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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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LUCENT TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-3408857
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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600 MOUNTAIN AVENUE, MURRAY HILL, NEW JERSEY 07974
(908) 582-8500
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
---------------------
RICHARD J. RAWSON, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
LUCENT TECHNOLOGIES INC.
600 MOUNTAIN AVENUE
MURRAY HILL, NEW JERSEY 07974,
(908) 582-8500
(Name and address, including zip code, and telephone number,
including area code, of agent for service)
---------------------
COPY TO:
STEPHEN L. BURNS, ESQ.
CRAVATH, SWAINE & MOORE
825 EIGHTH AVENUE
NEW YORK, NEW YORK 10019
(212) 474-1000
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this registration statement, as the selling
securityholders determine.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ---------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] --------------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE REGISTRATION FEE
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8.00% Redeemable Convertible Preferred
Stock, $1.00 par value per share and
initial liquidation preference
$1,000.00 per share................. 1,885,000 shares $ 1,145(2) $ 2,158,325,000(2) $ 539,582
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8.00% Convertible Subordinated
Debentures.......................... $1,885,000,000(3) (3) (3) (3)
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Common Stock, $.01 par value per share
and related preferred stock purchase
rights(4)........................... 252,005,273 shares(5) (5) (5) (5)
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Common Stock, $.01 par value per share
and related preferred stock purchase
rights(4)........................... 46,328,725 shares(6) 6.51(7) 301,600,000(7) 75,400
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(1) Exclusive of accrued interest and distributions, if any.
(2) Estimated solely for purposes of calculating the amount of the registration
fee, pursuant to Rule 457(c), based upon the average of the bid and asked
prices of the preferred stock on the PORTAL Market on October 24, 2001.
(3) Represents the aggregate principal amount of convertible subordinated
debentures originally issuable in exchange for the preferred stock, together
with an indeterminate aggregate principal amount as may become issuable in
exchange for the preferred stock as a result of increases in the liquidation
preference of the preferred stock to reflect the accretion of unpaid
dividends. Pursuant to Rule 457(i), no additional registration fee is
required for the convertible subordinated debentures issuable in exchange
for the preferred stock because no additional consideration will be received
in connection with the exchange.
(4) This registration statement also relates to rights to purchase shares of the
registrant's junior preferred stock, par value $1.00 per share, which are
attached to all shares of common stock. Until the occurrence of certain
prescribed events, the rights are not exercisable, are evidenced by the
certificates representing the common stock and are transferred with and only
with the common stock. The value attributable to the rights, if any, is
reflected in the value of the common stock and no separate consideration has
been received for the rights.
(5) Represents the underlying shares of common stock originally issuable upon
exercise of the conversion privilege attached to the preferred stock or the
convertible subordinated debentures, together with an indeterminate number
of additional shares as may become issuable upon exercise of the conversion
privilege attached to preferred stock or convertible subordinated debentures
as a result of antidilution adjustments and, in the case of conversion of
the preferred stock, increases in the liquidation preference of the
preferred stock to reflect the accretion of unpaid dividends. Pursuant to
Rule 457(i), no additional registration fee is required for the common stock
issuable upon conversion of the preferred stock or convertible subordinated
debentures because no additional consideration will be received in
connection with the exercise of the conversion privilege attached to the
preferred stock or the convertible subordinated debentures.
(6) Represents shares of common stock that the registrant may elect to issue in
connection with the payment of dividends on the preferred stock.
(7) Estimated solely for purposes of calculating the amount of the registration
fee, pursuant to Rule 457(c), based upon the average of the high and low
sales prices of the common stock on The New York Stock Exchange on October
24, 2001.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION DATED OCTOBER 26, 2001
PROSPECTUS
LUCENT TECHNOLOGIES INC.
1,885,000 SHARES OF 8.00% REDEEMABLE CONVERTIBLE PREFERRED STOCK
$1,885,000,000 PRINCIPAL AGGREGATE AMOUNT OF 8.00% CONVERTIBLE SUBORDINATED
DEBENTURES ISSUABLE IN EXCHANGE FOR THE PREFERRED STOCK
252,005,273 SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THE CONVERSION
PRIVILEGE
ATTACHED TO THE PREFERRED STOCK OR CONVERTIBLE SUBORDINATED DEBENTURES
46,328,725 SHARES OF COMMON STOCK ISSUABLE IN CONNECTION WITH THE PAYMENT OF
DIVIDENDS ON THE PREFERRED STOCK
We originally issued the preferred stock in a private placement on August 6,
2001. This prospectus relates to resales of preferred stock and to sales of
convertible subordinated debentures that may be issued in exchange for preferred
stock and common stock that may be issued upon conversion of preferred stock or
convertible subordinated debentures, by the securityholders named under the
caption "Selling Securityholders" in this prospectus, and to sales by the
transfer agent for the preferred stock, on behalf of the holders of the
preferred stock, of common stock that may be issued to the transfer agent in
connection with the payment of dividends on the preferred stock, all as
described under the caption "Plan of Distribution" in this prospectus.
Each share of preferred stock has an initial liquidation preference of
$1,000.00 and was convertible initially into 133.6898 shares of our common
stock, based on an initial conversion price of $7.48 per share, subject in each
case to specified adjustments. Your option to convert the preferred stock into
our common stock will not be exercisable until the earlier of nine months from
August 6, 2001 and the day after the date of the distribution to our common
stockholders of our shares of Agere Systems Inc. Our common stock trades on The
New York Stock Exchange under the symbol "LU." On October 24, 2001, the closing
sale price of our common stock was $6.59 per share.
Dividends on the preferred stock are payable on February 1 and August 1 of
each year, beginning on February 1, 2002. Dividends accrue from the beginning of
the relevant dividend period, which in the case of the first dividend period is
August 6, 2001, at the annual rate of 8.00% of the applicable accreted
liquidation preference per share. We will pay dividends on a dividend payment
date either, at our option and subject to agreed upon conditions, in cash or by
delivering shares of our common stock to the transfer agent to be sold on the
holders' behalf, resulting in net cash proceeds to be distributed to the holders
in an amount equal to the cash dividend otherwise payable. If we are unable to
pay a dividend on a dividend payment date, unpaid dividends will accrete at an
annual rate of 10.00% per year for the relevant dividend period and will be
reflected as an accretion to the liquidation preference of the preferred stock.
Because the conversion price will not change as a result of this increase,
holders who convert their preferred stock following an accretion of dividends
will receive more shares of our common stock.
We may, at any time on or after August 15, 2006, under agreed upon
conditions, redeem all or any shares of preferred stock for, at our option, cash
or shares of our common stock valued at a discount of 5% from the market price
of our common stock. The holders of the preferred stock will have specified
optional and mandatory redemption rights, including the right to require us to
redeem their shares of preferred stock on August 2, 2004, August 2, 2007, August
2, 2010 and August 2, 2016, at the prices described in this prospectus. We will
be obligated to redeem all outstanding shares of preferred stock on August 1,
2031, at the price and subject to certain conditions described in this
prospectus.
We also have the right, subject to certain conditions, to require holders of
the preferred stock to exchange their shares for convertible subordinated
debentures with similar terms.
INVESTING IN OUR PREFERRED STOCK, CONVERTIBLE SUBORDINATED DEBENTURES OR
COMMON STOCK INVOLVES RISKS. "RISK FACTORS" BEGINS ON PAGE 9 OF THIS PROSPECTUS.
THE SECURITIES OFFERED IN THIS PROSPECTUS HAVE NOT BEEN RECOMMENDED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE OR FOREIGN SECURITIES COMMISSION
OR ANY REGULATORY AUTHORITY. THESE AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY
OR DETERMINED THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is , 2001
TABLE OF CONTENTS
PAGE
----
Incorporation of Certain Information by Reference........... ii
Available Information....................................... iii
The Company................................................. 1
Summary of the Terms of the Preferred Stock and the
Convertible Subordinated Debentures....................... 1
Risk Factors................................................ 9
Forward-Looking Statements.................................. 13
Use of Proceeds............................................. 15
Ratio of Earnings to Combined Fixed Charges and Preferred
Stock Dividend Requirements............................... 15
Ratio of Earnings to Fixed Charges.......................... 15
Description of the Preferred Stock.......................... 16
Description of the Convertible Subordinated Debentures...... 38
Certain Federal Income Tax Consequences..................... 44
Selling Securityholders..................................... 52
Plan of Distribution........................................ 57
Legal Matters............................................... 60
Experts..................................................... 60
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This prospectus is part of a registration statement that we filed with the
SEC utilizing a "shelf" registration process. Under this shelf process, selling
securityholders may, from time to time over the next two years, resell their
preferred stock and sell convertible subordinated debentures issued in exchange
for their preferred stock and common stock issued upon conversion of their
preferred stock or convertible subordinated debentures, in one or more
offerings. In addition, under this shelf process, the transfer agent for the
preferred stock may from time to time sell, on behalf of the holders of the
preferred stock, common stock, that may be issued to the transfer agent in
connection with the payment of dividends on the preferred stock and covered by
this prospectus, in one or more offerings.
You should read this prospectus and any applicable prospectus supplement
together with additional information described immediately below under the
headings "Incorporation of Certain Information By Reference" and "Available
Information."
i
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
This prospectus incorporates by reference important business and financial
information about us that is not otherwise included in this document. The
following documents filed by us, Commission File No. 001-11639, with the SEC are
incorporated herein by reference and shall be deemed to be a part hereof:
1. Amended Annual Report on Form 10-K/A for the fiscal year ended
September 30, 2000, filed on June 13, 2001;
2. Quarterly Report on Form 10-Q for the three months ended June 30,
2001, filed on August 13, 2001;
3. Quarterly Report on Form 10-Q for the three months ended March 31,
2001, filed on May 10, 2001;
4. Amended Quarterly Report on Form 10-Q/A for the three months ended
December 31, 2000, filed on June 13, 2001;
5. Current Reports on Form 8-K filed pursuant to Item 5 of Form 8-K
on October 12, 2000, October 24, 2000, November 15, 2000, November 21,
2000, December 22, 2000, February 27, 2001, July 31, 2001, August 1, 2001,
August 16, 2001 and October 23, 2001;
6. Current Report on Form 8-K filed pursuant to Item 9 of Form 8-K on
August 2, 2001; and
7. The "Description of Capital Stock" section of our Registration
Statement on Form 10 filed with the SEC on February 26, 1996, as amended by
Amendment No. 1 filed on Form 10/A on March 12, 1996, Amendment No. 2 filed
on Form 10/A on March 22, 1996, and Amendment No. 3 filed on Form 10/A on
April 1, 1996, and any other amendments or reports filed for the purpose of
updating that description.
Except where specifically stated above, Current Reports on Form 8-K
containing only Regulation FD disclosure furnished under Item 9 of Form 8-K are
not incorporated herein by reference.
All documents and reports filed by us with the SEC (other than Current
Reports on Form 8-K containing only Regulation FD disclosure furnished pursuant
to Item 9 of Form 8-K, unless otherwise indicated therein) pursuant to Section
13(a), 13(c), 14 or 15(d) of the Securities and Exchange Act of 1934 after the
date of this document and prior to the termination of this offering shall be
deemed incorporated herein by reference and shall be deemed to be a part hereof
from the date of filing of such documents and reports. Any statement contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this document to
the extent that a statement contained herein or in any subsequently filed
document or report that also is or is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this document.
The financial statements, financial statement schedules, selected financial
data and management's discussion and analysis of results of operations and
financial condition in the Current Report on Form 8-K filed on July 31, 2001 and
incorporated by reference herein supersede the financial statements, financial
statement schedules, selected financial data and management's discussion and
analysis of results of operations and financial condition in the Amended Annual
Report on Form 10-K/A, but those financial statements and management's
discussion and analysis of results of operations and financial condition are not
updated for events occurring after the initial filing date of the Annual Report
on Form 10-K for the fiscal year ended September 30, 2000, except as expressly
noted in such Current Report on Form 8-K filed on July 31, 2001. The financial
statements and management's discussion and analysis of results of operations and
financial condition in our Amended Quarterly Report on Form 10-Q/A for the three
months ended December 31, 2000 do not reflect the reclassification of Agere
Systems Inc. and the power systems business as discontinued operations.
Subsequent financial statements and management's discussion
ii
and analysis of results of operations and financial condition do reflect this
reclassification, see notes 1 and 3 to our consolidated financial statements
included in our Current Report on Form 8-K, filed on July 31, 2001, and Note 3
in our Quarterly Report on Form 10-Q for the three months ended June 30, 2001,
filed on August 13, 2001, incorporated by reference herein.
We will provide, without charge to each person, including any beneficial
owner, to whom this document is delivered, upon written or oral request of such
person, a copy of any or all of the documents incorporated herein by reference
other than exhibits, unless such exhibits specifically are incorporated by
reference into such documents or this document. Requests for such documents
should be addressed in writing or by telephone to:
Corporate Secretary
Lucent Technologies Inc.
600 Mountain Avenue
Murray Hill, New Jersey 07974
(908) 582 8500.
AVAILABLE INFORMATION
We are subject to the information reporting requirements of the Securities
Exchange Act of 1934, as amended, and accordingly file annual, quarterly and
special reports, proxy statements and other information with the SEC. Members of
the public may read and copy any materials we file with the SEC at the SEC's
following public reference facilities:
Public Reference Room Chicago Regional Office
450 Fifth Street, N.W. Citicorp Center
Room 1024 500 West Madison Street
Washington, D.C. 20549 Suite 1400 Chicago, Illinois 60661-2511
Information on the operation of these public reference facilities may be
obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet
site at http://www.sec.gov that contains materials we file electronically with
the SEC. Our SEC filings can also be inspected and copied at the offices of The
New York Stock Exchange at 20 Broad Street, New York, New York 10005.
iii
THE COMPANY
We design and deliver networks for the world's largest communications
service providers. Backed by Bell Labs research and development, we rely on our
capabilities in mobility, optical and data networking technologies as well as
software and services to develop next-generation networks. Our systems, services
and software are designed to help customers quickly deploy and better manage
their networks and create new, revenue-generating services that help businesses
and consumers.
Our principal executive offices are located at 600 Mountain Avenue, Murray
Hill, New Jersey 07974 and our telephone number, at that location, is (908)
582-8500.
SUMMARY OF THE TERMS OF THE PREFERRED STOCK AND
THE CONVERTIBLE SUBORDINATED DEBENTURES
The following is a brief summary of select terms of the preferred stock, as
well as of the convertible subordinated debentures that may be issued, at our
election, in exchange for the preferred stock if agreed upon conditions are met.
For a more complete description of the terms of the preferred stock and the
convertible subordinated debentures, see the sections of this prospectus
entitled "Description of the Preferred Stock" and "Description of the
Convertible Subordinated Debentures."
THE PREFERRED STOCK
Issuer........................ Lucent Technologies Inc.
Maximum number of securities
offered....................... 1,885,000 shares of our 8.00% redeemable
convertible preferred stock owned by selling
stockholders named herein or in prospectus
supplements.
Liquidation preference........ Initially $1,000.00 per share, subject to
accretion.
Ranking....................... The preferred stock ranks, with respect to
dividend rights and rights upon liquidation,
winding up or dissolution:
- junior to:
- all our existing and future debt
obligations; and
- each class or series of our capital stock
the terms of which provide that such class
or series will rank senior to the preferred
stock;
- on a parity with each class or series of our
capital stock that has terms providing that
such class or series will rank on a parity
with the preferred stock; and
- senior to our Series A Junior Participating
Preferred Stock, our common stock and each
class or series of our capital stock that has
terms providing that such class or series
will rank junior to the preferred stock.
Without the consent of holders of at least
two-thirds of the shares of preferred stock
outstanding, we will not be entitled to issue
any class or series of capital stock that ranks
senior to the preferred stock.
1
Dividends..................... Dividend payment rate: annual rate of 8.00% of
the applicable accreted liquidation preference
per share, accruing from the beginning of the
relevant dividend period.
Dividend payment dates: semi-annually, on
February 1 and August 1 of each year, beginning
on February 1, 2002.
Form of dividend payment: We may, at our
option, pay dividends:
- in cash; or
- in shares of our common stock delivered to
the transfer agent to be sold on the holders'
behalf, except as described below, resulting
in net cash proceeds to be distributed to the
holders in an amount equal to the cash
dividend otherwise payable.
We will pay dividends on the preferred stock on
each dividend payment date, unless we are
unable to satisfy the relevant conditions to
payment described below.
The terms of our existing credit facilities
were recently amended to allow us to pay
dividends on the preferred stock in cash;
however, they prevent us from doing so if,
before the payment or after giving effect to
the payment, an event of default, as described
in our credit facilities, is or would be in
existence, and our future credit facilities and
other indebtedness may contain a similar or
other restrictions on paying dividends in cash.
To pay dividends, we must pay the dividends out
of funds legally available for payment, and to
pay dividends by delivering shares to the
transfer agent, we must provide the transfer
agent with a registration statement permitting
the immediate sale of the shares of common
stock in the public market. The registration
statement, of which this prospectus forms a
part, permits the immediate sale by the
transfer agent for the preferred stock, on
behalf of the holders of the preferred stock,
of up to 46,328,725 shares of our common stock
in the public market for this purpose; however,
we cannot assure you that we will pay dividends
in this manner or that we will be able to keep
effective the registration statement or that
this number of shares will be sufficient to
meet our future dividend payment requirements.
If we pay dividends by delivering shares of our
common stock to the transfer agent, those
shares will be owned beneficially by the
holders of the preferred stock upon delivery of
such shares of our common stock to the transfer
agent, and the transfer agent will hold those
shares and the net cash proceeds from the sale
of those shares for the exclusive benefit of
the holders. If a holder provides notice to the
transfer agent at least 30 days prior to the
applicable dividend payment date not to sell
any shares of common stock received and held on
behalf of that holder, the transfer agent will
deliver to or for the account of the holder
promptly after receipt by the transfer agent,
shares of common stock having the value of the
dividend payment calculated based
2
on an average sale price on the five trading
days preceding the third business day before
the relevant dividend payment date.
Dividend accretion: If we are unable to pay
dividends on the preferred stock in full on any
dividend payment date, the liquidation
preference of the preferred stock will be
increased for subsequent dividend periods by an
amount that reflects the accretion of the
unpaid dividends at an annual rate of 10.00%,
calculated on a semi-annual basis, from, and
including, the first day of the relevant
dividend period to, but excluding, the dividend
payment date. The conversion price will not
change as a result of any accretion.
Redemption at our option...... We may not redeem any shares of preferred stock
at any time before August 15, 2006. Thereafter,
we may, at our option and upon notice to the
holders of the preferred stock, redeem any
outstanding shares of preferred stock at a
price per share equal to the accreted
liquidation preference thereof, plus an amount
equal to accrued and unpaid dividends from, and
including, the immediately preceding dividend
payment date to, but excluding, the redemption
date.
We may, at our option, elect to pay the
redemption price:
- in cash; or
- in shares of our common stock valued at a
discount of 5% from the market price of our
common stock; or
- any combination thereof.
We may pay such redemption price only out of
funds legally available for such payment, and
if we pay the redemption price in shares of our
common stock, such shares must be eligible for
immediate sale in the public market by
non-affiliates of ours absent a registration
statement.
Redemption at the option of
the holder.................... On the redemption dates of August 2, 2004,
August 2, 2007, August 2, 2010, and August 2,
2016, we will, at the option of the holder, be
required to redeem any outstanding shares of
preferred stock at a price per share equal to
the accreted liquidation preference thereof,
plus an amount equal to accrued and unpaid
dividends from, and including, the immediately
preceding dividend payment date to, but
excluding, the redemption date.
The terms of the preferred stock permit us, at
our option, to pay the redemption price:
- in cash; or
- in shares of our common stock valued at a
discount of 5% from the market price of our
common stock; or
- any combination thereof.
3
We may pay the redemption price only out of
funds legally available for such payment, and
if we pay the redemption price in shares of the
common stock, such shares must be eligible for
immediate sale in the public market by
non-affiliates of ours absent a registration
statement.
Mandatory redemption.......... We will be obligated to redeem all outstanding
shares of preferred stock on August 1, 2031, at
a price per share equal to the accreted
liquidation preference thereof, plus an amount
equal to accrued and unpaid dividends from, and
including, the immediately preceding dividend
payment date to, but excluding, the date of
redemption.
The terms of the preferred stock permit us, at
our option, to pay the redemption price:
- in cash; or
- in shares of our common stock valued at a
discount of 5% from the market price of our
common stock; or
- any combination thereof.
We may pay the redemption price only out of
funds legally available for such payment, and
if we pay the redemption price in shares of our
common stock, such shares must be eligible for
immediate sale in the public market by
non-affiliates of ours absent a registration
statement.
Conversion.................... Each share of preferred stock may be converted
at the option of the holder into a number of
shares of our common stock, subject to
adjustment based on adjustments to the
conversion price, at any time from and after
the earlier of:
- nine months after the issuance of the
preferred stock; and
- the day immediately following the date of the
share distribution in connection with our
spin-off of Agere Systems Inc.
Initial conversion price: $7.48 per share of
common stock, subject to adjustment in a number
of circumstances described under "Description
of Preferred Stock -- Adjustments to the
Conversion Price." The initial conversion price
is equivalent to an initial conversion rate of
133.6898 shares of common stock for each
$1,000.00 initial liquidation preference of the
preferred stock. The conversion price will not
be increased in connection with an increase in
the accreted liquidation preference of the
preferred stock. Accordingly, holders who
convert their preferred stock following an
increase in the accreted liquidation preference
will receive more shares of our common stock.
For the tax consequences of the adjustment to
the conversion price following the anticipated
distribution of the Class B common stock of
Agere Systems Inc. to our common stockholders,
see "Certain Federal Income Tax
Consequences -- U.S. Holders -- Preferred
Stock -- Deemed Distributions" and
4
"-- Non-U.S. Holders -- Preferred Stock and
Common Stock -- Distributions" below.
Voting rights................. The holders of shares of preferred stock are
not entitled to any voting rights except as
required by law.
Notwithstanding the foregoing, so long as any
shares of preferred stock remain outstanding,
we shall not, without the consent of the
holders of at least two-thirds of the shares of
preferred stock outstanding:
- issue shares of or increase the authorized
number of shares of any class or series of
stock ranking prior to the outstanding
preferred stock as to the payment of
dividends or distributions upon liquidation,
dissolution or winding up; or
- amend our certificate of incorporation or the
resolutions contained in the certificate of
designations, whether by merger,
consolidation or otherwise, if the amendment
would alter or change any power, preference
or special right of the outstanding preferred
stock so as to materially and adversely
affect the holders thereof.
Change of control............. If we undergo a change of control, each holder
of shares of preferred stock will have the
right to require us to redeem any outstanding
shares of the holder's preferred stock at a
redemption price per share equal to the
accreted liquidation preference of those
shares, plus an amount equal to accrued and
unpaid dividends, if any, on those shares from,
and including, the immediately preceding
dividend payment date to, but excluding, the
date of redemption. This right of holders will
be subject to our obligation to repay or
repurchase any indebtedness or preferred stock
required to be repaid or repurchased in
connection with a change of control and to any
contractual restrictions then contained in our
indebtedness. Under the terms of our current
credit facilities, we are prohibited from
paying the redemption price of the preferred
stock in cash. Our future credit facilities and
other existing or future indebtedness may
contain similar restrictions. When we have
satisfied these obligations, we will redeem all
shares tendered upon a change of control,
subject to the legal availability of funds for
this purpose.
We may, at our option, elect to pay the
redemption price in cash or in shares of our
common stock valued at a discount of 5% from
the market price of our common stock, or any
combination thereof. However, we may pay such
redemption price only out of funds legally
available for such payment, and if we pay the
redemption price in shares of our common stock,
such shares must be eligible for immediate sale
in the public market by non-affiliates of ours
absent a registration statement.
Holders of the preferred stock will not have
this redemption right if our common stock
trades at or above 105% of the conversion price
of the preferred stock during specified
periods,
5
or if holders of the preferred stock receive
specified securities as a result of the change
of control.
Exchange right................ We have the right, at any time we have legally
available funds, to require all holders of
outstanding preferred stock to exchange their
preferred stock for our convertible
subordinated debentures having an aggregate
principal amount equal to the accreted
liquidation preference of the preferred stock
and having a conversion price and interest rate
equal to the conversion price and dividend rate
for the preferred stock, rounded down to the
nearest whole dollar amount. The terms of the
convertible subordinated debentures are
described below.
Tax consequences to U.S.
holders of our exercising the
exchange right................ The exchange of preferred stock for our
convertible subordinated debentures under the
exchange right would be taxable to the U.S.
holders of the preferred stock and may be
treated as a taxable distribution in the amount
of the fair market value of the convertible
subordinated debentures. See "Certain Federal
Income Tax Consequences -- Preferred
Stock -- Exchange Right" below. Based upon the
advice of our counsel, we intend to treat such
exchange as generally giving rise to capital
gain or loss.
Tax consequences to non-U.S.
holders....................... Dividends paid to non-U.S. holders on our
preferred stock or on our common stock
(including deemed dividends) will generally be
subject to U.S. Federal withholding tax. The
exchange by a non-U.S. holder of preferred
stock for our convertible subordinated
debentures under the exchange right may be
treated as a taxable distribution subject to
U.S. Federal withholding tax, although based
upon the advice of our counsel, we do not
intend to treat the exchange as a distribution
subject to U.S. Federal withholding tax. See
"Certain Federal Income Tax
Consequences -- Non-U.S. Holders -- Preferred
Stock."
Registration rights........... We have agreed to cause a shelf registration
statement to remain effective, subject to some
exceptions, until the earlier of (a) two years
following the issue date of the preferred stock
and (b) the date on which all shares of
preferred stock or common stock covered by that
registration statement have been sold under
that registration statement. If we do not
satisfy this obligation, we will be required to
pay additional dividends to holders of the
preferred stock.
Trading....................... Our common stock currently trades on The New
York Stock Exchange under the symbol "LU." We
have not applied and do not intend to apply for
the listing of the preferred stock or the
convertible subordinated debentures on any
securities exchange.
6
THE CONVERTIBLE SUBORDINATED DEBENTURES
Securities offered............ The convertible subordinated debentures will be
convertible into shares of our common stock and
will have terms and conditions substantially
similar to the preferred stock, except as
described below.
Principal amount.............. The aggregate principal amount of the
convertible subordinated debentures will be
limited to the aggregate accreted liquidation
preference of the preferred stock outstanding
on the effective date of the exchange. The
convertible subordinated debentures will be
issued in denominations equal to integral
multiples of the accreted liquidation
preference of one share of preferred stock as
of the effective date of the exchange, rounded
down to the nearest whole dollar amount.
Ranking....................... The convertible subordinated debentures will be
unsecured obligations of ours and will rank
equally with all of our other unsecured
subordinated indebtedness.
Subordination................. The payment of principal and interest on the
convertible subordinated debentures is
subordinated in right of prior payment to the
prior payment in full of all of our existing or
future senior debt.
Interest...................... Interest on the convertible subordinated
debentures will accrue at an annual rate of
8.00% of the principal amount from the dividend
payment date of the preferred stock immediately
preceding the exchange date or, if the exchange
date is a dividend payment date, from the
exchange date, and thereafter from the most
recent interest payment date.
Interest will be payable in cash on February 1
and August 1 of each year to holders of record
on the prior January 1 and July 1.
We will not have the right to defer interest
payments or to accrete the principal amount of
the convertible subordinated debentures, and we
will not have the right to redeem the principal
amount of the convertible subordinated
debentures, except as described below.
Redemption at our option...... We may redeem all or a portion of the
convertible subordinated debentures for cash at
any time on or after August 15, 2006, at a
price equal to 100% of the principal amount of
the convertible subordinated debentures to be
redeemed plus an amount equal to accrued and
unpaid interest to, but excluding, the
redemption date.
Redemption at the option of
the holder.................... The holders of convertible subordinated
debentures will have redemption at the option
of the holder terms that are substantially
identical to the redemption at the option of
the holder terms of the preferred stock.
Maturity...................... August 1, 2031. We will not have the right to
pay the principal amount due on the maturity
date in shares of our common stock.
7
Conversion.................... The conversion rights of the convertible
subordinated debentures will be substantially
similar to the conversion rights of the
preferred stock.
Voting rights................. The holders of convertible subordinated
debentures will not have the right to vote in
the election of our directors or any other
voting rights prior to the holders' receipt of
common stock upon conversion of their
convertible subordinated debentures.
Change of control............. The change of control redemption rights of
holders of the convertible subordinated
debentures will be substantially identical to
the change of control redemption rights of
holders of the preferred stock.
Registration rights........... The holders of convertible subordinated
debentures will have registration rights that
are substantially identical to the registration
rights of holders of the preferred stock.
Events of default............. A default in payment of principal or interest,
the failure to deliver common stock upon
conversion or the occurrence of specified
events of bankruptcy, insolvency or
reorganization affecting us will constitute an
event of default with respect to the
convertible subordinated debentures.
8
RISK FACTORS
Investing in these securities involves a high degree of risk. You should
carefully consider the following risk factors and all the other information
contained in this prospectus before investing in these securities.
RISKS RELATED TO OUR BUSINESS
Investing in these securities involves exposure to the risks related to our
business. Please review all of the documents incorporated by reference in this
prospectus for a description of the risks related to our business. Please note,
in particular, the following sections of our 2000 10-K/A:
- Item 1. Business, Section VIII. Outlook
- Item 3. Legal Proceedings
Please also note, in particular, the following sections of our Quarterly
Report on Form 10-Q for the three months ended June 30, 2001:
- Part I. Financial Information, Item 1. Financial Statements, Note 6.
Securitization Facility, Note 7. Debt and Note 12. Commitments and
Contingencies
- Part I. Financial Information, Item 2. Management's Discussion and
Analysis of Results of Operations and Financial Condition -- Overview,
-- Liquidity and Capital Resources, -- Other Information and
-- Forward-Looking Statements
- Part II. Other Information, Item 1. Legal Proceedings
Please note also, in our Current Report on Form 8-K filed on August 2, 2001
incorporated by reference in this prospectus, the "Recent Developments" set out
in Exhibit 99.1 to that Current Report.
The risks related to our business include risks related to:
- liquidity and future capital requirements, including with respect to our
customer financings;
- execution risks associated with the implementation of phase II of our
restructuring program;
- our ability to utilize contract manufacturing effectively as result of
our outsourcing plan, including relationships with our suppliers;
- our significant past losses;
- the effects of market demand on our revenues and other results of
operations;
- our dependence on new product development;
- our dependence on a limited number of large customers;
- legal and regulatory proceedings; and
- other risks set forth below under "Forward-Looking Statements."
RISKS RELATED TO THE PREFERRED STOCK, OUR COMMON STOCK AND, IF EXCHANGED, THE
CONVERTIBLE SUBORDINATED DEBENTURES
BECAUSE THE TRADING MARKET FOR THE PREFERRED STOCK IS IN ITS INFANCY, THERE HAS
NOT BEEN ANY TRADING MARKET FOR THE CONVERTIBLE SUBORDINATED DEBENTURES AND
THESE SECURITIES MAY BE AFFECTED BY FLUCTUATIONS IN THE MARKET PRICE OF OUR
COMMON STOCK AND OUR OTHER SECURITIES, WE CANNOT ASSURE YOU THAT AN ACTIVE
TRADING MARKET WILL DEVELOP FOR THE PREFERRED STOCK OR THE CONVERTIBLE
SUBORDINATED DEBENTURES OR THAT YOU WILL BE ABLE TO RESELL THESE SECURITIES AT
OR ABOVE THE PURCHASE PRICE.
There is currently no public market for the preferred stock or for the
convertible subordinated debentures. In addition, the liquidity of any trading
market in the preferred stock or, if exchanged, the convertible subordinated
debentures, and the market price quoted for shares of preferred stock or for the
9
convertible subordinated debentures, may be adversely affected by changes in the
overall market for these securities and by changes in our financial performance
or prospects or in the prospects of companies in our industry generally. We
cannot predict the extent to which investors' interest will lead to a liquid
trading market or whether the market price of the preferred stock or, if
exchanged, the convertible subordinated debentures, will be volatile. Because
the preferred stock and the convertible subordinated debentures are convertible
into common stock, their trading prices may be affected by fluctuations in the
market price of our common stock. The price of our common stock over the past
two years has fluctuated significantly. We have not applied and do not intend to
apply for the listing of the preferred stock or the convertible subordinated
debentures on any securities exchange or for the inclusion of the preferred
stock or the convertible subordinated debentures in any automated quotation
system.
WE MAY NOT BE ABLE TO PAY THE REDEMPTION PRICE OF THE PREFERRED STOCK OR THE
CONVERTIBLE SUBORDINATED DEBENTURES ON SPECIFIED DATES OR UPON A CHANGE OF
CONTROL IF THE HOLDERS EXERCISE THEIR RIGHT TO REQUIRE US TO REDEEM SUCH
SECURITIES. WE ALSO COULD BE PREVENTED FROM PAYING DIVIDENDS IN SHARES OF OUR
COMMON STOCK.
On specified dates or if we undergo a change of control, subject to limited
exceptions, each holder of the preferred stock or the convertible subordinated
debentures will have the right to require us to redeem all or any part of that
holder's shares or convertible subordinated debentures at a redemption price
equal to 100% of the accreted liquidation preference or the principal amount
thereof, plus an amount equal to all accrued and unpaid dividends on those
shares or interest on those debentures to the date of redemption. We will have
the option to pay for those shares or debentures either in cash or in shares of
our common stock valued at a discount of 5% from the market price of our common
stock.
Under the terms of our current credit facilities, however, we are
prohibited from paying the redemption price of the preferred stock in cash. Our
future credit facilities and other existing and future indebtedness may contain
similar restrictions. We may pay the redemption price in shares of our common
stock only if we have legally available funds for such payment and if such
shares are eligible for immediate sale in the public market by non-affiliates of
ours absent a registration statement. In addition, the right of holders to cause
us to redeem the preferred stock upon a change of control will be subject to our
obligation to repay or repurchase any indebtedness, such as our current credit
facilities, or preferred stock required in connection with a change in control.
Similar restrictions will apply to any redemption of our convertible
subordinated debentures.
In addition, even if the terms of the instruments governing our
indebtedness and preferred stock allow us to pay cash dividends and to redeem
the preferred stock, we generally can make such payments under Delaware law only
from our "surplus" (the excess of our total assets over the sum of our total
liabilities plus the aggregate par value of our outstanding capital stock) and
we cannot assure you that we will have any surplus. Moreover, without surplus,
we generally cannot pay dividends in shares of our common stock.
YOU WILL EXPERIENCE IMMEDIATE DILUTION IF YOU CONVERT YOUR SHARES OF PREFERRED
STOCK OR THE CONVERTIBLE SUBORDINATED DEBENTURES INTO SHARES OF COMMON STOCK
BECAUSE THE PER SHARE CONVERSION PRICE OF YOUR SHARES OF PREFERRED STOCK OR THE
CONVERTIBLE SUBORDINATED DEBENTURES IS HIGHER THAN THE NET TANGIBLE BOOK VALUE
PER SHARE OF OUR COMMON STOCK.
If you convert your shares of preferred stock or the convertible
subordinated debentures into shares of common stock, you will experience
immediate dilution because the per share conversion price of your shares of
preferred stock or the convertible subordinated debentures is higher than the
net tangible book value per share of the outstanding common stock immediately
after this offering. In addition, you will also experience dilution when we
issue additional shares of common stock that we are permitted or required to
issue under options, warrants, our stock option plan or other employee or
director compensation plans.
10
THE SALE OF A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK IN THE PUBLIC
MARKET, OR THE EXPECTATION THEREOF, COULD ADVERSELY AFFECT THE MARKET PRICE OF
OUR COMMON STOCK AND MAY MAKE IT MORE DIFFICULT FOR US TO EFFECT ADDITIONAL
EQUITY FINANCINGS AT ACCEPTABLE PRICES.
Substantially all of our currently outstanding shares of common stock have
been registered for sale under the Securities Act, are eligible for sale under
an exemption from its registration requirements or are subject to registration
rights pursuant to which holders may require us to register such shares in the
future. Sales or the expectation of sales of a substantial number of shares of
our common stock in the public market could adversely affect the prevailing
market price of our common stock.
THE PREFERRED STOCK RANKS JUNIOR TO ALL OF OUR AND OUR SUBSIDIARIES'
LIABILITIES.
In the event of our bankruptcy, liquidation or winding-up, our assets will
be available to pay obligations on the preferred stock only after all our
indebtedness and other liabilities have been paid. In addition, the preferred
stock will effectively rank junior to all existing and future liabilities of our
subsidiaries and the capital stock (other than common stock) of our subsidiaries
held by third parties. The rights of holders of the preferred stock to
participate in the assets of our subsidiaries upon any liquidation or
reorganization of any subsidiary will rank junior to the prior claims of that
subsidiary's creditors and equity holders. As of September 30, 2001, we had
total consolidated liabilities of $20.8 billion. There may not be sufficient
assets remaining to pay amounts due on any or all of the preferred stock then
outstanding.
THE CONVERTIBLE SUBORDINATED DEBENTURES WILL RANK JUNIOR TO OUR EXISTING AND
FUTURE SENIOR DEBT AND THE EXISTING AND FUTURE LIABILITIES OF OUR SUBSIDIARIES,
AND WE MAY BE UNABLE TO REPAY OUR OBLIGATIONS UNDER THE CONVERTIBLE SUBORDINATED
DEBENTURES.
The convertible subordinated debentures will be unsecured and subordinated
in right of payment to all of our existing and future senior debt, which
constitutes all of our existing indebtedness, other than trade payables, and
future borrowings, except any future indebtedness that expressly provides that
it ranks equal with, or subordinated in right of payment to, the convertible
subordinated debentures. Because the convertible subordinated debentures are
unsecured, if we became insolvent the holders of any secured debt would receive
payments from the assets used as security before you receive payments on the
convertible subordinated debentures. Because the convertible subordinated
debentures are subordinated to our senior debt, in the event of:
- our bankruptcy, liquidation or reorganization,
- the acceleration of the convertible subordinated debentures due to an
event of default under the indenture and
- certain other events,
we will make payments on the convertible subordinated debentures only after we
have satisfied all of our senior debt obligations. Therefore, in paying the
senior and secured debt and other liabilities, we may not have sufficient assets
remaining to pay amounts on any or all of the convertible subordinated
debentures.
In addition, the convertible subordinated debentures will effectively rank
junior to all existing and future liabilities of our subsidiaries and the
capital stock (other than common stock) of our subsidiaries held by third
parties. The rights of holders of the convertible subordinated debentures to
participate in a distribution of the assets of our subsidiaries upon any
liquidation or reorganization of that subsidiary will rank junior to the claims
of that subsidiary's creditors and preferred equity holders, if any.
On September 30, 2001, we had approximately $4.4 billion of outstanding
senior debt excluding $3.0 billion of available borrowings as of that date under
our credit facilities. Our credit facilities and certain other debt and
obligations are secured by substantially all of our assets and, subject to
certain exceptions, all of the assets of most of our wholly owned domestic
subsidiaries. We may incur substantial amounts of additional debt, including
secured debt, that will rank senior to the convertible subordinated debentures.
In addition, all payments on the convertible subordinated debentures will be
prohibited in the
11
event of a payment default on senior debt obligations and may be prohibited in
the event of some non-payment defaults according to the terms of our existing
and future senior debt obligations.
WE ARE CURRENTLY PROHIBITED FROM REDEEMING THE PREFERRED STOCK AND THE
CONVERTIBLE SUBORDINATED DEBENTURES FOR CASH AND OUR ABILITY TO PAY CASH
DIVIDENDS ON THE PREFERRED STOCK AND OUR COMMON STOCK IS SUBJECT TO
RESTRICTIONS.
Subject to our meeting specified operating performance or credit benchmarks
and there being no event of default, as described in our credit facilities, the
current terms of our credit facilities allow us to pay cash dividends on our
common stock of up to $.02 per share per quarter. We did not declare a dividend
on our common stock during our last quarter and, given that we do not currently
meet either of these benchmarks and are unsure as to whether we will meet them
in the future, we cannot assure you that we will be able to pay any future cash
dividends on our common stock.
While the recent amendments of our credit facilities permit us to pay cash
dividends on our preferred stock, they prevent us from doing so if, before the
payment or after giving effect to the payment, an event of default, as described
in our credit facilities, is or would be in existence. The current terms of our
credit facilities prohibit us from redeeming the preferred stock or the
convertible subordinated debentures for cash.
WE ARE CURRENTLY PROHIBITED FROM EXCHANGING THE PREFERRED STOCK FOR THE
CONVERTIBLE SUBORDINATED DEBENTURES.
The terms of our credit facilities prohibit us from exchanging the
preferred stock for the convertible subordinated debentures. Further, we cannot
assure you that any future credit facilities or other indebtedness will not also
prohibit us from exchanging the preferred stock for the convertible subordinated
debentures or that we will exercise our right of exchange even if we were able
to.
12
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that are based on
current expectations, estimates, forecasts and projections about the industries
in which we operate, management's beliefs, and assumptions made by management.
In addition, other written or oral statements that constitute forward-looking
statements may be made by or on behalf of us. Words such as "expects,"
"anticipates," "intends," "plans," "believes," "seeks," "estimates," variations
of such words and similar expressions are intended to identify such
forward-looking statements. These statements are not guarantees of future
performance and involve risks, uncertainties and assumptions that are difficult
to predict. Therefore, actual outcomes and results may differ materially from
what is expressed or forecast in such forward-looking statements. Except as
required under the federal securities laws and the rules and regulations of the
SEC, we do not have any intention or obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.
The risks, uncertainties and assumptions that are involved in our
forward-looking statements include:
- the timely implementation of our restructuring program, including phase
II;
- the disposition, on the anticipated timetable or at all, of our optical
fiber business;
- the potential for deterioration of the credit quality of customers for
which we have provided financing;
- continued availability of financing, financial instruments and financial
resources in the amounts, at the times and on the terms required to
support our future business;
- our ability to implement successfully our new strategic direction;
- compliance with the covenants and restrictions of our credit facilities
and any amendments thereto;
- our credit ratings;
- the outcome of pending and future litigation and governmental
proceedings;
- our ability to focus our business on the mix of products and services
necessary to take advantage of the most desirable opportunities in our
industry;
- our ability to implement our product rationalizations and other aspects
of our new strategic direction in a manner that does not disrupt our
customers' business;
- the desirability of a strategy focused on offering fewer products to
large service providers;
- customer demand for our products and services;
- our relationship with our customers;
- technological, implementation and cost/financial risks in the use of
large, multiyear contracts;
- U.S. and non-U.S. governmental and public policy changes that may affect
the level of new investments and purchases made by customers;
- changes in environmental and other U.S. and non-U.S. governmental
regulations;
- protection and validity of patent and other intellectual property rights;
- our reliance on significant suppliers;
- the timely completion of the proposed distribution of our remaining
shares of Agere Systems Inc.;
- the ability to recruit and retain talent;
- the ability to integrate the operations and business of acquired
companies successfully;
- increasing price, products and services competition by U.S. and non-U.S.
competitors, including new entrants;
13
- rapid technological developments and changes in our ability to continue
to introduce competitive new products and services on a timely,
cost-effective basis; and
- the availability of manufacturing capacity, components and materials.
These are representative of the risks, uncertainties and assumptions that
could cause actual outcomes and results to differ materially from what is
expressed or forecast in forward-looking statements. In addition, such
statements could be affected by general industry and market conditions and
growth rates, general U.S. and non-U.S. economic conditions, including the
global economic slowdown and interest rate and currency exchange rate
fluctuations and other risks, uncertainties and assumptions.
For a further description of the risks, uncertainties and assumptions that
could cause actual results to differ materially from such forward-looking
statements, see "Risk Factors -- Risks Related to our Business" above.
14
USE OF PROCEEDS
We will not receive any proceeds from the sale by any selling
securityholder of the preferred stock, the issue or subsequent sale by any
selling securityholder of the convertible subordinated debentures that may be
issued in exchange for the preferred stock or the issue or subsequent sale by
any selling securityholder of the common stock issuable upon exercise of the
conversion privilege attached to the preferred stock or convertible subordinated
debentures. We will not receive proceeds from any sale made by the transfer
agent for the preferred stock, on behalf of the holders of the preferred stock,
of the common stock that may be issued to the transfer agent in connection with
the payment of dividends on the preferred stock as these proceeds will be used
to satisfy our dividend payment obligations in relation to the preferred stock.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDEND REQUIREMENTS
The following table sets forth our consolidated ratios of earnings to
combined fixed charges and preferred stock dividend requirement for the periods
shown.
YEAR ENDED SEPTEMBER 30, NINE MONTHS
NINE MONTHS ENDED ------------------------- ENDED
JUNE 30, 2001 2000 1999 1998 1997 SEPTEMBER 30, 1996
----------------- ---- ---- ---- ---- ------------------
--(1) 4.6 7.2 4.3 2.4 --(1)
---------------
(1) Our earnings were insufficient to cover our combined fixed charges and
preferred stock dividend requirements by $10,219 million during the nine
months ended June 30, 2001, and by $175 million during the nine months ended
September 30, 1996.
For purposes of determining the ratios of earnings to combined fixed
charges and preferred stock dividend requirements and insufficiency of earnings
to cover combined fixed charges and preferred stock dividend requirements,
earnings are defined as income (loss) from continuing operations before income
taxes, less interest capitalized, less undistributed earnings of
non-consolidated affiliates plus fixed charges and preferred stock dividends.
Fixed charges consist of interest expenses on all indebtedness and that portion
of operating lease rental expense that is representative of the interest factor.
Preferred stock dividend requirements consist of the amount of pre-tax earnings
that is required to pay the dividends on outstanding preferred stock.
RATIO OF EARNINGS TO FIXED CHARGES
Because we had no preferred stock dividend requirements prior to the
issuance of our preferred stock, our consolidated ratios of earnings to fixed
charges for the years ended September 30, 2000, 1999, 1998 and 1997 and the
deficiency of our earnings to cover our fixed charges during the nine months
ended June 30, 2001 and September 30, 1996 are the same as our consolidated
ratios of earnings to combined fixed charges and preferred stock dividend
requirements for those periods and the deficiency of our earnings to cover
combined fixed charges and preferred stock dividend requirements during the nine
months ended June 30, 2001 and September 30, 1996, respectively. See "Ratio of
Earnings to Combined Fixed Charges and Preferred Stock Dividend Requirements,"
above.
15
DESCRIPTION OF THE PREFERRED STOCK
Our restated certificate of incorporation, as amended, authorizes us to
issue 10 billion shares of our common stock and 25 million shares of our junior
participating preferred stock. We issued the preferred stock under a certificate
of designations on August 6, 2001, in a private transaction that was not subject
to the registration requirements of the Securities Act.
The following section is a summary of the material provisions of the
certificate of designations and does not restate the certificate of designations
in its entirety. We urge you to read the certificate of designations because it,
and not this description, defines your rights as holders of the preferred stock.
Copies of the certificate of designations are available as set forth under
"-- Additional Information" below.
As used in this description, references to "we," "us," "our" or "Lucent" do
not include any current or future subsidiary of Lucent.
GENERAL
On August 6, 2001, we issued 1,885,000 shares of 8.00% redeemable
convertible preferred stock, $1.00 par value per share and having an initial
liquidation preference of $1,000.00 per share. The liquidation preference of the
preferred stock is subject to adjustment as described below under
"-- Dividends." The shares of preferred stock were validly issued, fully paid
and nonassessable.
The holders of the shares of preferred stock have no preemptive or
preferential rights to purchase or subscribe to stock, obligations, warrants or
any other of our securities.
Except as noted below or as otherwise required by applicable law, all
notices with respect to the preferred stock will be deemed given upon
publication on Bloomberg Business News or our website or by any other electronic
means of publication reasonably calculated to constitute notice.
Under Delaware law, we may:
- pay dividends on the preferred stock, whether in cash or in shares of
common stock,
- redeem the preferred stock, whether we pay the redemption price in cash
or in shares of common stock, or
- exchange the preferred stock for convertible subordinated debentures,
only if we have legally available funds in an amount at least equal to:
- the amount of the relevant dividend payment,
- the relevant redemption price or
- the accreted liquidation preference and any accrued but unpaid dividends
as of the date of the exchange.
We do not need to have legally available funds to accrete the liquidation
preference of the preferred stock as a result of the non-payment of dividends.
Legally available funds means the amount of our surplus. If there is no
surplus, legally available funds also means, in the case of a dividend, the
amount of our net profits for the fiscal year in which the payment occurs and/or
the preceding fiscal year. Our surplus is the amount by which the value of our
net assets exceeds the amount of our capital as determined by our board of
directors. Net assets means the amount by which our total assets exceed our
total liabilities.
When the need to make a determination of legally available funds arises,
the amount of our total assets and liabilities and the amount of our capital
will be determined by our board of directors in accordance with Delaware law.
16
RANKING
The preferred stock rank, with respect to dividend rights and rights upon
liquidation, winding up or dissolution:
- junior to:
- all our existing and future debt obligations; and
- each class or series of our capital stock the terms of which provide
that such class or series will rank senior to the preferred stock;
- on a parity with parity stock, which is any other class or series of our
capital stock that has terms which provide that that class or series will
rank on a parity with the preferred stock; and
- senior to junior stock, which is our Series A Junior Participating
Preferred Stock, our common stock and each class or series of our capital
stock that has terms which provide that that class or series will rank
junior to the preferred stock.
Without the consent of the holders of at least two-thirds of the shares of
preferred stock outstanding, we will not be entitled to issue any class or
series of capital stock that ranks senior to the preferred stock with respect to
the payment of dividends and distributions upon liquidation, winding up and
dissolution, including, without limitation, any class or series of capital
stock, other than junior stock, that pays cumulative dividends.
Except as set forth in the preceding sentence, we may, without the consent
of the holders of the shares of preferred stock, authorize, create (by way of
reclassification or otherwise) or issue parity or junior stock or any obligation
or security convertible or exchangeable into, or evidencing a right to purchase,
shares of any class or series of parity or junior stock.
The terms parity stock and junior stock include warrants, rights, calls or
options exercisable for or convertible into that type of stock.
DIVIDENDS
The holders of the shares of preferred stock are entitled to receive
non-cumulative dividends at the annual rate of 8.00% of the applicable accreted
liquidation preference per share of preferred stock. The term accreted
liquidation preference is defined below under this subheading. The right of the
holders of the shares of preferred stock to receive dividend payments is subject
to the rights of any holders of shares of senior stock and parity stock.
Additional dividends will be payable under the circumstances described
below under "-- Registration Rights." All references to dividends or to a
dividend rate shall be deemed to include such additional dividends if such
additional dividends are then payable.
Dividends are payable on February 1 and August 1 of each year, beginning on
February 1, 2002. If any of those dates is not a business day, then dividends
will be payable on the next succeeding business day. Dividends will accrue from
the beginning of the relevant dividend period. The first dividend period began
on August 6, 2001. Dividends will be payable to holders of record as they appear
in our stock records at the close of business on January 1 and July 1 of each
year. Dividends payable on the shares of preferred stock for any period other
than a full semi-annual period will be computed on the basis of a 360-day year
consisting of twelve 30-day months.
We will pay dividends on the preferred stock on a dividend payment date,
unless:
- we do not have funds legally available for such payment;
- we are subject to contractual restrictions that prevent us from making
the payment; or
- in the case of dividends paid in shares of common stock, we cannot
provide the transfer agent with an effective registration statement, as
described below.
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We may pay dividends, at our option, in cash, shares of common stock or any
combination thereof. Shares of our common stock delivered to the transfer agent
on behalf of the holders of the preferred stock will be sold automatically on
the holders' behalf for cash. The transfer agent will serve as the designated
agent of the holders of the preferred stock in making any such sales. If we pay
dividends by delivering shares of our common stock to the transfer agent, we
must deliver to the transfer agent a number of shares of our common stock which,
when sold by the transfer agent on the holders' behalf, will result in net cash
proceeds to be distributed to the holders in an amount equal to the cash
dividends otherwise payable. To pay dividends in this manner, we must provide
the transfer agent with a registration statement permitting the immediate sale
of the shares of common stock in the public market. The registration statement,
of which this prospectus forms a part, permits the immediate sale by the
transfer agent for the preferred stock, on behalf of the holders of the
preferred stock, of up to 46,328,725 shares of common stock in the public market
for this purpose; however, we cannot assure you that we will be able to keep
effective the registration statement or that this number of shares will be
sufficient to meet our future dividend payment requirements.
The terms of our existing credit facilities were recently amended to allow
us to pay dividends on the preferred stock in cash; however, they prevent us
from doing so if, before the payment or after giving effect to the payment, an
event of default, as described in our credit facilities, is or would be in
existence, and our future credit facilities and other indebtedness may contain
restrictions on paying dividends in cash. We are not currently prohibited from
paying dividends in shares of common stock. In addition, we do not intend to
enter into any agreement or other contractual arrangement that would prohibit us
from paying dividends in shares of common stock. If we are unable to pay
dividends in cash on a dividend payment date because such payment would be
contrary to applicable law or our restated certificate of incorporation or our
by-laws or continue or cause a default under any provision of any agreement or
other instrument that is binding on us, then we will use our reasonable best
efforts to file and cause to be declared effective the registration statement
required to permit us to pay dividends in common stock.
If we pay dividends in shares of our common stock by delivering them to the
transfer agent, those shares will be owned beneficially by the holders of the
preferred stock upon delivery to the transfer agent, and the transfer agent will
hold those shares and the net cash proceeds from the sale of those shares for
the exclusive benefit of the holders. By purchasing the preferred stock, you are
deemed to appoint the transfer agent as your agent for the sale of any shares of
common stock that are delivered to the transfer agent, on your behalf, upon
payment of dividends on the preferred stock. If a holder provides notice to the
transfer agent at least 30 days prior to the applicable dividend payment date
not to sell shares of common stock held on behalf of that holder to provide cash
to pay all or a portion of the dividends payable to such holder, the transfer
agent will deliver to or for the account of the holder promptly after their
receipt by the transfer agent, shares of common stock having the value of the
dividend payment calculated based on an aggregate average sale price on the five
trading days preceding the third business day before the relevant dividend
payment date. No fractional shares of common stock will be issued to pay
dividends. Instead of issuing fractional shares, we will deliver scrip that will
entitle the holder to receive a full share upon surrender of such scrip
aggregating a full share.
Shares of our common stock paid as dividends by delivery to or for the
account of the holder, as described above, will:
- be treated as restricted securities;
- bear a legend to that effect; and
- not be transferable by the recipient thereof except pursuant to an
effective registration statement or pursuant to an exemption from the
registration requirements of the Securities Act.
All such shares of common stock will be issued in physical certificated
form and will not be eligible for receipt in global form through the facilities
of The Depository Trust Company, which we refer to as the depositary. In
addition, you will not have the right to require us to register those shares of
common stock.
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If we are unable to pay dividends in full on the preferred stock on any
dividend payment date, as described above, the accreted liquidation preference
of the preferred stock will be increased as of the first day of the immediately
succeeding dividend period by the accretion amount in respect of the unpaid
dividends. The accretion amount per share of preferred stock for any dividend
payment date on which dividends are not paid in full will be calculated by
multiplying:
- the accretion rate of 10.00% per year, calculated on a semi-annual basis,
by
- the accreted liquidation preference as of the first day of the relevant
dividend period by
- the fraction of the dividends for that dividend period that were not paid
on the dividend payment date.
The accreted liquidation preference per share of preferred stock as of any
date will equal the initial liquidation preference of $1,000.00 per share
increased, as described above, as the result of the non-payment of dividends on
all prior dividend payment dates and decreased to the extent we have made any
payments described in the next paragraph on prior dividend payment dates. The
amount of dividends payable for any dividend period following a non-payment of
dividends will be calculated on the basis of the accreted liquidation preference
as of the first day of the relevant dividend period.
We may pay all or a portion of the amount by which the accreted liquidation
preference per share of preferred stock exceeds $1,000.00 on any dividend
payment date in cash or in shares of our common stock, as described above. The
accreted liquidation preference per share of the preferred stock will be reduced
by the amount of such payment. Accordingly, if we pay all of such excess on any
dividend payment date, the liquidation preference per share will return to the
initial liquidation preference, and the amount of subsequent dividend payments
will be calculated on the basis of the initial liquidation preference. If we pay
a portion of the dividends payable on the preferred stock on a dividend payment
date and accrete the unpaid portion as described above, we will pay the current
portion equally and ratably to the holders of the preferred stock.
We will use our reasonable best efforts to provide notice to the holders of
the preferred stock not later than 15 days prior to a dividend payment date if
we determine that we will not pay dividends on that dividend payment date. If a
development occurs less than 15 days prior to a dividend payment date that will
prevent us from paying dividends on such date, and we have not already provided
notice, we will provide prompt notice to the holders and the transfer agent. The
notice will indicate whether we will accrete all or a portion of the dividends,
the amount of the dividends to be accreted and whether the portion of dividends
to be paid will be paid in cash or in common stock delivered to the transfer
agent.
REDEMPTION
REDEMPTION AT OUR OPTION
We may not redeem any shares of preferred stock at any time before August
15, 2006. After that date, we will have the option to redeem any outstanding
shares of preferred stock, out of funds legally available for such payment, upon
not less than 30 nor more than 60 days' prior notice, at a redemption price per
share equal to the accreted liquidation preference thereof, plus an amount equal
to accrued and unpaid dividends from, and including, the immediately preceding
dividend payment date to, but excluding, the redemption date, adjusted as
described below under "-- Provisions Relating to Redemption at Our Option."
PROVISIONS RELATING TO REDEMPTION AT OUR OPTION
We may, at our option, elect to pay the redemption price in cash or in
shares of our common stock valued at a discount of 5% from the market price, as
defined below under "General Provisions Concerning the Redemption of Preferred
Stock with Shares of Common Stock," of our common stock, or any combination
thereof. Notwithstanding the foregoing, we may pay such redemption price,
whether in cash or in shares of common stock, only if we have funds legally
available for such payment and may pay such
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redemption price in shares of our common stock only if such shares are eligible
for immediate sale in the public market by non-affiliates of ours absent a
registration statement. In the case of any partial redemption, we will select
the shares of preferred stock to be redeemed on a pro rata basis, by lot or any
other method that we, in our discretion, deem fair and appropriate. However, we
may redeem all the shares held by holders of fewer than 100 shares or holders
who would hold fewer than 100 shares as a result of the redemption.
REDEMPTION AT THE OPTION OF THE HOLDER
On the redemption dates of August 2, 2004, August 2, 2007, August 2, 2010
and August 2, 2016, we will, at the option of the holder, be required to redeem
any outstanding shares of preferred stock, out of funds legally available for
such payment, at a redemption price per share equal to the accreted liquidation
preference thereof, plus an amount equal to accrued and unpaid dividends from,
and including, the immediately preceding dividend payment date to, but
excluding, the redemption date, for which a written redemption notice has been
properly delivered by the holder to the transfer agent and not withdrawn.
Holders may submit their shares of preferred stock for redemption to the
transfer agent at any time from the opening of business on the date that is 45
business days prior to such redemption date until the close of business on the
business day that is three business days prior to such redemption date.
We may, at our option, elect to pay the redemption price in cash or in
shares of our common stock valued at a discount of 5% from the market price of
our common stock, or any combination thereof. Under the terms of our current
credit facilities, however, we are prohibited from paying the redemption price
of the preferred stock in cash. If the amount of stock to be issued in
connection with any redemption equals or exceeds 20% of the voting power of our
outstanding stock prior to the issuance in connection with the redemption, we
may, under The New York Stock Exchange rules, be required to obtain the approval
of our stockholders for such an issuance. Our future credit facilities and other
indebtedness may contain similar restrictions. We may pay the redemption price
in shares of our common stock only if such shares are eligible for immediate
sale in the public market by non-affiliates of ours absent a registration
statement.
We will be required to give notice on a date not less than 45 business days
prior to each redemption date by providing notice to all holders and to
beneficial owners as required by applicable law, stating among other things:
- whether we will pay the redemption price of the preferred stock in cash
or common stock or any combination thereof, specifying the percentages of
each;
- if we elect to pay in common stock, the method of calculating the market
price of the common stock, as described under "General Provisions
Concerning the Redemption of Preferred Stock with Shares of Common Stock"
below; and
- the procedures that holders must follow to require us to redeem their
preferred stock.
The redemption notice given by each holder electing to require us to redeem
their preferred stock must state:
- in the case of shares in certificated form, the certificate numbers of
the holder's shares of preferred stock to be delivered for redemption;
- that the shares of preferred stock are to be redeemed by us pursuant to
the applicable provision of the preferred stock and the certificate of
designations; and
- in the event we elect, pursuant to the notice that we are required to
give, to pay the redemption price in common stock, in whole or in part,
but the redemption price is ultimately to be paid to the holder entirely
in cash because any condition to payment of the redemption price or
portion of the
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redemption price in common stock is not satisfied prior to the close of
business on the redemption date, as described below, whether the holder
elects:
- to withdraw the redemption notice as to some or all of the shares of
preferred stock to which it relates; or
- to receive cash in respect of the entire redemption price for all
shares of preferred stock or portions of shares of preferred stock
subject to such redemption notice.
If the holder fails to indicate the holder's choice with respect to the
election described in the third bullet point above, the holder shall be deemed
to have elected to receive cash in respect of the entire redemption price for
all shares of preferred stock subject to the redemption notice in these
circumstances.
Any redemption notice may be withdrawn by the holder by a written notice of
withdrawal delivered to the transfer agent prior to the close of business on the
day that is three business days prior to the redemption date.
The notice of withdrawal shall state:
- the number of shares of preferred stock being withdrawn;
- in the case of shares in certificated form, the certificate numbers of
the shares of preferred stock being withdrawn; and
- the number of the holder's shares of preferred stock, if any, that
remains subject to the redemption notice.
In the event we elect to deliver common stock in payment, in whole or in
part, of the redemption price, instead of issuing fractional shares, we will
deliver scrip that will entitle the holder to receive a full share upon
surrender of such scrip aggregating a full share.
MANDATORY REDEMPTION
We will be obligated to redeem all outstanding shares of preferred stock on
August 1, 2031, only out of funds legally available for such payment, at a
redemption price equal to the accreted liquidation preference thereof, plus an
amount equal to accrued and unpaid dividends from, and including, the
immediately preceding dividend payment date to, but excluding, the date of
redemption upon not less than 30 nor more than 60 days' prior notice to the
holders.
We may, at our option, elect to pay the redemption price in cash or in
shares of our common stock valued at a discount of 5% from the market price of
our common stock, or any combination thereof. Under the terms of our current
credit facilities, however, we are prohibited from paying the redemption price
of the preferred stock in cash. Our future credit facilities and other
indebtedness may contain similar restrictions. We may pay the redemption price
in shares of our common stock only if such shares are eligible for immediate
sale in the public market by non-affiliates of ours absent a registration
statement.
GENERAL PROVISIONS CONCERNING THE REDEMPTION OF PREFERRED STOCK WITH SHARES OF
COMMON STOCK
We will notify the holders of the preferred stock upon the determination of
the actual number of shares of common stock deliverable upon any redemption of
the preferred stock.
Our right to redeem preferred stock, in whole or in part, with shares of
common stock is subject to our satisfying various conditions, including:
- the listing of such shares of common stock on the principal United States
securities exchange on which the common stock is then listed or, if not
so listed, on Nasdaq;
- the registration of the common stock under the Securities Act and the
Exchange Act, if required; and
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- any necessary qualification or registration under applicable state
securities law or the availability of an exemption from such
qualification and registration.
If such conditions are not satisfied with respect to a holder prior to the
close of business on any redemption date, we will pay the redemption price of
such holder's shares of preferred stock entirely in cash unless we do not have
legally available funds or our credit facilities or other contractual
obligations prohibit us from paying the redemption price in cash. We may not
change the form or components or percentages of components of consideration to
be paid for the shares of preferred stock once we have given any notice that we
are required to give to holders of the preferred stock, except as described in
the first sentence of this paragraph.
The market price of our common stock means the average of the sale prices
of our common stock for the twenty trading day period ending on the third
business day prior to the applicable redemption date (if the third business day
prior to the applicable redemption date is a trading day, or if not, then on the
last trading day prior to the third business day), appropriately adjusted to
take into account the occurrence, during the period commencing on the first of
the trading days during the twenty trading day period and ending on the
redemption date, of any event that would result in an adjustment to the
conversion price of the preferred stock, as described below under
"-- Adjustments to the Conversion Price."
The sale price of our common stock on any trading day means the closing
sale price per share (or if no closing sale price is reported, the average of
the bid and ask prices or, if more than one in either case, the average of the
average bid and the average asked prices) on that trading day as reported in
composite transactions for the principal U.S. securities exchange on which our
common stock is traded or, if our common stock is not listed on a U.S. national
or regional securities exchange, as reported by The Nasdaq National Market.
A trading day means each day on which the securities exchange or quotation
system that is used to determine the sale price is open for trading or
quotation.
Because the market price of our common stock is determined prior to the
applicable redemption date, holders of the preferred stock bear the market risk
with respect to the value of our common stock to be received from the date the
market price is determined to the redemption date. We may pay the redemption
price or any portion of the redemption price in shares of our common stock only
if the information necessary to calculate the market price is publicly
available.
In connection with any redemption offer, we will comply with the provisions
of Rule 13e-4, Rule 14e-1 and any other tender offer rules under the Exchange
Act that may then be applicable including filing a Schedule TO or any other
required schedule under the Exchange Act.
GENERAL PROVISIONS
Payment of the redemption price for shares of preferred stock is
conditioned upon book-entry transfer of or physical delivery of certificates
representing the preferred stock, together with necessary endorsements, to the
transfer agent at any time after delivery of the redemption notice. Payment of
the redemption price for the preferred stock will be made promptly following the
later of the redemption date and the time of book-entry transfer of or physical
delivery of the preferred stock.
If the transfer agent holds money or securities sufficient to pay the
redemption price of preferred stock on the business day following the redemption
date in accordance with the terms of the certificate of designations, then,
immediately after the redemption date, the preferred stock will cease to be
outstanding, whether or not book-entry transfer is made or certificates
representing the preferred stock are delivered to the transfer agent. At such
time, all rights as a holder of shares of preferred stock shall terminate, other
than the right to receive the redemption price upon delivery of certificates
representing the preferred stock.
If the redemption date falls after a dividend payment record date and
before the related dividend payment date, the holders of the shares of preferred
stock at the close of business on that dividend payment record date will be
entitled to receive the dividend payable on those shares on the corresponding
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dividend payment date. However, the redemption price payable on such redemption
date will include only the accreted liquidation preference of the shares being
redeemed and will not include any amount in respect of accrued but unpaid
dividends.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
Lucent, each holder of shares of preferred stock will be entitled to payment,
out of our assets available for distribution, of an amount equal to the accreted
liquidation preference per share of preferred stock held by that holder, plus an
amount equal to all accrued and unpaid dividends on those shares from, and
including, the immediately preceding dividend payment date to, but excluding,
the date of liquidation, dissolution or winding up, before any distribution is
made on any junior stock, including our common stock. After payment in full of
the accreted liquidation preference and the amount equal to all accrued and
unpaid dividends to which holders of shares of preferred stock are entitled, the
holders will not be entitled to any further participation in any distribution of
our assets. If, upon any voluntary or involuntary liquidation, dissolution or
winding up of our company, the amounts payable with respect to shares of
preferred stock and all other parity stock are not paid in full, the holders of
shares of preferred stock and the holders of the parity stock will share equally
and ratably in any distribution of our assets in proportion to the full
liquidation preference and the amount equal to all accrued and unpaid dividends
to which each such holder is entitled.
Neither the voluntary sale, conveyance, exchange or transfer, for cash,
shares of stock, securities or other consideration, of all or substantially all
of our property or assets nor the consolidation, merger or amalgamation of
Lucent with or into any other entity or the consolidation, merger or
amalgamation of any other entity with or into Lucent will be deemed to be a
voluntary or involuntary liquidation, dissolution or winding up of Lucent.
CONVERSION RIGHTS
Each share of preferred stock will be convertible at any time from and
after the initial conversion date, at the option of the holder, into fully paid
and nonassessable shares of our common stock. The preferred stock will be
convertible into common stock at an initial conversion price of $7.48 per share,
adjusted as provided under "-- Adjustments to the Conversion Price." The number
of shares of common stock deliverable upon conversion of a share of preferred
stock, commonly referred to as the "conversion rate," will initially be
133.6898, based on the initial conversion price and the initial liquidation
preference. The initial conversion date will be the earlier of:
- nine months after the initial issuance of the preferred stock; and
- the day immediately following the date of the share distribution in
connection with our spin-off of Agere Systems Inc.
The conversion price will not be increased in connection with an increase
in the accreted liquidation preference of the preferred stock. Accordingly,
holders who convert their preferred stock following an increase in the accreted
liquidation preference will receive more shares of our common stock.
Holders of shares of preferred stock who convert their shares into common
stock will not be entitled to any accrued dividends for the dividend period in
which they convert their shares. Accordingly, shares of preferred stock
surrendered for conversion during the period between the close of business on
any dividend payment record date and the opening of business on the
corresponding dividend payment date must be accompanied by payment of an amount
equal to the dividend payable on such shares on such dividend payment date.
In case any shares of preferred stock are to be redeemed, the right to
convert those shares of preferred stock will terminate at the close of business
on the business day immediately preceding the date fixed for redemption unless
we default in the payment of the redemption price of those shares.
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No fractional shares of common stock will be issued upon conversion.
Instead of issuing fractional shares, we will deliver scrip that will entitle
the holder to receive a full share upon surrender of such scrip aggregating a
full share. If more than one share of preferred stock is surrendered for
conversion by the same holder at the same time, the number of full shares of
common stock issuable on conversion of those shares will be computed on the
basis of the total number of shares of preferred stock surrendered for
conversion.
We will at all times reserve and keep available, free from preemptive
rights, for issuance upon the conversion of shares of preferred stock a number
of our authorized but unissued shares of common stock that will from time to
time be sufficient to permit the conversion of all outstanding shares of
preferred stock. Before the delivery of any securities that we will be obligated
to deliver upon conversion of the preferred stock, we will comply with all
applicable federal and state laws and regulations which require action to be
taken by us. All shares of common stock delivered upon conversion of the
preferred stock will upon delivery be duly and validly issued and fully paid and
nonassessable, free of all liens and charges and not subject to any preemptive
rights.
ADJUSTMENTS TO THE CONVERSION PRICE
The conversion price is subject to adjustment from time to time as follows:
(1) Stock splits and combinations. In case we, at any time or from
time to time after the issuance date of the shares of preferred stock:
- subdivide or split the outstanding shares of our common stock,
- combine or reclassify the outstanding shares of our common stock
into a smaller number of shares or
- issue by reclassification of the shares of our common stock any
shares of our capital stock,
then, and in each such case, the conversion price in effect immediately
prior to that event or the record date therefor, whichever is earlier, will
be adjusted so that the holder of any shares of preferred stock thereafter
surrendered for conversion will be entitled to receive the number of shares
of our common stock or of our other securities which the holder would have
owned or have been entitled to receive after the occurrence of any of the
events described above, had those shares of preferred stock been
surrendered for conversion immediately before the occurrence of that event
or the record date therefor, whichever is earlier.
(2) Stock dividends in common stock. In case we, at any time or from
time to time after the issuance date of the shares of preferred stock, pay
a dividend or make a distribution in shares of our common stock on any
class of our capital stock other than dividends or distributions of shares
of common stock or other securities with respect to which adjustments are
provided in paragraph (1) above, and the total number of shares
constituting the dividend or distribution exceeds 25% of the total number
of shares of common stock outstanding at the close of business on the
record date fixed for determination of stockholders entitled to receive the
dividend or distribution, the conversion price will be adjusted by
multiplying:
- the conversion price immediately prior to the record date fixed for
determination of stockholders entitled to receive the dividend or
distribution by
- a fraction, the numerator of which will be the number of shares of
common stock outstanding at the close of business on that record
date and the denominator of which will be the sum of that number of
shares and the total number of shares issued in that dividend or
distribution.
In case the total number of shares constituting that dividend or
distribution does not exceed 25% of the total number of shares of common
stock outstanding at the close of business on the record date fixed for
that dividend or distribution, the shares of common stock will be
considered to be issued as a
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dividend or distribution at the time of any such next succeeding dividend
or other distribution in which the number of shares of common stock issued,
together with the number of shares issued in all previous such dividends
and distributions for which no adjustment to the conversion price has been
made, exceeds 25% of the total number of shares of common stock outstanding
at the close of business on the record date for such dividend or
distribution.
(3) Issuance of rights or warrants. In case we issue to all holders
of our common stock rights or warrants expiring within 45 days entitling
those holders to subscribe for or purchase our common stock at a price per
share less than the current market price, the conversion price in effect
immediately before the close of business on the record date fixed for
determination of stockholders entitled to receive those rights or warrants
will be decreased by multiplying:
- the conversion price by
- a fraction, the numerator of which is the sum of the number of
shares of our common stock outstanding at the close of business on
that record date and the number of shares of common stock that the
aggregate offering price of the total number of shares of our
common stock so offered for subscription or purchase would purchase
at the current market price and the denominator of which is the sum
of the number of shares of common stock outstanding at the close of
business on that record date and the number of additional shares of
our common stock so offered for subscription or purchase.
For purposes of this paragraph (3), the issuance of rights or warrants
to subscribe for or purchase securities convertible into shares of our
common stock will be deemed to be the issuance of rights or warrants to
purchase shares of our common stock into which those securities are
convertible at an aggregate offering price equal to the sum of the
aggregate offering price of those securities and the minimum aggregate
amount, if any, payable upon conversion of those securities into shares of
our common stock. This adjustment will be made successively whenever any
such event occurs. For purposes of this paragraph, the current market price
of our common stock means the average of the sale prices of our common
stock for the five consecutive trading days selected by our board of
directors beginning not more than 20 trading days before, and ending not
later than the date immediately preceding the record date for the relevant
event.
(4) Distribution of indebtedness, securities or assets. In case we
distribute to all holders of our common stock, whether by dividend or in a
merger, amalgamation or consolidation or otherwise, evidences of
indebtedness, shares of capital stock of any class or series, other
securities, cash or assets (other than common stock, rights or warrants
referred to in paragraph (3) above, a dividend payable exclusively in cash,
shares of capital stock or similar equity interests in the case of a
spin-off, as described in the second succeeding paragraph, and other than
as a result of a fundamental change described in paragraph (5) below), the
conversion price in effect immediately before the close of business on the
record date fixed for determination of stockholders entitled to receive
that distribution will be decreased by multiplying:
- the conversion price by
- a fraction, the numerator of which is the current market price of
our common stock and the denominator of which is the current market
price of the common stock plus the fair market value, as determined
by our board of directors, whose determination in good faith will
be conclusive, of the portion of those evidences of indebtedness,
shares of capital stock, other securities, cash and assets so
distributed applicable to one share of common stock.
This adjustment will be made successively whenever any such event
occurs. For purposes of this paragraph, current market price of our common
stock means the average of the sale prices of our common stock for the
first 10 trading days from, and including, the first day that the common
stock trades "ex-distribution."
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In respect of a dividend or other distribution of shares of capital
stock of any class or series, or similar equity interests, of or relating
to a subsidiary or other business unit, which we refer to as a spin-off,
the conversion price in effect immediately before the close of business on
the record date fixed for determination of stockholders entitled to receive
that distribution will be decreased by multiplying:
- the conversion price by
- a fraction, the numerator of which is the current market price of
our common stock and the denominator of which is the current market
price of the common stock plus the fair market value, determined as
described below, of the portion of those shares of capital stock or
similar equity interests so distributed applicable to one share of
common stock.
The adjustment to the conversion price under the preceding paragraph
will occur at the earlier of:
- the tenth trading day from, and including, the effective date of
the spin-off and
- the date of the initial public offering of the securities being
distributed in the spin-off, if that initial public offering is
effected simultaneously with the spin-off.
For purposes of this section, "initial public offering" means the
first time securities of the same class or type as the securities being
distributed in the spin-off are bona fide offered to the public for cash.
In the event of a spin-off that is not effected simultaneously with an
initial public offering of the securities being distributed in the
spin-off, the fair market value of the securities to be distributed to
holders of our common stock means the average of the sale prices of those
securities over the first 10 trading days after the effective date of the
spin-off. Also, for purposes of a spin-off, the current market price of our
common stock means the average of the sale prices of our common stock over
the first 10 trading days after the effective date of the spin-off.
If, however, an initial public offering of the securities being
distributed in the spin-off is to be effected simultaneously with the
spin-off, the fair market value of the securities being distributed in the
spin-off means the initial public offering price, while the current market
price of our common stock means the sale price of our common stock on the
trading day on which the initial public offering price of the securities
being distributed in the spin-off is determined.
The application of the preceding paragraphs to our planned spin-off of
Agere Systems Inc. will result in an adjustment determined pursuant to the
following formula:
The conversion price will be multiplied by the fraction LU/((X)(AGR) +
LU) where:
- X equals the number of shares of Class B common stock of Agere
Systems Inc. received per share of our common stock in the
spin-off;
- AGR equals the average of the sale prices of the shares of Class B
common stock of Agere Systems Inc. on the NYSE over the first 10
trading days after, and including, the effective date of the
spin-off; and
- LU equals the average of the sale prices of our common stock on the
NYSE over the first 10 trading days after, and including, the
effective date of the spin-off.
For the tax consequences of the adjustment to the conversion price
following a distribution, if any, of the Class B common stock of Agere
Systems Inc. to our common stockholders, see "Certain Federal Income Tax
Consequences -- U.S. Holders -- Preferred Stock -- Deemed Distributions"
and "-- Non-U.S. Holders -- Preferred Stock and Common
Stock -- Distributions," below. For a description of the conditions to the
Agere spin off see "Recent Developments -- Agere Spin Off Update."
26
(5) Fundamental changes. For purposes of this paragraph (5), the term
fundamental change means any transaction or event, including any merger,
consolidation, sale of assets, tender or exchange offer, reclassification,
compulsory share exchange or liquidation, in which all or substantially all
outstanding shares of our common stock are converted into or exchanged for
stock, other securities, cash or assets. If a fundamental change occurs,
the holder of each share of preferred stock outstanding immediately before
that fundamental change occurred that remains outstanding after the
fundamental change will have the right upon any subsequent conversion to
receive, out of funds legally available, to the extent required by
applicable law, the kind and amount of stock, other securities, cash and
assets that holder would have received if that share had been converted
immediately prior to the fundamental change.
(6) Special adjustment for some changes of control. If we undergo a
change of control, as defined below under "Change of Control," in a
transaction or series of related transactions in which:
- our stockholders receive consideration per share of common stock
that is greater than the conversion price, without giving effect to
the adjustment described below, at the effective time of the change
of control and
- at least 10%, but less than 75%, of the total consideration paid to
our stockholders consists of cash, cash equivalents, securities or
other assets (other than publicly-traded securities), which we
refer to as non-public consideration,
then the conversion price will be adjusted so that, upon conversion of
shares of preferred stock that remain outstanding after the change of
control, in addition to the common stock or other securities deliverable
upon the conversion of the preferred stock as described under
"-- Conversion Rights" and in paragraphs 1 through 5 above, the holder will
receive, in respect of each share of preferred stock, a number of publicly
traded securities of the acquiror determined through the following
calculation:
PV cashflows X (non-public consideration / total consideration)
Acquiror stock price
where
PV cashflows = the present value of the aggregate dividend payments that
would have been payable on a share of the preferred stock
from the date of conversion through August 15, 2006,
calculated using a discount rate equal to 2.00% plus the
yield to maturity of U.S. Treasury securities having a
maturity closest to, but not later than August 15, 2006;
Total consideration = the total value of the consideration payable to our
stockholders at the effective time of the change of control,
with the value of any assets or securities other than cash
or a publicly-traded security being determined in good faith
by our board of directors based upon an opinion as to that
value obtained from an accounting, appraisal or investment
banking firm of international standing; and
Acquiror stock = the sale price of a share of the acquiror's publicly-traded
price common stock or other publicly-traded securities delivered
in connection with the change of control transaction at the
effective time of the change of control;
provided that if the consideration received by our stockholders in respect
of the change of control is greater than the conversion price at the
effective time of the change of control and consists of at least 75%
non-public consideration or if the acquiror's common stock is not publicly
traded, then upon conversion of preferred stock that remain outstanding
after the change of control, in lieu of the foregoing conversion price
adjustment set forth in this clause (6), the holder will be entitled to
receive, in respect of each share of preferred stock, an additional amount
in cash calculated as follows:
PV cashflows X (non-public consideration / total consideration)
(7) Self-tender. In case we or any of our subsidiaries engage in a
tender or exchange offer for all or any portion of our common stock that
will expire, and such tender or exchange offer, as
27
amended upon the expiration thereof, will require the payment to
stockholders of consideration per share of common stock having a fair
market value, as determined by the board of directors, whose determination
in good faith will be conclusive, that as of the last time, that we refer
to as the expiration time, tenders or exchanges may be made pursuant to
such tender or exchange offer, as it may be amended, exceeds the sale price
per share of common stock as of the trading day next succeeding the
expiration time, the conversion price shall be decreased so that it will
equal the rate determined by multiplying the conversion price in effect
immediately prior to the expiration time by a fraction the numerator of
which will be the number of shares of common stock outstanding, including
any tendered or exchanged shares, at the expiration time multiplied by the
sale price per share of common stock as of the trading day next succeeding
the expiration time and the denominator of which will be the sum of:
- the fair market value, determined as described above, of the
aggregate consideration payable to stockholders based on the
acceptance, up to any maximum specified in the terms of the tender
or exchange offer, of all shares of common stock validly tendered
or exchanged and not withdrawn as of the expiration time, the
shares of common stock deemed so accepted, up to any such maximum,
being referred to as the purchased shares; and
- the product of the number of shares of common stock outstanding,
less any purchased shares, at the expiration time and the sale
price per share of common stock as of the trading day next
succeeding the expiration time,
such decrease to become effective as of the opening of business on the
trading day next succeeding the expiration time. In the event that we are
obligated to purchase shares of common stock pursuant to any such tender or
exchange offer, but we are permanently prevented by applicable law from
effecting any such purchases or all such purchases are rescinded, the
conversion price will again be adjusted to be the conversion price that
would then be in effect if such tender or exchange offer had not been made.
(8) Extraordinary cash distribution. In case we pay a dividend or
make a distribution in cash on our common stock and the amount of cash
constituting the dividend or distribution exceeds 15% of the current market
price of our common stock at the close of business on the day that the
common stock trades ex-distribution, the conversion price in effect
immediately before the close of business on the day that the common stock
trades ex-distribution, will be adjusted upon conversion by multiplying:
- the conversion price by
- a fraction, the numerator of which will be the current market price
of our common stock and the denominator of which is the current
market price of our common stock plus the amount per share of such
dividend or distribution.
For the purpose of this paragraph, the current market price of our
common stock will be the average of the sale prices of our common stock for
the period of five consecutive trading days after the common stock trades
ex-distribution.
We will not, however, be required to give effect to any adjustment in
the conversion price unless and until the net effect of one or more
adjustments, each of which will be carried forward until counted toward
adjustment, will have resulted in a change of the conversion price by at
least 1%, and when the cumulative net effect of more than one adjustment so
determined will be to change the conversion price by at least 1%, that
change in the conversion price will be given effect. In the event that, at
any time as a result of the provisions of this section, the holders of
shares of preferred stock upon subsequent conversion become entitled to
receive any shares of our capital stock other than common stock, the number
of those other shares so receivable upon conversion of shares of preferred
stock will thereafter be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions
contained in this section.
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There will be no adjustment to the conversion price in case of the
issuance of any shares of our stock in a merger, reorganization,
acquisition, reclassification, recapitalization or other similar
transaction except as provided in this section.
In any case in which this section requires that an adjustment as a
result of any event become effective from and after a record date, we may
elect to defer until after the occurrence of that event:
- issuing to the holder of any shares of preferred stock converted
after that record date and before the occurrence of that event the
additional shares of common stock issuable upon that conversion
over and above the shares issuable on the basis of the conversion
price in effect immediately before adjustment; and
- delivering scrip in lieu of a fractional share of common stock.
If we take a record of the holders of our common stock for the purpose
of entitling them to receive a dividend or other distribution, and after
this and before the distribution to our stockholders we legally abandon our
plan to pay or deliver that dividend or distribution, then no adjustment in
the number of shares of our common stock issuable upon conversion of shares
of preferred stock or in the conversion price then in effect will be
required by reason of the taking of that record.
Our board of directors will have the power to resolve any ambiguity
or, subject to applicable law, correct any error in this section, and its
action in so doing will be final and conclusive.
VOTING RIGHTS
Holders of the preferred stock are not entitled to any voting rights except
as required by law. Notwithstanding the foregoing, so long as any shares of
preferred stock remain outstanding, we shall not, without the consent of the
holders of at least two-thirds of the shares of preferred stock outstanding at
the time:
- issue shares of or increase the authorized number of shares of any class
or series of stock ranking prior to the outstanding preferred stock as to
dividends or upon liquidation; or
- amend our restated certificate of incorporation or the resolutions
contained in the certificate of designations, whether by merger,
consolidation or otherwise, if the amendment would alter or change any
power, preference or special right of the outstanding preferred stock so
as to materially and adversely affect the holders thereof.
Notwithstanding the foregoing, any increase in the authorized number of
shares of common stock or preferred stock or the authorization and issuance of
other classes or series of common stock or preferred stock ranking on parity
with or junior to the preferred stock as to the payment of dividends and
distributions upon liquidation, dissolution or winding up or any issuance of
parity or junior preferred stock with voting or redemption rights that are
different than the voting or redemption rights of the preferred stock shall not
be deemed to be an amendment that alters or changes such powers, preferences or
special rights so as to materially and adversely affect the holders of the
preferred stock.
Any increase, decrease or change in the par value of any class or series of
capital stock, including the preferred stock, will not be deemed to be an
amendment that alters or changes the powers, preferences and special rights of
the shares of preferred stock so as to materially and adversely affect the
holders of the preferred stock.
CHANGE OF CONTROL
For purposes of this section, change of control of our company means the
occurrence of any of the following:
- if any "person" or "group" (as such terms are used in Section 13(d) and
Section 14(d) of the Exchange Act or any successor provisions to either
of the foregoing), including any group acting for the purpose of
acquiring, holding, voting or disposing of securities within the meaning
of
29
Rule 13d-5(b) (1) under the Exchange Act becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act, except that a person
will be deemed to have "beneficial ownership" of all shares that any such
person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly,
of 50% or more of the total voting power of our voting stock; or
- if we consolidate or merge with or into any other person, other than a
consolidation or merger under a transaction in which our outstanding
voting stock remains outstanding or is changed into or exchanged for
cash, securities or property with the effect that the beneficial owners
of our outstanding voting stock immediately before that transaction,
beneficially own, directly or indirectly, more than 50% of the voting
stock, measured by voting power rather than number of shares, of the
surviving corporation immediately following that transaction; or
- upon the sale, transfer, assignment, lease conveyance or other
disposition, directly or indirectly, of all or substantially all the
assets of our company and its subsidiaries considered as a whole; or
- if during any period of two consecutive years, individuals who at the
beginning of such period constituted our board of directors (together
with any new directors whose election or appointment by such board or
whose nomination for election by our stockholders was approved by a vote
of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to
constitute a majority of our board of directors then in office.
CHANGE OF CONTROL PUT RIGHT
If we undergo a change of control, each holder of shares of preferred stock
that remain outstanding after the change of control will have the right to
require us to redeem, out of legally available funds, any outstanding shares of
the holder's preferred stock at a redemption price per share equal to the
accreted liquidation preference of those shares, plus an amount equal to accrued
and unpaid dividends, if any, on those shares from, and including, the
immediately preceding dividend payment date to, but excluding, the date of
redemption. This right of holders will be subject to our obligation to repay or
repurchase any indebtedness or preferred stock required in connection with a
change of control and to any contractual restrictions then contained in our
indebtedness. Under the terms of our current credit facilities, we are
prohibited from paying the redemption price of the preferred stock in cash. Our
future credit facilities and other existing or future indebtedness may contain
similar restrictions. When we have satisfied these obligations, we will so
redeem all shares tendered upon a change of control. We may, at our option,
elect to pay the redemption price in cash or in shares of our common stock
valued at a discount of 5% from the market price of our common stock, or any
combination thereof. However, we may pay such redemption price in shares of our
common stock only if such shares are eligible for immediate sale in the public
market by non-affiliates of ours absent a registration statement.
Holders of the preferred stock will not have the foregoing put right if:
- the sale price per share of our common stock for any five trading days
within the period of 10 consecutive trading days ending immediately after
the later of the change of control or the public announcement thereof (in
the case of a change of control under the first bullet above) or the
period of 10 consecutive trading days ending immediately before the
change of control in the case of a change of control under the second,
third and fourth bullets above) shall equal or exceed 105% of the
conversion price of the preferred stock immediately after the later of
the change of control and the public announcement thereof; or
- at least 95% of the consideration in the change of control transaction
consists of shares of capital stock traded on a U.S. national securities
exchange or quoted on The Nasdaq National Market, and as a result of the
transaction, the preferred stock becomes convertible solely into this
capital stock.
30
For purposes of the above paragraphs:
- the term capital stock of any person means any and all shares, interests,
participations or other equivalents however designated of corporate stock
or other equity participations, including partnership interests, whether
general or limited, of such person and any rights (other than debt
securities convertible or exchangeable into an equity interest), warrants
or options to acquire an equity interest in such person; and
- the term voting stock of any person means capital stock of such person
which ordinarily has voting power for the election of directors, or
persons performing similar functions, of such person, whether at all
times or only for so long as no senior class of securities has such
voting power by reason of any contingency.
We intend to comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations to the extent those laws and
regulations are applicable in connection with the redemption of preferred stock
as a result of a change of control. To the extent that the provisions of any
securities laws or regulations conflict with any of the provisions of this
section, we will comply with the applicable securities laws and regulations and
will be deemed not to have breached our obligations under this section.
In some changes of control, holders of the preferred stock who elect to
convert their shares of preferred stock rather than exercise their change of
control put right will be entitled to receive additional compensation based upon
the present value of the remaining aggregate dividend payments that would have
been payable on the preferred stock through August 15, 2006, as described above
under "-- Adjustments to Conversion Price -- (6) Special adjustment for some
changes of control."
On the date scheduled for payment of the shares of preferred stock, we
will, to the extent lawful:
- redeem all shares of preferred stock properly tendered;
- deposit with the transfer agent an amount equal to the redemption price
of the shares of preferred stock so tendered; and
- deliver or cause to be delivered to the transfer agent shares of
preferred stock so accepted together with an officers' certificate
stating the aggregate accreted liquidation preference of the shares of
preferred stock being redeemed by us.
The transfer agent will promptly mail or deliver to each holder of shares
of preferred stock so tendered the applicable payment for those shares of
preferred stock, and the transfer agent will promptly countersign and mail or
deliver, or cause to be transferred by book-entry, to each holder new shares of
preferred stock equal in accreted liquidation preference to any unredeemed
portion of the shares of preferred stock surrendered, if any. We will publicly
announce the results of our offer on or as soon as practicable after the
redemption date for the redemption of shares of preferred stock in connection
with a change of control of our company.
We will not be required to redeem any shares of preferred stock upon the
occurrence of a change of control if a third party makes an offer to purchase
the preferred stock in the manner, at the price, at the times and otherwise in
compliance with the requirements described in this section and purchases all
shares of preferred stock validly tendered and not withdrawn.
EXCHANGE RIGHT
We have the right, at any time we have legally available funds, to require
all holders of outstanding preferred stock to exchange their preferred stock for
our convertible subordinated debentures having a principal amount equal to the
accreted liquidation preference of the preferred stock, rounded down to the
nearest whole dollar amount, and having a conversion price and interest rate
equal to the conversion price and dividend rate for the preferred stock. We
refer to this right as the exchange right, although under Section 151 and
Section 160 of the General Corporation Law of the State of Delaware, this
exchange is
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considered to be a redemption of the preferred stock. The convertible
subordinated debentures will be issued under an indenture substantially in the
form of Exhibit H to the certificate of designations. The convertible
subordinated debentures will be our subordinated debt securities, will be
convertible into shares of our common stock and will otherwise have terms and
conditions substantially similar to the preferred stock, except as described
below under "Description of the Convertible Subordinated Debentures."
We are only able to exercise the exchange right if:
- we have legally available funds for such exchange;
- we have entered into an indenture substantially in the form of Exhibit H
to the certificate of designations with a trustee that is a national
association or other entity having corporate trust powers, that is
organized and doing business under the laws of the United States of
America or any state thereof or the District of Columbia and that has a
combined capital and surplus of at least $50,000,000; and
- we deliver to the trustee a certificate of one of our executive officers
and an opinion of legal counsel, subject to customary assumptions and
exceptions, stating, among other things, that:
- the convertible subordinated debentures have been duly authorized and
when executed, authenticated and delivered in exchange for the
preferred stock, will be valid and binding obligations of our company,
enforceable in accordance with their terms;
- the execution and delivery by us of our obligations under the
convertible subordinated debentures and the indenture will not, as
determined in good faith by our board of directors, contravene or
cause a default under any provision of applicable law or our restated
certificate of incorporation or by-laws or any agreement or other
instrument binding upon us or any of our subsidiaries (including
without limitation, our credit agreements) or any judgment, order or
decree of any governmental body, agency or court having jurisdiction
over us or any of our subsidiaries; and
- no consent, approval, authorization or order of, or qualification
with, any governmental body or agency is required for the performance
by us of our obligations under the indenture or the convertible
subordinated debentures.
We may only exercise the exchange right in whole and not in part.
If we exercise the exchange right, we will provide notice to the trustee
not less than 30 nor more than 60 days preceding the date we desire the exchange
to be effective (the "exchange date"), providing:
- our election to exercise the exchange right;
- a description of the type and amount of convertible subordinated
debentures to be delivered in respect of the preferred stock, the place
or places where certificates for shares of preferred stock are to be
surrendered for exchange, including any procedures applicable to
exchanges to be accomplished through book-entry transfers; and
- the exchange date.
We will cause the convertible subordinated debentures to be delivered to
the trustee in preparation for the exchange no later than 5 business days prior
to the exchange date. We will provide the same notice of such exercise of the
exchange right to each holder of record of preferred stock promptly after
providing notice of such exercise to the trustee.
If we exercise the exchange right, delivery of the convertible subordinated
debentures to the holders of the preferred stock to be exchanged will be
conditioned upon delivery or book-entry transfer of such preferred stock
(together with any necessary endorsements) to the trustee at any time (whether
prior to, on or after the exchange date) after notice of the exercise of the
exchange right is given to the trustee. In
32
such event, such convertible subordinated debentures will be delivered to each
holder of preferred stock to be exchanged no later than the later of:
- the exchange date or
- the time of delivery or transfer of the certificates representing, or
other indicia of ownership of, preferred stock to the trustee.
If, following any exercise of the exchange right, the trustee holds
convertible subordinated debentures in respect of all the outstanding preferred
stock, then at the close of business on such exchange date, whether or not the
certificates representing, or other indicia of ownership of, preferred stock are
delivered to the trustee:
- we will become the owner and record holder of such preferred stock;
- the holders of such preferred stock shall have no further rights with
respect to the preferred stock other than the right to receive the
convertible subordinated debentures upon delivery of the certificates
representing, or other indicia of ownership of, preferred stock;
- dividends on the preferred stock to be exchanged will cease to accrue on
the exchange date whether or not certificates for shares of preferred
stock are surrendered for exchange on the exchange date; and
- the depositary or its nominee, as the record holder of the preferred
stock, will exchange the global certificate or certificates representing
the preferred stock for a global certificate or certificates representing
the convertible subordinated debentures to be delivered upon such
exchange.
In the event that delivery of the convertible subordinated debentures due
on the exchange date is improperly withheld or is refused and not paid by the
trustee or by us, distributions on the preferred stock will continue to accrue
from the exchange date to the actual date of delivery.
The aggregate principal amount of the convertible subordinated debentures
will be limited to the aggregate accreted liquidation preference of the
preferred stock outstanding on the effective date of the exchange.
Notwithstanding the foregoing, the convertible subordinated debentures will be
issued in denominations equal to integral multiples of the accreted liquidation
preference of one share of preferred stock as of the effective date of the
exchange, rounded down to the nearest whole dollar amount. The excess, if any,
of the accreted liquidation preference of each share of preferred stock, as of
the effective date of the exchange, over the nearest whole dollar amount to
which that accreted liquidation preference has been rounded-down shall be paid
in cash to the holder.
Our exercise of the exchange right would be taxable to the holders of the
preferred stock and may be treated as a taxable distribution in the amount of
the fair market value of the convertible subordinated debentures, see "Certain
Federal Income Tax Consequences -- Preferred Stock -- Exchange Right" below.
REGISTRATION RIGHTS
On August 6, 2001, we entered into a registration rights agreement with the
initial purchasers of the preferred stock. Under the registration rights
agreement, we agreed to use our reasonable best efforts to:
- file, on or before February 2, 2002, a shelf registration statement with
the SEC on the appropriate form under the Securities Act to cover resales
of the shares of preferred stock and of common stock issued upon
conversion of the shares of preferred stock;
- cause that registration statement to be declared effective, subject to
some exceptions, on or before April 3, 2002; and
33
- subject to certain "black-out" periods not to exceed 90 days in the
aggregate in any consecutive 365-day period, use our reasonable best
efforts to cause that registration statement to remain effective, subject
to some exceptions, until the earlier of:
- two years following the issue date of the preferred stock and
- the date on which all shares of preferred stock or common stock
covered by that registration statement have been sold under that
registration statement.
Holders of shares of preferred stock are required to deliver certain
information to be used in connection with the shelf registration statement
within the time periods indicated in the registration rights agreement in order
to have their shares of preferred stock or common stock into which the shares of
preferred stock may be converted included in the shelf registration statement.
We filed the shelf registration of which this prospectus forms a part. The
certificate of designations provides that if the shelf registration statement
ceases to be effective or usable in connection with resales of shares of
preferred stock and common stock during the periods specified in the
registration rights agreement -- we refer to that event as a registration
default -- then we will pay to each holder of shares of preferred stock
registrable under the registration rights agreement, with respect to the first
90-day period immediately following the occurrence of a registration default,
additional dividends on the preferred stock computed by increasing the
applicable dividend rate or accretion rate for the relevant period by 0.25% per
year, which we refer to as additional dividends. The applicable dividend rate or
accretion rate will increase by an additional 0.25% per year with respect to any
subsequent 90-day period, but in no event will the additional dividend rate or
accretion rate exceed 1.00% per year in the aggregate regardless of the number
of registration defaults, until all registration defaults have been cured. If,
after the cure of all registration defaults then in effect, there is a
subsequent registration default, the additional dividend rate or accretion rate
for that subsequent registration default will initially be 0.25%, regardless of
the additional dividend rate in effect with respect to any prior registration
default at the time of the cure of that registration default. An amount equal to
all accrued additional dividends will be payable to the holders entitled to
those dividends, in the manner provided for the payment or accretion of
dividends in the certificate of designations.
This is a summary of some important provisions of the registration rights
agreement. This summary is not complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the registration rights
agreement. You may request a copy of the registration rights agreement by
contacting us at our principal executive offices.
TRANSFER AGENT
The transfer agent, registrar, paying agent and redemption agent for our
shares of preferred stock is The Bank of New York. The Bank of New York is also
the transfer agent and registrar for our shares of common stock.
BOOK-ENTRY ISSUANCE
The shares of preferred stock were issued in the form of global
certificates registered in the name of Cede & Co., a nominee of the depositary.
All book-entry certificates are represented by fully registered global
certificates, without coupons. Each global certificate was deposited on behalf
of the depositary, a securities depositary, and was registered in the name of
Cede & Co., a nominee of the depositary. The depositary is the only registered
holder of the shares of preferred stock.
Shares of preferred stock that are issued as described below under
"-- Certificated Preferred Stock" will be issued in definitive form. Upon the
transfer of preferred stock in definitive form, such preferred stock will,
unless the global securities have previously been exchanged for preferred stock
in definitive
34
form, be exchanged for an interest in the global securities representing the
accreted liquidation preference of preferred stock being transferred.
Purchasers of shares of preferred stock may hold interests in the global
certificates through the depositary if they are participants in the depositary
system. Purchasers may also hold interests through a securities
intermediary -- banks, brokerage houses and other institutions that maintain
securities accounts for customers -- that has an account with the depositary.
The depositary will maintain accounts showing the security holdings of its
participants, and these participants will in turn maintain accounts showing the
security holdings of their customers. Some of these customers may themselves be
securities intermediaries holding securities for their customers. Thus, each
beneficial owner of a book-entry certificate will hold that certificate
indirectly through a hierarchy of intermediaries, with the depositary at the
"top" and the beneficial owner's own securities intermediary at the "bottom."
The shares of preferred stock of each beneficial owner of a book-entry
certificate are evidenced solely by entries on the books of the beneficial
owner's securities intermediary. The actual purchaser of shares of preferred
stock will generally not be considered the owner under our certificate of
incorporation or by-laws. The book-entry system for holding securities
eliminates the need for physical movement of certificates and is the system
through which most publicly traded stock is held in the United States. However,
the laws of some jurisdictions require some purchasers of securities to take
physical delivery of their securities in definitive form. These laws may impair
the ability of a beneficial owner to transfer book-entry shares of preferred
stock.
Investors who purchased preferred stock in offshore transactions in
reliance on Regulation S under the Securities Act may hold their interests in
the global certificate directly through Euroclear Bank S.A./N.V., as operator of
the Euroclear System, or Euroclear, and Clearstream Banking, societe anonyme, or
Clearstream, if they are participants in such systems, or indirectly through
organizations that are participants in such systems. Euroclear and Clearstream
will hold interests in the global certificate on behalf of their participants
through their respective depositories, which in turn will hold such interests in
the global certificate in the depositories' names on the books of the
depositary.
Transfers between participants in Euroclear and Clearstream will be
effected in the ordinary way in accordance with their respective rules and
operating procedures. If a holder requires physical delivery of a definitive
certificate for any reason, including to sell certificates to persons in
jurisdictions that require such delivery of such certificates or to pledge such
certificates, such holder must transfer its interest in the global certificate
in accordance with the normal procedures of the depositary and the procedures
set forth in the certificate of designations.
Cross-market transfers between the depositary, on the one hand, and
directly or indirectly through Euroclear or Clearstream participants, on the
other, will be effected in the depositary in accordance with the depositary
rules on behalf of Euroclear or Clearstream, as the case may be, by its
respective depositary; however, such cross-market transactions will require
delivery of instructions to Euroclear or Clearstream, as the case may be, by the
counterparty in such system in accordance with its rules and procedures and
within its established deadlines (Brussels time). Euroclear or Clearstream, as
the case may be, will, if the transaction meets its settlement requirements,
deliver instructions to its respective depositary to take action to effect final
settlement on its behalf by delivering or receiving interests in the global
certificate in the depositary, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to the
depositary. Euroclear participants and Clearstream participants may not deliver
instructions directly to the depositaries for Euroclear or Clearstream.
Because of time zone differences, the securities account of a Euroclear or
Clearstream participant purchasing an interest in the global certificate from a
depositary participant will be credited during the securities settlement
processing day (which must be a business day for Euroclear or Clearstream, as
the case may be) immediately following the depositary settlement date, and such
credit or any interests in the global certificate settled during such processing
day will be reported to the relevant Euroclear or Clearstream participant on
such day. Cash received in Euroclear or Clearstream as a result of sales of
interests in the global certificate by or through a Euroclear or Clearstream
participant to a depositary
35
participant will be received with value on the depositary settlement date, but
will be available in the relevant Euroclear or Clearstream cash account only as
of the business day following settlement in the depositary.
A beneficial owner of book-entry shares of preferred stock represented by a
global certificate may exchange the shares for definitive, certificated shares
of preferred stock only if the conditions for such an exchange, as described
under "-- Certificated Preferred Stock" are met.
In this prospectus, references to actions taken by holders of shares of
preferred stock will mean actions taken by the depositary upon instructions from
its participants, and references to payments and notices of redemption to
holders of shares of preferred stock will mean payments and notices of
redemption to the depositary as the registered holder of the shares of preferred
stock for distribution to participants in accordance with the depositary's
procedures.
In order to ensure that the depositary's nominee will timely exercise a
right conferred by the preferred stock, the beneficial owner of that preferred
stock must instruct the broker or other direct or indirect participant through
which it holds an interest in that preferred stock to notify the depositary of
its desire to exercise that right. Different firms have different deadlines for
accepting instructions from their customers. Each beneficial owner should
consult the broker or other direct or indirect participant through which it
holds an interest in the preferred stock in order to ascertain the deadline for
ensuring that timely notice will be delivered to the depositary.
The depositary is a limited purpose trust company organized under the laws
of the State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered under Section 17A of the Exchange Act. The rules
applicable to the depositary and its participants are on file with the SEC.
We will not have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests in the book-entry securities or for maintaining, supervising or
reviewing any records relating to beneficial ownership interests.
The depositary may discontinue providing its services as securities
depositary at any time by giving reasonable notice. Under those circumstances,
in the event that a successor securities depositary is not appointed, share
certificates are required to be printed and delivered. Additionally, we may
decide to discontinue use of the system of book-entry transfers through the
depositary or any successor depositary with respect to the shares of preferred
stock. In that event, certificates for the shares will be printed and delivered.
The information in this section concerning the depositary and the
depositary's book-entry system has been obtained from sources that we believe to
be reliable, but we do not take responsibility for the accuracy of that
information.
CERTIFICATED PREFERRED STOCK
The preferred stock represented by the global securities is exchangeable
for certificated preferred stock in definitive form of like tenor to such
preferred stock if:
- the depositary notifies us that it is unwilling or unable to continue as
depositary for the global securities or if at any time the depositary
ceases to be a clearing agency registered under the Exchange Act and, in
either case, a successor depositary is not appointed by us within 120
days after the date of such notice;
- we in our sole discretion at any time determine not to have all of the
preferred stock represented by the global securities; or
- otherwise required by applicable law.
Any preferred stock that is exchangeable pursuant to the preceding sentence
is exchangeable for certificated preferred stock issuable in authorized
denominations and registered in such names as the
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depositary shall direct. Subject to the foregoing, the global securities are not
exchangeable, except for global securities of the same aggregate accreted
liquidation preferences to be registered in the name of the depositary or its
nominee. In addition, such certificates will bear the legend referred to under
"Notice to Investors (unless we determine otherwise in accordance with
applicable law) subject, with respect to such preferred stock, to the provisions
of such legend.
ADDITIONAL INFORMATION
Anyone who receives this prospectus may obtain a copy of the certificate of
designations, the form of indenture (or in the event that we exercise our
exchange right, the indenture), the form of convertible subordinated debenture
and the registration rights agreement without charge from us. Requests for such
documents should be addressed in writing or by telephone to the Corporate
Secretary, Lucent Technologies Inc., 600 Mountain Avenue, Murray Hill, New
Jersey 07974 (908) 582-8500.
37
DESCRIPTION OF THE CONVERTIBLE SUBORDINATED DEBENTURES
The convertible subordinated debentures that the holders of the preferred
stock would receive in exchange for their preferred stock if we exercise our
exchange right, as described under "Description of Preferred Stock -- Exchange
Right," will be a separate series of securities issued pursuant to an indenture
substantially in the form of Exhibit H to the certificate of designations for
the preferred stock between us and a trustee to be selected by us in accordance
with the conditions to our exercise of the exchange right as provided under
"Description of the Preferred Stock -- Exchange Right." We expect the trustee to
be The Bank of New York. We will issue the convertible subordinated debentures
in a transaction that is not subject to the registration requirements of the
Securities Act.
The following section is a summary of the material provisions of the
convertible subordinated debentures and does not restate the form of the
indenture in its entirety. We urge you to read the form of the indenture and the
form of convertible subordinated debenture attached to it, because those
documents, and not this description, define your rights as holders of the
convertible subordinated debentures. Copies of the form of the indenture and the
form of convertible subordinated debenture are available as set forth under
"-- Additional Information" below.
As used in this description, references to "we," "us," "our" or "Lucent" do
not include any current or future subsidiary of Lucent.
GENERAL
The convertible subordinated debentures:
- will be unsecured obligations of ours;
- will be subordinated in right of payment to all of our existing and
future senior debt, as described below;
- will be limited to an aggregate principal amount equal to the aggregate
accreted liquidation preference of the preferred stock outstanding on the
effective date of the exchange;
- will be issued in denominations equal to integral multiples of the
accreted liquidation preference of one share of preferred stock as of the
effective date of the exchange, rounded down to the nearest whole dollar
amount (with cash being paid in lieu of any convertible subordinated
debentures that would otherwise be issued with a denomination of less
than a whole dollar);
- will mature on August 1, 2031; and
- will accrue interest at an annual rate of 8.00% of the principal amount
from the dividend payment date of the preferred stock immediately
preceding the exchange date or, if the exchange date is a dividend
payment date, from the exchange date.
The convertible subordinated debentures will not have the benefit of a
sinking fund. Principal of and interest on the convertible subordinated
debentures will be payable at the office of the paying agent, which initially
will be an office or agency of the trustee, or an office or agency maintained
for such purpose, in the Borough of Manhattan, The City of New York. The
convertible subordinated debentures may be presented for exchange at the office
of the exchange agent, and for registration of transfer or exchange at the
office of the registrar, each such agent initially being the trustee. No service
charge will be made for any registration of transfer or exchange of convertible
subordinated debentures, but we may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
The convertible subordinated debentures will be issued only in registered
form without coupons.
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SUBORDINATION
The payment of the principal and interest on the convertible subordinated
debentures will be subordinated in right of prior payment, as set forth in the
indenture, to the prior payment in full of all our existing or future senior
debt, whether outstanding on the date of the indenture or thereafter incurred.
The term senior debt means:
- the principal of, premium, if any, and accrued and unpaid interest on:
- our indebtedness for money borrowed, whether outstanding on the date
of execution of the indenture or thereafter created, incurred or
assumed,
- guarantees by us of indebtedness for money borrowed by any other
person, whether outstanding on the date of execution of the indenture
or thereafter created, incurred or assumed,
- indebtedness evidenced by notes, debentures, bonds or other
instruments of indebtedness for the payment of which we are
responsible or liable, by guarantees or otherwise, whether outstanding
on the date of execution of the indenture or thereafter created,
incurred or assumed, and
- obligations of ours under any agreement to lease, or lease of, any
real or personal property, whether outstanding on the date of
execution of the indenture or thereafter created, incurred or assumed,
- any other indebtedness, liability or obligation, contingent or otherwise,
of ours and any guarantee, endorsement or other contingent obligation in
respect thereof, whether outstanding on the date of execution of the
indenture or thereafter created, incurred or assumed; and
- modifications, renewals, extensions and refundings of any such
indebtedness, liabilities or obligations; unless, in the instrument
creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such indebtedness, liabilities or
obligations, or such modification, renewal, extension or refunding
thereof, or our obligations pursuant to such a guarantee, are not senior
in right of payment to the convertible subordinated debentures.
No payment on account of principal or interest on the convertible
subordinated debentures may be made if at the time of such payment there exists
a default with respect to any senior debt and the default is the subject of
judicial proceedings or we receive notice from certain authorized persons that
payments may not be made. Upon any distributions of our assets upon any
dissolution, total or partial liquidation or reorganization of or similar
proceeding relating to us, the holders of senior debt will be entitled to
receive payment in full before the holders of the convertible subordinated
debentures are entitled to receive any payment.
By reason of such subordination, in the event of our insolvency, our
creditors who are holders of senior debt, as well as general creditors of ours,
may recover more, ratably, than the holders of the convertible subordinated
debentures.
The indenture will contain no limitations on the incurrence of senior debt.
INTEREST
Interest on the convertible subordinated debentures will accrue at an
annual rate of 8.00% of the principal amount from the dividend payment date of
the preferred stock immediately preceding the exchange date or, if the exchange
date is a dividend payment date, from the exchange date.
Interest will be payable in cash on February 1 and August 1 of each year to
holders of record on the prior January 1 and July 1, respectively.
We will not have the right to defer interest payments or to accrete the
principal amount of the convertible subordinated debentures, and we will not
have the right to redeem the principal amount of the convertible subordinated
debentures, except as described below.
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REDEMPTION
REDEMPTION AT OUR OPTION
We may redeem all or a portion of the convertible subordinated debentures
for cash at any time on or after August 15, 2006 at a price equal to 100% of the
principal amount of the convertible subordinated debentures to be redeemed plus
an amount equal to accrued and unpaid interest to, but excluding, the redemption
date.
REDEMPTION AT THE OPTION OF THE HOLDER
The holders of convertible subordinated debentures will have redemption at
the option of the holder terms that are substantially identical to the
redemption at the option of the holder terms of the preferred stock.
MATURITY
The convertible subordinated debentures will mature on August 1, 2031. We
will not have the right to pay the principal amount due on the maturity date in
shares of our common stock.
CONVERSION
The conversion rights of the convertible subordinated debentures will be
substantially similar to the conversion rights of the preferred stock.
VOTING RIGHTS
The holders of convertible subordinated debentures will not have the right
to vote in the election of our directors or any other voting rights prior to the
holders' receipt of common stock upon conversion of their convertible
subordinated debentures.
CHANGE OF CONTROL
The change of control redemption rights of holders of the convertible
subordinated debentures will be substantially identical to the change of control
redemption rights of holders of the preferred stock.
REGISTRATION RIGHTS
The holders of convertible subordinated debentures will have registration
rights that are substantially identical to the registration rights of holders of
the preferred stock.
EVENTS OF DEFAULT
Each of the following will constitute an event of default with respect to
the convertible subordinated debentures (whatever the reason for such event of
default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
- default in payment of the principal of the convertible subordinated
debentures at maturity or upon redemption with respect to any convertible
subordinated debenture when such amount becomes due and payable;
- the failure to pay interest within 30 days of the due date;
- our failure to deliver shares of our common stock, together with cash in
lieu of any fractional shares, when such common stock and cash is
required to be delivered upon conversion of convertible subordinated
debentures and continuance of such default for ten business days;
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- our failure to comply with any of our other agreements in the convertible
subordinated debentures or the indenture upon receipt by us of notice of
such default by the trustee or by holders of not less than 25% in
aggregate principal amount of the convertible subordinated debentures
then outstanding and our failure to cure (or obtain a waiver of) such
default within 60 days after receipt by us of such notice; and
- certain events of bankruptcy, insolvency or reorganization affecting us.
ACCELERATION
If any event of default with respect to the convertible subordinated
debentures, other than an event of default relating to specific events of
bankruptcy, insolvency or reorganization affecting us, has happened and is
continuing, either the trustee or the holders of at least 25% in aggregate
principal amount of the convertible subordinated debentures then outstanding may
declare by written notice the principal of all the convertible subordinated
debentures, plus interest on the convertible subordinated debentures accrued and
unpaid to the date of such declaration to be immediately due and payable. In the
case of certain events of bankruptcy, insolvency or reorganization, the
principal of all the convertible subordinated debentures plus interest on the
convertible subordinated debentures accrued and unpaid to the occurrence of such
event shall automatically become and be immediately due and payable. At any time
after a declaration of acceleration has been made, but before a judgment or
decree for payment of money has been obtained by the trustee, and subject to
applicable law and certain other provisions of the indenture, the holders of a
majority in aggregate principal amount of the convertible subordinated
debentures may, under certain circumstances, rescind and annul such
acceleration.
The indenture provides that, within 90 days after the occurrence of any
event which is, or after notice or lapse of time or both would become, an event
of default thereunder with respect to the convertible subordinated debentures,
the trustee shall transmit, in the manner set forth in the indenture, notice of
such default to the holders of the convertible subordinated debentures unless
such default has been cured or waived; provided, however, that except in the
case of a default in the payment of principal of, or premium, if any, or
interest, if any, on any convertible subordinated debentures, the trustee may
withhold such notice if and so long as the board of directors, the executive
committee or a trust committee of directors or responsible officers of the
trustee in good faith determine that the withholding of such notice is in the
best interest of the holders of convertible subordinated debentures.
If an event of default occurs and is continuing with respect to the
convertible subordinated debentures, the trustee may in its discretion proceed
to protect and enforce its rights and the rights of the holders of convertible
subordinated debentures by all appropriate judicial proceedings.
The indenture provides that, subject to the duty of the trustee during any
default to act with the required standard of care, the trustee will be under no
obligation to exercise any of its rights or powers under the indenture at the
request or direction of any of the holders of convertible subordinated
debentures, unless such holders shall have offered to the trustee reasonable
indemnity. Subject to such provisions for the indemnification of the trustee,
and subject to applicable law and certain other provisions of the indenture, the
holders of a majority in aggregate principal amount of the outstanding
convertible subordinated debentures will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
trustee, or exercising any trust or power conferred on the trustee, with respect
to the convertible subordinated debentures.
MODIFICATION OF THE INDENTURE
Modification Without Consent of Holders. We and the trustee may enter into
supplemental indentures without the consent of the holders of the convertible
subordinated debentures to:
- make provision with respect to the conversion rights of the holders upon
the occurrence of a fundamental change involving the conversion of our
common stock or the matters described in "Covenants Restricting Mergers
and Other Significant Corporate Actions;"
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- secure the convertible subordinated debentures;
- evidence the assumption by a successor corporation of our obligations;
- add covenants for the protection of the holders of the convertible
subordinated debentures;
- provide for uncertificated convertible subordinated debentures in
addition to or in place of certificated convertible subordinated
debentures;
- cure any ambiguity or correct any defect or inconsistency;
- evidence the acceptance of appointment by a successor trustee;
- provide for the issuance of convertible subordinated debentures in coupon
form; or
- modify, eliminate or add to provisions of the indenture to the extent
necessary to effect the qualifications of the indenture under the Trust
Indenture Act.
Modification With Consent of Holders. We and the trustee, with the consent
of the holders of not less than a majority in aggregate principal amount of the
convertible subordinated debentures, may add any provisions to, or change in any
manner or eliminate any of the provisions of, the indenture or modify in any
manner the rights of the holders of the convertible subordinated debentures. In
addition, any amendment to, or waiver of, the provisions of the indenture
relating to subordination that adversely affects the rights of the holders of
the convertible subordinated debentures will require the consent of the holders
of at least 75% in aggregate principal amount of the convertible subordinated
debentures then outstanding. However, we and the trustee may not make any of the
following changes to the convertible subordinated debentures without the consent
of each holder that would be affected by such change:
- extend the final maturity of the principal;
- reduce the principal amount;
- reduce the rate or extend the time of payment of interest;
- reduce any amount payable on redemption;
- change the currency in which the principal or interest thereon is
payable;
- adversely change our obligation to redeem any convertible subordinated
debenture;
- impair the right of a holder to convert any convertible subordinated
debenture;
- impair the right of any holder to institute suit for the enforcement
of any payment on the convertible subordinated debentures when due; or
- reduce the percentage of the convertible subordinated debentures the
consent of whose holders is required for modification of the
indenture.
COVENANTS RESTRICTING MERGERS AND OTHER SIGNIFICANT CORPORATE ACTIONS
Merger, Consolidation, Sale or Conveyance. The indenture provides that we
will not merge or consolidate with any other person and will not sell or convey
all or substantially all of our assets to any other person, unless either:
- we will be the continuing corporation; or
- the successor corporation or person that acquires all or substantially
all of our assets will expressly assume all of our obligations under the
indenture and the convertible subordinated debentures issued under the
indenture,
and immediately after the merger, consolidation, sale, lease or conveyance, we,
that person or that successor corporation, as applicable, will not be in default
in the performance of the covenants and conditions of the indenture applicable
to us, that person or that successor corporation, as applicable.
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BOOK-ENTRY ISSUANCE
The convertible subordinated debentures will be represented by one or more
global convertible subordinated debentures registered in the name of a nominee
of the depositary.
ADDITIONAL INFORMATION
Anyone who receives this prospectus may obtain a copy of the certificate of
designations, the form of indenture (or in the event that we exercise our
exchange right, the indenture), the form of convertible subordinated debenture
and the registration rights agreement without charge from us. Requests for such
documents should be addressed in writing or by telephone to the Corporate
Secretary, Lucent Technologies Inc., 600 Mountain Avenue, Murray Hill, New
Jersey 07974 (908) 582-8500.
43
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain U.S. federal income tax consequences
of the ownership of the preferred stock, the convertible subordinated debentures
and our common stock. The discussion is based upon the Internal Revenue Code of
1986, as amended, which we refer to as the Code, Treasury Regulations, judicial
authorities, published positions of the Internal Revenue Service, which we refer
to as the IRS, and other applicable authorities, all as in effect on the date
hereof and all of which are subject to change or differing interpretations
(possibly with retroactive effect). The discussion does not address all of the
tax consequences that may be relevant to a particular holder of preferred stock
or to holders of the preferred stock subject to special treatment under federal
income tax laws such as:
- certain financial institutions;
- insurance companies;
- dealers in securities or foreign currencies;
- U.S. holders whose functional currency is not the U.S. dollar;
- partnerships or other entities classified as partnerships for U.S.
federal income tax purposes;
- persons who own 10% or more of our voting stock;
- persons subject to the alternative minimum tax; or
- tax-exempt organizations.
This discussion is limited to:
- holders of the preferred stock and common stock who hold our preferred
stock and common stock as capital assets; and
- initial holders of our convertible subordinated debentures.
No ruling has been or will be sought from the IRS regarding any matter
discussed herein. Our counsel has not rendered any legal opinion regarding any
tax consequences relating to us or an investment in us. No assurance can be
given that the IRS would not assert, or that a court would not sustain, a
position contrary to any of the tax aspects set forth below. PROSPECTIVE
INVESTORS MUST CONSULT THEIR OWN TAX ADVISORS AS TO THE FEDERAL INCOME TAX
CONSEQUENCES OF ACQUIRING, HOLDING AND DISPOSING OF OUR STOCK OR DEBT, AS WELL
THE EFFECTS OF STATE, LOCAL AND NON-U.S. TAX LAWS.
As used herein, the term U.S. holder means a beneficial owner of a share of
preferred stock or common stock or of a convertible subordinated debenture that
is for United States federal income tax purposes:
- a citizen or resident of the United States;
- a corporation or other entity taxed as a corporation created or organized
in or under the laws of the United States or of any political subdivision
thereof;
- an estate the income of which is subject to United States federal income
taxation regardless of its source; or
- a trust if:
- a U.S. court is able to exercise primary supervision over the
administration of the trust and
- one or more U.S. persons have the authority to control all substantial
decisions of the trust.
The term U.S. holder also includes certain former citizens of the United
States. A non-U.S. holder means a beneficial owner of a share of preferred stock
or common stock or of a convertible subordinated debenture that is not a U.S.
holder.
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U.S. HOLDERS
PREFERRED STOCK AND COMMON STOCK
Distributions. Except as discussed below, the amount of distributions you
receive on shares of our preferred or common stock will be treated as follows:
first, as a dividend, taxable as ordinary income, to the extent paid out of our
current or accumulated earnings and profits for federal income tax purposes;
next as a tax-free return of capital to the extent of your tax basis in such
stock; and thereafter, as capital gain from the sale of such stock (which
capital gain will be long term if the holding period for the stock is more than
one year). The amount of any distribution of property other than cash (including
common stock distributed to holders of the preferred stock) will be the fair
market value of such property on the date of distribution. Distributions on the
preferred stock will generally be taxable when received, either by you, or by
the transfer agent upon our distribution of our common stock.
Distributions taxable as dividends to corporate holders of the preferred
stock will be eligible for the dividends received deduction, subject to various
limitations. No assurance can be given that we will have sufficient earnings and
profits for federal income tax purposes to cause all distributions to be taxable
as dividends. The benefits of any dividends received deduction to a corporate
holder of preferred stock may, in effect, be reduced or eliminated by many
exceptions and restrictions, including restrictions relating to the holding
period of stock on which the dividends are received, debt-financed portfolio
stock, taxpayers that pay alternative minimum tax and the so-called
"extraordinary dividend" provisions of section 1059 of the Code.
Deemed Distributions. The conversion price at which the preferred stock is
converted to shares of common stock is subject to adjustments in certain
circumstances. Adjustments that have the effect of increasing the proportionate
interest of holders of the preferred stock in our assets or earnings can give
rise to deemed dividend income to those holders. For example, an adjustment to
the conversion price following the anticipated distribution of the Class B
common stock of Agere Systems Inc. to holders of our common stock may result in
deemed dividend income to our preferred holders, although based upon the advice
of our counsel, we do not intend to treat such adjustment as a deemed dividend.
Similarly, a failure to adjust the conversion price to reflect a stock dividend
or other events increasing the proportionate interest of the holders of our
common stock can in some circumstances give rise to deemed dividend income to
those holders. Adjustments to the conversion price made pursuant to a bona fide
reasonable adjustment formula which has the effect of preventing the dilution of
the interest of the holders of the preferred stock, however, will generally not
be considered to result in a constructive distribution of stock.
If we are unable to pay dividends on the preferred stock, the accreted
liquidation preference of the preferred stock will be increased and may give
rise to deemed dividend income, at the time of such increase, to the holders of
the preferred stock in the amount of all, or a portion of, the increase in
liquidation preference.
Conversion. A holder of preferred stock who converts preferred stock into
our common stock will generally not recognize gain or loss; except that the fair
market value of any shares of common stock attributable to dividend arrearages
will be treated as a distribution as described above under "-- Distributions."
The tax basis of common stock received on conversion will equal the tax basis of
the preferred stock converted, and the holding period for the common stock
received will generally include the holding period of the preferred stock
converted.
Redemption for Cash. A holder of preferred stock will generally recognize
capital gain or loss on our redemption of preferred stock for cash, provided
that the redemption meets at least one of the following requirements:
- the redemption is not essentially equivalent to a dividend as determined
for federal income tax purposes;
- the redemption results in a complete termination of the holder's interest
in our stock (preferred and common); or
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- the redemption is substantially disproportionate with respect to the
holder of preferred stock as determined for federal income tax purposes.
If the redemption satisfies any of these requirements, such capital gain or
loss will generally be equal to the difference between the amount of cash
received by the holder of preferred stock and the holder's tax basis in the
preferred stock redeemed. This capital gain or loss will be long term if the
holding period for the preferred stock is more than one year. In determining
whether any of the above requirements apply, shares considered to be owned by
the holder of preferred stock by reason of certain attribution rules must be
taken into account. It may be more difficult for a person who owns, actually or
constructively by operation of the attribution rules, any of our common stock to
satisfy any of the above requirements.
If the redemption does not satisfy any of the above requirements, then the
entire amount received (i.e., without any offset for the holder's tax basis in
the preferred stock redeemed) will be treated as a distribution taxable as
described in "-- Distributions" above. In such case, the holder's tax basis in
the preferred stock that is redeemed will be allocated to the holder's remaining
stock, if any, or possibly to stock owned by him constructively if the holder of
preferred stock does not continue to own, directly, any of our stock.
PROSPECTIVE INVESTORS MUST CONSULT THEIR OWN TAX ADVISORS AS TO THE FEDERAL
INCOME TAX CONSEQUENCES OF A REDEMPTION OF OUR PREFERRED STOCK.
Redemption for Common Stock. A holder of preferred stock will generally
not recognize gain or loss on our redemption of preferred stock solely for our
common stock (except that ordinary income may be recognized to the extent that a
portion of the common stock is determined to constitute a payment in respect of
dividends in arrears on the preferred stock). The tax basis of such common stock
received will generally equal the tax basis of the preferred stock redeemed, and
the holding period for the common stock received will generally include the
holding period of the preferred stock redeemed (except that the portion, if any,
of common stock received that constitutes a payment in respect of dividends in
arrears will have a tax basis equal to its fair market value at the time of the
redemption and a new holding period commencing at the time of the redemption).
Exchange Right. The exchange of preferred stock for our convertible
subordinated debentures under the exchange right generally cannot qualify under
the "complete termination" or "substantially disproportionate" test described in
"-- Redemption for Cash" above because of the conversion feature of the
convertible subordinated debentures and generally may not qualify under the
"essentially equivalent to dividend" test described above as the holder's
interest in us before and after the conversion will generally not be
meaningfully reduced, and therefore, generally the exchange may be treated as a
taxable distribution in the amount of the fair market value of the convertible
subordinated debentures and any cash received, as described in
"-- Distributions" above. Otherwise, the exchange would give rise to capital
gain or loss for U.S. federal income tax purposes, equal to the difference
between (i) the value of the convertible subordinated debentures and any cash
received upon exchange, and (ii) the U.S. holder's adjusted tax basis in the
preferred stock. The tax basis of such convertible subordinated debentures will
equal their fair market value at the time of receipt. Based upon the advice of
our counsel, we intend to treat the exchange of preferred stock for our
convertible subordinated debentures under the exchange right as generally giving
rise to capital gain or loss.
Change in Control Put Right. If, as a result of a change in control, a
holder of preferred stock exercises the right to put preferred stock to us and
we decide to pay for such stock solely in cash, the holder will be taxed under
the rules described in "-- Redemption for Cash" above.
If a holder of preferred stock exercises the put right and we decide to pay
for such stock solely in common stock, the holder will generally not recognize
gain or loss (except that ordinary income may be recognized to the extent that a
portion of the common stock is determined to constitute a payment in respect of
dividends in arrears on the preferred stock). The tax basis of common stock
received on exercise of the put will generally equal the tax basis of the
preferred stock tendered, and the holding period for the common stock received
will generally include the holding period of the preferred stock tendered
(except that the portion, if any, of common stock received that constitutes a
payment in respect of dividends in
46
arrears will have a tax basis equal to its fair market value at the time of the
tender and a new holding period commencing at the time of the tender).
Other Sales or Dispositions. Except as set forth above, a holder of
preferred or common stock who sells or otherwise disposes of our stock will
generally recognize capital gain or loss equal to the difference between the sum
of the amount of cash and fair market value of any property received on the sale
or other disposition and the tax basis in the shares sold or disposed. This
capital gain or loss will be long term if the holding period for the stock sold
or disposed is more than one year. Capital losses are subject to limitations.
CONVERTIBLE SUBORDINATED DEBENTURES
Payments of Interest. Interest paid on a convertible subordinated
debenture will be taxable to a U.S. holder as ordinary interest income at the
time it accrues or is received in accordance with the holder's method of
accounting for federal income tax purposes provided that the interest is
qualified stated interest (as defined below).
"Qualified stated interest" is stated interest unconditionally payable as a
series of payments (other than in debt instruments of the issuer) at least
annually during the entire term of the convertible subordinated debenture and
equal to the outstanding principal balance of the convertible subordinated
debenture multiplied by a single fixed rate of interest.
Original Issue Discount on Convertible Subordinated Debentures. If the
preferred stock is exchanged for convertible subordinated debentures at a time
when the fair market value of the preferred stock, which we refer to as the
convertible subordinated debenture's issue price, is less than the amount
payable on the convertible subordinated debentures at maturity, the convertible
subordinated debentures will generally be issued with original issue discount
unless the convertible subordinated debentures satisfy a de minimis threshold,
as described below. In that event, the initial holder of a convertible
subordinated debenture will be required to include in ordinary income in each
taxable year during which he holds the convertible subordinated debenture a
portion of the original issue discount allocable to the convertible subordinated
debenture before the receipt of cash payments attributable to that income.
Original issue discount is calculated under a constant yield to maturity method.
Under this method, U.S. holders of original issue discount convertible
subordinated debentures generally will be required to include in income
increasingly greater amounts of original issue discount in successive accrual
periods.
If the difference between the amount payable on the convertible
subordinated debenture at maturity and the convertible subordinated debenture's
issue price is less than a de minimis amount, i.e., 1/4 of 1 percent of the
amount payable on the convertible subordinated debenture redemption price at
maturity multiplied by the number of complete years to maturity, then the
convertible subordinated debentures will not be considered to have original
issue discount.
Bond Premium on Convertible Subordinated Debentures. If preferred stock is
exchanged for convertible subordinated debentures at a time when the fair market
value of such convertible subordinated debentures exceeds the amount payable at
the maturity date of the convertible subordinated debentures, such excess will
be deductible by the holder of such convertible subordinated debentures only if
an election under Section 171 of the Code is in effect, or is made, and only to
the extent that the premium is not attributable to the conversion privilege of
the convertible subordinated debentures. If a holder so elects, such holder must
reduce his tax basis in the convertible subordinated debentures by the amount of
the premium amortized in any year. An election under Section 171 is available
only if the convertible subordinated debenture is held as a capital asset, is
binding once made and applies to all obligations owned by the holder at the
beginning of the taxable year and acquired in subsequent years.
Redemption for Common Stock. A holder of convertible subordinated
debentures will generally not recognize gain or loss on our redemption of
convertible subordinated debentures for our common stock, except that ordinary
income may be recognized to the extent that a portion of the common stock is
determined to constitute a payment in respect of interest on the convertible
subordinated debentures. The
47
tax basis of such common stock received will generally equal the tax basis of
the convertible subordinated debentures redeemed, and the holding period for the
common stock received will generally include the holding period of the
convertible subordinated debentures redeemed, except that the portion, if any,
of common stock received that constitutes a payment in respect of interest will
have a tax basis equal to its fair market value at the time of the redemption
and a new holding period commencing at the time of the redemption.
Sale or Cash Redemption of Convertible Subordinated Debentures. Upon the
sale or cash redemption of a convertible subordinated debenture, the holder will
recognize gain or loss, measured by the difference between the amount of cash
and fair market value of any property received and the holder's tax basis in the
convertible subordinated debenture redeemed. The tax basis of a holder who
received convertible subordinated debentures upon their issue in exchange for
preferred stock will be increased by any original issue discount previously
included in the income of such holder and will be decreased by the amount of any
bond premium previously amortized by such holder. Recognized gain or loss
generally will be taxable as capital gain or loss and will be long term if the
holding period for the convertible subordinated debentures sold or redeemed is
more than one year.
Conversion into Common Stock. No gain or loss will be recognized for U.S.
federal income tax purposes upon the conversion of the convertible subordinated
debentures into shares of common stock. The tax basis for the shares of common
stock received upon the conversion will be equal to the tax basis of the
convertible subordinated debentures converted and the holding period of the
shares of common stock will include the holding period of the convertible
subordinated debentures. The foregoing does not apply to cash received in lieu
of fractional shares. Gain realized upon receipt of cash paid in lieu of
fractional shares of common stock will be taxed immediately, generally as
capital gain, which will be long-term if the holding period for the convertible
subordinated debenture converted is more than one year.
Adjustment of Conversion Price. As described above under "-- Deemed
Distributions" with respect to the preferred stock, certain constructive
distributions of stock with respect to stock and convertible securities are
treated as taxable events. Certain adjustments in the conversion price of
convertible subordinated debentures to reflect taxable distributions on common
stock (but not stock splits or nontaxable stock dividends) would be treated as
such constructive distributions of stock and would be taxable as dividends to
the extent of our current or accumulated earnings and profits.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Information returns may be filed with the IRS in connection with payments
of dividends on the preferred and common stock, payments of interest on the
convertible subordinated debentures, and the proceeds from a sale or other
disposition of the preferred or common stock or of the convertible subordinated
debentures. You will not be subject to United States backup withholding tax on
these payments if you provide your taxpayer identification number to the paying
agent and comply with certain certification procedures or otherwise establish an
exemption from backup withholding. The amount of any backup withholding from a
payment to you will be allowed as a credit against your U.S. federal income tax
liability and may entitle you to a refund, provided that the required
information is furnished to the IRS.
NON-U.S. HOLDERS
PREFERRED STOCK AND COMMON STOCK
Distributions. Distributions on our preferred stock or on our common stock
(including deemed distributions arising as described above under "U.S.
Holders -- Preferred Stock -- Deemed Distributions") will constitute a dividend
for U.S. federal income tax purposes to the extent of our current or accumulated
earnings and profits as determined under U.S. federal income tax principles.
Dividends paid on our preferred or common stock held by a non-U.S. holder, which
dividends are not effectively connected with a trade or business conducted by
such non-U.S. holder in the United States, will generally be subject to a 30%
United States withholding tax or such lower rate as provided by an applicable
treaty. The particular
48
withholding tax rate that would apply to you depends on your tax status and on
the particular tax treaty. A non-U.S. holder that is eligible for a reduced rate
of United States withholding tax pursuant to a tax treaty may obtain a refund of
any excess amounts withheld by filing an appropriate claim for refund with the
IRS.
Subject to certain limited circumstances, you can comply with the
documentation requirements to claim tax treaty benefits by satisfying one of the
following conditions.
- You provide a completed Form W-8BEN to the bank, broker or other
intermediary through which you hold your shares.
- You hold your shares directly through a "qualified intermediary." In this
case, you need not file Form W-8BEN if the qualified intermediary has in
its files, or obtains from you, certain information concerning your
eligibility for treaty benefits. A "qualified intermediary" is an
intermediary that (1) is either a U.S. or non-U.S. entity, (2) is acting
out of a non-U.S. branch or office and (3) has signed an agreement with
the IRS providing that it will administer all or part of the U.S. tax
withholding rules under specified procedures.
- In some limited circumstances, you may be permitted to provide
documentary evidence in lieu of Form W-8BEN even if you hold your shares
through an intermediary that is not a qualified intermediary.
Alternatively, dividends paid to you will be exempt from U.S. withholding
tax if the dividend income is effectively connected with the conduct of your
trade or business in the U.S. To claim this exemption, you must generally
complete Form W-8ECI.
The rules regarding withholding are complex, are subject to change and vary
depending on your individual situation. We suggest that you consult with your
tax advisor regarding the application of such rules to your situation.
U.S. Trade or Business. If you hold your shares of our preferred or common
stock in connection with a trade or business that you are conducting in the
U.S., any dividends on the shares, and any gain from disposing of the shares,
generally will be subject to income tax at the usual U.S. rates applicable to
U.S. persons. In addition, if you are a corporation, you may be subject to the
"branch profits tax" on your earnings that are connected with your U.S. trade or
business, including earnings from the shares. This tax is 30%, but may be
reduced or eliminated by an applicable income tax treaty.
Conversion. A non-U.S. holder of preferred stock who converts preferred
stock into our common stock will generally not recognize gain or loss for U.S.
federal income tax purposes, except that the fair market value of any shares of
common stock attributable to dividend arrearages will be treated as a
distribution as described above under "Non-U.S. Holders -- Distributions."
Redemption for Cash. A non-U.S. holder of preferred stock will determine
its U.S. federal income tax consequences of our redemption of preferred stock
for cash by applying the tests described above under "U.S.
Holders -- Redemptions for Cash." If a non-U.S. holder of preferred stock is
treated as satisfying one of the requirements described therein, such holder
will be taxed as described below under "Other Sales or Dispositions." Otherwise,
the entire amount received upon redemption of the preferred stock will be
treated as a distribution as described above under "Non-U.S.
Holders -- Distributions."
Redemption for Common Stock. A non-U.S. holder of preferred stock will
generally not recognize gain or loss for U.S. Federal income tax purposes on our
redemption of preferred stock solely for our common stock (except that a portion
of the common stock may be determined to constitute a payment in respect of
dividends in arrears on the preferred stock, taxable as described above under
"Non-U.S. Holders -- Distributions").
Exchange Right. The exchange of preferred stock for our convertible
subordinated debentures under the exchange right may be treated as a taxable
distribution, as described above under "U.S. Holders -- Exchange Right." In such
case, a non-U.S. holder may have to treat the fair market value of the
49
convertible subordinated debentures and any cash received as a taxable
distribution as described above under "Non-U.S. Holders -- Distributions."
Otherwise, the exchange would be treated as described below under "Other Sales
or Dispositions." Based upon the advice of our counsel, we intend to treat the
exchange of preferred stock for our convertible subordinated debentures under
the exchange right as generally taxable to non-U.S. holders as described under
"Other Sales or Dispositions."
Change in Control Put Right. If, as a result of a change in control, a
non-U.S. holder of preferred stock exercises the right to put preferred stock to
us and we decide to pay for such stock solely in cash, the non-U.S. holder will
be taxed under the rules described in "Non-U.S. Holders -- Redemption for Cash"
above. If a non-U.S. holder of preferred stock exercises the put right and we
decide to pay for such stock solely in common stock, the non-U.S. holder will
generally not recognize gain or loss for U.S. federal income tax purposes
(except if a portion of the common stock is determined to constitute a payment
in respect of dividends in arrears on the preferred stock, in which case the
non-U.S. holder will be taxed on such amount as described above under "Non-U.S.
Holders -- Distributions").
Other Sales or Dispositions. Subject to the discussion below under
"Information Reporting and Backup Withholding," non-U.S. holders generally will
not be subject to U.S. federal income tax in respect of gain recognized on a
sale, exchange or other disposition (including a redemption that is not treated
as a dividend) of our preferred stock or our common stock, unless (i) the gain
is effectively connected with a trade or business conducted by the non-U.S.
holder within the United States, or alternatively, if a tax treaty applies,
attributable to a United States permanent establishment maintained by the
non-U.S. holder, (ii) in the case of an individual non-U.S. holder, such holder
is present in the United States for a least 183 days in the taxable year of the
disposition and meets certain other requirements, or (iii) we are or have been
during certain periods preceding the disposition a "U.S. real property holding
corporation," for U.S. federal income tax purposes (which we believe we are not
and are not likely to become). See "U.S. Holders -- Other Sales or
Dispositions," above.
Estate Taxes. If you are an individual, your shares will be subject to
U.S. estate tax when you die unless you are entitled to the benefits of an
estate tax treaty.
CONVERTIBLE SUBORDINATED DEBENTURES
Withholding Taxes. Generally, payments of principal, interest and original
issue discount, if any, on the convertible subordinated debentures will be
exempt from U.S. withholding taxes.
For the exemption from withholding taxes to apply to you, you must meet one
of the following requirements:
- You provide a completed Form W-8BEN to the bank, broker or other
intermediary through which you hold your convertible subordinated
debentures.
- You hold your convertible subordinated debentures directly through a
"qualified intermediary", as defined above, and the qualified
intermediary has sufficient information in its files indicating that you
are not a U.S. holder.
- You are entitled to an exemption from withholding tax on interest under a
tax treaty between the U.S. and your country of residence. To claim this
exemption, you must generally complete and submit a Form W-8BEN.
- The interest income on the convertible subordinated debentures is
effectively connected with the conduct of your trade or business in the
U.S. To claim this exemption, you must complete and submit a Form W-8ECI.
Even if you meet one of the above requirements, interest paid to you will
be subject to withholding tax under certain limited circumstances, including if
you own 10% or more of our voting stock, you are a "controlled foreign
corporation" related to us, or you are a bank making a loan in the ordinary
course of its business. In these cases, you will be exempt from withholding
taxes only if you are eligible for a treaty
50
exemption or if the interest income is effectively connected with your conduct
of a trade or business in the U.S. and the required certification has been
filed.
As described above, the rules regarding withholding are complex, are
subject to change and vary depending on your individual situation. We suggest
that you consult with your tax advisor regarding the application of such rules
to your situation.
Redemption for Common Stock. A non-U.S. holder of convertible subordinated
debentures will generally not recognize gain or loss for U.S. federal income tax
purposes on our redemption of convertible subordinated debentures for our common
stock, except that a portion of the common stock may be attributable to interest
on the convertible subordinated debentures, in which case such portion will be
taxable as described above under "Non-U.S. Holders -- Withholding Taxes."
Conversion into Common Stock. No gain or loss will be recognized by a
non-U.S. holder for U.S. federal income tax purposes upon the conversion of the
convertible subordinated debentures into shares of our common stock. The
foregoing does not apply to cash received in lieu of fractional shares, which
will be taxed as described below under "Sale or Retirement of Convertible
Subordinated Debentures."
Adjustments of Conversion Price. Certain adjustments in the conversion
price of convertible subordinated debentures made to reflect taxable
distributions on common stock (but not stock splits or nontaxable stock
dividends) may be treated as constructive distributions of stock and may be
taxable as described above under "Non-U.S. Holders -- Preferred Stock and Common
Stock -- Distributions."
Sale or Retirement of Convertible Subordinated Debentures. Upon a sale or
cash redemption of a convertible subordinated debenture, you will not be subject
to U.S. federal income tax on any gain unless (i) the gain is effectively
connected with a trade or business that you conduct in the U.S.; (ii) you are an
individual, you are present in the U.S. for at least 183 days during the taxable
year in which you dispose of the convertible subordinated debenture, and certain
other conditions are satisfied; or (iii) a portion of the gain represents
accrued interest or original issue discount, in which case the rules for
interest would apply. See "Non-U.S. Holders -- Withholding Taxes," above.
U.S. Trade or Business. If you hold your convertible subordinated
debentures in connection with a trade or business that you are conducting in the
U.S., any interest on the convertible subordinated debentures, and any gain from
disposing of the convertible subordinated debentures, generally will be subject
to income tax as if you were a U.S. holder. See "U.S. Holders," above. In
addition, you may be subject to the "branch profits tax" on your earnings that
are connected with your U.S. trade or business as described above under
"Non-U.S. Holders -- Preferred Stock and Common Stock -- U.S. Trade or
Business."
Estate Taxes. If you are an individual, your convertible subordinated
debentures will not be subject to U.S. estate tax when you die. However, this
rule only applies if, at your death, payments on the convertible subordinated
debentures were not connected to a trade or business that you were conducting in
the U.S.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Information returns may be filed with the IRS in connection with payments
of dividends on the preferred and common stock, payments of interest on the
convertible subordinated debentures and the proceeds from a sale or other
disposition of the preferred or common stock or of the convertible subordinated
debentures. You may be subject to United States backup withholding tax on these
payments unless you comply with certification procedures to establish that you
are not a United States person. Some shareholders, including all corporations,
are exempt from these rules. The certification procedures required to claim the
exemption from withholding tax on interest and original issue discount described
above will generally satisfy the certification requirements necessary to avoid
the backup withholding tax as well. The amount of any backup withholding from a
payment to you will be allowed as a credit against your United States federal
income tax liability and may entitle you to a refund, provided that the required
information is furnished to the IRS.
51
SELLING SECURITYHOLDERS
We originally issued the preferred stock on August 6, 2001 in a private
placement to Salomon Smith Barney Inc., Morgan Stanley & Co. Incorporated, Bear,
Stearns & Co. Inc., J.P. Morgan Securities Inc., Merrill Lynch, Pierce, Fenner &
Smith Incorporated and SG Cowen Securities Corporation, whom we refer to as the
initial purchasers. The initial purchasers then resold the preferred stock in
transactions not requiring registration under the Securities Act or applicable
state securities laws to persons the initial purchasers reasonably believed to
be "qualified institutional buyers", as defined in Rule 144A under the
Securities Act, in compliance with Rule 144A or outside the United States to
non-"U.S. Persons" in "offshore transactions", as defined in Regulation S under
the Securities Act, in reliance upon Regulation S.
This prospectus, in part, relates to:
- resales of preferred stock; and
- sales of:
- convertible subordinated debentures issued in exchange for preferred
stock; and
- common stock issued upon conversion of preferred stock or convertible
subordinated debentures,
by the selling securityholders as described below under "Plan of Distribution".
The registration statement of which this prospectus forms a part has been filed
with the SEC pursuant to the registration rights granted in connection with the
original issue of the preferred stock to afford the holders of the preferred
stock the opportunity to sell their securities in public transactions rather
than pursuant to exemptions from the registration and prospectus delivery
requirements of the Securities Act. In order to take advantage of that
opportunity, a holder of the preferred stock must provide information about
itself and the securities it is selling as required under the Securities Act.
The selling securityholders listed below and the beneficial owners of the
preferred stock and their transferees, pledgees, donees or other successors, if
not identified in this prospectus then so identified in supplements to this
prospectus as required, are the selling securityholders under this prospectus.
The following table sets forth information, as of a recent practicable date
prior to the effectiveness of the registration statement of which this
prospectus forms a part, with respect to the selling securityholders named below
and the respective:
- number of shares of preferred stock owned by each selling securityholder;
- principal amount of convertible subordinated debentures issuable in
exchange for the preferred stock owned by each selling securityholder;
and
- number of shares of common stock issuable upon the exercise of the
conversion privilege attached to the preferred stock or convertible
subordinated debentures owned by each selling securityholder,
that may be offered pursuant to this prospectus together with the number of
shares of common stock owned by each selling securityholder prior to this
offering. This information was supplied to us by the selling securityholders
named in the table and may change from time to time. Because the selling
securityholders may offer all or some portion of these securities pursuant to
this prospectus, and because we are not currently aware of any agreements,
arrangements or understandings with respect to the sale of these securities, we
cannot predict the number of shares or principal amount of the securities that
will be held by the selling securityholders upon termination of this offering.
In addition, some of the selling securityholders may have sold, transferred or
otherwise disposed of all or a portion of their securities since the date on
which they provided the information about themselves and the securities they
were selling in transactions exempt from the registration requirements of the
Securities Act. See "Plan of Distribution," below.
52
Unless otherwise disclosed in the footnotes to the table below, no selling
securityholder has, or within the past three years has had, any position, office
or other material relationship with us or any of our predecessors or affiliates.
Each selling securityholder listed below may, under this prospectus, from
time to time offer and sell the number of shares of preferred stock listed below
opposite its name or the principal amount of convertible subordinated debentures
for which its shares of preferred stock may be exchanged and/or the number of
shares of common stock into which its shares of preferred stock or convertible
subordinated debentures may be converted. Prior to any use of this prospectus in
connection with an offering of these securities by a beneficial owner not listed
as a selling securityholder below or its transferee, pledgee, donee or other
successor, this prospectus will be supplemented to set forth the name and
information with respect to that person.
PRINCIPAL AMOUNT SHARES OF
OF CONVERTIBLE COMMON
SHARES OF SUBORDINATED SHARES OF STOCK
PREFERRED DEBENTURES COMMON OWNED PRIOR
SELLING SECURITYHOLDER(1) STOCK(2) (2)(3) STOCK(4) TO THIS OFFERING
------------------------- --------- ---------------- ------------- ----------------
Aim VI Growth & Income Fund................ 5,000 5,000,000 668,449 nil
Aim Charter Fund........................... 15,000 15,000,000 2,005,347 nil
Amaranth Securities L.L.C. ................ 4,500 $ 4,500,000 601,605 nil
Argent Classic Convertible Arbitrage Fund
L.P. .................................... 3,150 3,150,000 421,123 nil
Argent LowLev Convertible Arbitrage Fund
LLC...................................... 2,500 2,500,000 334,225 nil
Associated Electric & Gas Insurance
Services Limited(5)...................... 2,500 2,500,000 334,225 nil
Aventis Pension Master Trust(5)............ 200 200,000 26,738 nil
Bear, Sterns & Co. Inc..................... 410,000 410,000,000 54,812,818
BNP Paribas Equity Strategies SNC.......... 399 399,000 53,343 1,124,075
Boilermaker -- Blacksmith Pension
Trust(5)................................. 1,265 1,265,000 169,118 nil
CALAMOS Convertible Fund -- CALAMOS
Investment Trust(5)...................... 7,100 7,100,000 949,198 nil
CALAMOS Convertible Growth and Income
Fund -- CALAMOS Investment Trust(5)...... 2,480 2,480,000 331,551 nil
CALAMOS Convertible Portfolio -- CALAMOS
Advisors Trust(5)........................ 130 130,000 17,380 nil
CALAMOS Convertible Technology Fund --
CALAMOS Investment Trust(5).............. 70 70,000 9,359 nil
CALAMOS Global Convertible Fund -- CALAMOS
Investment Trust(5)...................... 5,500 5,500,000 735,294 nil
CALAMOS High Yield Fund -- CALAMOS
Investment Trust(5)...................... 150 150,000 20,054 nil
CALAMOS Market Neutral Fund -- CALAMOS
Investment Trust(5)...................... 8,300 8,300,000 1,109,626 nil
Century -- National Insurance Company...... 750 750,000 100,268 nil
City of Albany Pension Plan(5)............. 110 110,000 14,706 nil
City of Knoxville Pension System(5)........ 265 265,000 35,428 nil
Clarica Life Insurance Co. -- U.S.(5)...... 320 320,000 42,781 nil
Consulting Group Capital Markets
Funds(5)................................. 730 730,000 97,594 nil
CooperNeff Convertible Strategies Fund,
LP....................................... 69 69,000 9,225 nil
Delta Airlines Master Trust(5)............. 2,125 2,125,000 284,091 nil
Delta Pilots Disability and Survivorship
Trust(5)................................. 430 430,000 57,487 nil
Drury University(5)........................ 40 40,000 5,348 nil
53
PRINCIPAL AMOUNT SHARES OF
OF CONVERTIBLE COMMON
SHARES OF SUBORDINATED SHARES OF STOCK
PREFERRED DEBENTURES COMMON OWNED PRIOR
SELLING SECURITYHOLDER(1) STOCK(2) (2)(3) STOCK(4) TO THIS OFFERING
------------------------- --------- ---------------- ------------- ----------------
Fidelity Securities Fund: Fidelity Growth &
Income Portfolio(6)...................... 6,300 1,630,000 842,246 nil
Fidelity Devonshire Trust: Fidelity Equity
Income Fund(6)........................... 12,360 12,360,000 1,652,406 nil
Fidelity Financial Trust: Fidelity
Convertible Securities Fund(6)........... 10,600 10,600,000 1,417,112 nil
Fidelity Puritan Trust: Fidelity Puritan
Fund(6).................................. 6,980 6,980,000 933,155 nil
Fidelity Financial Trust: Fidelity Equity-
Income II Fund(6)........................ 6,850 6,850,000 915,776 1,720,000
Fidelity Securities Fund: Fidelity Dividend
Growth Fund(6)........................... 6,600 6,600,000 882,353 nil
Fidelity Hastings Street Trust: Fidelity
Fund(6).................................. 6,100 6,100,000 815,508 3,533,034
Fidelity Charles Street Trust: Fidelity
Asset Manager(6)......................... 5,130 5,130,000 685,829 1,255,300
Fidelity Mt. Vernon Street Trust: Fidelity
Aggressive Growth Fund(6)................ 4,000 4,000,000 534,760 3,019,755
Fidelity Charles Street Trust: Fidelity
Asset Manager: Growth(6)................. 2,570 2,570,000 343,583 nil
Fidelity Advisor Series I: Fidelity Advisor
Growth & Income Fund(6).................. 1,350 1,350,000 180,482 nil
Fidelity Advisor Series I: Fidelity Advisor
Mid Cap Fund(6).......................... 1,300 1,300,000 173,797 nil
Fidelity Advisor Series I: Fidelity Advisor
Dividend Growth Fund(6).................. 900 900,000 120,321 300,000
Fidelity Advisor Series I: Fidelity Advisor
Balanced Fund(6)......................... 710 710,000 94,920 nil
Fidelity Trend Fund: Fidelity Trend
Fund(6).................................. 500 500,000 66,845 nil
Fidelity Advisor Series I: Fidelity Advisor
Value Strategies Fund(6)................. 400 400,000 53,476 nil
Fidelity Advisor Series I: Fidelity Advisor
Equity Value Fund(6)..................... 88 88,000 11,765 nil
Fidelity Management Trust Company on behalf
of accounts managed by it(7)............. 790 790,000 105,615 nil
First Mercury Insurance Company............ 30,000 30,000,000 4,010,694 nil
First Union National Bank.................. 39,000 39,000,000 5,213,902,200 nil
First Union Securities Inc. ............... 5,400 5,400,000 721,925 nil
HFR Master Fund, Ltd(5).................... 50 50,000 6,685 nil
H.K. Porter Company, Inc.(5)............... 30 30,000 4,011 nil
Highbridge International LLC............... 22,500 22,500,000 3,008,021 nil
JAS Securities, LLC........................ 2,000 2,000,000 267,380 nil
JMG Capital Partners, LP................... 24,325 24,325,000 3,252,005 nil
JMG Triton Offshore Fund, Ltd. ............ 24,325 24,325,000 3,252,005 nil
Kettering Medical Center Funded
Depreciation Account(5).................. 75 75,000 10,027 nil
Knoxville Utilities Board Retirement
System(5)................................ 180 180,000 24,065 nil
Lincoln National Convertible Securities
Fund..................................... 10,000 10,000,000 1,336,898 nil
54
PRINCIPAL AMOUNT SHARES OF
OF CONVERTIBLE COMMON
SHARES OF SUBORDINATED SHARES OF STOCK
PREFERRED DEBENTURES COMMON OWNED PRIOR
SELLING SECURITYHOLDER(1) STOCK(2) (2)(3) STOCK(4) TO THIS OFFERING
------------------------- --------- ---------------- ------------- ----------------
Louisiana Workers' Compensation
Corporation(5)........................... 620 620,000 82,888 nil
Lyxor Master Fund.......................... 350 350,000 46,792 nil
McMahan Securities Co. L.P. ............... 40 40,000 5,348 nil
Paloma Securities L.L.C. .................. 4,500 4,500,000 601,605 28,100
Port Authority of Allegheny County
Retirement and Disability Allowance Plan
for Employees Represented by Local 85 of
the Amalgamated Transit Union(5)......... 1,320 1,320,000 176,471 nil
Prisma Foundation.......................... 110 110,000 14,706 nil
Quattro Fund Ltd........................... 1,000 1,000,000 133,690 nil
SCI Endowment Care Common Trust Fund --
First Union(5)........................... 75 75,000 10,027 nil
SCI Endowment Care Common Trust Fund --
National Fiduciary Services(5)........... 105 105,000 14,038 nil
SCI Endowment Care Common Trust Fund --
Suntrust(5).............................. 240 240,000 32,086 nil
Southdown Pension Plan(5).................. 135 135,000 18,049 nil
SPT(5)..................................... 1,500 1,500,000 200,535 nil
Sturgeon Limited........................... 32 32,000 4,279 nil
The Dow Jones Chemical Company Employees'
Retirement Plan(5)....................... 2,500 2,500,000 334,225 nil
The Fondren Foundation(5).................. 80 80,000 10,696 nil
Tribeca Investments, L.L.C. ............... 65,000 65,000,000 8,689,837 nil
UBS AG, London Branch...................... 8,902 8,902,500, 1,190,107 nil
Union Carbide Retirement Account(5)........ 2,115 2,115,000 282,754 nil
United Food and Commercial Workers Local
1262 and Employers Pension Fund(5)....... 600 600,000 80,214 nil
Variable Insurance Products Fund: Equity-
Income Portfolio(6)...................... 5,660 5,660,000 756,685 nil
Variable Insurance Products Fund III:
Balanced Portfolio(6).................... 100 100,000 13,369 nil
Variable Insurance Products Fund: Value
Portfolio(6)............................. 12 12,000 1,605 nil
Vopak USA Inc., Retirement Plan (f.k.a. Van
Waters & Rogers, Inc. Retirement
Plan)(5)................................. 310 310,000 41,444 nil
White River Securities L.L.C. ............. 10,000 10,000,000 1,336,898 nil
---------------
(1) Information about other selling securityholders may be provided in
prospectus supplements.
(2) In each case, none of these securities were held prior to this offering.
(3) Based on the principal amount of convertible subordinated debentures
originally issuable in exchange for the preferred stock, calculated by
reference to the initial liquidation preference of the preferred stock of
$1,000.00 per share. The principal amount is subject to increase as a result
of increases in the liquidation preference of the preferred stock to reflect
the accretion of unpaid dividends. See "Description of Preferred
Stock -- Exchange Right," above.
(4) Based on the shares of common stock originally issuable upon exercise of the
conversion privilege attached to the preferred stock or the convertible
subordinated debentures with fractions rounded up
55
to the nearest whole share. The number of shares of common stock so issuable
is subject to increase as a result of antidilution adjustments and, in the
case of conversion of the preferred stock, increases in the liquidation
preference of the preferred stock to reflect the accretion of unpaid
dividends. No fractional shares of common stock will be issued upon
conversion of the preferred stock. Instead of issuing fractional shares, we
will deliver scrip that will entitle the holder to receive a full share upon
surrender of such scrip aggregating a full share. See "Description of
Preferred Stock -- Conversion Rights" and "Description of the Convertible
Subordinated Debentures -- Conversion," above.
(5) CALAMOS Asset Management, Inc. acts as investment manager with respect to
the selling securityholder and as such has shared voting and investment
power with respect to the securities owned by the selling securityholder.
(6) The selling securityholder is either an investment company or a portfolio of
an investment company registered under Section 8 of the Investment Company
Act of 1940, as amended, or a private investment account advised by Fidelity
Management & Research Company, or FMR Co. FMR Co. is a Massachusetts
corporation and an investment advisor registered under Section 203 of the
Investment Advisers Act of 1940, as amended, and provides investment
advisory services to the selling securityholder, and to other registered
investment companies and to certain other funds which are generally offered
to a limited group of investors. FMR Co. is a wholly owned subsidiary of FMR
Corp., a Massachusetts corporation.
(7) Securities indicated as owned by this selling securityholder represent in
aggregate less than 1% of the securities offered and are owned directly by
private investment accounts, primarily employee benefit plans for which this
selling securityholder serves as trustee or managing agent. This selling
securityholder is a wholly owned subsidiary of FMR Corp. and a bank as
defined in Section 3(a)(6) of the Securities Exchange Act.
---------------------
This prospectus also relates to sales by the transfer agent for the
preferred stock, on behalf of the holders of the preferred stock, of common
stock issued to the transfer agent in connection with the payment of dividends
on the preferred stock as described below under "Plan of Distribution" and
covered by this prospectus. Shares of our common stock delivered to the transfer
agent for this purpose will be owned beneficially by the holders of the
preferred stock upon delivery to the transfer agent, and the transfer agent will
hold those shares and the net cash proceeds from the sale of those shares for
the exclusive benefit of the holders. Because we do not know the number of
shares of our common stock, if any, which will be delivered to the transfer
agent, and because the holders of the preferred stock may change from time to
time, we cannot predict the number of shares of our common stock held by the
holders of the preferred stock prior to this offering, to be offered or to be
held by the holders of the preferred stock upon termination of this offering nor
can we predict whether any holder of the preferred stock has, or within the past
three years has had, any position, office or other material relationship with us
or any predecessors or affiliates.
56
PLAN OF DISTRIBUTION
The selling securityholders may from time to time directly sell their
preferred stock, convertible subordinated debentures issued in exchange for
their preferred stock and common stock issued upon conversion of their preferred
stock or convertible subordinated debentures directly to purchasers.
Alternatively, the selling securityholders may from time to time offer these
securities through underwriters, brokers, dealers or agents who may receive
compensation in the form of discounts, concessions or commissions from the
selling securityholders and/or the purchasers of these securities for whom they
may act as agent.
We cannot assure you that any selling securityholder will sell any or all
of its securities under this prospectus or that any selling securityholder will
not transfer, devise or gift its securities by other means not described in this
prospectus.
In addition, the transfer agent for the preferred stock may from time to
time sell, on behalf of the holders of the preferred stock, common stock, issued
to the transfer agent and covered by this prospectus, for cash to pay dividends
on the preferred stock or to pay all or a portion of the amount by which the
accreted liquidation preference per share of preferred stock exceeds $1,000.00.
We have entered into a Stock Transfer Agency Agreement dated September 6, 1996,
and a Preferred Stock Transfer Agency Agreement, dated August 6, 2001, both with
The Bank of New York Company, Inc., which we refer to as the transfer agent,
pursuant to which The Bank of New York acts as the transfer agent for our common
stock and our preferred stock, respectively. Pursuant to the Preferred Stock
Transfer Agency Agreement, the transfer agent has agreed to procedures
concerning the sale of shares of our common stock that may be delivered to it by
us for these purposes.
Pursuant to these procedures, if we desire to pay all or any part of a
dividend on the preferred stock or amount by which the accreted liquidation
preference per share of preferred stock exceeds $1,000.00 with shares of our
common stock, prior to the applicable payment date, we will deliver to the
transfer agent a number of shares of our common stock, which when sold by the
transfer agent, will result in net cash proceeds sufficient (together with any
cash payments made by us to the transfer agent for these purposes) to permit the
transfer agent to pay the applicable payment in cash to the holders of the
preferred stock, together with instructions for the transfer agent to effect the
sales in accordance with the Preferred Stock Transfer Agency Agreement and
indicating the applicable payment date, the aggregate payment to be made on that
date and any specific instructions regarding the manner of sale of the shares of
common stock which may include restrictions with respect to the sale including
maximum and minimum sale prices, limit instructions, sale scheduling, sale
blackout periods, commissions and brokerage fees. We may revoke or amend these
instructions at any time by notice to the transfer agent. Shares of our common
stock delivered to the transfer agent for these purposes will be owned
beneficially by the holders of the preferred stock upon delivery to the transfer
agent, and the transfer agent will hold those shares and the net cash proceeds
from the sale of those shares for the exclusive benefit of the holders.
The transfer agent will conduct sales of the shares of our common stock so
delivered, in accordance with the terms of the Preferred Stock Transfer Agency
Agreement and our instructions. Subject to our instructions, sales may be
effected on any United States national or regional securities exchange or market
on which our common stock is listed or admitted for trading and the transfer
agent may engage brokers or other agents, which may be affiliated with the
transfer agent and which may receive customary compensation in the form of fees
or commissions, to effect sales. In effecting the sales, the transfer agent will
act as agent for the holders of the preferred stock. See "Description of the
Preferred Stock -- Dividends," above.
The selling securityholders, the transfer agent and any brokers, dealers or
agents who participate in the distribution of the securities covered by this
prospectus may be deemed to be "underwriters," and any profits on the sale of
the securities by them and any discounts, commissions or concessions received by
any brokers, dealers or agents might be deemed to be underwriting discounts and
commissions under the Securities Act. To the extent the selling securityholders
or the transfer agent may be deemed to be underwriters, the selling
securityholders or the transfer agent may be subject to some statutory
liabilities of
57
the Securities Act, including, but not limited to, Sections 11, 12 and 17 of the
Securities Act and Rule 10b-5 under the Exchange Act. If the selling
securityholders or the transfer agent are deemed to be underwriters, they will
be subject to the prospectus delivery requirements of the Securities Act, which
may include delivery through the facilities of The New York Stock Exchange
pursuant to Rule 153 under the Securities Act.
The securities offered hereby may be sold from time to time by, as
applicable, the selling securityholders and, subject to the terms of the
Preferred Stock Transfer Agency Agreement and our instructions, the transfer
agent or, to the extent permitted, by pledgees, donees, transferees or other
successors in interest including by disposal from time to time in one or more
transactions through any one or more of the following, as appropriate:
- a block trade in which the broker or dealer so engaged will attempt to
sell the securities as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
- purchases by a broker or dealer as principal and resale by that broker or
dealer for its account;
- ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
- an exchange distribution in accordance with the rules of that exchange or
transactions in the over-the-counter market;
- in transactions otherwise than in the over-the-counter market;
- through the writing of put or call options on the securities;
- short sales of the securities and sales to cover the short sales;
- the pledge of the securities as security for any loan or obligation,
including pledges to brokers or dealers who may, from time to time,
themselves effect distributions of the securities or interest therein;
- the distribution of the securities by any selling securityholder to its
partners, members or securityholders;
- sales through underwriters or dealers who may receive compensation in the
form of underwriting discounts, concessions or commissions from the
selling shareholders or successors in interest or from the purchasers of
the shares for whom they may act as agent; and
- a combination of any of the above.
In addition, the securities covered by this prospectus may be sold in
private transactions or under Rule 144 rather than under this prospectus.
Sales may be made at prices and at terms then prevailing or at prices
related to the then current market price or at negotiated prices and terms. In
effecting sales, brokers or dealers may arrange for other brokers or dealers to
participate.
Upon being notified by a selling securityholder or the transfer agent that
any material arrangement has been entered into with an underwriter, broker,
dealer or agent regarding the sale of securities covered by this prospectus, a
revised prospectus or prospectus supplement, if required, will be distributed
which will set forth the aggregate amount and type of securities being offered
and the terms of the offering, including the name or names of any underwriters,
dealers or agents, any discounts, commissions and other items constituting
compensation from the selling securityholders or the transfer agent, and any
discounts, commissions or concessions allowed or reallowed or paid to dealers.
The prospectus supplement and, if necessary, a post-effective amendment to the
registration statement of which this prospectus forms a part, will be filed with
the SEC to reflect the disclosure of additional information with respect to the
distribution of the securities.
To our knowledge, there are currently no agreements, arrangements or
understandings between any selling securityholders, the transfer agent, and any
broker, dealer, agent or underwriter regarding the sale
58
by any selling securityholder or the transfer agent of shares of common stock or
preferred stock covered by this prospectus. Under the securities laws of some
states, the securities may be sold only through registered or licensed brokers
or dealers. In addition, in some states, the securities may not be sold unless
they have been registered or qualified for sale in the state or an exemption
from registration or qualification is available and complied with. The selling
securityholders, the transfer agent, and any other person participating in the
distribution will be subject to applicable provisions of the Exchange Act,
including, without limitation, Regulation M, which may limit the timing of
purchases and sales of any of the securities by the selling securityholders, the
transfer agent, and any other person. Furthermore, under Regulation M, any
person engaged in the distribution of the securities may not simultaneously
engage in market-making activities with respect to the particular securities
being distributed for particular periods prior to the commencement of the
distribution. All of the foregoing may affect the marketability of these
securities and the ability of any person or entity to engage in market-making
activities with respect to the securities.
Under the terms of the registration rights agreement, holders of securities
covered by this prospectus, on the one hand, and we, on the other hand, have
agreed to indemnify each other against certain liabilities, including certain
liabilities under the Securities Act, or will be entitled to contribution in
connection with those liabilities. Under the terms of our agreements with the
transfer agent referenced above, we have agreed to indemnify the transfer agent
against certain liabilities arising in connection with the services rendered by
it under the agreements.
Under the terms of the registration rights agreement, we have also agreed
to pay substantially all of the expenses in connection with the registration of
the preferred stock, convertible subordinated debentures issued in exchange for
the preferred stock and common stock issued upon conversion of the preferred
stock or convertible subordinated debentures other than underwriting discounts,
if any, and commissions and transfer taxes, if any, relating to the sale or
disposition by the selling securityholders of their securities covered by this
prospectus.
There is no public trading market for the shares of preferred stock and we
do not intend to apply for listing of the shares of preferred stock on any
national securities exchange or for quotation of the shares on any automated
inter-dealer quotation system. No assurance can be given as to the liquidity of
the trading market for the shares of preferred stock or that an active public
market for those shares will develop. If an active market for the shares of
preferred stock does not develop, the market price and liquidity of those shares
may be adversely affected. If the shares of preferred stock are traded, they may
trade at a discount from their initial offering price, depending on the market
for similar securities, our performance and other factors.
In connection with the original private placement of the preferred stock
with the initial purchasers, we and our executive officers and directors agreed
that, without the prior written consent of Salomon Smith Barney and Morgan
Stanley, and subject to the exceptions described below, we and they will not,
prior to October 30, 2001,
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock or
- enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the
common stock,
whether any transaction described above is to be settled by delivery of common
stock or other securities, in cash or otherwise.
59
The restrictions described in the previous paragraph do not apply to:
- the original private placement of the preferred stock with the initial
purchasers or the resale of the preferred stock by the initial purchasers
in transactions not requiring registration under the Securities Act or
applicable state securities laws;
- the issuance by Lucent of shares of common stock:
- upon the exercise of an option or warrant or the conversion of a
security outstanding on August 1, 2001 and disclosed in an SEC
filing by Lucent; or
- pursuant to employee or director benefit plans;
- the issuance by Lucent of shares of common stock on conversion of the
preferred stock or the convertible subordinated debentures;
- the granting by Lucent of stock options, restricted stock or restricted
stock units pursuant to any employee or director benefit plan approved by
our board of directors;
- the issuance by Lucent of equity securities or securities convertible
into or exercisable or exchangeable for equity securities to one or more
strategic investors in a private placement (other than an offering
pursuant to Rule 144A or similar offering) so long as such investors
agree to the restrictions set forth in the preceding paragraph with
respect to sales of such securities during the period referred to above;
or
- in the case of our executive officers and directors, transactions
relating to shares of Lucent's common stock or its other securities
acquired in open market transactions after the completion of the original
private placement of the preferred stock with the initial purchasers and
resale of the preferred stock by the initial purchasers in transactions
not requiring registration under the Securities Act or applicable state
securities laws.
LEGAL MATTERS
Richard J. Rawson, our Senior Vice President, General Counsel and
Secretary, will pass upon the legality of these securities. As of October 24,
2001, Richard J. Rawson owned 104,219.64 shares of our common stock and vested
options and stock units for 1,051,606 shares of our common stock. Our special
counsel, Cravath, Swaine & Moore, New York, New York, may pass upon certain
other legal matters in connection with this offering for us.
EXPERTS
The consolidated financial statements and financial statement schedule for
the year ended September 30, 2000 incorporated in this prospectus by reference
to our Current Report on Form 8-K, filed on July 31, 2001, have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
60
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table itemizes the expenses incurred by the registrant in
connection with the offerings described in this registration statement. All the
amounts shown are estimates, except the SEC registration fees.
SEC Registration Fees....................................... $614,982
Accounting fees and expenses................................ 10,000
Legal fees and expenses..................................... 200,000
Printing fees and expenses.................................. 50,000
Fees and expenses of Trustee................................ 9,000
Miscellaneous fees and expenses............................. 10,000
--------
Total............................................. $893,982
========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The registrant's Certificate of Incorporation provides that a director of
the registrant shall not be personally liable to the registrant or its
securityholders for monetary damages for breach of fiduciary duty as a director,
except, if required by the Delaware General Corporation Law, for liability (1)
for any breach of the director's duty of loyalty to the registrant or its
stockholders, (2) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) under Section 174 of
the Delaware General Corporation Law, which concerns unlawful payments of
dividends, stock purchases or redemptions or (4) for any transaction from which
the director derived an improper personal benefit. Neither the amendment nor
repeal of such provision shall eliminate or reduce the effect of such provision
in respect of any matter occurring, or any cause of action, suit or claim that,
but for such provision, would accrue or arise prior to such amendment or repeal.
While the registrant's Certificate of Incorporation provides directors with
protection from awards for monetary damages for breach of their duty of care, it
does not eliminate such duty. Accordingly, the registrant's Certificate of
Incorporation will have no effect on the availability of equitable remedies such
as an injunction or rescission based on a director's breach of his or her duty
of care.
The registrant's Certificate of Incorporation provides that each person who
was or is made a party to or is threatened to be made a party to or is involved
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that such
person, or a person of whom such person is the legal representative, is or was a
director or officer of the registrant or is or was serving at the request of the
registrant as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee or agent
or in any other capacity while serving as a director, officer, employee or
agent, shall be indemnified and held harmless by the registrant to the fullest
extent authorized by the Delaware General Corporation Law, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the registrant to provide broader
indemnification rights than said law permitted the registrant to provide prior
to such amendment), against all expense, liability and loss reasonably incurred
or suffered by such person in connection therewith. Such right to
indemnification includes the right to have the registrant pay the expenses
incurred in defending any such proceeding in advance of its final disposition,
subject to the provisions of the Delaware General Corporation Law. Such rights
are not exclusive of any other right which any person may have or hereafter
acquire under any statute, provision of the registrant's Certificate
II-1
of Incorporation or By-laws, agreement, vote of securityholders or disinterested
directors or otherwise. No repeal or modification of such provision will in any
way diminish or adversely affect the rights of any director, officer, employee
or agent of the registrant thereunder in respect of any occurrence or matter
arising prior to any such repeal or modification.
The registrant's Certificate of Incorporation also specifically authorizes
the registrant to maintain insurance and to grant similar indemnification rights
to employees or agents of the registrant. The directors and officers of the
registrant are covered by insurance policies indemnifying them against certain
liabilities, including certain liabilities arising under the Securities Act,
which might be incurred by them in such capacities.
ITEM 16. EXHIBITS
See the index to exhibits, which is incorporated herein by reference.
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 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission under Rule 424(b) if, in the aggregate, the changes
in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by the
registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act that is incorporated by reference in the registration
statement shall be
II-2
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act 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 Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, 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 and will be governed by
the final adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Murray Hill, State of New Jersey on October 11, 2001.
LUCENT TECHNOLOGIES INC.
Registrant
By: /s/ JOHN A. KRITZMACHER
------------------------------------
John A. Kritzmacher
Senior Vice President and Corporate
Controller
Date: October 11, 2001
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, each of the undersigned constitutes and
appoints John A. Kritzmacher, Frank A. D'Amelio and Richard A. Rawson, and each
of them, as attorneys-in-fact and agents, with full power of substitution and
resubstitution, for and in the name, place and stead of the undersigned, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this registration statement or any registration statement for
this offering that is to be effective upon the filing pursuant to rule 462(b)
under the Securities Act of 1933, as amended, and all post-effective amendments
thereto, and to file the same, with all exhibits thereto and all other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as the undersigned
might or could do in person, hereby ratifying and confirming all that each of
said attorney-in-fact or substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons, in the
capacities indicated, on October 11, 2001.
(SIGNATURE) (TITLE)
----------- -------
/s/ HENRY B. SCHACHT Chief Executive Officer (principal executive
------------------------------------------------ officer) and Director
Henry B. Schacht
/s/ FRANK A. D'AMELIO Executive Vice President and Chief Financial
------------------------------------------------ Officer (principal financial officer)
Frank A. D'Amelio
/s/ JOHN A. KRITZMACHER Senior Vice President and Corporate Controller
------------------------------------------------ (principal accounting officer)
John A. Kritzmacher
/s/ PAUL A. ALLAIRE Director
------------------------------------------------
Paul A. Allaire
/s/ BETSY S. ATKINS Director
------------------------------------------------
Betsy S. Atkins
II-4
(SIGNATURE) (TITLE)
----------- -------
/s/ CARLA A. HILLS Director
------------------------------------------------
Carla A. Hills
/s/ FRANKLIN A. THOMAS Director
------------------------------------------------
Franklin A. Thomas
/s/ JOHN A. YOUNG Director
------------------------------------------------
John A. Young
II-5
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
4.1 -- Provisions of the Certificate of Incorporation of the
registrant, as amended effective February 16, 2000, that
define the rights of securityholders of the registrant.(1)
4.2 -- Provisions of the By-Laws of the registrant, as amended
effective February 17, 1999, that define the rights of
securityholders of the registrant.(2)
4.3 -- Rights Agreement between the registrant and The Bank of New
York (successor to First Chicago Trust Company of New York),
as rights agent, dated as of April 4, 1996.(3)
4.4 -- Amendment to Rights Agreement between the registrant and The
Bank of New York (successor to First Chicago Trust Company
of New York), dated as of February 18, 1998.(4)
4.5 -- Certificate of Designations of 8.00% Redeemable Convertible
Preferred Stock setting forth the powers, preferences and
rights, and the qualifications, limitations and restrictions
thereof, filed with the Certificate of Incorporation.(5)
4.6 -- Registration Rights Agreement dated as of August 6, 2001,
among the registrant and the initial purchasers.
4.7 -- Form of Indenture relating to the 8.00% Convertible
Subordinated Debentures Due 2031 (included as Exhibit H to
Exhibit 4.1).
4.8 -- Form of 8.00% Convertible Subordinated Debentures Due 2031
(included as Exhibit A to Exhibit H to Exhibit 4.1).
4.9 -- Preferred Stock Transfer Agency Agreement between the
registrant and The Bank of New York Company, Inc., dated as
of August 6, 2001.
5 * -- Opinion and consent of Richard J. Rawson, Senior Vice
President, General Counsel and Secretary of the registrant.
12 -- Statement Regarding Computation of Ratios.
23.1 -- Consent of PricewaterhouseCoopers LLP.
23.2* -- Consent of Richard J. Rawson (included in Exhibit 5).
24 -- Powers of Attorney (included in the signatures pages of this
registration statement).
25 -- Statement of Eligibility Under the Trust Indenture Act of
1939 of a Corporation Designated to Act as Trustee, by The
Bank of New York on Form T-1.
---------------
* To be filed by amendment.
(1) Incorporated by reference to Exhibit 3.1 to the registrant's Registration
Statement on Form S-4 (No. 333-31400), filed with the SEC on March 1, 2000.
(2) Incorporated by reference to Exhibit 3(ii) to the registrant's Annual Report
on Form 10-K for the year ended September 30, 1999, filed with the SEC on
December 21, 1999.
(3) Incorporated by reference to Exhibit 4.2 to the registrant's Registration
Statement on Form S-1/A (No. 333-00703), filed with the SEC on April 1,
1996.
(4) Incorporated by reference to Exhibit 10(i)5 to the registrant's Annual
Report on Form 10-K for the year ended September 30, 1998, filed with the
SEC on December 22, 1998.
(5) Incorporated by reference to Exhibit 3 to the registrant's Quarterly Report
on Form 10-Q for the three months ended June 30, 2001, filed with the SEC on
August 13, 2001.