debentures and the common stock issuable upon
conversion of the Debentures have ceased to be outstanding (whether as a result
of redemption, repurchase and cancellation, conversion or otherwise); or
(3)
the date when all of the Debentures and the common stock issuable upon
conversion of the Debentures are disposed of pursuant to the registration
statement or pursuant to Rule 144 under the Securities Act or any similar
provision then in effect.
We
have filed the registration statement of which this prospectus is a part to
meet
our obligations under the registration rights agreement. In order to sell
Debentures or common stock pursuant to this registration statement, a holder
must complete and deliver a questionnaire to us on or prior to the 10th business
day before the effectiveness of the registration statement. Upon receipt of
a
completed questionnaire after effectiveness of the registration statement,
we
will, within 15 business days, file any amendments to the registration statement
or supplements to the related prospectus as are necessary to permit the relevant
holder to deliver a prospectus to purchaser of Debentures or common stock sold
pursuant to the registration statement, provided, that if such notice is
delivered during a suspension period referred to below or within 15 business
days prior to the commencement of such a suspension period, such amendments
or
supplements need not be filed until the 15th business day following the
expiration of such suspension period, and provided, further, that we shall
not
be obligated to file more than one such amendment or supplement for all holders
during a fiscal quarter and any such amendment or supplement shall be filed
concurrently with the filing of our quarterly or annual reports under the
Exchange Act or if a suspension period is in effect on the date of such filing,
within 15 business days after the expiration of the suspension period. It will
be a registration default and we will pay the predetermined liquidated damages
described below 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.
In
connection with the filing of this registration statement, we have agreed to:
| • | provide to each holder for whom the registration statement was filed copies of the prospectus that is a part of the registration statement upon request; | |||
| • | notify each such holder when the registration statement has become effective; | |||
| • | notify each such holder of the commencement of any suspension period (as described below); and | |||
| • | take certain other actions as are required to permit unrestricted resales of the Debentures and the common stock issuable upon conversion of the Debentures. | |||
Each
holder who sells securities pursuant to the registration statement generally
will be:
| • | required to be named as a selling holder in the related prospectus; | |||
39
| • | required to deliver a prospectus to the purchaser; | |||
| • | subject to certain of the civil liability provisions under the Securities Act in connection with the holder’s sales; and | |||
| • | bound by the provisions of the registration rights agreement which are applicable to the holder (including certain indemnification rights and obligations). | |||
We
may suspend the holder’s use of the prospectus for a period not to exceed 45
days in any 90-day period, and not to exceed an aggregate of 120 days in any
360-day period, if:
| • | the prospectus would, in our judgment, contain a material misstatement or omission as a result of an event that has occurred and is continuing; and | |||
| • | we determine in good faith that the disclosure of this material non-public information would be detrimental to us and our subsidiaries. | |||
However,
if the disclosure relates to a previously undisclosed proposed or pending
material business transaction, the disclosure of which we determine in good
faith would be reasonably likely to impede our ability to consummate such
transaction, we may extend the suspension period from 45 days to 60 days. In
addition, if we deem it necessary to file a post-effective amendment to the
registration statement in order to make changes to the information in the
prospectus regarding the selling holders or the plan of distribution, we may
suspend sales under the registration statement until the date on which the
post-effective amendment is declared effective by the Commission, provided,
however, that any days in any such suspension period shall count towards the
45
and 120 day periods referred to in the previous paragraph. We need not specify
the nature of the event giving rise to a suspension in any notice to holders
of
the Debentures of the existence of such a suspension. Each holder, by its
acceptance of the Debentures, agrees to hold any notice by us of a suspension
period in confidence.
We
refer to each of the following as a registration default:
| • | the registration statement has not been filed prior to or on the 90th day following the earliest date of original issuance of any of the Debentures; or | |||
| • | the registration statement has not been declared effective prior to or on the 180th day following the earliest date of original issuance of any of the Debentures, which we refer to as the effectiveness target date; or | |||
| • | we do not comply with our obligations to name a holder as a selling security holder in the prospectus or file a post-effective amendment or have such post-effective amendment declared effective within the required time periods as specified above; or | |||
| • | at any time after the effectiveness target date, the registration statement ceases to be effective or fails to be usable, other than as a result of a requirement to file a post-effective amendment or prospectus supplement to the registration statement in order to make changes to the information in the prospectus regarding the selling security holders or the plan of distribution, and (1) we do not cure the lapse of effectiveness or usability of the registration statement within ten business days (or if a suspension period is then in effect, the tenth business day following the expiration of such suspension period) by a post-effective amendment, prospectus supplement or report filed pursuant to the Exchange Act or (2) if applicable, we do not terminate the suspension period, described in the preceding paragraph, by the 45th or 60th day, as the case may be or (3) if suspension periods exceed an aggregate of 120 days in any 360-day period. | |||
If
a registration default occurs (other than a registration default relating to
a
failure to file or have an effective registration statement with respect to
the
shares of common stock), cash liquidated damages will accrue on the Debentures
that are transfer restricted securities, from and including the day following
the registration default to
40
but
excluding the earlier of (1) the date on which the registration default has
been
cured and (2) the date the registration statement is no longer required to
be
kept effective. Liquidated damages will be paid semiannually in arrears on
each
June 15 and December 15, commencing on the first interest payment date following
the registration default, and will accrue at a rate per year equal to:
| • | 0.25% of the principal amount of a Debenture to and including the 90th day following such registration default; and | |||
| • | 0.50% of the principal amount of a Debenture from and after the 91st day following such registration default. | |||
In
no event will liquidated damages accrue at a rate per year exceeding 0.50%.
In
no event will liquidated damages accrue on the Debentures solely as a result
of
a registration default with respect to the common stock. If a holder converts
some or all of its Debentures into common stock when there exists a registration
default with respect to the common stock, the holder will not be entitled to
receive liquidated damages on such common stock, but will receive additional
shares upon conversion equal to 3% of the applicable conversion rate for each
$1,000 principal amount of Debentures (except to the extent we elect to deliver
cash upon conversion). In addition, such holder will receive, on the settlement
date for any Debentures submitted for conversion during a registration default,
accrued and unpaid liquidated damages to the conversion date relating to such
settlement date. If a registration default with respect to the common stock
occurs after a holder has converted its Debentures into common stock, such
holder will not be entitled to any compensation with respect to such common
stock.
If
a registration statement covering the resales of the Debentures and common
stock
issuable upon conversion of the Debentures is not effective, these securities
may not be sold or otherwise transferred except in accordance with the
provisions set forth under “Transfer Restrictions.”
Form,
Denomination and Registration
Denomination
and Registration
The
Debentures will be issued in fully registered form, without coupons, in
denominations of $1,000 principal amount and integral multiples thereof.
Global
Debentures
Debentures
are evidenced by one or more global Debentures deposited with the trustee as
custodian for DTC, and registered in the name of Cede & Co. as DTC’s
nominee.
Record
ownership of the global Debentures may be transferred, in whole or in part,
only
to another nominee of DTC or to a successor of DTC or its nominee, except as
set
forth below. A holder may hold its interests in the global Debentures directly
through DTC if such holder is a participant in DTC, or indirectly through
organizations which are direct DTC participants if such holder is not a
participant in DTC. Transfers between direct DTC participants will be effected
in the ordinary way in accordance with DTC’s rules and will be settled in
same-day funds. Holders may also beneficially own interests in the global
Debentures held by DTC through certain banks, brokers, dealers, trust companies
and other parties that clear through or maintain a custodial relationship with
a
direct DTC participant, either directly or indirectly.
So
long as Cede & Co., as nominee of DTC, is the registered owner of the global
Debentures, Cede & Co. for all purposes will be considered the sole holder
of the global Debentures. Except as provided below, owners of beneficial
interests in the global Debentures:
| • | will not be entitled to have certificates registered in their names; | |||
| • | will not receive or be entitled to receive physical delivery of certificates in definitive form; and | |||
| • | will not be considered holders of the global Debentures. | |||
41
The
laws of some states require that certain persons take physical delivery of
securities in definitive form. Consequently, the ability of an owner of a
beneficial interest in a global security to transfer the beneficial interest
in
the global security to such persons may be limited.
We
will wire, through the facilities of the trustee, payments of principal,
interest, contingent interest, if any, liquidated damages, if any, the
redemption price, change of control repurchase price or repurchase price on
the
global Debentures to Cede & Co., the nominee of DTC, as the registered owner
of the global Debentures. None of us, the trustee or any paying agent will
have
any responsibility or be liable for paying amounts due on the global Debentures
to owners of beneficial interests in the global Debentures.
It
is DTC’s current practice, upon receipt of any payment on the global Debentures,
to credit participants’ accounts on the payment date in amounts proportionate to
their respective beneficial interests in the Debentures represented by the
global Debentures, as shown on the records of DTC, unless DTC believes that
it
will not receive payment on the payment date. Payments by DTC participants
to
owners of beneficial interests in Debentures represented by the global
Debentures held through DTC participants will be the responsibility of DTC
participants, as is now the case with securities held for the accounts of
customers registered in “street name.”
If
you would like to convert your Debentures into common stock pursuant to the
terms of the Debentures, you should contact your broker or other direct or
indirect DTC participant to obtain information on procedures, including proper
forms and cut-off times, for submitting those requests and effecting delivery
of
such Debentures on DTC’s records.
Because
DTC can only act on behalf of DTC participants, who in turn act on behalf of
indirect DTC participants and other banks, your ability to pledge your interest
in the Debentures represented by global Debentures to persons or entities that
do not participate in the DTC system, or otherwise take actions in respect
of
such interest, may be affected by the lack of a physical certificate.
We
will issue the Debentures in definitive certificated form if DTC notifies us
that it is unwilling or unable to continue as depositary or DTC ceases to be
a
clearing agency registered under the U.S. Securities Exchange Act of 1934,
as
amended and a successor depositary is not appointed by us within 90 days. In
addition, beneficial interests in a global Debenture may be exchanged for
definitive certificated Debentures upon request by or on behalf of DTC in
accordance with customary procedures. The indenture permits us to determine
at
any time and in our sole discretion that Debentures shall no longer be
represented by global Debentures. DTC has advised us that, under its current
practices, it would notify its participants of our request, but will only
withdraw beneficial interests from the global Debentures at the request of
each
DTC participant. We would issue definitive certificates in exchange for any
such
beneficial interests withdrawn.
Neither
we nor the trustee (nor any registrar, paying agent or conversion agent under
the indenture) will have any responsibility for the performance by DTC or direct
or indirect DTC participants of their 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, without limitation,
the presentation of Debentures for conversion or repurchase as described above,
only at the direction of one or more direct DTC participants to whose account
with DTC interests in the global Debentures are credited and only for the
principal amount of the Debentures for which directions have been given.
DTC
has advised us as follows: DTC is a limited purpose trust company organized
under the laws of the State of New York, a member of the Federal Reserve System,
a “clearing corporation” within the meaning of the Uniform Commercial Code and a
“clearing agency” registered pursuant to the provisions of Section 17A of the
Exchange Act, as amended. DTC was created to hold securities for DTC
participants and to facilitate the clearance and settlement of securities
transactions between DTC participants through electronic book-entry changes
to
the accounts of its participants, thereby eliminating the need for physical
movement of certificates. Participants include securities brokers and dealers,
banks, trust companies and clearing corporations and may include certain other
organizations, such as the initial purchaser of the Debentures. Certain DTC
participants or their representatives,
42
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.
Although
DTC has agreed to the foregoing procedures in order to facilitate transfers
of
interests in the global Debentures among DTC participants, it is under no
obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. None of us, the trustee or any
of
their respective agents will have any responsibility for the performance by
DTC
or direct or indirect DTC participants of their obligations under the rules
and
procedures governing their operations, including maintaining, supervising or
reviewing the records relating to or payments made on account of beneficial
ownership interests in global Debentures.
According
to DTC, the foregoing information with respect to DTC has been provided to
its
participants and other members of the financial community for information
purposes only and is not intended to serve as a representation, warranty or
contract modification of any kind.
Restrictions
on Transfer; Legends
The
Debentures and common stock issuable upon conversion of the Debentures will
be
subject to certain restrictions on transfer set forth on the Debentures and
in
the indenture, and certificates evidencing the Debentures will bear the legend
regarding such transfer restrictions set forth under “Transfer
Restrictions.”
Governing
Law
The
indenture and the Debentures are governed by, and construed in accordance with,
the laws of the State of New York.
Information
Concerning the Trustee
US
Bank, as trustee under the indenture, has been appointed by us as paying agent,
conversion agent, calculation agent, registrar and custodian with regard to
the
Debentures. Equiserv is the transfer agent and registrar for our common stock.
The trustee or its affiliates may from time to time in the future provide
banking and other services to us in exchange for a fee.
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 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.
Calculations
in Respect of Debentures
The
trustee, as calculation agent, will be responsible for making all calculations
called for under the Debentures. These calculations include, but are not limited
to, determination of the trading prices of the Debentures and of our common
stock. The calculation agent will make all these calculations in good faith
and,
absent manifest error, their calculations will be final and binding on holders
of Debentures.
Our
authorized capital stock consists of 60 million shares of common stock, par
value $0.02 per share and 10 million shares of preferred stock, par value $0.02
per share. As of October 28, 2005, we had 35,623,615 shares of common
stock
issued and outstanding. The following summary description of our capital stock
does not purport to be complete and is subject to the detailed provisions of,
and is qualified in its entirety by reference to, the Certificate of
Incorporation and Bylaws, copies of which have been filed or incorporated by
reference as exhibits hereto, and to the applicable provisions of the General
Corporation Law of the State of Delaware (the “DGCL”).
43
Common
Stock
The
holders of common stock are entitled to one vote for each share held of record
on all matters submitted to a vote of stockholders. Subject to the rights of
any
holders of preferred stock, holders of common stock are entitled to receive
ratably such dividends as may be declared by the Board of Directors out of
funds
legally available. Since our inception, no dividends have been paid on the
common stock. Certain of our credit facilities contain restrictions on the
payment of dividends. In the event of a liquidation, dissolution or winding
up,
holders of the common stock are entitled to share ratably in the distribution
of
all assets remaining after payment of liabilities, subject to the rights of
any
holders of preferred stock. The holders of common stock have no preemptive
rights to subscribe for additional shares of common stock and no right to
convert their common stock into any other securities. In addition, there are
no
redemption or sinking fund provisions applicable to the common stock. All the
outstanding shares of common stock are fully paid and non-assessable.
Preferred
Stock
The
Board of Directors is authorized, without further action by the stockholders,
to
issue any or all shares of authorized preferred stock as a class without series
or in one or more series and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption, liquidation preferences and the number of shares
constituting any series. The issuance of preferred stock could adversely affect
the voting power of holders of common stock and could have the effect of
delaying, deferring or impeding a change in control of us. The Board of
Directors has authorized the issuance of Series A Junior preferred stock, as
described below.
Certain
Provisions Our Certificate of Incorporation and Bylaws
Certain
provisions of our Certificate of Incorporation and Bylaws summarized below
may
be deemed to have an anti-takeover effect and may delay, defer or make more
difficult a takeover attempt that a stockholder might consider in its best
interest. Set forth below is a description of certain provisions of our
Certificate of Incorporation and Bylaws.
The
Certificate of Incorporation provides that our Board of Directors be divided
into three classes of directors serving staggered three-year terms. The classes
of directors will be as nearly equal in number as possible. Accordingly,
approximately one-third of our Board of Directors will be elected each year.
The
Certificate of Incorporation provides that the number of directors will be
determined by the Board of Directors. To amend such provision, the affirmative
vote of 80% of our shareholders is required.
Our
Certificate of Incorporation provides that no director shall be liable to us
or
our stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director’s duty of
loyalty to us or our stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of laws, (iii)
in
respect of certain unlawful dividend payments or stock redemptions or
repurchases pursuant to Section 174 of the DGCL or (iv) for any transaction
from
which the director derived an improper personal benefit. The effect of these
provisions is to eliminate the rights of us and our stockholders (through
stockholders’ derivative suits on behalf of us) to recover monetary damages
against a director for breach of fiduciary duty as a director (including
breaches resulting from grossly negligent behavior), except in the situations
described above. These provisions may not limit the liability of directors
under
federal securities laws.
Section
203 of Delaware General Corporation Law
Section
203 of the DGCL prohibits certain transactions between a Delaware corporation
and an “interested stockholder,” which is defined as a person who, together with
any affiliates or associates of such person, beneficially owns, directly or
indirectly, 15% or more of the outstanding voting shares of a Delaware
corporation. This provision prohibits certain business combinations (defined
broadly to include mergers, consolidations, sales or other dispositions of
assets having an aggregate value in excess of 10% of the consolidated assets
of
the corporation, and certain transactions that would increase the interested
stockholder’s proportionate share ownership in the corporation) between an
interested stockholder and a corporation for a period of three years after
the
date the interested
44
stockholder
becomes an interested stockholder, unless (i) the business combination is
approved by the corporation’s board of directors prior to the date the
interested stockholder becomes an interested stockholder, (ii) the interested
stockholder acquired at least 85% of the voting stock of the corporation (other
than stock held by directors who are also officers or by certain employee stock
plans) in the transaction in which it becomes an interested stockholder or
(iii)
the business combination is approved by a majority of the board of directors
and
by the affirmative vote of 66 2/3% of the outstanding voting stock that is
not
owned by the interested stockholder.
Preferred
Stock Purchase Rights
On
March 20, 2003, our Board of Directors approved a Rights Agreement (as amended
from time to time, the “Rights Agreement”) between us and EquiServe Trust
Company, N.A. (the “Rights Agent”), as Rights Agent. In connection with its
approval of the Rights Agreement, the Board of Directors also declared a
dividend of one “right” for each outstanding share of our common stock, payable
on April 4, 2003 to stockholders of record at the close of business on March
27,
2003. On November 28, 2003, we amended the Rights Agreement in connection with
an agreement entered into between us and Fletcher International, Ltd. on
November 20, 2003. This amendment became effective on November 28, 2003. The
amendment excludes Fletcher International, Ltd. and its affiliates from the
definition of “Acquiring Person” under certain conditions.
Each
right generally entitles the holder to purchase one one-thousandth (1/1,000)
of
a share (a “Unit”) of our Series A Junior preferred stock at a price of $57.00
per Unit upon certain events. The purchase price and amount and form of
consideration to be issued upon exercise are subject to appropriate adjustment
for stock splits and other events. Generally, the rights are not exercisable
until the Distribution Date (as defined below). The rights are redeemable under
certain circumstances at $0.01 per right and will expire, unless earlier
redeemed, on April 3, 2013.
The
rights will not prevent a takeover of us. However, the rights may cause
substantial dilution to a person or group that acquires 15% or more of the
common stock, unless the rights are first redeemed by the Board of Directors
or
an exchange occurs (as described below). Nevertheless, the rights should not
interfere with a transaction that is in the best interests of us and our
stockholders because the rights can be redeemed, or an exchange can be effected,
before the consummation of such transaction.
The
complete description and terms of the rights are set forth in the Rights
Agreement, which was filed as Exhibit 4.1 to our Current Report on Form 8-K
filed by us on November 4, 2003 with the Securities and Exchange Commission.
Description
of Rights; Purchase Price
Each
right entitles the registered holder to purchase from us, under certain
circumstances, one Unit, which consists of one one-thousandth (1/1,000) of
a
share of our Series A Junior preferred stock, par value $.02 per share (the
“Series A Preferred Stock”), at a purchase price of $57.00 per Unit upon certain
events. The purchase price and amount and form of consideration to be issued
upon exercise are subject to appropriate adjustment for stock splits and other
events.
Voting
Each
Unit shall entitle the holder thereof to one vote on all matters submitted
to a
vote of our stockholders, voting together with holders of common stock as one
class on all such matters. Holders of Units shall not have the right to cumulate
their votes in the election of our directors, and will have the same voting
rights and limitations applicable to holders of common stock as set forth in
our
Certificate of Incorporation, as amended.
Dividends
Each
Unit shall entitle the holder thereof to receive dividends, when, as and if
declared by the Board of Directors out of funds legally available therefor
and
only after payment of, or provision for, full dividends on all outstanding
shares of any senior series of preferred stock and after we have made provision
for any required sinking or purchase funds for any series of preferred stock,
on
a pari passu basis with dividend rights of the common stock.
45
Liquidation
In
the event of our voluntary or involuntary liquidation, dissolution or winding
up, holders of Units shall be entitled to share equally and ratably in all
of
the assets remaining, if any, after satisfaction of (i) all of our debts and
liabilities, and (ii) the preferential rights of any senior series of preferred
stock, but before any such liquidation distributions are paid in respect of
common stock.
Mergers
In
the event of any merger, consolidation or other transaction in which common
stock is changed or exchanged, holders of Units will be entitled to receive
the
same consideration received per share of common stock. These rights are
protected by customary antidilution provisions (see Adjustments, below).
Although the rights are redeemable, Units of Series A Preferred Stock
purchasable upon exercise of the rights will not be redeemable.
Because
a Unit is equal to one one-thousandth (1/1,000) of a share of Series A Preferred
Stock, a holder of one full share of Series A Preferred Stock generally would
be
entitled to dividend, liquidation and voting rights equal to one thousand
(1,000) times the dividend, liquidation and voting rights of one share of common
stock. Because of the nature of the Units’ dividend, liquidation and voting
rights, the value of one one-thousandth (1/1,000) of a share of Series A
Preferred Stock purchasable upon exercise of each right should approximate
the
value of one share of common stock.
Exercisability
of Rights; Expiration Date
The
rights are not exercisable until the Distribution Date (as defined below),
and
will expire at the close of business on April 3, 2013 (the “Final Expiration
Date”) unless the rights are earlier redeemed or exchanged by us, all as
described below.
Triggering
Events; Distribution Date
The
rights will be exercisable only upon the earlier of: (i) 10 business days
following a public announcement (the “Stock Acquisition Date”) that a person or
group of affiliated or associated persons has become an Acquiring Person and
(ii) 10 business days following the commencement of a tender offer or exchange
offer that would result in such person or group becoming an Acquiring Person
(the “Distribution Date”).
Generally,
any person (including affiliates and associates) or group which acquires
beneficial ownership or 15% or more of the then outstanding common stock is
an
“Acquiring Person”. The following persons who meet this definition will not
become Acquiring Persons: (i) us, (ii) any of our subsidiaries, (iii) any
employee benefit plan of us or of any of our subsidiaries, or any person or
entity organized, appointed or established by us for or pursuant to the terms
of
any such plan, (iv) Fletcher International, Ltd., together with all of its
affiliates (collectively, “Fletcher”), but only so long as (A) the common stock
beneficially owned by Fletcher is limited to the common stock Fletcher acquires
or is permitted to acquire under the terms of the agreement with Fletcher and
related certificate and (B) Fletcher’s beneficial ownership (as determined
pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended
and
in effect on the date of the Rights Agreement, of common stock does not at
any
time exceed 14.99% of the then outstanding common stock, (v) any person that
became the beneficial owner of 15% or more of the outstanding common stock
as a
result of a decrease in the number of outstanding shares of common stock caused
by a transaction approved by the Board of Directors, and (vi) any person who
has
reported or is required to report such ownership on Schedule 13G under the
Exchange Act (or any comparable or successor report) or on Schedule 13D under
the Exchange Act (or any comparable or successor report) which Schedule 13G
or
Schedule 13D does not state any intention to or reserve the right to control
or
influence our management or policies or engage in any of the actions specified
in Item 4 of such schedule (other than the disposition of the common stock)
and,
within 10 business days of being requested by us to advise it regarding the
same, certifies to us that such person acquired shares of common stock in excess
of 15% inadvertently or without knowledge of the terms of the rights and who,
together with all affiliates and associates, thereafter does not acquire any
additional shares of common stock while being the beneficial owner of 15% or
more of the shares of common stock then outstanding.
46
Flip
In Rights
In
the event that any person or group becomes an Acquiring Person (a “Flip-In
Triggering Event”), each right will automatically convert into a right to buy
common stock rather than Series A Preferred Stock. As such, each holder of
a
right will thereafter have the right to purchase our common stock (or, in
certain circumstances, cash, property or other securities) having a value equal
to two times the exercise price of the right, or in other words, effectively
at
one-half of our then-current common stock price. However, any rights associated
with common stock acquired by an Acquiring Person will be void, and such
Acquiring Person will not be able to exercise the rights to purchase additional
common stock. Rights are not exercisable following the occurrence of a Flip-In
Triggering Event until such time as the rights are no longer redeemable by
us,
as described below.
The
following is an example of how exercise of the rights would work, assuming
an
exercise price of $30 per right and a then-current market price for our common
stock of $10.
Example:
At
an exercise price of $30 per right, each right (excluding those owned by an
Acquiring Person) would be multiplied by the number of Units of Series A
Preferred Stock into which the right was exercisable - 1. That number ($30
× 1 =
$30) is then divided by 50% of the then-current market price of our stock (50%
of $10 = $5) - thus, $30 divided by 5 equals 6, which is the number of shares
of
our common stock received for each right. Thus, for each $30 purchase price,
each holder would receive 6 shares of our common stock, which would have an
aggregate value of $60-twice the $30 purchase price.
Flip
Over
In
the event that, at any time following the Flip-In Triggering Event: (i) we
are
acquired in a merger or other business combination transaction, or (ii) more
than 50% of our assets or earning power is sold or transferred, each holder
of a
right (except voided rights held by the Acquiring Person) shall have the right
to purchase common stock of the Acquiring Person having a value equal to two
times the exercise price of the right. The formula for a Flip-Over purchase
is
the same as used for a Flip-In Triggering Event, only utilizing the market
price
of the Acquiring Person’s stock.
Transfer
and Detachment of Rights
The
rights were attached to all common stock certificates representing common stock
outstanding at the close of business on March 27, 2003, and no separate rights
certificates will be distributed. The rights will separate from the common
stock
upon a Distribution Date. Until the Distribution Date: (i) the rights will
be
evidenced by the common stock certificates and will be transferred with and
only
with such common stock certificates, (ii) new common stock certificates issued
after March 11, 2003 contain a legend and notation incorporating the Rights
Agreement by reference and (iii) the surrender for transfer of any certificates
for common stock outstanding will also constitute the transfer of the rights
associated with the common stock represented by such certificate. Except as
otherwise determined by the Board of Directors, only shares of common stock
issued prior to the Distribution Date will be issued with rights.
As
soon as practicable after a Distribution Date, rights certificates will be
mailed to holders of record of the common stock as of the close of business
on
the Distribution Date and, thereafter, the separate rights certificates alone
will represent the rights. Any registered holder desiring to transfer, split
up,
combine or exchange any rights certificate must make such request in writing
to
the rights Agent, and shall surrender the rights certificate to be transferred,
split up, combined or exchanged at the principal office or offices of the rights
Agent. Neither the rights Agent nor us shall be obligated to take any action
whatsoever regarding the transfer of any such surrendered rights certificate
until the registered holder has completed and signed the certificate contained
in the form of assignment on the reverse side of the rights certificate and
has
provided such additional information about the identity of the parties involved,
as we may reasonably request. Thereupon the Rights Agent shall, subject to
certain restrictions contained in the Rights Agreement regarding certain
entities acquiring 15% or more of our common stock, countersign and deliver
to
the person entitled a rights certificate or rights certificates, as the case
may
be, as so requested. We may require payment of a sum sufficient to cover any
tax
or governmental charge that may be imposed in connection with any transfer,
split up, combination or exchange of rights certificates.
47
Adjustments
The
purchase price payable, and the number of Units or other securities or property
issuable, upon exercise of the rights are subject to adjustment from time to
time to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Series A Preferred Stock,
(ii) if holders of the Series A Preferred Stock are granted certain rights
or
warrants to subscribe for Series A Preferred Stock, or shares having the same
rights, preferences and privileges as the Series A Preferred Stock, or
convertible securities at less than the current market price of the Series
A
Preferred Stock, or (iii) upon the distribution to holders of the Series A
Preferred Stock of evidences of indebtedness or assets (excluding regular
quarterly cash dividends) or of subscription rights or warrants (other than
those referred to above).
The
number of outstanding rights, and the number of Units or other securities or
property issuable, upon exercise of the rights are subject to adjustment from
time to time in the event that we (i) declare a dividend on the outstanding
shares of common stock payable in shares of common stock, (ii) subdivide the
outstanding shares of common stock, or (iii) combine the outstanding shares
of
common stock into a smaller number of shares.
With
certain exceptions, no adjustment in the purchase price will be required until
cumulative adjustments amount to at least 1% of the purchase price. No
fractional Units will be issued and, in lieu thereof, an adjustment in cash
will
be made based on the market price of the Series A Preferred Stock on the last
trading date prior to the date of exercise.
Redemption
In
general, at any time prior to the earlier of (i) the close of business on the
10th business day following a Stock Acquisition Date, or (ii) the Final
Expiration Date, we may redeem the rights in whole, but not in part, at a price
of $.01 per right. Immediately upon the action of the Board of Directors
ordering redemption of the rights, the rights will terminate and the only right
of the holders of rights will be to receive the redemption price.
Exchange
In
general, at any time after a person becomes an Acquiring Person, and prior
to
the acquisition by such person or group of 50% or more of the outstanding common
stock, the Board of Directors may exchange all or part of the then outstanding
rights (other than rights owned by such person or group which have become void)
for common stock at an exchange ratio of one share of common stock per right
(or
in certain circumstances preferred stock), subject to applicable adjustments.
No
Stockholder Rights for Right Holders
Until
a right is exercised, the holder thereof will have no rights as a stockholder
relating to the rights, including, without limitation, the right to vote,
receive dividends or any distributions upon liquidation.
Tax
Consequences
While
the distribution of the rights will not be taxable to stockholders or to us,
stockholders may, depending upon the circumstances, recognize taxable income
in
the event that the rights became exercisable for our common stock (or other
consideration) or for common stock of the acquiring company as set forth above.
Amendments
The
Rights Agreement may be amended by the Board of Directors prior to the
Distribution Date. After the Distribution Date, the Rights Agreement may be
amended by the Board of Directors in order to cure any ambiguity, to correct
or
supplement any defective or inconsistent provisions, to make any necessary
or
desirable changes that do not adversely affect the interests of holders of
rights, or to shorten or lengthen any time period under the Rights Agreement;
provided, however, that no amendment to adjust the time period governing
redemption shall be made at
48
such
time as the rights are not redeemable and any amendment to lengthen any other
time period must be for the purpose of protecting, enhancing or clarifying
the
rights of or benefits to the holders of rights.
The
following is a summary of certain U.S. federal income tax considerations to
U.S.
holders relating to the purchase, ownership and disposition of the Debentures
or
shares of our common stock. This discussion is based upon the Internal Revenue
Code of 1986, as amended (the “Code”), existing and proposed Treasury
Regulations, and judicial decisions and administrative interpretations
thereunder, as of the date hereof, all of which are subject to change or
different interpretations, possibly with retroactive effect. We cannot assure
you that the Internal Revenue Service (the “IRS”) will not challenge one or more
of the tax results described herein, and we have not obtained, nor do we intend
to obtain, a ruling from the IRS with respect to the federal tax consequences
of
acquiring, holding or disposing of the Debentures or shares of our common stock.
This
discussion is limited to holders of Debentures who purchase the Debentures
in
connection with their original issue from the initial purchaser at the “issue
price” of the Debentures (as described below) and who hold the Debentures and
any shares of our common stock into which the Debentures are converted as
capital assets within the meaning of the Code.
This
discussion does not contain a complete analysis of all the potential tax
considerations relating to the purchase, ownership and disposition of the
Debentures or shares of our common stock. In particular, this discussion does
not address all tax considerations that may be important to you in light of
your
particular circumstances (such as the alternative minimum tax provisions) or
under certain special rules. Special rules may apply, for instance, to certain
financial institutions, insurance companies, tax-exempt organizations, regulated
investment companies, security dealers and other persons that mark-to-market,
holders whose functional currency for federal income tax purposes is not the
United States dollar, persons who hold Debentures or shares of our common stock
as part of a hedge, conversion or constructive sale transaction, or straddle
or
other integrated or risk reduction transaction, or persons who have ceased
to be
United States citizens or are to be taxed as resident aliens. In addition,
the
discussion does not apply to holders of Debentures or shares of our common
stock
that are partnerships. If a partnership (including for this purpose any entity
treated as a partnership for federal income tax purposes) is a beneficial owner
of the Debentures or shares of our common stock into which the Debentures are
converted, the treatment of a partner in the partnership will generally depend
upon the status of the partner and upon the activities of the partnership.
A
holder of Debentures that is a partnership and partners in such partnership
should consult their own tax advisors about the federal income tax consequences
of holding and disposing of the Debentures or shares of our common stock into
which the Debentures are converted. This discussion also does not address the
tax consequences arising under the laws of any foreign, state or local
jurisdiction.
PLEASE
CONSULT YOUR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO YOU
OF
ACQUIRING, HOLDING, CONVERTING OR OTHERWISE DISPOSING OF THE DEBENTURES AND
SHARES OF OUR COMMON STOCK, INCLUDING THE EFFECT AND APPLICABILITY OF STATE,
LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED
STATES FEDERAL OR OTHER TAX LAWS.
Tax
Consequences to U.S. Holders
U.S.
Holders
As
used herein, the term “U.S. Holder” means a beneficial owner of a Debenture that
is, for U.S. federal income tax purposes:
| • | a citizen or resident of the United States; | |||
| • | a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or of any political subdivision thereof; or | |||
49
| • | an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source. | |||
Classification
of the Debentures
We
intend to treat the Debentures as indebtedness for United States federal income
tax purposes and intend to take the position that the Debentures will be subject
to the special regulations governing contingent payment debt instruments
(referred to as the “Contingent Debt Regulations”). Under the terms of the
indenture governing the Debentures, we and each holder of the Debentures agree,
for United States federal income tax purposes, to treat the Debentures as debt
instruments that are subject to the Contingent Debt Regulations, and the
remainder of this discussion assumes that the Debentures will be so treated.
In
addition, under the indenture, each holder will be deemed to have agreed to
treat the fair market value of our common stock received by such holder upon
conversion as a contingent payment and to recognize amounts as interest income
treated as original issue discount under the Code with respect to the Debentures
for United States federal income tax purposes according to the “noncontingent
bond method,” set forth in section 1.1275-4(b) of the Contingent Debt
Regulations, using the comparable yield (as defined below) determined by us.
The
Internal Revenue Service, or the IRS, has issued a revenue ruling with respect
to instruments having certain features similar to the Debentures. However,
the
application of the Contingent Debt Regulations to instruments such as the
Debentures is uncertain in several respects, and, as a result, no assurance
can
be given that the IRS or a court will agree with the treatment described herein.
Any differing treatment could affect the amount, timing and character 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 higher or lower rate,
might not recognize income, gain or loss upon conversion of the Debentures
into
shares of our common stock, and might recognize capital gain or loss upon a
taxable disposition of the Debentures. Holders should consult their tax advisors
concerning the tax treatment of holding and disposing of the Debentures.
In
this regard, it should be noted that in 2002, the IRS sought comments in Notice
2002-36 regarding the tax classification and treatment of convertible
instruments under the Contingent Debt Regulations. In this Notice, the IRS
acknowledged that subtle changes to the terms of an instrument could effectively
make use of the non-contingent bond method under the contingent debt regulations
elective. Moreover, the Service acknowledged that there is considerable
uncertainty about the tax consequences of convertible debt instruments that
are
widely used and broadly traded in the capital markets. The IRS invited comments
on several issues including whether the exclusion from the non-contingent bond
method for straight convertible debt instruments should be eliminated, expanded
or modified and whether the rule that remote and incidental contingencies are
disregarded in determining whether a debt instrument is a contingent debt
instrument should be modified. The IRS has not issued any guidance pursuant
to
the request for comments set forth in Notice 2002-36. The Notice clearly sets
forth, however, the scope of uncertainty with respect to instruments such as
the
Debentures. Accordingly, any potential holder of the Debentures is encouraged
to
consult their tax counsel regarding the tax treatment of the Debentures in
their
hands.
Accrual
of Interest on the Debentures
Pursuant
to the Contingent Debt Regulations, a U.S. holder will be required, regardless
of whether the U.S. holder uses the cash or accrual method of tax accounting,
to
accrue an amount of ordinary interest income as original issue discount at
the
comparable yield (which will be substantially in excess of the interest payments
actually received in that year).
A
U.S. holder must accrue an amount of ordinary income, as interest income treated
as original issue discount for United States federal income tax purposes, for
each accrual period prior to and including the maturity date of the Debentures
that equals:
(1)
the product of (i) the adjusted issue price (as defined below) of the Debentures
as of the beginning of the accrual period, and (ii) the comparable yield (as
defined below) of the Debentures, adjusted for the length of the accrual period;
50
(2)
divided by the number of days in the accrual period; and
(3)
multiplied by the number of days during the accrual period that the U.S. holder
held the Debentures.
The
Debentures’ issue price is the first price at which a substantial amount of the
Debentures is sold, excluding sales to bond houses, brokers or similar persons
or organizations acting in the capacity of underwriters, placement agents or
wholesalers. The adjusted issue price of a Debenture is its issue price
increased by any interest income previously accrued, determined without regard
to any adjustments to interest accruals described below, and decreased by the
projected amount of any projected payments (as defined below) previously made
(including payments of stated cash interest) with respect to the Debentures.
Unless
certain conditions are met, the term “comparable yield” means the annual yield
we would pay, as of the initial issue date, on a noncontingent, nonconvertible,
fixed-rate debt instrument with terms and conditions otherwise comparable to
those of the Debentures. We have determined that the comparable yield for the
Debentures is 9.05%, compounded semi-annually. The precise manner of calculating
the comparable yield, however, is not entirely clear. If the comparable yield
were successfully challenged by the IRS, the redetermined yield could differ
materially from the comparable yield provided by us. Moreover, the projected
payment schedule could differ materially from the projected payment schedule
provided by us.
The
Contingent Debt Regulations require that we provide to U.S. holders, solely
for
United States federal income tax purposes, a schedule of the projected amounts
of payments, which we refer to as projected payments, on the Debentures. This
schedule must produce the comparable yield. The projected payment schedule
includes the semi-annual stated cash interest payable on the Debentures at
the
rate of 1.625% per annum, estimates for certain contingent interest payments
and
an estimate for a payment at maturity taking into account the conversion
feature. In this connection, the fair market value of any common stock (and
cash, if any) received by a holder upon conversion will be treated as a
contingent payment.
U.S.
holders may also obtain the projected payment schedule by submitting a written
request for such information to: Euronet Worldwide, Inc., 4601 College Blvd.,
Suite 300, Leawood, Kansas 66211.
THE
COMPARABLE YIELD AND THE SCHEDULE OF PROJECTED PAYMENTS ARE NOT DETERMINED
FOR
ANY PURPOSE OTHER THAN FOR THE DETERMINATION OF A U.S. HOLDER’S INTEREST
ACCRUALS AND ADJUSTMENTS THEREOF IN RESPECT OF THE DEBENTURES FOR UNITED STATES
FEDERAL INCOME TAX PURPOSES AND DO NOT CONSTITUTE A PROJECTION OR REPRESENTATION
REGARDING THE ACTUAL AMOUNTS PAYABLE ON THE DEBENTURES.
Amounts
treated as interest under the Contingent Debt Regulations are treated as
original issue discount for all purposes of the Internal Revenue Code of 1986,
as amended (which we refer to as the Code”).
Adjustment
to Interest Accrual on the Debentures
As
noted above, the projected payment schedule includes amounts attributable to
the
stated semi-annual cash interest payable on the Debentures. Accordingly, the
receipt of the stated semi-annual cash interest payments will not be separately
taxable to U.S. holders. If, during any taxable year, a U.S. holder receives
actual payments with respect to the Debentures for that taxable year that in
the
aggregate exceed the total amount of projected payments for that taxable year,
the U.S. holder will incur a “net positive adjustment” under the Contingent Debt
Regulations equal to the amount of such excess. The U.S. holder will treat
a
“net positive adjustment” as additional interest income. For this purpose, the
payments in a taxable year include the fair market value of property received
in
that year, including the fair market value of our common stock received upon
conversion.
If
a U.S. holder receives in a taxable year actual payments with respect to the
Debentures for that taxable year that in the aggregate were less than the amount
of projected payments for that taxable year, the U.S. holder will incur a “net
negative adjustment” under the Contingent Debt Regulations equal to the amount
of such deficit. This adjustment will (a) first reduce the U.S. holder’s
interest income on the Debentures for that taxable year, and (b) to the
51
extent
of any excess after the application of (a), give rise to an ordinary loss to
the
extent of the U.S. holder’s interest income on the Debentures during prior
taxable years, reduced to the extent such interest was offset by prior net
negative adjustments. A negative adjustment is not subject to the two percent
floor limitation imposed on miscellaneous itemized deductions under Section
67
of the Code. Any negative adjustment in excess of the amounts described in
(a)
and (b) will be carried forward and treated as a negative adjustment in the
succeeding taxable year and will offset future interest income accruals in
respect of the Debentures or will reduce the amount realized on the sale,
exchange, purchase by us at the holder’s option, conversion, redemption or
retirement of the Debentures.
If
a U.S. holder purchases Debentures at a discount or premium to the adjusted
issue price, the discount will be treated as a positive adjustment and the
premium will be treated as a negative adjustment. The U.S. holder must
reasonably allocate the adjustment over the remaining term of the Debentures
by
reference to the accruals of original issue discount at the comparable yield
or
to the projected payments. It may be reasonable to allocate the adjustment
over
the remaining term of the Debentures pro rata with the accruals of original
issue discount at the comparable yield. You should consult your tax advisors
regarding these allocations.
Sale,
Exchange, Conversion or Redemption
Generally,
the sale or exchange of a Debenture, the purchase of a Debenture by us at the
holder’s option, or the redemption or retirement of a Debenture for cash, will
result in taxable gain or loss to a U.S. holder. As described above, our
calculation of the comparable yield and the schedule of projected payments
for
the Debentures includes the receipt of common stock upon conversion as a
contingent payment with respect to the Debentures. Accordingly, we intend to
treat the receipt of our common stock by a U.S. holder upon the conversion
of a
Debenture as a contingent payment under the Contingent Debt Regulations. Under
this treatment, conversion also would result in taxable gain or loss to the
U.S.
holder. As described above, holders will be deemed to have agreed to be bound
by
our determination of the comparable yield and the schedule of projected
payments.
The
amount of gain or loss on a taxable sale, exchange, purchase by us at the
holder’s option, conversion, redemption or retirement would be equal to the
difference between (a) the amount of cash plus the fair market value of any
other property received by the U.S. holder, including the fair market value
of
any of our common stock received, and (b) the U.S. holder’s adjusted tax basis
in the Debenture. A U.S. holder’s adjusted tax basis in a Debenture will
generally be equal to the U.S. 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, other than adjustments to reflect a discount or premium to
the
adjusted issue price, if any), and decreased by the amount of any projected
payments that have been previously made in respect of the Debentures to the
U.S.
holder (without regard to the actual amount paid). Gain recognized upon a sale,
exchange, purchase by us at the holder’s option, conversion, redemption or
retirement of a Debenture will generally be treated as ordinary interest income;
any loss will be ordinary loss to the extent of net original issue discount
inclusions, and thereafter, capital loss (which will be long-term if the
Debenture is held for more than one year). The deductibility of net capital
losses by individuals and corporations is subject to limitations.
A
U.S. holder’s tax basis in our common stock received upon a conversion of a
Debenture will equal the then current fair market value of such 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.
Given
the uncertain tax treatment of instruments such as the Debentures, you should
contact your tax advisors concerning the tax treatment on conversion of a
Debenture and the ownership of our common stock.
Adjustment
of Conversion Rate
If
at any time we make a distribution of property to shareholders that would be
taxable to such shareholders as a dividend for federal income tax purposes
(for
example, distributions of cash, evidences of indebtedness or assets of ours,
but
generally not stock dividends or rights to subscribe for our common stock)
and,
pursuant to the anti-dilution provisions of the indenture, the conversion rate
of the Debentures is increased, such increase may be deemed to be the payment
of
a taxable stock dividend to you. If the conversion rate is increased at our
discretion or in certain other circumstances, such increase also may be deemed
to be the payment of a taxable dividend to you,
52
notwithstanding
the fact that you do not receive a cash payment. In certain circumstances,
the
failure to make an adjustment of the conversion rate under the indenture may
result in a taxable distribution to holders of our common stock. Any deemed
distribution will be taxable as a dividend, return of capital or capital gain
in
accordance with the tax rules applicable to corporate distributions, but may
not
be eligible for the reduced rates of tax applicable to certain dividends paid
to
individual holders nor to the dividends-received deduction applicable to certain
dividends paid to corporate holders.
Ownership
and Disposition of Shares of Our Common Stock
Distributions,
if any, paid on shares of our common stock generally will be includable in
your
income as ordinary income to the extent made from our current or accumulated
earnings and profits. Such distributions will be eligible for the
dividends-received deduction in the case of a corporate holder that meets
certain holding period and other applicable requirements, and will qualify
for
taxation at reduced rates in the case of an individual holder (effective for
tax
years beginning before January 1, 2009) if the holder meets certain holding
period and other requirements. Upon the sale, exchange or other disposition
of
shares of our common stock, you generally will recognize capital gain or capital
loss equal to the difference between the amount realized on such sale or
exchange and your adjusted tax basis in such shares. You should consult your
tax
advisors regarding the treatment of capital gains (which may be taxed at lower
rates than ordinary income for taxpayers who are individuals) and losses (the
deductibility of which is subject to limitations).
Backup
Withholding and Information Reporting
Payments
of interest or dividends made by us on, or the proceeds of the sale or other
disposition of, the Debentures or shares of our common stock may be subject
to
information reporting and federal backup withholding tax if the recipient of
such payment fails to supply an accurate taxpayer identification number or
otherwise fails to comply with applicable United States information reporting
or
certification requirements. Any amount withheld from a payment to a holder
under
the backup withholding rules is allowable as a credit against the holder’s U.S.
federal income tax, provided that the required information is furnished to
the
IRS.
Tax
Consequences to Non-U.S. Holders
As
used herein, the term “Non-U.S. Holder” means a beneficial owner of a Debenture
or our common stock that is, for U.S. federal income tax purposes:
(A)
an individual who is classified as a nonresident alien for U.S. federal income
tax purposes;
(B)
a foreign corporation; or
(C)
a nonresident alien fiduciary of a foreign estate or trust.
Withholding
Tax Payments on Debentures
Except
as described below with respect to constructive dividends, all payments on
the
Debentures made to a Non-U.S. Holder, including a payment in our common stock
or
cash pursuant to a conversion, exchange or retirement and any gain realized
on a
sale of the Debentures, will not be subject to the 30% U.S. federal income
and
withholding tax, provided that:
| • | the Non-U.S. Holder does not own, actually or constructively, 10% or more of the total combined voting power of all classes of our stock entitled to vote, is not a controlled foreign corporation related, directly or indirectly, to us through stock ownership and is not a bank receiving certain types of interest, | |||
| • | the certification requirement described below has been fulfilled with respect to the Non-U.S. Holder, | |||
53
| • | such payments are not effectively connected with the conduct by such Non-U.S. Holder of a trade or business in the United States, and | |||
| • | in the case of gain realized on the sale, conversion, exchange or retirement of the Debentures or disposition of our common stock following conversion we are not, and have not been within the shorter of the five-year period preceding such sale, conversion, exchange or retirement and the period the Non-U.S. Holder held the Debentures, a U.S. real property holding corporation. | |||
The
certification requirement referred to above will be fulfilled if either (a)
the
beneficial owner of a Debenture certifies to the applicable payer or its agent,
under penalties of perjury, that it is not a U.S. person and provides its name
and address on IRS Form W-8BEN (or a suitable substitute form); or (b) a
securities clearing organization, bank or other financial institution, that
holds customers’ securities in the ordinary course of its trade or business (a
“financial institution”) and holds the Debenture, certifies under penalties of
perjury that such a Form W-8BEN (or a suitable substitute form) has been
received from the beneficial owner by it or by a financial institution between
it and the beneficial owner and furnishes the payor with a copy thereof.
Generally,
a corporation is a U.S. real property holding corporation under the “FIRPTA”
rules if the fair market value of its U.S. real property interests, as defined
in the Internal Revenue Code and applicable regulations, equals or exceeds
50%
of the aggregate fair market value of its worldwide real property interests
and
its other assets used or held for use in a trade or business. We currently
are
not a U.S. real property holding corporation and do not intend to become one
in
the future. However, no assurance can be given that we will not become a U.S.
real property holding corporation in the future. If we are determined to be
a
U.S. real property holding corporation, then an exemption would generally apply
to a Non-U.S. Holder who at no time actually or constructively owned more than
5% of the outstanding Debentures or more than 5% of our outstanding common
stock, assuming our common stock continues to be regularly traded on an
established securities market, as prescribed by Treasury regulations.
If
a Non-U.S. Holder of a Debenture is engaged in a trade or business in the United
States, and if payments on the Debenture are effectively connected with the
conduct of this trade or business, the Non-U.S. Holder, although exempt from
U.S. withholding tax, will generally be taxed in the same manner as a U.S.
Holder (see general discussion of federal income tax considerations to U.S.
Holders above), except that the Non-U.S. Holder will be required to provide
a
properly executed IRS Form W-8ECI in order to claim an exemption from
withholding tax. These Non-U.S. Holders should consult their own tax advisers
with respect to other tax consequences of the ownership of the Debentures,
including the possible imposition of a 30% branch profits tax or, if applicable,
a lower treaty rate.
Tax
Consequences to Dividends
Dividends
(including deemed dividends on Debentures described above under “-U.S.
Holders-Adjustment of Conversion Rate) if any, paid to a Non-U.S. Holder of
our
common stock generally will be subject to U.S. withholding tax at a 30% rate,
subject to reduction under an applicable treaty. In order to obtain a reduced
rate of withholding, a Non-U.S. Holder will be required to provide a properly
executed IRS Form W-8BEN certifying its entitlement to benefits under a treaty.
It is possible that U.S. federal tax on the constructive dividend would be
withheld from subsequent interest or principal payments made to the Non-U.S.
Holder of the Debentures. A Non-U.S. Holder who is subject to withholding tax
under such circumstances should consult his own tax adviser as to whether he
can
obtain a refund of all or a portion of the withholding tax. Except to the extent
otherwise provided under an applicable tax treaty, you generally will be taxed
in the same manner as a U.S. Holder on dividends that are effectively connected
with your conduct of a trade or business in the United States. If you are a
foreign corporation, you may also be subject to a U.S. branch profits tax on
such effectively connected income at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty, subject to certain adjustments.
Gain
on Disposition of the Debentures and Shares of Our Common Stock
A
Non-U.S. Holder generally will not be subject to U.S. federal income or
withholding tax on gain realized on a sale or other disposition of the common
stock received upon a conversion of a Debenture, unless:
| • | the gain is effectively connected with the conduct by such Non-U.S. Holder of a trade or business in the United States, | |||
54
| • | in the case of a Non-U.S. Holder who is a nonresident alien individual, the individual is present in the United States for 183 or more days in the taxable year of the disposition and either (A) you have a “tax home” in the United States and certain other requirements are met, or (B) the gain from the disposition is attributable to an office or other fixed place of business in the United States; | |||
| • | in the case of an amount which is attributable to interest or original issue discount, you do not meet the conditions for exemption from U.S. federal withholding tax as described in “Withholding Tax Payments on Debentures” above; or | |||
| • | we are or have been a U.S. real property holding corporation at any time within the shorter of the five year period preceding such sale, exchange or disposition and the period the Non-U.S. Holder held the common stock. | |||
As
discussed above, we believe that we are not, and do not anticipate becoming,
a
U.S. real property holding corporation for United States federal income tax
purposes.
If
a Non-U.S. Holder of our common stock is engaged in a trade or business in
the
United States, and if the gain on the common stock is effectively connected
with
the conduct of this trade or business, the Non-U.S. Holder will generally be
taxed in the same manner as a United States Holder (see general discussion
of
federal income tax considerations to U.S. Holders above). These Non-U.S. Holders
should consult their own tax advisers with respect to other tax consequences
of
the disposition of the common stock, including the possible imposition of a
30%
branch profits tax.
Backup
Withholding and Information Reporting
Information
returns may be filed with the IRS in connection with payments on the Debentures,
the common stock and the proceeds from a sale or other disposition of the
Debentures or the common stock. A Non-U.S. Holder may be subject to United
States backup withholding tax on these payments unless the Non-U.S. Holder
complies with certification procedures to establish that it is not a U.S.
person. The certification procedures required of Non-U.S. Holders to claim
the
exemption from withholding tax on certain payments on the Debentures, described
above, will satisfy the certification requirements necessary to avoid the backup
withholding tax as well. The amount of any backup withholding from a payment
will be allowed as a credit against the holder’s U. S. federal income tax
liability and may entitle the holder to a refund, provided that the required
information is timely furnished to the IRS. In addition, we must report annually
to the IRS and to each Non-U.S. Holder the amount of any dividends paid to,
and
the tax withheld with respect to, such holder, regardless of whether any
withholding was actually required. Copies of these information returns may
also
be made available under the provisions of a specific treaty or agreement to
the
tax authorities of the country in which the Non-U.S. Holder resides.
We
issued the Debentures in a private offering on December 15, 2004. The initial
purchaser has advised us that they resold the Debentures to qualified
institutional buyers under Rule 144A under the Securities Act. The Debentures
and the common stock that are offered for resale by this prospectus are offered
for the accounts of the selling security holders. These subsequent purchasers,
or their transferees, pledgees, donees or successors, may from time to time
offer and sell any or all of the Debentures and/or the common stock issuable
upon conversion of the Debentures pursuant to this prospectus.
The
following table sets forth certain information with respect to the selling
security holders and the principal amount of Debentures and the number of shares
of our common stock that are beneficially owned by each selling security holder
and that may be offered and sold from time to time pursuant to this prospectus.
The information is based solely on information provided by or on behalf of
the
selling security holders set forth below, and we have not independently verified
the information.
55
Except
as indicated below, none of the selling security holders set forth below has
had
any position, office or other material relationship with us or our affiliates
within the past three years.
|
Name
|
Principal Amount
of
Debentures
Beneficially
Owned
($)
|
Principal Amount
of
Debentures
That May Be Sold
($)(1) |
Number of Shares
of
Common Stock
Beneficially
Owned
(2)(3)
|
Number of Shares
of
Common Stock
That
May Be Sold
(1)(3)
|
|||||||||
|
1976
Distribution Trust FBO A.R. Lauder/Zinterhofer
|
6,000
|
6,000
|
178.44
|
178.44
|
|||||||||
|
2000
Revocable Trust FBO A.R. Lauder/Zinterhofer
|
6,000
|
6,000
|
178.44
|
178.44
|
|||||||||
|
Alcon
Laboratories
|
368,000
|
368,000
|
10,944.03
|
10,944.03
|
|||||||||
|
Aloha
Airlines Non-Pilots Pension Trust
|
100,000
|
100,000
|
2,973.92
|
2,973.92
|
|||||||||
|
Aloha
Pilots Retirement Trust
|
65,000
|
65,000
|
1,933.05
|
1,933.05
|
|||||||||
| Amaranth LLC | 2,000,000 | 2,000,000 | 59,478.40 | 59,478.40 | |||||||||
|
American
Investors Life Insurance Company
|
1,000,000
|
1,000,000
|
29,739.20
|
29,739.20
|
|||||||||
|
Arlington
County Employees Retirement System
|
593,000
|
593,000
|
17,635.35
|
17,635.35
|
|||||||||
|
Asante
Health Systems
|
115,000
|
115,000
|
3,420.01
|
3,420.01
|
|||||||||
|
ATSF-Transamerica
Convertible Securities
|
6,250,000
|
6,250,000
|
185,870.00
|
185,870.00
|
|||||||||
|
Attorney’s
Title Insurance Fund
|
175,000
|
175,000
|
5,204.36
|
5,204.36
|
|||||||||
|
BNP
Paribas Equity Strategies, SNC
|
1,620,000
|
1,620,000
|
48,177.50
|
48,177.50
|
|||||||||
|
Boilermakers
Blacksmith Pension Trust
|
2,600,000
|
2,600,000
|
77,321.92
|
77,321.92
|
|||||||||
|
British
Virgin Islands Social Security Board
|
108,000
|
108,000
|
3,211.83
|
3,211.83
|
|||||||||
|
BTOP
Multi Strategy Master Portfolio Ltd.
|
200,000
|
200,000
|
5,947.84
|
5,947.84
|
|||||||||
|
C
& H Sugar Company Inc.
|
115,000
|
115,000
|
3,420.01
|
3,420.01
|
|||||||||
|
CALAMOS
Growth & Income Fund—CALAMOS Investment Trust
|
27,000,000
|
27,000,000
|
802,958.40
|
802,958.40
|
|||||||||
|
CALAMOS
Growth & Income Portfolio—CALAMOS Advisers Trust
|
200,000
|
200,000
|
5,947.84
|
5,947.84
|
|||||||||
|
Chrysler
Corporation Master Retirement Trust
|
7,745,000
|
7,745,000
|
230,330.10
|
230,330.10
|
|||||||||
|
City
and County of San Francisco Retirement System
|
1,315,000
|
1,315,000
|
39,107.05
|
39,107.05
|
|||||||||
|
City
of New Orleans
|
108,000
|
108,000
|
3,211.83
|
3,211.83
|
|||||||||
|
City
University of New York
|
123,000
|
123,000
|
3,657.92
|
3,657.92
|
|||||||||
|
CNHCA
Master Account, LP
|
6,100,000
|
6,100,000
|
181,409.12
|
181,409.12
|
|||||||||
| Coda Capital ND Portfolio | 100,000 | 100,000 | 2,973.92 | 2,973.92 | |||||||||
|
CooperNeff
Conv Strat (Cayman) Master Fund, LP
|
594,000
|
594,000
|
17,665.08
|
17,665.08
|
|||||||||
|
Delaware
Public Employees Retirement System
|
1,067,000
|
1,067,000
|
31,731.73
|
31,731.73
|
|||||||||
|
Delta
Airlines Master Trust
|
1,920,000
|
1,920,000
|
57,099.26
|
57,099.26
|
|||||||||
|
Delta
Pilots Disability & Survivorship Trust—CV
|
760,000
|
760,000
|
22,601.79
|
22,601.79
|
|||||||||
|
DKR
Soundshore Strategic Holding Fund Ltd.
|
3,000,000
|
3,000,000
|
89,217.60
|
89,217.60
|
|||||||||
|
Duke
Endowment
|
465,000
|
465,000
|
13,828.73
|
13,828.73
|
|||||||||
|
F.M.
Kirby Foundation, Inc.
|
1,145,000
|
1,145,000
|
34,051.38
|
34,051.38
|
|||||||||
|
Franklin
and Marshall College
|
105,000
|
105,000
|
3,122.62
|
3,122.62
|
|||||||||
|
Frontpoint
Convertible Arbitrage Fund, Ltd.
|
4,000,000
|
4,000,000
|
118,956.80
|
118,956.80
|
|||||||||
|
Grady
Hospital Foundation
|
116,000
|
116,000
|
3,449.75
|
3,449.75
|
|||||||||
56
|
Name
|
Principal
Amount
of
Debentures
Beneficially
Owned
($)
|
|
Principal
Amount
of
Debentures
That
May Be Sold
($)(1)
|
|
Number
of Shares
of
Common Stock
Beneficially
Owned
(2)(3)
|
|
Number
of Shares
of
Common Stock
That
May Be Sold
(1)(3)
|
|
|||||
|
Hawaiian
Airlines Employees Pension Plan-IAM
|
35,000
|
35,000
|
1,040.87
|
1,040.87
|
|||||||||
|
Hawaiian
Airlines Pension Plan for Salaried Employees
|
5,000
|
5,000
|
148.70
|
148.70
|
|||||||||
|
Hawaiian
Airlines Pilots Retirement Plan
|
115,000
|
115,000
|
3,420.01
|
3,420.01
|
|||||||||
|
Huntrise
Capital Leveraged Partners, LLC
|
50,000
|
50,000
|
1,486.96
|
1,486.96
|
|||||||||
|
IDEX-Transamerica
Convertible Securities Fund
|
4,000,000
|
4,000,000
|
118,956.80
|
118,956.80
|
|||||||||
|
Inflective
Convertible Opportunity Fund I, Limited
|
2,000,000
|
2,000,000
|
59,478.40
|
59,478.40
|
|||||||||
|
Inflective
Convertible Opportunity Fund I, L.P.
|
1,000,000
|
1,000,000
|
29,739.20
|
29,739.20
|
|||||||||
|
Innovest
Finanzdienstle
|
1,435,000
|
1,435,000
|
42,675.75
|
42,675.75
|
|||||||||
|
International
Truck & Engine Corporation Non-Contributory Retirement Plan Trust
|
875,000
|
875,000
|
26,021.80
|
26,021.80
|
|||||||||
|
International
Truck & Engine Corporation Retirement Plan for Salaried Employees
Trust
|
840,000
|
840,000
|
24,980.93
|
24,980.93
|
|||||||||
|
International
Trust & Engine Corporation Retiree Health Benefit Trust
|
345,000
|
345,000
|
10,260.02
|
10,260.02
|
|||||||||
|
KBC
Financial Products USA, Inc.
|
1,500,000
|
1,500,000
|
44,608.80
|
44,608.80
|
|||||||||
| Lord Abett Investment Trust - LA Convertible Fund | 950,000 | 950,000 | 28,252.24 | 28,252.24 | |||||||||
|
Louisiana
CCRF
|
125,000
|
125,000
|
3,717.40
|
3,717.40
|
|||||||||
|
Lyxor/Conv
Arb Fund Ltd
|
270,000
|
270,000
|
8,029.58
|
8,029.58
|
|||||||||
|
Lyxor/Inflective
Convertible Opportunity Fund Limited
|
2,500,000
|
2,500,000
|
74,348.00
|
74,348.00
|
|||||||||
|
Merrill
Lynch Insurance Group
|
284,000
|
284,000
|
8,445.93
|
8,445.93
|
|||||||||
|
Microsoft
Corporation
|
770,000
|
770,000
|
22,899.18
|
22,899.18
|
|||||||||
|
Municipal
Employees
|
236,000
|
236,000
|
7,018.45
|
7,018.45
|
|||||||||
|
New
Orleans Firefighters Pension/Relief Fund
|
73,000
|
73,000
|
2,170.96
|
2,170.96
|
|||||||||
|
Nomura
Securities International, Inc.
|
2,000,000
|
2,000,000
|
59,478.40
|
59,478.40
|
|||||||||
|
Nuveen
Preferred & Convertible Fund JQC
|
1,070,000
|
1,070,000
|
31,820.94
|
31,820.94
|
|||||||||
|
Occidental
Petroleum Corporation
|
231,000
|
231,000
|
6,869.76
|
6,869.76
|
|||||||||
|
OCM
Convertible Trust
|
2,175,000
|
2,175,000
|
64,682.76
|
64,682.76
|
|||||||||
|
OCM
Global Convertible Securities Fund
|
265,000
|
265,000
|
7,880.89
|
7,880.89
|
|||||||||
|
Ohio
Bureau of Workers Compensation
|
75,000
|
75,000
|
2,230.44
|
2,230.44
|
|||||||||
|
Partner
Reinsurance Company Ltd.
|
1,325,000
|
1,325,000
|
39,404.44
|
39,404.44
|
|||||||||
|
Policeman
and Firemen Retirement System of the City of Detroit
|
232,000
|
232,000
|
6,899.49
|
6,899.49
|
|||||||||
|
Pro-mutual
|
779,000
|
779,000
|
23,166.84
|
23,166.84
|
|||||||||
|
Pyramid
Equity Strategy Fund
|
50,000
|
50,000
|
1,486.96
|
1,486.96
|
|||||||||
| Quattro Fund Limited | 6,375,000 | 6,375,000 | 189,587.40 | 189,587.40 | |||||||||
| Quattro Multistrategy Masterfund LP |
1,125,000
|
1,125,000
|
33,456.60 | 33,456.60 | |||||||||
|
Qwest
Occupational Health Trust
|
385,000
|
385,000
|
11,449.59
|
11,449.59
|
|||||||||
| Qwest Pension Trust | 850,000 | 850,000 |
25,278.32
|
25,278.32 | |||||||||
| S.G. Americas Securities, LLC | 8,000,000 | 8,000,000 | 237,913.60 | 237,913.60 | |||||||||
|
Salomon
Brothers Asset Management, Inc.
|
6,250,000
|
6,250,000
|
185,870.00
|
185,870.00
|
|||||||||
|
Singlehedge
US Conv Arb Fund
|
237,000
|
237,000
|
7,048.19
|
7,048.19
|
|||||||||
|
Southern
Farm Bureau Life Insurance
|
875,000
|
875,000
|
26,021.80
|
26,021.80
|
|||||||||
|
State
Employees’ Retirement Fund of the State of Delaware
|
1,870,000
|
1,870,000
|
55,612.30
|
55,612.30
|
|||||||||
|
State
Street Custodian for GE Pension Trust
|
725,000
|
725,000
|
21,560.92
|
21,560.92
|
|||||||||
|
Stonebridge
Life Insurance
|
750,000
|
750,000
|
22,304.40
|
22,304.40
|
|||||||||
|
Sturgeon
Limited
|
279,000
|
279,000
|
8,297.24
|
8,297.24
|
|||||||||
|
The
Drake Offshore Master Fund, Ltd.
|
5,000,000
|
5,000,000
|
148,696.00
|
148,696.00
|
|||||||||
|
The
Grable Foundation
|
73,000
|
73,000
|
2,170.96
|
2,170.96
|
|||||||||
|
Transamerica
Life Insurance and Annuities Corp.
|
4,500,000
|
4,500,000
|
133,826.40
|
133,826.40
|
|||||||||
|
Transamerica
Premier High Yield Fund
|
1,000,000
|
1,000,000
|
29,739.20
|
29,739.20
|
|||||||||
|
Trustmark
Insurance Company
|
155,000
|
155,000
|
4,609.58
|
4,609.58
|
|||||||||
|
UnumProvident
Corporation
|
730,000
|
730,000
|
21,709.62
|
21,709.62
|
|||||||||
|
US
Bank FBO Benedictine Health Systems
|
175,000
|
175,000
|
5,204.36
|
5,204.36
|
|||||||||
|
Virginia
Retirement System
|
500,000
|
500,000
|
14,869.60
|
14,869.60
|
|||||||||
| Whitebox Diversified Convertible Arbitrage Partners LP | 1,000,000 | 1,000,000 | 29,739.20 | 29,739.20 | |||||||||
|
(1)
|
Because
a selling security holder may sell all or a portion of the Debentures
and
common stock issuable upon conversion of the Debentures pursuant
to this
prospectus, no estimate can be given as to the number or percentage
of
Debentures and common stock that the selling security holder will
hold
upon termination of any sales.
|
|
|
(2)
|
Includes
shares of common stock issuable upon conversion of the Debentures.
|
|
|
(3)
|
The
number of shares of our common stock issuable upon conversion of
the
Debentures assumes a holder would receive the maximum number of shares
of
common stock issuable in connection with the conversion of the full
amount
of Debentures held by such holder at the initial conversion rate
of
29.7392 shares per $1,000 principal amount of Debentures. This conversion
rate is subject to adjustment as described under “Description of the
Debentures - Conversion Rights.” Accordingly, the maximum number of shares
of common stock issuable upon conversion of the Debentures may increase
or
decrease from time to time. Under the terms of the indenture, fractional
shares will not be issued upon conversion of the Debentures; cash
will be
paid in lieu of fractional shares, if any.
|
|
The
selling security holders identified above may have sold, transferred or
otherwise disposed of all or a portion of their Debentures or common stock
since
the date on which the information in the preceding table is presented.
Information concerning the selling security holders may change from time to
time
and any such changed information will be set forth in prospectus supplements
or,
to the extent required, post-effective amendments to the registration statement.
Each
selling security holder who is an affiliate of a broker-dealer has informed
us
that such selling security holder purchased the securities in the ordinary
course of business and, at the time of the purchase of the securities, did
not
have any agreements or understandings, directly or indirectly, with any person
to distribute the securities.
57
The
securities to be offered and sold using this prospectus are being registered
to
permit public secondary trading of these securities by the selling security
holders from time to time after the date of this prospectus. We will not receive
any of the proceeds from the sale by the selling security holders of the
securities offered by this prospectus. Selling security holders will act
independently of us in making decisions with respect to the timing, manner
and
size of each sale.
The
Debentures and the common stock issuable upon conversion of the Debentures
may
be sold in one or more transactions at fixed prices, at prevailing market prices
at the time of sale, at prices relating to such prevailing market prices, at
varying prices determined at the time of sale, or at negotiated prices. Sales
of
Debentures and common stock issuable upon conversion of the Debentures may
be
effected in transactions (which may involve crosses or block transactions)
(i)
on any national securities exchange or quotation service on which the Debentures
or common stock issuable upon conversion of the Debentures may be listed or
quoted at the time of sale, (ii) in the over-the-counter market, (iii) in
transactions otherwise than on such exchanges or services or in the
over-the-counter market or (iv) through the writing of options. The selling
security holders may effect such transactions by selling the Debentures or
common stock issuable upon conversion of the Debentures directly to purchasers,
through broker-dealers acting as agents for the selling security holders, or
to
broker-dealers who may purchase Debentures or common stock issuable upon
conversion of the Debentures as principals and thereafter sell the Debentures
or
common stock issuable upon conversion of the Debentures from time to time in
transactions. In effecting sales, broker-dealers engaged by selling security
holders may arrange for other broker-dealers to participate. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the selling security holders and/or the
purchasers of the Debentures or common stock issuable upon conversion of the
Debentures for whom such broker-dealers may act as agents or to whom they may
sell as principals, or both (which compensation as to a particular broker-dealer
might be in excess of customary commissions).
In
connection with the sale of Debentures or common stock issuable upon conversion
of the Debentures, the selling security holders may, subject to the terms of
their agreements with us and applicable law, (i) enter into transactions with
brokers-dealers or others, who in turn may engage in short sales of the
securities in the course of hedging the positions they assume, (ii) sell short
or deliver securities to close out positions or (iii) loan securities to
brokers, dealers or others that may in turn sell such securities. The selling
security holders may enter into option or other transactions with broker-dealers
or other financial institutions that require the delivery to the broker-dealer
of the Debentures or common stock issuable upon conversion of the Debentures.
The broker-dealer or other financial institution may then resell or transfer
these securities through this prospectus. The selling security holders may
also
loan or pledge their Debentures or common stock issuable upon conversion of
the
Debentures to a broker-dealer or other financial institution. The broker-dealer
or other financial institution may sell the securities which are loaned or,
upon
a default, the broker-dealer or other financial institution may sell the pledged
securities by use of this prospectus.
The
selling security holders and any broker-dealers, agents or underwriters that
participate with the selling security holders in the distribution of the
Debentures or common stock issuable upon conversion of the Debentures may be
deemed to be underwriters within the meaning of the Securities Act. Any
commissions paid or any discounts or concessions allowed to any such persons,
and any profits received on the resale of the Debentures or common stock
issuable upon conversion of the Debentures and purchased by them may be deemed
to be underwriting commissions or discounts under the Securities Act. Because
the selling security holders may be deemed to be “underwriters” within the
meaning of the Securities Act, the selling security holders will be subject
to
the prospectus delivery requirements of the Securities Act. Neither the delivery
of any prospectus, or any prospectus supplement, nor any other action taken
by
the selling security holders or any purchaser relating to the purchase or sale
of Debentures or common stock issuable upon conversion of the Debentures under
this prospectus shall be treated as an admission that any of them is an
underwriter within the meaning of the Securities Act, relating to the sale
of
any Debentures or common stock issuable upon conversion of the Debentures.
To
the extent required by the Securities Act, a prospectus supplement or amendment
will be filed and disclose the specific number of shares of common stock to
be
sold, the name of the selling security holder, the purchase price, the public
offering price, the names of any agent, dealer or underwriter, and any
applicable
58
commissions
paid or discounts or concessions allowed with respect to a particular offering
and other facts material to the transaction.
To
our knowledge, there are currently no plans, arrangements or understandings
between any selling security holders and any underwriter, broker-dealer or
agent
regarding the sale of the Debentures and shares of our common stock issuable
upon conversion of the Debentures by the selling security holders.
Pursuant
to our registration rights agreement, we have agreed to pay all of our expenses
incident to the offer and sale of the Debentures and common stock issuable
upon
conversion of the Debentures offered by the selling security holders. The
selling security holders will pay all underwriting discounts and selling
commissions, stock transfer taxes and fees and expenses of the selling security
holders. We have agreed to indemnify the selling security holders against
certain liabilities, including certain liabilities under the Securities Act,
and
to contribute to payments the selling security holders may be required to make
in respect thereof.
To
comply with the securities laws of certain jurisdictions, if applicable, the
Debentures and common stock issuable upon conversion of the Debentures will
be
offered or sold in such jurisdictions only through registered or licensed
brokers or dealers.
Under
applicable rules and regulations under the Exchange Act, any person engaged
in a
distribution of the Debentures or the common stock issuable upon conversion
of
the Debentures may be limited in its ability to engage in market activities
with
respect to such Debentures or common stock issuable upon conversion of the
Debentures. In addition and without limiting the foregoing, each selling
security holder will be subject to applicable provisions of the Exchange Act
and
the rules and regulations thereunder, including, without limitation, Regulation
M, which provisions may limit the timing of purchase and sales of any of the
Debentures and common stock issuable upon conversion of the Debentures by the
selling security holders. Furthermore, Regulation M of the Exchange Act may
restrict the ability of any person engaged in the distribution of the Debentures
and common stock issuable upon conversion of the Debentures to engage in
market-making activities with respect to the particular Debentures and common
stock issuable upon conversion of the Debentures being distributed for a period
of five business days prior to the commencement of the distribution.
Any
selling security holder who is a broker-dealer is deemed to be an underwriter
within the meaning of Section 2(11) of the Securities Act. To our knowledge,
Nomura Securities International, Inc. and S.G. Americas Securities LLC are
the only selling security holders who are registered broker-dealers
and, as
such, deemed to be underwriters of the Debentures and the underlying
common stock within the meaning of the Securities Act. We do not have a material
relationship with Nomura Securities International, Inc. or S.G. Americas
Securities LLC, and Nomura Securities International, Inc. and S.G. Americas
Securities LLC do not have the right to designate or nominate a member
or
members of our board directors. Nomura Securities International, Inc. and
S.G. Americas Securities LLC purchased their Debentures in the open market,
not
directly from us, and we are not aware of any underwriting plan or agreement,
underwriters’ or dealers’ compensation, or passive market-making or stabilizing
transactions involving the purchase or distribution of these securities by
Nomura Securities International, Inc. or S.G. Americas Securities LLC. To our
knowledge, none of the selling security holders who are affiliates of
broker-dealers purchased the Debentures outside of the ordinary course of
business or, at the time of the purchase of the Debentures, had any agreement
or
understanding, directly or indirectly, with any person to distribute the
securities.
We
may suspend the use of this prospectus and any supplements hereto upon any
event
or circumstance which necessitates the making of any changes in the registration
statement or prospectus, or any document incorporated or deemed to be
incorporated therein by reference, so that the registration statement, the
prospectus and any amendment or supplement thereto will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading.
Any
securities covered by this prospectus that qualify for sale pursuant to Rule
144
or Rule 144A under the Securities Act, may be sold under Rule 144 or Rule 144A
rather than pursuant to this prospectus.
We
cannot assure you that the selling security holders will sell any or all of
the
securities offered hereunder.
59
The
validity of the Debentures and the common stock issuable upon conversion of
the
Debentures is being passed upon by Stinson Morrison Hecker LLP.
The
consolidated financial statements of Euronet Worldwide, Inc. and subsidiaries
as
of December 31, 2004 and 2003, and for each of the years in the two-year period
ended December 31, 2004, and management’s assessment of the effectiveness of
internal control over financial reporting as of December 31, 2004, have been
incorporated by reference herein in this registration statement in reliance
upon
the reports of KPMG LLP, independent registered public accounting firm,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
The
audit
report on management's assessment of the effectiveness of internal control
over
financial reporting and the effectiveness of internal control over financial
reporting as of December 31, 2004 contains an explanatory paragraph that states
that Euronet Worldwide, Inc. acquired Call Processing Inc. (CPI) and Movilcarga
during 2004, and management and KPMG LLP have excluded these entities from
its
assessment of the effectiveness of Euronet Worldwide, Inc.'s internal control
over financial reporting as of December 31, 2004. CPI an Movilcarga's internal
control over financial reporting is associated with total assets of $36.9
million and total revenues of $4.5 million, included in the consolidated
financial statements of Euronet Worldwide, Inc. and subsidiaries as of and
for
the year ended December 31, 2004.
The
consolidated statements of operations and comprehensive loss, changes in
stockholders’ equity/(deficit), and cash flows of Euronet Worldwide, Inc. and
subsidiaries for the year ended December 31, 2002, have been incorporated by
reference into this registration statement in reliance upon the report of KPMG
Audyt Sp. z o.o. (f/k/a KPMG Polska Sp. z o.o.), independent registered public
accounting firm, incorporated by reference herein, and upon authority of said
firm as experts in accounting and auditing.
The
financial statements of e-pay Limited that are incorporated in this registration
statement by reference to our Current Report on Form 8-K/A filed on May 2,
2003
have been so incorporated in reliance on the report of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of said firm as experts
in
auditing and accounting.
We
file annual, quarterly and interim reports, proxy and information statements
and
other information with the SEC. These filings contain important information
which does not appear in this prospectus. You may read and copy any materials
we
file at the SEC’s public reference room at 450 Fifth Street, NW, Room 1024,
Washington, D.C. 20549. You may obtain information on the operation of the
public reference room by calling the SEC at 1-800-SEC-0330. The SEC maintains
an
Internet site that contains reports, proxy and information statements and other
information regarding us at http://www.sec.gov.
We
have filed with the SEC a registration statement on Form S-3 under the
Securities Act of 1933, as amended, with respect to the common stock offered
by
this prospectus. This prospectus does not contain all of the information in
the
registration statement. We have omitted certain parts of the registration
statement, as permitted by the rules and regulations of the SEC. You may inspect
and copy the registration statement, including exhibits, at the SEC’s public
reference facilities or web site.
The
SEC allows us to “incorporate by reference” into this prospectus, which means
that we may disclose important information to you by referring you to other
documents that we have filed or will file with the SEC. We are incorporating
by
reference into this prospectus the following documents filed with the SEC:
| • | Our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2005, June 30, 2005 and September 30, 2005 | |||
| • | Our Annual Report on Form 10-K for the year ended December 31, 2004; | |||
| • | Our definitive Proxy Statement filed April 12, 2005; | |||
60
| • | Our Current Report on Form 8-K filed October 5, 2005; | |||
| • | Our Current Report on Form 8-K filed September 30, 2005; | |||
| • | Our Current Report on Form 8-K filed September 29, 2005; | |||
| • | Our Current Report on Form 8-K filed September 28, 2005; | |||
| • | Our Current Report on Form 8-K filed April 15, 2005; | |||
| • | Our Current Report on Form 8-K filed March 22, 2005; | |||
| • | Our Current Report on Form 8-K/A filed on May 2, 2003; | |||
| • | The description of our common stock contained in our registration statement on Form 8-A/A, dated November 24, 2004, including any amendment or reports filed for the purpose of updating that description; and | |||
| • | The description of our preferred stock purchase rights contained in our registration statement on Form 8-A/A, dated November 24, 2004, including any amendment or reports filed for the purpose of updating that description. | |||
All
documents which we file with the SEC pursuant to section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended, after the date of
this
prospectus and before the termination of this offering of common stock shall
be
deemed to be incorporated by reference in this prospectus and to be a part
of it
from the filing dates of such documents. Also, all such documents filed by
us
with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange act of 1934, as amended, after the date of the registration statement
of which this prospectus forms a part and prior to effectiveness of the
registration statement shall be deemed to be incorporated by reference in this
prospectus and to be a part of it from the filing dates of such documents.
Certain statements in and portions of this prospectus update and supersede
information in the above listed documents incorporated by reference. Likewise,
statements in or portions of a future document incorporated by reference in
this
prospectus may update and supersede statements in and portions of this
prospectus or the above listed documents.
The
following information contained in such documents is not incorporated herein
by
reference: (i) information furnished under Items 9 and 12 of our Current Reports
on Form 8-K, (ii) certifications accompanying or furnished in any such documents
pursuant to Title 18, Section 1350 of the United States Code and (iii) any
other
information in such documents which is not deemed to be filed with the SEC
under
Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise
subject to the liabilities of that section.
We
shall provide you without charge, upon your written or oral request, a copy
of
any of the documents incorporated by reference in this prospectus, other than
exhibits to such documents which are not specifically incorporated by reference
into such documents or this prospectus. Please direct your written or telephone
requests to:
Euronet
Worldwide, Inc.
Attn:
Corporate Secretary
4601
College Boulevard
Suite
300
Leawood,
Kansas 66211
(913)
327-4200
61
You
should rely only on the information contained in or incorporated by reference
into this prospectus. We have not authorized anyone to provide you with
different information, and you should not rely on any such information. We
are
not making an offer of these securities in any jurisdiction where an offer
or
sale of these securities is not permitted. You should not assume that the
information in this prospectus, and the documents incorporated by reference
herein, is accurate as of any date other than their respective dates. Our
business, financial condition, results of operations and prospects may have
changed since such dates.
Euronet
Worldwide, Inc.
$140,000,000
Principal
Amount of 1.625% Convertible Senior Debentures Due 2024
Common
Stock Issuable upon Conversion of the Debentures
P
ROSPECTUS
,
2005
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
|
Item 14.
|
Other
Expenses of Issuance and Distribution
|
|
The
estimated expenses to be borne by the Registrant in connection with the offering
are as follows:
|
Amount to be Paid
|
||||
|
Securities
and Exchange Commission registration fee
|
$
|
16,478
|
||
|
Accounting
fees and expenses
|
135,122
|
|||
|
Legal
fees and expenses
|
135,722
|
|||
|
Miscellaneous
expenses (including printing expenses)
|
70,791
|
|||
|
Total
|
$
|
358,113
|
||
|
Item 15.
|
Indemnification
of Directors and Officers
|
|
Section
145 of the Delaware General Corporation Law authorizes a court to award, or
a
corporation’s board of directors to grant, indemnity to directors and officers
in terms sufficiently broad to permit indemnification under certain
circumstances for liabilities (including reimbursement for expenses incurred)
arising under the Securities Act. Article Eighth of the Registrant’s amended
certificate of incorporation and Article VII of the Registrant’s bylaws provide
for indemnification of the Registrant’s directors and officers to the maximum
extent permitted by the Delaware General Corporation Law. The Registrant also
maintains, and intends to continue to maintain, insurance for the benefit of
its
directors and officers to insure these persons against certain liabilities,
including liabilities under the securities laws.
|
Item 16.
|
Exhibits
|
|
The
index to exhibits appears immediately following the signature pages to this
Registration Statement.
|
Item 17.
|
Undertakings
|
|
(a)
The undersigned registrant hereby undertakes:
(1)
To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i)
To include any prospectus required by Section 10(a)(3) of the Securities Act
of
1933, as amended;
(ii)
To reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement. Notwithstanding
the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of the securities offered would not exceed that which was
registered) and any deviation from the low or high end of estimated maximum
offering range may be reflected in the form of prospectus filed with the SEC
pursuant to Rule 424(b) if, in the aggregate, the change in volume and price
represent no more than a 20 percent change in the maximum aggregate offering
price set forth in the “Calculation of Registration Fee” table in the effective
registration statement;
II-1
(iii)
To include any material information with respect to the plan of distribution
not
previously disclosed in the registration statement or any material change to
such information in the registration statement;
Provided,
however, that paragraphs (a)(1)(i) and (a)(1)(ii) 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
SEC
by the registrant pursuant to Section 13 or Section 15(d) of the Exchange Act
that are incorporated by reference in the registration statement.
(2)
That, for the purpose of determining any liability under the Securities Act
of
1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona
fide offering thereof.
(3)
To remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
(b)
The undersigned registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the registrant’s
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall
be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be
the initial bona fide offering thereof.
(c)
Insofar as indemnification for liabilities arising under the Securities Act
of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions of the Delaware General Corporation Law,
the certificate of incorporation or bylaws of the registrant or resolutions
of
the registrant’s board of directors adopted pursuant thereto, 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 of 1933, and is, therefore, unenforceable. In the event that
a
claim for indemnification against such liabilities (other than the payment
by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-2
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
Leawood, State of Kansas, on this 10th day of November, 2005.
| EURONET WORLDWIDE, INC. | ||
| |
|
|
| By: | /s/ Michael J. Brown | |
|
Michael
J. Brown
|
||
|
Chief
Executive Officer
|
||
II-3
POWER
OF ATTORNEY
KNOW
ALL PERSONS BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints Michael J. Brown and Daniel R. Henry, and each
of
them, the undersigned’s true and lawful attorneys-in-fact and agents with full
power of substitution, for the undersigned and in the undersigned’s name, place
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to sign any
registration statement for the same offering covered by this Registration
Statement that is to be effective upon filing pursuant to Rule 462(b)
promulgated under the Securities Act of 1933, as amended, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto and all
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 and about the premises, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or his
or
their substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
Pursuant
to the requirements of the Securities Act of 1933, as amended, this registration
statement has been signed by the following persons in the capacities and on
the
dates indicated.
|
Signature
|
Title
|
Date
|
|
|
/s/
Michael J. Brown
Michael
J. Brown
|
Chairman
of the Board of Directors, Chief Executive Officer and Director (principal
executive officer)
|
November 10,
2005
|
|
|
/s/
Daniel R. Henry
Daniel
R. Henry
|
Chief
Operating Officer, President and Director
|
November 10,
2005
|
|
|
/s/
Eriberto R. Scocimara
Eriberto
R. Scocimara
|
Director
|
November 10,
2005
|
|
|
/s/
Thomas A. McDonnell
Thomas
A. McDonnell
|
Director
|
November 10,
2005
|
|
|
/s/
M. Jeannine Strandjord
M.
Jeannine Strandjord
|
Director
|
November 10,
2005
|
|
|
/s/
Andzrej Olechowski
Andzrej
Olechowski
|
Director
|
November 10,
2005
|
|
|
/s/
Paul S. Althasen
Paul
S. Althasen
|
Director
|
November 10,
2005
|
|
|
/s/
Andrew B. Schmitt
Andrew
B. Schmitt
|
Director
|
November 10,
2005
|
|
|
/s/
Rick L. Weller
Rick
L. Weller
|
Executive
Vice President and Chief Financial Officer (principal financial and
accounting officer)
|
November 10,
2005
|
II-4
EXHIBIT
INDEX
|
EXHIBIT
NUMBER
|
|
DESCRIPTION
|
|
|
4.1
|
|
Certificate
of Incorporation of Euronet Worldwide, Inc., as amended (filed as
Exhibit
3.1 to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2001, and incorporated by reference herein)
|
|
|
4.2
|
|
Bylaws
of Euronet Worldwide, Inc. (filed as Exhibit 3.2 to the Company’s
registration statement on Form S-1 filed on December 18, 1996
(Registration No. 333-18121), and incorporated by reference herein)
|
|
|
4.3
|
|
Amendment
No. 1 to Bylaws of Euronet Worldwide, Inc. (filed as Exhibit 3(ii)
to the
Company’s quarterly report on Form 10-Q for the fiscal period ended March
31, 1997, and incorporated by reference herein)
|
|
|
4.4
|
|
Amendment
No. 2 to Bylaws of Euronet Worldwide, Inc. (filed as Exhibit 3.1
to the
Company’s current report on Form 8-K filed on March 24, 2003, and
incorporated by reference herein)
|
|
|
4.5
|
|
Form
of Certificate issued to the shareholders of transact Elektronische
Zahlungssysteme GmbH, dated November 19/20, 2003 (filed as Exhibit
4.1 to
the Company’s current report on Form 8-K filed on November 25, 2003, and
incorporated by reference herein)
|
|
|
4.6
|
|
Certificate
of Additional Investment Rights issued to Fletcher International,
Ltd. on
November 21, 2003 (filed as Exhibit 4.2 to the Company’s current report on
Form 8-K filed on November 25, 2003, and incorporated by reference
herein)
|
|
|
4.7
|
|
Agreement,
dated November 20, 2003, between Euronet Worldwide, Inc. and Fletcher
International, Ltd. (filed as Exhibit 10.1 to the Company’s current report
on Form 8-K filed on November 25, 2003, and incorporated by reference
herein)
|
|
|
4.8
|
|
Rights
Agreement, dated as of March 21, 2003, between Euronet Worldwide,
Inc. and
EquiServe Trust Company, N.A. (filed as Exhibit 4.1 to the Company’s
current report on Form 8-K filed on March 24, 2003, and incorporated
by
reference herein)
|
|
|
4.9
|
|
First
Amendment to Rights Agreement, dated as of November 28, 2003, between
Euronet Worldwide, Inc. and EquiServe Trust Company, N.A. (filed
as
Exhibit 4.1 to the Company’s current report on Form 8-K filed on December
4, 2003, and incorporated by reference herein)
|
|
|
4.10
|
|
Indenture,
dated as of December 15, 2004, between the Registrant and U.S. Bank
National Association(1)
|
|
|
4.11
|
|
Purchase
Agreement, dated as of December 9, 2004, among the Registrant and
Banc of
America Securities LLC(1)
|
|
|
4.12
|
|
Registration
Rights Agreement, dated as of December 15, 2004, among the Registrant,
and
Banc of America Securities LLC(1)
|
|
|
4.14
|
|
Specimen
1.625% Convertible Senior Debenture due 2024 (Certificated Security)
(included in Exhibit 4.10)(1)
|
|
|
5
|
|
Opinion
of Stinson Morrison Hecker LLP(1)
|
|
|
23.1
|
|
Consent
of KPMG LLP
|
|
|
23.2
|
|
Consent
of KPMG Audyt Sp. z o.o. (f/k/a KPMG Polska Sp. z o.o.)
|
|
|
23.3
|
|
Consent
of PricewaterhouseCoopers LLP
|
|
|
23.4
|
|
Consent
of Stinson Morrison Hecker LLP (included in Exhibit 5)(1)
|
|
|
24
|
|
Power
of Attorney (included on signature page)(1)
|
|
|
(1)
|
Previously
filed with the registrant’s Registration Statement on Form S-3 filed on
January 26, 2005.
|
|