AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 17, 2005
REGISTRATION NO. 333-119012
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
POST-EFFECTIVE
AMENDMENT NO. 2
TO
FORM S-1
ON
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
PER-SE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 7374
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
DELAWARE 58-1651222
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1145 SANCTUARY PARKWAY
SUITE 200
ALPHARETTA, GA 30004
(770) 237-4300
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
---------------------
PAUL J. QUINER
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
PER-SE TECHNOLOGIES, INC.
1145 SANCTUARY PARKWAY
SUITE 200
ALPHARETTA, GA 30004
(770) 237-4300
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------
WITH COPIES TO:
NILS H. OKESON
ALSTON & BIRD LLP
1201 WEST PEACHTREE STREET
ATLANTA, GEORGIA 30309
(404) 881-7000 TELEPHONE
(404) 881-7777 FACSIMILE
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 being 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 the earlier effective
registration statement for the same offering. [ ] ____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED TO BE REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
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3.25% Convertible Subordinated Debentures
Due 2024................................... $125,000,000 (1) 100% $125,000,000 $15,837.50 (2)
Common Stock, $.01 par value per share (with
attached Rights to purchase Series A Junior
Participating Preferred Stock)(3).......... 7,003,037(4) (4) (4) (5)
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(1) Represents the aggregate principal amount of the debentures issued by the
Registrant.
(2) The Registrant previously paid the Securities and Exchange Commission a
filing fee of $15,837.50 in connection with the initial filing of this
registration statement.
(3) Prior to the occurrence of certain events, the rights will not be evidenced
or traded separately from the Registrant's common stock. Value, if any, of
the rights is reflected in the market price of the Registrant's common
stock. Accordingly, no separate fee is paid.
(4) The Registrant is registering the maximum number of shares of common stock
that may be issued upon conversion of the debentures pursuant to their terms
based on the initial conversion rate of 56.0243 shares per $1,000 principal
amount of debentures. In addition, in accordance with Rule 416 under the
Securities Act of 1933, as amended, the amount to be registered includes an
indeterminable number of additional shares of common stock that may be
issued to prevent dilution resulting from stock splits, stock dividends or
similar transactions affecting the shares to be offered by the selling
securityholders. If the Registrant needs to register additional shares of
common stock issuable upon conversion of the debentures due to a conversion
rate adjustment and Rule 416 is unavailable, the Registrant will file
another registration statement to register the resale of any additional
shares.
(5) Pursuant to Rule 457(i), no filing fee is payable with respect to the common
stock issuable upon conversion of the debentures because no additional
consideration will be received in connection with the conversion privilege.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
EXPLANATORY NOTE
This Post-Effective Amendment No. 2 to Form S-1 on Form S-3 of Per-Se
Technologies, Inc. is being filed to convert the Registration Statement on Form
S-1, as amended, (No. 333-119012) (the "S-1 Registration Statement") into a
Registration Statement on Form S-3. The S-1 Registration Statement related to
$125,000,000 principal amount of 3.25% convertible subordinated debentures due
2024 and up to 7,003,037 shares of common stock issuable upon conversion of the
debentures to be offered from time to time by selling securityholders named in
the table under the caption "Selling Securityholders" in the prospectus that is
part of the S-1 Registration Statement. The prospectus contained in this
Registration Statement on Form S-3 relates to the debentures and shares of
common stock, if any, into which the debentures are convertible registered under
the S-1 Registration Statement that may be offered by the selling
securityholders named therein.
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-119012
SUBJECT TO COMPLETION, DATED JUNE 17, 2005
PROSPECTUS
$125,000,000
PER-SE TECHNOLOGIES, INC.
3.25% CONVERTIBLE SUBORDINATED DEBENTURES
DUE 2024
AND
UP TO 7,003,037 SHARES OF COMMON STOCK ISSUABLE
UPON CONVERSION OF THE DEBENTURES
We issued the debentures offered by this prospectus in a private placement
in June 2004. This prospectus may be used by selling securityholders to resell
their debentures and the common stock issuable, if any, upon conversion of their
debentures. We will not receive any proceeds from the sale of the debentures or
the shares of common stock offered by the selling securityholders pursuant to
this prospectus. The selling securityholders, and the maximum amount of
securities that they may offer, are identified beginning on page 17 of this
prospectus.
The debentures will mature on June 30, 2024. You may convert your
debentures before their maturity into cash and, depending on the trading price
of our common stock, shares of our common stock in the manner and upon the
events described beginning on page 31 of this prospectus.
We will pay interest on the debentures on June 30 and December 30 of each
year, beginning December 30, 2004.
We may redeem some or all of the debentures for cash on or after July 6,
2009. You may require us to repurchase all or a portion of your debentures for
cash on June 30, 2009, June 30, 2014 and June 30, 2019, or upon the occurrence
of a fundamental change.
We do not intend to list the debentures on any national securities exchange
or to include them in any automated quotation system. The debentures issued in
the private placement are eligible for trading in The PORTAL Market of the
National Association of Securities Dealers, Inc. The debentures sold using this
prospectus, however, will no longer be eligible for trading in The PORTAL
Market.
Shares of our common stock are quoted on the Nasdaq National Market under
the symbol "PSTI." The last reported sale price of our common stock on June 3,
2005 was $19.16 per share.
INVESTING IN THE DEBENTURES OR OUR COMMON STOCK INVOLVES RISKS. PLEASE
REVIEW THE "RISK FACTORS" BEGINNING ON PAGE 7 OF THIS PROSPECTUS FOR A
DISCUSSION OF CERTAIN RISKS THAT YOU SHOULD CONSIDER IN CONNECTION WITH AN
INVESTMENT IN THE DEBENTURES AND COMMON STOCK ISSUABLE, IF ANY, UPON CONVERSION
OF THE DEBENTURES.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 2005.
TABLE OF CONTENTS
PAGE
----
Prospectus Summary.......................................... 1
Risk Factors................................................ 7
Forward-Looking Statements.................................. 15
Use of Proceeds............................................. 16
Selling Securityholders..................................... 17
Plan of Distribution........................................ 25
Description of the Debentures............................... 27
Description of Capital Stock................................ 49
Certain Material United States Federal Income Tax
Considerations............................................ 53
Legal Matters............................................... 59
Experts..................................................... 59
Where You Can Find More Information......................... 59
Documents Incorporated by Reference......................... 59
PROSPECTUS SUMMARY
OUR COMPANY
We were organized in 1985 under the laws of the State of Delaware, and
focus on providing services and solutions that improve the administrative
functions of the healthcare industry. Specifically, we provide Connective
Healthcare solutions that help physicians and hospitals achieve their income
potential. Connective Healthcare solutions support and unite healthcare
providers, payers and patients with innovative technology processes that improve
and accelerate reimbursement and reduce the administrative cost of care. We
serve the healthcare industry through two divisions: Physician Services and
Hospital Services.
The Physician Services division provides Connective Healthcare services and
solutions that manage the revenue cycle for physician groups. The division is
the largest provider of business management outsourced services that supplant
all or most of the administrative functions of a physician group. Services
include clinical data collection, data input, medical coding, billing, contract
management, cash collections, accounts receivable management and extensive
reporting of metrics related to the physician practice. These services are
designed to assist healthcare providers with the business management functions
associated with the delivery of healthcare services, allowing physicians to
focus on providing quality patient care. These services also help physician
groups to be financially successful by improving cash flows and reducing
administrative costs and burdens.
The target market is primarily hospital-affiliated physician groups in the
specialties of radiology, anesthesiology, emergency medicine and pathology as
well as physician groups practicing in the academic setting and other large
physician groups. Approximately 225,000 U.S.-based hospital-affiliated
physicians represent our target market for business management outsourced
services. Our target market consists of large physician groups -- typically 10
or more physicians depending upon the specialty -- and represents an estimated
market opportunity of approximately $7 billion. We estimate that approximately
20% to 30% of the physicians in the target market currently outsource their
business management needs, with the remainder of physicians performing these
services in house. Our Physician Services division is the largest provider of
comprehensive business management outsourcing services to the U.S.
hospital-based physician market, supporting approximately 1,100 clients in 42
states. This division also offers a physician practice management solution that
is delivered via an application service provider model which represented less
than 4% of the division's revenue in 2004.
The Hospital Services division provides Connective Healthcare solutions
that increase revenue and decrease expenses for hospitals, with a focus on
revenue cycle management and resource management. The division has one of the
largest electronic clearinghouses in the medical industry, which provides an
important infrastructure to support its revenue cycle offering. The
clearinghouse supports more than 1,400 governmental and commercial payer
connections in 48 states. The clearinghouse delivers dedicated electronic and
Internet-based business-to-business solutions that focus on electronic
processing of medical transactions as well as complementary transactions, such
as electronic remittance advices, real-time eligibility verification and
high-speed print and mail services. Other revenue cycle management solutions
provide insight into a hospital's revenue cycle inefficiencies, such as denial
management. Denial management allows hospitals to identify charges denied
reimbursement by a payer and to take corrective actions such as resubmitting for
reimbursement. Hospitals may opt to outsource portions of their revenue cycle
management process to us, such as secondary insurance billing. Our revenue cycle
management solutions are currently in approximately 400 hospitals in the United
States.
The Hospital Services division also provides resource management solutions
that enable hospitals to efficiently manage resources to reduce costs and
improve their bottom line. The division's resource management offerings include
staff scheduling solutions that can efficiently plan nurse schedules,
accommodating individual preferences as well as environmental factors, such as
acuity levels, as well as schedule all the personnel across the hospital
enterprise. The division also offers patient scheduling solutions that help
effectively manage a hospital's most expensive and profitable area, the
operating room, as well as schedule patients across the enterprise. The Hospital
Services division has the market-leading
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staff scheduling solution and a market-leading patient scheduling solution. We
provide staff and patient scheduling solutions to approximately 1,600 hospitals,
primarily in the United States.
As stated previously, we focus on the administrative functions of the
healthcare market, with the majority of our business based in the United States.
Healthcare spending in the United States reached an estimated $1.7 trillion or
15.3% of gross domestic product in 2003. It has been estimated that as much as
31% of annual healthcare spending is for administrative functions. Our solutions
help make the reimbursement of healthcare more efficient and help improve the
overall patient care experience by simplifying the revenue cycle process for
physicians and hospitals. Our services and solutions are not capital-intensive
for providers, making them a cost-effective solution as providers focus on their
financial health.
CORPORATE INFORMATION
Our principal executive office is located at 1145 Sanctuary Parkway, Suite
200, Alpharetta, Georgia 30004, and our telephone number is (770) 237-4300. Our
corporate website is www.per-se.com. Information contained on our website is not
part of this prospectus.
RISK FACTORS
You should read the "Risk Factors" section, beginning on page 7 of this
prospectus, to understand the risks associated with an investment in the
debentures.
SUMMARY OF THE DEBENTURES
Maturity Date................. June 30, 2024.
Ranking....................... The debentures will be subordinated in right of
payment to all of our existing and future
senior debt as that term is described in this
prospectus. The indenture for the debentures
does not restrict the amount of senior debt or
other indebtedness as that term is described in
this prospectus that we or any of our
subsidiaries can incur. At March 31, 2005 our
senior debt totaled approximately $3.8 million.
See "Description of the
Debentures -- Subordination." The debentures
will not be guaranteed by any of our
subsidiaries and, accordingly, the debentures
are effectively subordinated to the
indebtedness and other liabilities of our
subsidiaries, including trade creditors. As of
March 31, 2005, our subsidiaries had
liabilities of approximately $57.5 million
excluding intercompany indebtedness and
guarantees under our credit agreement, all of
which is structurally senior to the debentures.
Interest...................... We will pay interest on the debentures on June
30 and December 30 of each year, beginning
December 30, 2004.
Conversion Rights............. You may convert your debentures prior to stated
maturity only under the following
circumstances:
- during any fiscal quarter commencing after
September 30, 2004, if the closing sale price
of our common stock for at least 20 trading
days in the 30 trading-day period ending on
the last trading day of the preceding fiscal
quarter is more than 130% of the conversion
price on that 30th trading day; or
2
- during the five business day period after any
five consecutive trading day period, which we
refer to in this prospectus as the
measurement period, in which the trading
price per debenture for each day of such
measurement period was less than 98% of the
product of the closing sale price of our
common stock on such day and the conversion
rate on such day; provided, however, if you
convert your debentures in reliance on this
subsection, and on any trading day during
such measurement period the closing sale
price of shares of our common stock was
between 100% and 130% of the conversion price
of the debentures, you will receive cash
equal to the principal amount of the
debentures plus accrued and unpaid interest,
if any, and liquidated damages, if any; or
- if we have called your debentures for
redemption, provided that if we elect to
redeem less than all of the debentures, only
those debentures called for redemption may be
converted; or
- upon the occurrence of specified corporate
transactions described under "Description of
the Debentures -- Conversion Rights."
As originally issued, the debentures were
convertible into shares of our common stock at
an initial conversion rate of 56.0243 shares
per $1,000 principal amount, which represents
an initial conversion price of approximately
$17.85 per share. However, we have made an
irrevocable election under the terms of the
indenture to satisfy in cash up to 100% of the
principal amount of the debentures submitted
for conversion, with any remaining amount to be
satisfied in shares of our common stock as
described under "Description of the
Debentures -- Conversion Rights -- Payment Upon
Conversion." As described in this prospectus,
the conversion rate may be adjusted for certain
reasons.
Upon conversion, you will not receive any cash
payment representing accrued and unpaid
interest, if any. Instead, any such amounts
will be deemed paid by the cash and common
stock, if any, received by you on conversion.
You will, however, receive any accrued and
unpaid liquidated damages to, but not
including, the conversion date.
Debentures called for redemption may be
surrendered for conversion until the close of
business on the business day prior to the
redemption date.
If you convert your debentures in connection
with certain fundamental changes on or prior to
June 30, 2009, we will, in certain
circumstances, pay a make-whole premium in the
form of consideration into which or for which
our common stock was converted, exchanged or
acquired as more fully described below.
Payment at Maturity........... For each $1,000 principal amount of the
debentures that you hold, you shall be entitled
to receive $1,000 at maturity, plus accrued
interest, if any, and accrued and unpaid
liquidated damages, if any.
3
Sinking Fund.................. None.
Optional Redemption by Us..... We may not redeem the debentures prior to July
6, 2009. We may redeem some or all of the
debentures for cash on or after July 6, 2009,
upon at least 30 days but not more than 60 days
notice by mail to holders of debentures, at a
price equal to 100% of the principal amount of
the debentures redeemed, plus accrued and
unpaid interest, if any, and accrued and unpaid
liquidated damages, if any, to, but not
including, the redemption date.
Repurchase of Debentures by Us
at Your Option................ You may require us to repurchase all or a
portion of your debentures for cash on June 30,
2009, June 30, 2014 and June 30, 2019 at a
price equal to 100% of the principal amount of
the debentures to be purchased plus accrued and
unpaid interest, if any, and accrued and unpaid
liquidated damages, if any, to, but not
including, the date of repurchase.
Fundamental Change Put........ If a fundamental change occurs to us, as
defined under "Description of the
Debentures -- Repurchase of Debentures at Your
Option -- Fundamental Change Put," you may
require us to repurchase all or a portion of
your debentures. We will pay a repurchase price
equal to 100% of the principal amount of the
debentures to be purchased plus accrued
interest, if any, and accrued and unpaid
liquidated damages, if any, to, but not
including, the fundamental change repurchase
date.
Make-Whole Premium Upon
Certain Fundamental Changes... If certain fundamental changes occur prior to
June 30, 2009, we will, in certain
circumstances, pay a make-whole premium on the
debentures converted or tendered for repurchase
upon such fundamental change. The make-whole
premium, if any, will be payable in the
consideration into which or for which our
common stock was converted, exchanged or
acquired in such fundamental change.
The amount of the make-whole premium, if any,
will be based on our stock price and the
effective date of such specified fundamental
change. A table showing the make-whole-premium
that would apply at various stock prices and
specified fundamental change effective dates is
set forth under "Description of the
Debentures -- Repurchase of Debentures at Your
Option -- Make-Whole Premium." No make-whole
premium will be paid if the common stock price
is less than $12.57 or if the common stock
price exceeds $50.00.
Use of Proceeds............... We will not receive any proceeds from the sale
by any selling securityholders of the
debentures or any shares of common stock that
may be issuable upon conversion of the
debentures.
Absence of a Public Market for
the Debentures................ The debentures are new securities for which
there is currently no public market. We cannot
assure you that any active or liquid market
will develop for the debentures. See "Plan of
Distribution."
4
Trading....................... We do not intend to list the debentures on any
national securities exchange or include them in
any automated quotation system. The debentures
issued in the private placement are eligible
for trading in The PORTAL Market of the
National Association of Securities Dealers,
Inc. The debentures sold using this prospectus,
however, will no longer be eligible for trading
in The PORTAL Market.
Nasdaq Symbol for our Common
Stock......................... Our common stock is quoted on the Nasdaq
National Market under the symbol "PSTI."
5
RATIO OF EARNINGS TO FIXED CHARGES
The following table presents our historical ratios of earnings to fixed
charges for the periods indicated:
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------ -----------------------------------
2005 2004 2004 2003 2002 2001 2000
------ ------ ----- ----- ----- ---- ----
(UNAUDITED)
Ratio(1)................................ 6.29x 1.73x 2.16x 1.68x 1.58x (2) (2)
---------------
(1) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of earnings before income tax expense, plus fixed charges. Fixed
charges consist of:
- interest expense, which includes interest on capitalized leases and
amortization of deferred financing costs, whether expensed or
capitalized, and
- that portion of rental expense estimated by management to be attributable
to interest based on the net present value of real estate and equipment
leases using interest equal to our weighted average interest rate for the
period.
(2) Our pre-tax income from continuing operations was inadequate to cover fixed
charges for the years ended December 31, 2001 and 2000 by approximately $5.9
million and $21.4 million, respectively.
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RISK FACTORS
RISKS RELATED TO OUR BUSINESS
IF WE FAIL TO MAINTAIN AN EFFECTIVE SYSTEM OF INTERNAL CONTROLS, WE MAY NOT
BE ABLE TO ACCURATELY REPORT OUR FINANCIAL RESULTS ON A TIMELY BASIS. AS A
RESULT, CURRENT AND POTENTIAL STOCKHOLDERS COULD LOSE CONFIDENCE IN OUR
FINANCIAL REPORTING WHICH WOULD HARM OUR BUSINESS AND THE TRADING PRICE OF OUR
STOCK.
As a result of errors that led to the restatements of our financial
statements for the years ended December 31, 2001, and 2002, and the nine months
ended September 30, 2003, our independent auditors determined that a material
weakness related to our internal controls existed. Our auditors reported to us
that the errors that resulted in the restatements were the result of not having
appropriate controls over the estimation process associated with the
establishment of accruals and reserves and the lack of adequate supervision of
accounting personnel. The errors generally related to the recording of accruals
for sales commissions, vacation liabilities, legal expenses, health insurance,
incentive compensation and other liabilities. While we have taken steps to
improve controls in these areas, we cannot be certain that these steps will
ensure that we implement and maintain adequate controls over financial processes
and reporting. Failure to maintain adequate controls of this type could
adversely impact the accuracy and future timeliness of our financial reports
filed pursuant to the Securities Exchange Act of 1934. If we cannot provide
reliable and timely financial reports, our business and operating results could
be harmed, investors could lose confidence in our reported financial
information, our common stock could be delisted from the Nasdaq Stock Market,
and the trading price of our common stock could fall.
WE HAVE A SIGNIFICANT AMOUNT OF LONG-TERM DEBT AND OBLIGATIONS TO MAKE
PAYMENTS, WHICH COULD LIMIT OUR FUNDS AVAILABLE FOR OTHER ACTIVITIES.
We have approximately $125 million of long-term indebtedness and $0.6
million in capital lease obligations and, as a result, have obligations to make
interest and principal payments on that debt. If unable to make the required
debt payments, we could be required to reduce or delay capital expenditures,
sell certain assets, restructure or refinance our indebtedness, or seek
additional equity capital. Our ability to make payments on our debt obligations
will depend on future operating performance, which may be affected by conditions
beyond our control.
WE ARE REGULARLY INVOLVED IN LITIGATION, WHICH MAY EXPOSE US TO SIGNIFICANT
LIABILITIES.
We are involved in litigation arising in the ordinary course of our
business, which may expose us to loss contingencies. These matters include, but
are not limited to, claims brought by former customers with respect to the
operation of our business. We have also received written demands from customers
and former customers that have not yet resulted in legal action.
We may not be able to successfully resolve such legal matters, or other
legal matters that may arise in the future. In the event of an adverse outcome
with respect to such legal matters or other legal matters in which we may become
involved, our insurance coverage, errors and omissions coverage or other
coverage, may not fully cover any damages assessed against us. Although we
maintain all insurance coverage in amounts that we believe is sufficient for our
business, such coverage may prove to be inadequate or may become unavailable on
acceptable terms, if at all. A successful claim brought against us, which is
uninsured or under-insured, could materially harm our business, results of
operations or financial condition.
THE PHYSICIAN BUSINESS MANAGEMENT OUTSOURCING BUSINESS IS HIGHLY
COMPETITIVE AND OUR INABILITY TO SUCCESSFULLY COMPETE FOR BUSINESS COULD
ADVERSELY AFFECT US.
The physician business management outsourcing business, especially for
revenue cycle management, is highly competitive. We compete with regional and
local physician reimbursement organizations as well as physician groups that
provide their own business management services in house. Successful competition
within this industry is dependent on numerous industry and market conditions.
Potential industry and market changes that could adversely affect our
ability to compete for business management outsourcing services include an
increase in the number of local, regional or national
7
competitors providing comparable services and new alliances between healthcare
providers and third-party payers in which healthcare providers are employed by
such third-party payers.
THE BUSINESS OF PROVIDING SERVICES AND SOLUTIONS TO HOSPITALS FOR BOTH
REVENUE CYCLE AND RESOURCE MANAGEMENT IS ALSO HIGHLY COMPETITIVE AND OUR
INABILITY TO SUCCESSFULLY COMPETE FOR BUSINESS COULD ADVERSELY AFFECT US.
The business of providing services and solutions to hospitals for both
revenue cycle and resource management is also highly competitive. We compete
with traditional electronic data interface companies, outsourcing companies and
specialized software vendors with national, regional and local bases. Some
competitors have longer operating histories and greater financial, technical and
marketing resources than us. Our successful competition within this industry is
dependent on numerous industry and market conditions.
THE MARKETS FOR OUR SERVICES AND SOLUTIONS ARE CHARACTERIZED BY RAPIDLY
CHANGING TECHNOLOGY, EVOLVING INDUSTRY STANDARDS AND FREQUENT NEW PRODUCT
INTRODUCTIONS AND OUR INABILITY TO KEEP PACE COULD ADVERSELY AFFECT US.
The markets for our services and solutions are characterized by rapidly
changing technology, evolving industry standards and frequent new product
introductions. Our ability to keep pace with changes in the healthcare industry
may be dependent on a variety of factors, including our ability to enhance
existing products and services; introduce new products and services quickly and
cost effectively; achieve market acceptance for new products and services; and
respond to emerging industry standards and other technological changes.
Competitors may develop competitive products that could adversely affect
our operating results. It is possible that we will be unsuccessful in refining,
enhancing and developing our technology going forward. The costs associated with
refining, enhancing and developing these systems may increase significantly in
the future. Existing software and technology may become obsolete as a result of
ongoing technological developments in the marketplace.
THE HEALTHCARE MARKETPLACE IS CHARACTERIZED BY CONSOLIDATION, WHICH MAY
RESULT IN FEWER POTENTIAL CUSTOMERS FOR OUR SERVICES.
In general, consolidation initiatives in the healthcare marketplace may
result in fewer potential customers for our services. Some of these types of
initiatives include employer initiatives such as creating purchasing
cooperatives, or GPOs; provider initiatives, such as risk-sharing among
healthcare providers and managed care companies through capitated contracts; and
integration among hospitals and physicians into comprehensive delivery systems.
Consolidation of management and billing services through integrated
delivery systems may result in a decrease in demand for our business management
outsourcing services for particular physician practices.
THE HEALTHCARE INDUSTRY IS HIGHLY REGULATED, WHICH MAY INCREASE OUR COSTS
OF OPERATION.
The healthcare industry is highly regulated and is subject to changing
political, economic and regulatory influences. Federal and state legislatures
have periodically considered programs to reform or amend the U.S. healthcare
system at both the federal and state level and to change healthcare financing
and reimbursement systems, such as the Balanced Budget Act of 1997 and the
Medicare Modernization Act of 2003. These programs may contain proposals to
increase governmental involvement in healthcare, lower reimbursement rates or
otherwise change the environment in which healthcare industry participants
operate. Current or future government regulations or healthcare reform measures
may affect our business. Healthcare industry participants may respond by
reducing their investments or postponing investment decisions, including
investments in our products and services.
Medical billing and collection activities are governed by numerous federal
and state civil and criminal laws. Federal and state regulators use these laws
to investigate healthcare providers and companies that provide billing and
collection services. In connection with these laws, we may be subjected to
federal or
8
state government investigations and possible penalties may be imposed upon us,
false claims actions may have to be defended, private payers may file claims
against us, and we may be excluded from Medicare, Medicaid or other
government-funded healthcare programs.
In the past, we have been the subject of federal investigations, and we may
become the subject of false claims litigation or additional investigations
relating to our billing and collection activities. Any such proceeding or
investigation could have a material adverse effect on our business.
Under the Health Insurance Portability and Accountability Act of 1996, or
HIPAA, final rules have been published regarding standards for electronic
transactions as well as standards for privacy and security of individually
identifiable health information. The HIPAA rules set new or higher standards for
the healthcare industry in handling healthcare transactions and information,
with penalties for noncompliance. We have incurred and will continue to incur
costs to comply with these rules. Although management believes that future
compliance costs will not have a material impact on our results of operations,
compliance with these rules may prove to be more costly than is anticipated.
Failure to comply with such rules may have a material adverse effect on our
business and may subject us to civil and criminal penalties as well as loss of
customers.
We rely upon third parties to provide data elements to process electronic
medical claims in a HIPAA compliant format. While we believe we will be fully
and properly prepared to process electronic medical claims in a HIPAA-compliant
format, there can be no assurance that third parties, including healthcare
providers and payers, will likewise be prepared to supply all the data elements
required to process electronic medical claims and make electronic remittance
under HIPAA's standards. If payers reject electronic medical claims and such
claims are processed manually rather than electronically, there could be a
material adverse affect on our business. We have made and expect to continue to
make investments in product enhancements to support customer operations that are
regulated by HIPAA. Responding to HIPAA's impact may require us to make
investments in new products or charge higher prices.
Numerous federal and state civil and criminal laws govern the collection,
use, storage and disclosure of health information for the purpose of
safeguarding the privacy and security of such information. Federal or state
governments may impose penalties for noncompliance, both criminal and civil.
Persons who believe their health information has been misused or disclosed
improperly may bring claims and payers who believe instances of noncompliance
with privacy and security standards have occurred may bring administrative
sanctions or remedial actions against offending parties.
Passage of HIPAA is part of a wider healthcare reform initiative. We expect
that the debate on healthcare reform will continue. We also expect that the
federal government as well as state governments will pass laws and issue
regulations addressing healthcare issues and reimbursement of healthcare
providers. We cannot predict whether the government will enact new legislation
and regulations, and, if enacted, whether such new developments will affect our
business.
THE TRADING PRICE OF OUR COMMON STOCK MAY BE VOLATILE AND NEGATIVELY AFFECT
YOUR INVESTMENT.
The trading price of our common stock may be volatile. The market for our
common stock may experience significant price and volume fluctuations in
response to a number of factors including actual or anticipated quarterly
variations in operating results, changes in expectations of future financial
performance, changes in estimates of securities analysts, government regulatory
action, healthcare reform measures, client relationship developments and other
factors, many of which are beyond our control. Furthermore, the stock market in
general, and the market for software, healthcare business services and high
technology companies in particular, has experienced volatility that often has
been unrelated to the operating performance of particular companies. These broad
market and industry fluctuations may adversely affect the trading price of our
common stock, regardless of actual operating performance.
9
RISKS RELATED TO THE DEBENTURES
THE DEBENTURES ARE SUBORDINATED IN RIGHT OF PAYMENT TO OUR OTHER
INDEBTEDNESS, AND THERE MAY NOT BE SUFFICIENT ASSETS TO PAY AMOUNTS DUE ON THE
DEBENTURES IN THE EVENT OF A BANKRUPTCY OR LIQUIDATION OR UPON ACCELERATION OF
THE DEBENTURES.
The debentures are unsecured obligations subordinated in right of payment
to all of our existing and future senior debt. In the event of our bankruptcy,
liquidation or reorganization or upon acceleration of the debentures due to an
event of default under the indenture and in certain other events, our assets
will be available to pay obligations on the debentures only after all our senior
debt has been paid. As a result, there may not be sufficient assets remaining to
pay amounts due on any or all of the outstanding debentures.
THE DEBENTURES WILL BE EFFECTIVELY SUBORDINATED TO EXISTING AND FUTURE
INDEBTEDNESS AND OTHER LIABILITIES OF OUR SUBSIDIARIES, AND IN THE EVENT OF A
BANKRUPTCY OR LIQUIDATION OF A SUBSIDIARY, WE MAY NOT RECEIVE ANY OF ITS ASSETS
TO HELP FULFILL OUR OBLIGATIONS UNDER THE DEBENTURES.
Because we operate through our subsidiaries, we derive our revenues from
and hold our assets through those subsidiaries. As a result, we rely upon the
operations of our subsidiaries in order to meet our payment obligations under
the debentures and our other obligations. These subsidiaries are separate and
distinct legal entities and will have no obligation to pay any amounts due on
our debt securities, including the debentures, or to provide us with funds for
our payment obligations, whether by dividends, distributions, loans or
otherwise. Our right to receive any assets of any subsidiary in the event of a
bankruptcy or liquidation of the subsidiary, and therefore the right of our
creditors to participate in those assets, will be effectively subordinated to
the claims of that subsidiary's creditors, including trade creditors. In
addition, even if we were a creditor of any subsidiary, our rights as a creditor
would be subordinated to any indebtedness of that subsidiary senior to that held
by us, including secured indebtedness to the extent of the assets securing such
indebtedness. As of March 31, 2005, our subsidiaries had liabilities of
approximately $57.5 million, excluding intercompany indebtedness and guarantees
under our credit agreement, all of which is structurally senior to the
debentures.
BECAUSE WE OPERATE THROUGH SUBSIDIARIES, WE MAY BE UNABLE TO REPAY OR
REPURCHASE THE DEBENTURES IF OUR SUBSIDIARIES ARE UNABLE TO PAY DIVIDENDS OR
MAKE ADVANCES TO US.
At maturity, the entire outstanding principal amount of the debentures will
become due and payable by us. In addition, each holder of the debentures may
require us to repurchase all or a portion of that holder's debentures on June 30
of 2009, 2014, and 2019 or, if a fundamental change, as defined in the
indenture, of our company occurs. A fundamental change also may constitute an
event of default under, and result in the acceleration of the maturity of,
indebtedness under another indenture or other indebtedness that we have or may
incur in the future.
We, as a holding company, are dependent upon the operations of our
subsidiaries to enable us to service our outstanding debt, including the
debentures. At maturity or upon a repurchase request, if we do not have
sufficient funds on hand or available through existing borrowing facilities or
through the declaration and payment of dividends by our subsidiaries, we will
need to seek additional financing. Additional financing may not be available to
us in the amounts necessary.
Our credit agreement contains, and future borrowing arrangements or
agreements may contain, restrictions on our repayment or repurchase of the
debentures under certain conditions. For example, our credit agreement contains
a provision prohibiting us from prepaying, redeeming or acquiring the debentures
for cash. In the event that the maturity date or repurchase request occurs at a
time when we are restricted from repaying or repurchasing the debentures, we
could attempt to obtain the consent of the lenders under those arrangements to
purchase the debentures or could attempt to refinance the borrowings that
contain the restrictions. If we do not obtain the necessary consents or
refinance these borrowings, we will be unable to repay or repurchase the
debentures. Failure by us to repurchase the debentures when required will result
in an event of default with respect to the debentures, which would, in turn,
result in an event of default under our credit agreement or may result in an
event of default under such other arrangements.
10
WE HAVE A SUBSTANTIAL AMOUNT OF INDEBTEDNESS, WHICH COULD ADVERSELY AFFECT
OUR FINANCIAL PERFORMANCE AND IMPACT OUR ABILITY TO MAKE PAYMENTS ON THE
DEBENTURES.
As of March 31, 2005, we, including our subsidiaries, had total debt of
approximately $125.6 million. Our level of indebtedness could have important
consequences to the holders of the debentures. For example, it:
- may limit our ability to obtain additional financing for working capital,
capital expenditures or general corporate purposes, particularly if the
ratings assigned to our debt securities by rating organizations were
revised downward;
- will require us to dedicate a substantial portion of our cash from
operations to the payment of principal and interest on our debt, reducing
the funds available to us for other purposes, including expansion through
acquisitions, capital expenditures, marketing spending and expansion of
our product offerings;
- 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; and
- may place us at a possible competitive disadvantage relative to less
leveraged competitors and competitors that have better access to capital.
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, AND THEREFORE THE PRICE OF THE DEBENTURES, MAY BE SUBJECT
TO SIGNIFICANT FLUCTUATIONS AND VOLATILITY, WHICH COULD NEGATIVELY AFFECT YOUR
INVESTMENT.
The market price of the debentures may be significantly affected by the
market price of our common stock particularly if our common stock trades in
excess of the conversion price of the debentures. This may result in greater
volatility in the trading value of the debentures than would be expected for
non-convertible debt securities that we issue. Among the factors that could
affect our common stock price are those discussed above under "-- Risks Related
to Our Business" as well as:
- quarterly variations in our operating results;
- federal or state legislative, licensing or regulatory changes with
respect to our industry;
- healthcare reform measures;
- client relationship developments;
- changes in revenue or earnings estimates or publication of research
reports by analysts;
- speculation in the press or investment community;
- strategic actions by us or our competitors;
- general market conditions; and
- domestic and international economic factors unrelated to our performance.
In addition, the stock markets have experienced extreme volatility that has
often been unrelated to the operating performance of particular companies. These
broad market fluctuations may adversely affect the trading price of our common
stock and of the debentures.
THE TRADING PRICES FOR THE DEBENTURES MAY BE AFFECTED BY THE TRADING PRICES
FOR OUR COMMON STOCK, WHICH ARE IMPOSSIBLE TO PREDICT.
The price of our common stock could be affected by possible sales of our
common stock by investors who view the debentures as a more attractive means of
equity participation in our company particularly if our common stock trades in
excess of the conversion price of the debentures. In addition, the trading price
11
of our common stock could be affected by hedging or arbitrage trading activity
that may develop involving our common stock. The hedging or arbitrage could, in
turn, affect the trading prices of the debentures.
THE CONDITIONAL CONVERSION FEATURE OF THE DEBENTURES COULD RESULT IN YOU
NOT RECEIVING THE VALUE OF THE CASH AND COMMON STOCK, IF ANY, INTO WHICH THE
DEBENTURES ARE CONVERTIBLE.
The debentures are convertible into cash and, depending on the trading
price of our common stock, shares of common stock only if specific conditions
are met. If the specific conditions for conversion are not met, you may not be
able to receive the value of the cash and common stock, if any, into which your
debentures would otherwise be convertible.
CONVERSION OF DEBENTURES ENTAILS MARKET RISK WITH RESPECT TO OUR COMMON
STOCK, AND IF THE TRADING PRICE OF OUR COMMON STOCK DECLINES AFTER YOU SUBMIT A
CONVERSION NOTICE, YOU MAY ULTIMATELY RECEIVE LESS CASH AND COMMON STOCK THAN
YOU EXPECTED TO RECEIVE WHEN YOU SUBMITTED YOUR CONVERSION NOTICE.
The amount of cash and common stock, if any, payable upon conversion of
debentures depends, in part, on the trading price of our common stock during a
period of 20 trading days occurring after you submit a conversion notice.
Conversion notices cannot be revoked. As a result, if the trading price of our
common stock declines during the applicable 20 trading day period, you may
receive less cash and common stock than you expected to receive when you
submitted your conversion notice. You may receive less than 100% of the
principal amount of the debentures surrendered for conversion. The manner in
which the amount of cash and common stock, if any, payable upon conversion of
debentures will be determined is described under "Description of
Debentures -- Conversion Rights -- Payment Upon Conversion."
THERE MAY NOT BE AN ACTIVE TRADING MARKET FOR THE DEBENTURES, WHICH COULD
ADVERSELY AFFECT THE TRADING PRICE OF THE DEBENTURES AND YOUR ABILITY TO SELL
THE DEBENTURES.
Prior to this offering, there has been no trading market for the
debentures. We do not intend to apply for listing of the debentures on any
securities exchange or any automated quotation system. Although the initial
purchasers advised us that they intend to make a market in the debentures, they
are not obligated to do so and may discontinue their market-making activities at
any time without notice. Consequently, we cannot be sure that any market for the
debentures will develop, or if one does develop, that it will be maintained. If
an active market for the debentures fails to develop or be sustained, the
trading price and liquidity of the debentures could be adversely affected.
IF YOU ARE ABLE TO RESELL YOUR DEBENTURES, MANY OTHER FACTORS MAY AFFECT
THE PRICE YOU RECEIVE, WHICH MAY BE LOWER THAN YOU BELIEVE TO BE APPROPRIATE.
If you are able to resell your debentures, the price you receive will
depend on many other factors that may vary over time, including:
- the number of potential buyers;
- the level of liquidity of the debentures;
- ratings published by major credit rating agencies;
- our financial performance;
- the amount of indebtedness we have outstanding;
- the level, direction and volatility of market interest rates generally;
- the market for similar securities;
- the redemption and repayment features of the debentures to be sold; and
- the time remaining to the maturity of your debentures.
As a result of these factors, you may only be able to sell your debentures
at prices below those you believe to be appropriate, including prices below the
price you paid for them.
12
THE CONVERSION RATE OF THE DEBENTURES MAY NOT BE ADJUSTED FOR ALL DILUTIVE
EVENTS, WHICH COULD ADVERSELY AFFECT THE VALUE OF THE DEBENTURES AND ANY COMMON
STOCK THAT MAY BE ISSUABLE UPON CONVERSION OF THE DEBENTURES.
The conversion rate of the debentures is subject to adjustment for certain
events, including but not limited to the issuance of stock dividends on our
common stock, the issuance of rights or warrants, subdivisions, combinations,
distributions of capital stock, indebtedness or assets, certain cash dividends
and certain tender or exchange offers as described under "Description of the
Debentures -- Conversion Rights -- Conversion Rate Adjustments." The conversion
rate will not be adjusted for other events, such as an issuance of common stock
for cash, which may adversely affect the trading price of the debentures or our
common stock. We cannot assure you that an event that adversely affects the
value of the debentures, but does not result in an adjustment to the conversion
rate, will not occur.
YOU MAY HAVE TO PAY TAXES WITH RESPECT TO DISTRIBUTIONS ON OUR COMMON STOCK
THAT YOU DO NOT RECEIVE.
The conversion rate of the debentures is subject to adjustment for certain
events arising from stock splits and combinations, stock dividends, certain cash
dividends and certain other actions by us that modify our capital structure. See
"Description of the Debentures -- Conversion Rights -- Conversion Rate
Adjustments." If the conversion rate is adjusted as a result of a distribution
that is taxable to our common stock holders, such as a cash dividend, you would
be required to include an amount in income for federal income tax purposes,
notwithstanding the fact that you do not actually receive such distribution. The
amount that you would have to include in income will generally be equal to the
amount of the distribution that you would have received if you had settled the
purchase contract and purchased our common stock. In addition, non-U.S. holders
of the debentures may, in certain circumstances, be deemed to have received a
distribution subject to U.S. federal withholding tax requirements. See "Certain
Material United States Federal Income Tax Considerations."
THE DEBENTURES DO NOT RESTRICT OUR ABILITY TO INCUR ADDITIONAL DEBT OR TO
TAKE OTHER ACTION THAT COULD NEGATIVELY IMPACT OUR ABILITY TO MAKE PAYMENTS ON
THE DEBENTURES WHEN DUE.
We are not restricted under the terms of the indenture and the debentures
from incurring additional indebtedness or securing indebtedness other than the
debentures. In addition, the debentures do not require us to achieve or maintain
any minimum financial results relating to our financial position or results of
operations. Our ability to recapitalize, incur additional debt, secure existing
or future debt and take a number of other actions that are not limited by the
terms of the indenture and the debentures could have the effect of diminishing
our ability to make payments on the debentures when due. In addition, we are not
restricted from repurchasing subordinated indebtedness or common stock by the
terms of the indenture and the debentures.
CONVERSION OF THE DEBENTURES MAY DILUTE THE OWNERSHIP INTEREST OF EXISTING
STOCKHOLDERS, INCLUDING HOLDERS WHO HAD PREVIOUSLY CONVERTED THEIR DEBENTURES.
The conversion of debentures may 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.
IF YOU HOLD DEBENTURES, YOU WILL NOT BE ENTITLED TO ANY RIGHTS WITH RESPECT
TO OUR COMMON STOCK, BUT YOU WILL BE SUBJECT TO ALL CHANGES MADE WITH RESPECT TO
OUR COMMON STOCK.
If you hold debentures, you will not be entitled to any rights with respect
to our common stock (including, without limitation, voting rights and rights to
receive any dividends or other distributions on our common stock), but you will
be subject to all changes affecting the common stock. You will have rights with
respect to our common stock only if and when we deliver shares of common stock
to you upon conversion of your debentures and, in limited cases, under the
conversion rate adjustments applicable to
13
the debentures. For example, in the event that an amendment is proposed to our
certificate of incorporation or bylaws requiring stockholder approval and the
record date for determining the stockholders of record entitled to vote on the
amendment occurs prior to delivery of common stock to you, you will not be
entitled to vote on the amendment, although you will nevertheless be subject to
any changes in the powers, preferences or special rights of our common stock.
WE HAVE VARIOUS MECHANISMS IN PLACE TO DISCOURAGE TAKEOVER ATTEMPTS, WHICH
MAY REDUCE OR ELIMINATE OUR STOCKHOLDERS' ABILITY TO SELL THEIR SHARES FOR A
PREMIUM IN A CHANGE OF CONTROL TRANSACTION.
Various provisions of our certificate of incorporation and bylaws and of
Delaware corporate law may discourage, delay or prevent a change of control or
takeover attempt of our company by a third party that is opposed to by our
management and board of directors. Public stockholders who might desire to
participate in such a transaction may not have the opportunity to do so. These
anti-takeover provisions could substantially impede the ability of public
stockholders to benefit from a change of control or change in our management and
board of directors. These provisions include:
- preferred stock that could be issued by our board of directors to make it
more difficult for a third party to acquire, or to discourage a third
party from acquiring, a majority of our outstanding voting stock;
- non-cumulative voting for directors;
- control by our board of directors of the size of our board of directors;
- limitations on the ability of stockholders to call special meetings of
stockholders;
- a unanimity requirement for stockholders to take any action by written
consent; and
- advance notice requirements for nominations of candidates for election to
our board of directors or for proposing matters that can be acted upon by
our stockholders at stockholder meetings.
We have also approved a Rights Agreement, which we refer to in this
prospectus as the rights plan. Pursuant to the rights plan, the holders of our
common stock are entitled to purchase one one-hundredth of a share of Series A
Junior Participating Preferred Stock at a purchase price of $75 per unit.
Subject to certain exceptions specified in the rights plan, the right to
purchase will separate from the common stock and become exercisable upon the
earlier to occur of (i) 10 business days following a public announcement that a
person or group of affiliated or associated persons has acquired beneficial
ownership of 15% or more of the outstanding common stock or (ii) 10 business
days following the commencement of a tender offer for the common stock. The
existence of the rights plan may discourage, delay or prevent a change of
control or takeover attempt of our company by a third party opposed to by our
management and board of directors.
14
FORWARD-LOOKING STATEMENTS
This prospectus includes statements reflecting assumptions, expectations,
projections, intentions, and/or beliefs about future events and future
performance that are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. You can identify these
statements by the fact that they do not relate strictly to historical or current
facts or because they necessarily depend upon future events. They sometimes
include words such as "anticipate," "estimate," "project," "forecast," "may,"
"will," "intend," "should," "could," "would," "expect," "believe" and other
words of similar meaning. In particular, these forward-looking statements
include, but are not limited to, statements relating to the following:
- meritorious defenses to the claims and other issues asserted in pending
legal matters;
- the effect of industry and regulatory changes on our business and our
customer base;
- the impact of revenue backlog on future revenue; and
- overall profitability and the availability of capital.
Any or all of our forward-looking statements may turn out to be wrong. They
can be affected by inaccurate assumptions and by known or unknown risks and
uncertainties. Although we believe that the forward-looking statements we have
made are based on reasonable assumptions, they are based on current information
and beliefs and, accordingly, we can give no assurance that our expectations
will be achieved. In addition, these statements are subject to factors that
could cause actual results to differ materially from those suggested by the
forward-looking statements. These factors include, but are not limited to,
factors identified in this prospectus under the caption "Risk Factors."
Many of these factors and uncertainties will be important in determining
our actual future results. Consequently, no forward-looking statement can be
guaranteed. Our actual future results may vary materially from those expressed
or implied in any forward-looking statements.
All of our forward-looking statements, whether written or oral are
expressly qualified by these cautionary statements and any other cautionary
statements that may accompany such forward-looking statements. In addition, we
disclaim any obligation to update forward-looking statements to reflect events
or circumstances that occur or become known after the date of this prospectus.
15
USE OF PROCEEDS
We will not receive any proceeds from the sale by any selling
securityholder of the debentures or the shares of common stock issuable, if any,
upon conversion of the debentures.
16
SELLING SECURITYHOLDERS
The debentures were originally issued by us in a private placement and were
resold by the initial purchasers thereof to qualified institutional buyers in
reliance on Rule 144A under the Securities Act of 1933, as amended, which we
refer to in this prospectus as the Securities Act. Selling securityholders named
in the following table, including any of their non-sale transferees, pledgees or
donees, or their successors, may from time to time offer and sell any or all of
the debentures and shares of common stock, if any, into which the debentures are
convertible pursuant to this prospectus.
The selling securityholders may offer all, some or none of the debentures
or shares of common stock, if any, into which the debentures are convertible.
Because the selling securityholders may offer all or some portion of the
debentures or the common stock, no estimate can be given as to the amount of the
debentures or the common stock that will be held by the selling securityholders
upon completion of this offering.
CONVERSION
PRINCIPAL NUMBER OF SHARES OF
AMOUNT OF SHARES OF COMMON DEBENTURES
DEBENTURES COMMON STOCK STOCK OWNED AFTER SHARES OF COMMON
BENEFICIALLY OWNED PRIOR THAT MAY COMPLETION STOCK OWNED AFTER
OWNED THAT TO THIS BE OF THIS COMPLETION OF THIS
NAME OF SELLING SECURITYHOLDER MAY BE SOLD OFFERING(1)(2) SOLD(2) OFFERING(3) OFFERING(3)
------------------------------ ------------ --------------- ---------- ----------- ------------------
Acuity Master Fund, Ltd.(4)...... 760,000 -- -- 0 0
Akela Capital Master Fund,
Ltd.(5)........................ 12,500,000 -- -- 0 0
Attorney's Title Insurance
Fund(6)........................ 90,000 -- -- 0 0
Banc of America Securities
LLC(7)......................... 3,475,000 -- -- 0 0
Bancroft Convertible Fund,
Inc.(8)........................ 500,000 -- -- 0 0
Basso Multi-Strategy Holding Fund
Ltd.(9)........................ 1,000,000 -- -- 0 0
BNP Paribas Equity Strategies,
SNC(10)........................ 3,241,000 2,301 -- 0 2,301
Boilermakers Blacksmith Pension
Trust(11)...................... 1,245,000 -- -- 0 0
BP Amoco PLC Master Trust(12).... 567,000 -- -- 0 0
Calamos(R) Market Neutral Fund --
Calamos(R) Investment
Trust(13)...................... 3,000,000 -- -- 0 0
Citadel Credit Trading
Ltd.(14)....................... 160,000 -- -- 0 0
Citadel Equity Fund Ltd.(15)..... 1,840,000 -- -- 0 0
Consulting Group Capital Markets
Funds(16)...................... 600,000 -- -- 0 0
CooperNeff Convertible Strategies
(Cayman) Master Fund, LP(17)... 1,188,000 -- -- 0 0
CQS Convertible and Quantitative
Strategies Master Fund
Limited(18).................... 500,000 -- -- 0 0
DBAG London(19).................. 525,000 -- -- 0 0
Delta Airlines Master
Trust(20)...................... 315,000 -- -- 0 0
Diaco Investments LP(21)......... 240,000 -- -- 0 0
DKR SoundShore Opportunity
Holding Fund Ltd.(22).......... 2,100,000 -- -- 0 0
Duke Endowment(23)............... 265,000 -- -- 0 0
Ellsworth Convertible Growth and
Income Fund, Inc.(24).......... 500,000 -- -- 0 0
FrontPoint Convertible Arbitrage
Fund, L.P.(25)................. 3,500,000 -- -- 0 0
Geode U.S. Convertible Arbitrage
Fund(26)....................... 3,350,000 -- -- 0 0
17
CONVERSION
PRINCIPAL NUMBER OF SHARES OF
AMOUNT OF SHARES OF COMMON DEBENTURES
DEBENTURES COMMON STOCK STOCK OWNED AFTER SHARES OF COMMON
BENEFICIALLY OWNED PRIOR THAT MAY COMPLETION STOCK OWNED AFTER
OWNED THAT TO THIS BE OF THIS COMPLETION OF THIS
NAME OF SELLING SECURITYHOLDER MAY BE SOLD OFFERING(1)(2) SOLD(2) OFFERING(3) OFFERING(3)
------------------------------ ------------ --------------- ---------- ----------- ------------------
Grace Convertible Arbitrage Fund,
Ltd.(27)....................... 3,500,000 -- -- 0 0
HFRCA Select Fund(28)............ 750,000 -- -- 0 0
Highbridge International
LLC(29)........................ 4,000,000 -- -- 0 0
Hotel Union & Hotel Industry of
Hawaii Pension Plan(30)........ 92,000 -- -- 0 0
Institutional Benchmarks Master
Fund Ltd. c/o SSI Investment
Management(31)................. 781,000 -- -- 0 0
Institutional Benchmarks Master
Fund Ltd. c/o Zazove
Associates(32)................. 1,750,000 -- -- 0 0
Lord Abbett Investment
Trust -- LA Convertible
Fund(33)....................... 2,500,000 -- -- 0 0
Lyxor/Convertible Arbitrage Fund
Limited(34).................... 540,000 -- -- 0 0
Man Convertible Bond Master Fund,
Ltd.(35)....................... 7,190,000 -- -- 0 0
McMahan Securities Co.
L.P.(36)....................... 2,000,000 -- -- 0 0
Mill River Master Fund,
L.P.(37)....................... 1,000,000 -- -- 0 0
MSD TCB, LP(38).................. 10,700,000 -- -- 0 0
The City of Southfield Fire &
Police Retirement System
(39)........................... 3,000 -- -- 0 0
The Northwestern Mutual Life
Insurance Company(40).......... 1,900,000 -- -- 0 0
Polaris Vega Fund L.P.(41)....... 7,400,000 -- -- 0 0
Putnam Convertible Income-Growth
Trust(42)...................... 3,500,000 -- -- 0 0
RBC Alternative Assets -- Conv.
ARB(43)........................ 250,000 -- -- 0 0
S.A.C. Arbitrage Fund, LLC(44)... 1,000,000 42,130 -- 0 42,130
San Diego County Employee
Retirement Association(45)..... 2,000,000 -- -- 0 0
Singlehedge US Convertible
Arbitrage Fund(46)............. 474,000 -- -- 0 0
Sphinx Convertible Arbitrage Fund
SPC(47)........................ 605,000 -- -- 0 0
SSI Blended Market Neutral
L.P.(48)....................... 295,000 -- -- 0 0
SSI Hedged Convertible Market
Neutral L.P.(49)............... 459,000 -- -- 0 0
St. Thomas Trading, Ltd.(50)..... 3,335,000 -- -- 0 0
Sterling Invest Co.(51).......... 85,000 -- -- 0 0
Sturgeon Limited(52)............. 557,000 -- -- 0 0
Sunrise Partners Limited
Partnership(53)................ 12,300,000 -- -- 0 0
Value Line Convertible Fund,
Inc.(54)....................... 250,000 -- -- 0 0
Viacom Inc. Pension Plan Master
Trust(55)...................... 33,000 -- -- 0 0
18
CONVERSION
PRINCIPAL NUMBER OF SHARES OF
AMOUNT OF SHARES OF COMMON DEBENTURES
DEBENTURES COMMON STOCK STOCK OWNED AFTER SHARES OF COMMON
BENEFICIALLY OWNED PRIOR THAT MAY COMPLETION STOCK OWNED AFTER
OWNED THAT TO THIS BE OF THIS COMPLETION OF THIS
NAME OF SELLING SECURITYHOLDER MAY BE SOLD OFFERING(1)(2) SOLD(2) OFFERING(3) OFFERING(3)
------------------------------ ------------ --------------- ---------- ----------- ------------------
VICIS Capital Master Fund(56).... 3,243,750 -- -- 0 0
Victus Capital, LP(57)........... 2,162,500 -- -- 0 0
Wachovia Capital Markets
LLC(58)........................ 400,000 -- -- 0 0
Whitebox Convertible Arbitrage
Partners, L.P.(59)............. 7,550,000 -- -- 0 0
Whitebox Diversified Convertible
Arbitrage Partners LP(60)...... 3,250,000 -- -- 0 0
Wolverine Asset Management(61)... 2,000,000 -- -- 0 0
WPG Convertible Arbitrage
Overseas Master Fund(62)....... 600,000 -- -- 0 0
WPG Univest Multi-Strategy --
Conv. ARB(63).................. 150,000 -- -- 0 0
Zazove Convertible Arbitrage Fund
L.P.(64)....................... 5,200,000 -- -- 0 0
Zazove Hedged Convertible Fund,
L.P.(65)....................... 2,000,000 -- -- 0 0
Zazove Income Fund L.P.(66)...... 1,000,000 -- -- 0 0
----------- --------- --------- -- ------
Total(67)........................ 125,000,000 44,431 -- 0 44,431
=========== ========= ========= == ======
---------------
(1) Includes common stock into which the debentures are convertible.
(2) As originally issued, the debentures were convertible into shares of our
common stock at an initial conversion rate of 56.0243 shares per $1,000
principal amount, for an aggregate of 7,003,037 shares. However, we have
made an irrevocable election under the terms of the indenture to satisfy in
cash up to 100% of the principal amount of the debentures submitted for
conversion, with any remaining amount to be satisfied in shares of our
common stock as described under "Description of the
Debentures -- Conversion Rights -- Payment Upon Conversion." The precise
number of shares, if any, issuable upon conversion of debentures depends,
in part, on the trading price of our common stock following an election to
convert and is not presently determinable. If the trading price of our
common stock does not exceed approximately $17.85, no shares of common
stock would be issuable upon conversion of debentures. In no event will the
number of shares issuable upon conversion, per $1,000 principal amount of
debentures, exceed the applicable conversion rate. The conversion rate
currently remains at the initial rate of 56.0243 shares per $1,000
principal amount, but is subject to adjustment in the manner and upon the
events described under "Description of the Debentures -- Conversion
Rights -- Conversion Rate Adjustments."
(3) We do not know when or in what amounts a selling securityholder may offer
the debentures or shares of common stock for sale. The selling
securityholders might not sell any or all of the debentures or shares of
common stock offered by this prospectus. Because the selling
securityholders may offer all or some of the debentures or shares of common
stock pursuant to this prospectus, and because there are currently no
agreements, arrangements or understandings with respect to the sale of any
of the debentures or shares of common stock, we cannot estimate the number
of the debentures or shares of common stock that will be held by the
selling securityholders after completion of this offering. However, for
purposes of this table, we have assumed that, after completion of the
offering pursuant to this prospectus, none of the debentures or shares of
common stock covered by this prospectus will be held by the selling
securityholders.
(4) David J. Harris and Howard Needle are the managing members of the selling
securityholder and exercise voting control and dispositive power over these
securities.
19
(5) Anthony B. Bosco acts as investment manager for the selling securityholder
and exercises voting control and dispositive power over these securities.
(6) Ann Houlihan acts as investment manager for the selling securityholder and
exercises voting control and dispositive power over these securities.
(7) The selling securityholder is a subsidiary of Bank of America Corp., a
reporting company under the Exchange Act. The selling securityholder served
as the lead manager in the initial offering of the debentures and is an
affiliate of Bank of America, N.A., one of the lenders under our credit
agreement. The selling securityholder has informed us that it is a
registered broker-dealer. As such, it is an underwriter in connection with
the sale of the debentures and the shares of common stock, if any, into
which the debentures are convertible. The selling securityholder has
informed us that it purchased the securities in the ordinary course of
business, and at the time of purchase, it had no agreements or
understandings, directly or indirectly, with any person to distribute the
securities.
(8) Davis-Dinsmore Management Company acts as investment advisor to the selling
securityholder. Thomas H. Dinsmore is the portfolio manager of
Davis-Dinsmore Management Company and exercises voting control and
dispositive power over these securities.
(9) Basso Asset Management, L.P. acts as investment manager for the selling
securityholder. Basso GP, LLC is the general partner of Basso Asset
Management, L.P., and Howard Fischer as managing member of Basso GP, LLC
exercises voting control and dispositive power over these securities.
(10) The total under "Number of Shares of Common Stock Owned Prior to this
Offering" includes 1,261 shares of our common stock owned by the selling
securityholder. CooperNeff Advisors, Inc. acts as investment manager for
the selling securityholder. Christian Menestrier is the Chief Executive
Officer of CooperNeff Advisors, Inc. and exercises voting control and
dispositive power over these securities. The selling securityholder has
informed us that (i) it is an affiliate of BNP Paribas Securities Corp., a
registered broker-dealer, (ii) it purchased the securities in the ordinary
course of business, and (iii) at the time of purchase, the selling
securityholder had no agreements or understandings, directly or indirectly,
with any person to distribute the securities.
(11) Ann Houlihan acts as investment manager for the selling securityholder and
exercises voting control and dispositive power over these securities.
(12) John Gottfurcht, George Douglas and Amy Jo Gottfurcht act as investment
managers for the selling securityholder and exercise voting control and
dispositive power over these securities.
(13) Nick Calamos acts as investment manager for the selling securityholder and
exercise voting control and dispositive power over these securities.
(14) Citadel Limited Partnership, or Citadel, is the trading manager of the
selling securityholder and disclaims beneficial ownership of these
securities. Kenneth C. Griffin indirectly controls Citadel and therefore
exercises ultimate voting control and dispositive power over these
securities. Mr. Griffin disclaims beneficial ownership of these securities.
The selling securityholder has informed us that (i) it is an affiliate of
Aragon Investments Ltd., Palofax Trading LLC, Citadel Trading Group, LLC
and Citadel Derivatives Group, LLC, each a registered broker-dealer, (ii)
it purchased the securities in the ordinary course of business, and (iii)
at the time of purchase, the selling securityholder had no agreements or
understandings, directly or indirectly, with any person to distribute the
securities.
(15) Citadel Limited Partnership, or Citadel, is the trading manager of the
selling securityholder and disclaims beneficial ownership of these
securities. Kenneth C. Griffin indirectly controls Citadel and therefore
exercises ultimate voting control and dispositive power over these
securities. Mr. Griffin disclaims beneficial ownership of these securities.
The selling securityholder has informed us that (i) it is an affiliate of
Aragon Investments Ltd., Palofax Trading LLC, Citadel Trading Group, LLC
and Citadel Derivatives Group, LLC, each a registered broker-dealer, (ii)
it purchased the securities in the ordinary course of business, and (iii)
at the time of purchase, the selling securityholder had no agreements or
understandings, directly or indirectly, with any person to distribute the
securities.
(16) Nick Calamos acts as investment manager for the selling securityholder and
exercises voting control and dispositive power over these securities.
20
(17) CooperNeff Advisors, Inc. acts as investment manager for the selling
securityholder. Christian Menestrier is the Chief Executive Officer of
CooperNeff Advisors, Inc. and exercises voting control and dispositive
power over these securities.
(18) CQS Convertible and Quantitative Strategies Feeder Fund Limited is the sole
investor in the selling securityholder. CQS Cayman Limited Partnership acts
as investment manager to the selling securityholder and, in turn, CQS
Cayman Limited Partnership has delegated its investment management
responsibilities to the investment advisor, CQS (UK) LLP. The directors of
the selling securityholder have ultimate voting control and dispositive
power over these securities. The directors of the selling securityholder
are Alan Smith, Michael Hintze, Jim Rogers, Jonathan Crowther, Blair Gould
and Karla Bodden.
(19) Patrick Corrigan and Tom Sullivan act as brokers for the selling
securityholder and exercise voting control and dispositive power over these
securities. The selling securityholder has informed us that (i) it is an
affiliate of Deutsche Bank Securities, Inc., a registered broker-dealer,
(ii) it purchased the securities in the ordinary course of business, and
(iii) at the time of purchase, the selling securityholder had no agreements
or understandings, directly or indirectly, with any person to distribute
the securities.
(20) Ann Houlihan acts as investment manager for the selling securityholder and
exercises voting control and dispositive power over these securities.
(21) Simon Glick is the general partner of the selling securityholder and
exercises voting control and investment power over these securities.
(22) DKR Capital Partners L.P. acts as investment manager for the selling
securityholder. DKR Capital Partners, L.P. has retained certain portfolio
managers to act as the portfolio manager for the selling securityholder.
DKR Capital Partners L.P. and these certain portfolio managers have shared
voting control and shared dispositive power over the selling
securityholder's securities. Tom Kirvaitis has trading authority over these
securities for the selling securityholder.
(23) Ann Houlihan acts as investment manager for the selling securityholder and
exercises voting control and dispositive power over these securities.
(24) Davis-Dinsmore Management Company acts as investment advisor to the selling
securityholder. Thomas H. Dinsmore is the portfolio manager of
Davis-Dinsmore Management Company and exercises voting control and
dispositive power over these securities.
(25) FrontPoint Partners LLC is the managing member of FrontPoint Convertible
Arbitrage Fund GP LLC, the selling securityholder's general partner, and
has voting control and dispositive power over these securities. Philip
Duff, W. Gillespie Caffray and Paul Ghaffari are members of the board of
managers of FrontPoint Partners LLC and exercise voting control and
dispositive power over these securities.
(26) Vincent Gubitosi acts as portfolio manager for the selling securityholder
and exercises voting control and dispositive power over these securities.
(27) Bradford Whitmore and Michael Brailon are managing members of the selling
securityholder and exercise voting control and dispositive power over these
securities.
(28) Gene T. Pretti acts as investment advisor to the selling securityholder and
exercises voting control and dispositive power over these securities.
(29) Highbridge Capital Management acts as trading advisor to the selling
securityholder. Glenn Dubin and Henry Swieca are the principals of
Highbridge Capital Management and exercise voting control and dispositive
power over these securities. The selling securityholder has informed us
that (i) it is an affiliate of Highbridge Capital Corp., a registered
broker-dealer, (ii) it purchased the securities in the ordinary course of
business, and (iii) at the time of purchase, the selling securityholder had
no agreements or understandings, directly or indirectly, with any person to
distribute the securities.
(30) John Gottfurcht, George Douglas and Amy Jo Gottfurcht act as investment
managers for the selling securityholder and exercise voting control and
dispositive power over these securities.
21
(31) John Gottfurcht, George Douglas and Amy Jo Gottfurcht act as investment
managers for the selling securityholder and exercise voting control and
dispositive power over these securities.
(32) Gene T. Pretti acts as investment advisor to the selling securityholder and
exercises voting control and dispositive power over these securities.
(33) Maren Lindstrom is a fiduciary manager and partner at Lord Abbett & Co. and
exercises voting control and dispositive power over these securities.
(34) CooperNeff Advisors, Inc. acts as investment manager for the selling
securityholder. Christian Menestrier is the Chief Executive Officer of
CooperNeff Advisors, Inc. and exercises voting control and dispositive
power over these securities.
(35) Marin Capital Partners, LP acts as investment advisor to the selling
securityholder. J.T. Hansen and John Null are principals of Marin Capital
Partners, LP and exercise voting control and dispositive power over these
securities.
(36) D. Bruce McMahan is the general partner of the selling securityholder and
exercises voting control and dispositive power over these securities. The
selling securityholder has informed us that it is a registered
broker-dealer. As such it is an underwriter in connection with the sale of
the debentures and the shares of common stock, if any, into which the
debentures are convertible. The selling securityholder has informed us that
it purchased the securities in the ordinary course of business, and at the
time of purchase, it had no agreements or understandings, directly or
indirectly, with any person to distribute the securities.
(37) Massachusetts Mutual Life Insurance Company, or Massachusetts Mutual, is an
affiliate of the selling securityholder and sold various insurance policies
to our company. Annual premium payments for all policies total
approximately $87,250. Massachusetts Mutual is the principal equityholder
of the selling securityholder. Mill River Management L.L.C., or MRM, is the
General Partner of the selling securityholder. Babson Capital Management
LLC, or Babson, is the sole member of MRM. MassMutual Holding LLC, or
MassMutual, is the sole member of Babson. Massachusetts Mutual is the sole
member of MassMutual. Patrick J. Joyce acts as portfolio manager for the
selling securityholder and exercises sole voting and dispositive power over
these securities. The selling securityholder has informed us that (i) it is
an affiliate of MML Distributors, LLC, MML Investors Services, Inc.,
Oppenheimer Funds Distributor, Inc., Centennial Asset Management
Corporation and Babson Securities Corporation, each a registered
broker-dealer, (ii) it purchased the securities in the ordinary course of
business, and (iii) at the time of purchase, the selling securityholder had
no agreements or understandings, directly or indirectly, with any person to
distribute the securities.
(38) John Phelan and Glenn Fuhman are the managing partners of the selling
securityholder and exercise voting control and dispositive power over these
securities.
(39) John Gottfurcht, George Douglas and Amy Jo Gottfurcht act as investment
managers for the selling securityholder and exercise voting control and
dispositive power over these securities.
(40) Northwestern Investment Management Company, LLC, or NIMC, is the investment
advisor to the selling securityholder with respect to these securities.
NIMC has shared voting power or investment power over these securities.
Jerome R. Baier is a portfolio manager for NIMC and manages the portfolio
holding these securities. The selling securityholder has informed us that
(i) it is an affiliate of Northwestern Mutual Investment Services, LLC,
Frank Russell Capital Inc., Frank Russell Securities, Inc. and Russell Fund
Distributors, Inc., each a registered broker-dealer, (ii) it purchased the
securities in the ordinary course of business, and (iii) at the time of
purchase, the selling securityholder had no agreements or understandings,
directly or indirectly, with any person to distribute the securities.
(41) Gregory R. Levinson controls the selling securityholder's investment
advisor and exercises voting control and dispositive power over these
securities.
(42) The selling securityholder is managed by Putnam Investment Management, LLC,
which is owned through intermediaries by Marsh & McLennan Companies, Inc.,
a reporting company under the Exchange Act. The selling securityholder has
informed us that (i) it is an affiliate of Putnam Retail
22
Management Limited Partnership, a registered broker-dealer, (ii) it
purchased the securities in the ordinary course of business, and (iii) at
the time of purchase, the selling securityholder had no agreements or
understandings, directly or indirectly, with any person to distribute the
securities.
(43) Sheri Kaplan acts as portfolio manager for the selling securityholder and
exercises voting control and dispositive power over these securities.
(44) The total under "Number of Shares of Common Stock Owned Prior to this
Offering" includes 42,130 shares of our common stock owned by the selling
securityholder. Pursuant to investment agreements, each of S.A.C. Capital
Advisors, LLC, or SAC Capital Advisors, and S.A.C. Capital Management, LLC,
or SAC Capital Management, share all investment and voting power over these
securities. Steven A. Cohen controls both SAC Capital Advisors and SAC
Capital Management. Each of SAC Capital Advisors, SAC Capital Management
and Mr. Cohen disclaim beneficial ownership of any of these securities.
(45) Gene T. Pretti acts as investment advisor to the selling securityholder and
exercises voting control and dispositive power over these securities.
(46) CooperNeff Advisors, Inc. acts as investment manager for the selling
securityholder. Christian Menestrier is the Chief Executive Officer of
CooperNeff Advisors, Inc. and exercises voting control and dispositive
power over these securities.
(47) John Gottfurcht, George Douglas and Amy Jo Gottfurcht act as investment
managers for the selling securityholder and exercise voting control and
dispositive power over these securities.
(48) John Gottfurcht, George Douglas and Amy Jo Gottfurcht act as investment
managers for the selling securityholder and exercise voting control and
dispositive power over these securities.
(49) John Gottfurcht, George Douglas and Amy Jo Gottfurcht act as investment
managers for the selling securityholder and exercise voting control and
dispositive power over these securities.
(50) Marin Capital Partners, LP acts as investment advisor to the selling
securityholder. J.T. Hansen and John Null are principals of Marin Capital
Partners, LP and exercise voting control and dispositive power over these
securities. The selling securityholder has informed us that (i) it is an
affiliate of Tiburon Fund Trading, LLC, an inactive registered
broker-dealer, (ii) it purchased the securities in the ordinary course of
business, and (iii) at the time of purchase, the selling securityholder had
no agreements or understandings, directly or indirectly, with any person to
distribute the securities.
(51) Ann Houlihan acts as investment manager for the selling securityholder and
exercises voting control and dispositive power over these securities.
(52) CooperNeff Advisors, Inc. has shared voting control and sole investment
control over these securities. Christian Menestrier is the Chief Executive
Officer of CooperNeff Advisors, Inc.
(53) S. Donald Sussman controls the selling securityholder's general partner and
exercises voting control and dispositive power over these securities. The
selling securityholder has informed us that (i) it is an affiliate of
Paloma Securities L.L.C., a registered broker-dealer, (ii) it purchased the
securities in the ordinary course of business, and (iii) at the time of
purchase, the selling securityholder had no agreements or understandings,
directly or indirectly, with any person to distribute the securities.
(54) John Gottfurcht, George Douglas and Amy Jo Gottfurcht act as investment
managers for the selling securityholder and exercise voting control and
dispositive power over these securities.
(55) David T. Henigson as vice president exercises voting control and
dispositive power over these securities.
(56) Shad Stastney, John Succo and Sky Lucas are members of the selling
securityholder and exercise voting control and dispositive power over these
securities.
(57) Shad Stastney, as a managing director, John Succo, as a managing director,
Sky Lucas, as a portfolio manager and managing director, and Bryan Zwen, as
a principal, exercise voting control and dispositive power over these
securities. The selling securityholder has informed us that (i) it is an
affiliate of H.C. Wainwright, a registered broker-dealer, (ii) it purchased
the securities in the
23
ordinary course of business, and (iii) at the time of purchase, the selling
securityholder had no agreements or understandings, directly or indirectly,
with any person to distribute the securities.
(58) The selling securityholder is a subsidiary of Wachovia Corporation, a
reporting company under the Exchange Act. The selling securityholder has
informed us that it is a registered broker-dealer. As such, it is an
underwriter in connection with the sale of the debentures and the shares of
common stock, if any, into which the debentures are convertible. The
selling securityholder has informed us that it purchased the securities in
the ordinary course of business, and at the time of purchase, it had no
agreements or understandings, directly or indirectly, with any person to
distribute the securities.
(59) Whitebox Diversified Arbitrage Advisors LLC is the general partner of the
selling securityholder. Andrew Redleaf is the managing member of Whitebox
Diversified Arbitrage Advisors LLC and exercises voting control and
dispositive power over these securities.
(60) Whitebox Diversified Arbitrage Advisors LLC is the general partner of the
selling securityholder. Andrew Redleaf is the managing member of Whitebox
Diversified Arbitrage Advisors LLC and exercises voting control and
dispositive power over these securities.
(61) Rob Bellick is the general partner of the selling securityholder and
exercises voting control and dispositive power over these securities.
(62) Sheri Kaplan acts as portfolio manager for the selling securityholder and
exercises voting control and dispositive power over these securities. The
selling securityholder has informed us that (i) it is an affiliate of
Robeco USA Brokerage, a registered broker-dealer, (ii) it purchased the
securities in the ordinary course of business, and (iii) at the time of
purchase, the selling securityholder had no agreements or understandings,
directly or indirectly, with any person to distribute the securities.
(63) Sheri Kaplan acts as portfolio manager for the selling securityholder and
exercises voting control and dispositive power over these securities.
(64) Gene T. Pretti acts as investment advisor to the selling securityholder and
exercises voting control and dispositive power over these securities.
(65) Gene T. Pretti acts as investment advisor to the selling securityholder and
exercises voting control and dispositive power over these securities.
(66) Gene T. Pretti acts as investment advisor to the selling securityholder and
exercises voting control and dispositive power over these securities.
(67) The sum of the beneficial ownership information we have received from
selling securityholders and reflected in the table above exceeds
$125,000,000. We believe this is because certain selling securityholders
have transferred their debentures or otherwise reduced their position
without informing us, but nevertheless resulting in us receiving new
beneficial ownership information from their transferees. However, the
maximum principal amount of debentures that may be sold under this
prospectus will not exceed $125,000,000. Accordingly, the $125,000,000
total has been retained in the table above and represents the maximum
principal amount of debentures that could be sold hereunder. Information
about additional selling securityholders not named in this table, or anyone
directly or indirectly obtaining debentures or shares of common stock from
such securityholders, will be set forth in post-effective amendments to the
registration statement of which this prospectus forms a part before such
persons are permitted to make any offers or sales pursuant to this
prospectus. We may file prospectus supplements to include information about
non-sale transferees, pledgees or donees who obtain debentures or shares of
common stock from selling securityholders named in this table in transfers
occurring after the date of this prospectus.
24
PLAN OF DISTRIBUTION
The selling securityholders and their successors, including their
transferees, pledges or donees or their successors, may sell the debentures and
any underlying common stock from time to time directly to purchasers or through
underwriters, brokers, dealers or agents who may receive compensation in the
form of discounts, concessions or commissions from the selling securityholders
or the purchasers. These discounts, concessions or commissions as to any
particular underwriter, broker, dealer or agent may be in excess of those
customary in the types of transactions involved.
The debentures and any underlying common stock may be sold in one or more
transactions at:
- fixed prices,
- prevailing market prices at the time of sale,
- prices related to the prevailing market prices,
- varying prices determined at the time of sale, or
- negotiated prices.
The sales may be affected in transactions (which may involve block
transactions):
- on any national securities exchange or quotation service on which the
debentures or any underlying common stock may be listed or quoted at the
time of sale,
- in the over-the-counter market,
- in transactions other than on such exchanges or services or in the
over-the-counter market,
- through the writing and exercise of options, whether the options are
listed on an options exchange or otherwise, or
- through the settlement of short sales.
In connection with sales of the debentures and any underlying common stock
or otherwise, the selling securityholders may enter into hedging transactions
with brokers, dealers or other financial institutions. These brokers, dealers or
other financial institutions may in turn engage in short sales of the debentures
or any such underlying common stock in the course of hedging their positions.
The selling securityholders may also sell the debentures or any underlying
common stock short and deliver debentures or any such underlying common stock to
close out short positions, or loan or pledge debentures or any underlying common
stock to brokers or dealers that, in turn, may sell the debentures or any such
underlying common stock. To our knowledge, there are currently no plans,
arrangements or understandings between any selling securityholders and any
underwriter, broker, dealer or agent regarding the sale of the debentures or any
underlying common stock by the selling securityholders.
The aggregate proceeds to the selling securityholders from the sale of the
debentures or any underlying common stock offered by them will be the purchase
price of the debentures or any such underlying common stock less discounts and
commissions, if any. Each of the selling securityholders reserves the right to
accept and, together with their agents from time to time, to reject, in whole or
in part, any proposed purchase of the debentures or any underlying common stock
to be made directly or through agents. We will not receive any of the proceeds
of the sale of the debentures or any underlying common stock offered by this
prospectus.
In order to comply with the securities laws of some states, if applicable,
the debentures and any underlying common stock may be sold in these
jurisdictions only through registered or licensed brokers or dealers. In
addition, in some states, the debentures and any underlying common stock may not
be sold unless they have been registered or qualified for sale or an exemption
from registration or qualification requirements is available and is complied
with.
25
Selling securityholders who are registered broker-dealers are
"underwriters" under the securities laws. Other selling securityholders and any
brokers, dealers or agents who participate in the sale of the debentures or any
underlying common stock may be "underwriters" under the securities laws. Any
profits on the sale of securities by selling securityholders who are
underwriters and any discounts, commissions or concessions received by any
brokers, dealers or agents who are underwriters might be deemed to be
underwriting discounts or commissions under the securities laws. Persons who are
underwriters may be subject to liabilities under the securities laws and will be
subject to the prospectus delivery requirements of the securities laws.
If the debentures or any underlying common stock are sold through
underwriters, brokers or dealers, the selling securityholders will be
responsible for underwriting discounts or commissions or agent commissions.
We do not know when or whether any selling securityholder will sell any or
all of the debentures or any underlying common stock pursuant to this
prospectus. In addition, any debentures or underlying common stock covered by
this prospectus that qualify for sale under Rule 144 or Rule 144A of the
Securities Act may be sold under Rule 144 or Rule 144A rather than under this
prospectus. The selling securityholders may not sell any or all of the
debentures or any underlying common stock and may not transfer, devise or gift
these securities by other means not described in this prospectus.
The selling securityholders have acknowledged that they and other persons
participating in any distribution will be subject to the securities laws and
rules, including Regulation M of the Exchange Act, which may limit the timing of
purchases and sales of any of the debentures or any underlying common stock by
the selling securityholders and any other persons. In addition, Regulation M of
the Exchange Act may restrict the ability of any person engaged in the
distribution of the debentures or any underlying common stock to engage in
market-making activities with respect to the debentures or our common stock for
a period of up to five business days prior to the commencement of the
distribution. This restriction may affect the marketability of the debentures or
any underlying common stock and the ability of any person or entity to engage in
market-making activities with respect to the debentures or our common stock.
To the extent required, the specific debentures or any underlying common
stock to be sold, the names of the selling securityholders, the respective
purchase prices and public offering prices, the names of any agent, dealer or
underwriter, and any applicable commissions or discounts with respect to a
particular offer will be set forth in an accompanying prospectus supplement or,
if appropriate, a post-effective amendment to the registration statement of
which this prospectus is a part.
We entered into a registration rights agreement for the benefit of holders
of the debentures to register their debentures and any underlying common stock
under applicable federal and state securities laws under specific circumstances
and at specific times. Under the registration rights agreement, we and the
selling securityholders will be indemnified by (or entitled to contribution
from) one another against specified liabilities in connection with the offer and
sale of the debentures and any underlying common stock, including some
liabilities under the Securities Act.
We have agreed to pay substantially all of the expenses incidental to the
registration of the debentures and any underlying common stock other than
commissions, fees and discounts of underwriters, brokers, dealers and agents.
26
DESCRIPTION OF THE DEBENTURES
We issued the debentures under an indenture, dated as of June 30, 2004,
between us and U.S. Bank National Association, as trustee. Initially, the
trustee acted as paying agent, conversion agent and calculation agent for the
debentures. The terms of the debentures include those provided in the indenture
and those provided in the registration rights agreement, which we entered into
with the initial purchasers. The following description is only a summary of the
material provisions of the debentures, the indenture and the registration rights
agreement. We urge you to read these documents in their entirety because they,
and not this description, define your rights as holders of the debentures. You
may request a copy of the indenture and the registration rights agreement from
us. When we refer to "Per-Se," "we," "our" or "us" in this section, we refer
only to Per-Se Technologies, Inc., a Delaware corporation, and not its
subsidiaries.
BRIEF DESCRIPTION OF THE DEBENTURES
The debentures offered hereby:
- are $125,000,000 in aggregate principal amount;
- bear interest at a rate of 3.25% per annum, payable on each June 30 and
December 30, beginning December 30, 2004;
- are issued only in registered form, without coupons, in denominations of
$1,000 principal amount and integral multiples thereof;
- are our unsecured obligations, subordinated in right of payment to all of
our existing and future senior debt; as our indebtedness, the debentures
are effectively subordinated to all indebtedness and liabilities of our
subsidiaries;
- are convertible into our common stock initially at a conversion rate of
56.0243 shares per $1,000 principal amount of debentures which is
equivalent to an initial conversion price of approximately $17.85 per
share, under the conditions and subject to such adjustments as are
described under "-- Conversion Rights"; however, we have made an
irrevocable election under the terms of the indenture to satisfy in cash
up to 100% of the principal amount of the debentures submitted for
conversion, with any remaining amount to be satisfied in shares of our
common stock;
- are redeemable at our option in whole or in part beginning on July 6,
2009 upon the terms set forth under "-- Optional Redemption by Us";
- are subject to repurchase by us at your option on June 30 of each of
2009, 2014 and 2019 or upon the occurrence of a fundamental change with
respect to our company, upon the terms and at the repurchase price in
cash set forth below under "-- Repurchase of Debentures at Your Option";
- are entitled in certain circumstances to the make-whole premium in
connection with a conversion or repurchase as a result of certain
fundamental changes; and
- are due on June 30, 2024, unless earlier converted, redeemed by us at our
option or repurchased by us at your option.
The indenture does not contain any financial covenants and does not
restrict us from paying dividends, incurring additional indebtedness or issuing
or repurchasing our other securities. The indenture also does not protect you in
the event of a highly leveraged transaction or a change of control of our
company, except to the extent described under "-- Repurchase of Debentures at
Your Option -- Fundamental Change Put" and "-- Repurchase of Debentures at Your
Option -- Make-Whole Premium" below.
No sinking fund is provided for the debentures and the debentures will not
be subject to defeasance.
You may present definitive debentures for conversion and registration of
transfer and exchange at our office or agency in New York City, which shall
initially be the principal corporate trust office of the trustee currently
located at 100 Wall Street, 16th Floor, New York, New York 10005. For
information regarding conversion, registration of transfer and exchange of
global debentures, see "-- Form,
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Denomination and Registration." No service charge will be made for any
registration of transfer or exchange of debentures, but we may require payment
of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
SUBORDINATION
The debentures are subordinate in right of payment to all of our existing
and future senior debt. The indenture does not restrict the amount of senior
debt or other indebtedness that we or any of our subsidiaries can incur. As of
March 31, 2005, the debentures were subordinated to $3.8 million of our senior
debt, as defined in this prospectus. In addition, as of March 31, 2005, our
subsidiaries had liabilities of approximately $57.5 million, excluding
intercompany indebtedness and guarantees under our credit agreement, all of
which are structurally senior to the debentures. The payment of the principal
of, interest on or any other amounts due on the debentures is subordinated in
right of payment to the prior payment in full in cash of all of our existing and
future senior debt. No payment on account of principal of, redemption of,
interest on or any other amounts due on the debentures, including, without
limitation, any payments on the fundamental change repurchase right, and no
redemption, repurchase or other acquisition of the debentures may be made,
except in our common stock, if:
- a default in the payment of designated senior debt occurs, called a
payment default; or
- a default other than a payment default occurs and is continuing that
permits the holders of designated senior debt to accelerate its maturity,
and the trustee receives a notice of such default, called a payment
blockage notice, from us or any other person permitted to give such
notice under the credit agreement so long as it remains in effect, and
thereafter any other person permitted to give such notice under the
indenture, called a non-payment default.
We may resume payments and distributions on the debentures:
- in case of a payment default, upon the date on which such default ceases
to exist or is cured or waived in writing by agent so long as the credit
agreement remains in effect, and thereafter in accordance with the terms
of the applicable senior debt; and
- in the case of a non-payment default, upon the earliest of the date on
which such non-payment default ceases to exist or is cured or waived in
writing by agent so long as the credit agreement remains in effect, and
thereafter in accordance with the terms of the applicable senior debt or
179 days from the date the payment blockage notice is received.
Notwithstanding the foregoing, not more than one payment blockage notice
may be given in any consecutive 360-day period, called a payment blockage
period, irrespective of the number of defaults with respect to designated senior
debt during such period. No default which existed or was continuing on the date
of the commencement of any payment blockage notice with respect to the
designated senior debt whose holders delivered the payment blockage notice may
be made the basis of the commencement of a subsequent payment blockage period by
the holders of such designated senior debt, whether or not within a period of
360 consecutive days, unless the default has been cured or waived for a period
of not less than 90 consecutive days.
Upon any distribution of our assets in connection with any dissolution,
winding-up, liquidation or reorganization of us or acceleration of the principal
amount due on the debentures because of any event of default, all senior debt
must be paid in full in cash before the holders of the debentures are entitled
to any payments whatsoever.
As a result of these subordination provisions, in the event of our
insolvency, holders of the debentures may recover ratably less than the holders
of our senior debt and our general creditors.
If the payment of the debentures is accelerated because of an event of
default, we or the trustee shall promptly notify the holders of senior debt or
the trustee(s) for the senior debt of the acceleration. We may not pay the
debentures until five days after the holders or trustee(s) of senior debt
receive notice of
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the acceleration and, after which we may pay the debentures only if the
subordination provisions of the indenture otherwise permit payment at that time.
If the trustee or any holder of debentures receives any payment or
distribution of our assets of any kind in contravention of any of the terms of
the indenture, whether in cash, property or securities, including, without
limitation by way of set-off or otherwise, in respect of the debentures before
all senior debt is paid in full in cash, then the payment or distribution will
be held by the recipient in trust for the benefit of holders of senior debt, and
will be immediately paid over or delivered to the holders of senior debt or
their representative or representatives to the extent necessary to make payment
in full in cash of all senior debt remaining unpaid, after giving effect to any
concurrent payment or distribution, or provision therefor, to or for the holders
of senior debt.
The debentures are the obligations only of Per-Se and not our subsidiaries.
Since a significant amount of our operations are conducted through our
subsidiaries, our cash flow and our consequent ability to service debt,
including the debentures, will depend in part upon the earnings of our
subsidiaries and the distribution of those earnings to, or under loans or other
payments of funds by those subsidiaries to, us. The payment of dividends and the
making of loans and advances to us by our subsidiaries may be subject to
statutory or contractual restrictions, will depend upon the earnings of those
subsidiaries and are subject to various business considerations.
Our right to receive assets of any of our subsidiaries upon their
liquidation or reorganization, and the consequent right of the holders of the
debentures to participate in those assets, is effectively subordinated to the
claims of that subsidiary's creditors, including trade creditors, except to the
extent that we are recognized as a creditor of that subsidiary, in which case
our claims would still be subordinate to any security interests in the assets of
that subsidiary and any indebtedness of that subsidiary senior to that held by
us.
The indenture does not limit the amount of additional indebtedness,
including senior debt, which we can create, incur, assume or guarantee, nor does
the indenture limit the amount of indebtedness and other liabilities which any
subsidiary can create, incur, assume or guarantee.
Credit agreement means our credit agreement dated as of September 11, 2003,
as amended as of June 30, 2004, among us, as the borrower, our subsidiaries
identified therein as guarantors, Bank of America, N.A., as administrative
agent, swingline lender and L/C issuer, Wachovia Bank, N.A., as syndication
agent and the other lenders who are party thereto, as further amended, restated,
supplemented or otherwise modified from time to time, and all direct and
indirect refundings, refinancings and replacements of any credit agreement.
Designated senior debt means (1) any indebtedness from time to time
outstanding under the credit agreement and (2) any other senior debt the
principal amount of which is $10,000,000 or more and that has been designated by
us as designated senior debt.
Exchange rate contract means, with respect to any person, any currency swap
agreements, forward exchange rate agreements, foreign currency futures or
options, exchange rate collar agreements, exchange rate insurance and other
agreements or arrangements, or combination thereof, the principal purpose of
which is to provide protection against fluctuations in currency exchange rates.
An exchange rate contract may also include an interest rate agreement.
GAAP means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession,
which are applied on a consistent basis.
Guarantee means a guarantee, other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner, including, without limitation, letters of credit and
reimbursement agreements in respect thereof, of all or any part of any
Indebtedness.
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Hedging obligations means, with respect to any specified person, the
obligations of such person under (1) interest rate swap agreements, interest
rate cap agreements, interest rate collar agreements and other agreements or
arrangements with respect to exposure to interest rates; (2) commodity swap
agreements, commodity option agreements, forward contracts and other agreements
or arrangements with respect to exposure to commodity prices; and (3) foreign
exchange contracts, currency swap agreements and other agreements or
arrangements with respect to exposure to foreign currency exchange rates.
Indebtedness means, with respect to any person, any indebtedness of such
person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit, or
reimbursement agreements in respect thereof, or representing the balance
deferred and unpaid of the purchase price of any property, including pursuant to
capital leases and sale-and-leaseback transactions, or representing any hedging
obligations under an exchange rate contract or an interest rate agreement,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing indebtedness, other than obligations
under an exchange rate contract or an interest rate agreement, would appear as a
liability upon a balance sheet of such person prepared in accordance with GAAP,
and also includes, to the extent not otherwise included, the guarantee of items
which would be included within this definition. The amount of any indebtedness
outstanding as of any date shall be the accreted value thereof, in the case of
any indebtedness issued with original issue discount. Indebtedness shall not
include liabilities for taxes of any kind.
Interest rate agreement means, with respect to any person, any interest
rate swap agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement the principal purpose of which is to protect the
party indicated therein against fluctuations in interest rates.
Senior debt with respect to us means indebtedness of ours, including any
monetary obligation in respect of the credit agreement, and interest, whether or
not allowable, accruing on indebtedness incurred pursuant to the credit
agreement after the filing of a petition initiating any proceeding under any
bankruptcy, insolvency or similar law, arising under the credit agreement, all
hedging obligations owing to any lender or affiliate of any lender party to the
credit agreement, all obligations under treasury management agreements with any
lender or affiliate of any lender party to the credit agreement or any other
indebtedness of ours, whether outstanding on the date of the indenture or
thereafter created, incurred, assumed or guaranteed by us and any of our
subsidiaries.
Notwithstanding anything to the contrary in the foregoing, senior debt
shall not include: (a) indebtedness of or amounts owed by us for compensation to
employees, or for goods or materials purchased or for services obtained in the
ordinary course of business; (b) our indebtedness to any of our subsidiaries or
(c) our indebtedness that expressly provides that it shall not be senior in
right of payment to the debentures or expressly provides that it is on the same
basis or junior to the debentures.
INTEREST
The debentures will bear interest at a rate of 3.25% per annum from June
30, 2004. We will pay interest semiannually in arrears on June 30 and December
30 of each year, beginning December 30, 2004, to the holders of record at the
close of business on the preceding June 15 and December 15, respectively. There
is one exception to the preceding sentence:
In general, we will not pay accrued and unpaid interest on any debentures
that are submitted for conversion. Instead, accrued interest will be deemed paid
by the cash and common stock, if any, received by holders on conversion. You
will receive, however, accrued and unpaid liquidated damages to, but not
including, the conversion date. If you surrender debentures for conversion after
a record date for an interest payment but prior to the corresponding interest
payment date, you will receive on that interest payment date accrued and unpaid
interest on those debentures, notwithstanding your conversion of those
debentures prior to that interest payment date, because you will have been the
holder of record on the corresponding record date. However, at the time you
surrender debentures for conversion, you must pay to us an amount equal to the
interest that has accrued and that will be paid on the related interest payment
date. The preceding sentence does not apply, however, if (1) we have specified a
redemption date that is
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after a record date for an interest payment but on or prior to the corresponding
interest payment date, (2) we have specified a repurchase date following a
fundamental change that is during such period or (3) to the extent of any
overdue interest if any overdue interest exists at the time of conversion with
respect to the debentures converted. Accordingly, under these circumstances you
will not be required to pay us, at the time that you surrender those debentures
for conversion, the amount of interest you will receive on the interest payment
date.
Except as provided below, we will pay interest on:
- global debentures to the Depository Trust Company, which we refer to in
this prospectus as DTC, in immediately available funds;
- any definitive debentures having an aggregate principal amount of
$5,000,000 or less by check mailed to the holders of those debentures;
and
- any definitive debentures having an aggregate principal amount of more
than $5,000,000 by wire transfer in immediately available funds if
requested by the holders of those debentures.
At maturity we will pay interest on the definitive debentures at our office
or agency in New York City, which initially will be the principal corporate
trust office of the trustee presently located at 100 Wall Street, 16th Floor,
New York, New York 10005.
Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months.
If any interest payment date falls on a day that is not a business day,
such interest payment date will be postponed to the next succeeding business day
and no additional interest will be payable in respect of such delay. The term
business day means, with respect to any debenture, any day other than a
Saturday, a Sunday or a day on which banking institutions in The City of New
York are authorized or required by law, regulation or executive order to close.
CONVERSION RIGHTS
GENERAL
As originally issued, the debentures were convertible, subject to the
conditions and during the periods described below, into shares of our common
stock, at an initial conversion rate of 56.0243 shares per $1,000 principal
amount of the debentures, which is equal to an initial conversion price of
approximately $17.85 per share. However, we have made an irrevocable election
under the terms of the indenture to satisfy in cash up to 100% of the principal
amount of the debentures submitted for conversion, with any remaining amount to
be satisfied in shares of our common stock as described below. The conversion
rate and the corresponding conversion price in effect at any given time will be
subject to adjustment as described below. We will not issue fractional shares of
common stock upon conversion of the debentures. Instead, we will pay the cash
value of such fractional shares based upon the closing sale price of our common
stock on the trading day immediately preceding the conversion date. You may
convert debentures only in denominations of $1,000 principal amount and integral
multiples thereof.
If you have exercised your right to require us to repurchase your
debentures in the circumstances described under "-- Repurchase of Debentures at
Your Option," you may convert your debentures only if you withdraw your
repurchase notice or fundamental change repurchase notice and convert your
debentures prior to the close of business on the repurchase date or fundamental
change repurchase date, as applicable.
You may surrender debentures for conversion prior to the stated maturity
only under the following circumstances:
CONVERSION UPON SATISFACTION OF MARKET PRICE CONDITION
You may surrender any of your debentures for conversion during any fiscal
quarter, and only during such fiscal quarter, commencing after September 30,
2004, if the closing sale price of our common stock
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for at least 20 trading days in the 30 consecutive trading-day period ending on
the last trading day of the preceding fiscal quarter is more than 130% of the
conversion price as of that 30th trading day.
The conversion agent, which initially will be U.S. Bank National
Association, will, on our behalf, determine if the debentures are convertible as
a result of the sale price of our common stock and notify us and the trustee.
The closing sale price of our common stock on any date means the closing
sale price per share, determined without regard for after-hours or extended
market trading, or, if no closing sale price is reported, the average of the bid
and ask prices or, if there is more than one bid or ask price, the average of
the average bid and the average ask prices, on that date as reported by the
Nasdaq National Market or, if our common stock is not then quoted on the Nasdaq
National Market, as reported in composite transactions for the principal U.S.
securities exchange on which our common stock is traded. If our common stock is
not listed on a U.S. national or regional securities exchange and not reported
by the Nasdaq National Market on the relevant date, the closing 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. In the absence of such quotations, our board of directors will
make a good faith determination of the closing sale price.
Trading day means a day during which trading in our common stock generally
occurs and a closing sale price for our common stock is provided on the Nasdaq
National Market or, if our common stock is not listed on the Nasdaq National
Market, 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 principal other market on
which our common stock is then traded.
CONVERSION UPON SATISFACTION OF TRADING PRICE CONDITION
You may surrender any of your debentures for conversion during the five
consecutive business day period after the measurement period in which the
trading price per debenture for each day of such measurement period was less
than 98% of the product of the closing sale price of our common stock on such
day and the conversion rate on such date; provided, however, if you convert your
debentures in reliance on this subsection and on any trading day during such
measurement period the closing sale price of shares of our common stock was
between 100% and 130% of the conversion price of the debentures on such day, you
will receive cash equal to 100% of the principal amount of the debentures plus
accrued and unpaid interest and liquidated damages, if any, to, but not
including, the conversion date.
The trading price of a debenture on any date of determination means the
average of the secondary market bid quotations obtained by the trustee for
$2,000,000 principal amount of the debentures at approximately 3:30 p.m., New
York City time, on such determination date from three independent nationally
recognized securities dealers we select; provided, that if three such bids
cannot reasonably be obtained by the trustee, but two such bids are obtained,
then the average of the two bids shall be used, and if only one such bid can
reasonably be obtained by the trustee, that one bid shall be used. If the
trustee cannot reasonably obtain at least one bid for $2,000,000 principal
amount of the debentures from a nationally recognized securities dealer, then
the trading price per $1,000 principal amount of debentures will be deemed equal
to the product of the closing sale price of our common stock and the conversion
rate.
The conversion agent will, on our behalf, determine if the debentures are
convertible as a result of the trading price of the debentures and notify us and
the trustee; provided, that the conversion agent shall have no obligation to
determine the trading price of the debentures unless we have requested such
determination and we shall have no obligation to make such request unless
requested to do so by a holder of the debentures. At such time, we shall
instruct the conversion agent to determine the trading price of the debentures
beginning on the next trading day and on each successive trading day until the
trading price of the debentures is greater than or equal to 98% of the product
of the closing sale price of our common stock and the conversion rate.
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CONVERSION UPON NOTICE OF REDEMPTION
You may surrender for conversion any of your debentures that have been
called for redemption at any time prior to the close of business on the business
day prior to the redemption date, even if the debentures are not otherwise
convertible at that time. If you have already delivered a repurchase notice or a
fundamental change repurchase notice with respect to a debenture, you may not
surrender that debenture for conversion until you have withdrawn the notice in
accordance with the indenture.
CONVERSION UPON SPECIFIED CORPORATE TRANSACTIONS
(1) Certain Distributions.
In the event:
- we 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 distribution, shares of our common stock at a price per share
less than the closing sale price of the common stock on the business day
immediately preceding the announcement of such distribution, or
- we elect to distribute to all holders of our common stock, cash or other
assets, debt securities or certain rights to purchase our securities,
which distribution has a per share value exceeding 10% of the closing
sale price of the common stock on the business day preceding the
declaration date for the distribution, then
at least 20 days prior to the ex-dividend date for the distribution, we must
notify you of the occurrence of such event. Once we have given that notice, you
may surrender your debentures for conversion at any time until the earlier of
close of business on the business day immediately prior to the ex-dividend date
or the date of our announcement that the distribution will not take place. No
adjustment to the conversion rate or your ability to convert will be made if we
provide that you will participate in the distribution without conversion.
(2) Change of Control.
If we are a party to a consolidation, merger or binding share exchange
pursuant to which our common stock is converted into cash, securities or other
property, then you may surrender debentures for conversion at any time from and
after the date which is 15 days prior to the anticipated effective date of the
transaction until the effective date of the transaction or, if such transaction
also constitutes a fundamental change, the fundamental change repurchase date.
In addition, if the transaction described in the second paragraph of the
definition of change of control constitutes a fundamental change and occurs
before June 30, 2009, we will pay a make-whole premium in connection with the
conversion of debentures, calculated as described under "-- Repurchase of
Debentures at Your Option -- Make-Whole Premium." Payment of the make-whole
premium to holders surrendering their debentures for conversion will be made
upon the later of: (1) the fundamental change repurchase date and (2) the
conversion settlement date for those debentures. We will pay the make-whole
premium in the form of consideration into which or for which our common stock
was converted, exchanged or acquired. The method of determining the amount of
such consideration is described under "-- Repurchase of Debentures at Your
Option -- Make-Whole Premium."
Upon any determination by us or the trustee that you are or will be
entitled to convert your debentures in accordance with the foregoing provisions,
we will issue a press release, as promptly as practicable, but in no event less
than 15 days prior to the effective date of such transaction, through a public
medium that is customary for such press releases or publish the information on
our website or through such other public medium as we may use at such time.
If a transaction occurs pursuant to which you would be entitled to a
make-whole premium upon conversion, you can also, subject to certain conditions,
require us to repurchase all or a portion of your
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debentures as described under "-- Repurchase of Debentures at Your
Option -- Fundamental Change Put."
If we are a party to a consolidation, merger or binding share exchange
pursuant to which our common stock is converted into cash, securities or other
property, then at the effective time of the transaction, any then existing right
to receive shares of our common stock upon conversion of debentures will be
changed into a right to receive the kind and amount of cash, securities or other
property which you would have received if you had converted such debentures
immediately prior to the transaction.
CONVERSION PROCEDURES
By delivering to you the full amount of cash, common stock or other
property issuable upon conversion, together with a cash payment in lieu of any
fractional shares, we will satisfy our obligation with respect to the
debentures. That is, accrued and unpaid interest, if any, will be deemed to be
paid in full rather than canceled, extinguished or forfeited.
You will not be required to pay any taxes or duties relating to the
issuance or delivery of shares of common stock issuable, if any, upon conversion
of your debentures, but you will be required to pay any tax or duty which may be
payable relating to any transfer involved in the issuance or delivery of such
common stock in a name other than your own. Certificates representing shares of
common stock will be issued or delivered only after all applicable taxes and
duties, if any, payable by you have been paid.
To convert a definitive debenture, you must:
- complete the conversion notice on the back of the debentures, or a
facsimile thereof;
- deliver the completed conversion notice and, if the debentures are in
certificated form, the debentures to be converted to the specified office
of the conversion agent;
- pay all funds required, if any, relating to interest on the debentures to
be converted to which you are not entitled, as described in
"-- Interest"; and
- pay all taxes or duties payable by you, if any, as described above.
To convert interests in a global debenture, you must comply with the last two
bullets above and deliver to DTC the appropriate instruction form for conversion
pursuant to DTC's conversion program.
Conversion notices are irrevocable. The conversion date will be the date on
which all of the foregoing requirements have been satisfied. The debentures will
be deemed to have been converted immediately prior to the close of business on
the conversion date. A certificate will be delivered to you, or a book entry
transfer through DTC will be made, for the number of shares of common stock, if
any, into which the debentures are converted along with the amount of cash
payable to your upon conversion, including any cash in lieu of any fractional
shares, as soon as practicable on or after the conversion date.
PAYMENT UPON CONVERSION
Pursuant to the indenture, we have irrevocably elected to satisfy in cash
up to 100% of the principal amount of the debentures submitted for conversion,
with any remaining amount to be satisfied in shares of our common stock.
Accordingly, for each $1,000 principal amount of debentures, we will deliver to
you:
- cash in an amount equal to the lesser of (1)(x) the then current
conversion rate, multiplied by (y) the average closing price of our
common stock during the 20 trading-day period beginning on the day after
receipt of your notice of conversion and (2) $1,000; and
- a number of shares of our common stock equal to the greater of (1) zero
and (2) the excess, if any, of the then current conversion rate over the
number of shares equal to the sum, for each day of the 20 trading-day
period beginning on the day after receipt of your notice of conversion,
of (x) 5% of the cash amount determined in accordance with the
immediately preceding bullet point, divided by (y) the closing sale price
of our common stock on such day.
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We will pay cash for all fractional shares of common stock. The cash payment for
fractional shares will be based on the closing sale price of our common stock on
the trading day immediately prior to the conversion date.
Settlement will occur on the business day following the 20 trading-day
period beginning on the day after receipt of your notice of conversion.
CONVERSION RATE ADJUSTMENTS
We will adjust the conversion rate if any of the following events occur:
(1) We issue our common stock as a dividend or distribution on our
common stock.
(2) We distribute to all holders of common stock certain rights or
warrants entitling them to purchase, for a period expiring within
60 days after the date of the distribution, shares of our common
stock at a price per share of less than the closing sale price of
our common stock on the record date for the distribution.
(3) We subdivide or combine our common stock.
(4) We distribute to all holders of our common stock capital stock,
evidences of indebtedness or assets, including securities, but
excluding rights or warrants listed in (2) above, dividends or
distributions listed in (1) above and distributions consisting
exclusively of cash, in which event the conversion rate in effect
immediately before the close of business on the record date fixed
for the determination of stockholders entitled to receive that
distribution will be increased by multiplying it by a fraction,
- the numerator of which will be the current market price of our
common stock and
- the denominator of which will be the current market price of our
common stock minus the fair market value, as determined by our
board of directors whose determination in good faith will be
conclusive, 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.
If we distribute capital stock of, or similar equity interests in,
a subsidiary or other business unit of ours, then the conversion
rate will be adjusted based on the market value of the securities
so distributed relative to the market value of our common stock,
in each case based on the average closing sales price of those
securities, where such closing sale prices are available, for the
10 trading days commencing on and including the fifth trading day
after the ex-dividend date for such distribution on the Nasdaq
National Market or such other national or regional exchange or
market on which the securities are then listed or quoted.
(5) We distribute cash, excluding any dividend or distribution in
connection with our liquidation, dissolution or winding up, in
which event the conversion rate will be increased by multiplying
it by a fraction,
- the numerator of which will be the current market price of our
common stock and
- the denominator of which will be the current market price of our
common stock minus the amount per share of such dividend or the
amount of such distribution as determined below.
(6) We or one of our subsidiaries makes a payment in respect of a
tender offer or exchange offer for our common stock to the extent
that the cash and value of any other consideration included in the
payment per share of our common stock exceeds the closing sale
price of our common stock on the trading day next succeeding the
last date on which tenders or
35
exchanges may be made pursuant to such tender or exchange offer, in
which event the conversion rate will be increased by multiplying it
by a fraction,
- the numerator of which will be the sum of (a) 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 (b) the product of
the number of shares of our common stock outstanding less any
such purchased shares and the closing sale price of our common
stock on the trading day next succeeding the expiration of the
tender or exchange offer and
- the denominator of which will be the product of the number of
shares of our common stock outstanding, including any such
purchased shares, and the closing sale price of our common stock
on the trading day next succeeding the expiration of the tender
or exchange offer.
(7) Someone other than us or one of our subsidiaries makes a payment
in respect of a tender offer or exchange offer in which, as of the
closing date of the offer, our board of directors is not
recommending rejection of the offer, in which event each
conversion rate will be increased by multiplying such conversion
rate by a fraction,
- the numerator of which will be the sum of (a) the fair market
value, as determined by our board of directors, of the aggregate
consideration payable to our stockholders based on the
acceptance up to any maximum specified in the terms of the
tender or exchange offer of all shares validly tendered or
exchanged and not withdrawn as of the expiration of the offer
and (b) the product of the number of shares of our common stock
outstanding less any such purchased shares and the closing price
of our common stock on the trading day next succeeding the
expiration of the tender or exchange offer and
- the denominator of which will be the product of the number of
shares of our common stock outstanding, including any such
purchased shares, and the closing price of our common stock on
the trading day next succeeding the expiration of the tender or
exchange offer.
The adjustment referred to in this clause (7) will be made only
if:
- the tender offer or exchange offer is for an amount that
increases the offeror's ownership of common stock to more than
25% of the total shares of common stock outstanding; and
- the cash and value of any other consideration included in the
payment per share of common stock exceeds the current market
price per share of common stock on the trading day next
succeeding the last date on which tenders or exchanges may be
made pursuant to the tender or exchange offer.
However, the adjustment referred to in this clause (7) will
generally not be made if, as of the closing of the offer, the
offering documents disclose a plan or an intention to cause us to
engage in a consolidation or merger or a sale of all or
substantially all of our assets.
The current market price of our common stock on any day means the average
of the closing sale price of our common stock as defined above under
"-- Conversion -- General" for each of the 10 consecutive trading days ending on
the earlier of the day in question and the day before the ex-dividend date with
respect to the issuance or distribution requiring such computation.
To the extent that we have a rights plan in effect upon conversion of the
debentures you will receive, in addition to any shares of our common stock that
may be issuable pursuant to such conversion, the rights under the rights plan
attributable to such shares, unless prior to any conversion, the rights have
separated from the common stock, in which case the conversion rate will be
adjusted at the time of separation as described in clause (4) above, as if we
distributed to all holders of our common stock, shares of our
36
capital stock, evidences of indebtedness or assets as described above, subject
to readjustment in the event of the expiration, termination or redemption of
such rights.
In the event of:
- any reclassification of our common stock;
- a consolidation, merger, binding share exchange or combination involving
us; or
- a sale or conveyance to another person or entity of all or substantially
all of our property or assets;
in which holders of common stock would be entitled to receive stock, other
securities, other property, assets or cash for their common stock, upon
conversion of your debentures you will be entitled to receive the same type of
consideration that you would have been entitled to receive if you had converted
the debentures immediately prior to any of these events.
The conversion rate will not be adjusted:
- upon the issuance of any shares of our common stock pursuant to any
present or future plan providing for the reinvestment of dividends or
interest payable on our securities and the investment of additional
optional amounts in shares of our common stock under any plan,
- upon the issuance of any shares of our common stock or options or rights
to purchase those shares pursuant to any present or future employee,
director or consultant benefit plan or program of or assumed by us or any
of our subsidiaries,
- upon the issuance of any shares of our common stock pursuant to any
option, warrant, right or exercisable, exchangeable or convertible
security not described in the preceding bullet and outstanding as of the
date the debentures were first issued,
- for a change in the par value of the common stock, or
- for accrued and unpaid interest and liquidated damages, if any.
In the event of a taxable distribution to holders of our common stock which
results in an adjustment to the conversion rate, you may, in certain
circumstances, be deemed to have received a distribution subject to U.S. income
tax as a dividend; in certain other circumstances, the absence of such
adjustment may result in a taxable dividend to the holders of our common stock.
In addition, non-U.S. holders of debentures in certain circumstances may be
deemed to have received a distribution subject to U.S. federal withholding tax
requirements. See "Certain Material United States Federal Income Tax
Considerations -- Treatment of U.S. Holders -- Constructive Dividends" and
"Treatment of Non-U.S. Holders -- Constructive Dividends."
To the extent permitted by law, we may, from time to time, increase the
conversion rate for a period of at least 20 days if our board of directors has
made a determination that this increase would be in our best interests. Any such
determination by our board will be conclusive. We would give holders at least 15
days notice of any increase in the conversion rate. In addition, we may increase
the conversion rate if our board of directors deems it advisable to avoid or
diminish any income tax to holders of common stock resulting from any dividend
or distribution of stock or rights to acquire stock or from any event treated as
such for income tax purposes.
PAYMENT AT MATURITY
Each holder of $1,000 principal amount of the debentures shall be entitled
to receive $1,000 at maturity, plus accrued and unpaid interest, and liquidated
damages, if any. We will pay principal on:
- global debentures to DTC in immediately available funds; and
- any definitive debentures at our office or agency in New York City, which
initially will be the office or agency of the trustee in New York City.
37
OPTIONAL REDEMPTION BY US
Prior to July 6, 2009, the debentures will not be redeemable at our option.
Beginning on July 6, 2009, we may redeem the debentures for cash at any time as
a whole, or from time to time in part, at a redemption price equal to 100% of
the principal amount of the debentures plus any accrued and unpaid interest and
liquidated damages, if any, on the debentures to but not including the
redemption date. We will give at least 30 days but not more than 60 days notice
of redemption by mail to holders of debentures. Debentures or portions of
debentures called for redemption will be convertible by the holder until the
close of business on the business day prior to the redemption date.
If we do not redeem all of the debentures, the trustee will select the
debentures to be redeemed in principal amounts of $1,000 or integral multiples
thereof, by lot, on a pro rata basis or by such other method that the trustee
considers fair and appropriate, so long as such method is not prohibited by the
rules of any securities exchange or quotation association on which the
debentures may then be traded or quoted. If any debentures are to be redeemed in
part only, we will issue a new debenture or debentures with a principal amount
equal to the unredeemed principal portion thereof. If a portion of your
debentures is selected for partial redemption and you convert a portion of your
debentures, the converted portion will be deemed to be taken from the portion
selected for redemption.
In the event of any redemption in part, we will not be required to:
- register the transfer of or exchange any debenture in certificated form,
during a period beginning at the opening of business 15 days before any
selection of debentures in certificated form, for redemption and ending
at the close of business on the earliest date on which the relevant
notice of redemption is deemed to have been given to all holders of
debentures to be so redeemed; or
- register the transfer of or exchange any debenture in certificated form,
so selected for redemption, in whole or in part, except the unredeemed
portion of any debenture being redeemed in part.
REPURCHASE OF DEBENTURES AT YOUR OPTION
OPTIONAL PUT
On June 30, 2009, June 30, 2014, and June 30, 2019, each a repurchase date,
you may require us to repurchase for cash any outstanding debentures for which
you have properly delivered and not withdrawn a written repurchase notice,
subject to certain additional conditions, at a repurchase price equal to 100% of
the principal amount of the debentures plus accrued and unpaid interest and
liquidated damages, if any, to, but not including, the repurchase date.
You may submit your debentures for repurchase to the paying agent at any
time from the opening of business on the date that is 20 business days prior to
the repurchase date until the close of business on the repurchase date.
Your repurchase notice electing to require us to repurchase debentures
shall be given so as to be received by the paying agent no later than the close
of business on the repurchase date and must state:
- if definitive debentures have been issued, the certificate numbers of
your debentures to be delivered for repurchase, or, if the debentures are
not issued in definitive form, the notice of repurchase must comply with
appropriate DTC procedures;
- the portion of the principal amount of debentures to be repurchased,
which must be $1,000 or an integral multiple thereof; and
- that the debentures are to be repurchased by us pursuant to the
applicable provisions of the debentures and the indenture.
38
You may withdraw any repurchase notice in whole or in part by delivering a
written notice of withdrawal to the paying agent prior to the close of business
on the repurchase date. The notice of withdrawal shall state:
- the principal amount of debentures being withdrawn;
- if definitive debentures have been issued, the certificate numbers of the
debentures being withdrawn or, if the debentures are not issued in
definitive form, the notice of withdrawal must comply with appropriate
DTC procedures; and
- the principal amount of the debentures, if any, that remain subject to
the repurchase notice.
In connection with any repurchase, we will, to the extent applicable:
- comply with the provisions of Rule 13e-4, Rule 14e-1 and any other tender
offer rules under the Exchange Act which may then be applicable; and
- file Schedule TO or any other required schedule under the Exchange Act.
Our obligation to pay the repurchase price for debentures for which a
repurchase notice has been delivered and not validly withdrawn is conditioned
upon your delivering the debentures, together with necessary endorsements, to
the paying agent at any time after delivery of the repurchase notice. We will
cause the repurchase price for the debentures to be paid promptly following the
later of the repurchase date or the time of delivery of the debentures, together
with such endorsements.
If the paying agent holds money sufficient to pay the repurchase price of
the debentures for which a repurchase notice has been given on the business day
following the repurchase date in accordance with the terms of the indenture,
then, immediately after the repurchase date, the debentures will cease to be
outstanding and interest and liquidated damages, if any, on the debentures will
cease to accrue, whether or not the debentures are delivered to the paying
agent, and all other rights of the holder shall terminate, other than the right
to receive the repurchase price upon delivery of the debentures.
Our ability to repurchase debentures for cash may be limited by
restrictions on our ability to obtain funds for such repurchase through
dividends, loans or other distributions from our subsidiaries and the terms of
our then existing borrowing agreements and the subordination provisions
described above in "Subordination." We cannot assure you that we would have the
financial resources, or would be able to arrange financing, to pay the
repurchase price in cash for all the debentures that might be delivered to
holders of debentures seeking to exercise the repurchase right. See "Risk
Factors -- Risks Related to the Debentures -- Because we operate through
subsidiaries, we may be unable to repay or repurchase the debentures if our
subsidiaries are unable to pay dividends or make advances to us."
FUNDAMENTAL CHANGE PUT
If a fundamental change, as defined below, occurs, you will have the right
on the fundamental change repurchase date, subject to certain exceptions set
forth below, to require us to repurchase all of your debentures not previously
called for redemption, or any portion of those debentures that is equal to
$1,000 in principal amount or integral multiples thereof, at a fundamental
change repurchase price in cash equal to 100% of the principal amount of the
debentures plus any accrued and unpaid interest, the make-whole premium, if any
and liquidated damages, if any, on the debentures to but not including the
fundamental change repurchase date. If the fundamental change repurchase date is
on a date that is after a record date and on or prior to the corresponding
interest payment date, we will pay such interest, and liquidated damages, if any
to the holder of record on the corresponding record date, which may or may not
be the same person to whom we will pay the repurchase price and the repurchase
price will be 100% of the principal amount of the debentures repurchased.
Notwithstanding the foregoing, we may be required to offer to repurchase or
otherwise repay in full our senior debt on a pro rata basis with the debentures,
or prior to the debentures as a result of the
39
subordination provisions described above under "-- Subordination," upon a change
of control, if similar change of control offers are or will be required by our
senior debt.
Within 30 days after the occurrence of a fundamental change, we are
required to give you notice of such occurrence and of your resulting repurchase
right, and the procedures that holders must follow to require us to repurchase
their debentures as described below. The fundamental change repurchase date
specified by us will be 30 days after the date on which we give you this notice.
To exercise your fundamental change repurchase right, you must deliver,
before the close of business on the business day prior to the fundamental change
repurchase date, the debentures to be repurchased, duly endorsed for transfer,
together with the written fundamental change repurchase notice, to the paying
agent. Your fundamental change repurchase notice must state:
- if definitive debentures have been issued, the certificate numbers of the
holders' debentures to be delivered for repurchase or, if the debentures
are not issued in definitive form, the fundamental change repurchase
notice must comply with appropriate DTC procedures;
- the portion of the principal amount of debentures to be repurchased,
which must be $1,000 or an integral multiple thereof; and
- that the debentures are to be repurchased by us pursuant to the
applicable provisions of the debentures.
A holder may withdraw any fundamental change repurchase notice in whole or
in part by delivering a written notice of withdrawal to the paying agent prior
to the close of business on the fundamental change repurchase date. The notice
of withdrawal shall state:
- the principal amount at maturity of debentures being withdrawn;
- if definitive debentures have been issued, the certificate numbers of the
debentures being withdrawn or, if the debentures are not issued in
definitive form, the notice of withdrawal must comply with appropriate
DTC procedures; and
- the principal amount of the debentures, if any, that remain subject to
the fundamental change repurchase notice.
A fundamental change will be deemed to have occurred upon a change of
control or a termination of trading.
A change of control will be deemed to have occurred at such time after the
original issuance of the debentures when any of the following has occurred:
(1) as indicated by the filing of a Schedule TO under the Exchange Act
or any other schedule, form or report under the Exchange Act disclosing the
acquisition by any person, including any syndicate or group deemed to be a
"person" under Section 13(d)(3) of the Exchange Act of beneficial
ownership, directly or indirectly, through a purchase, merger or other
acquisition transaction or series of purchase, merger or other acquisition
transactions, of shares of our capital stock entitling that person to
exercise 50% or more of the total voting power of all shares of our capital
stock entitled to vote generally in elections of directors, other than any
acquisition by us, any of our subsidiaries or any of our employee benefit
plans, except that any of those persons shall be deemed to have beneficial
ownership of all securities it has the right to acquire, whether the right
is currently exercisable or is exercisable only upon the occurrence of a
subsequent condition; or
(2) our consolidation or merger with or into any other person, any
merger of another person into us, or any conveyance, transfer, sale, lease
or other disposition of all or substantially all of our properties and
assets to another person, other than:
- any transaction pursuant to which holders of our capital stock
immediately prior to the transaction have the entitlement to
exercise, directly or indirectly, 50% or more of the total voting
power of all shares of capital stock entitled to vote generally in
elections of
40
directors of the continuing or surviving person immediately after
giving effect to such issuance; or
- any merger, share exchange, transfer of assets or similar
transaction solely for the purpose of changing our jurisdiction of
incorporation and resulting in a reclassification, conversion or
exchange of outstanding shares of common stock, if at all, solely
into shares of common stock of the surviving entity or a direct or
indirect parent of the surviving entity.
Beneficial ownership shall be determined in accordance with Rule 13d-3
promulgated by the Securities and Exchange Commission, which we refer to in this
prospectus as the SEC, under the Exchange Act. The term "person" includes any
syndicate or group that would be deemed to be a "person" under Section 13(d)(3)
of the Exchange Act.
The definition of change of control includes a phrase relating to the
conveyance, transfer, sale, lease or disposition of "all or substantially all"
of our assets. There is no precise, established definition of the phrase
"substantially all" under applicable law. Accordingly, your ability to require
us to repurchase your debentures as a result of a conveyance, transfer, sale,
lease or other disposition of less than all our assets may be uncertain.
However, notwithstanding the foregoing, it will not constitute a
fundamental change if more than 90% of the consideration in the transaction or
transactions, other than cash payments for fractional shares and cash payments
made in respect of dissenters' appraisal rights, constituting a change of
control consists of shares of common stock traded or to be traded immediately
following a change of control on a national securities exchange or the Nasdaq
National Market, and, as a result of the transaction or transactions, the
debentures become convertible into that common stock (to the same extent
convertible into our common stock before such transaction or transactions,
subject to appropriate adjustments to give effect to such transaction or
transactions) and any rights attached thereto.
A termination of trading will be deemed to have occurred if our common
stock or other common stock into which the debentures are then convertible is
neither listed for trading on a U.S. national securities exchange nor approved
for trading on the Nasdaq National Market.
Rule 13e-4 under the Exchange Act requires the dissemination of certain
information to security holders if an issuer tender offer occurs and may apply
if the repurchase option becomes available to holders of the debentures. We will
comply with this rule and file Schedule TO or any similar schedule to the extent
applicable at that time.
If the paying agent holds money or securities sufficient to pay the
fundamental change repurchase price and the make-whole premium, if any, with
respect to debentures which holders have elected to require us to repurchase on
the business day following the fundamental change repurchase date in accordance
with the terms of the indenture, then, immediately after the fundamental change
repurchase date, those debentures will cease to be outstanding and interest and
liquidated damages, if any, on the debentures will cease to accrue, whether or
not the debentures are delivered to the paying agent and all other rights of the
holder shall terminate, other than the right to receive the fundamental change
repurchase price and the make-whole premium, if any, upon delivery of the
debentures.
The foregoing provisions would not necessarily protect holders of the
debentures if highly leveraged or other transactions involving us occur that may
affect holders adversely. We could, in the future, enter into certain
transactions, including certain recapitalizations, that would not constitute a
fundamental change with respect to the fundamental change repurchase feature of
the debentures but that would increase the amount of our or our subsidiaries'
outstanding indebtedness.
Our ability to repurchase debentures for cash upon the occurrence of a
fundamental change is subject to important limitations. Our ability to
repurchase the debentures for cash may be limited by restrictions on our ability
to obtain funds for such repurchase through dividends, loans or other
distributions from our subsidiaries and the terms of our then existing borrowing
agreements and the subordination provisions described above under
"-- Subordination." In addition, the occurrence of a fundamental change could
41
cause an event of default under, or be prohibited or limited by the terms of,
our other senior debt. We cannot assure you that we would have the financial
resources, or would be able to arrange financing, to pay the fundamental change
repurchase price in cash for all the debentures that might be delivered by
holders of debentures seeking to exercise the repurchase right. See "Risk
Factors -- Risks Related to the Debentures -- Because we operate through
subsidiaries, we may be unable to repay or repurchase the debentures if our
subsidiaries are unable to pay dividends or make advances to us."
The fundamental change purchase feature of the debentures may in certain
circumstances make more difficult or discourage a takeover of our company. The
fundamental change repurchase feature, however, is not the result of our
knowledge of any specific effort:
- to accumulate shares of our common stock;
- to obtain control of us by means of a merger, tender offer solicitation
or otherwise; or
- by management to adopt a series of anti-takeover provisions.
Instead, the fundamental change repurchase feature is a standard term
contained in securities similar to the debentures.
MAKE-WHOLE PREMIUM
If a transaction described in the second paragraph of the definition of
change of control occurs prior to June 30, 2009 and constitutes a fundamental
change, we will pay, in addition to the repurchase price described above under
"-- Fundamental Change Put," a make-whole premium described below to the holder
of debentures who elects to require us to repurchase such debentures in
connection with such a fundamental change.
No make-whole premium will be paid if the stock price as defined below is
less than $12.57 or greater than $50.00, in each case subject to adjustment. The
make-whole premium will be determined by reference to the table below and is
based on the date on which such specified corporate transaction becomes
effective, or the effective date, and the price paid per share of our common
stock, or the stock price, in the transaction constituting the fundamental
change. If the holders of our common stock receive only cash in the fundamental
change, the stock price shall be the cash amount paid per share. Otherwise the
stock price shall be the closing sale price of our common stock on the 10
trading days up to, but not including, the effective date.
In connection with the repurchase of the debentures as described above or
upon a conversion of the debentures as a result of certain specified corporate
transactions as described under "Conversion Rights -- Conversion Upon Specified
Corporate Events -- Change of Control" above, we will pay the make-whole premium
in the form of consideration into which or for which our common stock was
converted, exchanged or acquired except that we will pay cash in lieu of
fractional interests in any security or other property delivered in connection
with such transaction.
If holders of our common stock receive or have the right to receive more
than one form of consideration in connection with such transaction, then for
purposes of the foregoing, the forms of consideration in which the make-whole
premium will be paid will be in proportion to the relative values, determined as
described in the next paragraph, of the different forms of consideration paid to
our common stockholders in connection with such fundamental change.
The value of such consideration to be delivered in respect of the
make-whole premium will be calculated as follows:
- securities that are traded on a U.S. national securities exchange or
approved for quotation on the Nasdaq National Market or any similar
system of automated dissemination of quotations of securities prices will
be valued based on 98% of the average closing price or last sale price,
as applicable, on the 10 trading days prior to but excluding the
fundamental change repurchase date,
42
- other securities, assets or property other than cash will be valued based
on 98% of the average of the fair market value of such securities, assets
or property other than cash as determined by two independent
nationally-recognized banks selected by the trustee, and
- 100% of any cash.
The stock prices set forth in the first row of the table (i.e., the column
headers), will be adjusted as of any date on which the conversion rate of the
debentures is adjusted. The adjusted stock prices will equal the stock prices
applicable immediately prior to such adjustment multiplied by a fraction, the
numerator of which is the conversion rate immediately prior to the adjustment
giving rise to the stock price adjustment and the denominator of which is the
conversion rate as so adjusted.
The following table sets forth the make-whole premiums (table in
percentages of principal amount of debentures).
STOCK PRICE
---------------------------------------------------------------------------------------------------------
EFFECTIVE DATE $12.57 $13.89 $15.21 $16.53 $17.85 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 $50.00
-------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
6/24/2004................ 0.00 5.32 10.51 16.41 22.14 20.14 16.50 13.97 12.07 10.56 9.64 8.64
6/30/2005................ 0.00 3.73 8.60 14.36 19.67 17.76 13.99 11.46 9.68 8.34 7.54 6.72
6/30/2006................ 0.00 2.54 6.93 12.55 18.10 15.50 11.50 8.99 7.36 6.21 5.58 4.96
6/30/2007................ 0.00 1.42 5.93 10.35 15.80 12.57 8.31 5.94 4.55 3.71 3.37 2.97
6/30/2008................ 0.00 0.00 3.62 6.69 11.89 7.75 3.63 1.91 1.22 0.98 0.91 0.82
6/30/2009................ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
The exact stock price and effective dates may not be set forth on the
table, in which case
- if the stock price is between two stock price amounts on the table or the
effective date is between two dates on the table, the make-whole premium
will be determined by straight-line interpolation between the additional
premium amounts set forth for the higher and lower stock price amounts
and the two dates, as applicable, based on a 365-day year;
- if the stock price is in excess of $50.00 per share, subject to
adjustment, no make-whole premium will be paid; and
- if the stock price is less than $12.57, subject to adjustment, no
make-whole premium will be paid.
Our obligation to pay the make-whole premium could be considered a penalty,
in which case the enforceability thereof would be subject to general principles
of reasonableness of economic remedies.
MERGER AND SALES OF ASSETS
The indenture provides that we may not consolidate with or merge into any
other person or convey, transfer, sell, lease or otherwise dispose of all or
substantially all of our properties and assets to another person unless, among
other things:
- we are the continuing corporation or the resulting, surviving or
transferee person is organized and existing under the laws of the U.S.,
any state thereof or the District of Columbia and such person assumes all
our obligations under the debentures and the indenture;
- if as a result of such transaction the debentures become convertible into
common stock or other securities issued by a third party, such third
party fully and unconditionally guarantees all our obligations or such
successor under the debentures and the indenture; and
- we are or such successor is not then or immediately thereafter in default
under the indenture.
The occurrence of certain of the foregoing transactions could constitute a
change of control.
This covenant includes a phrase relating to the conveyance, transfer, sale,
lease or disposition of "all or substantially all" of our assets. There is no
precise, established definition of the phrase "substantially
43
all" under applicable law. Accordingly, there may be uncertainty as to whether a
conveyance, transfer, sale, lease or other disposition of less than all our
assets is subject to this covenant.
EVENTS OF DEFAULT
Each of the following constitutes an event of default under the indenture:
- default in our obligation to deliver cash or shares of our common stock
upon conversion of any debentures;
- default in our obligation to provide timely notice of a fundamental
change;
- default in our obligation to repurchase debentures at the option of
holders or following a fundamental change;
- default in our obligation to redeem debentures after we have exercised
our redemption option;
- default in our obligation to pay the principal amount of the debentures
at maturity, when due and payable;
- default in our obligation to pay any interest or liquidated damages when
due and payable, and continuance of such default for a period of 30 days;
- our failure to perform or observe any other term, covenant or agreement
contained in the debentures or the indenture for a period of 60 days
after written notice of such failure, provided that such notice requiring
us to remedy the same shall have been given to us by the trustee or to us
and the trustee by the holders of at least 25% in aggregate principal
amount of the debentures then outstanding;
- a default that results in the acceleration of maturity of any
indebtedness for borrowed money of our company or our designated
subsidiaries in an aggregate amount of $25,000,000 or more, unless the
acceleration is rescinded, stayed or annulled within 30 days after
written notice of default is given to us by the trustee or to us and the
trustee by holders of not less than 25% in aggregate principal amount of
the debentures then outstanding; and
- certain events of bankruptcy, insolvency or reorganization with respect
to us or any of our subsidiaries that is a designated subsidiary or any
group of two or more subsidiaries that, taken as a whole, would
constitute a designated subsidiary.
A designated subsidiary means any existing or future, direct or indirect,
subsidiary of ours whose assets constitute 15% or more of our total assets on a
consolidated basis. The indenture will provide that the trustee shall, within 90
days of the occurrence of a default, give to the registered holders of the
debentures notice of all uncured defaults known to it, but the trustee shall be
protected in withholding such notice if it, in good faith, determines that the
withholding of such notice is in the best interest of such registered holders,
except in the case of a default under any of the first five bullets above.
If certain events of default specified in the last bullet point above shall
occur and be continuing, then automatically the principal amount of the
debentures plus any accrued and unpaid interest and liquidated damages, if any,
through such date shall become immediately due and payable. If any other event
of default shall occur and be continuing (the default not having been cured or
waived as provided under "-- Modification and Waiver" below), the trustee or the
holders of at least 25% in aggregate principal amount of the debentures then
outstanding may declare the debentures due and payable at their principal amount
plus any accrued and unpaid interest and liquidated damages, if any, through
such date and thereupon the trustee may, at its discretion, proceed to protect
and enforce the rights of the holders of debentures by appropriate judicial
proceedings. Such declaration may be rescinded or annulled with the written
consent of the holders of a majority in aggregate principal amount of the
debentures then outstanding upon the conditions provided in the indenture.
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The indenture contains a provision entitling the trustee, subject to the
duty of the trustee during default to act with the required standard of care, to
be indemnified by the holders of debentures before proceeding to exercise any
right or power under the indenture at the request of such holders. The indenture
provides that the holders of a majority in aggregate principal amount of the
debentures then outstanding, through their written consent, may direct the time,
method and place of conducting any proceeding for any remedy available to the
trustee or exercising any trust or power conferred upon the trustee.
We will be required to furnish annually to the trustee a statement as to
the fulfillment of our obligations under the indenture.
MODIFICATION AND WAIVER
CHANGES REQUIRING APPROVAL OF EACH AFFECTED HOLDER
The indenture, including the terms and conditions of the debentures, cannot
be modified or amended without the written consent or the affirmative vote of
the holder of each debenture affected by such change to:
- change the maturity of any debenture or the payment date of any
installment of interest or liquidated damages payable on any debentures;
- reduce the principal amount of, or any interest, liquidated damages,
redemption price, repurchase price, fundamental change repurchase price
or make-whole premium on, any debenture;
- impair or adversely affect the conversion rights of any holder of
debentures;
- change the currency of payment of such debentures or interest, liquidated
damages, redemption price, fundamental change repurchase price,
repurchase price or make-whole premium thereon;
- alter the manner of calculation or rate of interest, liquidated damages,
redemption price, fundamental change repurchase price, repurchase price
or make-whole premium on any debenture or extend the time for payment of
any such amount;
- impair the right to institute suit for the enforcement of any payment on
or with respect to, or conversion of, any debenture;
- modify our obligation to maintain an office or agency in New York City;
- except as otherwise permitted or contemplated by provisions concerning
corporate reorganizations, adversely affect the repurchase option of
holders including after a fundamental change;
- modify the redemption provisions of the indenture in a manner adverse to
the holders of debentures;
- modify the subordination provisions of the indenture in a manner adverse
to the holders of debentures;
- reduce the percentage in aggregate principal amount of debentures
outstanding necessary to modify or amend the indenture or to waive any
past default; or
- reduce the percentage in aggregate principal amount of debentures
outstanding required for any other waiver under the indenture.
CHANGES REQUIRING MAJORITY APPROVAL
The indenture, including the terms and conditions of the debentures, may be
modified or amended, subject to the provisions described above, with the written
consent of the holders of at least a majority in aggregate principal amount of
the debentures at the time outstanding.
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CHANGES REQUIRING NO APPROVAL
The indenture, including the terms and conditions of the debentures, may be
modified or amended by us and the trustee, without the consent of the holder of
any debenture, for the purposes of, among other things:
- adding to our covenants for the benefit of the holders of debentures;
- surrendering any right or power conferred upon us;
- providing for conversion rights of holders of debentures if any
reclassification or change of our common stock or any consolidation,
merger or sale of all or substantially all of our assets occurs;
- providing for the assumption of our obligations to the holders of
debentures in the case of a merger, consolidation, conveyance, transfer
or lease;
- increasing the conversion rate, provided that the increase will not
adversely affect the interests of the holders of debentures;
- complying with the requirements of the SEC in order to effect or maintain
the qualification of the indenture under the Trust Indenture Act of 1939,
as amended;
- making any changes or modifications necessary in connection with the
registration of the debentures under the Securities Act as contemplated
in the registration rights agreement; provided that such change or
modification does not, in the good faith opinion of our board of
directors and the trustee, adversely affect the interests of the holders
of debentures in any material respect;
- to evidence and provide for the acceptance of the appointment of a
successor trustee;
- curing any ambiguity or correcting or supplementing any defective
provision contained in the indenture; provided that such modification or
amendment does not, in the good faith opinion of our board of directors
and the trustee, adversely affect the interests of the holders of
debentures in any material respect; provided further that any amendment
made solely to conform the provisions of the indenture to the description
of the debentures in this prospectus will not be deemed to adversely
affect the interests of the holders of the debentures; or
- adding or modifying any other provisions with respect to matters or
questions arising under the indenture which we and the trustee may deem
necessary or desirable and which will not adversely affect the interests
of the holders of debentures.
REGISTRATION RIGHTS
We entered into a registration rights agreement with the initial purchasers
for the benefit of the holders of the debentures. Pursuant to the agreement, we
will, at our expense:
- use our commercially reasonable efforts to cause the registration
statement of which this prospectus is a part to become effective within
210 days after the earliest date of original issuance of the debentures;
and
- use our commercially reasonable efforts to keep such registration
statement effective until the earlier of:
(1) the date when the non-affiliated holders of the debentures and the
common stock issuable upon conversion of the debentures, if any, are able
to sell all such securities immediately without restriction pursuant to the
volume limitation provisions of Rule 144 under the Securities Act; and
(2) the date when all of the debentures and the common stock issuable
upon conversion of the debentures, if any, are sold pursuant to the shelf
registration statement or pursuant to Rule 144 under the Securities Act or
any similar provision then in effect.
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Additionally, we will:
- provide to each holder for whom the shelf registration statement was
filed copies of the prospectus that is a part of the shelf registration
statement;
- notify each such holder for whom the shelf registration statement was
filed, when the shelf registration statement has become effective; and
- take certain other actions as are required to permit unrestricted resales
of the debentures and the common stock issuable upon conversion of the
debentures, if any.
Each holder who sells securities pursuant to the shelf registration
statement generally will be:
- required to be named as a selling holder in the related prospectus;
- required to deliver a prospectus to the purchaser;
- subject to certain of the civil liability provisions under the Securities
Act in connection with the holder's sales; and
- bound by the provisions of the registration rights agreement which are
applicable to the holder including certain indemnification rights and
obligations.
We may suspend the use of the prospectus for a period not to exceed 45 days
in any 90-day period, and not to exceed an aggregate of 120 days in any 360-day
period, if:
- the prospectus would, in our reasonable judgment, contain a material
misstatement or omission as a result of an event that has occurred and is
continuing; and
- we reasonably determine in good faith that the disclosure of this
material non-public information would be seriously detrimental to us and
our subsidiaries.
However, if the disclosure relates to a previously undisclosed proposed or
pending material business transaction, the disclosure of which we determine in
good faith would be reasonably likely to impede our ability to consummate such
transaction, we may extend the suspension period from 45 days to 60 days. We
will not specify the nature of the event giving rise to a suspension in any
notice to holders of the debentures of the existence of such a suspension.
We refer to each of the following as a registration default:
- the registration statement has not been filed prior to or on the 90th day
following the earliest date of original issuance of any of the
debentures; or
- the registration statement has not been declared effective prior to or on
the 210th day following the earliest date of original issuance of any of
the debentures, or the effectiveness target date; or
- at any time after the effectiveness target date, the registration
statement ceases to be effective or fails to be usable and (1) we do not
cure the registration statement within five business days (or, if the
suspension period is then in effect, the fifth business day following the
expiration of such suspension period) by a post-effective amendment,
prospectus supplement or report filed pursuant to the Exchange Act or (2)
if applicable, we do not terminate the suspension period, described in
the preceding paragraph, by the 45th or 60th day, as the case may be, or
(3) if suspension periods exceed an aggregate of 90 days in any 360-day
period.
If a registration default occurs, other than a registration default
relating to a failure to file or have an effective registration statement with
respect to the shares of common stock, cash liquidated damages will accrue on
the debentures that are transfer restricted securities, from and including the
day following the registration default to but excluding the earlier of (1) the
day on which the registration default has been cured and (2) the date the
registration statement is no longer required to be kept effective. Subject to
the subordination described above under "-- Subordination," liquidated damages
will be paid semiannually in
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arrears, with the first semiannual payment due on each June 30 and December 30,
commencing on the first interest payment date following the registration
default, and will accrue at a rate per year equal to:
- 0.25% of the principal amount of a debenture to and including the 90th
day following such registration default; and
- 0.50% of the principal amount of a debenture from and after the 91st day
following such registration default.
In no event will liquidated damages accrue at a rate per year exceeding
0.50%. If a holder converts some or all of its debentures when there exists a
registration default with respect to the common stock or a registration default
occurs following such conversion, the holder will not be entitled to receive
liquidated damages on any common stock that may have been issued pursuant to
such conversion.
GOVERNING LAW
The indenture and the debentures will be governed by, and construed in
accordance with, the laws of the State of New York.
INFORMATION CONCERNING THE TRUSTEE
U.S. Bank National Association, as trustee under the indenture, has been
appointed by us as paying agent, conversion agent, calculation agent, registrar
and custodian with regard to the debentures. American Stock Transfer & Trust
Company is the transfer agent and registrar for our common stock. The trustee or
its affiliates may from time to time in the future provide banking and other
services to us in exchange for a fee.
CALCULATIONS IN RESPECT OF DEBENTURES
We or our agents will be responsible for making all calculations called for
under the debentures. These calculations include, but are not limited to,
determination of the trading prices of the debentures and of our common stock.
We or our agents will make all these calculations in good faith and, absent
manifest error, our and their calculations will be final and binding on holders
of debentures. We or our agents will provide a schedule of these calculations to
the trustee, and the trustee is entitled to conclusively rely upon the accuracy
of these calculations without independent verification.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
Our authorized capital stock consists of 200,000,000 shares of common
stock, par value $.01 per share, 600,000 shares of non-voting common stock, par
value $.01 per share and 20,000,000 shares of preferred stock, no par value. As
of June 3, 2005, 29,855,412 shares of our common stock were outstanding. In this
section, we summarize certain of the features and rights of our common stock,
non-voting common stock, and preferred stock. This summary does not purport to
be exhaustive and is qualified in its entirety by reference to our Certificate
of Incorporation, Bylaws, the Shareholder Protection Rights Agreement and all
amendments thereto, and to applicable Delaware law.
COMMON STOCK
The holders of shares of our common stock are entitled to one vote per
share on all matters upon which stockholders have the right to vote. Each
stockholder may exercise such vote either in person or by proxy. Directors are
elected by a plurality of the votes cast and stockholders are not entitled to
cumulate their votes for the election of directors, which means that the holders
of more than 50% of the common stock voting for the election of directors can
elect all of the directors to be elected by holders of common stock, in which
event the holders of the remaining common stock voting will not be able to elect
any director. In all other matters, the affirmative vote of a majority of the
shares of stock entitled to vote held by stockholders present in person or by
proxy at a meeting of stockholders shall be required for approval, unless a
greater vote is required by law or our certificate of incorporation. Subject to
preferences to which holders of preferred stock, if any, may be entitled, and
the holders of non-voting common stock receiving an equivalent per share
dividend, the holders of common stock are entitled to receive ratably such
dividends, if any, as may be declared from time to time by our board of
directors out of legally available funds. We do not presently anticipate paying
cash dividends in the foreseeable future. In the event we liquidate, dissolve or
wind up our business, the holders of common stock and the holders of non-voting
common stock are entitled to share ratably in all of our assets which are
legally available for distribution to stockholders, subject to the prior rights
on liquidation of creditors and to preferences to which holders of preferred
stock, if any, may be entitled. The holders of common stock have no preemptive,
subscription, redemption or sinking fund rights.
NON-VOTING COMMON STOCK
Our board of directors has the authority to issue non-voting common stock.
The holders of shares of our non-voting common stock are not entitled to vote
except as provided by law. Subject to certain limitations, our non-voting common
stock is convertible, at the option of its holder, into an equal number of
shares of our common stock. Subject to preferences to which holders of preferred
stock, if any, may be entitled, the holders of non-voting common stock are
entitled to receive ratably such dividends, if any, as may be declared from time
to time by our board of directors out of legally available funds. No dividend
will be declared or paid on the common stock unless an equivalent per share
dividend is declared or paid on the non-voting common stock. We do not presently
anticipate paying cash dividends in the foreseeable future. In the event we
liquidate, dissolve or wind up our business, the holders of common stock and the
holders of non-voting common stock are entitled to share ratably in all of our
assets which are legally available for distribution to stockholders, subject to
the prior rights on liquidation of creditors and to preferences to which holders
of preferred stock, if any, may be entitled. The holders of non-voting common
stock have no preemptive, subscription, redemption or sinking fund rights. At
present, we have no plans to issue any of the non-voting common stock and we are
not aware of any pending or proposed transaction that would be affected by such
an issuance.
PREFERRED STOCK
Our board of directors has the authority to issue preferred stock in one or
more series and to fix the rights, preferences, privileges and restrictions
thereof, including dividend rights, dividend rates, conversion
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rights, voting rights, terms of redemption (including sinking fund provisions),
redemption prices and liquidation preferences, and the number of shares
constituting and the designation of any such series, without further vote or
action by the stockholders. At present, we have no plans to issue any of the
preferred stock and we are not aware of any pending or proposed transaction that
would be affected by such an issuance.
POTENTIAL ANTI-TAKEOVER EFFECTS OF OUR CERTIFICATE OF INCORPORATION, BY-LAWS,
DELAWARE LAW AND SHAREHOLDER PROTECTION RIGHTS AGREEMENT
DELAWARE LAW
We are subject to Section 203 of the Delaware General Corporation Law. This
statute regulating corporate takeovers prohibits a Delaware corporation such as
ours from engaging in any business combination with any interested stockholder
for three years following the date that the stockholder became an interested
stockholder unless:
- prior to such time, the board of directors of the Delaware corporation
approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder;
- upon the consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes
of determining the number of shares of voting stock outstanding (a)
shares owned by persons who are directors and also officers, and (b)
shares owned by employee stock plans in which employee participants do
not have the right to determine confidentially whether shares held
subject to the plan will be tendered in a tender or exchange offer; or
- on or subsequent to the date of the transaction, the business combination
is approved by the board and authorized at an annual or special meeting
of stockholders, and not by written consent, by the affirmative vote of
at least 66 2/3% of the outstanding voting stock which is not owned by
the interested stockholder.
Section 203 defines a "business combination" to include the following:
- any merger or consolidation involving the corporation and the interested
stockholder;
- any sale, transfer, pledge or other disposition involving the interested
stockholder of assets of the corporation having an aggregate market value
equal to 10% or more of either the aggregate market value of all the
assets or of all the outstanding stock or the corporation;
- subject to exceptions, any transaction that results in the issuance or
transfer by the corporation of any stock of the corporation to the
interested stockholder; or
- the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, Section 203 defines an interested stockholder as any entity or
person beneficially owning 15% or more of the outstanding voting stock of the
corporation or any entity or person affiliated with or controlling or controlled
by such entity or person.
RESTATED CERTIFICATE OF INCORPORATION AND RESTATED BY-LAW PROVISIONS
Our restated Certificate of Incorporation and restated By-laws contain
provisions that could have an anti-takeover effect. These provisions include:
- authorized but unissued shares of common and preferred stock available
for future issuance without stockholder approval;
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- vacancies on our board may only be filled by the remaining directors and
not our stockholders (unless no director remains);
- non-cumulative voting for directors
- authorization for our board of directors, without stockholder approval,
to issue up to 20,000,000 shares of preferred stock;
- limitations on the ability of stockholders to call special meetings of
stockholders;
- a unanimity requirement for stockholders to take any action by written
consent;
- the board may generally adopt, amend and repeal our bylaws;
- stockholders must submit proposals for annual stockholders' meetings or
nominees for election as director at least 120 days prior to the
anniversary date of the distribution of the company's proxy statement
related to its last annual meeting in order for their proposals or
nominees to be considered.
These and other provisions contained in our restated certificate of
incorporation and restated by-laws could delay or discourage transactions
involving an actual or potential change in control of us or our management,
including transactions in which stockholders might otherwise receive a premium
for their shares over their current prices. Such provisions could also limit the
ability of stockholders to remove current management or approve transactions
that stockholders may deem to be in their best interests and could adversely
affect the price of our common stock.
SHAREHOLDER PROTECTION RIGHTS AGREEMENT
Pursuant to the rights plan adopted in 1999, our board of directors
declared a dividend of one right for each outstanding share of common stock to
stockholders of record at the close of business on February 16, 1999. Each right
entitles the registered holder to purchase a unit consisting of one one-
hundredth of a share of Series A Junior Participating Preferred Stock from us.
Currently, and after certain adjustments for certain recapitalization activities
such as reverse stock splits, the purchase or exercise price for such right is
$75 per unit.
In the event that a person becomes an acquiring person, as defined in the
rights plan, except pursuant to an offer for all outstanding shares of common
stock that our independent directors determine to be fair and otherwise in the
best interests of our company and our stockholders, each holder of a right will
thereafter have the right to receive, upon exercise, common stock or, in certain
circumstances, cash, property or other securities of ours having a value equal
to two times the exercise price of the right.
Until a right is exercised, the holder will not possess stockholder rights,
such as the right to vote or to receive dividends. While the distribution of the
rights will not be taxable to stockholders or to us, stockholders may, in
certain circumstances, recognize taxable income in the event that the rights
become exercisable for our common stock or other consideration, or for common
stock of the acquiring company, or in the event of the redemption of the rights.
The rights are not exercisable until the distribution date, as that term is
defined in the rights plan, and are set to expire at 5:00 P.M. (EST) on February
16, 2009, unless earlier redeemed, exchanged, extended or terminated by us.
CERTAIN EFFECTS OF AUTHORIZED AND UNISSUED STOCK
As of June 3, 2005, there are 170,144,588 unissued shares of common stock,
600,000 unissued shares of non-voting common stock and 20,000,000 unissued
shares of preferred stock of which 1,000,000 shares of such preferred stock have
been designated Series A Junior Participating Preferred Stock in connection with
the adoption of our rights plan. These additional shares may be issued for a
variety of proper corporate purposes, including future public or private
offerings to raise additional capital or facilitate acquisitions. We do not
presently intend to issue additional shares of common stock, non-voting common
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stock or preferred stock other than in connection with our employee benefit
plans or pursuant to conversions of the debentures. The existence of unissued
shares of common stock, non-voting common stock and preferred stock may enable
our board of directors to discourage an attempt to change control of our company
by means of a tender offer, proxy contest or otherwise and thereby protect the
continuity of our management. If, in the due exercise of its fiduciary duties,
our board of directors determined that an attempt to change control of our
company was not in the best interest of our stockholders, our board of directors
could authorize, without having to obtain approval of the stockholders, the
issuance of such shares in one or more transactions that might prevent or render
more difficult the completion of such attempt. In this regard, our board of
directors has the authority to establish the rights and preferences of the
authorized and unissued shares of preferred stock, one or more series of which
could be issued entitling the holders thereof to vote separately as a class or
to cast a proportionately larger vote than the holders of shares of common stock
on any proposed action, to elect directors having terms of office or voting
rights greater than the terms of office or voting rights of other directors, to
convert shares of preferred stock into a proportionately larger number of shares
of common stock or our other securities, to demand redemption at a specified
price under prescribed circumstances related to such a change or to exercise
other rights designed to impede such a change. The issuance of shares of
preferred stock, whether or not related to any attempt to effect such a change,
may adversely affect the rights of the holders of shares of common stock and
non-voting common stock.
TRANSFER AGENT AND REGISTRAR
The registrar and transfer agent for our common stock is American Stock
Transfer & Trust Company.
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CERTAIN MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain U.S. federal income tax consequences
as of the date of this prospectus of purchasing, holding and selling the
debentures, and where noted, our common stock. The discussion below is based
upon the provisions of the Internal Revenue Code of 1986, as amended, which we
refer to in this prospectus as the Code, Treasury regulations (including
proposed treasury regulations) issued thereunder, Internal Revenue Service, or
IRS, rulings and pronouncements and judicial decisions now in effect, all of
which are subject to change, possibly with retroactive effect, so as to result
in U.S. federal income tax considerations different from those discussed below.
Except where we state otherwise, this summary deals only with debentures held as
capital assets by a "U.S. Holder" (as described below) who purchases the
debentures at their "issue price" (as defined below).
We do not address all of the tax consequences that may be relevant to a
U.S. Holder. We also do not address, except as stated below, any of the tax
consequences to holders that are "Non-U.S. Holders" (as defined below) or to
holders that may be subject to special tax treatment including banks, thrift
institutions, real estate investment trusts, personal holding companies,
regulated investment companies, insurance companies, tax exempt entities,
persons who hold the debentures in a "straddle" or as part of a "hedging,"
"conversion" or "constructive sale" transaction or U.S. Holders whose
"functional currency" is not the U.S. dollar, and brokers and dealers in
securities or currencies. Further, we do not address:
- the U.S. federal income tax consequences to stockholders in, or partners
or beneficiaries of, an entity that is a holder of the debentures;
- the U.S. federal estate and gift or alternative minimum tax consequences
of the purchase, ownership or sale of the debentures; or
- any state, local or foreign tax consequences of the purchase, ownership
and sale of the debentures.
A U.S. Holder is a beneficial owner of our debentures, or our common stock
received upon the conversion of our debentures, and is for U.S. federal income
tax purposes:
- a citizen or resident of the U.S.;
- a corporation, or other entity taxable as a corporation for U.S. federal
income tax purposes, created or organized in or under the laws of the
U.S., any state thereof or the District of Columbia;
- a trust if (1) a U.S. court can exercise primary supervision over its
administration and one or more U.S. persons have the authority to control
all of its substantial decisions or (2) the trust has a valid election in
effect under applicable U.S. Treasury regulations to be treated as a U.S.
person; or
- estates, the income of which is subject to United States federal income
taxation regardless of its source.
A Non-U.S. Holder is a beneficial owner (other than a partnership) of our
debentures, or our common stock received upon the conversion of our debentures,
other than a U.S. Holder.
If a partnership holds our debentures or common stock, the tax treatment of
a partner will generally depend upon the status of the partner and the
activities of the partnership. If you are a partner in a partnership holding the
debentures, you should consult your own tax advisor.
No rulings have been sought or will be sought from the IRS with respect to
any of the U.S. federal income tax considerations discussed below. As a result,
we cannot assure you that the IRS will agree with the tax characterizations and
the tax consequences described below.
If you are considering purchasing the debentures, you should consult your
own tax advisor concerning the U.S. federal income and estate tax consequences
in light of your particular situation and any consequences arising under the
laws of any other taxing jurisdiction.
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TREATMENT OF U.S. HOLDERS
PAYMENTS OF INTEREST
It is expected, and this discussion assumes, that the debentures were
issued without original issue discount for U.S. federal income tax purposes.
Accordingly, payments of interest on the debentures generally will be taxable to
a U.S. Holder as ordinary interest income at the time such payments are accrued
or are received (in accordance with the U.S. Holder's regular method of tax
accounting). If, however, the debentures "stated redemption price at maturity"
(generally the sum of all payments required under the debenture other than
payments of stated interest) exceeds the issue price by more than a de minimis
amount, a U.S. Holder will be required to include such excess in income as
original issue discount, as it accrues, in accordance with a constant yield
method based on a compounding of interest before the receipt of cash payments
attributable to this income.
LIQUIDATED DAMAGES AND MAKE-WHOLE PREMIUM
We may be required to pay liquidated damages if we fail to comply with
certain obligations under the registration rights agreement. See "Description of
the Debentures -- Registration Rights." Additionally, we may be required to pay
the make-whole premium in connection with a change in control. See "Description
of the Debentures -- Conversion Rights," and "Description of the
Debentures -- Repurchase of Debentures at the Option of Holders."
We believe (and this discussion assumes) that, as of the date of issuance
of the debentures, the likelihood of the payment of liquidated damages or the
make-whole premium is a "remote" contingency within the meaning of the
regulations that apply to debt instruments providing for one or more contingent
payments. Our determination in this regard is binding on a U.S. Holder unless
such holder explicitly discloses that it is taking a contrary position in its
tax return for the first year that it owns the debenture. This position,
however, is not binding on the IRS. If the IRS took a contrary position from
that described above, then a U.S. Holder may be required to accrue interest
income based upon a "comparable yield," regardless of the holder's method of
accounting. Such yield will be higher than the stated coupon on the debentures.
In addition, any gain on the sale, exchange, retirement or other taxable
disposition of the debentures, including any gain realized on the conversion of
a debenture, may be recharacterized as ordinary income. U.S. Holders should
consult their tax advisors regarding the tax consequences of the debentures
being treated as contingent payment debt instruments.
If we become obligated to pay liquidated damages, we intend to take the
position that such amounts would be treated as ordinary interest income and
taxed as described under "-- Payments of Interest" above. In the event that a
make-whole premium is paid, such premium would be included in the amount
realized by the holder on conversion or repurchase of the debentures. See
"-- Conversion of the Debentures" and "-- Sale, Exchange, Redemption or
Repurchase of the Debentures."
SALE, EXCHANGE, REDEMPTION OR REPURCHASE OF THE DEBENTURES
Except as set out below under "-- Conversion of the Debentures," the sale,
exchange, redemption or repurchase of a debenture will cause you to recognize
gain or loss equal to the difference between the amount you received (the sum of
the cash and the fair market value of any property received) and your adjusted
tax basis in the debentures. Any gain you recognize generally will be treated as
a capital gain. Provided that you have held the debentures for more than one
year, such gain will be treated as long-term capital gain. Long-term capital
gains recognized by certain non-corporate taxpayers generally will be subject to
a reduced tax rate. Any loss you recognize will be treated as a capital loss.
The deductibility of capital losses is subject to limitations. If a capital loss
from the sale, exchange, redemption or repurchase of the debentures meets
certain thresholds (generally $10 million for corporate U.S. Holders, other than
S corporations, and $2 million for other U.S. Holders), you may be required to
file a disclosure statement with the IRS.
54
Special rules apply in determining the tax basis of a debenture. If you are
an accrual basis taxpayer, your basis in a debenture is generally increased by
unpaid interest you previously accrued on the debentures. If you are a cash
basis taxpayer, your basis will not include unpaid interest but your gain from
the sale, exchange, redemption or repurchase of the debenture will be reduced by
the portion of the payment you receive that represents unpaid interest. That
amount will be taxable as ordinary income rather than as gain or loss from the
sale, exchange, redemption or repurchase of the debenture.
CONVERSION OF THE DEBENTURES
Because we have made an irrevocable election under the terms of the
indenture to satisfy in cash up to 100% of the principal amount of the
debentures submitted for conversion, with any remaining amount to be satisfied
in shares of our common stock, we intend to take the position that the
conversion will be treated as a recapitalization. As a result, the amount of
gain recognized is the lesser of (1) the value of the cash and stock received
(less the value of any cash or stock treated as payment of accrued but unpaid
interest) minus your adjusted basis in the debentures or (2) the amount of cash
received (less any portion of the cash treated as paid for accrued but unpaid
interest). As a result, no loss would be recognized on the conversion. You
should consult your own tax advisor regarding the proper treatment to you of the
receipt of a combination of cash and common stock upon conversion.
CONSTRUCTIVE DISTRIBUTIONS
The conversion price of the debentures will be adjusted in certain
circumstances. See the discussion under "Description of the
Debentures -- Conversion -- Conversion Rate Adjustment" above. Under Section
305(c) of the Code, adjustments, or failures to make adjustments, that have the
effect of increasing your proportionate interest in our assets or earnings may,
in certain circumstances, be treated as a deemed distribution to you. For
example, if we were to make a distribution of cash to our stockholders, and the
conversion rate of the debentures were increased, such increase would be deemed
to be a distribution to you. Any deemed distributions will be taxable as a
dividend, return of capital or capital gain in accordance with the rules
governing corporate distributions. It is unclear whether such deemed
distributions would be eligible for the dividends received deduction or at the
reduced rate of 15% applicable to certain non-corporate U.S. Holders (currently
effective for tax years 2004 through 2008). You should carefully review the
conversion rate adjustment provisions and consult your own tax advisor with
respect to the tax consequences of any such adjustment.
DISTRIBUTIONS ON COMMON STOCK
In general, distributions with respect to our common stock received upon
the conversion of a debenture will constitute dividends to the extent made out
of our current or accumulated earnings and profits, as determined under U.S.
federal income tax principles. If a distribution exceeds our current and
accumulated earnings and profits, the excess will be treated as a non-taxable
return of capital to the extent of a U.S. Holder's basis in our common stock and
thereafter as capital gain. Dividends received by a corporate U.S. Holder will
be eligible for the dividends-received deduction if the holder meets certain
holding period and other applicable requirements. Dividends received by a
non-corporate U.S. Holder will qualify for taxation at the 15% rate (currently
effective for tax years 2004 through 2008) if the holder meets certain holding
period and other applicable requirements.
SALE OR OTHER DISPOSITION OF COMMON STOCK
You will recognize capital gain or loss on the sale or other disposition of
our common stock received upon the conversion of a debenture. This capital gain
or loss will equal the difference between the amount realized and the holder's
tax basis in our common stock. Capital gain of a non-corporate U.S. Holder is
eligible to be taxed at reduced rates where the property is held for more than
one year. The deductibility of capital losses is subject to limitations. If you
sell common stock at a loss that meets certain thresholds (generally $10 million
for corporate U.S. Holders, other than S corporations, and $2 million for other
U.S. Holders), you may be required to file a disclosure statement with the IRS.
55
TREATMENT OF NON-U.S. HOLDERS
The following is a summary of U.S. federal tax consequences that will apply
to you if you are a Non-U.S. Holder of debentures or shares of our common stock.
As described above, a "Non-U.S. Holder" is a beneficial owner (other than a
partnership) of our debentures, or our common stock received upon the conversion
of our debentures, other than a U.S. Holder.
Special rules may apply to certain Non-U.S. Holders such as "controlled
foreign corporations," "passive foreign investment companies," "foreign personal
holding companies," corporations that accumulate earnings to avoid federal
income tax or, in certain circumstances, individuals who are U.S. expatriates.
Such Non-U.S. Holders should consult their own tax advisors to determine the
U.S. federal, state, local and other tax consequences that may be relevant to
them.
PAYMENTS WITH RESPECT TO THE DEBENTURES
Subject to the discussion below under "-- Constructive Dividends," if you
are a Non-U.S. Holder, all payments made to you on the debentures, and any gain
realized on a sale, exchange, conversion, redemption or repurchase of the
debentures, will be exempt from the 30% U.S. federal withholding tax and the
U.S. federal income tax, provided that:
- you do not (directly or indirectly, actually or constructively) own 10%
or more of the total combined voting power of all classes of our stock
that are entitled to vote;
- you are not a controlled foreign corporation that is related to us
through stock ownership;
- you are not a bank whose receipt of interest on a debenture is described
in Section 881(c)(3)(A) of the Code;
- (a) you provide your name and address, and certify, under penalties of
perjury, that you are not a U.S. person, which certification may be made
on an IRS Form W-8BEN (or successor form), or (b) you hold your
debentures through certain qualified intermediaries and you satisfy the
certification requirements of applicable Treasury regulations (special
certification rules apply to holders that are pass-through entities); and
- in the case of a sale, exchange, conversion, redemption or repurchase of
the debentures:
- we are not, and have not been within the shorter of the five-year
period preceding such sale, exchange, conversion, redemption or
repurchase and the period during which the Non-U.S. Holder held the
debentures, a "U.S. real property holding corporation" as defined in
Section 897(c)(2);
- if we are determined to be a U.S. real property holding corporation,
you own, actually or constructively, 5% or less of our debentures and
our common stock and our common stock is publicly traded;
- if you are an individual Non-U.S. Holder, you are present in the
United States for less than 183 days in the taxable year of
disposition (or are present in the United States for 183 days or more
in the taxable year of disposition and certain other conditions are
not met); and
- your holding of the debenture is not effectively connected with the
conduct of a trade or business in the U.S.
We believe that we are not, and do not anticipate becoming, a U.S. real
property holding corporation for U.S. federal income tax purposes.
If you cannot satisfy the requirements described above, payments of
interest will be subject to the 30% U.S. federal withholding tax, unless you
provide us with a properly executed (1) IRS Form W-8BEN (or successor form)
claiming an exemption from or reduction in withholding under the benefit of an
applicable tax treaty or (2) IRS Form W-8ECI (or successor form) stating that
interest paid on the
56
debentures is not subject to withholding tax because it is effectively connected
with your conduct of a trade or business in the U.S.
If you are engaged in a trade or business in the U.S. and interest on a
debenture or gain realized from the sale, exchange, conversion, repurchase or
redemption of the debenture is effectively connected with the conduct of that
trade or business (and, where a tax treaty applies, is attributable to a U.S.
permanent establishment), you will be subject to U.S. federal income tax, but
not the 30% withholding tax if you provide a Form W-8ECI as described above, on
that interest or gain on a net income basis in the same manner as if you were a
U.S. person as defined under the Code. In addition, if you are a foreign
corporation, you may be subject to a "branch profits tax" equal to 30% (or lower
applicable treaty rate) of your earnings and profits for the taxable year,
subject to adjustments, that are effectively connected with your conduct of a
trade or business in the U.S. For this purpose, interest or gain will be
included in the earnings and profits of such foreign corporation. An individual
Non-U.S. Holder who is in the U.S. for more than 183 days in the taxable year
that the debenture is sold, exchanged, redeemed or repurchased, and meets
certain other conditions, will be subject to a flat 30% U.S. federal income tax
on the gain derived, which may be offset by U.S. source capital losses, even
though the holder is not considered a resident of the U.S.
PAYMENTS ON COMMON STOCK
Any dividends paid to a non-U.S. holder with respect to the shares of
common stock will be subject to withholding tax at a 30% rate or such lower rate
as may be specified by an applicable income tax treaty. However, dividends that
are effectively connected with the conduct of a trade or business within the
U.S. or, where a tax treaty applies, are attributable to a U.S. permanent
establishment, are not subject to the withholding tax, but instead are subject
to U.S. federal income tax on a net income basis at applicable individual or
corporate rates. Certain certification and disclosure requirements must be
complied with in order for effectively connected income to be exempt from
withholding. Any such effectively connected dividends received by a foreign
corporation may, under certain circumstances, be subject to an additional
"branch profits tax" at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty.
A Non-U.S. Holder of shares of common stock who wishes to claim the benefit
of an applicable treaty rate is required to satisfy applicable certification and
other requirements. If you are eligible for a reduced rate of U.S. withholding
tax pursuant to an income tax treaty, you may obtain a refund of any excess
amounts withheld by filing an appropriate claim for refund with the IRS.
CONSTRUCTIVE DIVIDENDS
Under certain circumstances, a Non-U.S. Holder may be deemed to have
received a constructive dividend, see "Treatment of U.S. Holders -- Constructive
Distributions" above. Any constructive dividend deemed paid to a Non-U.S. Holder
will be subject to withholding tax at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty unless that gain is effectively
connected with your conduct of a trade or business in the U.S. or, where a tax
treaty applies, is attributable to a U.S. permanent establishment. A Non-U.S.
Holder who wishes to claim the benefit of an applicable treaty rate is required
to satisfy applicable certification and other requirements. It is possible that
U.S. federal tax on the constructive dividend would be withheld from interest
paid to the Non-U.S. Holder of the debentures. A Non-U.S. Holder who is subject
to withholding tax under such circumstances should consult its own tax advisor
as to whether it can obtain a refund for all or a portion of the withholding
tax.
SALE, EXCHANGE OR REDEMPTION OF SHARES OF COMMON STOCK
Any gain that a Non-U.S. Holder realizes upon the sale, exchange,
redemption or other disposition of a share of our common stock generally will
not be subject to U.S. federal income tax unless:
- that gain is effectively connected with your conduct of a trade or
business in the U.S. or, where a tax treaty applies, is attributable to a
U.S. permanent establishment;
57
- you are an individual who is present in the U.S. for 183 days or more in
the taxable year of that disposition and certain other conditions are
met; or
- we are or have been a U.S. real property holding corporation for U.S.
federal income tax purposes, except if you own, actually or
constructively, less than 5 percent of our common stock and such common
stock is publicly traded.
An individual Non-U.S. Holder who realizes gain described in the first
bullet point above will be subject to U.S. federal income tax on the net gain
derived. An individual Non-U.S. Holder described in the second bullet point
above will be subject to a flat 30% U.S. federal income tax on the gain derived,
which may be offset by U.S. source capital losses, even though the holder is not
considered a resident of the U.S. A Non- U.S. Holder that is a foreign
corporation and that realizes gain described in the first bullet point above
will be subject to tax on the gain at regular graduated U.S. federal income tax
rates and, in addition, may be subject to a "branch profits tax" at a 30% rate
or a lower rate if so specified by an applicable income tax treaty. As to the
third bullet point, as stated above, we believe that we are not, and do not
anticipate becoming, a U.S. real property holding corporation for U.S. federal
income tax purposes.
BACKUP WITHHOLDING AND INFORMATION REPORTING
If you are a U.S. Holder of our debentures or common stock, information
reporting requirements will generally apply to all payments we make to you and
the proceeds from a sale of a debenture or share of common stock made to you,
unless you are an exempt recipient, such as a corporation. If you fail to supply
your correct taxpayer identification number, under-report your tax liability or
otherwise fail to comply with applicable U.S. information reporting or
certification requirements, the IRS may require us to withhold federal income
tax at the rate set by Section 3406 of the Code (currently 28%) from those
payment.
In general, if you are a Non-U.S. Holder you will not be subject to backup
withholding and information reporting with respect to payments that we make to
you provided that we do not have actual knowledge or reason to know that you are
a U.S. person and you have given us the certification described above under
"Treatment of Non-U.S. Holders -- Payments With Respect to the Debentures."
In addition, if you are a Non-U.S. Holder you will not be subject to backup
withholding or information reporting with respect to the proceeds of the sale of
a debenture or share of common stock within the U.S. or conducted through
certain U.S.-related financial intermediaries, if the payor receives the
certification described above under "Treatment of Non-U.S. Holders -- Payments
With Respect to the Debentures" and does not have actual knowledge that you are
a U.S. person, as defined under the Code, or you otherwise establish an
exemption.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against your U.S. federal income tax liability provided the
required information is timely furnished to the IRS.
58
LEGAL MATTERS
The opinion of counsel as to the validity of the debentures and the common
stock issuable upon conversion of the debentures has been given by Paul J.
Quiner, our Senior Vice President and General Counsel. As of the date hereof,
Mr. Quiner beneficially owns 160,167 shares of our common stock.
EXPERTS
Our consolidated financial statements and schedule as of December 31, 2004
and 2003, and for each of the three years in the period ended December 31, 2004
have been incorporated by reference in this prospectus and registration
statement in reliance on the report of Ernst & Young LLP, independent registered
public accounting firm, given on the authority of such firm as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy materials that we have filed
with the SEC at their public reference room located at 100 F Street, N.E., Room
1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference room. The SEC maintains an Internet website
that contains reports, proxy and information statements, and other information
regarding registrants that file electronically with the SEC. The address of the
site is http://www.sec.gov.
Our common stock is quoted on the Nasdaq National Market under the symbol
"PSTI," and our SEC filings can also be read at the following address:
Nasdaq Operations, 1735 K Street, N.W. Washington, D.C. 20006.
Our SEC filings are also available to the public at our Internet website at
http://www.per-se.com.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" into this prospectus the
information we file with the SEC. This means that we can disclose important
information to you by referring you to those documents without restating that
information in this document. The information incorporated by reference into
this prospectus is considered to be part of this prospectus, and information we
file with the SEC from the date of this prospectus will automatically update and
supersede the information contained in this prospectus and documents listed
below. We incorporate by reference into this prospectus the documents listed
below and any future filings made by us with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act, including exhibits, until the
termination of the offering by the selling securityholders pursuant to this
prospectus:
(a) Our Annual Report on Form 10-K for the fiscal year ended December 31,
2004;
(b) Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2005;
(c) Our Current Reports on Form 8-K filed April 4, 2005, May 10, 2005 and
May 23, 2005; and
(d) The description of our common stock and accompanying rights contained
in our registration statement on Form 8-A filed on August 22, 1991, as
amended on November 12, 1993, March 28, 1995, May 22, 1996, July 21,
1998, February 12, 1999 and February 22, 2005 (File No. 000-19480).
We will provide to each person, including any beneficial owner, to whom a
copy of this prospectus is delivered, a copy of any or all of the information
that we have incorporated by reference into this prospectus. We will provide
this information upon written or oral request at no cost to the requester. You
may request this information by contacting our corporate headquarters at the
following address and
59
telephone number: 1145 Sanctuary Parkway, Suite 200, Alpharetta, GA 30004, Attn:
Investor Relations, telephone number (770) 237-7827.
You should rely only on the information contained in or incorporated by
reference into this prospectus. We have not authorized any dealer, salesperson
or other person to give you different information. This prospectus is not an
offer to sell nor is it seeking an offer to buy the securities referred to in
this prospectus in any jurisdiction where the offer or sale is not permitted.
The information contained in this prospectus is correct only as of the date of
this prospectus, regardless of the time of the delivery of this prospectus or
any sale of the securities referred to in this prospectus.
60
------------------------------------------------
$125,000,000
PER-SE TECHNOLOGIES, INC.
3.25% CONVERTIBLE SUBORDINATED DEBENTURES
DUE 2024
AND
UP TO 7,003,037 SHARES OF COMMON STOCK ISSUABLE
UPON CONVERSION OF THE DEBENTURES
------------------------------------------------
PROSPECTUS
------------------------------------------------
, 2005
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a list of anticipated expenses in connection with the
issuance and distribution of the securities being registered. All amounts other
than the SEC and NASDAQ fees are estimated.
SEC registration fee........................................ $ 15,837.50
Printing costs.............................................. $123,000.00
Legal fees.................................................. $464,000.00
Accounting fees............................................. $365,000.00
Miscellaneous............................................... --
-----------
Total..................................................... $967,837.50
===========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Delaware law, directors of a Delaware corporation can generally be
held liable for certain types of negligence and other acts and omissions in
connection with the performance of their duties to the corporation and our
stockholders. As permitted by Delaware law, however, our Certificate of
Incorporation contains a provision eliminating the liability of our directors
for monetary damages for breaches of their duty of care to us and our
stockholders, except as described below.
Such provision does not eliminate liability for (i) breaches of the duty of
loyalty to us and our stockholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
transactions from which improper personal benefit is derived, or (iv) unlawful
declaration of dividends or repurchases or redemptions of shares of our capital
stock. Such provision applies to officers only if they are directors and are
acting in their capacity as directors. Although the issue has not been
determined by any court, such provision would probably have no effect on claims
arising under federal securities laws. Such provision does not eliminate the
duty of care, but only eliminates liability for monetary damages for breaches of
such duty under various circumstances. Accordingly, such provision has no effect
on the availability of equitable remedies, such as an injunction or rescission,
based upon a breach of the duty of care. Equitable remedies may not, however, be
wholly effective to remedy the injury caused by any such breach.
Section 145 of the Delaware General Corporation Law permits a corporation
to provide discretionary indemnification to any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, by reason of the fact that such person is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement, if such indemnified person acted in good faith and in a manner which
such person reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such person's conduct was unlawful.
With respect to any threatened, pending or completed action or suit by or
in the right of the corporation, Section 145 also permits a corporation to
provide discretionary indemnification if such indemnified person acted in good
faith and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the corporation; provided, however, that
indemnification may not be made for any claim, issue or matter as to which such
a person has been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable to the corporation, unless and
only to the extent that the court in which the action or suit was brought or
other court of competent jurisdiction determines otherwise in light of all the
circumstances.
II-1
Section 145 of the Delaware General Corporation Law provides for mandatory
indemnification against expenses (including attorney's fees), actually and
reasonably incurred by such indemnified person in connection with the defense,
to the extent that a director, officer, employee or agent of a corporation has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in the preceding two paragraphs, or in defense of any
claim, issue or matter therein.
Section 145 of the Delaware General Corporation Law and Article VI, Section
4 of our Bylaws permits a corporation to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, whether or not the corporation would have
the power to indemnify such person against such liability under Section 145.
Article VI, Section 4 of our Bylaws provides that we shall indemnify and
hold harmless, to the full extent permitted by the Delaware General Corporation
Law, any person who was or is made or is threatened to be made a party or is
otherwise involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such person or such
person's legal representative, is or was a director, officer, employee or agent
of Per-Se Technologies, Inc. or is or was serving, at our request, as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, enterprise or nonprofit entity, including service with respect
to employee benefit plans, against all liability and loss suffered and expenses
reasonably incurred by such person.
David E. McDowell, a member of our Board of Directors and our former
Chairman and Chief Executive Officer, is party to an agreement with us pursuant
to which we have agreed to indemnify and hold him harmless to the fullest extent
permitted by the Delaware General Corporation Law as it presently exists or to
such greater extent as such law may subsequently be amended.
ITEM 16. EXHIBITS
EXHIBIT
NUMBER DOCUMENT
------- --------
4.1 -- Restated Certificate of Incorporation of Registrant
(incorporated by reference to Exhibit 3.1 to Annual Report
on Form 10-K for the year ended December 31, 1999 (the "1999
Form 10-K")).
4.2 -- Restated By-laws of Registrant, as amended (incorporated by
reference to Exhibit 3.2 to Annual Report on Form 10-K for
the year ended December 31, 2003).
4.3 -- Specimen Common Stock Certificate (incorporated by reference
to Exhibit 4.1 to the 1999 Form 10-K).
4.4 -- Rights Agreement dated as of February 11, 1999, between
Registrant and American Stock Transfer & Trust Company
(including form of rights certificates) (incorporated by
reference to Exhibit 4 to Current Report on Form 8-K filed
on February 12, 1999).
4.5 -- First Amendment to Rights Agreement dated as of February 11,
1999, between Registrant and American Stock Transfer & Trust
Company, entered into as of May 4, 2000 (incorporated by
reference to Exhibit 4.4 to Quarterly Report of Form 10-Q
for the quarter ended March 31, 2000).
4.6 -- Second Amendment to Rights Agreement dated as of February
11, 1999, between Registrant and American Stock Transfer &
Trust Company, entered into as of December 6, 2001, to be
effective as of March 6, 2002 (incorporated by reference to
Exhibit 4.12 to Annual Report on Form 10-K for the year
ended December 31, 2001 (the "2001 Form 10-K")).
4.7 -- Third Amendment to Rights Agreement dated as of February 11,
1999, between Registrant and American Stock Transfer & Trust
Company, entered into as of March 10, 2003 (incorporated by
reference to Exhibit 4.13 to Annual Report on Form 10-K for
the year ended December 31, 2002 (the "2002 Form 10-K")).
II-2
EXHIBIT
NUMBER DOCUMENT
------- --------
4.8 -- Fourth Amendment to Rights Agreement dated as of February
11, 1999, between Registrant and American Stock Transfer &
Trust Company, entered into as of February 18, 2005
(incorporated herein by reference to Exhibit 4.1 to Current
Report on Form 8-K filed on February 22, 2005).
4.9 -- Indenture dated as of June 30, 2004, between Registrant and
U.S. Bank National Association, as Trustee, relating to
Registrant's 3.25% Convertible Subordinated debentures Due
2024 (incorporated by reference to Exhibit 4.5 to Quarterly
Report on Form 10-Q for the quarter ended June 30, 2004).
4.10 -- Resale Registration Rights Agreement dated as of June 30,
2004, between Registrant and Banc of America Securities LLC,
as representative of the several initial purchasers of
Registrant's 3.25% Convertible Subordinated debentures Due
2024 (incorporated by reference to Exhibit 4.6 to Quarterly
Report on Form 10-Q for the quarter ended June 30, 2004).
5 -- Opinion of Paul J. Quiner, Senior Vice President and General
Counsel of the Registrant, regarding validity of the
securities being registered (previously filed with the
Registrant's registration statement on Form S-1 (File No.
333-119012) dated September 15, 2004).
12 -- Statement re: Computation of Ratio of Earnings to Fixed
Charges.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Paul J. Quiner (previously filed with the
Registrant's registration statement on Form S-1 (File No.
333-119012) dated September 15, 2004).
24 -- Powers of Attorney (previously filed with the Registrant's
registration statement on Form S-1 (File No. 333-119012)
dated September 15, 2004).
25 -- Statement re: Eligibility of Trustee (previously filed with
the Registrant's registration statement on Form S-1 (File
No. 333-119012) dated September 15, 2004).
---------------
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in the 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; and
(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.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be initial bona fide offering thereof.
II-3
(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;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) above shall not
apply if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed with or furnished to
the Commission by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(h) 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 Securities Act of 1933 and will be governed by the
final adjudication of such issue.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Alpharetta, State of Georgia, on the 17th day of June,
2005.
PER-SE TECHNOLOGIES, INC.
By: /s/ PHILIP M. PEAD
------------------------------------
Philip M. Pead
Chairman, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on June 17, 2005.
SIGNATURE TITLE
--------- -----
* Chairman, President and Chief Executive Officer
------------------------------------------------ (principal executive officer)
Philip M. Pead
* Executive Vice President and Chief Financial
------------------------------------------------ Officer
Chris E. Perkins (principal financial officer)
* Vice President and Corporate Controller
------------------------------------------------ (principal accounting officer)
Richard A. Flynt
* Director
------------------------------------------------
Craig Macnab
* Director
------------------------------------------------
David E. McDowell
* Director
------------------------------------------------
C. Christopher Trower
* Director
------------------------------------------------
Jeffrey W. Ubben
*By: /s/ PHILIP M. PEAD
------------------------------------------
Philip M. Pead
Attorney-in-Fact
II-5
EXHIBIT INDEX
EXHIBIT
NUMBER DOCUMENT
------- --------
4.1 -- Restated Certificate of Incorporation of Registrant
(incorporated by reference to Exhibit 3.1 to Annual Report
on Form 10-K for the year ended December 31, 1999 (the "1999
Form 10-K")).
4.2 -- Restated By-laws of Registrant, as amended (incorporated by
reference to Exhibit 3.2 to Annual Report on Form 10-K for
the year ended December 31, 2003).
4.3 -- Specimen Common Stock Certificate (incorporated by reference
to Exhibit 4.1 to the 1999 Form 10-K).
4.4 -- Rights Agreement dated as of February 11, 1999, between
Registrant and American Stock Transfer & Trust Company
(including form of rights certificates) (incorporated by
reference to Exhibit 4 to Current Report on Form 8-K filed
on February 12, 1999).
4.5 -- First Amendment to Rights Agreement dated as of February 11,
1999, between Registrant and American Stock Transfer & Trust
Company, entered into as of May 4, 2000 (incorporated by
reference to Exhibit 4.4 to Quarterly Report of Form 10-Q
for the quarter ended March 31, 2000).
4.6 -- Second Amendment to Rights Agreement dated as of February
11, 1999, between Registrant and American Stock Transfer &
Trust Company, entered into as of December 6, 2001, to be
effective as of March 6, 2002 (incorporated by reference to
Exhibit 4.12 to Annual Report on Form 10-K for the year
ended December 31, 2001 (the "2001 Form 10-K")).
4.7 -- Third Amendment to Rights Agreement dated as of February 11,
1999, between Registrant and American Stock Transfer & Trust
Company, entered into as of March 10, 2003 (incorporated by
reference to Exhibit 4.13 to Annual Report on Form 10-K for
the year ended December 31, 2002 (the "2002 Form 10-K")).
4.8 -- Fourth Amendment to Rights Agreement dated as of February
11, 1999, between Registrant and American Stock Transfer &
Trust Company, entered into as of February 18, 2005
(incorporated herein by reference to Exhibit 4.1 to Current
Report on Form 8-K filed on February 22, 2005).
4.9 -- Indenture dated as of June 30, 2004, between Registrant and
U.S. Bank National Association, as Trustee, relating to
Registrant's 3.25% Convertible Subordinated debentures Due
2024 (incorporated by reference to Exhibit 4.5 to Quarterly
Report on Form 10-Q for the quarter ended June 30, 2004).
4.10 -- Resale Registration Rights Agreement dated as of June 30,
2004, between Registrant and Banc of America Securities LLC,
as representative of the several initial purchasers of
Registrant's 3.25% Convertible Subordinated debentures Due
2024 (incorporated by reference to Exhibit 4.6 to Quarterly
Report on Form 10-Q for the quarter ended June 30, 2004).
5 -- Opinion of Paul J. Quiner, Senior Vice President and General
Counsel of the Registrant, regarding validity of the
securities being registered (previously filed with the
Registrant's registration statement on Form S-1 (File No.
333-119012) dated September 15, 2004).
12 -- Statement re: Computation of Ratio of Earnings to Fixed
Charges.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Paul J. Quiner (previously filed with the
Registrant's registration statement on Form S-1 (File No.
333-119012) dated September 15, 2004).
24 -- Powers of Attorney (previously filed with the Registrant's
registration statement on Form S-1 (File No. 333-119012)
dated September 15, 2004).
25 -- Statement re: Eligibility of Trustee (previously filed with
the Registrant's registration statement on Form S-1 (File
No. 333-119012) dated September 15, 2004).