AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 23, 2004
REGISTRATION NO. 333-109130
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
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DST SYSTEMS, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 43-1581814
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
333 WEST 11TH STREET, 5TH FLOOR
KANSAS CITY, MISSOURI 64105-1594
(816) 435-1000
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
RANDALL D. YOUNG, ESQ.
333 WEST 11TH STREET
KANSAS CITY, MISSOURI 64105
(816) 435-8651
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code
of Agent for Service)
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COPY TO:
JOHN F. MARVIN
DIANE M. BONO
SONNENSCHEIN NATH & ROSENTHAL LLP
4520 MAIN STREET, SUITE 1100
KANSAS CITY, MISSOURI 64111
(816) 460-2400
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this registration statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
--
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [ ]
-- -----------------------------
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
-- --------------------------------------------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
--
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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 SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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The information in this prospectus is not complete and may be changed. The
selling security holders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
Subject to Completion dated January 23, 2004
PRELIMINARY PROSPECTUS
$840,000,000
DST SYSTEMS, INC.
4.125% SERIES A CONVERTIBLE SENIOR DEBENTURES DUE 2023
3.625% SERIES B CONVERTIBLE SENIOR DEBENTURES DUE 2023
AND
COMMON STOCK ISSUABLE UPON CONVERSION OF THE DEBENTURES
This prospectus relates to $540,000,000 aggregate principal amount of our
4.125% Series A Convertible Senior Debentures due 2023 and $300,000,000
aggregate principal amount of our 3.625% Series B Convertible Senior Debentures
due 2023. We originally issued and sold the debentures to Citigroup Global
Markets Inc., Banc of America Securities, LLC, Morgan Stanley & Co.
Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Wachovia
Capital Markets, LLC, Fleet Securities, Inc., U.S. Bancorp Piper Jaffray Inc.,
Deutsche Bank Securities Inc., Bear, Stearns & Co. Inc., Legg Mason Walker Wood,
Incorporated, and Wells Fargo Securities, LLC, in a private placement in August
2003. This prospectus will be used by selling security holders to resell their
debentures and the common stock issuable upon conversion of the debentures.
The Series A debentures and the Series B debentures, which we refer to as
the debentures, will bear regular cash interest on the original principal amount
of each debenture at a rate of 4.125% per year on the Series A debentures and
3.625% per year on the Series B debentures. Regular cash interest will be
payable semiannually in arrears on February 15 and August 15 of each year
beginning February 15, 2004, until August 15, 2010 in the case of the Series A
debentures and August 15, 2008 in the case of the Series B debentures. Beginning
on August 15, 2010, in the case of the Series A debentures, and August 15, 2008,
in the case of the Series B debentures, we will not pay regular cash interest on
the debentures prior to maturity. Instead, the original principal amount of each
debenture will increase at a rate of 4.125% per year on the Series A debentures
and 3.625% per year on the Series B debentures, computed from August 15, 2010,
in the case of the Series A debentures, and August 15, 2008, in the case of the
Series B debentures, on a semiannual bond equivalent basis using a 360-day year
composed of twelve 30-day months. On the maturity date of the debentures, a
holder will receive, for each $1,000 original principal amount of debentures,
$1,700.28 for the Series A debentures and $1,714.09 for the Series B debentures.
Beginning on August 20, 2015, in the case of the Series A debentures, and August
20, 2008, in the case of the Series B debentures, we will pay additional
contingent interest on each series of debentures if the average trading price of
that series of debentures is above a specified level during a specified period,
as described in this prospectus. The debentures will be unsecured and will rank
equally with all of our other existing and future unsecured and unsubordinated
indebtedness.
The debentures are convertible under certain circumstances by holders into
shares of our common stock per $1,000 original principal amount of debentures at
an initial conversion rate of 20.3732 shares for the Series A debentures and
20.3732 shares of our common stock for the Series B debentures (each subject to
adjustment in certain events). This is equivalent to an initial conversion price
of $49.08 per share for the Series A debentures and $49.08 per share for the
Series B debentures. Each series of debentures are convertible under any of the
following circumstances: (1) the closing price of our common stock reaches a
specified threshold, (2) the trading price per debenture falls below a specified
threshold, (3) if we call the debentures for redemption or (4) upon the
occurrence of specified corporate transactions, each as described in this
prospectus. Upon conversion, we will have the right to deliver, in lieu of
common stock, cash or any combination of cash and common stock.
The Series A debentures will mature on August 15, 2023. We may redeem some
or all of the Series A debentures at any time on or after August 20, 2010 at the
redemption price set forth herein in cash. Holders will have the right to
require us to purchase the Series A debentures at a purchase price set forth
herein on August 15, 2010, August 15, 2015 and August 15, 2020, or upon a
fundamental change, as described in this prospectus. For purchases on August 15,
2010, we will pay the purchase price in cash. Thereafter, and upon any
fundamental change, we can pay the purchase price at our option in cash, common
stock or any combination of cash and common stock.
The Series B debentures will mature on August 15, 2023. We may redeem some
or all of the Series B debentures at any time on or after August 20, 2008 at the
redemption price set forth herein in cash. Holders will have the right to
require us to purchase the Series A debentures at a purchase price set forth
herein on August 15, 2008, August 15, 2013 and August 15, 2018, or upon a
fundamental change,
as described in this prospectus. For purchases on August 15, 2008, we will pay
the purchase price in cash. Thereafter, and upon any fundamental change, we can
pay the purchase price at our option in cash, common stock or any combination of
cash and common stock.
The debentures are unsecured and rank equally with all of our other
unsecured and unsubordinated indebtedness from time to time outstanding.
The debentures will be treated as contingent payment debt instruments that
will be subject to special United States federal income tax rules. For
discussion of the special tax rules governing contingent payment debt
instruments, see "Material U.S. Federal Income Tax Considerations."
Our common stock is listed on the New York Stock Exchange under the symbol
"DST." The last reported sales price of our common stock on the New York Stock
Exchange on January 22, 2004 was $42.74 per share.
INVESTING IN THE DEBENTURES INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 13.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED WHETHER
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this prospectus is , 2004
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. YOU SHOULD NOT
ASSUME THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THAT
DOCUMENT AND THAT ANY INFORMATION WE HAVE INCORPORATED BY REFERENCE IS ACCURATE
ONLY AS OF THE DATE OF THE DOCUMENT INCORPORATED BY REFERENCE.
TABLE OF CONTENTS
PAGE
Where You Can Find More Information..................................... i
Special Note Regarding Forward-Looking Statements....................... iii
Summary................................................................. 1
Risk Factors............................................................ 13
Use of Proceeds......................................................... 22
Description of the Series A Debentures.................................. 23
Description of the Series B Debentures.................................. 49
Description of Capital Stock............................................ 75
Material U.S. Federal Income Tax Considerations......................... 81
Selling Security Holders................................................ 88
Plan of Distribution.................................................... 94
Validity of Securities.................................................. 96
Experts................................................................. 96
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission, which we refer to as
the SEC. You may read and copy any document that we file at the SEC's public
reference room at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference room. Our SEC filings are also available
from the SEC's web site at http://www.sec.gov, and at the offices of the New
York Stock Exchange, which we refer to as the NYSE. For further information on
obtaining copies of our public filings at the NYSE, you should call (212)
656-5060.
This prospectus "incorporates by reference" information that we have filed
with the SEC under the Securities Exchange Act of 1934, as amended, which we
refer to as the Exchange Act. This means that we are disclosing important
information to you by referring you to those documents. Any statement contained
in this prospectus or in any document incorporated or deemed to be incorporated
by reference in this prospectus will be deemed to be modified or superseded for
purposes of this prospectus to the extent that a statement contained in this
prospectus or any subsequently filed document which also is, or is deemed to be,
incorporated by reference in this prospectus modifies or supersedes that
statement. Any statement so modified or superseded will not be deemed, except as
to modified or superseded, to constitute a part of this prospectus. We
incorporate by reference the following documents listed below and any future
filings made with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the
Exchange Act (other than Current Reports furnished under Item 9 of Form 8-K),
until the initial purchasers sell all the debentures:
o Our Annual Report on Form 10-K for the year ended December 31, 2002;
o Our Quarterly Reports on Form 10-Q for the quarters ended March 31,
2003, June 30, 2003 and September 30, 2003;
o Our Current Reports on Form 8-K or 8-K/A filed on March 17, 2003,
April 29, 2003, August 13, 2003, November 10, 2003, November 18, 2003,
November 25, 2003, December 1, 2003, December 2, 2003, December 15,
2003 and December 16, 2003;
o Our Proxy Statement(1), filed on March 28, 2003;
o Appendix A (Share Exchange Agreement) and Appendix E (OMS Combined
Financial Statements, December 31, 2002 and 2001) to our special
meeting proxy statement filed November 13, 2003;
o The description of our common stock and related rights to purchase
preferred stock contained in our Registration Statement on Form 8-A
filed with the SEC on November 17, 1995, including any amendment or
report filed for the purpose of updating such description.
All documents subsequently filed by us pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act (excluding any information furnished pursuant to
Item 9 or Item 12 on any current report on Form 8-K), prior to the termination
of the offering, shall be deemed to be incorporated by reference into this
prospectus and to be a part hereof from the date of the filing of such document.
In addition, all documents filed by us pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act (excluding any information furnished pursuant to Item
9 or Item 12 on any current report on Form 8-K) after the date of the initial
registration statement and prior to effectiveness of the registration statement
shall be deemed to be incorporated by reference into this prospectus and to be a
part hereof from the date of the filing of such document. Any statement
contained in a document incorporated by reference herein shall be deemed to be
modified or superseded for all purposes to the extent that a statement contained
in this prospectus, or in any other subsequently filed document which is also
incorporated or deemed to be incorporated by reference, modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this prospectus.
You may also request a copy of these filings and a copy of any or all
documents incorporated by reference in this prospectus at no cost, by writing or
telephoning us at the following address:
DST Systems, Inc.
333 West 11th Street
Kansas City, Missouri 64105
Attn: DST Corporate Secretary
(816) 435-4636
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K and definitive proxy statements are also available to the
public as soon as reasonably practicable after filing with the SEC on or through
our website at www.dstsystems.com. (We have included our website address as an
inactive textural reference and do not intend it to be an active link to our
website. Information on our website is not part of this prospectus.)
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(1) The information referred to in Item 402(a)(8) of Regulation S-K and
paragraph (d)(3) of Item 7 of Schedule 14A promulgated by the SEC shall not
be deemed to be specifically incorporated by reference into this
prospectus.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated or deemed to be incorporated
by reference herein contain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, which we refer to as the
Securities Act, and Section 21E of the Exchange Act. Statements in this document
and the documents incorporated or deemed to be incorporated by reference herein
that are not historical facts, including statements about our beliefs and
expectations, particularly regarding recent business and economic trends, the
share exchange with Janus Capital Group Inc., which we refer to as Janus, the
impact of litigation, dispositions, impairment charges, the integration of
acquisitions and restructuring costs, constitute forward-looking statements. In
some cases you can identify forward-looking statements by terms such as "may,"
"will," "should," "intend," "expect," "plan," "anticipate," "believe,"
"estimate," "predict," "potential" or "continue," or the negative of such terms
or other comparable terms. These statements are based on assumptions by DST's
management at the time the statements are made including assumptions about risks
and uncertainties faced by us. If any of management's assumptions prove
incorrect or unanticipated circumstances arise, the actual results could differ
materially from those anticipated by such forward-looking statements.
Forward-looking statements speak only as of the date they are made, and we
undertake no obligation to update publicly any of them in light of new
information or future events.
Differences could be caused by a number of factors or combination of
factors. Such factors include, but are not limited to, those associated with our
ability to attract new clients and retain existing clients; the financial
success of our clients; the impact of technological developments; the successful
completion of joint ventures which complement and expand our business
capabilities; accounting or other fraud that may occur with respect to the
financial statements or business of financial service providers or other clients
of ours; changes in management strategies; changes in lines of business or
markets; failure of anticipated opportunities to materialize; changes in the
cost of necessary supplies; and changes in the economic, political or regulatory
environments in the United States and/or the other countries where we now
compete or may compete in the future.
Our liquidity could be adversely affected if we are unable to access
capital or to raise proceeds from asset sales. Our financial condition and
future results of operations could also be adversely affected if we recognize
additional impairment charges due to future events or in the event of other
adverse accounting-related developments.
At any given time we may be engaged in a number of preliminary discussions
that may result in one or more joint ventures, acquisitions or dispositions.
These opportunities require confidentiality and from time to time give rise to
bidding scenarios that require quick responses by us. Although there is
uncertainty that any of these discussions will result in definitive agreements
or the completion of any transactions, the announcement of any such transaction
may lead to increased volatility in the trading price of our securities.
Investors should evaluate any statements made by us in light of these
important factors and the factors contained in the "Risk Factors" section.
SUMMARY
THIS SUMMARY CONTAINS BASIC INFORMATION ABOUT US AND THIS OFFERING. BECAUSE
IT IS A SUMMARY, IT DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD
CONSIDER BEFORE INVESTING. YOU SHOULD CAREFULLY READ THIS ENTIRE PROSPECTUS
INCLUDING THE SECTION ENTITLED "RISK FACTORS" AND THE DOCUMENTS WE INCORPORATE
BY REFERENCE TO FULLY UNDERSTAND THE TERMS OF THE DEBENTURES AS WELL AS THE TAX
AND OTHER CONSIDERATIONS THAT ARE IMPORTANT TO YOU IN MAKING A DECISION WHETHER
TO INVEST IN THE DEBENTURES AND THE COMMON STOCK ISSUABLE UPON THEIR CONVERSION.
OUR COMPANY
DST has several operating business units that offer sophisticated
information processing and software services and products. These business units
are reported as three operating segments:
o Financial Services;
o Output Solutions; and
o Customer Management.
In addition, investments in equity securities and certain financial interests
and our real estate subsidiaries and affiliates have been aggregated into an
Investments and Other segment. A summary of each of these segments follows:
FINANCIAL SERVICES
Our Financial Services segment provides sophisticated information
processing and computer software services and products primarily to mutual
funds, investment managers, corporations, insurance companies, banks, brokers
and financial planners. Our proprietary software systems include:
o mutual fund shareowner and unit trust recordkeeping systems for U.S.
and international mutual fund companies;
o a defined-contribution participant recordkeeping system for the U.S.
retirement plan market;
o securities transfer systems offered to corporations, corporate
trustees and transfer agents;
o investment management systems offered to U.S. and international fund
accountants and investment managers;
o a workflow management and customer contact system offered to mutual
funds, insurance companies, brokerage firms, banks, cable television
operators and health care providers; and
o record-keeping systems to support "managed account" investment
products.
We also provide design, management and transaction processing services for
customized consumer equipment maintenance and debt protection programs.
The segment distributes its services and products on a direct basis and
through subsidiaries and joint venture affiliates in the United States, United
Kingdom, Canada, Europe, Australia, South Africa and Asia-Pacific and, to a
lesser degree, distributes such services and products through various strategic
alliances.
OUTPUT SOLUTIONS
Our Output Solutions segment provides single source, integrated print and
electronic communications solutions. In the United States, DST Output, LLC, our
wholly owned subsidiary, provides customized and personalized bill and statement
processing services, electronic bill payment and presentment solutions and
computer output archival solutions which establish DST Output, LLC as a
preferred service provider to customers of the Financial Services and Customer
Management segments and other industries that value customer communications and
require high quality, accurate and timely bill and statement processing.
The segment also offers its services to the Canadian and U.K. markets. DST
Output Canada Inc., our wholly owned subsidiary, offers customer communications
and document automation solutions to the Canadian market. DST International
Output Limited, which was acquired in 2002, provides personalized paper and
electronic communications, principally in the United Kingdom.
The segment distributes its products directly in connection with the
provision of certain Financial Services and Customer Management products and in
connection with other providers of data processing services.
DST Output Marketing Services, Inc., referred to in this prospectus as OMS,
was included in this segment until the time of the share exchange transaction
described below under "--Recent Developments--Share Exchange Transaction."
CUSTOMER MANAGEMENT
Our Customer Management segment provides customer management, billing and
marketing solutions to the video/broadband, direct broadcast satellite,
wire-line and Internet Protocol telephony, Internet and utility markets. The
segment offers a comprehensive customer management and billing solution by
providing core customer care products that are supplemented with the products
and services offered from our other operating segments.
The segment distributes its services and products on a direct basis,
through subsidiaries in North America, the United Kingdom and parts of Europe
and with international alliance partners in other regions of the world.
INVESTMENTS AND OTHER
The Investments and Other segment holds investments in equity securities
and certain financial interests and our real estate subsidiaries and affiliates.
We hold investments in equity securities with a market value of approximately
$1,024.9 million at September 30, 2003, including 12.8 million shares of State
Street Corporation with a market value of approximately $575.6 million and 8.6
million shares of Computer Sciences Corporation with a market value of
approximately $324.3 million. Additionally, the segment owns and operates real
estate mostly in the United States and the United Kingdom, which is held
primarily for lease to our other business segments.
COMPANY INFORMATION
DST was originally established in 1969. Through a reorganization in August
1995, DST is now a corporation organized in the State of Delaware. Our principal
executive offices are located at 333 West 11th Street, Kansas City, Missouri
64105. Our telephone number is (816) 435-1000.
RECENT DEVELOPMENTS
SHARE EXCHANGE TRANSACTION
On August 25, 2003, DST, OMS, a New York corporation and wholly-owned
subsidiary of DST, and Janus Capital Group Inc., a Delaware corporation,
referred to in this prospectus as Janus, entered into a Share Exchange
Agreement, referred to as the Share Exchange Agreement. Upon the terms and
subject to the conditions set forth in the Share Exchange Agreement, on December
1, 2003, referred to as the Closing Date, DST transferred to Janus all of the
issued and outstanding shares of OMS common stock, par value $0.01 per share,
referred to in this prospectus as the OMS Shares, and Janus transferred to DST
32.3 million shares of DST common stock owned by Janus, referred to in this
prospectus as the Janus DST Shares, in exchange for the OMS Shares (such
transfers collectively referred to as the Exchange). Upon completion of the
Exchange, Janus owned approximately 7.4 million shares of DST common stock (or
approximately 9% of the outstanding shares), but DST holds a proxy to vote these
shares.
At the time of the Exchange on December 1, 2003, OMS held graphics design
and sheet-fed offset commercial printing operations, the laser printing and
fulfillment operations of the Marketing Services Division of DST's Output
Solutions segment, and additional cash to approximately equalize the value of
the OMS Shares to the Janus DST Shares exchanged. Based on the average closing
price of the Company's common stock and exchange agreement terms, the exchange
value used for the DST shares received in connection with the Exchange was
$34.50 per share. Under the terms of the Share Exchange Agreement, the OMS
operations business was valued at $115 million and its assets at closing
included additional cash of $999.4 million.
The Share Exchange Agreement subjects DST to non-compete provisions with
respect to certain business products and services of OMS for a period of five
years from the Closing Date.
NEW CREDIT FACILITY
In November 2003, DST entered into a $650 million syndicated bank credit
facility, which replaces its existing $315 million syndicated bank credit
facility. The credit facility consists of a $400 million three-year revolving
line of credit and a $250 million three-year term note. This facility is
guaranteed by a wholly owned subsidiary of DST and secured by certain marketable
securities held by that subsidiary. DST used a portion of this facility to
assist in financing the Exchange and intends to use the facility to fund working
capital needs.
SUMMARY OF THE OFFERING
For a more complete description of the terms of the debentures and the
common stock issuable upon conversion of the debentures, see "Description of the
Series A Debentures," "Description of the Series B Debentures" and "Description
of Capital Stock."
4.125% SERIES A CONVERTIBLE SENIOR DEBENTURES
Issuer..............DST Systems, Inc.
Debentures
Offered.............$540,000,000 aggregate original principal amount of 4.125%
Series A Convertible Senior Debentures due 2023.
Maturity............August 15, 2023, unless earlier redeemed, purchased or
converted.
Interest............The Series A debentures initially bear regular cash interest
at an annual rate equal to 4.125% on the original principal
amount. Regular cash interest will be payable semiannually
in arrears on February 15 and August 15 of each year, each
an interest payment date, beginning February 15, 2004, until
August 15, 2010.
Beginning August 15, 2010, we will not pay regular cash
interest on the Series A debentures prior to maturity.
Instead, the original principal amount of each Series A
debenture will increase daily at a rate of 4.125% per year
to $1,700.28, which is the full accreted principal amount
payable at maturity for each $1,000 original principal
amount of Series A debentures. The accreted principal amount
of a debenture will be computed from August 15, 2010 on a
semiannual bond equivalent basis using a 360-day year
composed of twelve 30-day months.
We will also pay contingent interest and liquidated damages
on the Series A debentures under the circumstances described
in this prospectus.
Ranking.............The Series A debentures are unsecured and rank equally in
right of payment with all of our other existing and future
unsecured and unsubordinated indebtedness. The Series A
debentures are effectively subordinated to existing and
future indebtedness and other liabilities of our
subsidiaries and to any of our secured indebtedness. As of
September 30, 2003, we had outstanding approximately $26.0
million of unsecured, unsubordinated indebtedness, and
approximately $132.3 million of secured indebtedness.
Contingent
Interest............Under certain circumstances, we will make additional
payments of interest, referred to in this prospectus as
"contingent interest."
For the period from August 20, 2010 to February 14, 2011,
and thereafter for any six-month interest period from
February 15 to August 14 or August 15 to February 14, we
will pay contingent interest for such period if the average
trading price of the Series A debentures for the applicable
five trading-day reference period equals or exceeds 120% of
the accreted principal amount of the Series A debentures. We
will pay contingent interest on the interest payment date
immediately following the applicable six-month interest
period. The amount of contingent interest payable per Series
A debenture in respect of any six-month interest period will
be equal to 0.19% of the average trading price of a Series A
debenture for the applicable five trading-day reference
period. The "five trading-day reference period" means the
five trading days ending on the second trading day
immediately preceding the relevant six-month interest
period. For more information about contingent interest, see
"Description of the Series A Debentures -- Contingent
Interest."
Conversion Rights...Holders may convert their Series A debentures into shares of
our common stock under any of the following circumstances:
o during any calendar quarter after September 30, 2003
(and only during such calendar quarter) if the last
reported sale 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 calendar quarter, is greater than or equal to
120% of the applicable conversion price, or
o subject to certain exceptions, during the five business
day period after any five consecutive trading-day
period in which the trading price per $1,000 original
principal amount of Series A debentures for each day of
that period was less than 95% of the product of the
last reported sale price of our common stock and the
conversion rate on each such day, or
o if the Series A debentures have been called for
redemption, or
o upon the occurrence of specified corporate transactions
described under "Description of the Series A Debentures
-- Conversion Rights -- Conversion UpoN Specified
Corporate Transactions."
For each $1,000 original principal amount of Series A
debentures surrendered for conversion, you may convert your
Series A debentures into 20.3732 shares of our common stock.
This represents an initial conversion price of $49.08 per
share of common stock. As described in this prospectus, the
conversion rate may be adjusted for certain reasons,
including for any cash dividend or distribution in excess of
$0.0025 per quarter, but it will not be adjusted for accrued
and unpaid cash interest, including contingent interest and
liquidated damages, if any, or for accretion of the
principal amount of the Series A debentures (except as
otherwise described in this prospectus). Except as otherwise
described in this prospectus, you will not receive any
payment representing accrued and unpaid cash interest,
including contingent interest, if any, or accretion of the
principal amount upon conversion of a Series A debenture;
however, we will pay accrued and unpaid liquidated damages,
if any, to the conversion date in accordance with the
registration rights agreement.
Upon conversion, we will have the right to deliver, in lieu
of shares of our common stock, cash or a combination of cash
and shares of our common stock. See "Description of Series A
Debentures -- Conversion Rights -- Payment Upon Conversion."
Series A debentures called for redemption may be surrendered
for conversion prior to the close of business on the
business day immediately preceding the redemption date.
Optional
Redemption..........Prior to August 20, 2010, the Series A debentures will not
be redeemable by us. On or after August 20, 2010, we may
redeem for cash all or part of the Series A debentures at
any time, upon not less than 30 days nor more than 60 days
notice before the redemption date, by mail to the trustee,
the paying
agent and each holder of Series A debentures, for a price
equal to the accreted principal amount of the Series A
debentures to be redeemed plus any accrued and unpaid cash
interest, including contingent interest and liquidated
damages, if any, to the redemption date. See "Description of
the Series A Debentures-- Optional Redemption."
Purchase of Series
A Debentures by Us
at the Option of
the Holder..........Holders have the right to require us to purchase all or any
portion of their Series A debentures on August 15, 2010,
August 15, 2015 and August 15, 2020. In each case, the
purchase price will be equal to the accreted principal
amount of the Series A debentures to be purchased plus any
accrued and unpaid cash interest, including contingent
interest and liquidated damages, if any, to such purchase
date. See "Description of the Series A Debentures-- Purchase
of Series A Debentures by Us at the Option of the Holder."
We will pay cash for all Series A debentures so purchased on
August 15, 2010. For purchases on August 15, 2015 and August
15, 2020, we may pay the purchase price for any Series A
debentures that we are required to purchase in cash, common
stock, or any combination thereof. If we choose to pay all
or part of the purchase price in shares of common stock, the
shares will be valued at 97.5% of the market price (as
defined) of our common stock as of the third business day
prior to the purchase date.
Fundamental
Change..............If we undergo a Fundamental Change (as defined under
"Description of the Series A Debentures-- Fundamental Change
Requires Purchase of Series A Debentures by Us at the Option
of the Holder"), holders will have the right, at their
option, to require us to purchase all or any portion of
their Series A debentures. The price we are required to pay
is equal to the accreted principal amount of the Series A
debentures to be purchased plus accrued and unpaid cash
interest, including contingent interest and liquidated
damages, if any, to the Fundamental Change purchase date. We
may choose to pay the purchase price for any Series A
debentures that you require us to purchase upon a
Fundamental Change in cash, shares of our common stock or
any combination of cash and shares. If we choose to pay all
or part of the purchase price in shares of common stock, the
shares will be valued at 97.5% of the market price (as
defined) of our common stock as of the third business day
prior to the purchase date. See "Description of the Series A
Debentures-- Fundamental Change Requires Purchase of Series
A Debentures by Us at the Option of the Holder."
Use of Proceeds.....We will not receive any proceeds from the sale by the
selling security holders of the debentures or the common
stock issuable upon conversion thereof. See "Use of
Proceeds."
Material U.S.
Federal Income Tax
Considerations......Each holder agrees in the indenture to treat the Series A
debentures as contingent payment debt instruments for U.S.
federal income tax purposes. As a holder of Series A
debentures, you will agree to accrue original issue discount
on a constant yield to maturity basis at a rate comparable
to the rate at which we would borrow in a noncontingent,
nonconvertible borrowing, 8.4% compounded semi-annually. As
a result, you will generally recognize taxable income in
each year in excess of interest payments actually received
that year. Additionally, you will generally be required to
recognize ordinary income on
the gain, if any, realized on a sale, exchange, conversion
or redemption of the Series A debentures. This gain will be
measured by the sum of the amount of any cash and the fair
market value of any shares of our common stock or other
property received. A summary of the U.S. federal income tax
consequences of ownership and disposition of Series A
debentures and our common stock is described in this
prospectus under the heading "Material U.S. Federal Income
Tax Considerations." Owners of the Series A debentures
should consult their tax advisors as to the U.S. federal,
state, local, or other tax consequences of acquiring, owning
and disposing of the Series A debentures and our common
stock.
Trading.............The Series A debentures will not be listed on any securities
exchange or included in any automated quotation system. No
assurance can be given as to the development or liquidity of
any trading market for the Series A debentures. Our common
stock is listed on the NYSE under the symbol "DST." The
Series A debentures have been approved for designation in
the PORTALsm Market of the National Association of
Securities Dealers, Inc.
3.625% SERIES B CONVERTIBLE SENIOR DEBENTURES
Issuer..............DST Systems, Inc.
Debentures
Offered.............$300,000,000 aggregate original principal amount of 3.625%
Series B Convertible Senior Debentures due 2023.
Maturity............August 15, 2023, unless earlier redeemed, purchased or
converted.
Interest............The Series B debentures initially bear regular cash interest
at an annual rate equal to 3.625% on the original principal
amount. Regular cash interest will be payable semiannually
in arrears on February 15 and August 15 of each year, each
an interest payment date, beginning February 15, 2004, until
August 15, 2008.
Beginning August 15, 2008, we will not pay regular cash
interest on the Series B debentures prior to maturity.
Instead, the original principal amount of each Series B
debenture will increase daily at a rate of 3.625% per year
to $1,714.09, which is the full accreted principal amount
payable at maturity for each $1,000 original principal
amount of Series B debentures. The accreted principal amount
of a debenture will be computed from August 15, 2008 on a
semiannual bond equivalent basis using a 360-day year
composed of twelve 30-day months.
We will also pay contingent interest and liquidated damages
on the Series B debentures under the circumstances described
in this prospectus.
Ranking.............The Series B debentures are unsecured and rank equally in
right of payment with all of our other existing and future
unsecured and unsubordinated indebtedness. The Series B
debentures are effectively subordinated to existing and
future indebtedness and other liabilities of our
subsidiaries and to any of our secured indebtedness. As of
September 30, 2003, we had outstanding approximately $26.0
million of unsecured, unsubordinated indebtedness, and
approximately $132.3 million of secured indebtedness.
Contingent
Interest............Under certain circumstances, we will make additional
payments of interest, referred to in this prospectus as
"contingent interest." For the period from August 20, 2008
to February 14, 2009, and thereafter for any six-month
interest period from February 15 to August 14 or August 15
to February 14, we will pay contingent interest for such
period if the average trading price of the Series B
debentures for the applicable five trading-day reference
period equals or exceeds 120% of the accreted principal
amount of the Series B debentures. We will pay contingent
interest on the interest payment date immediately following
the applicable six-month interest period. The amount of
contingent interest payable per Series B debenture in
respect of any six-month interest period will be equal to
0.19% of the average trading price of a Series B debenture
for the applicable five trading-day reference period. The
"five trading-day reference period" means the five trading
days ending on the second trading day immediately preceding
the relevant six-month interest period. For more information
about contingent interest, see "Description of the Series B
Debentures-- Contingent Interest."
Conversion Rights...Holders may convert their Series B debentures into shares of
our common stock under any of the following circumstances:
o during any calendar quarter after September 30, 2003
(and only during such calendar quarter) if the last
reported sale 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 calendar quarter, is greater than or equal to
120% of the applicable conversion price, or
o subject to certain exceptions, during the five business
day period after any five consecutive trading-day
period in which the trading price per $1,000 original
principal amount of Series B debentures for each day of
that period was less than 95% of the product of the
last reported sale price of our common stock and the
conversion rate on each such day; or
o if the Series B debentures have been called for
redemption, or
o upon the occurrence of specified corporate transactions
described under "Description of the Series B Debentures
-- Conversion Rights -- Conversion Upon Specified
Corporate Transactions."
For each $1,000 original principal amount of Series B
debentures surrendered for conversion, you may convert your
Series B debentures into 20.3732 shares of our common stock.
This represents an initial conversion price of $49.08 per
share of common stock. As described in this prospectus, the
conversion rate may be adjusted for certain reasons,
including for any cash dividend or distribution in excess of
$0.0025 per quarter, but it will not be adjusted for accrued
and unpaid interest, including contingent interest and
liquidated damages, if any, or for accretion of the
principal amount of the Series B debentures (except as
otherwise described in this prospectus). Except as otherwise
described in this prospectus, you will not receive any
payment representing accrued and unpaid cash interest,
including contingent interest, if any, or accretion of the
principal amount upon conversion of a Series B debenture;
however, we will pay accrued and unpaid liquidated damages,
if any, to the conversion date in accordance with the
registration rights agreement.
Upon conversion, we will have the right to deliver, in lieu
of shares of our common stock, cash or a combination of cash
and shares of our common stock. See "Description of Series B
Debentures -- Conversion Rights -- Payment Upon Conversion."
Series B debentures called for redemption may be surrendered
for conversion prior to the close of business on the
business day immediately preceding the redemption date.
Optional
Redemption..........Prior to August 20, 2008, the Series B debentures will not
be redeemable by us. On or after August 20, 2008, we may
redeem for cash all or part of the Series B debentures at
any time, upon not less than 30 days nor more than 60 days
notice before the redemption date, by mail to the trustee,
the paying agent and each holder of Series B debentures, for
a price equal to the accreted principal amount of the Series
B debentures to be redeemed plus any accrued and unpaid cash
interest, including contingent interest and liquidated
damages, if any, to the redemption date. See "Description of
the Series B Debentures-- Optional Redemption."
Purchase of Series
B Debentures by Us
at the Option of
the Holder..........Holders have the right to require us to purchase all or any
portion of their Series B debentures on August 15, 2008,
August 15, 2013 and August 15, 2018. In each case, the
purchase price will be equal to the accreted principal
amount of the Series B debentures to be purchased plus any
accrued and unpaid cash interest, including contingent
interest and liquidated damages, if any, to such purchase
date. See "Description of the Series B Debentures-- Purchase
of Series B Debentures by Us at the Option of the Holder."
We will pay cash for all Series B debentures so purchased on
August 15, 2008. For purchases on August 15, 2013 and August
15, 2018, we may pay the purchase price for any Series B
debentures that we are required to purchase in cash, common
stock, or any combination thereof. If we choose to pay all
or part of the purchase price in shares of common stock, the
shares will be valued at 97.5% of the market price (as
defined) of our common stock as of the third business day
prior to the purchase date.
Fundamental
Change..............If we undergo a Fundamental Change (as defined under
"Description of the Series B Debentures-- Fundamental Change
Requires Purchase of Series B Debentures by Us at the Option
of the Holder"), holders will have the right, at their
option, to require us to purchase all or any portion of
their Series B debentures. The price we are required to pay
is equal to the accreted principal amount of the Series B
debentures to be purchased plus accrued and unpaid cash
interest, including contingent interest and liquidated
damages, if any, to the Fundamental Change purchase date. We
may choose to pay the purchase price for any Series B
debentures that you require us to purchase upon a
Fundamental Change in cash, shares of our common stock or
any combination of cash and shares. If we choose to pay all
or part of the purchase price in shares of common stock, the
shares will be valued at 97.5% of the market price (as
defined) of our common stock as of the third business day
prior to the purchase date. See "Description of the Series B
Debentures-- Fundamental Change Requires Purchase of Series
B Debentures by Us at the Option of the Holder."
Use of Proceeds.....We will not receive any proceeds from the sale by the
selling security holders of the debentures or the common
stock issuable upon conversion thereof. See "Use of
Proceeds."
Material U.S.
Federal Income Tax
Considerations......Each holder agrees in the indenture to treat the Series B
debentures as contingent payment debt instruments for U.S.
federal income tax purposes. As a holder of Series B
debentures, you will agree to accrue original issue discount
on a constant yield to maturity basis at a rate comparable
to the rate at which we would borrow in a noncontingent,
nonconvertible borrowing, 8.4% compounded semi-annually. As
a result, you will generally recognize taxable income in
each year in excess of interest payments actually received
that year. Additionally, you will generally be required to
recognize ordinary income on the gain, if any, realized on a
sale, exchange, conversion or redemption of the Series B
debentures. This gain will be measured by the sum of the
amount of any cash and the fair market value of any shares
of our common stock or other property received. A summary of
the U.S. federal income tax consequences of ownership and
disposition of Series B debentures and our common stock is
described in this prospectus under the heading "Material
U.S. Federal Income Tax Considerations." Owners of the
Series B debentures should consult their tax advisors as to
the U.S. federal, state, local, or other tax consequences of
acquiring, owning and disposing of the Series B debentures
and our common stock.
Trading.............The Series B debentures will not be listed on any securities
exchange or included in any automated quotation system. No
assurance can be given as to the development or liquidity of
any trading market for the Series B debentures. Our common
stock is listed on the NYSE under the symbol "DST." The
Series B debentures have been approved for designation in
the PORTALsm Market of the National Association of
Securities Dealers, Inc.
RATIO OF EARNINGS TO FIXED CHARGES
The following table shows the ratio of earnings to fixed charges for us and
our consolidated subsidiaries for each of the periods indicated.
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED
------------------------ SEPTEMBER 30
2002 2001 2000 1999 1998 2003
---- ---- ---- ---- ---- ------------
Ratio of earnings to fixed charges............................ 9.0(3) 12.1(2) 12.1 11.6 7.5(1) 8.4(3)
In calculating the earnings to fixed charges ratio, earnings are the sum of
earnings before income taxes and equity in earnings (losses) of equity
investees, plus fixed charges. Fixed charges are the sum of interest on
indebtedness, amortization of debt discount and expense and that portion of net
rental expense deemed representative of the interest component.
(1) In 1998, we recognized $33.1 million in merger and integrated costs related
to the merger with USCS International, Inc. and the acquisition of Custima
International.
(2) In 2001, we recognized a $32.8 million pre-tax gain on the sale of our
Portfolio Accounting Systems, which we refer to as PAS, business to State Street
Corporation, which we refer to as State Street.
(3) In 2002 and 2003, we recorded costs associated with facility consolidations
in our Output Solutions segment of $12.0 million and $2.4 million, respectively.
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE MAKING AN
INVESTMENT DECISION. THE RISKS DESCRIBED BELOW ARE NOT THE ONLY ONES FACING US.
ADDITIONAL RISKS NOT PRESENTLY KNOWN TO US OR THAT WE CURRENTLY DEEM IMMATERIAL
MAY ALSO IMPAIR OUR BUSINESS OPERATIONS.
OUR BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS COULD BE
MATERIALLY ADVERSELY AFFECTED BY ANY OF THESE RISKS. THE TRADING PRICE OF THE
DEBENTURES AND OUR COMMON STOCK COULD DECLINE DUE TO ANY OF THESE RISKS, AND YOU
MAY LOSE ALL OR PART OF YOUR INVESTMENT.
THIS PROSPECTUS ALSO CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS
AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS,
INCLUDING THE RISKS FACED BY US DESCRIBED BELOW AND ELSEWHERE IN THIS
PROSPECTUS.
RISKS RELATED TO DST
OUR BUSINESS DEPENDS LARGELY ON CERTAIN INDUSTRIES. EVENTS THAT IMPACT THESE
INDUSTRIES COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS.
We derive a substantial proportion of our consolidated revenues from the
financial services, video/broadband and telecommunications industries.
Consolidations which would decrease the number of potential clients in such
businesses, events which would reduce the rate of growth in or negatively impact
such businesses, or significant declines in the number of accounts or
subscribers serviced by clients in such businesses could have a material adverse
effect on our results of operations. In particular, recent consolidations and
business conditions in the telecommunications industry have negatively affected
the results of our Output Solutions segment.
Nearly 70% of our operating revenues in fiscal year 2002 were derived from
mutual fund/investment management, corporate securities processing and other
financial services industries. Approximately 43% of our operating revenues in
fiscal year 2002 were derived from the mutual fund industry alone. As a result,
our results of operations have been adversely affected by slower general market
activity, reduced trading and reduced mutual fund investing. A continued
deterioration in consumer confidence and resulting protracted slow down in
mutual fund investing and general market activity would have a material adverse
effect on our results of operations.
IF WE ARE NOT SUCCESSFUL IN DEVELOPING TECHNOLOGY FOR USE BY EQUISERVE, INC., IT
COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND RESULTS OF OPERATIONS.
On March 30, 2001, we acquired a controlling interest in EquiServe Limited
Partnership, a corporate stock transfer agent that provides services principally
to publicly held corporations. On August 1, 2001, we purchased the remaining
interest in the business, and EquiServe, Inc., which we refer to as EquiServe,
is now our wholly owned subsidiary. We are in the process of implementing and
enhancing a new stock transfer system, which we refer to as Fairway, that will
replace the existing systems used to maintain corporate stock transfer records.
Success of the acquisition is dependent in part on successful completion of
Fairway, successful conversion of all accounts from existing systems to Fairway,
and integration of our other technology and infrastructure to support EquiServe
operations. The failure to successfully complete Fairway development,
successfully convert the existing client base to Fairway, or successfully
integrate our technology and infrastructure to support EquiServe could have a
material adverse effect on our business and results of operations.
FAILURE OF OUR CLIENTS TO RENEW CONTRACTS, CANCELLATION OF CONTRACTS OR REDUCED
UTILIZATION BY OUR CLIENTS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR RESULTS
OF OPERATIONS.
Substantially all of our revenue is derived from the sale of services or
products under long-term contracts with our clients. We do not have the
unilateral option to extend the terms of such contracts upon their expiration.
In addition, certain of our service agreements contain "termination for
convenience" clauses that enable clients to cancel the agreements by providing
written notice to us a specified number of days prior to the desired termination
date. Such clauses are sometimes coupled with a requirement for payment by the
client of a fee in the event of termination for convenience. In addition, under
certain of our agreements, the fees we receive are dependent on utilization
rates for our services. The failure of clients to renew contracts, the
cancellation of contracts or a reduction in usage by clients under any contracts
could have a material adverse effect on our results of operations. In
particular, our Output Solutions and Customer Management segments have suffered
recent customer losses as a result of industry consolidation and competitive
pressures.
OUR INDUSTRY IS VERY COMPETITIVE. IF WE ARE UNABLE TO COMPETE EFFECTIVELY, IT
COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS.
We, our subsidiaries and our joint ventures encounter significant
competition for our services and products from other third-party providers of
similar services and products and from potential clients who chose not to
outsource certain services we provide. We also compete for shareowner accounting
services with brokerage firms that perform sub-accounting services for their
customers who purchase or sell shares of mutual funds for which we provide
shareowner recordkeeping services. Such brokerage firms maintain only an
"omnibus" account with us representing the aggregate number of shares of a
mutual fund owned by the brokerage firms' customers, thus resulting in fewer
mutual fund shareowner accounts being maintained by us. In particular, in light
of current market conditions, a significant portion of our recent revenues
growth is attributable to the acquisition of new clients. As a result, our
ability to continue to increase revenues is dependent upon our ability to
maintain and leverage our competitive advantages and continue to attract new
clients. In addition, our ability to compete effectively depends, in part, on
the availability of capital and other resources, and some of our competitors may
have greater resources and greater access to capital than we do. Any of these
events could have a material adverse effect on our results of operations. In
addition, competitive factors could influence or alter our overall revenue mix
among our various business segments, which would affect our gross profit
margins.
WE MAY EXPERIENCE FLUCTUATIONS IN OUR QUARTERLY AND ANNUAL OPERATING RESULTS.
Our quarterly and annual operating results may fluctuate from quarter to
quarter and year to year depending on various factors, including but not limited
to the unpredictable nature of the markets in which our products and services
are sold, general economic conditions, acquisitions, the impact of significant
start-up costs associated with initiating the delivery of contracted services to
new clients, the hiring of additional staff, new product development and other
expenses, introduction of new products by competitors and pricing pressures.
OUR FUTURE SUCCESS DEPENDS IN PART ON ADAPTING OUR PRODUCTS AND SERVICES TO
CHANGES IN TECHNOLOGY AND IN THE MARKETS IN WHICH OUR CLIENTS OPERATE. IF WE DO
NOT UPDATE OUR PRODUCTS AND SERVICES OR DEVELOP NEW PRODUCTS AND SERVICES THAT
ARE TIMELY DELIVERED TO AND WELL RECEIVED BY CLIENTS, THERE COULD BE A MATERIAL
ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS.
Our clients use computer technology-based products and services in the
complex and rapidly changing markets in which they operate. The technology
available to our clients, such as methods for the electronic dissemination of
documents, is expanding. Our future success depends in part on our ability to
continue to develop and adapt our technology, on a timely and cost effective
basis, to meet clients' needs and demands for the latest technology. There can
be no assurance that we will be able to respond adequately and in advance of our
competitors to these technological demands or that more advanced technology,
including technology for the electronic dissemination of documents, will not
reduce or replace the need for certain of our products and services.
Similarly, certain of our clients provide services related to
communications devices and/or the communications industry. The communications
industry, and wireless communication devices in particular, are rapidly
evolving. The future success of our business of providing administrative
services to clients in the communications industry depends in part on our
ability to continue to develop and adapt our services, on a timely and cost
effective basis, to meet clients' needs and demands for administrative services
appropriate to the latest communications technology.
We have expended considerable funds to develop products to serve new and
rapidly changing markets. If such markets grow more slowly than anticipated or
our products and services fail to achieve market acceptance, this could have a
material adverse effect on our results of operations.
WE HAVE SIGNIFICANT EQUITY INVESTMENTS. ANY SIGNIFICANT DECLINE IN THE VALUE OF
OUR EQUITY INVESTMENTS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR RESULTS OF
OPERATIONS.
We have a significant investment in available-for-sale equity securities of
other companies. The value of such securities depends on the market for such
securities and on changes in the markets in which such other companies operate.
Any significant decline in the value of our equity investments could have a
material adverse effect on our results of operations. As of September 30, 2003,
the market value of such investments was $1,024.9 million.
WE OWN, LEASE AND MANAGE REAL ESTATE, AND RELY ON OUR PROCESSING FACILITIES. ANY
EVENT THAT CAUSES LONG-TERM DAMAGE TO THESE FACILITIES COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS.
Our processing services are primarily dependent on facilities housing
central computer operations or in which information, image or bill and statement
processing occur. Our mutual fund full service, corporate stock transfer and
insurance, warranty and debt protection administrative service businesses are
dependent on call centers in various locations. In addition, we lease and manage
real estate. A natural disaster, terrorist act, or other calamity that causes
long-term damage to our facilities, or economic or other events impacting the
real estate markets in which we own, lease or manage real estate, could have a
material adverse effect on our results of operations.
WE RELY ON INSURERS IN CONNECTION WITH THE INSURANCE, WARRANTY AND DEBT
PROTECTION SERVICES WE PROVIDE TO CERTAIN CLIENTS. OUR FAILURE TO MAINTAIN
RELATIONSHIPS WITH THESE INSURERS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR
RESULTS OF OPERATIONS.
Currently, our business of providing administrative services in connection
with the insurance, warranty and debt protection services of our clients
significantly depends upon our business relationships with one or more insurance
companies that provide coverage necessary for the clients' products and
services. Termination of these business relationships could have a material
adverse effect on our results of operations if we were unable to arrange
alternative sources of coverage.
OUR BUSINESS IS DEPENDENT ON SKILLED TECHNICAL PERSONNEL AND OUR SENIOR
MANAGEMENT. IF WE ARE UNABLE TO RETAIN OR ATTRACT QUALIFIED TECHNICAL AND
MANAGEMENT PERSONNEL, IT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR RESULTS OF
OPERATIONS.
Our operations and the continuing implementation of our business strategy
depend upon the efforts of our technical personnel and senior management.
Recruiting and retaining capable personnel, particularly those with expertise in
the types of computer hardware and software utilized by us, are vital to our
success. There is substantial competition for qualified technical and management
personnel, and there can be no assurance that we will be able to attract or keep
the qualified personnel we require. The loss of key personnel or the failure to
hire qualified personnel could have a material adverse effect on our financial
condition and results of operations.
OUR BUSINESS STRATEGY INCLUDES A RELIANCE ON JOINT VENTURES. WE ARE NOT IN A
POSITION TO EXERCISE CONTROL OVER THESE JOINT VENTURES WITHOUT THE CONCURRENCE
OF OUR JOINT VENTURE PARTNERS.
Our business strategy for growth and expansion includes reliance on joint
ventures. We derive part of our net income from our pro rata share in the
earnings of these unconsolidated companies. Although we own significant equity
interests in such companies and have representation on their boards of directors
or governance structures, we are not in a position to exercise control over
their operations, strategies or financial decisions without the concurrence of
our equity partners. Our equity interests in Boston Financial Data Services,
Inc., which we refer to as BFDS, Argus Health Systems, Inc., and International
Financial Data Services Limited Partnership and International Financial Data
Services Limited, which we refer to collectively as IFDS, are subject to
contractual buy/sell arrangements that may restrict our ability to fully dispose
of our interest in these joint ventures and that under certain circumstances
permit such joint venture partners to purchase our interest.
WE AND CERTAIN OF OUR SUBSIDIARIES, JOINT VENTURES AND CLIENTS ARE SUBJECT TO
REGULATION BY VARIOUS REGULATORY AGENCIES. IF ANY OF OUR REGULATORY
AUTHORIZATIONS OR THOSE OF OUR SUBSIDIARIES AND JOINT VENTURES ARE SUSPENDED OR
REVOKED, IT COULD HAVE AN ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS. IN
ADDITION, REGULATORY CHANGES THAT ADVERSELY AFFECT OUR CLIENTS, COULD HAVE A
MATERIAL ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS.
As registered transfer agents, DST, our subsidiary, EquiServe, our indirect
subsidiary, EquiServe Trust Company, N.A., which we refer to as EquiServe Trust,
our joint venture, BFDS, and BFDS' subsidiary, National Financial Data Services,
Inc., which we refer to collectively as our domestic transfer agent businesses,
are subject to the Exchange Act and to the rules and regulations of the SEC
under the Exchange Act which require them to register with the SEC and which
impose on them recordkeeping and reporting requirements. Certain of the
operations and records of our domestic transfer agent businesses are subject to
examination by the SEC and, as providers of services to financial institutions,
to examination by bank and thrift regulatory agencies. In connection with its
transfer agency business, EquiServe Trust serves as a limited purpose trust
company subject to regulation of the Office of the Comptroller of the Currency.
In addition, companies wholly owned by IFDS, which we refer to as IFDS transfer
agent businesses, are subject to regulation of similar regulatory agencies in
other countries. Any of the domestic transfer agent businesses or IFDS transfer
agent businesses could have its regulatory authorizations suspended or revoked
if it were to materially violate applicable regulations, which could have a
material adverse effect on our results of operations.
Similarly, certain of our subsidiaries involved in the business of
providing administrative services in connection with insurance and warranty
products are licensed insurance agencies or licensed or registered service
warranty providers and, as such, are subject to applicable state insurance and
service warranty laws and to related rules and regulations. These laws and
regulations impose on them recordkeeping, reporting,
financial and other requirements and generally regulate the conduct of their
business operations. In the event any of the subsidiaries materially violate any
of these applicable laws or regulations, their regulatory authorizations could
be suspended or revoked, which could have a material adverse effect on our
results of operations.
Our existing and potential clients are subject to extensive regulation, and
certain of our revenue opportunities may depend on continued deregulation in the
world-wide communications industry. Certain of our clients are subject to
regulations governing the privacy and use of customer information that is
collected and managed by our products and services. Regulatory changes that
adversely affect our existing and potential clients could have a material
adverse effect on our results of operations.
OUR FAILURE TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS OR ANY SIGNIFICANT
THIRD PARTY INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS AGAINST US COULD HAVE A
MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND RESULTS OF OPERATIONS.
We rely on a combination of copyright, trade secret and patent laws,
nondisclosure agreements, and other contractual measures to protect our
proprietary technology. There can be no assurance that these measures will be
adequate to protect our proprietary rights. There can be no assurance that third
parties will not assert infringement claims against us or our clients or that
such claims, if brought, would not have a material adverse effect on our
business and results of operations.
IF WE FAIL TO PROTECT THE SECURITY OF PROPRIETARY CUSTOMER INFORMATION, IT COULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND RESULTS OF OPERATIONS.
Our business involves the electronic recordkeeping of proprietary
information of our customers, and of the clients of such customers. We maintain
systems and procedures to protect against unauthorized access to such
information and against computer viruses, which we refer to as security systems.
However, there is no guarantee that these security systems are adequate to
protect against all security breaches. Rapid advances in technology make it
impossible to anticipate or be prepared to address all potential security
threats. A material breach of our security systems could cause our customers to
reconsider use of our services and products, affect our reputation, or otherwise
have a material adverse effect on our business and results of operations.
CERTAIN PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND OUR STOCKHOLDERS'
RIGHTS PLAN COULD DELAY, DETER OR PREVENT A CHANGE OF CONTROL OF DST, EVEN IF IT
WOULD BE BENEFICIAL TO OUR STOCKHOLDERS. IN ADDITION, CERTAIN CLIENT AGREEMENTS
AND JOINT VENTURE AGREEMENTS HAVE PROVISIONS TRIGGERING CERTAIN RIGHTS OF THE
OTHER PARTY IN THE EVENT OF A CHANGE IN CONTROL OF DST.
Some provisions of our certificate of incorporation could make it more
difficult for a third party to acquire control of us, even if the change of
control would be beneficial to certain stockholders. We have also adopted a
stockholders' rights plan which could delay, deter or prevent a change in
control of DST. A few of our client agreements allow the client to terminate its
agreement or to obtain rights to use our software used in processing the
client's data in the event of an acquisition or change of control of DST. In the
event of a change in control of DST (as defined in the applicable plan or
agreement), vesting of awards (including stock options) under our stock option
and performance award plan will be automatically accelerated, certain limited
rights related to such options will become exercisable, and employment
continuation provisions will apply under the employment agreements of certain
executive officers. Certain of our joint venture agreements allow other parties
to the joint venture to buy our joint venture interests in the event of a change
of control of DST.
RISKS RELATED TO THE DEBENTURES
WE HAVE A SUBSTANTIAL AMOUNT OF INDEBTEDNESS AND OUR INDEBTEDNESS FURTHER
INCREASED UPON CONSUMMATION OF THE EXCHANGE. THIS COULD ADVERSELY AFFECT OUR
FINANCIAL PERFORMANCE AND IMPACT OUR ABILITY TO MAKE PAYMENTS ON THE DEBENTURES.
Since completion of the private offering of the debentures, we have a
substantial amount of indebtedness. In addition, our indebtedness further
increased upon consummation of the Exchange. Our level of indebtedness could
have important consequences to the holders of the debentures. For example, it:
o may limit our ability to obtain additional financing for working
capital, capital expenditures or general corporate purposes;
o will require us to dedicate a substantial portion of our cash flow
from operations to the payment of principal and interest on our
indebtedness, reducing the funds available to us for other purposes
including expansion through acquisitions, capital expenditures and
expansion of our product offerings; and
o may limit our flexibility to adjust to changing business and market
conditions and make us more vulnerable to a downturn in general
economic conditions as compared to our competitors.
Our ability to make scheduled payments or to refinance our obligations with
respect to our indebtedness will depend on our financial and operating
performance which, in turn, is subject to prevailing economic conditions and to
financial, business and other factors beyond our control.
OUR STOCK PRICE HAS BEEN VOLATILE HISTORICALLY AND MAY CONTINUE TO BE VOLATILE.
THE PRICE OF OUR COMMON STOCK, AND THEREFORE THE PRICE OF THE DEBENTURES, MAY
FLUCTUATE SIGNIFICANTLY, WHICH MAY MAKE IT DIFFICULT FOR HOLDERS TO RESELL THE
DEBENTURES OR THE SHARES OF OUR COMMON STOCK ISSUABLE UPON CONVERSION OF THE
DEBENTURES WHEN DESIRED OR AT ATTRACTIVE PRICES.
The market price for our common stock has been and may continue to be
volatile. We expect our stock price to be subject to fluctuations as a result of
a variety of factors, including factors beyond our control. These factors
include:
o quarterly fluctuations in our operating and financial results;
o changes in financial estimates and recommendations by financial
analysts;
o fluctuations in the stock price and operating results of our
competitors;
o consolidations, dispositions, acquisitions and financings; and
o general conditions in the industries in which we operate.
In addition, the stock markets in general, including the NYSE, recently
have experienced significant price and trading fluctuations. These fluctuations
have resulted in volatility in the market prices of securities that often has
been unrelated or disproportionate to changes in operating performance. These
broad market fluctuations may affect adversely the market prices of our common
stock. In addition, sales of substantial amounts of common stock by us in the
market, or the perception that such sales may occur, could also affect the price
of our common stock. Because the debentures are convertible into shares of our
common stock, volatility or depressed prices for our common stock could have a
similar effect on the trading price of the
debentures. This may result in greater volatility in the trading prices of the
debentures than would be expected for nonconvertible debt securities.
The price of our common stock could also be affected by possible sales of
our common stock by investors who view the debentures as a more attractive means
of equity participation in DST and by hedging or arbitrage trading activity that
we expect to develop involving our common stock. The hedging or arbitrage could,
in turn, affect the trading prices of the debentures.
THE CONDITIONAL CONVERSION FEATURE OF THE DEBENTURES COULD RESULT IN YOU
RECEIVING LESS THAN THE VALUE OF THE COMMON STOCK INTO WHICH A DEBENTURE WOULD
OTHERWISE BE CONVERTIBLE.
The debentures are convertible into shares of our common stock only if
specified conditions are met. If the specific conditions for conversion are not
met, you will not be able to convert your debentures, and you may not be able to
receive the value of the common stock into which the debentures would otherwise
be convertible.
CONVERSION OF THE DEBENTURES WILL DILUTE THE OWNERSHIP INTEREST OF EXISTING
STOCKHOLDERS, INCLUDING HOLDERS WHO HAVE 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.
AN ACTIVE TRADING MARKET MAY NOT DEVELOP FOR THE DEBENTURES.
The debentures are a new issue of securities with no established trading
market and will not be listed on any securities exchange. Certain of the initial
purchasers have informed us that they intend to make a market in the debentures.
However, they are not obligated to do so and may cease their market-making
activities at any time. In addition, such market-making activity will be subject
to limits imposed by the Securities Act and the Exchange Act. We cannot assure
you that an active trading market for the debentures will develop or as to the
liquidity or sustainability of any such market, or the ability of holders to
sell their debentures or the price at which holders of the debentures may be
able to sell their debentures. If an active market for the debentures fails to
develop or be sustained, the trading prices of the debentures could be adversely
affected. Future trading prices of the debentures will also depend on many other
factors, including, among other things, prevailing interest rates, the market
for similar securities, the price of our common stock, our performance and other
factors.
WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO PURCHASE THE
DEBENTURES UPON A FUNDAMENTAL CHANGE OR OTHER PURCHASE DATE, AS REQUIRED BY THE
INDENTURE GOVERNING THE DEBENTURES.
Holders of the Series A debentures may require us to purchase their
debentures on August 15, 2010, August 15, 2015 and August 15, 2020, although we
may pay the purchase price in shares of our common stock after August 15, 2010.
Holders of the Series B debentures may require us to purchase their debentures
on August 15, 2008, August 15, 2013 and August 15, 2018, although we may pay the
purchase price in shares of our common stock after August 15, 2008. In addition,
holders of the debentures may also require us to purchase their debentures upon
a Fundamental Change as described under "Description of the Series A Debentures
-- Fundamental Change Requires Purchase of Series A Debentures by Us at the
Option of the Holder" and "Description of the Series B Debentures -- Fundamental
Change Requires Purchase of Series B Debentures by Us at the Option of the
Holder." A Fundamental Change also may constitute an event of default under, and
result in the acceleration of the maturity of, our other indebtedness or other
indebtedness that we may incur in the future. In addition, our revolving credit
facility restricts the repurchase of the debentures for cash or stock if an
event of default has occurred or would occur under our revolving credit facility
as a result of such repurchase. In addition, we cannot assure you that we would
have sufficient financial resources, or would be able to arrange financing, to
pay the purchase price for the debentures tendered by holders. Failure by us to
purchase the debentures when required will result in an event of default with
respect to the debentures.
YOU SHOULD EVALUATE THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF OWNING THE
DEBENTURES.
Each holder agrees in the indenture to treat the debentures as contingent
payment debt instruments for U.S. federal income tax purposes, subject to the
Treasury regulations governing contingent payment debt instruments, which we
refer to as the CPDI regulations, and to be bound by our application of these
regulations to the debentures, including our determinations of the comparable
yield and projected payment schedule (as described under "Material U.S. Federal
Income Tax Considerations"). Under the CPDI regulations, you will be required to
accrue interest on a constant yield to maturity basis at a rate comparable to
the rate at which we would borrow in a non-contingent, non-convertible fixed
rate borrowing (subject to certain adjustments). As a result, you will generally
recognize taxable income in excess of cash received while your debentures are
outstanding. In addition, you will recognize ordinary income upon a sale,
exchange, conversion or redemption of your debentures at a gain. In computing
such gain, the amount realized by you will include the amount of any cash and
the fair market value of any shares of our common stock or other property
received. The proper application of the CPDI regulations to a holder of
debentures is uncertain in a number of respects, and no assurance can be given
that the Internal Revenue Service, which we refer to as the IRS, will not assert
that the debentures should be treated differently or that the IRS will not
prevail. A different treatment could affect the amount, timing and character of
income, gain or loss in respect of an investment in the debentures. In
particular, it might be determined that a holder should have accrued interest
income at a higher or lower rate, should not have recognized income or gain upon
conversion, or should have recognized capital gain upon a taxable disposition of
the debentures. To understand how this may affect you, you should seek advice
from your own tax advisor prior to purchasing the debentures. See "Material U.S.
Federal Income Tax Considerations."
THE DEBENTURES ARE EFFECTIVELY SUBORDINATED TO EXISTING AND FUTURE INDEBTEDNESS
AND OTHER LIABILITIES OF OUR SUBSIDIARIES.
We derive some of our revenues from, and hold some of our assets through,
our subsidiaries. As a result, we will depend in part on 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.
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 only be entitled
to rights on our common stock if and when we deliver shares of common stock to
you upon conversion or
purchase of your 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 your conversion, or our repurchase with
stock, of debentures, 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 MAY ISSUE ADDITIONAL SHARES OF COMMON STOCK AND THEREBY MATERIALLY AND
ADVERSELY AFFECT THE PRICE OF OUR COMMON STOCK.
We are not restricted from issuing additional common stock during the life
of the debentures and have no obligation to consider your interests for any
reason. If we issue additional shares of common stock, it may materially and
adversely affect the price of our common stock and, in turn, the price of the
debentures.
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 certain rights or warrants, subdivisions or
combinations of our common stock, certain distributions of assets, debt
securities, capital stock or cash to holders of our common stock and certain
issuer tender or exchange offers as described under "Description of Series A
Debentures -- Conversion Rights -- Conversion Rate Adjustments" and "Description
of Series B Debentures -- Conversion Rights -- Conversion Rate Adjustments." The
conversion rate will not be adjusted for other events, such as a third party
tender or exchange offer or 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.
THE DEBENTURES DO NOT RESTRICT OUR ABILITY TO INCUR ADDITIONAL INDEBTEDNESS OR
TO TAKE OTHER ACTIONS 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, including secured debt. In addition, the
limited covenants applicable to 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
indebtedness 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. If we issue other debt securities in
the future, our debt service obligations will increase.
USE OF PROCEEDS
We will not receive any proceeds from the sale by the selling security
holders of the debentures or the common stock issuable upon conversion of the
debentures. Please read "Selling Security Holders" for a list of the persons
receiving proceeds from the sale of the debentures or the underlying common
stock.
DESCRIPTION OF THE SERIES A DEBENTURES
We issued $540,000,000 aggregate principal amount of Series A debentures in
a private placement on August 12, 2003. The Series A debentures were issued
under an indenture between us and JPMorgan Chase Bank, as trustee. Copies of the
indenture are available from us upon request. The following description of the
Series A debentures is only a summary and is not intended to be comprehensive.
For purposes of this "Description of the Series A Debentures," the terms "DST,"
"we," "our," "ours" and "us" refer only to DST Systems, Inc. and not to any of
our subsidiaries.
GENERAL
The Series A debentures are limited to $540 million in aggregate original
principal amount. The Series A debentures are issued in registered form without
coupons only in denominations of $1,000 original principal amount and integral
multiples of $1,000. We use the term "Series A debenture" in this offering
memorandum to refer to each $1,000 original principal amount of Series A
debentures.
The Series A debentures will mature on August 15, 2023. On the maturity
date of the Series A debentures, a holder will receive $1,700.28, the accreted
principal amount at maturity of a Series A debenture. The Series A debentures
will bear regular cash interest at an annual rate equal to 4.125% per annum on
the original principal amount from August 12, 2003, or from the most recent date
to which interest has been paid or provided for, until August 15, 2010. During
such period, interest will be payable semiannually in arrears on February 15 and
August 15 of each year, each an interest payment date, beginning February 15,
2004, to the person in whose name a Series A debenture is registered at the
close of business on the February 1 or August 1, as the case may be, immediately
preceding the relevant interest payment date, each of which we refer to as a
"record date."
Beginning August 15, 2010, we will not pay regular cash interest prior to
maturity. Instead, the original principal amount of each Series A debenture will
increase daily at a rate of 4.125% per year, to produce the accreted principal
amount at maturity. Prior to August 15, 2010, the accreted principal amount of a
Series A debenture will be the original principal amount, and beginning on
August 15, 2010, the accreted principal amount will be computed on a semiannual
bond equivalent basis using a 360-day year composed of twelve 30-day months.
If any date on which regular cash interest is payable, the maturity date,
or any redemption date or purchase date (including upon the occurrence of a
Fundamental Change, as described below) is not a business day, we will pay
interest on the next business day (without any interest or other payment due on
the delay). Regular cash interest on the Series A debentures will be calculated
on the basis of a 360-day year consisting of twelve 30-day months. The term
"business day," when used with respect to any place of payment for the Series A
debentures, means a day other than a Saturday or a Sunday, a legal holiday or a
day on which banking institutions or trust companies in that place of payment
are authorized or obligated by law to close.
In addition, we will pay contingent interest on the Series A debentures
under the circumstances described below under " -- Contingent Interest" and
liquidated damages as set forth in the registration rights agreement.
Regular cash interest on Series A debentures will accrue from and including
the date of issue or from and including the last date in respect of which
interest has been paid, as the case may be, to, but excluding, the earlier of
(i) August 15, 2010 and (ii) the interest payment date or a purchase date upon a
Fundamental Change, as the case may be.
Holders may present Series A debentures for conversion at the office of the
conversion agent and may present Series A debentures for exchange or for
registration of transfer at the office or agency maintained by us for that
purpose in the Borough of Manhattan, The City of New York. We will not charge a
service charge for any exchange or registration of transfer of Series A
debentures. However, we may require payment of a sum sufficient to cover any tax
or other governmental charge payable for the registration of transfer or
exchange. The trustee will serve as the initial conversion agent, paying agent,
registrar and transfer agent for the Series A debentures. At any time, we may
designate additional paying agents and transfer agents. However, at all times we
will be required to maintain a paying agent and transfer agent for the Series A
debentures in the Borough of Manhattan, The City of New York.
Any monies deposited with the trustee or any paying agent or then held by
us in trust for the payment of principal and interest (including contingent
interest and liquidated damages, if any) on the Series A debentures that remain
unclaimed for two years after the date the payments became due and payable,
shall, at our request, be repaid to us or released from trust, as applicable,
and the holder of the Series A debenture shall thereafter look, as a general
unsecured creditor, only to us for payment thereof.
RANKING
The Series A debentures are our direct, unsecured and unsubordinated
obligations. The Series A debentures rank equally in right of payment with all
of our other existing and future unsecured and unsubordinated indebtedness. In
addition, the Series A debentures effectively rank junior to any secured
indebtedness that we may incur to the extent of the assets securing such
indebtedness. We currently conduct part of our operations through our
subsidiaries. Claims of creditors of those subsidiaries, including trade
creditors and secured creditors, will generally have a claim to the assets of
our subsidiaries that is superior to the claims of our creditors, including
holders of the Series A debentures.
As of September 30, 2003, we had outstanding approximately $26.0 million of
unsecured, unsubordinated indebtedness ranking equally in right of payment with
the Series A debentures, and approximately $13.4 of secured indebtedness,
excluding indebtedness of subsidiaries. As of September 30, 2003, our
subsidiaries had approximately $127.4 million of indebtedness outstanding, all
of which ranks structurally senior to the Series A debentures. The indenture
does not limit the amount of indebtedness we or our subsidiaries may incur.
CONTINGENT INTEREST
For the period from August 20, 2010 to February 14, 2011, and thereafter
for any six-month interest period measured from February 15 to August 14 or
August 15 to February 14, we will pay contingent interest if the average trading
price per Series A debenture for the applicable five trading-day reference
period equals or exceeds 120% of the accreted principal amount of a Series A
debenture. The "five trading-day reference period" means the five trading days
ending on the second trading day immediately preceding the relevant six-month
interest period.
The amount of contingent interest payable per Series A debenture in respect
of the period from August 20, 2010 to February 14, 2011, and thereafter for any
six-month interest period will be equal to 0.19% of the average trading price
per Series A debenture for the applicable five trading-day reference period.
The record date and payment date for contingent interest, if any, will be
the same as the regular record date and payment date, respectively, for the
semi-annual interest payments on the Series A debentures.
The "trading price" is as defined under "-- Conversion Rights -- Conversion
Upon Satisfaction of Trading Price Condition," provided that if at least one
required bid for the Series A debentures is not obtained by the trustee, or in
our reasonable judgment the bid quotations are not indicative of the secondary
market value of the Series A debentures, then the trading price of the Series A
debentures will equal (a) the then applicable conversion rate of the Series A
debentures multiplied by (b) the average of the last reported sale prices of our
common stock for the applicable five trading-day reference period.
The "last reported sale price" of our common stock on any date means the
closing sale price per share (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 our common stock is traded or, if our common stock is not listed on a U.S.
national or regional securities exchange, as reported by the Nasdaq National
Market. The last reported sale 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 "last reported sale 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 "last reported sale
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.
"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 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.
We will notify the holders of the Series A debentures upon a determination
that they will be entitled to receive contingent interest with respect to a
semi-annual interest period. In connection with providing such notice, we will
issue a press release and publish a notice containing information regarding the
contingent interest determination in a newspaper of general circulation in The
City of New York or publish the information on our web site or through such
other public medium as we may use at that time.
CONVERSION RIGHTS
Subject to the conditions and during the periods described below, holders
may convert their Series A debentures into shares of our common stock initially
at a conversion rate of 20.3732 shares of common stock per Series A debenture.
The conversion price as of any date of determination is a dollar amount
(initially $49.08 per share of common stock) derived by dividing the accreted
principal amount of a Series A debenture (which will be $1,000 until August 15,
2010) by the conversion rate in effect on such date. The conversion rate and the
corresponding conversion price in effect at any given time are referred to as
the "applicable conversion rate" and the "applicable conversion price,"
respectively, and will be subject to adjustment as described below. A holder may
convert fewer than all of such holder's Series A debentures so long as the
Series A debentures converted are an integral multiple of $1,000 original
principal amount.
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. For a discussion of the U.S. federal income tax consequences of
conversion to a holder, see "Material U.S. Federal Income Tax Considerations."
Except as otherwise described below, you will not receive any cash payment
representing accrued and unpaid cash interest, if any (including contingent
interest, if any) or increases on the accreted principal
amount of the Series A debentures upon conversion of a Series A debenture and we
will not adjust the conversion rate to account for the accrued and unpaid cash
interest, if any (including contingent interest and liquidated damages, if any)
or increases on the accreted principal amount of the Series A debentures. Upon
conversion we will deliver to you cash or shares of our common stock, as
described below. Delivery of cash or shares of common stock will be deemed to
satisfy our obligation to pay the accreted principal amount of the Series A
debentures, including accrued and unpaid cash interest, if any (including
contingent interest, if any). Increases on the accreted principal amount and
accrued and unpaid cash interest, if any (including contingent interest, if any)
will be deemed paid in full rather than canceled, extinguished or forfeited.
Notwithstanding conversion of any Series A debentures by a holder thereof,
accrued and unpaid liquidated damages, if any, to the conversion date will be
paid to such holder on the settlement date for such conversion.
If a holder converts Series A debentures, we will pay any documentary,
stamp or similar issue or transfer tax due on the issuance of shares of our
common stock upon the conversion, unless the tax is due because the holder
requests the shares to be issued or delivered to a person other than the holder,
in which case the holder will pay that tax.
To convert your Series A debenture into common stock you must do the
following:
o complete and manually sign the notice of conversion on the back of the
Series A debenture or facsimile of the notice of conversion and
deliver this notice to the conversion agent;
o surrender the Series A debenture to the conversion agent;
o if required, furnish appropriate endorsements and transfer documents;
o if required, pay all transfer or similar taxes; and
o if required, pay funds equal to interest, if any, (including
contingent interest, if any) payable on the next interest payment
date.
If your interest is a beneficial interest in a global Series A debenture,
to convert you must comply with the last three requirements listed above and
comply with the DTC's procedures for converting a beneficial interest in a
global Series A debenture. The conversion date will be the date on which all of
the foregoing requirements have been satisfied. Settlement of our obligation to
deliver shares or cash with respect to a conversion will occur on the dates
described below under "-- Payment Upon Conversion." A certificate for the number
of full shares of our common stock into which any Series A debentures are
converted, or cash in lieu thereof, together with any cash payment for
fractional shares, will be delivered through the conversion agent, other than in
the case of holders of Series A debentures in book-entry form, which shares or
cash will be delivered in accordance with DTC customary practices.
If a holder has already delivered a purchase notice as described under
either "-- Purchase of Series A Debentures by Us at the Option of the Holder" or
"-- Fundamental Change Requires Purchase of Series A Debentures by Us at the
Option of the Holder" with respect to a Series A debenture, however, the holder
may not surrender that Series A debenture for conversion until the holder has
withdrawn the purchase notice in accordance with the indenture.
Holders of Series A debentures at the close of business on a regular record
date will receive payment of interest, if any, including contingent interest and
liquidated damages, if any, payable on the corresponding interest payment date,
notwithstanding the conversion of such Series A debentures at any time after the
close of business on such regular record date. Series A Debentures surrendered
for conversion by a holder during the period from the close of business on any
regular record date to the opening of
business on the immediately following interest payment date must be accompanied
by payment of an amount equal to the interest, if any, including contingent
interest, if any, that the holder is to receive on the Series A debentures;
provided, however, that no such payment need be made if (1) we have specified a
redemption date that is after a record date and on or prior to the immediately
following interest payment date, (2) we have specified a purchase date following
a Fundamental Change that is during such period or (3) any overdue interest
(including overdue contingent interest, if any) exists at the time of conversion
with respect to such Series A debentures, to the extent of such overdue
interest.
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 stated maturity or, with respect to Series A 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 to deliver
common stock upon conversion (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 ("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 immediately following the cash settlement notice period
("conversion retraction period"). If no such election is made, no such
retraction can be made (and a conversion notice shall be irrevocable).
Settlement amounts will be computed as follows:
o If we elect to satisfy the entire conversion obligation in shares, we
will deliver to you a number of shares, for each $1,000 original
principal amount of Series A debentures, equal to the applicable
conversion rate. In addition, if on the date you submit your notice of
conversion there exists a registration default as defined in the
registration rights agreement, and the shares of common stock you will
receive on conversion are neither registered under the Securities Act
nor immediately freely saleable pursuant to Rule 144(k) under the
Securities Act, we will deliver to you additional shares as liquidated
damages (the "liquidated damages shares") equal to 3% of the
applicable conversion rate for each $1,000 original principal amount
of Series A debentures. We will pay cash for all fractional shares of
common stock. The cash payment for fractional shares will be based on
the last reported sale price of our common stock on the trading day
immediately prior to the conversion date.
o If we elect to satisfy the entire conversion obligation in cash, we
will deliver to you, for each $1,000 original principal amount of
Series A debentures, cash in an amount equal to the product of the
applicable conversion rate and the average last reported sale price of
our common stock for the 10 trading-day period beginning the day after
the conversion retraction period (the "cash settlement averaging
period").
o 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
("cash amount") and a number of shares, for each $1,000 original
principal amount of Series A debentures, equal to the applicable
conversion rate, plus liquidated damages shares, if any, minus the
number of shares equal to the sum, for each day of the cash settlement
averaging period, of (x) 10% of the cash amount, divided by (y) the
last reported price of our common stock; provided, however, that the
number of shares will not be less than zero. We will pay cash for all
fractional shares of
common stock. The cash payment for fractional shares will be based on
the last reported sale price of our common stock on the trading day
immediately prior to the conversion date.
If we choose to satisfy all or any portion of the conversion obligation in
cash and the conversion notice has not been retracted, then settlement (in cash
and/or shares) will occur on the business day following the cash settlement
averaging period. If we choose to satisfy the entire conversion obligation in
shares of our common stock then settlement will occur on the third business day
following the conversion date.
CONVERSION AFTER THE FINAL NOTICE DATE. In the event that we receive your
notice of conversion 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, if we choose to satisfy all or any portion of the
conversion obligation in cash after the final notice date, we will send, on or
prior to final notice date, 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 10 trading-day period beginning
on the day after receipt of your notice of conversion. If we do not elect to
satisfy all or any portion of the conversion obligation in cash, then settlement
will occur on the first business day following the conversion date.
CONDITIONS TO CONVERSION
Holders may surrender their Series A debentures for conversion into shares
of our common stock prior to stated maturity only under the circumstances
described below. For a discussion of the federal income tax consequences of a
conversion of the Series A debentures into our common stock, see "Material U.S.
Federal Income Tax Considerations."
CONVERSION UPON SATISFACTION OF SALE PRICE CONDITION. A holder may
surrender any of its Series A debentures for conversion into shares of our
common stock during any calendar quarter after September 30, 2003 (and only
during such calendar quarter) if the last reported sale 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 calendar quarter is greater
than or equal to 120% of the applicable conversion price (initially 120% of
$49.08, or $58.90), which we refer to as the "conversion trigger price."
The applicable conversion price of a Series A debenture at any time is
dependent upon the accreted principal amount of a Series A debenture at that
time and therefore both the applicable conversion price and the conversion
trigger price will increase following August 15, 2010 as the accreted principal
amount of a Series A debenture increases. The following table sets forth the
conversion trigger prices at August 15 of each year beginning 2010.
CONVERSION TRIGGER PRICES*
APPLICABLE CONVERSION
AUGUST 15, CONVERSION PRICE TRIGGER PRICE
---------------------------------------- ---------------- -------------
2010.................................... $49.08 $58.90
2011.................................... $51.13 $61.36
2012.................................... $53.26 $63.91
2013.................................... $55.48 $66.58
2014.................................... $57.79 $69.35
2015.................................... $60.20 $72.24
2016.................................... $62.71 $75.25
2017.................................... $65.32 $78.39
2018.................................... $68.05 $81.65
2019.................................... $70.88 $85.06
2020.................................... $73.84 $88.60
2021.................................... $76.91 $92.30
2022.................................... $80.12 $96.14
2023.................................... $83.46 $100.15
-------------------
* This table assumes no events have occurred that would require an adjustment
to the conversion rate.
CONVERSION UPON SATISFACTION OF TRADING PRICE CONDITION. A holder may
surrender any of its Series A 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
original principal amount of Series A debentures (as determined following a
request by a holder of the Series A debentures in accordance with the procedures
described below) for each day of that period was less than 95% of the product of
the last reported sale price of our common stock and the applicable conversion
rate of such Series A debentures on each such day; provided, however, that a
holder may not convert Series A debentures in reliance on this provision after
August 15, 2018 if on any trading day during such five consecutive trading-day
period the last reported sale price of our common stock was between the
applicable conversion price of the Series A debentures and 120% of the
applicable conversion price of the Series A debentures.
The "trading price" of the Series A debentures on any date of determination
means the average of the secondary market bid quotations per $1,000 original
principal amount of the Series A debentures obtained by the trustee for
$10,000,000 original principal amount of the Series A 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
$10,000,000 original principal amount of the Series A 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 original
principal amount of the Series A debentures, then the trading price per $1,000
original principal amount of the Series A debentures will be deemed to be less
than 95% of the product of the last reported sale 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 Series A 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 original principal
amount of the
Series A debentures would be less than 95% of the product of the last reported
sale price of our common stock and the applicable conversion rate. At such time,
we shall instruct the trustee to determine the trading price of the Series A
debentures beginning on the next trading day and on each successive trading day
until the trading price per $1,000 original principal amount of the Series A
debentures is greater than or equal to 95% of the product of the last reported
sale price of our common stock and the applicable conversion rate.
CONVERSION UPON REDEMPTION. If we elect to redeem the Series A debentures,
holders may convert Series A debentures 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 Series A debentures are not otherwise convertible
at such time.
CONVERSION UPON SPECIFIED CORPORATE TRANSACTIONS. If we elect to:
o 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 market price of a share of our
common stock on the record date for the distribution, or
o 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 last reported sale 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 Series A 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 Series A 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 Series A 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 or binding share
exchange pursuant to which our common stock would be converted into cash,
securities or other property, a holder may surrender Series A 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
Fundamental Change, until the business day immediately preceding the applicable
Fundamental Change purchase date). 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 right to convert a Series A debenture
into our common stock will be changed into a right to convert a Series A
debenture into the kind and amount of cash, securities or other property that
the holder would have received if the holder had converted its Series A
debentures immediately prior to the transaction. If the transaction also
constitutes a Fundamental Change, as defined below, a holder can require us to
purchase all or a portion of its Series A debentures as described below under
"-- Fundamental Change Requires Purchase of Series A Debentures by Us at the
Option of the Holder."
The Exchange (described in "Summary--Recent Developments" does not
constitute a specified corporate transaction permitting conversion.
CONVERSION RATE ADJUSTMENTS
The applicable conversion rate will be subject to adjustment, without
duplication, upon the occurrence of any of the following events:
(1) the payment of dividends and other distributions on our common
stock payable exclusively in shares of our common stock,
(2) the distribution to all holders of our common stock of rights or
warrants that allow the holders to purchase shares of our common stock for
a period expiring within 60 days from the date of issuance of the rights or
warrants at less than the market price on the record date for the
determination of shareholders entitled to receive the rights or warrants,
(3) subdivisions or combinations of our common stock,
(4) distributions to all holders of our common stock of our assets,
debt securities, shares of our capital stock or rights or warrants to
purchase our securities (excluding any dividend, distribution or issuance
covered by clause (1) or (2) above and any dividend or distribution paid
exclusively in cash) the conversion rate will be increased by multiplying
the conversion rate by a fraction,
(a) the numerator of which is the current market price of our
common stock plus the fair market value, as determined by
our board of directors, of the portion of those assets, debt
securities, shares of capital stock or rights or warrants so
distributed applicable to one share of common stock, and
(b) the denominator of which is the current market price of our
common stock.
The "current market price" of our common stock means the average of
the last reported sale prices for the first 10 trading days from, and
including, the ex-dividend date (as defined above in "-- Conditions to
Conversion -- Conversion Upon Specified Corporate Transactions") for such
dividend or distribution.
In the event that we make a distribution to all holders of our common
stock consisting of capital stock of, or similar equity interests in, a
subsidiary or other business unit of ours, the fair market value of the
securities so distributed will be based on the average of the closing sales
prices of those securities for each of the 10 trading days commencing on
and including the fifth trading day after the ex-dividend date (as defined
above in "-- Conditions to Conversion -- Conversion Upon Specified
Corporate Transactions") for such dividend or distribution on the NYSE or
such other national or regional exchange or market on which the securities
are then listed or quoted.
(5) we make distributions consisting exclusively of cash to all
holders of our common stock, excluding any cash dividend on our common
stock to the extent that the aggregate cash dividend per share of our
common stock in any quarter does not exceed $0.0025 (the "dividend
threshold amount") (the dividend threshold amount is subject to adjustment
on the same basis as the conversion rate, provided that no adjustment will
be made to the dividend threshold amount for any adjustment made to the
conversion rate pursuant to this clause (5)), in which event the conversion
rate will be adjusted by multiplying the conversion rate by a fraction,
(a) the numerator of which will be the current market price of
our common stock plus the amount per share of such dividend
or distribution and
(b) the denominator of which will be the current market price of
our common stock.
If an adjustment is required to be made under this clause (5) as a
result of a distribution that is a dividend, the adjustment would be based
upon the amount by which the distribution exceeds the dividend threshold
amount. If an adjustment is required to be made under this clause (5) as a
result of a distribution that is not a dividend, the adjustment would be
based upon the full amount of the distribution.
(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 last reported sale price of our common
stock on the trading day next succeeding the last date on which tenders or
exchanges may be made pursuant to such tender or exchange offer, the
conversion rate will be adjusted by multiplying the conversion rate by a
fraction,
(a) 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
last reported sale price of our common stock on the trading
day next succeeding the expiration of the tender or exchange
offer and
(b) 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 last reported sale price of
our common stock on the trading day next succeeding the
expiration of the tender or exchange offer.
Notwithstanding the foregoing, in the event of an adjustment pursuant to
clauses (4), (5) or (6) above, in no event will the conversion rate exceed
28.5225, subject to adjustment pursuant to clauses (1), (2) and (3) above.
To the extent that we have a rights plan in effect upon conversion of the
Series A debentures into common stock (including the rights plan described in
"Description of Capital Stock--Rights Plan" below), the holder will receive, in
addition to the common stock, the rights under the rights plan unless the rights
have separated from the common stock prior to the time of conversion, in which
case the conversion rate will be adjusted at the time of separation as if we
distributed to all holders of our common stock, our assets, debt securities,
shares of our capital stock or rights or warrants to purchase our securities as
described in clause (4) above.
In addition to these adjustments, we may increase the conversion rate as
our board of directors considers advisable to avoid or diminish any income tax
to holders of our common stock or rights to purchase our common stock resulting
from any dividend or distribution of stock (or rights to acquire stock) or from
any event treated as such for income tax purposes. We may also, from time to
time, to the extent permitted by applicable law, increase the conversion rate by
any amount for any period of at least 20 business days if our board of directors
has determined that such increase would be in our best interests. If our board
of directors makes such a determination, it will be conclusive. We will give
holders of Series A debentures at least 15 days' notice of such an increase in
the conversion rate.
"Market price" means the average of the last reported sale prices per share
of our common stock for the 10 trading-day period ending on the applicable date
of determination (if the applicable date of determination is a trading day or,
if not, then on the last trading day prior to the applicable date of
determination), appropriately adjusted to take into account the occurrence,
during the period commencing on the first of the trading days during the 10
trading-day period and ending on the applicable date of determination, of any
event that would result in an adjustment of the conversion rate under the
indenture.
The applicable conversion rate will not be adjusted:
o 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,
o 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,
o 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 Series A debentures were first issued (no adjustment will
be made for the issuance of common stock pursuant to conversion of the
Series B debentures),
o for a change in the par value of the common stock, or
o for accrued and unpaid cash interest, including contingent interest or
liquidated damages, if any, or accretion of the principal amount of
the Series A debentures.
No adjustment in the applicable conversion rate will be required unless the
adjustment would require an increase or decrease of at least 1% of the
applicable conversion rate. If the adjustment is not made because the adjustment
does not change the applicable conversion rate by more than 1%, then the
adjustment that is not made will be carried forward and taken into account in
any future adjustment.
In the event of:
o a taxable distribution to holders of shares of common stock which
results in an adjustment of the conversion rate; or
o an increase in the conversion rate at our discretion,
the holders of the Series A debentures may, in certain circumstances, be deemed
to have received a distribution subject to U.S. federal income tax as a
dividend. In addition, for Non-U.S. Holders of Series A debentures, this deemed
distribution may be subject to U.S. federal withholding tax requirements. See
"Material U.S. Federal Income Tax Considerations."
OPTIONAL REDEMPTION
No sinking fund is provided for the Series A debentures. Prior to August
20, 2010, the Series A debentures will not be redeemable. On or after August 20,
2010, we may redeem for cash all or part of the Series A debentures at any time,
upon not less than 30 days nor more than 60 days notice before the redemption
date by mail to the trustee, the paying agent and each holder of Series A
debentures.
If redeemed at our option, the Series A debentures will be redeemed at a
redemption price equal to the accreted principal amount, plus any accrued and
unpaid cash interest, including contingent interest and liquidated damages, if
any, to the redemption date. The table below shows the redemption prices of a
Series A debenture on August 15, 2010, on each August 15 thereafter prior to
maturity and at maturity on August 15, 2023 (assuming there is no accrued and
unpaid cash interest, contingent interest or liquidated damages). In addition,
the redemption price of a Series A debenture that is redeemed between the dates
listed below would include an additional amount reflecting the additional
principal amount that has accreted on such Series A debenture since the
immediately preceding date in the table below.
SERIES A
DEBENTURE ISSUE
REDEMPTION DATE: AUGUST 15, PRICE (1) ACCRETION AMOUNT (2) REDEMPTION PRICE (1) + (2)
----------------------------------- --------------- -------------------- --------------------------
2010............................... $1,000.00 $0.00 $1,000.00
2011............................... $1,000.00 $41.68 $1,041.68
2012............................... $1,000.00 $85.09 $1,085.09
2013............................... $1,000.00 $130.31 $1,130.31
2014............................... $1,000.00 $177.42 $1,177.42
2015............................... $1,000.00 $226.48 $1,226.48
2016............................... $1,000.00 $277.60 $1,277.60
2017............................... $1,000.00 $330.84 $1,330.84
2018............................... $1,000.00 $386.31 $1,386.31
2019............................... $1,000.00 $444.08 $1,444.08
2020............................... $1,000.00 $504.26 $1,504.26
2021............................... $1,000.00 $566.95 $1,566.95
2022............................... $1,000.00 $632.26 $1,632.26
2023............................... $1,000.00 $700.28 $1,700.28
If we decide to redeem fewer than all of the outstanding Series A
debentures, the trustee will select the Series A debentures to be redeemed (in
original principal amounts of $1,000 or integral multiples thereof) by lot, on a
pro rata basis or by another method the trustee considers fair and appropriate.
If the trustee selects a portion of your Series A debenture for partial
redemption and you convert a portion of the same Series A debenture, the
converted portion will be deemed to be from the portion selected for redemption.
In the event of any redemption in part, we will not be required to issue,
register the transfer of or exchange any Series A debenture during a period of
15 days before the mailing of the redemption notice.
For a discussion of the U.S. federal income tax consequences to a holder of
our redemption of the Series A debentures, see "Material U.S. Federal Income Tax
Considerations."
PURCHASE OF SERIES A DEBENTURES BY US AT THE OPTION OF THE HOLDER
Holders have the right to require us to purchase the Series A debentures on
August 15, 2010, August 15, 2015 and August 15, 2020 (each, a "purchase date").
We will pay cash for all Series A debentures purchased by us on August 15, 2010.
For purchases on August 15, 2015 and August 15, 2020 we may, at our option, pay
the purchase price in cash, shares of our common stock, or any combination
thereof. We may pay all or a portion of the purchase price in shares of our
common stock as long as our common stock is then listed on a national securities
exchange or traded on the Nasdaq National Market and if certain other conditions
specified below are satisfied. For purchases on August 15, 2015 and August 15,
2020, if we elect to pay the purchase price, in whole or in part, in shares of
our common stock, the number of shares of common stock to be delivered by us
will be equal to the portion of the purchase price to be paid in common stock
divided by 97.5% of the market price (as defined under "-- Conditions to
Conversion -- Conversion Rate Adjustments" above) as of the third business day
prior to the purchase date.
We will be required to purchase any outstanding Series A debentures for
which a holder delivers a written purchase notice to the paying agent. This
notice must be delivered during the period beginning at any time from the
opening of business on the date that is 20 business days prior to the relevant
purchase date and ending on the close of business on the business day prior to
the purchase date. If the purchase notice is given and withdrawn during such
period, we will not be obligated to purchase the related Series A debentures.
Our purchase obligation will be subject to some additional conditions as
described in the indenture. Also, as described in the "Risk Factors" section of
this offering memorandum under the caption "Risks Related to the Debentures --
We may not have the ability to raise the funds necessary to purchase the
debentures upon a Fundamental Change or other purchase date, as required by the
indenture governing the debentures," we may not have funds sufficient to
purchase the Series A debentures when we are required to do so or may be
prohibited from doing so under the terms of other indebtedness. Our failure to
purchase the Series A debentures when we are required to do so will constitute
an event of default under the indenture with respect to the Series A debentures.
The purchase price payable will be equal to 100% of the accreted principal
amount of the Series A debentures to be purchased plus any accrued and unpaid
cash interest, including contingent interest and liquidated damages, if any, to
such purchase date. The table below shows the purchase prices of a Series A
debenture on each of the purchase dates. The purchase prices below do not
include any additional amounts reflecting any accrued and unpaid cash interest
(including contingent interest, if any) and accrued and unpaid liquidated
damages, if any.
SERIES A
DEBENTURE ISSUE
PURCHASE DATE: AUGUST 15, PRICE (1) ACCRETION AMOUNT (2) PURCHASE PRICE (1) + (2)
----------------------------------- --------------- -------------------- ------------------------
2010............................... $1,000.00 $0.00 $1,000.00
2015............................... $1,000.00 $226.48 $1,226.48
2020............................... $1,000.00 $504.26 $1,504.26
For a discussion of the United States federal income tax treatment of a
holder receiving cash, see "Material U.S. Federal Income Tax Considerations."
On or before the 20th business day prior to each purchase date, we will
provide to the trustee, the paying agent and to all holders of the Series A
debentures at their addresses shown in the register of the registrar, and to
beneficial owners as required by applicable law, a notice stating, among other
things:
o for purchases on or after August 15, 2015, whether we will pay the
purchase price of the Series A debentures in cash, shares of our
common stock or a combination thereof, specifying the percentages of
each;
o for purchases on or after August 15, 2015, if we elect to pay in
shares of our common stock, the method of calculating the market price
of the shares of common stock;
o the purchase price;
o the name and address of the paying agent and the conversion agent;
o the conversion rate and any adjustments to the conversion rate;
o that the Series A debentures with respect to which a purchase notice
has been given by the holder may be converted only if the holder
withdraws the purchase notice in accordance with the terms of the
indenture; and
o the procedures that holders must follow to require us to purchase
their Series A debentures.
In connection with providing such notice, we will issue a press release and
publish a notice containing this information in a newspaper of general
circulation in The City of New York or publish the information on our web site
or through such other public medium as we may use at that time.
To exercise your purchase right, you must deliver, before the close of
business on the business day immediately preceding the purchase date, the Series
A debentures to be purchased, duly endorsed for transfer, together with the form
attached to the Series A debentures entitled "Purchase Notice" duly completed,
to the paying agent. A notice electing to require us to purchase your Series A
debentures must state:
o if certificated Series A debentures have been issued, the certificate
numbers of the Series A debentures,
o the portion of the original principal amount of Series A debentures to
be purchased, in integral multiples of $1,000,
o for purchases on or after August 15, 2015, in the event we elect,
pursuant to the notice that we are required to give, to pay the
purchase price in shares of our common stock, in whole or in part, but
the purchase price is ultimately to be paid to the holder entirely in
cash because any condition to payment of the purchase price or portion
of the purchase price in common stock is not satisfied prior to the
close of business on the purchase date, as described below, whether
the holder elects: (a) to withdraw the purchase notice as to some or
all of the Series A debentures to which it relates, or (b) to receive
cash in respect of the entire purchase price for all Series A
debentures or portions of Series A debentures subject to such purchase
notice, provided, however, that if the holder fails to indicate its
choice with respect to such election, the holder will be deemed to
have elected to receive cash in respect of the entire purchase price
for all Series A debentures subject to the purchase notice in these
circumstances, and
o that the Series A debentures are to be purchased by us pursuant to the
applicable provisions of the Series A debentures and the indenture.
If the Series A debentures are not in certificated form, your notice must
comply with appropriate DTC procedures.
We may not purchase any Series A debentures at the option of holders if the
accreted principal amount of the Series A debentures has been accelerated, and
such acceleration has not been rescinded.
You may withdraw any purchase notice (in whole or in part) by a written
notice of withdrawal delivered to the paying agent prior to the close of
business on the business day prior to the purchase date. The notice of
withdrawal must state:
o the original principal amount of the withdrawn Series A debentures,
o if certificated Series A debentures have been issued, the certificate
numbers of the withdrawn Series A debentures, and
o the original principal amount, if any, that remains subject to the
purchase notice.
If the Series A debentures are not in certificated form, your withdrawal
notice must comply with appropriate DTC procedures.
You must either effect book-entry transfer or deliver the Series A
debentures, together with necessary endorsements, to the office of the paying
agent after delivery of the purchase notice to receive payment of the purchase
price. You will receive payment promptly following the later of the purchase
date and the time of book-entry transfer or the delivery of the Series A
debentures. If the paying agent holds money or securities sufficient to pay the
purchase price of the Series A debentures on the purchase date, then on the
business day following the purchase date:
o the Series A debentures will cease to be outstanding and cash
interest, including contingent interest and liquidated damages, if
any, will cease to accrue and the principal amount will cease to
accrete (whether or not book-entry transfer of the debentures is made
or whether or not the Series A debentures are delivered to the paying
agent), and
o all other rights of the holder will terminate (other than the right to
receive the purchase price upon delivery or transfer of the Series A
debentures).
In connection with any purchase offer pursuant to these provisions, to the
extent applicable and required by law, we will:
o comply with the provisions of Rule 13e-4, Rule 14e-1 and any other
tender offer rules under the Exchange Act which may then be
applicable; and
o file Schedule TO or any other required schedule under the Exchange
Act.
Because the market price of our common stock is determined prior to the
applicable purchase date, holders of Series A debentures bear the market risk
with respect to the value of common stock to be received from the date the
market price is determined to such purchase date.
Our right to purchase Series A debentures, in whole or in part, with shares
of our common stock for purchases on or after August 15, 2015, is subject to
various conditions, including:
o the registration of the common stock under the Securities Act and the
Exchange Act, if required;
o any necessary qualification or registration under applicable state
securities law or the availability of an exemption from such
qualification and registration;
o the information necessary to calculate the market price is published
in a daily newspaper of national circulation; and
o our common stock is then listed on a national securities exchange or
traded on the Nasdaq National Market.
If such conditions are not satisfied prior to the close of business on the
purchase date, we will pay the purchase price of the Series A debentures
entirely in cash. We may not change the form, components or percentages of
components of consideration to be paid for the Series A debentures once we have
given the notice that we are required to give to holders of Series A debentures,
except as described in the preceding sentence.
FUNDAMENTAL CHANGE REQUIRES PURCHASE OF SERIES A DEBENTURES BY US AT THE OPTION
OF THE HOLDER
If a Fundamental Change (as defined below in this section) occurs at any
time prior to maturity, holders will have the right, at their option, to require
us to purchase any or all of their Series A debentures, or any portion of the
original principal amount thereof, that is equal to $1,000 or an integral
multiple of $1,000. The price we are required to pay (the "Fundamental Change
purchase price") is equal to the accreted principal amount of the Series A
debentures to be purchased plus accrued and unpaid cash interest, including
contingent interest and liquidated damages, if any, to the Fundamental Change
purchase date, unless such Fundamental Change purchase date falls after a record
date and on or prior to the corresponding interest payment date, in which case
we will pay the full amount of accrued and unpaid cash interest payable on such
interest payment date to the holder of record at the close of business on the
corresponding record date. For a discussion of the U.S. federal income tax
consequences to a holder of our purchase of the Series A debentures, see
"Material U.S. Federal Income Tax Considerations."
If we elect to pay the Fundamental Change purchase price, in whole or in
part, in shares of our common stock, the number of shares of common stock to be
delivered by us will be equal to the portion of the Fundamental Change purchase
price to be paid in common stock divided by 97.5% of the market price (as
defined under "-- Conditions to Conversion -- Adjustments to Conversion Rate"
above) of one share of our common stock as of the third business day prior to
the Fundamental Change purchase date.
Because the market price of the common stock is determined prior to the
applicable Fundamental Change purchase date, holders of Series A debentures bear
the market risk with respect to the value of the common stock to be received
from the date such market price is determined to such Fundamental Change
purchase date.
A "Fundamental Change" will be deemed to have occurred at any time after
the Series A debentures are originally issued that any of the following occurs:
(1) our common stock or other common stock into which the Series A
debentures are convertible is neither listed for trading on a U.S. national
securities exchange nor approved for trading on the Nasdaq National Market
or another established automated over-the-counter trading market in the
United States,
(2) a "person" or "group" (within the meaning of Section 13(d) of the
Exchange Act) other than us, our subsidiaries or our or their employee
benefit plans, files a Schedule TO or any schedule, form or report under
the Exchange Act disclosing that such person or group has become
the direct or indirect ultimate "beneficial owner," as defined in Rule
13d-3 under the Exchange Act, of our common equity representing more than
50% of the voting power of our common equity entitled to vote generally in
the election of directors,
(3) consummation of any share exchange, consolidation or merger of us
pursuant to which our common stock will be converted into cash, securities
or other property or any sale, lease or other transfer in one transaction
or a series of transactions of all or substantially all of the consolidated
assets of us and our subsidiaries, taken as a whole, to any person other
than us or one or more of our subsidiaries; provided, however, that a
transaction where the holders of our common equity immediately prior to
such transaction have directly or indirectly, more than 50% of the
aggregate voting power of all classes of common equity of the continuing or
surviving corporation or transferee entitled to vote generally in the
election of directors immediately after such event shall not be a
Fundamental Change, or
(4) continuing directors (as defined below in this section) cease to
constitute at least a majority of our board of directors.
The Exchange (described in "Summary--Recent Developments") does not
constitute a fundamental change.
A Fundamental Change will not be deemed to have occurred in respect of any
of the foregoing, however, if either:
(1) the last reported sale price of our common stock for any five
trading days within the 10 consecutive trading days ending immediately
before the later of the Fundamental Change or the public announcement
thereof, equals or exceeds 105% of the applicable conversion price of the
Series A debentures in effect immediately before the Fundamental Change or
the public announcement thereof, or
(2) all or substantially all of the consideration, excluding cash
payments for fractional shares, in the transaction or transactions
constituting the Fundamental Change consists of shares of capital 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 a Fundamental Change (these securities being referred to as
"publicly traded securities") and as a result of this transaction or
transactions the Series A debentures become convertible into such publicly
traded securities, excluding cash payments for fractional shares.
For purposes of the above paragraph the term "capital stock" of any person
means any and all shares, interests, participations or other equivalents however
designated of corporate stock or other equity participations, including
partnership interests, whether general or limited, of such person and any rights
(other than debt securities convertible or exchangeable into an equity
interest), warrants or options to acquire an equity interest in such person.
"Continuing director" means a director who either was a member of our board
of directors on the date of this offering memorandum or who becomes a member of
our board of directors subsequent to that date and whose appointment, election
or nomination for election by our stockholders is duly approved by a majority of
the continuing directors on our board of directors at the time of such approval,
either by a specific vote or by approval of the proxy statement issued by us on
behalf of the board of directors in which such individual is named as nominee
for director.
On or before the 30th day after the occurrence of a Fundamental Change, we
will provide to all holders of the Series A debentures and the trustee and
paying agent a notice of the occurrence of the Fundamental Change and of the
resulting purchase right. Such notice shall state, among other things:
o whether we will pay the Fundamental Change purchase price of the
Series A debentures in cash, shares of common stock or a combination
thereof, specifying the percentages of each,
o if we elect to pay in shares of common stock, the method of
calculating the market price of the common stock,
o the events causing a Fundamental Change,
o the date of the Fundamental Change,
o the last date on which a holder may exercise the purchase right,
o the Fundamental Change purchase price,
o the Fundamental Change purchase date,
o the name and address of the paying agent and the conversion agent,
o the conversion rate and any adjustments to the conversion rate,
o that the Series A debentures with respect to which a Fundamental
Change purchase notice has been given by the holder may be converted
only if the holder withdraws the Fundamental Change purchase notice in
accordance with the terms of the indenture, and
o the procedures that holders must follow to require us to purchase
their Series A debentures.
Simultaneously with providing such notice, we will issue a press release
and publish a notice containing this information in a newspaper of general
circulation in The City of New York or publish the information on our web site
or through such other public medium as we may use at that time.
To exercise your purchase right, you must deliver, before the close of
business on the business day immediately preceding the Fundamental Change
purchase date, the Series A debentures to be purchased, duly endorsed for
transfer, together with the form attached to the Series A debentures entitled
"Form of Fundamental Change Purchase Notice" duly completed, to the paying
agent. Your purchase notice must state:
o if certificated, the certificate numbers of their Series A debentures
to be delivered for purchase,
o the portion of the original principal amount of Series A debentures to
be purchased, which must be $1,000 or an integral multiple thereof,
o in the event we elect, pursuant to the notice that we are required to
give, to pay the Fundamental Change purchase price in our common
stock, in whole or in part, but the Fundamental Change purchase price
is ultimately to be paid to the holder entirely in cash because any
condition to payment of the Fundamental Change purchase price or
portion of the Fundamental Change purchase price in common stock is
not satisfied prior to the close of business on the Fundamental Change
purchase date, as described below, whether
the holder elects: (a) to withdraw the Fundamental Change purchase
notice as to some or all of the Series A debentures to which it
relates, or (b) to receive cash in respect of the entire Fundamental
Change purchase price for all Series A debentures or portions of
Series A debentures subject to such Fundamental Change purchase
notice; provided, however, that if the holder fails to indicate the
holder's choice with respect to the election described in this bullet
point, the holder will be deemed to have elected to receive cash in
respect of the entire Fundamental Change purchase price for all Series
A debentures subject to the Fundamental Change purchase notice in
these circumstances, and
o that the Series A debentures are to be purchased by us pursuant to the
applicable provisions of the Series A debentures and the indenture.
If the Series A debentures are not in certificated form, their Fundamental
Change purchase notice must comply with appropriate DTC procedures.
Holders may withdraw any Fundamental Change purchase notice (in whole or in
part) by a written notice of withdrawal delivered to the paying agent prior to
the close of business on the business day prior to the Fundamental Change
purchase date. The notice of withdrawal shall state:
o the original principal amount of the withdrawn Series A debentures,
o if certificated Series A debentures have been issued, the certificate
numbers of the withdrawn Series A debentures, and
o the original principal amount, if any, that remains subject to the
Fundamental Change purchase notice.
If the Series A debentures are not in certificated form, their withdrawal
notice must comply with appropriate DTC procedures.
We will be required to purchase the Series A debentures no less than 20 and
no more than 35 business days after the date of our notice of the occurrence of
the relevant Fundamental Change, subject to extension to comply with applicable
law. You may either effect book-entry transfer or deliver the Series A
debentures, together with necessary endorsements, to the office of the paying
agent after delivery of the Fundamental Change purchase notice to receive
payment of the Fundamental Change purchase price. Holders will receive payment
of the Fundamental Change purchase price promptly following the later of the
Fundamental Change purchase date or the time of book-entry transfer or the
delivery of the Series A debentures. If the paying agent holds money or
securities sufficient to pay the Fundamental Change purchase price of the Series
A debentures on the Fundamental Change purchase date, then on the business day
following the Fundamental Change purchase date:
o the Series A debentures will cease to be outstanding and cash
interest, including contingent interest and liquidated damages, if
any, will cease to accrue and principal will cease to accrete (whether
or not book-entry transfer of the Series A debentures is made or
whether or not the Series A debenture is delivered to the paying
agent), and
o all other rights of the holder will terminate (other than the right to
receive the Fundamental Change purchase price upon delivery or
transfer of the Series A debentures).
In connection with any purchase offer pursuant to these provisions, and to
the extent applicable and required by law, we will:
o comply with the provisions of Rule 13e-4, Rule 14e-1 and any other
tender offer rules under the Exchange Act which may then be
applicable; and
o file Schedule TO or any other required schedule under the Exchange
Act.
The rights of the holders to require us to purchase their Series A
debentures upon a Fundamental Change could discourage a potential acquirer of
us. The Fundamental Change purchase feature, however, is not the result of
management's knowledge of any specific effort to accumulate shares of our common
stock, to obtain control of us by any means or part of a plan by management to
adopt a series of anti-takeover provisions. Instead, the Fundamental Change
purchase feature is a standard term contained in other offerings of debt
securities similar to the Series A debentures that have been marketed by certain
of the initial purchasers. The terms of the Fundamental Change purchase feature
resulted from negotiations between the initial purchasers and us.
The term Fundamental Change is limited to specified transactions and may
not include other events that might adversely affect our financial condition. In
addition, the requirement that we offer to purchase the Series A debentures upon
a Fundamental Change may not protect holders in the event of a highly leveraged
transaction, reorganization, merger or similar transaction involving us.
No Series A debentures may be purchased at the option of holders upon a
Fundamental Change if the accreted principal amount of the Series A debentures
has been accelerated, and such acceleration has not been rescinded.
The definition of Fundamental Change includes a phrase relating to the
conveyance, transfer, sale, lease or disposition of "all or substantially all"
of our consolidated assets. There is no precise, established definition of the
phrase "substantially all" under applicable law. Accordingly, the ability of a
holder of the Series A debentures to require us to purchase its Series A
debentures as a result of the conveyance, transfer, sale, lease or other
disposition of less than all of our assets may be uncertain.
If a Fundamental Change were to occur, we may not have enough funds to pay
the Fundamental Change purchase price or we may be prohibited from doing so
under the terms of other indebtedness. See "Risk Factors" under the caption
"Risks Related to the Debentures -- We may not have the ability to raise the
funds necessary to purchase the debentures upon a Fundamental Change or other
purchase date, as required by the indenture governing the debentures." Our
failure to purchase the Series A debentures when required following a
Fundamental Change will constitute an event of default under the indenture with
respect to the Series A debentures. In addition, we have, and may in the future
incur, other indebtedness with similar change in control provisions permitting
holders to accelerate or to require us to purchase our indebtedness upon the
occurrence of similar events or on some specific dates, including the Series B
debentures.
Our right to purchase Series A debentures, in whole or in part, with common
stock is subject to our satisfying various conditions, including:
o the registration of the common stock under the Securities Act and the
Exchange Act, if required;
o any necessary qualification or registration under applicable state
securities law or the availability of an exemption from such
qualification and registration;
o the information necessary to calculate the market price is published
in a daily newspaper of national circulation; and
o our common stock is then listed on a national securities exchange or
traded on the Nasdaq National Market.
If such conditions are not satisfied prior to the close of business on the
Fundamental Change purchase date, we will pay the Fundamental Change purchase
price of the Series A debentures entirely in cash. We may not change the form,
components or percentages of components of consideration to be paid for the
Series A debentures once we have given the notice that we are required to give
to holders of Series A debentures, except as described in the preceding
sentence.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The indenture prohibits us from consolidating with or merging into another
business entity, or conveying, transferring or leasing substantially all of our
assets, unless:
o either (1) we are the continuing entity in the case of a merger, or
(2) the resulting, surviving or acquiring entity, if other than DST,
is a U.S. corporation and it expressly assumes our obligations with
respect to the Series A debentures, by executing a supplemental
indenture;
o immediately after giving effect to the transaction, no event of
default and no circumstances which, after notice or lapse of time or
both, would become an event of default, shall have happened and be
continuing; and
o we have delivered to the trustee an officers' certificate and a legal
opinion confirming that we have complied with the indenture.
However, certain of these transactions could constitute a Fundamental
Change (as defined above) permitting each holder to require us to purchase the
Series A debentures of such holder as described above.
EVENTS OF DEFAULT
Any of the following events constitute an event of default under the
indenture with respect to the Series A debentures:
o failure to pay interest, including contingent interest and liquidated
damages, if any, on the Series A debentures for thirty days past the
applicable due date,
o failure to pay the accreted principal amount of the Series A
debentures when due (whether at maturity, upon redemption, purchase or
otherwise),
o failure to deliver our common stock, or cash in lieu thereof, upon
conversion of any Series A debenture and such failure continues for
five days following the date such delivery is required,
o failure to perform any other covenant or agreement in the indenture,
which continues for 90 days after written notice from the trustee or
holders of 25% of the outstanding original principal amount of the
Series A debentures as provided in the indenture,
o acceleration of more than $25,000,000 of our indebtedness by its terms
(including the Series B debentures) if the acceleration is not
rescinded or such indebtedness is not paid within 10 days after
written notice from the trustee or holders of 25% of the outstanding
original principal amount of the Series A debentures as provided in
the indenture,
o failure to give timely notice of a Fundamental Change as set forth
under "-- Fundamental Change Requires Purchase of Series A Debentures
by Us at the Option of the Holder" above, and such failure continues
for five days following the date such notice is required, and
o specified events relating to our bankruptcy, insolvency or
reorganization.
If there is an event of default with respect to the Series A debentures,
which continues for the requisite amount of time, either the trustee or holders
of at least 25% of the aggregate original principal amount of the Series A
debentures may declare the accreted principal amount of and interest (including
contingent interest and liquidated damages, if any) on all of the Series A
debentures to be due and payable immediately, except that if an event of default
occurs due to bankruptcy, insolvency or reorganization as provided in the
indenture, then the accreted principal amount of and interest (including
contingent interest and liquidated damages, if any) on the Series A debentures
shall become due and payable immediately without any act by the trustee or any
holder of Series A debentures.
Before the acceleration of the maturity of the Series A debentures, the
holders of a majority in aggregate original principal amount of the Series A
debentures may, on behalf of the holders of all Series A debentures, waive any
past default or event of default and its consequences for the Series A
debentures, except (1) a default in the payment of the accreted principal or
interest (including contingent interest and liquidated damages, if any) with
respect to the Series A debentures or (2) a default with respect to a provision
of the indenture that cannot be amended without the consent of each holder
affected by the amendment. In case of a waiver of a default, that default shall
cease to exist, any event of default arising from that default shall be deemed
to have been cured for all purposes, and DST, the trustee, and the holders of
the Series A debentures will be restored to their former positions and rights
under the indenture.
A holder may institute a suit against us for enforcement of such holder's
rights under the indenture, for the appointment of a receiver or trustee, or for
any other remedy only if the following conditions are satisfied:
o the holder gives the trustee written notice of a continuing event of
default with respect to the Series A debentures held by that holder,
o holders of at least 25% of the aggregate original principal amount of
the Series A debentures make a request, in writing, and offer
reasonable indemnity, to the trustee for the trustee to institute the
requested proceeding,
o the trustee does not receive direction contrary to the holder's
request from holder's of a majority in original principal amount of
the Series A debentures within 60 days following such notice, request
and offer of indemnity under the terms of the indenture, and
o the trustee does not institute the requested proceeding within 60 days
following such notice.
The indenture requires us every year to deliver to the trustee a statement
as to any defaults under the indenture.
A default in the payment of the Series A debentures, or a default with
respect to the Series A debentures that causes them to be accelerated, may give
rise to a cross-default under our credit facilities or other indebtedness,
including the Series B debentures.
SATISFACTION AND DISCHARGE OF THE INDENTURE
The indenture will generally cease to be of any further effect with respect
to the Series A debentures, if:
o we have delivered to the trustee for cancellation all outstanding
Series A debentures (with certain limited exceptions), or
o all Series A debentures not previously delivered to the trustee for
cancellation have become due and payable, whether at stated maturity
or any redemption date or any purchase date (including upon the
occurrence of a Fundamental Change), or upon conversion or otherwise,
and we have deposited with the trustee as trust funds the entire
amount (including our common stock, as applicable) sufficient to pay
all of the outstanding Series A debentures,
o and if, in either case, we also pay or cause to be paid all other sums
payable under the indenture by us.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Series A debentures are not subject to any defeasance provisions under
the indenture.
MODIFICATION AND WAIVER
We may enter into supplemental indentures for the purpose of modifying or
amending the indenture with the consent of holders of at least a majority in
aggregate original principal amount of the Series A debentures. However, the
consent of all of the holders of the Series A debentures is required for any of
the following:
o to reduce the percentage in original principal amount of Series A
debentures whose holders must consent to an amendment,
o to reduce the rate of or extend the time for payment of regular cash
interest, contingent interest or liquidated damages on any Series A
debenture or reduce the amount of any interest payment (including
contingent interest or liquidated damages) for accretion of principal
to be made with respect to any Series A debenture or to alter the
manner of calculation of regular cash interest or accretion of
principal, contingent interest or liquidated damages payable on any
Series A debenture,
o to reduce the original principal amount or accreted principal amount
or change the stated maturity of principal of, or any installment of
principal of or interest on, any Series A debenture,
o to reduce the redemption price or purchase price (including upon the
occurrence of a Fundamental Change) or change the time at which any
Series A debenture may or shall be redeemed or purchased,
o to make any Series A debenture payable in a different currency,
o to make any change in the provisions of the indenture relating to
waivers of defaults or amendments that require unanimous consent,
o to change any place of payment where the Series A debentures or
interest thereon is payable,
o to make any change that adversely affects the right to convert the
Series A debentures or reduces the amount payable on conversion,
o to impair the right to bring a lawsuit for the enforcement of any
payment on or after the stated maturity of any Series A debenture (or
in the case of redemption or purchase, on or after the date fixed for
redemption or purchase), or
o to modify any of the above provisions of the indenture, except to
increase the percentage in original principal amount of Series A
debentures whose holders must consent to an amendment or to provide
that certain other provisions of the indenture cannot be modified or
waived without the consent of the holder of each outstanding Series A
debenture affected by the modification or waiver.
In addition, we and the trustee with respect to the indenture may enter
into supplemental indentures without the consent of the holders of the Series A
debentures for one or more of the following purposes:
o to evidence that another person has become our successor under the
provisions of the indenture relating to consolidations, mergers, and
sales of assets and that the successor assumes our covenants,
agreements, and obligations in the indenture and in the Series A
debentures,
o to surrender any of our rights or powers under the indenture, to add
to our covenants further covenants, restrictions, conditions, or
provisions for the protection of the holders of the Series A
debentures, and to make a default in any of these additional
covenants, restrictions, conditions, or provisions a default or an
event of default under the indenture,
o to cure any ambiguity or to make corrections to the indenture or to
make such other provisions in regard to matters or questions arising
under the indenture that do not adversely affect the interests of any
holders of Series A debentures,
o to modify or amend the indenture to permit the qualification of the
indenture or any supplemental indenture under the Trust Indenture Act
of 1939 as then in effect,
o to add guarantees with respect to the Series A debentures or to secure
the Series A debentures,
o to make any change that does not adversely affect the rights of any
holder of Series A debentures, and
o to evidence and provide for the acceptance of appointment by a
successor or separate trustee with respect to the Series A debentures.
BOOK-ENTRY SYSTEM
We issued the Series A debentures in the form of global securities. The
global securities were deposited with, or on behalf of, DTC and registered in
the name of a nominee of DTC. The Series A debentures sold pursuant to this
prospectus will be represented by one or more new unrestricted global
securities. Except under circumstances described below, the Series A debentures
will not be issued in definitive form.
Ownership of beneficial interests in a global security will be limited to
persons that have accounts with DTC or its nominee ("participants") or persons
that may hold interests through participants. Ownership of beneficial interests
in a global security will be shown on, and the transfer of that ownership will
be effected only through, records maintained by DTC or its nominee (with respect
to interests of persons other than participants). The laws of some states
require that some purchasers of securities take physical delivery of the
securities in definitive form. Such limits and such laws may impair the ability
to transfer beneficial interests in a global security.
So long as DTC or its nominee is the registered owner of a global security,
DTC or its nominee, as the case may be, will be considered the sole owner or
holder of the Series A debentures represented by that global security for all
purposes under the indenture. Except as provided below, owners of beneficial
interests in a global security will not be entitled to have Series A debentures
represented by that global security registered in their names, will not receive
or be entitled to receive physical delivery of Series A debentures in definitive
form and will not be considered the owners or holders thereof under the
indenture. Principal and interest payments, if any, on Series A debentures
registered in the name of DTC or its nominee will be made to DTC or its nominee,
as the case may be, as the registered owner of the relevant global security.
Neither we, the trustee, any paying agent or the security registrar for the
Series A debentures will have any responsibility or liability for any aspect of
the records relating to nor payments made on account of beneficial interests in
a global security or for maintaining, supervising or reviewing any records
relating to such beneficial interests.
We expect that DTC or its nominee, upon receipt of any payment of principal
or interest will credit immediately participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of the relevant global security as shown on the records of DTC or its
nominee. We also expect that payments by participants to owners of beneficial
interests in a global security held through these participants will be governed
by standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name," and will be the responsibility of the participants.
Beneficial owners of interests in global securities who desire to convert
their interests into common stock should contact their brokers or other
participants or indirect participants through whom they hold such beneficial
interests to obtain information on procedures, including proper forms and
cut-off times, for submitting requests for conversion.
Unless and until they are exchanged in whole or in part for Series A
debentures in definitive form, the global securities may not be transferred
except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or
another nominee of DTC. Transfers between participants in DTC will be effected
in the ordinary way in accordance with DTC rules and will be settled in same-day
funds.
If DTC at any time is unwilling or unable to continue as a depositary,
defaults in the performance of its duties as depositary or ceases to be a
clearing agency registered under the Exchange Act or other applicable statute or
regulation, and a successor depositary is not appointed by us within 90 days, we
will issue Series A debentures in definitive form in exchange for the global
securities relating to the Series A debentures. In addition, we may at any time
and in our sole discretion determine not to have the Series A debentures or
portions of the Series A debentures represented by one or more global securities
and, in that event, we will notify the trustee and issue individual Series A
debentures in exchange for the global security or securities representing the
Series A debentures. Series A debentures so issued in definitive form will be
issued as registered Series A debentures in denominations of $1,000 original
principal amount and integral multiples thereof, unless otherwise specified by
us.
THE TRUSTEE
JPMorgan Chase Bank is the initial trustee, conversion agent, paying agent,
transfer agent and registrar with respect to the Series A debentures. We perform
mutual fund, transfer agent and related services for certain funds sponsored by
JPMorgan Chase Bank.
GOVERNING LAW
The indenture and the Series A debentures are governed by, and construed in
accordance with, the laws of the State of New York.
DESCRIPTION OF THE SERIES B DEBENTURES
We issued $300,000,000 aggregate principal amount of Series B debentures in
a private placement on August 12, 2003. The Series B debentures were issued
under an indenture dated as of August 12, 2003, between us and JPMorgan Chase
Bank, as trustee. Copies of the indenture are available from us upon request.
The following description of the Series B debentures is only a summary and is
not intended to be comprehensive. For purposes of this "Description of the
Series B Debentures," the terms "DST," "we," "our," "ours" and "us" refer only
to DST Systems, Inc. and not to any of our subsidiaries.
GENERAL
The Series B debentures are limited to $300 million in aggregate original
principal amount. The Series B debentures are issued in registered form without
coupons only in denominations of $1,000 original principal amount and integral
multiples of $1,000. We use the term "Series B debenture" in this prospectus to
refer to each $1,000 original principal amount of Series B debentures.
The Series B debentures will mature on August 15, 2023. On the maturity
date of the Series B debentures, a holder will receive $1,714.09, the accreted
principal amount at maturity of a Series B debenture. The Series B debentures
will bear regular cash interest at an annual rate equal to 3.625% per annum on
the original principal amount from August 12, 2003, or from the most recent date
to which interest has been paid or provided for, until August 15, 2008. During
such period, interest will be payable semiannually in arrears on February 15 and
August 15 of each year, each an interest payment date, beginning February 15,
2004, to the person in whose name a Series B debenture is registered at the
close of business on the February 1 or August 1, as the case may be, immediately
preceding the relevant interest payment date, each of which we refer to as a
"record date".
Beginning August 15, 2008, we will not pay regular cash interest prior to
maturity. Instead, the original principal amount of each Series B debenture will
increase daily at a rate of 3.625% per year, to produce the accreted principal
amount at maturity. Prior to August 15, 2008, the accreted principal amount of a
Series B debenture will be the original principal amount, and beginning on
August 15, 2008, the accreted principal amount will be computed on a semiannual
bond equivalent basis using a 360-day year composed of twelve 30-day months.
If any date on which regular cash interest is payable, the maturity date,
or any redemption date or purchase date (including upon the occurrence of a
Fundamental Change, as described below) is not a business day, we will pay
interest on the next business day (without any interest or other payment due on
the delay). Regular cash interest on the Series B debentures will be calculated
on the basis of a 360-day year consisting of twelve 30-day months. The term
"business day," when used with respect to any place of payment for the Series B
debentures, means a day other than a Saturday or a Sunday, a legal holiday or a
day on which banking institutions or trust companies in that place of payment
are authorized or obligated by law to close.
In addition, we will pay contingent interest on the Series B debentures
under the circumstances described below under " -- Contingent Interest" and
liquidated damages as set forth in the registration rights agreement.
Regular cash interest for the Series B debentures will accrue from and
including the date of issue or from and including the last date in respect of
which interest has been paid, as the case may be, to, but excluding, the earlier
of (i) August 15, 2008 and (ii) the interest payment date or a purchase date
upon a Fundamental Change, as the case may be.
Holders may present Series B debentures for conversion at the office of the
conversion agent and may present Series B debentures for exchange or for
registration of transfer at the office or agency maintained by us for that
purpose in the Borough of Manhattan, The City of New York. We will not charge a
service charge for any exchange or registration of transfer of Series B
debentures. However, we may require payment of a sum sufficient to cover any tax
or other governmental charge payable for the registration of transfer or
exchange. The trustee will serve as the initial conversion agent, paying agent,
registrar and transfer agent for the Series B debentures. At any time, we may
designate additional paying agents and transfer agents. However, at all times we
will be required to maintain a paying agent and transfer agent for the Series B
debentures in the Borough of Manhattan, The City of New York.
Any monies deposited with the trustee or any paying agent or then held by
us in trust for the payment of principal and interest (including contingent
interest and liquidated damages, if any) on the Series B debentures that remain
unclaimed for two years after the date the payments became due and payable,
shall, at our request, be repaid to us or released from trust, as applicable,
and the holder of the Series B debenture shall thereafter look, as a general
unsecured creditor, only to us for payment thereof.
RANKING
The Series B debentures are our direct, unsecured and unsubordinated
obligations. The Series B debentures rank equally in right of payment with all
of our other existing and future unsecured and unsubordinated indebtedness. In
addition, the Series B debentures effectively rank junior to any secured
indebtedness that we may incur to the extent of the assets securing such
indebtedness. We currently conduct part of our operations through our
subsidiaries. Claims of creditors of those subsidiaries, including trade
creditors and secured creditors, will generally have a claim to the assets of
our subsidiaries that is superior to the claims of our creditors, including
holders of the Series B debentures.
As of September 30, 2003, we had outstanding approximately $26.0 million of
unsecured, unsubordinated indebtedness ranking equally in right of payment with
the Series B debentures, and approximately $13.4 million of secured
indebtedness, excluding indebtedness of subsidiaries. As of September 30, 2003,
our subsidiaries had approximately $127.4 million of indebtedness outstanding,
all of which ranks structurally senior to the Series B debentures. The indenture
does not limit the amount of indebtedness we or our subsidiaries may incur.
CONTINGENT INTEREST
For the period from August 20, 2008 to February 14, 2009, and thereafter
for any six-month interest period measured from February 15 to August 14 or
August 15 to February 14, we will pay contingent interest if the average trading
price per Series B debenture for the applicable five trading-day reference
period equals or exceeds 120% of the accreted principal amount of a Series B
debenture. The "five trading-day reference period" means the five trading days
ending on the second trading day immediately preceding the relevant six-month
interest period.
The amount of contingent interest payable per Series B debenture in respect
of the period from August 20, 2008 to February 14, 2009, and thereafter for any
six-month interest period will be equal to 0.19% of the average trading price
per Series B debenture for the applicable five trading-day reference period.
The record date and payment date for contingent interest, if any, will be
the same as the regular record date and payment date, respectively, for the
semi-annual interest payments on the Series B debentures.
The "trading price" is as defined under "-- Conversion Rights -- Conversion
Upon Satisfaction of Trading Price Condition," provided that if at least one
required bid for the Series B debentures is not obtained by the trustee, or in
our reasonable judgment the bid quotations are not indicative of the secondary
market value of the Series B debentures, then the trading price of the Series B
debentures will equal (a) the applicable conversion rate of the Series B
debentures multiplied by (b) the average of the last reported sale prices of our
common stock for the applicable five trading-day reference period.
The "last reported sale price" of our common stock on any date means the
closing sale price per share (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 our common stock is traded or, if our common stock is not listed on a U.S.
national or regional securities exchange, as reported by the Nasdaq National
Market. The last reported sale 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 "last reported sale 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 "last reported sale
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.
"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 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.
We will notify the holders of the Series B debentures upon a determination
that they will be entitled to receive contingent interest with respect to a
semi-annual interest period. In connection with providing such notice, we will
issue a press release and publish a notice containing information regarding the
contingent interest determination in a newspaper of general circulation in The
City of New York or publish the information on our web site or through such
other public medium as we may use at that time.
CONVERSION RIGHTS
Subject to the conditions and during the periods described below, holders
may convert their Series B debentures into shares of our common stock initially
at a conversion rate of 20.3732 shares of common stock per Series B debenture.
The conversion price as of any date of determination is a dollar amount
(initially $49.08 per share of common stock) derived by dividing the accreted
principal amount of a Series B debenture (which will be $1,000 until August 15,
2008) by the conversion rate in effect on such date. The conversion rate and the
corresponding conversion price in effect at any given time are referred to as
the "applicable conversion rate" and the "applicable conversion price,"
respectively, and will be subject to adjustment as described below. A holder may
convert fewer than all of such holder's Series B debentures so long as the
Series B debentures converted are an integral multiple of $1,000 original
principal amount.
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. For a discussion of the U.S. federal income tax consequences of
conversion to a holder, see "Material U.S. Federal Income Tax Considerations."
Except as otherwise described below, you will not receive any cash payment
representing accrued and unpaid interest, if any (including contingent interest,
if any) or increases on the accreted principal
amount of the Series B debentures upon conversion of a Series B debenture and we
will not adjust the conversion rate to account for the accrued and unpaid
interest, if any (including contingent interest and liquidated damages, if any)
or increases on the accreted principal amount of the Series B debentures. Upon
conversion we will deliver to you cash or shares of our common stock, as
described below. Delivery of cash or shares of common stock will be deemed to
satisfy our obligation to pay the accreted principal amount of the Series B
debentures, including accrued and unpaid cash interest, if any (including
contingent interest, if any). Increases on the accreted principal amount and
accrued and unpaid cash interest, if any (including contingent interest, if any)
will be deemed paid in full rather than canceled, extinguished or forfeited.
Notwithstanding conversion of any Series B debentures by a holder thereof,
accrued and unpaid liquidated damages, if any, to the conversion date will be
paid to such holder on the settlement date for such conversion.
If a holder converts Series B debentures, we will pay any documentary,
stamp or similar issue or transfer tax due on the issuance of shares of our
common stock upon the conversion, unless the tax is due because the holder
requests the shares to be issued or delivered to a person other than the holder,
in which case the holder will pay that tax.
To convert your Series B debenture into common stock you must do the
following:
o complete and manually sign the notice of conversion on the back of the
Series B debenture or facsimile of the notice of conversion and
deliver this notice to the conversion agent;
o surrender the Series B debenture to the conversion agent;
o if required, furnish appropriate endorsements and transfer documents;
o if required, pay all transfer or similar taxes; and
o if required, pay funds equal to interest, if any, (including
contingent interest, if any) payable on the next interest payment
date.
If your interest is a beneficial interest in a global Series B debenture,
to convert you must comply with the last three requirements listed above and
comply with the DTC's procedures for converting a beneficial interest in a
global Series B debenture. The conversion date will be the date on which all of
the foregoing requirements have been satisfied. Settlement of our obligation to
deliver shares or cash with respect to a conversion will occur on the dates
described below under "-- Payment Upon Conversion." A certificate for the number
of full shares of our common stock into which any Series B debentures are
converted, or cash in lieu thereof, together with any cash payment for
fractional shares, will be delivered through the conversion agent, other than in
the case of holders of Series B debentures in book-entry form, which shares or
cash will be delivered in accordance with DTC customary practices.
If a holder has already delivered a purchase notice as described under
either "-- Purchase of Series B Debentures by Us at the Option of the Holder" or
"-- Fundamental Change Requires Purchase of Series B Debentures by Us at the
Option of the Holder" with respect to a Series B debenture, however, the holder
may not surrender that Series B debenture for conversion until the holder has
withdrawn the purchase notice in accordance with the indenture.
Holders of Series B debentures at the close of business on a regular record
date will receive payment of interest, if any, including contingent interest and
liquidated damages, if any, payable on the corresponding interest payment date,
notwithstanding the conversion of such Series B debentures at any time after the
close of business on such regular record date. Series B Debentures surrendered
for conversion by a holder during the period from the close of business on any
regular record date to the opening of
business on the immediately following interest payment date must be accompanied
by payment of an amount equal to the interest, if any, including contingent
interest, if any, that the holder is to receive on the Series B debentures;
provided, however, that no such payment need be made if (1) we have specified a
redemption date that is after a record date and on or prior to the immediately
following interest payment date, (2) we have specified a purchase date following
a Fundamental Change that is during such period or (3) any overdue interest
(including overdue contingent interest, if any) exists at the time of conversion
with respect to such Series B debentures, to the extent of such overdue
interest.
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 stated maturity or, with respect to Series B 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 to deliver
common stock upon conversion (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 ("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 immediately following the cash settlement notice period
("conversion retraction period"). If no such election is made, no such
retraction can be made (and a conversion notice shall be irrevocable).
Settlement amounts will be computed as follows:
o If we elect to satisfy the entire conversion obligation in shares, we
will deliver to you a number of shares, for each $1,000 original
principal amount of Series B debentures, equal to the applicable
conversion rate. In addition, if on the date you submit your notice of
conversion there exists a registration default under the registration
rights agreement, and the shares of common stock you will receive on
conversion are neither registered under the Securities Act nor
immediately freely saleable pursuant to Rule 144(k) under the
Securities Act, we will deliver to you additional shares as liquidated
damages (the "liquidated damages shares") equal to 3% of the
applicable conversion rate for each $1,000 original principal amount
of Series B debentures. We will pay cash for all fractional shares of
common stock. The cash payment for fractional shares will be based on
the last reported sale price of our common stock on the trading day
immediately prior to the conversion date.
o If we elect to satisfy the entire conversion obligation in cash, we
will deliver to you, for each $1,000 original principal amount of
Series B debentures, cash in an amount equal to the product of the
applicable conversion rate and the average last reported sale price of
our common stock for the 10 trading-day period beginning the day after
the conversion retraction period (the "cash settlement averaging
period").
o 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
("cash amount") and a number of shares, for each $1,000 original
principal amount of Series B debentures, equal to the applicable
conversion rate, plus liquidated damages shares, if any, minus the
number of shares equal to the sum, for each day of the cash settlement
averaging period, of (x) 10% of the cash amount, divided by (y) the
last reported price of our common stock; provided, however, that the
number of shares will not be less than zero. We will pay cash for all
fractional shares of
common stock. The cash payment for fractional shares will be based on
the last reported sale price of our common stock on the trading day
immediately prior to the conversion date.
If we choose to satisfy all or any portion of the conversion obligation in
cash and the conversion notice has not been retracted, then settlement (in cash
and/or shares) will occur on the business day following the cash settlement
averaging period. If we choose to satisfy the entire conversion obligation in
shares of our common stock then settlement will occur on the third business day
following the conversion date.
CONVERSION AFTER THE FINAL NOTICE DATE. In the event that we receive your
notice of conversion 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, if we choose to satisfy all or any portion of the
conversion obligation in cash after the final notice date, we will send, on or
prior to final notice date, 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 10 trading-day period beginning
on the day after receipt of your notice of conversion. If we do not elect to
satisfy all or any portion of the conversion obligation in cash, then settlement
will occur on the first business day following the conversion date.
CONDITIONS TO CONVERSION
Holders may surrender their Series B debentures for conversion into shares
of our common stock prior to stated maturity only under the circumstances
described below. For a discussion of the federal income tax consequences of a
conversion of the Series B debentures into our common stock, see "Material U.S.
Federal Income Tax Considerations."
CONVERSION UPON SATISFACTION OF SALE PRICE CONDITION. A holder may
surrender any of its Series B debentures for conversion into shares of our
common stock during any calendar quarter after September 30, 2003 (and only
during such calendar quarter) if the last reported sale 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 calendar quarter is greater
than or equal to 120% of the applicable conversion price (initially 120% of
$49.08, or $58.90), which we refer to as the "conversion trigger price".
The applicable conversion price of a Series B debenture at any time is
dependent upon the accreted principal amount of a Series B debenture at that
time and therefore both the applicable conversion price and the conversion
trigger price will increase following August 15, 2008 as the accreted principal
amount of a Series B debenture increases. The following table sets forth the
conversion trigger prices at August 15 of each year beginning 2008.
CONVERSION TRIGGER PRICES*
APPLICABLE CONVERSION
AUGUST 15, CONVERSION PRICE TRIGGER PRICE
---------------------------------- ---------------- -------------
2008.............................. $49.08 $58.90
2009.............................. $50.88 $61.06
2010.............................. $52.74 $63.29
2011.............................. $54.67 $65.60
2012.............................. $56.67 $68.00
2013.............................. $58.74 $70.49
2014.............................. $60.89 $73.07
2015.............................. $63.12 $75.74
2016.............................. $65.43 $78.51
2017.............................. $67.82 $81.38
2018.............................. $70.30 $84.36
2019.............................. $72.87 $87.45
2020.............................. $75.54 $90.65
2021.............................. $78.30 $93.96
2022.............................. $81.17 $97.40
2023.............................. $84.13 $100.96
-------------------
* This table assumes no events have occurred that would require an adjustment
to the conversion rate.
CONVERSION UPON SATISFACTION OF TRADING PRICE CONDITION. A holder may
surrender any of its Series B 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
original principal amount of Series B debentures (as determined following a
request by a holder of the Series B debentures in accordance with the procedures
described below) for each day of that period was less than 95% of the product of
the last reported sale price of our common stock and the applicable conversion
rate of such Series B debentures on each such day; provided, however, that a
holder may not convert Series B debentures in reliance on this provision after
August 15, 2018 if on any trading day during such five consecutive trading-day
period the last reported sale price of our common stock was between the
applicable conversion price of the Series B debentures and 120% of the
applicable conversion price of the Series B debentures.
The "trading price" of the Series B debentures on any date of determination
means the average of the secondary market bid quotations per $1,000 original
principal amount of the Series B debentures obtained by the trustee for
$10,000,000 original principal amount of the Series B 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
$10,000,000 original principal amount of the Series B 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 original
principal amount of the Series B debentures, then the trading price per $1,000
original principal amount of the Series B debentures will be deemed to be less
than 95% of the product of the last reported sale 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 Series B 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 original principal
amount of the Series B debentures would be less than 95% of the product of the
last reported sale price of our common stock and the applicable conversion rate.
At such time, we shall instruct the trustee to determine the trading price of
the Series B debentures beginning on the next trading day and on each successive
trading day until the trading price per $1,000 original principal amount of the
Series B debentures is greater than or equal to 95% of the product of the last
reported sale price of our common stock and the applicable conversion rate.
CONVERSION UPON REDEMPTION. If we elect to redeem the Series B debentures,
holders may convert Series B debentures 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 Series B debentures are not otherwise convertible
at such time.
CONVERSION UPON SPECIFIED CORPORATE TRANSACTIONS. If we elect to:
o 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 market price of a share of our
common stock on the record date for the distribution, or
o 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 last reported sale 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 Series B 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 Series B 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 Series B 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 or binding share
exchange pursuant to which our common stock would be converted into cash,
securities or other property, a holder may surrender Series B 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
Fundamental Change, until the business day immediately preceding the applicable
Fundamental Change purchase date). 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 right to convert a Series B debenture
into our common stock will be changed into a right to convert a Series B
debenture into the kind and amount of cash, securities or other property that
the holder would have received if the holder had converted its Series B
debentures immediately prior to the transaction. If the transaction also
constitutes a Fundamental Change, as defined below, a holder can require us to
purchase all or a portion of its Series B debentures as described below under
"-- Fundamental Change Requires Purchase of Series B Debentures by Us at the
Option of the Holder."
The Exchange (described in Summary--Recent Developments") does not
constitute a specified corporate transaction permitting conversion.
CONVERSION RATE ADJUSTMENTS
The applicable conversion rate will be subject to adjustment, without
duplication, upon the occurrence of any of the following events:
(1) the payment of dividends and other distributions on our common
stock payable exclusively in shares of our common stock,
(2) the distribution to all holders of our common stock of rights or
warrants that allow the holders to purchase shares of our common stock for
a period expiring within 60 days from the date of issuance of the rights or
warrants at less than the market price on the record date for the
determination of shareholders entitled to receive the rights or warrants,
(3) subdivisions or combinations of our common stock,
(4) distributions to all holders of our common stock of our assets,
debt securities, shares of our capital stock or rights or warrants to
purchase our securities (excluding any dividend, distribution or issuance
covered by clause (1) or (2) above and any dividend or distribution paid
exclusively in cash), the conversion rate will be increased by multiplying
the conversion rate by a fraction,
(a) the numerator of which is the current market price of our
common stock plus the fair market value, as determined by our board of
directors, of the portion of those assets, debt securities, shares of
capital stock or rights or warrants so distributed applicable to one
share of common stock, and
(b) the denominator of which is the current market price of our
common stock.
The "current market price" of our common stock means the average of
the last reported sale prices for the first 10 trading days from, and
including, the ex-dividend date (as defined above in "--Conditions to
Conversion--Conversion Upon Specified Corporate Transactions") for such
dividend or distribution.
In the event that we make a distribution to all holders of our common
stock consisting of capital stock of, or similar equity interests in, a
subsidiary or other business unit of ours, the fair market value of the
securities so distributed will be based on the average of the closing sales
prices of those securities for each of the 10 trading days commencing on
and including the fifth trading day after the ex-dividend date (as defined
above in "--Conditions to Conversion--Conversion Upon Specified Corporate
Transactions") for such dividend or distribution on the NYSE or such other
national or regional exchange or market on which the securities are then
listed or quoted.
(5) we make distributions consisting exclusively of cash to all
holders of our common stock, excluding any cash dividend on our common
stock to the extent that the aggregate cash dividend per share of our
common stock in any quarter does not exceed $0.0025 (the "dividend
threshold amount") (the dividend threshold amount is subject to adjustment
on the same basis as the conversion rate, provided that no adjustment will
be made to the dividend threshold amount for any adjustment made to the
conversion rate pursuant to this clause (5)), in which event the conversion
rate will be adjusted by multiplying the conversion rate by a fraction,
(a) the numerator of which will be the current market price of
our common stock plus the amount per share of such dividend or
distribution and
(b) the denominator of which will be the current market price of
our common stock.
If an adjustment is required to be made under this clause (5) as a
result of a distribution that is a dividend, the adjustment would be based
upon the amount by which the distribution exceeds the dividend threshold
amount. If an adjustment is required to be made under this clause (5) as a
result of a distribution that is not a dividend, the adjustment would be
based upon the full amount of the distribution.
(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 last reported sale price of our common
stock on the trading day next succeeding the last date on which tenders or
exchanges may be made pursuant to such tender or exchange offer, the
conversion rate will be adjusted by multiplying the conversion rate by a
fraction,
(a) 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 last reported sale price of our common stock on the trading
day next succeeding the expiration of the tender or exchange offer and
(b) 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 last reported sale price of our common stock on the
trading day next succeeding the expiration of the tender or exchange
offer.
Notwithstanding the foregoing, in the event of an adjustment pursuant to
clauses (4), (5) or (6) above, in no event will the conversion rate exceed
28.5225, subject to adjustment pursuant to clauses (1), (2) and (3) above.
To the extent that we have a rights plan in effect upon conversion of the
Series B debentures into common stock (including the rights plan described in
"Description of Capital Stock--Rights Plan" below), the holder will receive, in
addition to the common stock, the rights under the rights plan unless the rights
have separated from the common stock prior to the time of conversion, in which
case the conversion rate will be adjusted at the time of separation as if we
distributed to all holders of our common stock, our assets, debt securities,
shares of our capital stock or rights or warrants to purchase our securities as
described in clause (4) above.
In addition to these adjustments, we may increase the conversion rate as
our board of directors considers advisable to avoid or diminish any income tax
to holders of our common stock or rights to purchase our common stock resulting
from any dividend or distribution of stock (or rights to acquire stock) or from
any event treated as such for income tax purposes. We may also, from time to
time, to the extent permitted by applicable law, increase the conversion rate by
any amount for any period of at least 20 business days if our board of directors
has determined that such increase would be in our best interests. If
our board of directors makes such a determination, it will be conclusive. We
will give holders of Series B debentures at least 15 days' notice of such an
increase in the conversion rate.
"Market price" means the average of the last reported sale prices per share
of our common stock for the 10 trading-day period ending on the applicable date
of determination (if the applicable date of determination is a trading day or,
if not, then on the last trading day prior to the applicable date of
determination), appropriately adjusted to take into account the occurrence,
during the period commencing on the first of the trading days during the 10
trading-day period and ending on the applicable date of determination, of any
event that would result in an adjustment of the conversion rate under the
indenture.
The applicable conversion rate will not be adjusted:
o 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,
o 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,
o 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 Series B debentures were first issued (no adjustment will
be made for the issuance of common stock pursuant to conversion of
Series A debentures),
o for a change in the par value of the common stock, or
o for accrued and unpaid cash interest, including contingent interest or
liquidated damages, if any, or accretion of the principal amount of
Series B debentures.
No adjustment in the applicable conversion rate will be required unless the
adjustment would require an increase or decrease of at least 1% of the
applicable conversion rate. If the adjustment is not made because the adjustment
does not change the applicable conversion rate by more than 1%, then the
adjustment that is not made will be carried forward and taken into account in
any future adjustment.
In the event of:
o a taxable distribution to holders of shares of common stock which
results in an adjustment of the conversion rate; or
o an increase in the conversion rate at our discretion,
the holders of the Series B debentures may, in certain circumstances, be deemed
to have received a distribution subject to U.S. federal income tax as a
dividend. In addition, for Non-U.S. Holders of Series B debentures, this deemed
distribution may be subject to U.S. federal withholding requirements. See
"Material U.S. Federal Income Tax Considerations."
OPTIONAL REDEMPTION
No sinking fund is provided for the Series B debentures. Prior to August
20, 2008, the Series B debentures will not be redeemable. On or after August 20,
2008, we may redeem for cash all or part of the
Series B debentures at any time, upon not less than 30 days nor more than 60
days notice before the redemption date by mail to the trustee, the paying agent
and each holder of Series B debentures.
If redeemed at our option, the Series B debentures will be redeemed at a
redemption price equal to the accreted principal amount, plus any accrued and
unpaid cash interest, including contingent interest and liquidated damages, if
any, to the redemption date. The table below shows the redemption prices of a
Series B debenture on August 15, 2008, on each August 15 thereafter prior to
maturity and at maturity on August 15, 2023 (assuming there is no accrued and
unpaid cash interest, contingent interest or liquidated damages). In addition,
the redemption price of a Series B debenture that is redeemed between the dates
listed below would include an additional amount reflecting the additional
principal amount that has accreted on such Series B debenture since the
immediately preceding date in the table below.
SERIES B
DEBENTURE ISSUE
REDEMPTION DATE: AUGUST 15, PRICE(1) ACCRETION AMOUNT(2) REDEMPTION PRICE(1) + (2)
---------------------------------------------- --------------- ------------------- -------------------------
2008.......................................... $1,000.00 $0.00 $1,000.00
2009.......................................... $1,000.00 $36.58 $1,036.58
2010.......................................... $1,000.00 $74.50 $1,074.50
2011.......................................... $1,000.00 $113.80 $1,113.80
2012.......................................... $1,000.00 $154.54 $1,154.54
2013.......................................... $1,000.00 $196.77 $1,196.77
2014.......................................... $1,000.00 $240.55 $1,240.55
2015.......................................... $1,000.00 $285.92 $1,285.92
2016.......................................... $1,000.00 $332.96 $1,332.96
2017.......................................... $1,000.00 $381.72 $1,381.72
2018.......................................... $1,000.00 $432.26 $1,432.26
2019.......................................... $1,000.00 $484.65 $1,484.65
2020.......................................... $1,000.00 $538.96 $1,538.96
2021.......................................... $1,000.00 $595.25 $1,595.25
2022.......................................... $1,000.00 $653.60 $1,653.60
2023.......................................... $1,000.00 $714.09 $1,714.09
If we decide to redeem fewer than all of the outstanding Series B
debentures, the trustee will select the Series B debentures to be redeemed (in
original principal amounts of $1,000 or integral multiples thereof) by lot, on a
pro rata basis or by another method the trustee considers fair and appropriate.
If the trustee selects a portion of your Series B debenture for partial
redemption and you convert a portion of the same Series B debenture, the
converted portion will be deemed to be from the portion selected for redemption.
In the event of any redemption in part, we will not be required to issue,
register the transfer of or exchange any Series B debenture during a period of
15 days before the mailing of the redemption notice.
For a discussion of the U.S. federal income tax consequences to a holder of
our redemption of the Series B debentures, see "Material U.S. Federal Income Tax
Considerations."
PURCHASE OF SERIES B DEBENTURES BY US AT THE OPTION OF THE HOLDER
Holders have the right to require us to purchase the Series B debentures on
August 15, 2008, August 15, 2013 and August 15, 2018 (each, a "purchase date").
We will pay cash for all Series B debentures purchased by us on August 15, 2008.
For purchases on August 15, 2013 and August 15, 2018 we may, at our option, pay
the purchase price in cash, shares of our common stock, or any combination
thereof. We may pay all or a portion of the purchase price in shares of our
common stock as long as our common stock is then listed on a national securities
exchange or traded on the Nasdaq National Market and if certain other conditions
specified below are satisfied. For purchases on August 15, 2013 and August 15,
2018, if we elect to pay the purchase price, in whole or in part, in shares of
our common stock, the number of shares of common stock to be delivered by us
will be equal to the portion of the purchase price to be paid in common stock
divided by 97.5% of the market price (as defined under "-- Conditions to
Conversion -- Conversion Rate Adjustments" above) as of the third business day
prior to the purchase date.
We will be required to purchase any outstanding Series B debentures for
which a holder delivers a written purchase notice to the paying agent. This
notice must be delivered during the period beginning at any time from the
opening of business on the date that is 20 business days prior to the relevant
purchase date and ending on the close of business on the business day prior to
the purchase date. If the purchase notice is given and withdrawn during such
period, we will not be obligated to purchase the related Series B debentures.
Our purchase obligation will be subject to some additional conditions as
described in the indenture. Also, as described in the "Risk Factors" section of
this offering memorandum under the caption "Risks Related to the Debentures --
We may not have the ability to raise the funds necessary to purchase the
debentures upon a Fundamental Change or other purchase date, as required by the
indenture governing the debentures," we may not have funds sufficient to
purchase the Series B debentures when we are required to do so or may be
prohibited from doing so under the terms of other indebtedness. Our failure to
purchase the Series B debentures when we are required to do so will constitute
an event of default under the indenture with respect to the Series B debentures.
The purchase price payable will be equal to 100% of the accreted principal
amount of the Series B debentures to be purchased plus any accrued and unpaid
cash interest, including contingent interest and liquidated damages, if any, to
such purchase date. The table below shows the purchases prices of a Series B
debenture on each of the purchase dates. The purchases prices below do not
include any additional amounts reflecting any accrued and unpaid cash interest
(including contingent interest, if any) and accrued and unpaid liquidated
damages, if any.
SERIES B
DEBENTURE ISSUE
PURCHASE DATE: AUGUST 15, PRICE(1) ACCRETION AMOUNT(2) REDEMPTION PRICE(1) + (2)
---------------------------------------------------- --------------- ------------------- -------------------------
2008................................................ $1,000.00 $0.00 $1,000.00
2013................................................ $1,000.00 $196.77 $1,196.77
2018................................................ $1,000.00 $432.26 $1,432.26
For a discussion of the U.S. federal income tax consequences to a holder of
our purchase of the Series B debentures, see "Material U.S. Federal Income Tax
Considerations."
On or before the 20th business day prior to each purchase date, we will
provide to the trustee, the paying agent and to all holders of the Series B
debentures at their addresses shown in the register of the registrar, and to
beneficial owners as required by applicable law, a notice stating, among other
things:
o for purchases on or after August 15, 2013, whether we will pay the
purchase price of the Series B debentures in cash, shares of our
common stock or a combination thereof, specifying the percentages of
each;
o for purchases on or after August 15, 2013, if we elect to pay in
shares of our common stock, the method of calculating the market price
of the shares of common stock;
o the purchase price;
o the name and address of the paying agent and the conversion agent;
o the conversion rate and any adjustments to the conversion rate;
o that the Series B debentures with respect to which a purchase notice
has been given by the holder may be converted only if the holder
withdraws the purchase notice in accordance with the terms of the
indenture; and
o the procedures that holders must follow to require us to purchase
their Series B debentures.
In connection with providing such notice, we will issue a press release and
publish a notice containing this information in a newspaper of general
circulation in The City of New York or publish the information on our web site
or through such other public medium as we may use at that time.
To exercise your purchase right, you must deliver, before the close of
business on the business day immediately preceding the purchase date, the Series
B debentures to be purchased, duly endorsed for transfer, together with the form
attached to the Series B debentures entitled "Purchase Notice" duly completed,
to the paying agent. A notice electing to require us to purchase your Series B
debentures must state:
o if certificated Series B debentures have been issued, the certificate
numbers of the Series B debentures,
o the portion of the original principal amount of Series B debentures to
be purchased, in integral multiples of $1,000,
o for purchases on or after August 15, 2013, in the event we elect,
pursuant to the notice that we are required to give, to pay the
purchase price in shares of our common stock, in whole or in part, but
the purchase price is ultimately to be paid to the holder entirely in
cash because any condition to payment of the purchase price or portion
of the purchase price in common stock is not satisfied prior to the
close of business on the purchase date, as described below, whether
the holder elects: (a) to withdraw the purchase notice as to some or
all of the Series B debentures to which it relates, or (b) to receive
cash in respect of the entire purchase price for all Series B
debentures or portions of Series B debentures subject to such purchase
notice, provided, however, that if the holder fails to indicate its
choice with respect to such election, the holder will be deemed to
have elected to receive cash in respect of the entire purchase price
for all Series B debentures subject to the purchase notice in these
circumstances, and
o that the Series B debentures are to be purchased by us pursuant to the
applicable provisions of the Series B debentures and the indenture.
If the Series B debentures are not in certificated form, your notice must comply
with appropriate DTC procedures.
We may not purchase any Series B debentures at the option of holders if the
accreted principal amount of the Series B debentures has been accelerated, and
such acceleration has not been rescinded.
You may withdraw any purchase notice (in whole or in part) by a written
notice of withdrawal delivered to the paying agent prior to the close of
business on the business day prior to the purchase date. The notice of
withdrawal must state:
o the original principal amount of the withdrawn Series B debentures,
o if certificated Series B debentures have been issued, the certificate
numbers of the withdrawn Series B debentures, and
o the original principal amount, if any, that remains subject to the
purchase notice.
If the Series B debentures are not in certificated form, your withdrawal notice
must comply with appropriate DTC procedures.
You must either effect book-entry transfer or deliver the Series B
debentures, together with necessary endorsements, to the office of the paying
agent after delivery of the purchase notice to receive payment of the purchase
price. You will receive payment promptly following the later of the purchase
date and the time of book-entry transfer or the delivery of the Series B
debentures. If the paying agent holds money or securities sufficient to pay the
purchase price of the Series B debentures on the purchase date, then on the
business day following the purchase date:
o the Series B debentures will cease to be outstanding and cash
interest, including contingent interest and liquidated damages, if
any, will cease to accrue and the principal amount will cease to
accrete (whether or not book-entry transfer of the debentures is made
or whether or not the Series B debentures are delivered to the paying
agent), and
o all other rights of the holder will terminate (other than the right to
receive the purchase price upon delivery or transfer of the Series B
debentures).
In connection with any purchase offer pursuant to these provisions, to the
extent applicable and required by law, we will:
o comply with the provisions of Rule 13e-4, Rule 14e-1 and any other
tender offer rules under the Exchange Act which may then be
applicable; and
o file Schedule TO or any other required schedule under the Exchange
Act.
Because the market price of our common stock is determined prior to the
applicable purchase date, holders of Series B debentures bear the market risk
with respect to the value of common stock to be received from the date the
market price is determined to such purchase date.
Our right to purchase Series B debentures, in whole or in part, with shares
of our common stock for purchases on or after August 15, 2013, is subject to
various conditions, including:
o the registration of the common stock under the Securities Act and the
Exchange Act, if required;
o any necessary qualification or registration under applicable state
securities law or the availability of an exemption from such
qualification and registration;
o the information necessary to calculate the market price is published
in a daily newspaper of national circulation; and
o our common stock is then listed on a national securities exchange or
traded on the Nasdaq National Market.
If such conditions are not satisfied prior to the close of business on the
purchase date, we will pay the purchase price of the Series B debentures
entirely in cash. We may not change the form, components or percentages of
components of consideration to be paid for the Series B debentures once we have
given the notice that we are required to give to holders of Series B debentures,
except as described in the preceding sentence.
FUNDAMENTAL CHANGE REQUIRES PURCHASE OF SERIES B DEBENTURES BY US AT THE OPTION
OF THE HOLDER
If a Fundamental Change (as defined below in this section) occurs at any
time prior to maturity, holders will have the right, at their option, to require
us to purchase any or all of their Series B debentures, or any portion of the
original principal amount thereof, that is equal to $1,000 or an integral
multiple of $1,000. The price we are required to pay (the "Fundamental Change
purchase price") is equal to the accreted principal amount of the Series B
debentures to be purchased plus accrued and unpaid cash interest, if any,
including contingent interest and liquidated damages, if any, to the Fundamental
Change purchase date, unless such Fundamental Change purchase date falls after a
record date and on or prior to the corresponding interest payment date, in which
case we will pay the full amount of accrued and unpaid cash interest, if any,
payable on such interest payment date to the holder of record at the close of
business on the corresponding record date. For a discussion of the U.S. federal
income tax consequences to a holder of our purchase of the Series B debentures,
see "Material U.S. Federal Income Tax Considerations."
If we elect to pay the Fundamental Change purchase price, in whole or in
part, in shares of our common stock, the number of shares of common stock to be
delivered by us will be equal to the portion of the Fundamental Change purchase
price to be paid in common stock divided by 97.5% of the market price (as
defined under "-- Conditions to Conversion -- Adjustments to Conversion Rate"
above) of one share of our common stock as of the third business day prior to
the Fundamental Change purchase date.
Because the market price of the common stock is determined prior to the
applicable Fundamental Change purchase date, holders of Series B debentures bear
the market risk with respect to the value of the common stock to be received
from the date such market price is determined to such Fundamental Change
purchase date.
A "Fundamental Change" will be deemed to have occurred at any time after
the Series B debentures are originally issued that any of the following occurs:
(1) our common stock or other common stock into which the Series B
debentures are convertible is neither listed for trading on a U.S. national
securities exchange nor approved for trading on the Nasdaq National Market
or another established automated over-the-counter trading market in the
United States,
(2) a "person" or "group" (within the meaning of Section 13(d) of the
Exchange Act) other than us, our subsidiaries or our or their employee
benefit plans, files a Schedule TO or any schedule, form or report under
the Exchange Act disclosing that such person or group has become
the direct or indirect ultimate "beneficial owner," as defined in Rule
13d-3 under the Exchange Act, of our common equity representing more than
50% of the voting power of our common equity entitled to vote generally in
the election of directors,
(3) consummation of any share exchange, consolidation or merger of us
pursuant to which our common stock will be converted into cash, securities
or other property or any sale, lease or other transfer in one transaction
or a series of transactions of all or substantially all of the consolidated
assets of us and our subsidiaries, taken as a whole, to any person other
than us or one or more of our subsidiaries; provided, however, that a
transaction where the holders of our common equity immediately prior to
such transaction have directly or indirectly, more than 50% of the
aggregate voting power of all classes of common equity of the continuing or
surviving corporation or transferee entitled to vote generally in the
election of directors immediately after such event shall not be a
Fundamental Change, or
(4) continuing directors (as defined below in this section) cease to
constitute at least a majority of our board of directors.
The Exchange (described in "Summary--Recent Developments") does not
constitute a fundamental change.
A Fundamental Change will not be deemed to have occurred in respect of any
of the foregoing, however, if either:
(1) the last reported sale price of our common stock for any five
trading days within the 10 consecutive trading days ending immediately
before the later of the Fundamental Change or the public announcement
thereof, equals or exceeds 105% of the applicable conversion price of the
Series B debentures in effect immediately before the Fundamental Change or
the public announcement thereof, or
(2) all or substantially all of the consideration, excluding cash
payments for fractional shares, in the transaction or transactions
constituting the Fundamental Change consists of shares of capital 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 a Fundamental Change (these securities being referred to as
"publicly traded securities") and as a result of this transaction or
transactions the Series B debentures become convertible into such publicly
traded securities, excluding cash payments for fractional shares.
For purposes of the above paragraph the term "capital stock" of any person
means any and all shares, interests, participations or other equivalents however
designated of corporate stock or other equity participations, including
partnership interests, whether general or limited, of such person and any rights
(other than debt securities convertible or exchangeable into an equity
interest), warrants or options to acquire an equity interest in such person.
"Continuing director" means a director who either was a member of our board
of directors on the date of this offering memorandum or who becomes a member of
our board of directors subsequent to that date and whose appointment, election
or nomination for election by our stockholders is duly approved by a majority of
the continuing directors on our board of directors at the time of such approval,
either by a specific vote or by approval of the proxy statement issued by us on
behalf of the board of directors in which such individual is named as nominee
for director.
On or before the 30th day after the occurrence of a Fundamental Change, we
will provide to all holders of the Series B debentures and the trustee and
paying agent a notice of the occurrence of the Fundamental Change and of the
resulting purchase right. Such notice shall state, among other things:
o whether we will pay the Fundamental Change purchase price of the
Series B debentures in cash, shares of common stock or a combination
thereof, specifying the percentages of each,
o if we elect to pay in shares of common stock, the method of
calculating the market price of the common stock,
o the events causing a Fundamental Change,
o the date of the Fundamental Change,
o the last date on which a holder may exercise the purchase right,
o the Fundamental Change purchase price,
o the Fundamental Change purchase date,
o the name and address of the paying agent and the conversion agent,
o the conversion rate and any adjustments to the conversion rate,
o that the Series B debentures with respect to which a Fundamental
Change purchase notice has been given by the holder may be converted
only if the holder withdraws the Fundamental Change purchase notice in
accordance with the terms of the indenture, and
o the procedures that holders must follow to require us to purchase
their Series B debentures.
Simultaneously with providing such notice, we will issue a press release
and publish a notice containing this information in a newspaper of general
circulation in The City of New York or publish the information on our web site
or through such other public medium as we may use at that time.
To exercise your purchase right, you must deliver, before the close of
business on the business day immediately preceding the Fundamental Change
purchase date, the Series B debentures to be purchased, duly endorsed for
transfer, together with the form attached to the Series B debentures entitled
"Form of Fundamental Change Purchase Notice" duly completed, to the paying
agent. Your purchase notice must state:
o if certificated, the certificate numbers of their Series B debentures
to be delivered for purchase,
o the portion of the original principal amount of Series B debentures to
be purchased, which must be $1,000 or an integral multiple thereof,
o in the event we elect, pursuant to the notice that we are required to
give, to pay the Fundamental Change purchase price in our common
stock, in whole or in part, but the Fundamental Change purchase price
is ultimately to be paid to the holder entirely in cash because any
condition to payment of the Fundamental Change purchase price or
portion of the Fundamental Change purchase price in common stock is
not satisfied prior to the close of business on the Fundamental Change
purchase date, as described below, whether the
holder elects: (a) to withdraw the Fundamental Change purchase notice
as to some or all of the Series B debentures to which it relates, or
(b) to receive cash in respect of the entire Fundamental Change
purchase price for all Series B debentures or portions of Series B
debentures subject to such Fundamental Change purchase notice;
provided, however, that if the holder fails to indicate the holder's
choice with respect to the election described in this bullet point,
the holder will be deemed to have elected to receive cash in respect
of the entire Fundamental Change purchase price for all Series B
debentures subject to the Fundamental Change purchase notice in these
circumstances, and
o that the Series B debentures are to be purchased by us pursuant to the
applicable provisions of the Series B debentures and the indenture.
If the Series B debentures are not in certificated form, their Fundamental
Change purchase notice must comply with appropriate DTC procedures.
Holders may withdraw any Fundamental Change purchase notice (in whole or in
part) by a written notice of withdrawal delivered to the paying agent prior to
the close of business on the business day prior to the Fundamental Change
purchase date. The notice of withdrawal shall state:
o the original principal amount of the withdrawn Series B debentures,
o if certificated Series B debentures have been issued, the certificate
numbers of the withdrawn Series B debentures, and
o the original principal amount, if any, that remains subject to the
Fundamental Change purchase notice.
If the Series B debentures are not in certificated form, their withdrawal notice
must comply with appropriate DTC procedures.
We will be required to purchase the Series B debentures no less than 20 and
no more than 35 business days after the date of our notice of the occurrence of
the relevant Fundamental Change, subject to extension to comply with applicable
law. You may either effect book-entry transfer or deliver the Series B
debentures, together with necessary endorsements, to the office of the paying
agent after delivery of the Fundamental Change purchase notice to receive
payment of the Fundamental Change purchase price. Holders will receive payment
of the Fundamental Change purchase price promptly following the later of the
Fundamental Change purchase date or the time of book-entry transfer or the
delivery of the Series B debentures. If the paying agent holds money or
securities sufficient to pay the Fundamental Change purchase price of the Series
B debentures on the Fundamental Change purchase date, then on the business day
following the Fundamental Change purchase date:
o the Series B debentures will cease to be outstanding and cash
interest, including contingent interest and liquidated damages, if
any, will cease to accrue and principal will cease to accrete (whether
or not book-entry transfer of the Series B debentures is made or
whether or not the Series B debenture is delivered to the paying
agent), and
o all other rights of the holder will terminate (other than the right to
receive the Fundamental Change purchase price upon delivery or
transfer of the Series B debentures).
In connection with any purchase offer pursuant to these provisions, and to
the extent applicable and required by law, we will:
o comply with the provisions of Rule 13e-4, Rule 14e-1 and any other
tender offer rules under the Exchange Act which may then be
applicable; and
o file Schedule TO or any other required schedule under the Exchange
Act.
The rights of the holders to require us to purchase their Series B
debentures upon a Fundamental Change could discourage a potential acquirer of
us. The Fundamental Change purchase feature, however, is not the result of
management's knowledge of any specific effort to accumulate shares of our common
stock, to obtain control of us by any means or part of a plan by management to
adopt a series of anti-takeover provisions. Instead, the Fundamental Change
purchase feature is a standard term contained in other offerings of debt
securities similar to the Series B debentures that have been marketed by certain
of the initial purchasers. The terms of the Fundamental Change purchase feature
resulted from negotiations between the initial purchasers and us.
The term Fundamental Change is limited to specified transactions and may
not include other events that might adversely affect our financial condition. In
addition, the requirement that we offer to purchase the Series B debentures upon
a Fundamental Change may not protect holders in the event of a highly leveraged
transaction, reorganization, merger or similar transaction involving us.
No Series B debentures may be purchased at the option of holders upon a
Fundamental Change if the accreted principal amount of the Series B debentures
has been accelerated, and such acceleration has not been rescinded.
The definition of Fundamental Change includes a phrase relating to the
conveyance, transfer, sale, lease or disposition of "all or substantially all"
of our consolidated assets. There is no precise, established definition of the
phrase "substantially all" under applicable law. Accordingly, the ability of a
holder of the Series B debentures to require us to purchase its Series B
debentures as a result of the conveyance, transfer, sale, lease or other
disposition of less than all of our assets may be uncertain.
If a Fundamental Change were to occur, we may not have enough funds to pay
the Fundamental Change purchase price or we may be prohibited from doing so
under the terms of other indebtedness. See "Risk Factors" under the caption
"Risks Related to the Debentures -- We may not have the ability to raise the
funds necessary to purchase the debentures upon a Fundamental Change or other
purchase date, as required by the indenture governing the debentures." Our
failure to purchase the Series B debentures when required following a
Fundamental Change will constitute an event of default under the indenture with
respect to the Series B debentures. In addition, we have, and may in the future
incur, other indebtedness with similar change in control provisions permitting
holders to accelerate or to require us to purchase our indebtedness upon the
occurrence of similar events or on some specific dates, including the Series A
debentures.
Our right to purchase Series B debentures, in whole or in part, with common
stock is subject to our satisfying various conditions, including:
o the registration of the common stock under the Securities Act and the
Exchange Act, if required;
o any necessary qualification or registration under applicable state
securities law or the availability of an exemption from such
qualification and registration;
o the information necessary to calculate the market price is published
in a daily newspaper of national circulation; and
o our common stock is then listed on a national securities exchange or
traded on the Nasdaq National Market.
If such conditions are not satisfied prior to the close of business on the
Fundamental Change purchase date, we will pay the Fundamental Change purchase
price of the Series B debentures entirely in cash. We may not change the form,
components or percentages of components of consideration to be paid for the
Series B debentures once we have given the notice that we are required to give
to holders of Series B debentures, except as described in the preceding
sentence.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The indenture prohibits us from consolidating with or merging into another
business entity, or conveying, transferring or leasing substantially all of our
assets, unless:
o either (1) we are the continuing entity in the case of a merger; or
(2) the resulting, surviving or acquiring entity, if other than DST,
is a U.S. corporation and it expressly assumes our obligations with
respect to the Series B debentures, by executing a supplemental
indenture,
o immediately after giving effect to the transaction, no event of
default and no circumstances which, after notice or lapse of time or
both, would become an event of default, shall have happened and be
continuing; and
o we have delivered to the trustee an officers' certificate and a legal
opinion confirming that we have complied with the indenture.
However, certain of these transactions could constitute a Fundamental
Change (as defined above) permitting each holder to require us to purchase the
Series B debentures of such holder as described above.
EVENTS OF DEFAULT
Any of the following events constitute an event of default under the
indenture with respect to the Series B debentures:
o failure to pay interest, including contingent interest and liquidated
damages, if any, on the Series B debentures for thirty days past the
applicable due date,
o failure to pay the accreted principal amount of the Series B
debentures when due (whether at maturity, upon redemption, purchase or
otherwise),
o failure to deliver our common stock, or cash in lieu thereof, upon
conversion of any Series B debenture and such failure continues for
five days following the date such delivery is required,
o failure to perform any other covenant or agreement in the indenture,
which continues for 90 days after written notice from the trustee or
holders of 25% of the outstanding original principal amount of the
Series B debentures as provided in the indenture,
o acceleration of more than $25,000,000 of our indebtedness by its terms
(including the Series A debentures) if the acceleration is not
rescinded or such indebtedness is not paid within 10 days after
written notice from the trustee or holders of 25% of the outstanding
original principal amount of the Series B debentures as provided in
the indenture,
o failure to give timely notice of a Fundamental Change as set forth
under "-- Fundamental Change Requires Purchase of Series B Debentures
by Us at the Option of the Holder" above, and such failure continues
for five days following the date such notice is required, and
o specified events relating to our bankruptcy, insolvency or
reorganization.
If there is an event of default with respect to the Series B debentures,
which continues for the requisite amount of time, either the trustee or holders
of at least 25% of the aggregate original principal amount of the Series B
debentures may declare the accreted principal amount of and interest (including
contingent interest and liquidated damages, if any) on all of the Series B
debentures to be due and payable immediately, except that if an event of default
occurs due to bankruptcy, insolvency or reorganization as provided in the
indenture, then the accreted principal amount of and interest (including
contingent interest and liquidated damages, if any) on the Series B debentures
shall become due and payable immediately without any act by the trustee or any
holder of Series B debentures.
Before the acceleration of the maturity of the Series B debentures, the
holders of a majority in aggregate original principal amount of the Series B
debentures may, on behalf of the holders of all Series B debentures, waive any
past default or event of default and its consequences for the Series B
debentures, except (1) a default in the payment of the accreted principal or
interest (including contingent interest and liquidated damages, if any) with
respect to the Series B debentures or (2) a default with respect to a provision
of the indenture that cannot be amended without the consent of each holder
affected by the amendment. In case of a waiver of a default, that default shall
cease to exist, any event of default arising from that default shall be deemed
to have been cured for all purposes, and DST, the trustee, and the holders of
the Series B debentures will be restored to their former positions and rights
under the indenture.
A holder may institute a suit against us for enforcement of such holder's
rights under the indenture, for the appointment of a receiver or trustee, or for
any other remedy only if the following conditions are satisfied:
o the holder gives the trustee written notice of a continuing event of
default with respect to the Series B debentures held by that holder,
o holders of at least 25% of the aggregate original principal amount of
the Series B debentures make a request, in writing, and offer
reasonable indemnity, to the trustee for the trustee to institute the
requested proceeding,
o the trustee does not receive direction contrary to the holder's
request from holder's of a majority in original principal amount of
the Series B debentures within 60 days following such notice, request
and offer of indemnity under the terms of the indenture, and
o the trustee does not institute the requested proceeding within 60 days
following such notice.
The indenture requires us every year to deliver to the trustee a statement
as to any defaults under the indenture.
A default in the payment of the Series B debentures, or a default with
respect to the Series B debentures that causes them to be accelerated, may give
rise to a cross-default under our credit facilities or other indebtedness,
including the Series A debentures.
SATISFACTION AND DISCHARGE OF THE INDENTURE
The indenture will generally cease to be of any further effect with respect
to the Series B debentures, if:
o we have delivered to the trustee for cancellation all outstanding
Series B debentures (with certain limited exceptions), or
o all Series B debentures not previously delivered to the trustee for
cancellation have become due and payable, whether at stated maturity
or any redemption date or any purchase date (including upon the
occurrence of a Fundamental Change), or upon conversion or otherwise,
and we have deposited with the trustee as trust funds the entire
amount (including our common stock, as applicable) sufficient to pay
all of the outstanding Series B debentures,
o and if, in either case, we also pay or cause to be paid all other sums
payable under the indenture by us.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Series B debentures are not subject to any defeasance provisions under
the indenture.
MODIFICATION AND WAIVER
We may enter into supplemental indentures for the purpose of modifying or
amending the indenture with the consent of holders of at least a majority in
aggregate original principal amount of the Series B debentures. However, the
consent of all of the holders of the Series B debentures is required for any of
the following:
o to reduce the percentage in original principal amount of Series B
debentures whose holders must consent to an amendment,
o to reduce the rate of or extend the time for payment of regular cash
interest, contingent interest or liquidated damages on any Series B
debenture or reduce the amount of any interest payment (including
contingent interest or liquidated damages) or accretion of principal
to be made with respect to any Series B debenture or to alter the
manner of calculation of regular cash interest or accretion of
principal, contingent interest or liquidated damages payable on any
Series B debenture,
o to reduce the original principal amount or accreted principal amount
or change the stated maturity of principal of, or any installment of
principal of or interest on, any Series B debenture,
o to reduce the redemption price or purchase price (including upon the
occurrence of a Fundamental Change) or change the time at which any
Series B debenture may or shall be redeemed or purchased,
o to make any Series B debenture payable in a different currency,
o to make any change in the provisions of the indenture relating to
waivers of defaults or amendments that require unanimous consent,
o to change any place of payment where the Series B debentures or
interest thereon is payable,
o to make any change that adversely affects the right to convert the
Series B debentures or reduces the amount payable on conversion,
o to impair the right to bring a lawsuit for the enforcement of any
payment on or after the stated maturity of any Series B debenture (or
in the case of redemption or purchase, on or after the date fixed for
redemption or purchase), or
o to modify any of the above provisions of the indenture, except to
increase the percentage in original principal amount of Series B
debentures whose holders must consent to an amendment or to provide
that certain other provisions of the indenture cannot be modified or
waived without the consent of the holder of each outstanding Series B
debenture affected by the modification or waiver.
In addition, we and the trustee with respect to the indenture may enter
into supplemental indentures without the consent of the holders of the Series B
debentures for one or more of the following purposes:
o to evidence that another person has become our successor under the
provisions of the indenture relating to consolidations, mergers, and
sales of assets and that the successor assumes our covenants,
agreements, and obligations in the indenture and in the Series B
debentures,
o to surrender any of our rights or powers under the indenture, to add
to our covenants further covenants, restrictions, conditions, or
provisions for the protection of the holders of the Series B
debentures, and to make a default in any of these additional
covenants, restrictions, conditions, or provisions a default or an
event of default under the indenture,
o to cure any ambiguity or to make corrections to the indenture or to
make such other provisions in regard to matters or questions arising
under the indenture that do not adversely affect the interests of any
holders of Series B debentures,
o to modify or amend the indenture to permit the qualification of the
indenture or any supplemental indenture under the Trust Indenture Act
of 1939 as then in effect,
o to add guarantees with respect to the Series B debentures or to secure
the Series B debentures,
o to make any change that does not adversely affect the rights of any
holder of Series B debentures, and
o to evidence and provide for the acceptance of appointment by a
successor or separate trustee with respect to the Series B debentures.
BOOK-ENTRY SYSTEM
We issued the Series B debentures in the form of global securities. The
global securities were deposited with, or on behalf of, DTC and registered in
the name of a nominee of DTC. The Series B debentures sold pursuant to this
prospectus will be represented by one or more new unrestricted global
securities. Except under circumstances described below, the Series B debentures
will not be issued in definitive form.
Ownership of beneficial interests in a global security will be limited to
persons that have accounts with DTC or its nominee ("participants") or persons
that may hold interests through participants. Ownership of beneficial interests
in a global security will be shown on, and the transfer of that ownership will
be effected only through, records maintained by DTC or its nominee (with respect
to interests of persons other than participants). The laws of some states
require that some purchasers of securities take physical delivery of the
securities in definitive form. Such limits and such laws may impair the ability
to transfer beneficial interests in a global security.
So long as DTC or its nominee is the registered owner of a global security,
DTC or its nominee, as the case may be, will be considered the sole owner or
holder of the Series B debentures represented by that global security for all
purposes under the indenture. Except as provided below, owners of beneficial
interests in a global security will not be entitled to have Series B debentures
represented by that global security registered in their names, will not receive
or be entitled to receive physical delivery of Series B debentures in definitive
form and will not be considered the owners or holders thereof under the
indenture. Principal and interest payments, if any, on Series B debentures
registered in the name of DTC or its nominee will be made to DTC or its nominee,
as the case may be, as the registered owner of the relevant global security.
Neither we, the trustee, any paying agent or the security registrar for the
Series B debentures will have any responsibility or liability for any aspect of
the records relating to nor payments made on account of beneficial interests in
a global security or for maintaining, supervising or reviewing any records
relating to such beneficial interests.
We expect that DTC or its nominee, upon receipt of any payment of principal
or interest will credit immediately participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of the relevant global security as shown on the records of DTC or its
nominee. We also expect that payments by participants to owners of beneficial
interests in a global security held through these participants will be governed
by standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name," and will be the responsibility of the participants.
Beneficial owners of interests in global securities who desire to convert
their interests into common stock should contact their brokers or other
participants or indirect participants through whom they hold such beneficial
interests to obtain information on procedures, including proper forms and
cut-off times, for submitting requests for conversion.
Unless and until they are exchanged in whole or in part for Series B
debentures in definitive form, the global securities may not be transferred
except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or
another nominee of DTC. Transfers between participants in DTC will be effected
in the ordinary way in accordance with DTC rules and will be settled in same-day
funds.
If DTC at any time is unwilling or unable to continue as a depositary,
defaults in the performance of its duties as depositary or ceases to be a
clearing agency registered under the Exchange Act or other applicable statute or
regulation, and a successor depositary is not appointed by us within 90 days, we
will issue Series B debentures in definitive form in exchange for the global
securities relating to the Series B debentures. In addition, we may at any time
and in our sole discretion determine not to have the Series B
debentures or portions of the Series B debentures represented by one or more
global securities and, in that event, we will notify the trustee and issue
individual Series B debentures in exchange for the global security or securities
representing the Series B debentures. Series B debentures so issued in
definitive form will be issued as registered Series B debentures in
denominations of $1,000 original principal amount and integral multiples
thereof, unless otherwise specified by us.
THE TRUSTEE
JPMorgan Chase Bank is the initial trustee, conversion agent, paying agent,
transfer agent and registrar with respect to the Series B debentures. We perform
mutual fund, transfer agent and related services for certain funds sponsored by
JPMorgan Chase Bank.
GOVERNING LAW
The indenture and the Series B debentures are governed by, and construed in
accordance with, the laws of the State of New York.
DESCRIPTION OF CAPITAL STOCK
The following descriptions are summaries of the material terms of our
common stock, preferred stock, certificate of incorporation and bylaws. This
summary is qualified by reference to our certificate of incorporation, as
amended, and amended and restated bylaws, copies of which we have previously
filed with the SEC, and by provisions of applicable law, including the Delaware
General Corporation Law, which we refer to as the DGCL, and the common and
constitutional law of the state of Delaware. Our authorized capital stock
consists of 310,000,000 shares of stock, including:
o 300,000,000 shares of common stock, $0.01 par value per share, of
which 115,777,046 shares were issued and outstanding as of November
30, 2003; and
o 10,000,000 shares of preferred stock, $0.01 par value per share,
including 60,000 shares that have been designated as Series A
Preferred Stock, $1.00 par value per share, in connection with our
rights agreement, of which no shares are currently issued or
outstanding.
COMMON STOCK
Holders of our common stock are entitled to one vote per share with respect
to each matter submitted to a vote of our stockholders, subject to voting rights
that may be established for shares of our preferred stock, if any. A majority of
the votes cast with respect to a matter will be sufficient to authorize action
upon that matter except as described below in "Special Provisions of Our
Certification of Incorporation and Bylaws." The holders of our common stock may
vote by proxy. Except as may be provided in connection with our preferred stock
or as otherwise may be required by law or our certificate of incorporation, our
common stock is the only capital stock entitled to vote in the election of
directors. Directors are elected by a majority of the votes cast. In an election
for directors, each stockholder has the right to cast as many votes in the
aggregate as shall equal the number of shares held by such stockholder,
multiplied by the number of directors to be elected at such election. Each
stockholder may cast the whole number of votes that such stockholder has the
right to cast either in person or by proxy, for one candidate or distribute them
among two or more candidates.
Subject to the rights of holders of our preferred stock, if any, holders of
our common stock are entitled to receive dividends and distributions lawfully
declared by our board of directors. Any payment of distributions by us is
subject to the restrictions of Delaware law applicable to the declaration of
distributions by a corporation. If we liquidate, dissolve or wind up our
business, whether voluntarily or involuntarily, holders of our common stock will
be entitled to receive any assets available for distribution to our stockholders
after we have paid or set apart for payment the amounts necessary to satisfy any
preferential or participating rights to which the holders of each outstanding
series of preferred stock are entitled by the express terms of such series of
preferred stock.
Our common stock does not have any preemptive, redemption, subscription or
conversion rights. We may issue additional shares of our authorized common stock
as authorized by our board of directors from time to time, without stockholder
approval, except as may be required by applicable stock exchange requirements.
PREFERRED STOCK
Our board of directors has been authorized to provide for the issuance of
shares of our preferred stock in multiple series without the approval of
stockholders. With respect to each series of our preferred stock, our board of
directors has the authority to fix the following terms:
o the designation of the series;
o the number of shares within the series;
o whether dividends are cumulative and, if cumulative, the dates from
which dividends are cumulative;
o the rate of any dividends, any conditions upon which dividends are
payable, and the dates of payment of dividends;
o whether the shares are redeemable, the redemption price and the terms
of redemption;
o whether the shares are convertible or exchangeable, the price or rate
of conversion or exchange, and the applicable terms and conditions;
o voting rights applicable to the series of preferred stock; and
o any other powers, preferences and rights and any qualifications,
limitations or restrictions of the shares of each such series.
The number of authorized shares of our preferred stock may be increased or
decreased (but not below the number of shares of our preferred stock outstanding
at such time) by an affirmative vote of the holders of a majority of our
outstanding common stock, without a vote of the holders of any outstanding
preferred stock, unless a vote of such preferred stockholders is required
pursuant to the terms of any certificate of designation.
Our ability to issue preferred stock, or rights to purchase such shares,
could discourage an unsolicited acquisition proposal. For example, we could
impede a business combination by issuing a series of preferred stock containing
class voting rights that would enable the holders of such preferred stock to
block a business combination transaction. Alternatively, we could facilitate a
business combination transaction by issuing a series of preferred stock having
sufficient voting rights to provide a required percentage vote of the
stockholders. Additionally, under certain circumstances, our issuance of
preferred stock could adversely affect the voting power of the holders of our
common stock. Although our board of directors is required to make any
determination to issue any preferred stock based on its judgment as to the best
interests of our stockholders, our board of directors could act in a manner that
would discourage an acquisition attempt or other transaction that some, or a
majority, of our stockholders might believe to be in their best interests or in
which stockholders might receive a premium for their stock over prevailing
market prices of such stock. Our board of directors does not at present intend
to seek stockholder approval prior to any issuance of currently authorized
stock, unless otherwise required by law or applicable stock exchange
requirements.
RIGHTS PLAN
We are party to a stockholders' rights agreement, which we refer to as the
rights plan, dated as of October 6, 1995, and amended as of July 9, 1998,
September 10, 1999 and September 25, 2001. Each share of our common stock held
of record on October 18, 1995 (when Kansas City Southern Industries, Inc. was
the sole stockholder of DST) and all shares of common stock issued in and
subsequent to our initial public offering has received one right. Each right
entitles its holder to purchase 1/1000th share of our preferred stock, or in
some circumstances, our other securities. In certain circumstances, the rights
entitle their holders to purchase shares in a surviving entity or its affiliates
resulting from transactions in which we are not the surviving entity or in which
we dispose of more than 50% of our assets or earnings power.
The rights, which are automatically attached to our common stock, are not
exercisable or transferable separately from shares of our common stock until ten
days following the earlier of (1) an announcement that a person or group, which
we refer to as an acquiring person, has acquired, or obtained the right to
acquire, beneficial ownership of 15% or more of our outstanding shares of common
stock or (2) ten days following the commencement or announcement of any person's
intention to make a tender offer or exchange offer that would result in
ownership of 15% or more of our outstanding common stock, unless our board of
directors sets a later date in either event. The rights attached to the common
stock of an acquiring person become void. Janus, which holds approximately 9% of
our outstanding shares of common stock, and certain entities affiliated with
Janus are, in certain circumstances, excluded from the definition of an
"acquiring person" under the rights plan.
The rights plan has certain anti-takeover effects. The rights plan may
cause substantial dilution to a person or group that attempts to acquire us on
terms not approved by our board of directors. The rights plan may therefore have
the effect of delaying, deterring or preventing a change in control of DST. The
rights should not interfere with any merger or other business combination that
our board of directors approves.
The description of the rights contained in this section does not describe
every aspect of the rights. The rights plan contains the full legal text of the
matters described in this section. See "Where You Can Find More Information" for
information on how to obtain a copy.
LIMITATION ON DIRECTORS' LIABILITY
Our certificate of incorporation provides, as authorized by Section
102(b)(7) of the DGCL, that our directors will not be personally liable to us or
our stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability:
o for any breach of the director's duty of loyalty to us or our
stockholders;
o for acts or omission not in good faith or which involve intentional
misconduct or a knowing violation of law;
o for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the DGCL; or
o for any transaction from which the director derived an improper
personal benefit.
The inclusion of this provision in our certificate of incorporation may
have the effect of reducing the likelihood of derivative litigation against
directors, and may discourage or deter stockholders or management from bringing
a lawsuit against directors for breach of their duty of care, even though such
an action, if successful, might otherwise have benefited us and our
stockholders.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Section 203 of the DGCL prohibits a defined set of transactions between a
Delaware corporation, such as DST, and an "interested stockholder." Pursuant to
the DGCL, an interested stockholder 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 may prohibit business combinations between an
interested stockholder and a corporation for a period of three years after the
date the interested stockholder becomes an interested stockholder. The term
"business combination" is broadly defined to include mergers, consolidations,
sales or other dispositions of assets having a total value in excess of 10% of
the consolidated assets of the corporation, and some other
transactions that would increase the interested stockholder's proportionate
share ownership in the corporation.
This prohibition is effective unless:
o the business combination is approved by the corporation's board of
directors prior to the time the interested stockholder becomes an
interested stockholder;
o 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 qualified employee stock plans, in the transaction in
which it becomes an interested stockholder; or
o 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.
SPECIAL PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS
Meetings of our stockholders are held at least annually. Written notice
must be mailed to each stockholder entitled to vote not less than ten nor more
than 60 days before the date of the meeting. The presence, in person or by
proxy, of stockholders holding a majority of our issued and outstanding shares
entitled to vote at such meeting constitutes a quorum for the transaction of
business at meetings of our stockholders. Special meetings of the stockholders
may be called for any purpose by our board of directors pursuant to a resolution
approved by a majority of the entire board upon not less than ten days' nor more
than 60 days' written notice. Our certificate of incorporation provides that our
stockholders may not act by written consent in lieu of a meeting.
Our amended and restated bylaws contain provisions requiring that advance
notice be delivered to us of any business to be brought by a stockholder before
an annual meeting of stockholders. Generally, such advance notice provisions
provide that a stockholder must give written notice to our corporate secretary
not less than 90 days nor more than 120 days before the scheduled date of the
annual meeting of our stockholders. The notice must set forth specific
information regarding such stockholder or business, as described in our bylaws.
Our amended and restated bylaws also provide for certain procedures to be
followed by stockholders in nominating persons for election to our board of
directors. Generally, a stockholder must give written notice to our corporate
secretary not less than 60 days nor more than 90 days before the scheduled date
of any stockholders' meeting at which directors are to be elected. The notice
must set forth specific information regarding such stockholder and the director
nominee, as described in our bylaws. Our certificate of incorporation provides
that the number of directors shall not be fewer than three nor more than eleven
and provides for a classified board of directors, consisting of three classes as
nearly equal in size as reasonably possible. Each class holds office until the
third annual stockholders' meeting for election of directors following the most
recent election of such class. Our directors may be removed only for cause by
the affirmative vote of the holders of at least 70% of the aggregate voting
power of our outstanding capital stock entitled to vote in the election of our
directors, which we refer to as the voting stock.
Special meetings of our board of directors may be called by the chairman of
our board of directors, the executive committee of our board of directors, our
president or by any three members of our board of directors. Our amended and
restated bylaws may be amended by our board of directors or by an affirmative
vote of the holders of at least 70% of the voting stock.
Pursuant to our certificate of incorporation, an affirmative vote of the
holders of at least 70% of the voting stock, voting together as a single class
is required for the following transactions:
o any merger or consolidation of DST or any of our subsidiaries with any
interested stockholder, or with any other corporation which is or,
after such merger or consolidation, would be an affiliate of an
interested stockholder;
o any sale, lease, exchange, mortgage, pledge, transfer or other
disposition to or with any interested stockholder, or any affiliate of
an interested stockholder, of any assets of DST or any of our
subsidiaries having an aggregate fair market value equaling or
exceeding 25% or more of the assets of DST and our subsidiaries;
o the issuance or transfer by DST or any of our subsidiaries of any
securities of DST or any of our subsidiaries to any interested
stockholder, or any affiliate of an interested stockholder, in
exchange for cash, securities or other property having an aggregate
fair market value equaling or exceeding 25% of the assets of DST and
our subsidiaries (except pursuant to an employee benefit plan of DST
or our subsidiaries);
o the adoption of any plan or proposal for the liquidation or
dissolution of DST proposed by or on behalf of any interested
stockholder, or any affiliate of an interested stockholder; or
o any reclassification of securities or recapitalization of DST, or any
merger or consolidation of DST with any of its subsidiaries or any
other transaction which has the effect of increasing the proportionate
share of the outstanding shares of any class of equity or convertible
securities of DST or any subsidiary, which is directly or indirectly
owned by any interested stockholder or any affiliate of an interested
stockholder, unless the increase in proportionate ownership of the
interested stockholder or any affiliate of an interested stockholder,
resulting from such transaction is no greater than the increase
experienced by the other stockholders generally.
Notwithstanding the above, if any of the transactions specified above have
been approved by a majority of our disinterested directors, such transaction
shall require only an affirmative vote of the majority of our outstanding shares
of capital stock, unless otherwise required by law.
Pursuant to our certificate of incorporation, an interested stockholder is
defined as any person that:
o is the beneficial owner, directly or indirectly, of more than 10% of
the voting power of the voting stock;
o is our affiliate and at any time within the two-year period
immediately prior to the date in question was the beneficial owner,
directly or indirectly, of 10% or more of the voting power of the then
outstanding voting stock; or
o is an assignee of, or has otherwise succeeded to, any shares of voting
stock which were at any time within the two-year period immediately
prior to the date in question beneficially owned by any interested
stockholder, if such assignment or succession shall have occurred in
the course of a transaction or series of transactions not involving a
public offering within the meaning of the Securities Act.
Pursuant to our certificate of incorporation, the term disinterested
director is defined as any member of our board of directors who is unaffiliated
with any interested stockholder and who was a member of our board of directors
prior to the time that any interested stockholder became an interested
stockholder, and any director who is thereafter chosen to fill any vacancy on
our board of directors or who is elected and who, in either event, is
unaffiliated with any interested stockholder, and in connection with such
director's initial
assumption of office is recommended for appointment or election by a majority of
disinterested directors on our board of directors.
The provisions of our certificate of incorporation relating to the
following may be amended or repealed only by the affirmative vote of the holders
of at least 70% of the voting stock, voting together as a single class:
o our board of directors;
o the amendment of our amended and restated bylaws or our certificate of
incorporation;
o the certain business transactions set forth above;
o the manner for considering tender offers, mergers or consolidations or
purchases of our assets;
o the indemnification of our directors and officers;
o the personal liability of our directors; and
o the prohibition of stockholder consents.
The foregoing provisions of our certificate of incorporation and our
amended and restated bylaws, together with the rights agreement and the
provisions of Section 203 of the DGCL, could have the effect of delaying,
deferring or preventing a change in control or the removal of existing
management, of deterring potential acquirors from making an offer to our
stockholders and of limiting any opportunity to realize premiums over prevailing
market prices for our common stock in connection therewith. This could be the
case notwithstanding that a majority of our stockholders might benefit from such
a change in control or offer.
TRANSFER AGENT AND REGISTRAR
EquiServe Trust Company serves as the registrar and transfer agent for our
common stock.
STOCK EXCHANGE LISTING
Our common stock is listed on the NYSE. The trading symbol for our common
stock on this exchange is "DST."
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material U.S. federal income tax
considerations relevant to the ownership and disposition of the debentures and
the shares of common stock into which the debentures may be converted. This
summary deals only with the debentures and the shares of common stock held as
capital assets for U.S. federal income tax purposes and applies only to those
initial holders that purchase debentures at the "issue price" (as defined
below). As used in this offering memorandum, "U.S. Holders" are any beneficial
owners of the debentures or the shares of common stock that are, for U.S.
federal income tax purposes: (1) citizens or residents of the United States, (2)
corporations (or entities treated as corporations for federal income tax
purposes) created or organized in or under the laws of the United States, any
state thereof or the District of Columbia, (3) estates, the income of which is
subject to U.S. federal income taxation regardless of its source, and (4)
trusts, if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more U.S. persons
have the authority to control all substantial decisions of the trust. As used in
this offering memorandum, "Non-U.S. Holders" are holders of the debentures or
the shares of common stock that are, for U.S. federal income tax purposes, (1)
nonresident alien individuals, (2) foreign corporations and (3) foreign estates
or trusts. If a partnership (including for this purpose any entity treated as a
partnership for U.S. federal income tax purposes) is a beneficial owner of the
debentures or the shares of common stock, 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 the debentures or the shares of
common stock that is a partnership and partners in such partnership should
consult their tax advisors about the U.S. federal income tax consequences of
holding and disposing of the debentures or the shares of common stock, as the
case may be. Unless otherwise stated, this summary does not deal with special
classes of holders such as banks, thrifts, real estate investment trusts,
regulated investment companies, insurance companies, dealers in securities or
currencies, tax-exempt investors, holders that hold the debentures as part of a
hedge, straddle, "synthetic security" or other integrated transaction for U.S.
federal income tax purposes and certain holders whose functional currency is not
the U.S. dollar. Further, this summary does not include any description of any
alternative minimum tax consequences, U.S. federal estate or gift tax laws or
the tax laws of any state, local or foreign government that may be applicable to
the debentures or the shares of common stock.
This summary is based on the Internal Revenue Code of 1986, as amended, the
Treasury regulations promulgated thereunder and administrative and judicial
interpretations thereof, all as of the date hereof, which we refer to as the
Current Law, and all of which are subject to change, possibly on a retroactive
basis. The proper application of Current Law to a holder of the debentures is
uncertain in a number of respects, and no assurance can be given that the IRS
will not assert that the debentures should be treated differently or that the
IRS will not prevail.
This summary is for general information only. Accordingly, we urge
prospective investors to consult their tax advisors with respect to the tax
consequences to them of the purchase, ownership and disposition of the
debentures and the shares of common stock in light of their own particular
circumstances, including the tax considerations under state, local, foreign and
other tax laws and the possible effects of changes in U.S. federal and other tax
laws.
CLASSIFICATION OF THE DEBENTURES
Pursuant to the terms of the applicable indenture, each holder of the
debentures will agree, for U.S. federal income tax purposes, to treat the
debentures as indebtedness for U.S. federal income tax purposes subject to the
Treasury regulations governing contingent payment debt instruments, which we
refer to as the CPDI regulations, and to be bound by our application of these
regulations to the debentures, including our determination of the rate at which
interest will be deemed to accrue on the debentures for U.S. federal income tax
purposes and the projected payment schedule (described below).
The remainder of this discussion assumes that the debentures will be treated in
accordance with the CPDI regulations and our determinations thereunder. However,
the proper application of the CPDI regulations to a holder of a debenture is
uncertain in a number of respects, and no assurance can be given that the IRS
will not assert that the debentures should be treated differently or that the
IRS will not prevail. A different treatment could affect the amount, timing and
character of income, gain or loss in respect of an investment in the debentures.
In particular, it might be determined that a holder should have accrued interest
income at a higher or lower rate, should not have recognized income or gain upon
the conversion, or should have recognized capital gain upon a taxable
disposition of its debentures.
TAX CONSIDERATIONS FOR U.S. HOLDERS
Under the rules governing contingent payment debt instruments, a U.S.
Holder will be required to accrue interest income on the debentures, in the
amounts described below, regardless of whether the U.S. Holder uses the cash or
accrual method of tax accounting. Accordingly, U.S. Holders will generally be
required to include interest in taxable income in each year in excess of the
interest payments actually received in that year. A U.S. Holder must accrue on
its debentures an amount of original issue discount as ordinary interest income
for U.S. federal income tax purposes for each accrual period prior to and
including the maturity date of the debentures that equals:
o 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;
o divided by the number of days in the accrual period; and
o multiplied by the number of days during the accrual period that the
U.S. Holder held the debentures.
The "issue price" of a debenture is the first price at which a substantial
amount of the debentures is sold to the public, excluding bond houses, brokers
or similar persons or organizations acting in the capacity 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 amounts of any previous payments with respect to the
debenture.
Under the rules governing contingent payment debt instruments, we are
required to establish the "comparable yield" for the debentures. The comparable
yield for the debentures is the annual yield we would incur, as of the initial
issue date, on a fixed rate nonconvertible debt security with no contingent
payments, but with terms and conditions otherwise comparable to those of the
debentures including the level of subordination, term, timing of payments and
general market conditions, but excluding any adjustments for liquidity or the
riskiness of the contingencies with respect to the debentures. Based on this
definition, we have determined the comparable yield to be 8.4% compounded
semiannually.
We are required to provide to holders, solely for U.S. federal income tax
purposes, a schedule of the projected amounts of payments on the debentures,
which we refer to as the "projected payment schedule." This schedule must
produce the comparable yield. Our determination of the projected payment
schedule for the debentures includes estimates for payments of contingent
interest and an estimate for a payment at maturity taking into account the
conversion feature. Holders may obtain the projected payment schedule by
submitting a written request for it to us at the address set forth in "Where You
Can Find More Information."
THE COMPARABLE YIELD AND THE SCHEDULE OF PROJECTED PAYMENTS ARE NOT DETERMINED
FOR ANY PURPOSE OTHER THAN FOR THE DETERMINATION OF INTEREST
ACCRUALS AND ADJUSTMENTS THEREOF IN RESPECT OF THE DEBENTURES FOR U.S. FEDERAL
INCOME TAX PURPOSES AND DO NOT CONSTITUTE A PROJECTION OR REPRESENTATION
REGARDING THE ACTUAL AMOUNTS PAYABLE TO U.S. HOLDERS OF THE DEBENTURES.
ADJUSTMENTS TO INTEREST ACCRUALS ON THE DEBENTURES
If a U.S. Holder receives actual payments with respect to the debentures in
a 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" equal to the amount of such excess. The U.S. Holder will treat the
"net positive adjustment" as additional interest income for the taxable year.
For this purpose, the payments in a taxable year include the fair market value
of property (including our common stock) received in that year.
If a U.S. Holder receives actual payments with respect to the debentures in
a taxable year that in the aggregate are less than the amount of the projected
payments for that taxable year, the U.S. Holder will incur a "net negative
adjustment" equal to the amount of such deficit. This adjustment will (a) reduce
the U.S. Holder's interest income on the debentures that would otherwise be
included for that taxable year, and (b) to the 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 treated
as ordinary loss on the debentures in prior taxable years, and (c) to the extent
of any further excess, reduce interest income in respect of the debentures in
subsequent taxable years, and to the extent not so applied, reduce the amount
realized on a sale, exchange or retirement of the debentures.
SALE, EXCHANGE, CONVERSION OR REDEMPTION OF THE DEBENTURES
Generally, the sale or exchange of a debenture, a conversion of a debenture
or the redemption of a debenture for cash, will result in taxable gain or loss
to a U.S. Holder. In addition, as described above, the schedule of projected
payments for the debentures includes the receipt of common stock upon conversion
of a debenture into shares of our common stock as a contingent payment with
respect to the debenture. Accordingly, we intend to treat the transfer of our
common stock to a U.S. Holder upon the conversion of a debenture as a contingent
payment. Under this treatment, such a conversion or redemption also will result
in taxable gain or loss to the U.S. Holder. The amount of gain or loss on a
taxable sale, exchange, conversion or redemption of a debenture will equal the
difference between (a) the amount of cash plus the fair market value of any of
our common stock or other property received by the U.S. Holder and (b) the U.S.
Holder's adjusted tax basis in the debenture. A U.S. Holder's adjusted tax basis
in a debenture on any date generally will equal 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 positive or
negative adjustments to interest accruals described above), and decreased by the
amount of any projected payments on the debentures projected to have been made
through that date. Gain recognized upon a sale, exchange, conversion or
redemption of a debenture generally will be treated as interest income; any loss
will be ordinary loss to the extent of the excess of interest previously
included in income over the total negative adjustments previously taken into
account as ordinary loss, and thereafter, will be capital loss (which will be
long-term if the debenture is held for more than one year). The deductibility of
net capital losses is subject to limitations. A U.S. Holder who sells the notes
at a loss that meets certain thresholds may be required to file a disclosure
statement with the IRS.
A U.S. Holder's tax basis in shares of our common stock received upon a
conversion of a debenture or upon a holder's exercise of a redemption right that
we elect to pay in shares of our common stock will equal the then current fair
market value of such common stock. The U.S. Holder's holding period for the
shares of our common stock received will commence on the date immediately
following conversion or redemption.
CONSTRUCTIVE DIVIDENDS
An increase in the conversion rate of the debentures, either at our
discretion or pursuant to the conversion rate adjustment provisions, may in
certain circumstances be treated as a taxable dividend to holders of the
debentures. For example, if at any time we make a distribution of property to
our stockholders that would be taxable to the stockholders as a dividend for
U.S. federal income tax purposes and, in accordance with the anti-dilution
provisions of the debentures, the conversion rate of the debentures is
increased, such increase may be deemed to be the payment of a taxable dividend
to holders of the debentures. An increase in the conversion rate in the event of
distribution of our evidences of indebtedness or our assets or an increase in
the event of the payment by us of a cash dividend will generally result in
deemed dividend treatment to holders of the debentures, but a reasonable
increase in the event of stock dividends or the distribution of rights to
subscribe for our common stock generally will not. If an event occurs that
dilutes the interests of the holders of the debentures and the conversion price
is not adjusted, the resulting increase in the proportionate interest of our
holders of common stock could be treated as a taxable dividend to such
stockholders.
DISTRIBUTIONS ON COMMON STOCK
Distributions paid on our common stock received upon conversion of a
debenture, other than certain pro rata distributions of common shares, will be
treated as a dividend to the extent paid out of current or accumulated earnings
and profits (as determined under U.S. federal income tax principles) and will be
includible in income by the U.S. Holder. If a distribution exceeds our current
and accumulated earnings and profits, the excess will be first treated as a
tax-free return of the U.S. Holder's investment, up to the U.S. Holder's tax
basis in the common stock. Any remaining excess will be treated as a capital
gain. Under recently enacted legislation, dividends received by noncorporate
U.S. Holders on common stock may be subject to U.S. federal income tax at lower
rates than other types of ordinary income if certain conditions are met. U.S.
Holders should consult their own tax advisors regarding the implications of this
new legislation in their particular circumstances.
SALE OR OTHER DISPOSITION OF COMMON STOCK
Gain or loss realized by a U.S. Holder on the sale or other disposition of
our common stock received upon conversion of a debenture will be capital gain or
loss for U.S. federal income tax purposes, and will be long-term capital gain or
loss if the U.S. Holder held the common stock for more than one year. The amount
of the U.S. Holder's gain or loss will be equal to the difference between the
U.S. Holder's tax basis in the common stock disposed of the amount realized on
the disposition. A U.S. holder who sells the stock at a loss that meets certain
thresholds may be required to file a disclosure statement with the IRS.
TAX CONSIDERATIONS FOR NON-U.S. HOLDERS
The rules governing U.S. federal income taxation of Non-U.S. Holders are
complex and this offering memorandum provides only a summary of such rules.
Non-U.S. Holders should consult with their tax advisors to determine the effect
of U.S. federal, state, local and foreign income tax laws, as well as treaties,
with regard to an investment in the debentures and shares of our common stock,
including any reporting requirements.
PAYMENTS MADE WITH RESPECT TO THE DEBENTURES
The 30% U.S. federal withholding tax will not apply to any payment to a
Non-U.S. Holder of principal or interest (including amounts taken into income as
interest under the accrual rules described above under "Tax Considerations for
of U.S. Holders" and amounts attributable to the receipt of shares of
our common stock upon a conversion or redemption of the debentures) on
debentures, provided that: (i) 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, (ii) the Non-U.S. Holder is not a controlled foreign
corporation related, directly or indirectly, to us through stock ownership; and
(iii) either (A) the beneficial owner of debentures certifies to us or our
paying agent on IRS Form W-8BEN or an appropriate substitute form, under
penalties of perjury, that it is not a U.S. person and provides its name,
address and certain other information or (B) the beneficial owner holds its
debentures through certain foreign intermediaries or certain foreign
partnerships and such holder satisfies certain certification requirements.
If the Non-U.S. Holder cannot satisfy the requirements described above,
payments of interest (including amounts taken into income under the accrual
rules described above under "Tax Considerations for U.S. Holders" and amounts
attributable to the receipt of our common stock upon a conversion of the
debentures) may be subject to the 30% U.S. federal withholding tax unless the
Non-U.S. Holder provides us with a properly executed (1) IRS Form W-8BEN (or
successor form) claiming an exemption from or reduction in withholding under an
applicable tax treaty or (2) IRS Form W-8ECI (or successor form) stating that
interest paid on the debentures is not subject to withholding tax because it is
effectively connected with the Non-U.S. Holder's conduct of a trade or business
in the United States.
If a Non-U.S. Holder of the debentures is engaged in a trade or business in
the United States, and if interest on the debentures is effectively connected
with the conduct of such trade or business, the Non-U.S. Holder, although exempt
from the withholding tax discussed in the preceding paragraphs, will generally
be subject to U.S. federal income tax on interest on a net basis in the same
manner as if it were a U.S. Holder (see "Tax Considerations for U.S. Holders"
above), except that the Non-U.S. Holder will be required to provide a properly
executed IRS From W-8ECI in order to claim an exemption from withholding tax.
These Non-U.S. Holders should consult their own tax advisors with respect to
other tax consequences of the ownership of the notes, including the possible
imposition of a branch profits tax at 30% (or at a reduced rate set under an
applicable tax treaty) for corporate Non-U.S. Holders.
SALE OR EXCHANGE OF DEBENTURES OR COMMON STOCK
A Non-U.S. Holder will not generally be subject to U.S. federal income or
withholding tax with respect to gain upon the sale, exchange or other
disposition of the debentures or shares of our common stock, unless: (1) the
income or gain is "U.S. trade or business income," which means income or gain
that is effectively connected with the conduct by the Non-U.S. Holder of a trade
or business, or, in the case of a treaty resident, attributable to a permanent
establishment or a fixed base in the United States; (2) such Non-U.S. Holder is
an individual who is present in the United States for 183 days or more in the
taxable year of disposition and certain other conditions are met; (3) such
Non-U.S. Holder is subject to tax pursuant to the provisions of the Internal
Revenue Code applicable to certain U.S. expatriates; (4) with respect to the
debentures, the Non-U.S. Holder does not meet the conditions for exemption from
U.S. federal withholding tax described above; or (5) in the case of gain
realized on the sale, exchange, conversion or redemption of the debentures, we
are not and have not been within the shorter of the five-year period preceding
such sale, exchange, conversion or redemption and the period during which the
Non-U.S. Holder held the debentures, a U.S. real property holding corporation.
We believe that we are currently not a U.S. real property holding corporation
for U.S. federal income tax purposes and will not become one in the future.
U.S. trade or business income of a Non-U.S. Holder will generally be
subject to U.S. federal income tax on a net basis in the same manner as if it
were realized by a U.S. Holder. A Non-U.S. Holder that realizes U.S. trade or
business income with respect to the debentures or common stock should consult
its tax advisors as to the treatment of such income or gain, including the
possible imposition of a branch profits tax of 30% (or at a reduced rate set
under an applicable tax treaty) for corporate Non-U.S. Holders.
CONSTRUCTIVE DIVIDENDS
If a Non-U.S. Holder were deemed to have received a constructive dividend
(see "Tax Considerations for U.S. Holders -- Constructive Dividends" above), the
Non-U.S. Holder generally will be subject to withholding tax at a 30% rate,
subject to reduction by an applicable tax treaty, on the taxable amount of the
dividend. To claim the benefit of a tax treaty, a Non-U.S. Holder must comply
with all certification requirements necessary to qualify for treaty benefits. It
is possible that U.S. federal tax on the constructive dividend would be withheld
from the interest paid to the Non-U.S. Holders of the debentures. A Non-U.S.
Holder who is subject to withholding tax under such circumstances should consult
its own tax advisor as to whether it can obtain a refund for all or a portion of
the withholding tax.
DISTRIBUTIONS ON COMMON STOCK
Dividends 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. A Non-U.S. Holder who is
subject to withholding tax under such circumstances should consult its own tax
advisor as to whether it can obtain a refund for all or a portion of the
withholding tax.
If a Non-U.S. Holder of our common stock is engaged in a trade or business
in the United States, and if the dividends (or constructive dividends) 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 "Tax Considerations for 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 advisors with respect to
other tax consequences of the ownership of our common stock, including the
possible imposition of a branch profits tax at 30% (or at a reduced rate under
an applicable tax treaty) for corporate Non-U.S. Holders.
BACKUP WITHHOLDING AND INFORMATION REPORTING
U.S. HOLDERS
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 U.S. 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 U.S.
information reporting or certification requirements. Any amount withheld from a
payment to a U.S. Holder under the backup withholding rules is allowable as a
credit against the holder's U.S. federal income tax liability, and may entitle
such U.S. Holder to a tax refund, provided that the required information is
furnished to the IRS.
NON-U.S. HOLDERS
A Non-U.S. Holder may be required to comply with certification procedures
to establish that the holder is not a U.S. person in order to avoid backup
withholding tax with respect to our payments of principal and interest on the
debentures, or dividends on our common stock, or the proceeds of the sale or
other disposition of the debentures or common stock. In addition, information
returns may be filed with the IRS in connection with payments on the debentures
and our common stock and the proceeds from a sale or other disposition of such
debentures or common stock. 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. Any amount
withhold from a payment to a Non-U.S. Holder under backup withholding rules is
allowable as a credit against the Non-U.S. Holder's federal income tax liability
and may entitle such Non-U.S. Holder to a refund, provided that the required
information is furnished to the IRS.
THE PROPER TAX TREATMENT OF A HOLDER OF THE DEBENTURES IS UNCERTAIN IN A NUMBER
OF RESPECTS. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE U.S.
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF AN INVESTMENT IN THE
DEBENTURES AND WHETHER AN INVESTMENT IN THE DEBENTURES IS ADVISABLE IN LIGHT OF
THE AGREED UPON TAX TREATMENT AND THE HOLDER'S PARTICULAR TAX SITUATION.
SELLING SECURITY HOLDERS
We originally issued the debentures in transactions exempt from or not
subject to registration under the Securities Act of 1933. The debentures and the
common stock issuable upon conversion thereof that may be offered under this
prospectus will be offered by the selling security holders, which includes their
donees, pledgees, transferees and other successors-in-interest. Only those
debentures and shares of common stock issuable upon conversion thereof listed
below may be offered for resale by the selling holders pursuant to this
prospectus.
The following table sets forth certain information, as of January 22, 2004,
about the principal amount of debentures beneficially owned by each selling
security holder and the number of shares of common stock issuable upon
conversion of these debentures that may be offered from time to time pursuant to
this prospectus.
The percentage of debentures outstanding beneficially owned by each selling
security holder is based on $540,000,000 aggregate principal amount of Series A
debentures outstanding and $300,000,000 aggregate principal amount of Series B
debentures outstanding. The number of shares of common stock owned prior to the
offering does not include shares of common stock issuable upon conversion of the
debentures. The number of shares of common stock shown in the table below
assumes conversion of the full amount of debentures held by such holder at the
initial conversion rate of 20.3732 shares per $1,000 principal amount of
debentures. This conversion rate is subject to adjustment as described under
"Description of the Series A Debentures--Conversion Rights" and "Description of
the Series B Debentures--Conversion Rights." Accordingly, the 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 instead
of fractional shares, if any.
NUMBER OF
SHARES OF
COMMON NUMBER OF
STOCK SHARES OF
PRINCIPAL AMOUNT OWNED COMMON PERCENTAGE OF
OF DEBENTURES PERCENTAGE OF PRIOR TO STOCK THAT COMMON
BENEFICIALLY OWNED DEBENTURES THE MAY BE STOCK
NAME OF SELLING SECURITY HOLDER THAT MAY BE SOLD OUTSTANDING OFFERING(1) SOLD (2) OUTSTANDING(3)
----------------------------------------- ----------- ---------- --------------
SERIES A SERIES B SERIES A SERIES B
-------- -------- -------- --------
1976 Distribution Trust FBO A.R. Lauder /
Zinterhofer 9,000 3,000 * * 0 244 *
2000 Revocable Trust FBO A.R. Lauder /
Zinterhofer 9,000 3,000 * * 0 244 *
Advent Convertible Master (Cayman) L.P. 19,949,000 4,130,000 3.69% 1.38% 0 490,565 *
Aftra Health Fund 75,000 0 * N/A 0 1,527 *
AG Domestic Convertibles, L.P. 4,375,000 1,750,000 * * 0 124,785 *
AG Offshore Convetibles, LTD 8,125,000 3,250,000 1.50% 1.08% 0 231,744 *
AIG DKR SoundShore Oasis Holding Fund
Ltd. 0 7,500,000 N/A 2.5% 0 152,799 *
AIG DSK SoundShore Strategic Holding Fund
Ltd. 0 7,500,000 N/A 2.5% 0 152,799 *
Akela Capital Master Fund, Ltd. 0 9,500,000 N/A 3.17% 0 193,545 *
Alcon Laboratories 464,000 0 * N/A 0 9,453 *
Allentown City Firefighters Pension Plan 17,000 6,000 * * 0 468 *
Allentown City Officers & Employees
Pension Fund 18,000 7,000 * * 0 508 *
NUMBER OF
SHARES OF
COMMON NUMBER OF
STOCK SHARES OF
PRINCIPAL AMOUNT OWNED COMMON PERCENTAGE OF
OF DEBENTURES PERCENTAGE OF PRIOR TO STOCK THAT COMMON
BENEFICIALLY OWNED DEBENTURES THE MAY BE STOCK
NAME OF SELLING SECURITY HOLDER THAT MAY BE SOLD OUTSTANDING OFFERING(1) SOLD (2) OUTSTANDING(3)
----------------------------------------- ----------- ---------- --------------
SERIES A SERIES B SERIES A SERIES B
-------- -------- -------- --------
Allentown City Police Pension Plan 28,000 10,000 * * 0 773 *
Allstate Insurance Company 1,000,000 0 * N/A 34,900 20,373 *
Allstate Life Insurance Company 1,500,000 0 * N/A 0 30,559 *
Alpha US Sub Fund 4 LLC 894,000 0 * N/A 0 18,213 *
Alta Partners Holdings LDC 10,000,000 0 1.85% N/A 0 203,732 *
American Investors Life Insurance Co. 800,000 0 * N/A 0 16,298 *
Arapahoe County Colorado 58,000 21,000 * * 0 1,608 *
Argent Classic Convertible Arbitrage Fund
L.P. 3,700,000 1,100,000 * * 0 97,790 *
Argent Classic Convertible Arbitrage Fund
II, L.P. 900,000 400,000 * * 0 26,484 *
Argent Classic Convertible Arbitrage Fund
(Bermuda) Ltd. 12,300,000 4,100,000 2.28% 1.37% 0 334,120 *
Argent LowLev Convertible Arbitrage Fund
LLC 2,254,000 2,774,000 * * 0 102,436 *
Argent LowLev Convertible Arbitrage Fund
II, LLC 346,000 426,000 * * 0 15,727 *
Argent LowLev Convertible Arbitrage Fund
Ltd. 9,600,000 8,800,000 1.78% 2.93% 0 374,866 *
Argent Silver Convertible Arbitrage Fund,
LDC 1,000,000 1,200,000 * * 0 44,820 *
Arlington County Employees Retirement
System 802,000 290,000 * * 0 22,247 *
Asante Health Systems 120,000 43,000 * * 0 3,320 *
Banc of America Securities LLC(4) 2,600,000 3,723,000 * 1.24% 0 128,819 *
Bank of America Pension Plan 3,000,000 0 * N/A 0 61,119 *
Barclays Global Investors Ltd 1,000,000 0 * N/A 0 20,373 *
Bay County PERS 100,000 0 * N/A 0 2,037 *
B.C. McCabe Foundation 125,000 0 * N/A 0 2,546 *
Bear Stearns & Co., Inc. 0 8,000,000 N/A 2.67% 0 162,985 *
Black Diamond Convertible Offshore LDC 1,089,000 0 * N/A 0 22,186 *
Black Diamond Offshore Ltd. 607,000 0 * N/A 0 12,366 *
BMO Nesbitt Burns Inc. 5,500,000 0 1.02% N/A 0 112,052 *
BNP Paribas Arbitrage 2,970,000 830,000 * * 0 77,417 *
British Virgin Islands Social Security
Board 105,000 38,000 * * 0 2,913 *
Canadian Imperial Holding, Inc. 5,000,000 0 * N/A 0 101,866 *
Century Park Trust 2,000,000 0 * N/A 0 40,746 *
Citadel Equity Fund Ltd. 15,930,000 0 2.95% N/A 202,800 324,545 *
Citadel Jackson Investment Fund Ltd. 2,070,000 0 * N/A 0 42,172
Citigroup Global Markets Inc.(5) 4,000,000 0 * N/A 0 81,492 *
City and County of San Francisco
Retirement System 1,773,000 641,000 * * 0 49,180 *
City of New Orleans 244,000 88,000 * * 0 6,763 *
City University of New York 180,000 65,000 * * 0 4,991 *
Class C Trading Company, Ltd. 1,200,000 1,400,000 * * 0 52,969 *
CNH CA Master Account, L.P. 1,000,000 1,000,000 * * 0 40,746 *
Consulting Group Capital Market Funds 1,000,000 0 * N/A 0 20,373 *
NUMBER OF
SHARES OF
COMMON NUMBER OF
STOCK SHARES OF
PRINCIPAL AMOUNT OWNED COMMON PERCENTAGE OF
OF DEBENTURES PERCENTAGE OF PRIOR TO STOCK THAT COMMON
BENEFICIALLY OWNED DEBENTURES THE MAY BE STOCK
NAME OF SELLING SECURITY HOLDER THAT MAY BE SOLD OUTSTANDING OFFERING(1) SOLD (2) OUTSTANDING(3)
----------------------------------------- ----------- ---------- --------------
SERIES A SERIES B SERIES A SERIES B
-------- -------- -------- --------
Continental Assurance Company on behalf of
its separate account (E) 4,500,000 1,000,000 * * 0 112,052 *
Continental Casualty Company 500,000 9,000,000 * 3.00% 0 193,544 *
Convertible Securities Fund 90,000 0 * N/A 0 1,833 *
CooperNeff Convertible Strategies (Cayman)
Master Fund, L.P. 3,135,000 854,000 * * 0 81,267 *
CQS Convertible & Quantitative Strategies
Master Fund Limited 0 2,500,000 N/A * 0 50,933 *
Credit Lyonnais Securities (USA) Inc. 0 6,000,000 N/A 2.00% 0 122,239 *
DB Equity Opportunities Master Portfolio
LTD 4,900,000 0 * N/A 0 99,828 *
DBAG London 30,500,000 0 5.65% N/A 0 621,382 *
DEAM Convertible Arbitrage 2,400,000 0 * N/A 0 48,895 *
DeepRock & Co. 2,500,000 0 * N/A 0 50,933 *
Delaware Public Employees Retirement System 1,857,000 671,000 * * 0 51,503 *
DKR Saturn Event Driven Holding Fund Ltd. 1,250,000 3,250,000 * 1.08% 0 91,678 *
DKR Saturn Special Situations Holding Fund
Ltd. 1,250,000 3,250,000 * 1.08% 0 91,678 *
Dodeca Fund, L.P. 2,150,000 0 * N/A 0 43,802 *
Double Black Diamond Offshore LDC 3,188,000 0 * N/A 0 64,949 *
DuckBill & Co. 1,000,000 0 * N/A 0 20,373 *
Fidelity Financial Trust: Fidelity
Convertible Securities Fund 2,000,000 0 * N/A 0 40,746 *
Fore Convertible Master Fund LTD 17,000,000 0 3.15% N/A 0 346,344 *
Gaia Offshore Master Fund Ltd. 11,300,000 4,400,000 2.09% 1.47% 0 319,859 *
Geode U.S. Convertible Arbitrage Fund, a
series of Geode Investors, LLC 5,250,000 0 * N/A 0 106,959 *
General Motors Welfare Benefit Trust 2,000,000 0 * N/A 0 40,746 *
Global Bermuda Limited Partnership 0 6,000,000 N/A 2.00% 0 122,239 *
GMAM Group Pension Trust 1,250,000 0 * N/A 0 25,466 *
Goldman Sachs & Co. 11,500,000 0 2.13% N/A 203,279 234,291 *
Goldman Sachs & Co. Profit Sharing Master
Trust 0 73,000 N/A * 0 1,487 *
Grady Hospital Foundation 160,000 58,000 * * 0 4,440 *
Guggenheim Portfolio Company VIII, LLC 3,352,000 0 * N/A 0 68,290 *
HFR Arbitrage Fund 1,015,000 0 * N/A 0 20,678 *
HFR CA Global Select Master Trust Account 200,000 300,000 * * 0 10,185 *
Highbridge International LLC 15,000,000 10,000,000 2.78% 3.33% 0 509,330 *
Independence Blue Cross 498,000 180,000 * * 0 13,812 *
Inflective Convertible Opportunity Fund I,
L.P. 50,000 0 * N/A 0 1,018 *
Intl. Truck & Engine Corp. Non
Contributory Retirement Plan Trust 525,000 0 * N/A 0 10,695 *
Intl. Truck & Engine Corp. Retirement Plan
for Salaried Employee's Trust 800,000 0 * N/A 0 16,298 *
John Deere Pension Trust 1,000,000 0 * N/A 0 20,373 *
JMG Capital Partners, LP 9,750,000 5,000,000 1.81% 1.67% 0 300,504 *
JMG Triton Offshore Fund, Ltd. 16,000,000 10,000,000 2.96% 3.33% 0 529,703 *
NUMBER OF
SHARES OF
COMMON NUMBER OF
STOCK SHARES OF
PRINCIPAL AMOUNT OWNED COMMON PERCENTAGE OF
OF DEBENTURES PERCENTAGE OF PRIOR TO STOCK THAT COMMON
BENEFICIALLY OWNED DEBENTURES THE MAY BE STOCK
NAME OF SELLING SECURITY HOLDER THAT MAY BE SOLD OUTSTANDING OFFERING(1) SOLD (2) OUTSTANDING(3)
----------------------------------------- ----------- ---------- --------------
SERIES A SERIES B SERIES A SERIES B
-------- -------- -------- --------
KBC Financial Products USA Inc. 3,343,300 1,717,000 * * 0 103,093 *
KeySpan Foundation 50,000 0 * N/A 0 1,018 *
Lakeshore International Limited 0 24,000,000 N/A 8.00% 0 488,956 *
LDG Limited 1,534,000 0 * N/A 0 31,252 *
LLT Limited 34,000 34,000 * * 0 1,384 *
Lord Abbett Investment Trust - LA
Convertible Fund 900,000 0 * N/A 0 18,335 *
Lyxor 1,500,000 1,500,000 * * 0 61,118 *
Lyxor/Convertible Arbitrage Fund Limited 233,000 50,000 * * 0 5,764 *
Lyxor/Gaia II Fund Ltd. 2,700,000 1,000,000 * * 0 75,380 *
Lyxor Master Fund 1,500,000 1,600,000 * * 0 63,156 *
McMahon Securities Co. L.P. 750,000 0 * N/A 0 15,279 *
Mainstay Convertible Fund 1,605,000 0 * N/A 0 32,698 *
Mainstay VP Convertible Fund 985,000 0 * N/A 0 20,067 *
Man Convertible Bond Master Fund, Ltd. 0 10,731,000 N/A 3.58% 0 218,624 *
Man Mac 1 Limited 5,267,000 0 * N/A 0 107,305 *
Maystone Continuum Master Fund, LTD. 0 1,500,000 N/A * 0 30,559 *
Merrill Lynch Insurance Corporation 395,000 143,000 * * 0 10,960 *
MLQA Convertible Securities Arbitrage, LTD 5,000,000 5,000,000 * 1.67% 0 203,732 *
Morgan Stanley Convertible Securities Trust 1,500,000 0 * N/A 0 30,559 *
Municipal Employees 287,000 104,000 * * 0 7,965 *
National Bank of Canada c/o Putnam Lovell
NBF Securities Inc. 8,500,000 0 1.57% N/A 0 173,172 *
National Fuel & Gas Company Retirement Plan 150,000 0 * N/A 0 3,055 *
Nations Convertible Securities Fund 11,910,000 0 2.21% N/A 0 242,644 *
New Orleans Firefighters Pension / Relief
Fund 163,000 59,000 * * 0 4,522 *
New York Life Insurance Company (Post 82) 1,750,000 0 * N/A 0 35,653 *
New York Life Insurance Company (Pre 82) 805,000 0 * N/A 0 16,400 *
New York Life Separate A/C #7 40,000 0 * N/A 0 814 *
Newport Alternative Income Fund 400,000 0 * N/A 0 8,149 *
Nomura Securities International, Inc. 25,000,000 0 4.63% N/A 7,800 509,330 *
NMS Services (Cayman) Inc. 10,000,000 0 1.85% N/A 0 203,732 *
Occidental Petroleum Corporation 323,000 117,000 * * 0 8,963 *
Ohio Bureau of Workers Compensation 214,000 77,000 * * 0 5,927 *
OIP Limited 570,000 0 * N/A 0 11,612 *
Oppenheimer Convertible Securities Fund 4,000,000 0 * N/A 0 81,492 *
Oxford, Lord Abbett & Co. 1,500,000 0 * N/A 0 30,559 *
OZ Convertible Master Fund, Ltd. 0 459,000 N/A * 0 9,351 *
OZ MAC 13 Ltd. 0 85,000 N/A * 0 1,731 *
OZ Master Fund, Ltd. 0 5,883,000 N/A 1.96% 0 119,855 *
Peoples Benefit Life Insurance Company
Teamsters 8,000,000 0 1.48% N/A 0 162,985 *
Policeman and Fireman Retirement System of
the City of Detroit 670,000 242,000 * * 0 18,580 *
Polygon Global Opportunities Master Fund 22,000,000 0 4.07% N/A 0 448,210 *
President & Fellows of Harvard College 0 10,000,000 N/A 3.33% 8,507 203,732 *
NUMBER OF
SHARES OF
COMMON NUMBER OF
STOCK SHARES OF
PRINCIPAL AMOUNT OWNED COMMON PERCENTAGE OF
OF DEBENTURES PERCENTAGE OF PRIOR TO STOCK THAT COMMON
BENEFICIALLY OWNED DEBENTURES THE MAY BE STOCK
NAME OF SELLING SECURITY HOLDER THAT MAY BE SOLD OUTSTANDING OFFERING(1) SOLD (2) OUTSTANDING(3)
----------------------------------------- ----------- ---------- --------------
SERIES A SERIES B SERIES A SERIES B
-------- -------- -------- --------
Pro-mutual 901,000 326,000 * * 0 24,997 *
Putnam Convertible Income - Growth Fund 7,300,000 0 1.35% N/A 0 148,724 *
Pyramid Equity Strategies Fund 1,200,000 0 * N/A 0 24,447 *
Radian Asset Assurance, Inc. 200,000 0 * N/A 0 4,074 *
Radian Group Convertible Securities 1,175,000 0 * N/A 0 23,938 *
Radian Guaranty 4,175,000 0 * N/A 0 85,058 *
RBC Alternative Assets L.P. 100,000 0 * N/A 11,590 2,037 *
Retail Clerks Pension Trust 2,000,000 0 * N/A 0 40,746 *
Retail Clerks Pension Trust #2 1,000,000 0 * N/A 0 20,373 *
Royal Bank of Canada 4,000,000 0 * N/A 5,320 81,492 *
S.A.C. Capital Associates, LLC 0 2,500,000 N/A * 131,000 50,933 *
Sage Capital 2,400,000 0 * N/A 0 48,895 *
Silverback Master, LTD 0 5,250,000 N/A 1.75% 0 106,959 *
Silvercreek II Limited 985,000 0 * N/A 0 20,067 *
Silvercreek Limited Partnership 2,045,000 0 * N/A 0 41,663 *
Singlehedge U.S. Convertible Arbitrage Fund 735,000 138,000 * * 0 17,785 *
St. Albans Partners Ltd. 5,000,000 0 * N/A 0 101,866 *
St. Thomas Trading, Ltd. 0 16,769,000 N/A 5.59% 0 341,638 *
State of Maryland Retirement Agency 3,843,000 1,398,000 * * 0 106,775 *
Sturgeon Limited 427,000 118,000 * * 0 11,103 *
Sunrise Partners Limited Partnership 21,000,000 9,000,000 3.89% 3.00% 2,600 611,195 *
Susquehanna Capital Group 0 8,750,000 N/A 2.92% 0 178,265 *
Tag Associates 192,000 0 * N/A 0 3,911 *
TD Securities (USA) Inc. 30,500,000 0 5.65% N/A 0 621,382 *
Teacher's Insurance & Annuity Association
of America 0 14,000,000 N/A 4.67% 0 285,224 *
The Coast Fund, L.P. 5,500,000 5,000,000 1.02% 1.67% 0 213,918 *
The Grable Foundation 96,000 35,000 * * 0 2,668 *
Topanga XI 3,500,000 1,600,000 * * 0 103,903 *
Total Fina Elf Finance USA, Inc. 250,000 0 * * 0 5,093 *
Tredia Performance Fund Ltd. 200,000 200,000 * * 0 8,148 *
Tribeca Investments L.T.D. 0 18,000,000 N/A 6.00% 0 366,717 *
Triborough Partners International Ltd. 1,050,000 0 * N/A 0 21,391 *
Triborough Partners LLC 450,000 0 * N/A 0 9,167 *
Trustmark Insurance 405,000 146,000 * * 0 11,225 *
United Overseas Bank Convertible Bond (SGD) 240,000 0 * N/A 0 4,889 *
United Overseas Bank Convertible Bond (USD) 100,000 0 * N/A 0 2,037 *
White River Securities, L.L.C. 0 8,000,000 N/A 2.67% 0 162,985 *
Windmill Master Fund, LP 0 1,000,000 N/A * 0 20,373 *
Worldwide Transactions Ltd. 116,000 0 * N/A 0 2,363 *
Xavex Convertible Arbitrage 2 Fund 700,000 800,000 * * 0 30,559 *
Xavex Convertible Arbitrage 10 Fund 1,100,000 200,000 * * 0 26,484 *
Yield Strategies Fund I, L.P. 3,250,000 0 * N/A 0 66,212 *
Yield Strategies Fund II, L.P. 3,500,000 0 * N/A 0 71,306 *
NUMBER OF
SHARES OF
COMMON NUMBER OF
STOCK SHARES OF
PRINCIPAL AMOUNT OWNED COMMON PERCENTAGE OF
OF DEBENTURES PERCENTAGE OF PRIOR TO STOCK THAT COMMON
BENEFICIALLY OWNED DEBENTURES THE MAY BE STOCK
NAME OF SELLING SECURITY HOLDER THAT MAY BE SOLD OUTSTANDING OFFERING(1) SOLD (2) OUTSTANDING(3)
----------------------------------------- ----------- ---------- --------------
SERIES A SERIES B SERIES A SERIES B
-------- -------- -------- --------
All other holders of debentures or future
transferees, pledgees or donees of such
holders(6)(7) 19,080,700 11,335,000 3.53% 3.78% 619,776 *
TOTAL 540,000,000 300,000,000 100.00% 100.00% 607,796 17,113,488 17.50%
---------------
* Less than one percent
N/A Not applicable
(1) Does not include shares of common stock issuable upon conversion of the
debentures.
(2) Consists of shares of common stock issuable upon conversion of the
debentures, assuming a conversion rate of 20.3732 shares per $1,000
principal amount of the debentures and a cash payment in lieu of any
fractional share interest. The conversion rate is subject to adjustment as
described under "Description of the Series A Debentures--Conversion Rights"
and "Description of the Series B Debentures--Conversion Rights."
Accordingly, the number of shares of common stock issuable upon conversion
of the debentures may increase or decrease from time to time.
(3) Calculated based on Rule 13d-3(d)(1) under the Securities Exchange Act of
1934, as amended, using 83,541,840 shares of common stock outstanding on
December 23, 2003. In calculating this amount, we treated as outstanding
the number of shares of common stock issuable upon conversion of the
debentures by the applicable holder. However, we did not assume the
conversion of any other holder's debentures.
(4) Banc of America Securities LLC was an initial purchaser of each of the 25%
of the Series A debentures and Series B debentures in the private placement
of these securities.
(5) Citigroup Global Markets Inc. was an initial purchaser of each of the 25%
of the Series A debentures and Series B debentures in the private placement
of these securities.
(6) We will identify additional selling security holders, if any, by prospectus
supplement or post-effective amendment before they offer or sell their
securities.
(7) Assumes that the unnamed holders of debentures or any future transferees,
pledgees or donees of or from any such unnamed holder do not beneficially
own any common stock other than the common stock issuable upon conversion
of the debentures at the initial conversion rate.
The preceding table has been prepared based upon the information furnished
to us by the selling security holders. The selling security holders identified
above may have sold, transferred or otherwise disposed of some or all of their
debentures since the date on which the information in the preceding table is
presented in transactions exempt from or not subject to the registration
requirements of the Securities Act of 1933. Information concerning the selling
security holders may change from time to time and, if necessary, we will
supplement this prospectus accordingly. We cannot give an estimate as to the
amount of the debentures or common stock issuable upon conversion thereof that
will be held by the selling security holders upon the termination of this
offering because the selling security holders may offer some or all of their
debentures or common stock pursuant to the offering contemplated by this
prospectus. See "Plan of Distribution."
To our knowledge, other than their ownership of the securities described
above, none of the selling security holders has, or has had within the past
three years, any position, office or other material relationship with us or any
of our predecessors or affiliates.
PLAN OF DISTRIBUTION
We will not receive any of the proceeds of the sale of the debentures and
the common stock offered by this prospectus. The aggregate proceeds to the
selling security holders from the sale of the debentures or common stock will be
the purchase price of the debentures or common stock less any discounts and
commissions. A selling security holder reserves the right to accept and,
together with their agents, to reject, any proposed purchase of debentures or
common stock to be made directly or through agents.
The debentures and the common stock offered by this prospectus may be sold
from time to time to purchasers:
o directly by the selling security holders and their successors, which
includes their donees, pledgees or transferees or their
successors-in-interest; or
o through underwriters, broker-dealers or agents, who may receive
compensation in the form of discounts, commissions or agent's
commissions from the selling security holders or the purchasers of the
debentures and the common stock. These discounts, concessions or
commissions may be in excess of those customary in the types of
transactions involved.
The selling security holders and any underwriters, broker-dealers or agents
who participate in the distribution of the debentures and the common stock may
be deemed to be "underwriters" within the meaning of the Securities Act of 1933.
As a result, any profits on the sale of the debentures and the common stock by
selling security holders and any discounts, commissions or agent's commissions
received by any such broker-dealers or agents may be deemed to be underwriting
discounts and commissions under the Securities Act of 1933. Selling security
holders who are "underwriters" within the meaning of the Securities Act of 1933
will be subject to prospectus delivery requirements of the Securities Act of
1933. If the selling security holders were deemed to be underwriters, the
selling security holders may be subject to certain statutory liabilities of the
Securities Act of 1933 and the Securities Exchange Act of 1934. If the
debentures and the common stock are sold through underwriters, broker-dealers or
agents, the selling security holders will be responsible for underwriting
discounts or commissions or agent's commissions.
The debentures and the common stock may be sold in one or more transactions
at:
o fixed prices;
o prevailing market prices at the time of sale;
o prices related to such prevailing market prices;
o varying prices determined at the time of sale; or
o negotiated prices.
These sales may be effected in one or more transactions:
o on any national securities exchange or quotation service on which the
notes and common stock may be listed or quoted at the time of the
sale;
o in the over-the-counter market;
o in transactions otherwise than on such exchanges or services or in the
over-the-counter market;
o through the writing of options (including the issuance by the selling
security holders of derivative securities), whether the options or
such other derivative securities are listed on an options exchange or
otherwise;
o through the settlement of short sales; or
o through any combination of the foregoing.
These transactions may include block transactions or crosses. Crosses are
transactions in which the same broker acts as an agent on both sides of the
trade.
In connection with the sales of the debentures and the common stock
issuable upon conversion thereof or otherwise, the selling security holders may
enter into hedging transactions with broker-dealers or other financial
institutions that in turn may engage in short sales of the debentures or the
common stock in the course of hedging their positions, sell the debentures and
common stock short and deliver the debentures and common stock to close out
short positions, loan or pledge debentures or the common stock to broker-dealers
or other financial institutions that in turn may sell the debentures and the
common stock, enter into option or other transactions with broker-dealers or
other financial institutions that require the delivery to the broker-dealer or
other financial institution of the debentures or the common stock, which the
broker-dealer or other financial institution may resell pursuant to the
prospectus, or enter into transactions in which a broker-dealer makes purchases
as a principal for resale for its own account or through other types of
transactions.
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 the common stock
by the selling security holders.
Our common stock trades on the New York Stock Exchange under the symbol
"DST." 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.
Accordingly, no assurance can be given as to the development of liquidity or any
trading market for the debentures. See "Risk Factors--An active trading market
may not develop for the debentures."
There can be no assurance that any selling security holder will sell any or
all of the debentures or the common stock pursuant to this prospectus. Further,
we cannot assure you that any such selling security holder will not transfer,
devise or gift the debentures and the common stock by other means not described
in this prospectus. In addition, any debentures or common stock covered by this
prospectus that qualify for sale pursuant to Rule 144 or Rule 144A of the
Securities Act of 1933 may be sold under Rule 144 or Rule 144A rather than under
this prospectus. The debentures and the common stock may be sold in some states
only through registered or licensed brokers or dealers. In addition, in some
states the debentures and common stock may not be sold unless they have been
registered or qualified for sale or an exemption from registration or
qualification is available and complied with.
The selling security holders and any other person participating in the sale
of debentures or the common stock will be subject to the Securities Exchange Act
of 1934. The Securities Exchange Act of 1934 rules include, without limitation,
Regulation M, which may limit the timing of purchases and sales of any of the
debentures and the common stock by the selling security holders and any other
such person. In addition, Regulation M may restrict the ability of any person
engaged in the distribution of the debentures and the common stock to engage in
market-making activities with respect to the particular debentures and the
common stock being distributed. This may affect the marketability of the
debentures and the common stock and the ability of any person or entity to
engage in market-making activities with respect to the debentures and the common
stock.
We have agreed to indemnify the selling security holders against certain
liabilities, including liabilities under the Securities Act of 1933.
We have agreed to pay substantially all of the expenses incidental to the
registration, offering and sale of the debentures and common stock to the public
other than commissions, fees and discounts of underwriters, brokers, dealers and
agents.
VALIDITY OF SECURITIES
The validity of the debentures and the common stock issuable upon
conversion thereof will be passed upon for us by Sonnenschein Nath & Rosenthal
LLP, Kansas City, Missouri.
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference to the Annual Report on Form 10-K for the year ended December 31, 2002
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.
The combined financial statements of OMS incorporated in this prospectus by
reference to the definitive special meeting proxy statement filed November 13,
2003 for the year ended December 31, 2002 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.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses payable by DST in connection
with the offering described in this Registration Statement. All of the expenses
are estimated, except for the SEC registration fee.
SEC registration fee $ 67,956
Printing expense 60,000
Accounting fees and expenses 50,000
Legal fees and expenses 100,000
Trustee fees and expenses 25,000
Miscellaneous 47,044
-------------------
Total $ 350,000
===================
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
DST is incorporated under the laws of the State of Delaware. Section 145 of
the General Corporation Law of the State of Delaware (the "Delaware Statute")
provides that a Delaware corporation may indemnify any persons who are, or are
threatened to be made, parties to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative (a
"proceeding"), other than an action by or in the right of such corporation, by
reason of the fact that such person is or was an officer, director, employee or
agent of such corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another corporation or
enterprise (an "indemnified capacity"). The indemnity may include expenses,
including attorneys' fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding, provided such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the corporation's best interests
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe that his conduct was illegal. Similar provisions apply to actions
brought by or in the right of the corporation, except that no indemnification
shall be made without judicial approval if the officer or director is adjudged
to be liable to the corporation. Where an officer or director is successful on
the merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director has actually and reasonably incurred. Section 145 of the Delaware
Statute further authorizes a corporation to purchase and maintain insurance on
behalf of any indemnified person against any liability asserted against him and
incurred by him in any indemnified capacity, or arising out of his status as
such, regardless of whether the corporation would otherwise have the power to
indemnify him under the Delaware Statute.
Section 102(b)(7) of the DGCL provides, generally, that the certificate of
incorporation may contain a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided that such provision
may not eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under section 174 of Title 8 of the DGCL, or
(iv) for any transaction from which the director derived an improper personal
benefit. No such provision may eliminate or limit the liability of a director
for any act or omission occurring prior to the date when such provision becomes
effective.
DST's Certificate of Incorporation, as amended (the "DST Certificate of
Incorporation") provides that the directors and officers of DST, or persons who
are or were serving at the request of DST as directors or officers of another
corporation, partnership, joint venture, trust or other enterprise, including
service with respect to an employee benefit plan, (collectively, "indemnitees")
shall be indemnified to the maximum extent permitted by law against all expense,
liability and loss reasonably incurred by such individuals in defending a civil
or criminal action, suit or proceeding, whether the basis of such proceeding is
alleged action in an official capacity as a director or officer or in any other
capacity while serving as a director or officer, brought against such officers
and directors in any such capacities. The right to indemnification includes the
right to have DST pay the expenses in advance of the final disposition of such
action, suit or proceeding. As to directors and officers, the DST Certificate of
Incorporation requires receipt by DST of an undertaking by or on behalf of the
director or officer to repay such amount if it is ultimately determined that the
director or officer is not entitled to be indemnified by DST as authorized by
the DGCL. Except as discussed below with respect to proceedings to enforce
rights to indemnification, DST will indemnify any such indemnitee in connection
with a proceeding initiated by such indemnitee only if such proceeding was
authorized by the DST Board of Directors.
If a claim for indemnification, or advancement of expenses, is not paid in
full by DST within the time periods specified in the DST Certificate of
Incorporation, the indemnitee may bring suit against DST to recover the unpaid
amount of the claim. If the indemnitee is successful in whole or in part in any
such suit, or in a suit brought by DST to recover an advancement of expenses
pursuant to the terms of an undertaking, the indemnitee will also be entitled to
be paid the expenses of prosecuting or defending such suit. In any suit by DST
to recover an advancement of expenses pursuant to the terms of an undertaking,
DST is entitled to recover such expenses upon a final adjudication that the
indemnitee has not met any applicable standard for indemnification set forth in
the DGCL. In any suit brought by the indemnitee to enforce a right to
indemnification or to an advancement of expenses, or by DST to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that the indemnitee is not entitled to be indemnified, or to such
advancement of expenses, under the DST Certificate of Incorporation will be on
DST.
The foregoing right of indemnification and advancement of expenses is not
exclusive of any other rights of indemnification and advancement of expenses to
which any such individual may be entitled by by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
DST's Certificate of Incorporation provides that a director of DST will not
be personally liable to DST or its stockholders for monetary damages for breach
of fiduciary duty as a director, except for the prohibition on elimination or
limitation set forth in Section 102(b)(7) of the DGCL. The DST Certificate of
Incorporation further provides that if the DGCL is amended to further eliminate
or limit the personal liability of directors, then the liability of a DST
director will be eliminated or limited to the fullest extent permitted by the
DGCL as so amended.
DST's Amended and Restated Bylaws provides that directors, officers,
employees or agents shall be indemnified only as provided in the DST Certificate
of Incorporation.
ITEM 16. EXHIBITS
EXHIBIT
NUMBER EXHIBIT
4.1 The Registration Rights Agreement dated October 24, 1995, between
Kansas City Southern ("KCS"; formerly Kansas City Southern
Industries, Inc.) and DST ("KCS Registration Rights Agreement"),
which is attached as Exhibit 4.1 to DST's Registration Statement
on Form S-1 filed on September 1, 1995, as amended (Registration
No. 33-96526) (the "IPO Registration Statement") is hereby
incorporated by reference as Exhibit 4.1.
4.1.1 The First Amendment dated June 30, 1999 to the KCS Registration
Rights Agreement, which amendment is attached as Exhibit 4.15.1
to DST's Form 10-Q for the quarter ended June 30, 1999
(Commission File No. 1-14036), is hereby incorporated by
reference as Exhibit 4.1.1.
4.1.2 The Assignment, Consent and Acceptance dated August 11, 1999
pertaining to the KCS Registration Rights Agreement and among
DST, KCS and Stilwell Financial, Inc. (now Janus Capital Group
Inc.), which is attached as Exhibit 4.15.2 to DST's Form 10-Q for
the quarter ended June 30, 1999 (Commission File No. 1-14036), is
hereby incorporated by reference as Exhibit 4.1.2.
4.2 The Certificate of Designations dated October 16, 1995,
establishing the Series A Preferred Stock of DST, which is
attached as Exhibit 4.3 to DST's IPO Registration Statement, is
hereby incorporated by reference as Exhibit 4.2.
4.3 The summary of the preferred stock purchase rights set forth in
DST's Registration Statement on Form 8-A dated November 15, 1995
in connection with the listing of the preferred stock purchase
rights on the New York Stock Exchange (the "Form 8-A")
(Commission File No. 1-14036), and the related Rights Agreement
dated as of October 6, 1995, between DST and State Street Bank
and Trust Company, as rights agent ("Rights Agreement"), which is
attached as Exhibit 4.4 to DST's IPO Registration Statement, are
hereby incorporated by reference as Exhibit 4.3.
4.3.1 The First Amendment dated as of July 9, 1998 to the Rights
Agreement, which amendment is attached as Exhibit 99 to Form
8-A12B/A, Amendment No. 1, dated July 30, 1998 (Commission File
No. 1-14036), to the Form 8-A, is hereby incorporated by
reference as Exhibit 4.3.1.
4.3.2 The Second Amendment dated as of September 10, 1999 to the Rights
Agreement, which amendment is attached as Exhibit 99 to Form
8-A12B/A, Amendment No. 2, dated September 27, 1999 (Commission
File No. 1-14036), to the Form 8-A, is hereby incorporated by
reference as Exhibit 4.3.2.
4.3.3 The Third Amendment dated as of September 25, 2001 to the Rights
Agreement, which amendment is attached as Exhibit 99 to Form
8-A12B/A, Amendment No. 3, dated November 26, 2001 (Commission
File No. 1-14036), to the Form 8-A, is hereby incorporated by
reference as Exhibit 4.3.3.
4.3.4 The Assignment, Acceptance and Consent dated as of November 7,
2001 and among DST, State Street Bank and Trust Company, and
EquiServe Trust Company, N.A., and pertaining to the Rights
Agreement, which is attached as Exhibit 4.3.4 to DST's Annual
Report on Form 10-K for the year ended December 31, 2001
(Commission File No. 1-14036), is hereby incorporated by
reference as Exhibit 4.3.4.
4.4 The Registration Rights Agreement dated October 31, 1995, between
DST and UMB Bank, N.A. ("UMB") as trustee of The Employee Stock
Ownership Plan of DST Systems, Inc., which is attached as Exhibit
4.4 to DST's Annual Report on Form 10-K for the year ended
December 31, 1995 (Commission File No. 1-14036), is hereby
incorporated by reference as Exhibit 4.4.
4.5 The description of DST's common stock, par value $0.01 per share,
set forth in DST's Registration Statement on Form 8-A dated
October 30, 1995 (Commission File No. 1-14036), as amended by
Amendment No. 1 on Form 8-A12B/A dated March 14, 2003 (Commission
File No. 1-14036), is hereby incorporated by reference as Exhibit
4.5.
4.6 Paragraphs fourth, fifth, sixth, seventh, tenth, eleventh, and
twelfth of DST's Amended Delaware Certificate of Incorporation,
as restated, which is attached as Exhibit 3.1 to the IPO
Registration Statement, as amended by DST's Certificate of
Amendment of Certificate of Incorporation dated May 9, 2000 which
is attached as Exhibit 3.1 to DST's Form 10-Q for the quarter
ended March 31, 2000 (Commission File No. 1-14036), are hereby
incorporated by reference as Exhibit 4.6.
4.7 Article I, Sections 1, 2, 3 and 11 of Article II, Article V,
Article VIII, Article IX of DST's Amended and Restated By-laws as
amended and restated on May 13, 2003, which is attached as
Exhibit 3.2 to DST's Form 10-Q for the quarter ended March 31,
2003 (Commission File No. 1-14036), are hereby incorporated by
reference as Exhibit 4.7.
4.8 The Affiliate Agreement with James C. Castle, dated October 28,
1998, which is attached as Exhibit 4.10 to DST's Annual Report on
Form 10-K for the year ended December 31, 1998 (Commission File
No. 1-14036), is hereby incorporated by reference as Exhibit 4.8.
4.9 The Indenture, dated as of August 12, 2003, between DST and
JPMorgan Chase Bank, as Trustee, under which the debentures were
issued, which is attached as Exhibit 4.1 to DST's Form 8-K filed
on August 13, 2003 (Commission File No. 1-14036), is hereby
incorporated by reference as Exhibit 4.9.
4.10 The Registration Rights Agreement, dated as of August 12, 2003,
between DST and Citigroup Global Markets Inc. and Banc of America
Securities LLC, as representatives of the several initial
purchasers in connection with the private offering of the
debentures, which is attached as Exhibit 4.5 to DST's Form 8-K
filed on August 13, 2003 (Commission File No. 1-14036), is hereby
incorporated by reference as Exhibit 4.10.
4.11 The global securities for DST's 4.125% Series A Convertible
Senior Debentures due 2023 in the amounts of $500,000,000 and
$40,000,000, respectively, which are attached as Exhibits 4.2 and
4.3, respectively, to DST's Form 8-K filed on August 13, 2003
(Commission File No. 1-14036), are hereby incorporated by
reference as Exhibit 4.11.
4.12 The global security for DST's 3.625% Series B Convertible Senior
Debentures due 2023 in the amount of $300,000,000, which is
attached as Exhibit 4.4 to DST's Form 8-K filed on August 13,
2003 (Commission File No. 1-14036), is hereby incorporated by
reference as Exhibit 4.12.
5.1* Opinion of Sonnenschein Nath & Rosenthal LLP.
8.1* Opinion of Sonnenschein Nath & Rosenthal LLP relating to tax
matters.
12.1 Computation of ratio of earnings to fixed charges.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Sonnenschein Nath & Rosenthal LLP (contained in
Exhibits 5.1 and 8.1).
24.1* Power of Attorney (included on the signature page of the
Registration Statement).
25.1* Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939, as amended, of JPMorgan Chase Bank, as
trustee under the Indenture on Form T-1.
* Previously filed
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
PROVIDED, HOWEVER, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purposes 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.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof.
(5) That, for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(6) That, for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
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 Amendment No. 1 to
the registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Kansas City, state of Missouri, on
January 23, 2004.
DST SYSTEMS, INC.
By: /S/ Kenneth V. Hager
-----------------------------------------------
Kenneth V. Hager
Vice President, Chief Financial Officer and
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the registration statement has been signed by the following persons in
the capacities indicated on January 23, 2004.
SIGNATURE TITLE
---------------------------------------- -----------------------------------------------------------------------------
Thomas A. McDonnell* President, Chief Executive Officer and Director
---------------------------------------- (Principal Executive Officer)
Thomas A. McDonnell
Thomas A. McCullough* Executive Vice President, Chief Operating Officer and Director
----------------------------------------
Thomas A. McCullough
/s/ Kenneth V. Hager Vice President, Chief Financial Officer and Treasurer
---------------------------------------- (Principal Financial Officer)
Kenneth V. Hager
Gregg Wm. Givens* Vice President and Chief Accounting Officer
---------------------------------------- (Principal Accounting Officer)
Gregg Wm. Givens
A. Edward Allinson* Director
----------------------------------------
A. Edward Allinson
Michael G. Fitt* Director
----------------------------------------
Michael G. Fitt
William C. Nelson* Director
----------------------------------------
William C. Nelson
Travis E. Reed* Director
----------------------------------------
Travis E. Reed
M. Jeannine Strandjord* Director
----------------------------------------
M. Jeannine Strandjord
*By: /S/ Kenneth V. Hager
--------------------
Kenneth V. Hager
Attorney-in-fact
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT
4.1 The Registration Rights Agreement dated October 24, 1995, between
Kansas City Southern ("KCS"; formerly Kansas City Southern
Industries, Inc.) and DST ("KCS Registration Rights Agreement"),
which is attached as Exhibit 4.1 to DST's Registration Statement
on Form S-1 filed on September 1, 1995, as amended (Registration
No. 33-96526) (the "IPO Registration Statement") is hereby
incorporated by reference as Exhibit 4.1.
4.1.1 The First Amendment dated June 30, 1999 to the KCS Registration
Rights Agreement, which amendment is attached as Exhibit 4.15.1
to DST's Form 10-Q for the quarter ended June 30, 1999
(Commission File No. 1-14036), is hereby incorporated by
reference as Exhibit 4.1.1.
4.1.2 The Assignment, Consent and Acceptance dated August 11, 1999
pertaining to the KCS Registration Rights Agreement and among
DST, KCS and Stilwell Financial, Inc. (now Janus Capital Group
Inc.), which is attached as Exhibit 4.15.2 to DST's Form 10-Q for
the quarter ended June 30, 1999 (Commission File No. 1-14036), is
hereby incorporated by reference as Exhibit 4.1.2.
4.2 The Certificate of Designations dated October 16, 1995,
establishing the Series A Preferred Stock of DST, which is
attached as Exhibit 4.3 to DST's IPO Registration Statement, is
hereby incorporated by reference as Exhibit 4.2.
4.3 The summary of the preferred stock purchase rights set forth in
DST's Registration Statement on Form 8-A dated November 15, 1995
in connection with the listing of the preferred stock purchase
rights on the New York Stock Exchange (the "Form 8-A")
(Commission File No. 1-14036), and the related Rights Agreement
dated as of October 6, 1995, between DST and State Street Bank
and Trust Company, as rights agent ("Rights Agreement"), which is
attached as Exhibit 4.4 to DST's IPO Registration Statement, are
hereby incorporated by reference as Exhibit 4.3.
4.3.1 The First Amendment dated as of July 9, 1998 to the Rights
Agreement, which amendment is attached as Exhibit 99 to Form
8-A12B/A, Amendment No. 1, dated July 30, 1998 (Commission File
No. 1-14036), to the Form 8-A, is hereby incorporated by
reference as Exhibit 4.3.1.
4.3.2 The Second Amendment dated as of September 10, 1999 to the Rights
Agreement, which amendment is attached as Exhibit 99 to Form
8-A12B/A, Amendment No. 2, dated September 27, 1999 (Commission
File No. 1-14036), to the Form 8-A, is hereby incorporated by
reference as Exhibit 4.3.2.
4.3.3 The Third Amendment dated as of September 25, 2001 to the Rights
Agreement, which amendment is attached as Exhibit 99 to Form
8-A12B/A, Amendment No. 3, dated November 26, 2001 (Commission
File No. 1-14036), to the Form 8-A, is hereby incorporated by
reference as Exhibit 4.3.3.
4.3.4 The Assignment, Acceptance and Consent dated as of November 7,
2001 and among DST, State Street Bank and Trust Company, and
EquiServe Trust Company, N.A., and pertaining to the Rights
Agreement, which is attached as Exhibit 4.3.4 to DST's Annual
Report on Form 10-K for the year ended December 31, 2001
(Commission File No. 1-14036), is hereby incorporated by
reference as Exhibit 4.3.4.
4.4 The Registration Rights Agreement dated October 31, 1995, between
DST and UMB Bank, N.A. ("UMB") as trustee of The Employee Stock
Ownership Plan of DST Systems, Inc., which is attached as Exhibit
4.4 to DST's Annual Report on Form 10-K for the year ended
December 31, 1995 (Commission File No. 1-14036), is hereby
incorporated by reference as Exhibit 4.4.
4.5 The description of DST's common stock, par value $0.01 per share,
set forth in DST's Registration Statement on Form 8-A dated
October 30, 1995 (Commission File No. 1-14036), as amended by
Amendment No. 1 on Form 8-A12B/A dated March 14, 2003 (Commission
File No. 1-14036), is hereby incorporated by reference as Exhibit
4.5.
4.6 Paragraphs fourth, fifth, sixth, seventh, tenth, eleventh, and
twelfth of DST's Amended Delaware Certificate of Incorporation,
as restated, which is attached as Exhibit 3.1 to the IPO
Registration Statement, as amended by DST's Certificate of
Amendment of Certificate of Incorporation dated May 9, 2000 which
is attached as Exhibit 3.1 to DST's Form 10-Q for the quarter
ended March 31, 2000 (Commission File No. 1-14036), are hereby
incorporated by reference as Exhibit 4.6.
4.7 Article I, Sections 1, 2, 3 and 11 of Article II, Article V,
Article VIII, Article IX of DST's Amended and Restated By-laws as
amended and restated on May 13, 2003, which is attached as
Exhibit 3.2 to DST's Form 10-Q for the quarter ended March 31,
2003 (Commission File No. 1-14036), are hereby incorporated by
reference as Exhibit 4.7.
4.8 The Affiliate Agreement with James C. Castle, dated October 28,
1998, which is attached as Exhibit 4.10 to DST's Annual Report on
Form 10-K for the year ended December 31, 1998 (Commission File
No. 1-14036), is hereby incorporated by reference as Exhibit 4.8.
4.9 The Indenture, dated as of August 12, 2003, between DST and
JPMorgan Chase Bank, as Trustee, under which the debentures were
issued, which is attached as Exhibit 4.1 to DST's Form 8-K filed
on August 13, 2003 (Commission File No. 1-14036), is hereby
incorporated by reference as Exhibit 4.9.
4.10 The Registration Rights Agreement, dated as of August 12, 2003,
between DST and Citigroup Global Markets Inc. and Banc of America
Securities LLC, as representatives of the several initial
purchasers in connection with the private offering of the
debentures, which is attached as Exhibit 4.5 to DST's Form 8-K
filed on August 13, 2003 (Commission File No. 1-14036), is hereby
incorporated by reference as Exhibit 4.10.
4.11 The global securities for DST's 4.125% Series A Convertible
Senior Debentures due 2023 in the amounts of $500,000,000 and
$40,000,000, respectively, which are attached as Exhibits 4.2 and
4.3, respectively, to DST's Form 8-K filed on August 13, 2003
(Commission File No. 1-14036), are hereby incorporated by
reference as Exhibit 4.11.
4.12 The global security for DST's 3.625% Series B Convertible Senior
Debentures due 2023 in the amount of $300,000,000, which is
attached as Exhibit 4.4 to DST's Form 8-K filed on August 13,
2003 (Commission File No. 1-14036), is hereby incorporated by
reference as Exhibit 4.12.
5.1* Opinion of Sonnenschein Nath & Rosenthal LLP.
8.1* Opinion of Sonnenschein Nath & Rosenthal LLP relating to tax
matters.
12.1 Computation of ratio of earnings to fixed charges.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Sonnenschein Nath & Rosenthal LLP (contained in
Exhibits 5.1 and 8.1).
24.1* Power of Attorney (included on the signature page of the
Registration Statement).
25.1* Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939, as amended, of JPMorgan Chase Bank, as
trustee under the Indenture on Form T-1.
* Previously filed.