forms-3.htm
As
filed with the Securities and Exchange Commission on August 24,
2007
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
________________
FORM
S-3
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
_______________
CHARMING
SHOPPES, INC.
(Exact
Name of Registrant as Specified in Its Charter)
_______________
|
Pennsylvania
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
23-1721355
(I.R.S.
Employer Identification Number)
|
|
450
Winks Lane
Bensalem,
Pennsylvania 19020
(215)
245-9100
(Address,
Including Zip Code, and Telephone Number,
Including
Area Code, of Registrant’s Principal Executive Offices)
|
Colin
D. Stern, Esq.
Charming
Shoppes, Inc.
450
Winks Lane
Bensalem,
Pennsylvania 19020
(215)
245-9100
(Name,
Address, Including Zip Code, and Telephone
Number,
Including Area Code, of Agent for
Service)
|
Copy
to:
F.
Douglas Raymond, III, Esq.
Drinker
Biddle & Reath LLP
One
Logan Square
18th
and Cherry Streets
Philadelphia,
PA 19103-6996
_______________
Approximate
date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration
Statement.
If
the
only securities being registered on this form are being offered pursuant to
dividend or interest reinvestment plans, please check the following
box. o
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. o
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. o
If
this
form is a registration statement pursuant to General Instruction I.D. or a
post-effective amendment thereto that shall become effective upon filing with
the Commission pursuant to Rule 462(e) under the Securities Act, check the
following box. x
If
this
form is a post-effective amendment to a registration statement filed pursuant
to
General Instruction I.D. filed to register additional securities or additional
classes of securities pursuant to Rule 413(b) under the Securities Act, check
the following box. o
CALCULATION
OF REGISTRATION FEE
|
Title
of Securities to be Registered
|
Amount
to be Registered
|
Proposed
Maximum Offering Price Per Security
|
Proposed
Maximum Aggregate Offering Price
|
Amount
of Registration Fee
|
|
1.125%
Senior Convertible Notes Due 2014
|
$275,000,000
|
100%
|
$275,000,000
|
$
8,442.50
|
|
Common
Stock, par value $0.10 per share (and the associated stock purchase
rights)(1)
|
(2)
|
(2)
|
(2)
|
(3)
|
|
(1)
|
Rights
to purchase Series A Preferred Shares of the registrant are attached
to
all shares of the registrant’s common stock in accordance with the Amended
and Restated Shareholder Rights Agreement, dated as of February 1,
2001,
between Charming Shoppes, Inc. and American Stock Transfer & Trust
Company, as Rights Agent. The rights are not exercisable until
the occurrence of events specified in the Amended and Restated Shareholder
Rights Agreement and are evidenced by the certificates representing
shares
of common stock and are transferable solely with the common
stock. The value attributable to the rights, if any, is
reflected in the value of the common
stock.
|
|
(2)
|
Includes
such indeterminable number of shares of common stock issuable upon
conversion of the notes. The notes are convertible into common
stock at an initial conversion rate of 65.0233 shares per $1,000
principal
amount of notes, subject to adjustment in certain
circumstances. Pursuant to Rule 416 under the Securities Act of
1933, the registration statement shall include an indeterminate number
of
shares of common stock that may be issued from time to time in connection
with a stock split, stock dividend, recapitalization or similar
event.
|
|
(3)
|
Pursuant
to Rule 457(i) under the Securities Act of 1933, there is no additional
filing fee with respect to the shares of common stock issuable upon
conversion of the notes because no additional consideration will
be
received in connection with the exercise of the conversion
privilege.
|
PROSPECTUS
$275,000,000
CHARMING
SHOPPES, INC.
1.125% Senior
Convertible Notes due 2014
________________
On
April 30, 2007, we issued
$250,000,000 aggregate principal amount of our 1.125% Senior Convertible Notes
due 2014 (the “notes”) in a private offering, and on May 11, 2007, pursuant to
the initial purchasers’ over-allotment option, we issued an additional
$25,000,000 aggregate principal amount of the notes. Selling
securityholders will use this prospectus to resell the notes and the shares
of
our common stock issuable upon conversion of the notes.
The
notes are our general unsecured
obligations and rank equally in right of payment with all of our other existing
and future obligations that are unsecured and unsubordinated.
The
notes bear interest at the rate of
1.125% per year. We will pay interest on the notes on May 1 and
November 1 of each year, beginning on November 1, 2007.
The
notes will mature on May 1,
2014, unless earlier converted or repurchased by us. You may require us to
repurchase in cash some or all of your notes at any time before the notes’
maturity following a fundamental change as described in this
prospectus.
Holders
may convert their notes based
on a conversion rate of 65.0233 shares per $1,000 principal amount of
notes, subject to adjustment upon certain events, only under the following
circumstances: (1) during specified periods, if the price of our common
stock reaches specified thresholds described in this prospectus; (2) if the
trading price of the notes is below a specified threshold; (3) at any time
after November 15, 2013 or (4) upon the occurrence of certain
corporate transactions described in this prospectus. Subject to our election
to
satisfy our conversion obligation entirely in shares of our common stock, upon
conversion, we will deliver an amount in cash equal to the lesser of the
aggregate principal amount of notes to be converted and our total conversion
obligation. If our conversion obligation exceeds the principal amount of the
notes, we will deliver shares of our common stock in respect of the excess.
If
certain corporate transactions occur, we will deliver upon conversion of the
notes additional shares of common stock or other securities as described in
this
prospectus.
We
do not intend to apply for listing
of the notes on any securities exchange or for inclusion of the notes in any
automated quotation system. The notes issued to qualified
institutional buyers in the initial private placement are eligible for trading
in The PORTALSM Market,
or PORTAL, however, notes sold pursuant to this prospectus will no longer be
eligible for quotation on PORTAL.
We
will not receive any of the proceeds
from the sale of the notes or the shares of common stock by the selling
securityholders. The notes and the shares of common stock may be offered by
the
selling securityholders in negotiated transactions or otherwise, at market
prices prevailing at the time of sale or at negotiated prices. The timing and
amount of any sale are within the sole discretion of the selling
securityholders. In addition, the shares of common stock may be offered from
time to time through ordinary brokerage transactions on NASDAQ. See “Plan of
Distribution.”
Our
common stock is listed on the
NASDAQ Global Select Market under the symbol “CHRS.” The closing sale price of
our common stock on the NASDAQ Global Select Market on August 22, 2007 was
$8.99
per share.
Investing
in the notes and common stock
issuable upon conversion of the notes involves risks. See “Risk
Factors” beginning on page 7 of this prospectus.
Neither
the Securities and Exchange
Commission nor any state securities commission has approved or disapproved
of
these securities or determined if this prospectus or any accompanying prospectus
supplement is truthful or complete. Any representation to the contrary is a
criminal offense.
This
prospectus is dated August 24, 2007
TABLE
OF CONTENTS
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iv
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SUMMARY
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1
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RISK
FACTORS
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7
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RATIO
OF EARNINGS TO FIXED CHARGES
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19
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USE
OF PROCEEDS
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19
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PRICE
RANGE OF COMMON STOCK
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19
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DIVIDEND
POLICY
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20
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DESCRIPTION
OF NOTES
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20
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DESCRIPTION
OF CAPITAL STOCK
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45
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PURCHASE
OF CONVERTIBLE NOTE HEDGE AND SALE OF WARRANTS
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49
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CERTAIN
UNITED STATES FEDERAL TAX CONSIDERATIONS
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51
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SELLING
SECURITYHOLDERS
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59
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PLAN
OF DISTRIBUTION
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63
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LEGAL
MATTERS
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65
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EXPERTS
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65
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WHERE
YOU CAN FIND MORE INFORMATION
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65
|
About
this Prospectus
All
references in this prospectus to
“Charming Shoppes,” the “company,” “our,” “us” and “we” refer to Charming
Shoppes, Inc. and its consolidated subsidiaries, except where the context
otherwise requires or as otherwise indicated.
This
prospectus is part of a
registration statement we filed with the Securities and Exchange Commission,
or
SEC, using a “shelf” registration process. Under this shelf
registration process, the selling securityholders may, from time to time, offer
the notes or the shares of common stock issued upon conversion of the notes
owned by them. Each time the selling securityholders offer notes or
common stock under this prospectus, they are required to provide to potential
investors a copy of this prospectus and, if applicable, a copy of any prospectus
supplements. You should read both this prospectus, and, if
applicable, any prospectus supplement together with the information incorporated
by reference in this prospectus. See “Where You Can Find More
Information” below for more information.
You
should rely only on the information
contained in, or incorporated by reference into, this prospectus. You
may obtain the information incorporated by reference into this prospectus
without charge by following the instructions under “Where You Can Find More
Information” below. We have not authorized any other person to
provide you with different information. If anyone provides you with
different or inconsistent information, you should not rely on it. We
are not making an offer to sell these securities or soliciting an offer to
buy
the securities in any jurisdiction where the offer or sale is not
permitted. You should assume that the information contained in this
prospectus and, if applicable, any prospectus supplement, or any document
incorporated by reference in this prospectus or any prospectus supplement,
is
accurate only as of the date on their respective cover pages or as specifically
indicated in the document. Our business, financial condition, results
of operations and prospects may have changed since that
date.
This
prospectus is based on information
provided by us and by other sources that we believe are reliable. We
cannot assure you that this information is accurate or complete. This
prospectus summarizes certain documents and other information, and we refer
you
to them for a more complete understanding of what we discuss in this
prospectus. In making an investment decision, you must rely on your
own examination of our company and the terms of the notes and common stock
issuable upon conversion of the notes, including the merits and risks
involved.
We
are not making any representation to
any purchaser of the notes or the common stock issuable upon conversion of
the
notes regarding the legality of an investment in the notes or the common stock
issuable upon conversion of the notes by such purchaser. You should
not consider any information in this prospectus to be legal, business or tax
advice. You should consult your own attorney, business advisor or tax
advisor for legal, business and tax advice regarding an investment in the notes
or the common stock issuable upon conversion of the notes.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains or
incorporates by reference certain statements and information that are
“forward-looking statements” within the meaning of Section 27A of the
Securities Act and Section 21E of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). These statements may include, but are not limited
to, projections of revenues, income or loss, cost reductions, capital
expenditures, liquidity, financing needs or plans and plans for future
operations, as well as assumptions relating to the foregoing. The words
“expect,” “could,” “should,” “project,” “estimate,” “predict,” “anticipate,”
“plan,” “intend,” “believes” and similar expressions are also intended to
identify forward-looking statements.
Forward-looking
statements are
inherently subject to risks and uncertainties, some of which we cannot predict
or quantify. Some of these risks are discussed below under “Risk Factors”
incorporated by reference in this prospectus from our Annual Report on
Form 10-K for the fiscal year ended February 3, 2007, and discussed under
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations, incorporated by reference in this prospectus from our Annual Report
on Form 10-K for the fiscal year ended February 3, 2007. Should one or more
of
these risks or uncertainties materialize, or should our underlying assumptions
prove incorrect, actual outcomes may vary materially from those
indicated.
We
operate in a rapidly changing and
competitive environment. New risk factors emerge from time to time and it is
not
possible for us to predict all risk factors that may affect us. Future events
and actual results, performance and achievements could differ materially from
those set forth in, contemplated by or underlying the forward-looking
statements, which speak only as of the date on which they were made. We assume
no obligation to update or revise any forward-looking statement to reflect
actual results or changes in, or additions to, the factors affecting such
forward-looking statements. Given those risks and uncertainties, investors
should not place undue reliance on forward-looking statements as a prediction
of
actual results.
SUMMARY
This
summary provides an overview of
selected information and does not contain all the information you should
consider. This summary is qualified in its entirety by, and should be read
in
conjunction with, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in, or incorporated by
reference in, this prospectus. You should read the entire prospectus, including
“Risk Factors” below, carefully before making an investment
decision.
We
have a 52-53 week fiscal
year ending on the Saturday nearest toJanuary 31. The fiscal year
ended February 3, 2007 consisted of 53 weeks.All other fiscal
years referred to in this prospectus consisted of52 weeks. As used
within this prospectus, the terms “Fiscal 2007,”and“Fiscal
2006” refer to the fiscal years ended February 3, 2007 and January 28,
2006, respectively, the term “Fiscal 2008 First Quarter” refers to the fiscal
quarter ended May 5, 2007, the term “Fiscal 2008 Second Quarter” refers to the
fiscal quarter ended on August 4, 2007 and the term “Fiscal 2009”
refers to the fiscal year ending January 31, 2009.
Charming
Shoppes, Inc.
We
are a leading multi-brand,
multi-channel specialty apparel retailer with a leading market share in women’s
plus-size specialty apparel. Our Retail Stores segment operates retail stores
and related E-commerce websites through the following distinct brands: LANE
BRYANT®,
FASHION BUG®,
CATHERINES PLUS SIZES®, LANE BRYANT
OUTLETtm and
PETITE SOPHISTICATE OUTLETtm. Our
Direct-to-Consumer segment operates numerous apparel, accessories, footwear
and
gift catalogs and related E-commerce websites through our Crosstown Traders
business, which we acquired in June 2005. During Fiscal 2007, the sale of
plus-size apparel represented approximately 74% of our total net sales. Through
our multiple channels, fashion content and broad merchandise assortments, we
seek to appeal to customers from a broad range of socioeconomic, demographic
and
cultural groups. As of May 5, 2007, we operated 2,396 stores in
48 states.
LANE
BRYANT® is
a widely recognized name in plus-size fashion. Through private labels, such
as
VENEZIA®,
CACIQUE® and
LANE BRYANT®,
we offer fashionable and sophisticated apparel in plus-sizes 14 – 28,
including intimate apparel, wear-to-work and casual sportswear, as well as
accessories. LANE BRYANT has a loyal customer base, generally ranging in age
from 25 to 45 years old, which shops for fashionable merchandise in the
moderate price range. Primarily a mall-based destination store for the plus-size
woman, LANE BRYANT operates 790 stores in 46 states that average
approximately 5,900 square feet. During Fiscal 2007, our LANE BRYANT
website (lanebryant.com) averaged more than 2.3 million unique visitors per
month and has an established on-line community.
During
Fiscal 2006, LANE BRYANT
introduced and tested a new store concept, the LANE BRYANT® intimate
apparel
side-by-side store. The new design pairs LANE BRYANT’s casual and wear-to-work
sportswear assortments with an expanded line of CACIQUE® intimates
as well
as additional national brands, presented in a double store-front. As a result
of
a successful testing period during Fiscal 2006, many of our LANE BRYANT retail
store openings and relocations for Fiscal 2007 were in the new side-by-side
format. This larger footprint of approximately 7,000 square feet per
combined store compares with the full-line LANE BRYANT store footprint of
approximately 5,900 square feet. During the Fiscal 2008 First Quarter, we
operated 66 stores (which are included in the 790 stores operated by LANE
BRYANT) in the LANE BRYANT intimate apparel side-by-side format.
In
December 2005, we announced plans to
enter the outlet channel through the assumption of outlet store leases from
Retail Brand Alliance and to operate those locations under the name LANE BRYANT
OUTLET. A majority of these locations had been operated as side-by-side
locations selling more than one brand. Subsequently, in January 2006, we
acquired the trademark and internet domain rights to the PETITE
SOPHISTICATE®
name. During Fiscal 2007, we opened 82 LANE BRYANT OUTLET stores, including
76 stores in locations that we acquired from Retail Brand Alliance and
three existing LANE BRYANT stores that we converted to LANE BRYANT OUTLET
stores. During Fiscal 2007, we also opened 45 PETITE SOPHISTICATE OUTLET stores,
the majority of which are operating with a LANE BRYANT OUTLET store in
side-by-side locations assumed from Retail Brand Alliance. These combined outlet
locations average approximately 9,300 square feet.
LANE
BRYANT OUTLETtm is
the only national chain exclusively offering women’s plus-size apparel in the
outlet sales channel, with 87 outlet store locations in 33 states
throughout the country. Through our private labels, VENEZIA, CACIQUE and LANE
BRYANT, as well as selected national brands, we offer fashionable and
sophisticated apparel in plus-sizes 14 – 28, including intimate apparel,
wear-to-work, casual sportswear and accessories, as well as footwear and social
occasion apparel. LANE BRYANT OUTLET stores average approximately
6,000 square feet.
PETITE
SOPHISTICATE
OUTLETtm is
the only national chain exclusively offering women’s petite-size apparel in the
outlet sales channel, with 46 outlet store locations in 23 states
throughout the country. PETITE SOPHISTICATE OUTLET targets women 35 –
55 years old and offers traditional, updated classic and contemporary
apparel in casual and career assortments. We offer clothing tailored to women
4’11” – 5’4” who wear petite sizes 0 – 14. PETITE SOPHISTICATE OUTLET
stores average approximately 2,700 square feet. During Fiscal 2007, we
launched a marketing and informational website
(petitesophisticate.com).
FASHION
BUG® stores
specialize in selling a wide variety of plus-size, misses and junior apparel,
accessories, intimate apparel and footwear. FASHION BUG customers generally
range in age from 20 to 49 years old and shop in the low-to-moderate price
range. Our 1,008 FASHION BUG stores are located in 44 states, primarily in
strip shopping centers, and average approximately 8,700 square feet. During
Fiscal 2007, our FASHION BUG website (fashionbug.com) averaged more than 800,000
unique visitors per month.
CATHERINES
PLUS SIZES® is
particularly known for extended sizes (over size 28) and petite plus-sizes.
CATHERINES offers classic apparel and accessories for wear-to-work and casual
lifestyles. CATHERINES customers generally range in age from 40 to 65 years
old, shop in the moderate price range and are concerned with fit and value
when
purchasing clothes. Our 465 CATHERINES stores are located in 44 states,
primarily in strip shopping centers in the Southeast, Mid-Atlantic and Eastern
Central regions of the United States, and average approximately
4,200 square feet. During Fiscal 2007, our CATHERINES website
(catherines.com) averaged more than 400,000 unique visitors per
month.
CROSSTOWN
TRADERS is a direct
marketer of women’s apparel, footwear, accessories and specialty gifts.
Crosstown Traders markets women’s apparel through its OLD PUEBLO TRADERS®, BEDFORD
FAIR
LIFESTYLES®,
BEDFORD FAIR SHOESTYLES®, WILLOW
RIDGE®, LEW MAGRAM®,
BROWNSTONE
STUDIO®,
REGALIA®,
INTIMATE APPEAL®, MONTEREY
BAY
CLOTHING COMPANY®, COWARD®
SHOE and other
catalog titles and related E-commerce sites and markets food and specialty
gift
products through its FIGI’S® catalog
and related
E-commerce site. During Fiscal 2007, our Crosstown Traders websites collectively
averaged approximately 600,000 unique visitors per month. Crosstown Traders
also
operates two outlet stores.
Charming
Shoppes, Inc. was incorporated
in Pennsylvania in 1969. Our principal offices are located at 450 Winks Lane,
Bensalem, Pennsylvania 19020. Our telephone number is (215) 245-9100. We
maintain a website at www.charmingshoppes.com. We are not including the
information contained on our website as a part of, or incorporating it by
reference into, this prospectus.
The
Offering
The
summary below highlights
information contained elsewhere in this prospectus. This summary is not complete
and does not contain all the informationthat you should consider before
investing in the notes. The “Description of Notes”section of this
prospectus contains a moredetailed description of the terms and
conditions of the notes. As used in this section, references to “Charming
Shoppes,” the“company,” “we,” “us” and “our” refer only to Charming
Shoppes, Inc. and do notinclude its subsidiaries.
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Issuer
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Charming
Shoppes, Inc., a Pennsylvania corporation.
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Notes Offered
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$275,000,000
aggregate principal amount of 1.125% Senior Convertible Notes due
2014.
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Maturity
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May 1,
2014, unless earlier converted or repurchased.
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Ranking
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The
notes are our senior, unsecured obligations and rank equal in right
of
payment to all of our other unsecured and unsubordinated indebtedness.
The
notes are effectively subordinated to all our existing and future
secured
debt and to the indebtedness and other liabilities of our
subsidiaries.
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Interest
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The
notes bear interest at an annual rate of 1.125%. Interest on the
notes is
payable semi-annually in arrears on May 1 and November 1 of each
year, beginning November 1, 2007.
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Conversion
Rights
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You
may convert the notes based on an initial conversion rate of
65.0233 shares per $1,000 principal amount of notes (equal to an
initial conversion price of approximately $15.38 per
share).
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You
may elect to convert the notes before the close of business on the
second
business day immediately preceding stated maturity, only under the
following circumstances:
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•during
any fiscal quarter commencing after May 5, 2007, if the closing sale
price of our common stock is greater than or equal to 130% of the
conversion price for at least 20 trading days in the period of 30
consecutive trading days ending on the last trading day of the preceding
fiscal quarter;
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•during
the five business day period following any five consecutive trading
day
period in which the trading price of the notes for each day of such
period
was less than 98% of the product of the closing sale price per share
of
our common stock on such day and the conversion rate in effect for
the
notes on each such day;
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•at
any time on or after November 15, 2013; or
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•upon
the occurrence of specified corporate transactions described under
“Description of Notes — Conversion Rights — Conversion upon
Specified Corporate Transactions.”
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The
initial conversion rate will be adjusted for certain events, but
it will
not be adjusted for accrued interest or additional amounts, if any.
You
will not receive any cash payment or additional shares representing
accrued and unpaid interest upon conversion of a note, except in
limited
circumstances. Instead, interest, including additional amounts, if
any,
will be deemed paid by the common stock or combination of cash and
common
stock delivered to you upon conversion.
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Subject
to our election to satisfy our conversion obligation entirely in
shares of
our common stock, upon a surrender of your notes for conversion,
we will
deliver an amount in cash equal to the lesser of the aggregate principal
amount of notes to be converted and our total conversion obligation.
If
our conversion obligation exceeds the aggregate principal amount
of notes
to be converted, we will deliver shares of our common stock in respect
of
the excess as described under “Description of Notes — Conversion
Rights — Payment upon Conversion.”
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If
you elect to convert your notes in connection with a fundamental
change,
we will deliver upon conversion of the notes a number of additional
shares
of common stock as described under “Description of Notes — Conversion
Rights — Additional Shares.”
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Fundamental
Change
|
If
we undergo a fundamental change (as defined in this prospectus under
“Description of Note – Repurchase of Note by us at Option of Holder upon a
Fundamental Change”) before maturity of the notes, you will have the
right, subject to certain conditions, to require us to repurchase
for cash
all or a portion of your notes at a repurchase price equal to 100%
of the
principal amount of the notes being repurchased, plus accrued and
unpaid
interest, including additional amounts, if any, up to but excluding
the
date of repurchase.
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Registration
Rights
|
Under
the registration rights agreement that we entered into with the initial
purchasers, we agreed to:
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•file
a shelf registration statement with the Securities and Exchange Commission
(the “SEC”) covering resales of the notes and the shares of our common
stock issuable on conversion of the notes (which will be an automatic
shelf registration statement if we are eligible to use an automatic
shelf
registration at the time of filing) no later than 120 days after the
first date of original issuance of the notes and
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•(if
we are not eligible to use an automatic shelf registration statement)
use
our reasonable efforts to cause the shelf registration statement
to become
effective under the Securities Act, no later than 210 days after the
first date of original issuance of the notes.
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If
we do not fulfill certain of our obligations under the registration
rights
agreement, we will be required to pay additional amounts to holders
of the
notes. See “Description of Notes — Registration
Rights.”
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Use
of Proceeds
|
We
will not receive any of the proceeds from the sale by any selling
securityholder of the notes or the underlying common
stock.
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Convertible
Note Hedge and Warrant Transactions
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We
entered into privately negotiated convertible note hedge transactions
with
affiliates of the initial purchasers (which we refer to collectively
as
the Hedge Participants) that we expect will reduce the potential
dilution
to our common stock upon any conversion of the notes. We also entered
into
warrant transactions with the Hedge Participants with respect to
our
common stock pursuant to which we may issue shares of our common
stock. In
connection with these transactions, we used a portion of the net
proceeds
of the private offering to pay the cost of the convertible note hedge
transactions. The cost of the convertible note hedge transactions
was
partially offset by the proceeds that we received from the sale of
the
warrants. In connection with hedging these transactions, the Hedge
Participants or their affiliates entered or may enter into various
derivative transactions with respect to our common stock at, and
possibly
after, the pricing of the notes and may purchase our common stock
in
secondary market transactions. These activities could have had the
effect
of increasing the price of our common stock before and possibly following
the pricing of the notes. The Hedge Participants or their affiliates
are
likely to modify their hedge positions from time to time before conversion
or maturity of the notes by purchasing and selling shares of our
common
stock, other of our securities or other instruments they may wish
to use
in connection with such hedging and entering into or unwinding various
derivative transactions with respect to our common stock (and are
likely
to do so (1) during any cash settlement averaging period related to a
conversion of notes and (2) if we have elected to satisfy our
conversion obligations entirely in shares of our common stock, during
(a) the 100 trading-day period beginning on the 102nd scheduled
trading day before the maturity date if the related conversion date
is on
or after November 15, 2013 or (b) the 100 trading-day period
beginning on and including the third scheduled trading day after
the
conversion date if the related conversion date is before November 15,
2013). The effect, if any, of any of these transactions and activities
on
the market price of our common stock or the notes will depend in
part on
market conditions and cannot be ascertained at this time, but any
of these
activities could adversely affect the value of our common stock and
the
value of the notes and, as a result, the conversion value you will
receive
upon conversion of the notes and, under certain circumstances, your
ability to convert notes. See “Risk Factors — Risks Related to an
Investment in the Notes and our Common Stock — The convertible note
hedge and warrant transactions may affect the value of the notes
and our
common stock.”
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Trustee,
Paying Agent and Conversion Agent
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Wells
Fargo Bank, National Association.
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Trading
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We
do not intend to apply to list the notes on any securities exchange
or to
include the notes in any automated quotation system. The notes issued
to
qualified institutional buyers in the private placement are eligible
for
trading on PORTAL. The notes resold using this prospectus, however,
will
no longer be eligible for trading on PORTAL.
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United
States Federal Income Tax Consequences
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For
the United States federal income tax consequences of the holding,
disposition and conversion of the notes, and the holding and disposition
of shares of our common stock, see “Certain United States Federal Tax
Considerations.”
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Trading
Symbol for Our Common Stock
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Our
common stock is listed on the NASDAQ Global Select Market under the
symbol
“CHRS.”
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Risk
Factors
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You
should carefully consider the information set forth in the section
of this
prospectus titled “Risk Factors” as well as the other information included
in or incorporated by reference in this prospectus before deciding
whether
to invest in the notes.
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RISK
FACTORS
You
should carefully consider the
risks described below before making an investmentdecision. The risks
described below are not the only ones facing our company.Additional
risks not presently known to us or that we currently consider
lesssignificant may also impair our business operations. Our business,
financialcondition or results of operations could be materially
adversely affected by any ofthese risks. The trading price of the notes
and our common stock could decline due toany of these risks, and you
may lose all or part of your investment.
This
prospectus also contains or
incorporates by reference forward-lookingstatements that involve risks
and uncertainties. Our actual results could differmaterially from those
anticipated in such forward-looking statements as a result ofcertain
factors, including the risks faced by us described below and elsewhere
inthis prospectus. See “Special Note Regarding
Forward-LookingStatements.”
Risks
Related to Our Business and Industry
Our
business is dependent upon our ability to accurately predict rapidly
changingfashion trends, customer preferences and other
fashion-related factors.
Customer
tastes and fashion trends are
volatile and tend to change rapidly, particularly for women’s apparel. Our
success depends in part on our ability to effectively predict and respond to
quickly changing fashion tastes and consumer demands and to translate market
trends into appropriate, saleable product offerings. If we are unable to
successfully predict or respond to changing styles or trends and misjudge the
market for our products or any new product lines, our sales will be lower,
and
we may be faced with a substantial amount of unsold inventory or missed sales
opportunities. In response, we may be forced to rely on additional markdowns
or
promotional sales to dispose of excess or slow-moving inventory, which could
have a material adverse effect on our business, financial condition and results
of operations.
Existing
and increased competition in the women’s retail apparel
anddirect-to-consumer markets may reduce our net
revenues, profits andmarket
share.
The
women’s specialty retail apparel
and direct-to-consumer markets are highly competitive. Our competitors include
individual and chain fashion specialty stores, department stores, discount
stores, catalog retailers and Internet-based retailers. As a result of this
competition, we are required to effectively market and competitively price
our
products to consumers in diverse markets, and we may experience pricing
pressures, increased marketing expenditures and loss of market share, which
could have a material adverse effect on our business, financial condition and
results of operations. We believe that the principal bases upon which we compete
are merchandise style, size, selection, fit, quality, display, price, attractive
website/catalog layout, efficient fulfillment of website and catalog mail orders
and personalized service to our customers, as well as store location, design,
advertising and promotion. Other women’s apparel and direct-to-consumer
companies with greater financial resources, marketing capabilities or brand
recognition may enter the plus-size business. We cannot give assurance that
we
will be able to compete successfully against existing or future
competitors.
A
slowdown in the United States economy, an uncertain economic outlook and
escalatingenergy costs could lead to reduced consumer
demand for our products in the future.
Consumer
spending habits, including
spending for our products, are affected by, among other things, prevailing
economic conditions, levels of employment, salary levels, wage rates,
availability of consumer credit, consumer confidence and consumer perception
of
economic conditions. A general slowdown in the United States economy, an
uncertain economic outlook and escalating energy costs could adversely affect
consumer spending habits and customer traffic, which could result in a reduction
in our net sales. A prolonged economic downturn could have a material adverse
effect on our business, financial condition and results of
operations.
Maintaining
and improving our operating margins is dependent on our ability
tosuccessfully control our operating
costs.
In
order to maintain or improve our
operating margins, we need to successfully manage our operating costs. Our
inability to successfully manage labor costs, increases in certain costs vital
to catalog operations, such as postage, paper and acquisition of prospects,
occupancy costs or other operating costs, or our inability to take advantage
of
opportunities to reduce operating costs, would adversely affect our operating
margins and our results of operations. The United States Postal Office recently
effected postal rate increases, which will result in additional costs to us,
especially in our catalog operations.
We
are subject to the Fair Labor
Standards Act and various state and Federal laws and regulations governing
such
matters as minimum wages, exempt status classification, overtime and employee
benefits. Changes in Federal or state laws or regulations regarding minimum
wages, such as the 2007 legislation that will increase the Federal minimum
wage
incrementally over the next two years, or other employee benefits will cause
us
to incur additional wage and benefit costs, which could adversely affect our
results of operations. In addition, we may be unable to obtain adequate
insurance coverage for our operations at a reasonable cost.
We
may not be able to obtain sufficient working capital
financing.
Our
business requires substantial
investment in our inventory for a long period before sales occur. Consequently,
we require significant amounts of working capital financing. We depend on the
availability of credit to fund our working capital, including credit we receive
from our suppliers and their agents, on our credit card securitization program
and on our revolving credit facility. If we are unable to obtain sufficient
financing at an affordable cost, we might be unable to adequately merchandise
our stores, E-commerce or catalog businesses, which could have a material
adverse effect on our business, financial condition and results of
operations.
Our
operating results fluctuate from season to season.
Our
retail store and direct-to-consumer
operations experience seasonal fluctuations in net sales and consequently in
operating income, with peak sales occurring during the Easter, Labor Day and
Christmas seasons. In addition, extreme or unseasonable weather can affect
our
sales. Any decrease in net sales or margins during our peak selling periods,
or
in the availability of working capital needed in the months before these
periods, could have a material adverse effect on our business, financial
condition and results of operations. We usually order merchandise in advance
of
peak selling periods and sometimes before new fashion trends are confirmed
by
customer purchases. We must carry a significant amount of inventory, including
perishable products in certain of our direct-to-consumer businesses, before
the
peak selling periods. If we are not successful in selling our inventory,
especially during our peak selling periods, we may be forced to rely on
markdowns or promotional sales to dispose of the inventory or we may not be
able
to sell the inventory at all, which could have a material adverse effect on
our
business, financial condition and results of operations.
We
face challenges in managing our recent growth.
Our
operating challenges and management
responsibilities are increasing as we continue to grow and expand into new
store
formats and additional distribution channels. Successful growth will require
that we continue to expand and improve our internal systems and our operations,
including our distribution infrastructure.
Our
business plan for our Retail Stores
segment depends on our ability to open and operate new retail stores and to
convert, where applicable, the formats of existing stores on a profitable basis.
In addition, we will need to identify, hire and retain a sufficient number
of
qualified personnel to work in our stores. During Fiscal 2007, we entered the
outlet distribution channel and expanded the number of stores using a new
double-store-front format.
We
are also completing the integration
of Crosstown Traders and our Direct-to-Consumer segment into our current
operating structure. Growth in our Direct-to-Consumer segment is dependent
on
sufficient response rates to our catalogs and Internet websites and access
to
new customers, which may not occur. In addition, we plan to
continue
to build infrastructure in our Direct-to-Consumer segment to prepare for the
launch of new catalogs, including the launch of the LANE BRYANT catalog in
late
Fiscal 2008 when the LANE BRYANT catalog trademark, currently licensed by us
to
a third party, reverts to us.
These
objectives have created, and may
continue to create, additional demands on our staff and on our operating
systems. We cannot assure the successful implementation of our business plan
for
our Retail Stores and Direct-to-Consumer segments or that we will achieve our
objectives as quickly or as effectively as we hope.
We
depend on key personnel and may not be able to retain or replace these
employeesor recruit additional qualified
personnel.
Our
success and our ability to execute
our business strategy depend largely on the efforts and abilities of our Chief
Executive Officer, Dorrit J. Bern, and her management team. The loss of services
of one or more of our key personnel could have a material adverse effect on
our
business, as we may not be able to find suitable management personnel to replace
departing executives on a timely basis. We do not maintain key-person life
insurance policies with respect to any of our employees.
Our
business plan is largely dependent upon continued growth in the plus-size
women’sapparel market.
Our
business is primarily focused on
sales of plus-size women’s apparel, which represents a majority of our total net
sales. Our operating results could be adversely affected by a lack of continued
growth in the plus-size women’s apparel market.
We
could be materially and adversely affected if any of our distribution
orfulfillment centers are shut
down.
We
operate distribution centers in
Greencastle, Indiana and Baltimore County, Maryland, and we operate catalog
fulfillment centers in Tucson, Arizona; Marshfield, Wisconsin; Stevens Point,
Wisconsin; and Wilmington, North Carolina. In addition, we use third-party
freight consolidators and service providers in Indianapolis, Indiana; Abingdon,
Maryland; Los Angeles, California; Miami, Florida; and North Bergen, New Jersey.
Most of the merchandise we purchase is shipped directly to our distribution
and
fulfillment centers or freight consolidators, where it is prepared for shipment
to the appropriate stores or to the customer. If any of our distribution
centers, fulfillment centers or freight consolidators were to shut down or
lose
significant capacity for any reason, the other locations may not be able to
adequately support the resulting additional distribution demands, in part
because of capacity constraints and in part because each location services
a
particular brand or brands. As a result, we could incur significantly higher
costs and longer lead times associated with distributing our products to our
stores or customers during the time it takes for us to reopen or replace the
affected distribution center, fulfillment center or freight
consolidator.
Natural
disasters, war, acts of terrorism or other armed conflict, or the threat
ofeither on the United States or other countries
may
negatively impact the availabilityof merchandise and
otherwise adversely impact our business.
In
the event of a natural disaster,
war, acts of terrorism or other armed conflict, or if such events are
threatened, our ability to obtain merchandise for sale in our stores or through
our direct-to-consumer business may be negatively impacted. A significant
portion of our merchandise is imported from other countries. If imported goods
become difficult or impossible to bring into the United States, and if we cannot
obtain such merchandise from other sources at similar costs, our net sales
and
profit margins may be adversely affected. If commercial transportation is
curtailed or substantially delayed, our business may be adversely impacted,
as
we may have difficulty shipping merchandise to our distribution centers,
fulfillment centers, stores or our direct-to-consumer customers. In the event
of
a natural disaster or acts of terrorism in the United States, or the threat
of
either, we may be required to suspend operations in some or all of our stores,
which could have a material adverse impact on our business, financial condition
and results of operations.
Our
inability to successfully manage customer service or fulfillment for
ourE-commerce websites or our catalog business could
adversely impact ouroperating
results.
Successful
management of our E-commerce
and catalog operations is dependent on our ability to maintain efficient and
uninterrupted customer service and order fulfillment. Inadequate systems
capacity, a disruption or slowdown in telecommunications services, changes
in
technology, changes in government regulations, systems issues, security
breaches, a failure to integrate order management systems or customer privacy
issues could result in reduced sales or increases in operating expenses as
a
result of our efforts or our inability to remedy such issues. In addition,
we
may not be able to hire sufficient qualified associates to support our
E-commerce or catalog operations during peak periods, especially during the
December holiday season. The occurrence of one or more of these events could
adversely affect our E-commerce or catalog businesses.
We
rely on foreign sources of production.
We
purchase a significant portion of
our apparel directly in foreign markets and indirectly through domestic vendors
with foreign sources. We face a variety of risks generally associated with
doing
business in foreign markets and importing merchandise from abroad. Such risks
include (but are not necessarily limited to):
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increased
security requirements applicable to imported
goods;
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imposition
of, or changes in, duties, quotas, taxes and other charges on
imports;
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currency
and exchange risks;
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issues
relating to compliance with domestic or international labor
standards;
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concerns
over anti-dumping;
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increased
costs of transportation.
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New
initiatives could be proposed that would have an impact on the trading status
of
certain countries and could include retaliatory duties or other trade sanctions
that, if enacted, could increase the cost of products purchased from suppliers
in such countries or restrict the importation of products from such countries.
The future performance of our business will depend on our foreign suppliers
and
may be adversely affected by the factors listed above, all of which are beyond
our control.
Issues
of global workplace conditions may adversely affect our
business.
If
any one of our manufacturers or
vendors fails to operate in compliance with applicable laws and regulations,
is
perceived by the public as failing to meet certain labor standards in the United
States, or employs unfair labor practices, our business could be adversely
affected. Current global workplace concerns of the public include perceived
low
wages, poor working conditions, age of employees and various other employment
standards. These globalization issues may affect the available supply of certain
manufacturers’ products, which may result in increased costs to us. Furthermore,
a negative customer perception of any of our key vendors or their products
may
result in a lower customer demand for our apparel.
We
depend on strip shopping center and mall traffic and our ability to
identifysuitable store locations for our Retail Stores
segment.
Our
sales are dependent in part on a
high volume of strip shopping center and mall traffic. Strip shopping center
and
mall traffic may be adversely affected by, among other things, economic
downturns, the closing of anchor stores, or changes in customer shopping
preferences. A decline in the popularity of strip shopping center or mall
shopping among our target customers could have a material adverse effect on
our
business. To take advantage of customer traffic and the shopping preferences
of
our customers, we need to maintain or acquire stores in desirable locations.
We
cannot assure that desirable store locations will continue to be available.
Acquisition of additional store locations is also dependent on our ability
to
successfully negotiate lease terms for such locations. In addition, the timely
opening of new store locations could be adversely affected by delays in
obtaining necessary permits and approvals, lack of availability of construction
materials and labor or work stoppages.
We
may be unable to protect our trademarks and other intellectual property
rights.
We
believe that our trademarks and
servicemarks are important to our success and our competitive position due
to
their name recognition with our customers. We devote substantial resources
to
the establishment and protection of our trademarks and servicemarks on a
worldwide basis. Nevertheless, there can be no assurance that the actions we
have taken to establish and protect our trademarks and servicemarks will be
adequate to prevent imitation of our products by others or to prevent others
from seeking to block sales of our products as a violation of the trademarks,
servicemarks and proprietary rights of others. Also, others may assert rights
in, or ownership of, our trademarks and other proprietary rights, and we may
not
be able to successfully resolve these types of conflicts to our satisfaction.
In
addition, the laws of certain foreign countries may not protect proprietary
rights to the same extent as do the laws of the United States.
Other
Risks
Anti-takeover
provisions in our governing documents and Pennsylvania law
maydiscourage other companies from attempting to
acquire us.
Some
provisions of our Restated
Articles of Incorporation and Bylaws and of Pennsylvania law may discourage
some
transactions where we would otherwise experience a change in control. For
example, our Restated Articles of Incorporation, Bylaws and Pennsylvania law
contain provisions that:
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classify
our board into three classes, with one class being elected each
year;
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do
not permit cumulative voting;
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permit
our board to issue “blank check” preferred stock without shareholder
approval;
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require
certain advance notice procedures with regard to the nomination of
candidates for election as directors,
other than nominations by or at the direction of our
board;
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prohibit
us from engaging in some types of business combinations with a holder
of
10% or more of our voting securities without super-majority shareholder
or
board approval
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prevent
our directors from being removed without cause except upon super-majority
shareholder approval; and
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prevent
a holder of 20% or more of our common stock from taking certain actions
without certain approvals.
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We
also have adopted a Shareholder
Rights Plan. This plan may make it more difficult and more expensive to acquire
us, and may discourage open market purchases of our common stock or a
non-negotiated tender or exchange offer for such stock, and, accordingly, may
limit a shareholder’s ability to realize a premium over the market price of our
common stock in connection with any such transaction.
Failure
to comply with the provisions of the Sarbanes-Oxley Act of 2002
couldadversely affect our
business.
Pursuant
to Section 404 of the
Sarbanes-Oxley Act of 2002, we are required to include our assessment of the
effectiveness of our internal control over financial reporting in our annual
reports. Our independent registered public accounting firm is also currently
required to attest to whether or not our assessment is fairly stated in all
material respects and to separately report on whether or not they believe that
we maintained, in all material respects, effective internal control over
financial reporting. If we are unable to maintain effective internal control
over financial reporting, or if our independent registered public accounting
firm is unable to timely attest to our assessment, we could be subject to
regulatory sanctions and a possible loss of public confidence in the reliability
of our financial reporting. Such a failure could result in our inability to
provide timely and/or reliable financial information and could adversely affect
our business.
New
accounting rules or regulations or changes in existing rules or regulations
couldadversely impact our reported results of
operations.
Changes
to existing accounting rules or
the adoption of new rules could have an adverse effect on our reported results
of operations.
Changes
in estimates related to our property, plant, equipment, goodwill,
orintangible assets could adversely affect our
reported results of operations.
We
make certain significant
assumptions, estimates and projections related to the useful lives of our
property, plant and equipment and the valuation of intangible assets related
to
acquisitions. The carrying amount and/or useful life of these assets are subject
to periodic valuation tests for impairment. Impairment results when the carrying
value of an asset exceeds the undiscounted (or for goodwill and indefinite-lived
intangible assets the discounted) future cash flows associated with the asset.
If actual experience were to differ materially from the assumptions, estimates
and projections used to determine useful lives or the valuation of property,
plant, equipment or intangible assets, a write-down for impairment of the
carrying value of the assets, or acceleration of depreciation or amortization
of
the assets, could result. Such a write-down or acceleration of depreciation
or
amortization would have an adverse impact on our reported results of
operations.
Risks
Related to an Investment in the Notes and our Common Stock
The
notes will be effectively subordinated to existing and future indebtedness
andother liabilities of our subsidiaries and to our
secured debt to the extent of thesecurity for such
indebtedness.
Because
we operate primarily through
our direct and indirectly owned subsidiaries, we derive all our revenues from
and hold substantially all of our assets through, these subsidiaries. The notes
are only our obligation and are not guaranteed by our subsidiaries.
Substantially all of our subsidiaries serve as guarantors with respect to our
existing credit facility. Creditors of each of our subsidiaries, including
trade
creditors, generally will have priority with respect to the assets and earnings
of the subsidiary over the claims of our creditors, including holders of the
notes. The notes, therefore, will be effectively subordinated to the
claims of creditors, including trade creditors, of our subsidiaries. In
addition, our rights and the rights of our creditors, including the holders
of
the notes, to participate in the assets of a subsidiary during its liquidation
or reorganization will be effectively subordinated to all existing and future
liabilities of that subsidiary. Furthermore, the indenture relating to the
notes
does not restrict our subsidiaries’ ability to incur secured or other
indebtedness in the future.
The
notes are our senior, unsecured
obligations and as unsecured indebtedness will be effectively junior to any
secured indebtedness to the extent of the security for such secured
indebtedness. Our principal credit facility is secured by substantially all
of
our assets. As of the date of this prospectus, we had no secured indebtedness
outstanding under our credit facility. We have mortgages and capitalized leases
secured by real estate and equipment, respectively, totaling approximately
$39
million as of May 5, 2007. However, the indenture relating to the notes does
not
restrict our ability to incur secured or other indebtedness in the future.
If we
become insolvent or are liquidated, or if payment of any secured indebtedness
is
accelerated, the holders of the secured indebtedness will
be
entitled to exercise the remedies available to secured lenders under applicable
law, including the ability to foreclose on and sell the assets securing such
indebtedness in order to satisfy such indebtedness. In any case, any remaining
assets may be insufficient to repay the notes.
We
may depend on the cash flows of our subsidiaries in order to satisfy
ourobligations under the
notes.
We
rely on distributions and advances
from our subsidiaries in order to meet our payment obligations under the notes
and our other obligations. If our subsidiaries are unable to pay us dividends
or
otherwise make payments to us, we will not be able to make debt service payments
on the notes. We are a holding company and conduct most of our operations
through our subsidiaries. Our operating cash flows and consequently our ability
to service our debt, including the notes, are therefore principally dependent
upon our subsidiaries’ earnings and their distributions of those earnings to us
and may also be dependent upon loans, advances or other payments of funds to
us
by those subsidiaries. Our subsidiaries are separate legal entities and have
no
obligation, contingent or otherwise, to pay any amount due pursuant to the
notes
or to make any funds available for that purpose. Our subsidiaries’ ability to
make payments may be subject to the availability of sufficient surplus funds,
the terms of such subsidiaries’ indebtedness, the terms of our credit facility,
applicable laws and other factors.
Our
revolving credit facility may limit our ability to pay any cash amount upon
theconversion of the notes.
Our
existing senior secured revolving
credit facility may prohibit us from making any cash payments on the conversion
of the notes if a default or an event of default has occurred under that
facility or if availability under the facility is, or would be as a result
of
such payments, below a specified threshold.
We
may not have sufficient cash to repurchase the notes at the option of the
holderupon a fundamental change or to pay the cash
payable upon a conversion, which mayincrease your
credit risk.
Upon
a fundamental change, subject to
certain conditions, we will be required to make an offer to repurchase for
cash
all outstanding notes at 100% of their principal amount plus accrued and unpaid
interest, including additional amounts, if any, up to but not including the
date
of repurchase. In addition, unless we elect to satisfy our conversion obligation
entirely in shares of our common stock, upon a conversion, we will be required
to make a cash payment of up to $1,000 for each $1,000 in principal amount
of
notes converted. However, we may not have enough available cash or be able
to
obtain financing at the time we are required to make repurchases of tendered
notes or settlement of converted notes. Any credit facility in place at the
time
of a repurchase or conversion of the notes may also define as a default
thereunder the events requiring repurchase or cash payment upon conversion
of
the notes or otherwise limit our ability to use borrowings to pay any cash
payable on a repurchase or conversion of the notes and may prohibit us from
making any cash payments on the repurchase or conversion of the notes if a
default or event of default has occurred under that facility without the consent
of the lenders under that credit facility. Our failure to repurchase tendered
notes at a time when the repurchase is required by the indenture or to pay
any
cash payable on a conversion of the notes would constitute a default under
the
indenture. A default under the indenture or the fundamental change itself could
lead to a default under the other existing and future agreements governing
our
indebtedness. If the repayment of the related indebtedness were to be
accelerated after any applicable notice or grace periods, we may
not
have
sufficient funds to repay the indebtedness and repurchase the notes or make
cash
payments upon conversion thereof.
The
convertible note hedge and warrant transactions may affect the value of the
notesand our common stock.
We
entered into convertible note hedge
transactions relating to shares of our common stock with the Hedge Participants.
We also entered into warrant transactions with the Hedge Participants pursuant
to which we may issue shares of our common stock. The convertible note hedge
transactions involved our purchasing call options from the Hedge Participants,
and the warrant transactions involved our selling call options to the Hedge
Participants with a higher strike price than the purchased call options. The
convertible note hedge transactions are expected to reduce the potential
dilution to our common stock upon conversion of the notes.
Because
we sold the warrants to the
Hedge Participants, the mitigating effect on dilution of the convertible note
hedge transactions will be capped, which means that the convertible note hedge
transactions may not completely mitigate dilution from conversion of the notes
as intended. The exercise of the warrants by the Hedge Participants could have
a
dilutive effect on our common stock to the extent the market price per share
of
our common stock at the time of exercise exceeded the higher strike price of
the
warrants. Further, the extent to which the convertible note hedge transactions
mitigate dilution will also depend on our choice of settlement
method.
In
connection with hedging these
transactions, the Hedge Participants or their affiliates may enter or may have
entered into various derivative transactions with respect to our common stock
and may also purchase and sell our common stock in secondary market
transactions. These activities could have the effect of increasing the price
of
our common stock. The Hedge Participants or their affiliates are likely to
modify their hedge positions from time to time before conversion or maturity
of
the notes by purchasing and selling shares of our common stock, other of our
securities or other instruments they may wish to use in connection with such
hedging and entering into or unwinding various derivative transactions with
respect to our common stock (and are likely to do so (1) during any cash
settlement averaging period related to a conversion of notes and (2) if we
have elected to satisfy our conversion obligations entirely in shares of our
common stock, during (a) the 100 trading-day period beginning on the
102nd scheduled trading day before the maturity date if the related
conversion date is on or after November 15, 2013 or (b) the 100
trading-day period beginning on and including the third scheduled trading day
after the conversion date if the related conversion date is before
November 15, 2013).
The
effect, if any, of any of these
transactions and activities on the market price of our common stock or the
notes
will depend in part on market conditions and cannot be ascertained at this
time,
but any of these activities could adversely affect the value of our common
stock
and the value of the notes and, as a result, the conversion value you will
receive upon the conversion of the notes and under certain circumstances, your
ability to convert the notes.
We
repurchase shares of our common stock from time to time, and these repurchases
may affect the market price of our common stock or the
notes.
We
have in the past and plan in the
future to repurchase shares of our common stock from time to time. These
repurchases may raise or maintain the market price of our common stock and
the
notes above independent market levels, may prevent or retard a decline in the
market price of our common stock or the notes or may cause fluctuations in
our
stock price, any of which effects may be significant.
The
additional common stock payable on any notes converted in connection
withspecified corporate transactions may not
adequately compensate you for any loss youmay
experience as a result of the specified corporate
transactions.
If
certain specified corporate
transactions occur, we will under certain circumstances increase the conversion
rate on notes converted in connection with the specified corporate transaction
by a number of additional shares of common stock. The number of additional
shares of common stock will be determined based on the date on which the
specified corporate transaction becomes effective and the price paid per share
of our common stock in the specified corporate transaction as
described under “Description of Notes — Conversion Rights — Additional
Shares.” The additional common stock issuable on conversion of the notes in
connection with a specified corporate transaction may not adequately compensate
you for any loss you may experience as a result of the specified corporate
transaction.
The
conversion rate of the notes may not be adjusted for all dilutive
events.
The
conversion rate of the notes is
subject to adjustment for certain events, including but not limited to the
issuance of stock dividends on our common stock, the issuance of rights or
warrants, subdivisions, combinations, distributions of capital stock,
indebtedness or assets, certain cash dividends and certain tender or exchange
offers as described under “Description of Notes — Conversion Rights.” The
conversion rate will not be adjusted for other events, such as an issuance
of
common stock for cash, that may adversely affect the trading price of the notes
or the
common
stock. There can be no assurance that an event that adversely affects the value
of the notes, but does not result in an adjustment to the conversion rate,
will
not occur.
The
conditional conversion feature of the notes could result in your not
receivingthe value of the common stock into which the
notes are convertible.
Before
November 15, 2013, the
notes are convertible only if specified conditions are met. If the specific
conditions for conversion are not met, you will not be able to convert your
notes, and you may not be able to receive the conversion value of your
notes.
Under
certain circumstances holders may receive less proceeds than expected
becausethe price of our common stock may decline (or
may not appreciate as much as holdersmay expect)
between the day that a holder exercises its conversion right and the
daythe value of the shares issuable upon conversion
is
determined or the shares
aredelivered.
Unless
we elect to satisfy our
conversion obligations entirely in shares of our common stock, our conversion
obligations will be settled, based on a daily settlement amount (as described
in
this prospectus) calculated on a proportionate basis for each day of a 50
trading-day cash settlement averaging period. Upon conversion of a note, holders
might not receive any shares of our common stock, or they might receive fewer
shares of our common stock relative to the conversion value of the note as
of
the conversion date. In addition, because of the 50 trading-day cash settlement
averaging period, settlement will be delayed until at least the 55th trading
day
following the related conversion date. The cash settlement averaging period
for
any notes tendered for conversion on or after November 15, 2013 will be the
50 consecutive trading days beginning on and including the 52nd trading day
immediately preceding the maturity date. See “Description of Notes —
Conversion Rights — Payment upon Conversion — Net Share Settlement.”
Whether we elect to satisfy our conversion obligation entirely in shares of
our
common stock or not, any holder who tenders notes for conversion on or after
November 15, 2013 will not receive any shares issuable in conversion
therefor until the maturity date. Accordingly, a holder who delivers a
conversion notice on or after November 15, 2013 may wait up to
167 days to receive the number of shares issuable to such holder upon
conversion, regardless of when such number of shares is determined. As a result,
upon conversion of the notes, you may receive less proceeds than expected
because the price of our common stock may decline (or not appreciate as much
as
you may expect) between the conversion date and the day the settlement amount
of
your notes is determined or the date the settlement shares are delivered, as
the
case may be. See “Description of Notes — Conversion Rights —
Payment upon Conversion — Settlement in Shares.”
You
should consider the U.S. federal income tax consequences of owning the
notes.
The
U.S. federal income tax
treatment of the conversion of the notes into a combination of our common stock
and cash is uncertain. You are urged to consult your tax advisors with respect
to the U.S. federal income tax consequences resulting from the conversion
of notes into a combination of cash and common stock. A discussion of the
U.S. federal income tax consequences of ownership and disposition of the
notes is contained in this prospectus under the heading “Certain United States
Federal Tax Considerations.”
You
may have to pay taxes if we make or fail to make certain adjustments to
theconversion rate of the notes even though you do
not
receive a corresponding
cashdistribution.
The
conversion rate of the notes is
subject to adjustment for certain events arising from stock splits and
combinations, stock dividends, certain cash dividends and certain other actions
by us that modify our capital structure. See “Description of Notes —
Conversion Rights — Conversion Rate Adjustments.” If, for example, the
conversion rate is adjusted as a result of a distribution that is taxable to
our
common stockholders, such as a cash dividend, you may be required to include
an
amount in income for U.S. federal income tax purposes, notwithstanding the
fact that you do not receive a corresponding cash distribution. In addition,
a
failure to adjust (or to adjust adequately) the conversion rate after an event
that has the effect of increasing your proportionate interest in our company
could be treated as a deemed taxable dividend to you. The amount that you would
have to include in
income
will generally be equal to the amount of the distribution that you would have
received if you had converted your notes into our common stock.
If
certain types of fundamental changes
occur on or before the maturity date of the notes, under some circumstances,
we
will increase the conversion rate for notes converted in connection with the
fundamental change. Such increase may also be treated as a distribution subject
to U.S. federal income tax as a dividend. See “Certain United States
Federal Tax Considerations.”
If
you are a non-U.S. holder (as
defined herein), any deemed dividend would be subject to U.S. federal
withholding tax at a 30% rate, or such lower rate as may be specified by an
applicable treaty, which may be set off against subsequent payments. See
“Certain United States Federal Tax Considerations.”
The
accounting method for convertible debt securities with net share settlement,
suchas the notes, may be subject to
change.
In
calculating our diluted earnings per
share, we currently account for the notes in accordance with Financial
Accounting Standards Board (“FASB”) Emerging Issues Task Force (“EITF”) Issue
No. 90-19, “Convertible Bonds with Issuer Option to Settle for Cash upon
Conversion.” The accounting method for a convertible debt security
that meets the requirements of EITF Issue No. 90-19, is similar to the
accounting for non-convertible debt. We recognize interest expense at
the stated coupon rate, and shares potentially issuable upon conversion of
the
debt are excluded from the calculation of diluted earnings per share until
the
market price of our common stock exceeds the conversion price (i.e. the
conversion price is “in the money”). Once the conversion price is in
the money, the shares that we would issue upon assumed conversion of the debt
are included in the calculation of fully diluted earnings per share using the
“treasury stock” method. No separate value is attributed to the
conversion feature of the debt at the time of issuance.
The
FASB has issued a proposed Staff
Position (“FSP”) that would apply to any convertible debt instrument that may be
settled in whole or in part with cash upon conversion. The proposal
would require separate accounting for the debt and equity components of the
security. Under the proposed FSP, the value assigned to the debt at
the time of issuance (the “debt component”) would be its estimated fair value,
based on a similar debt issue without the conversion feature. The
difference between the debt component and the par value of the debt would be
accounted for as an original issue discount, and included in stockholders’
equity as paid-in capital (the “equity component”). The original
issue discount would be amortized as interest expense over the life of the
debt,
with a corresponding accretion of the debt component to its par
value. Shares that we would issue upon assumed conversion of the debt
would continue to be included in the calculation of fully diluted earnings
per
share using the treasury stock method when the conversion price is in the
money.
As
compared to the current accounting
method, the proposal would reduce the amount recognized as debt and increase
the
amount recognized as stockholders’ equity at the time of
issuance. The amount of debt recognized at time of issuance would
increase over its life, with a corresponding reduction of net income and
earnings per share (net of tax), for the amortization of the original issue
discount. If the proposed FSP is adopted, we would be required to
adopt it as of February 3, 2008 (the beginning of Fiscal 2009), with
retrospective application to financial statements for periods prior to the
date
of adoption.
We
cannot predict whether or not the
FASB will adopt the proposed FSP, and we cannot predict the adoption of any
other changes in generally accepted accounting principals (“GAAP”) that may
affect the accounting for convertible debt securities. Any such
change in the accounting method for convertible debt securities could have
an
adverse impact on our reported or future results of operations or financial
position, and could adversely affect the trading price of our common stock
or
the trading price of the notes.
There
is no established trading market for the notes.
The
notes are a new issue of securities
for which there is currently no public market, and no active trading market
may
ever develop. We do not intend to apply to list the notes on any securities
exchange or to include the
notes
in
any automated quotation system. Although the Notes initially sold to qualified
institutional buyers are eligible for trading on PORTAL, the notes resold
pursuant to this prospectus will no longer be eligible for trading on the PORTAL
Market. The liquidity of any market for the notes will depend upon the number
of
holders of the notes, our results of operations and financial condition, the
market for similar securities, the interest of securities dealers in making
a
market in the notes and other factors. An active or liquid trading market for
the notes may not develop. If an active trading market does not develop or
is
not maintained, the market price and liquidity of the notes may be adversely
affected. In that case, you may not be able to sell your notes at a particular
time or you may not be able to sell your notes at a favorable price. Future
trading prices of the notes will depend on many factors, including:
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our
operating performance and financial
condition;
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•
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the
estimates, expectations and/or recommendations of securities analysts
of
us or the retail industry generally;
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•
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the
interest of securities dealers in making a
market; and
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•
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the
market for similar securities.
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Any
adverse rating of the notes may cause their trading price to
fall.
If
Moody’s Investor Service,
Standard & Poor’s or another rating service rates the notes and if any
of these rating services were to lower its rating on the notes below the rating
initially assigned to the notes or otherwise announces its intention to put
the
notes on credit watch, the trading price of the notes could
decline.
Holders
of the notes are not protected by restrictive
covenants.
We
are not restricted under the terms
of the notes from incurring additional debt, including secured debt that would
in some circumstances effectively rank senior to the notes or any debt that
would be equal in right of payment to the notes. In addition, the limited
covenants applicable to the notes do not require us to achieve or maintain
any
minimum financial results relating to our financial position or results of
operations. We could engage in many types of transactions, such as certain
acquisitions, refinancings or recapitalizations, that could substantially affect
our capital structure and the value of the notes and our common stock but would
not constitute a “fundamental change” that permits holders to require us to
repurchase their notes.
The
price of our common stock, and therefore of the notes, may
fluctuatesignificantly, and this may make it difficult
for you to resell the notes or commonstock issuable
upon conversion of the notes when you want or at prices you
findattractive.
The
market price for our common stock
has varied between a high of $15.57 in November 2006 and a low of $9.16 in
August 2007 in the 12-month period ended August 5, 2007. This volatility may
affect the price at which you could sell your common stock, and the sale of
substantial amounts of our common stock could adversely affect the price of
our
common stock. Our stock price is likely to continue to be volatile and subject
to significant price and volume fluctuations in response to market and other
factors, including the other factors discussed in “Risks Related to Our Business
and Industry,” variations in our quarterly operating results from our
expectations or those of securities analysts or investors, downward revisions
in
securities analysts’ estimates or recommendations, changes in our capital
structure and announcement by us or our competitors of significant acquisitions,
strategic partnerships, joint ventures or capital commitments.
In
addition, the stock market in recent
years has experienced significant price and volume fluctuations that have often
been unrelated to the operating performance of companies. These broad market
fluctuations may adversely affect our stock price, regardless of our operating
results.
Furthermore,
the price of our common
stock also could be affected by possible sales of our common stock by investors
who view the notes as a more attractive means of equity participation in us
and
by hedging or arbitrage
trading
activity that we expect to develop involving our common stock. The hedging
or
arbitrage could, in turn, affect the trading price of the notes.
Future
sales of our common stock in the public market could lower the market price
for
our common stock and adversely impact the trading price of the
notes.
The
issuance and sales of substantial
amounts of common stock, or the perception that issuances and sales may occur,
could adversely affect the trading price of the notes and the market price
of
our common stock. In the future, we may sell additional shares of our common
stock to raise capital. In addition, shares of our common stock are reserved
for
issuance on the exercise of stock options and on conversion of the notes and
our
other outstanding convertible notes. As of August 22, 2007, we had
outstanding approximately 123.1 million shares of our common stock and
options to purchase approximately 2.1 million shares of our common stock
(of which approximately 2.1 million were exercisable as of that date). The
sale or the availability for sale of a large number of shares of our common
stock in the public market could cause the price of our common stock to decline
and could depress the trading price of the notes.
If
you hold notes, you will not be entitled to any rights with respect to our
commonstock, but you will be subject to all changes
made with respect to our common stock.
If
you hold notes, you will not be
entitled to any rights with respect to our common stock (including, without
limitation, voting rights and rights to receive any dividends or other
distributions on our common stock), but you will be subject to all changes
affecting the common stock. You will have rights with respect to our common
stock only if and when we deliver common stock to you upon conversion of your
notes and, in limited cases, under the conversion rate adjustments applicable
to
the notes. For example, if an amendment is proposed to our Restated Articles
of
Incorporation or Bylaws requiring stockholder approval and the record date
for
determining the stockholders of record entitled to vote on the amendment occurs
before delivery of common stock to you, you will not be entitled to vote on
the
amendment, although you will nevertheless be subject to any changes in the
powers, preferences or special rights of our common stock effected by the
amendment, if adopted.
RATIO
OF EARNINGS TO FIXED CHARGES
Our
consolidated ratio of earnings to
fixed charges for each of the last five fiscal years and for the Fiscal 2008
First Quarter is set forth below. For the purpose of computing these ratios,
“earnings” consists of income from continuing operations before provision for
taxes on income, minority interest and cumulative effect of a change in
accounting principle less minority interest adjusted for fixed charges,
excluding capitalized interest. “Fixed charges” consists of interest expense
(which includes amortization of debt expenses), capitalized interest and an
estimate of the interest factor in our leases. It is not practicable to
calculate the interest factor in a material portion of our leases. The ratio
was
calculated by dividing the sum of the fixed charges into the sum of the earnings
from continuing operations before taxes and fixed charges.
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Year
Ended
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Quarter
Ended
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February
1,
2003
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January
31,
2004
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January
29,
2005
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January
28,
2006
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February
3,
2007
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May
5,
2007
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Ratio
of earnings to fixed charges
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1.87x
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1.80x
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2.39x
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2.90x
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2.94x
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2.94x
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USE
OF PROCEEDS
We
will not receive any proceeds from
the sale by any selling securityholder of the notes or the underlying common
stock.
PRICE
RANGE OF COMMON STOCK
Our
common stock is traded on the
over-the-counter market and quoted on the NASDAQ Global Select Market (“NASDAQ”)
under the symbol “CHRS” and is listed and traded on the Chicago Board Options
Exchange and Pacific Stock Exchange under the symbol “QSR.” The following table
sets forth the high and low sale prices for our common stock during the
indicated periods, as reported by NASDAQ. On August 22, 2007, the closing sale
price of our common stock on NASDAQ was $8.99 per share.
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Common
Stock
Price
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High
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Low
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Fiscal
2006:
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First
Quarter
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$ |
9.03
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$ |
7.04
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Second
Quarter
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12.25
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7.00
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Third
Quarter
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12.34
|
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9.69
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Fourth
Quarter
|
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14.07
|
|
|
|
10.86
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Fiscal
2007:
|
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First
Quarter
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$ |
15.18
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$ |
11.90
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Second
Quarter
|
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|
14.90
|
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9.97
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Third
Quarter
|
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15.35
|
|
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9.69
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Fourth
Quarter
|
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15.57
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12.30
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Fiscal
2008:
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First
Quarter
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$ |
13.38
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$ |
11.33
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Second
Quarter
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12.92
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9.16
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The
approximate number of holders of
record of our common stock as of August 22, 2007 was 1,776. This number excludes
individual stockholders holding stock under nominee security position
listings.
DIVIDEND
POLICY
We
have not paid any dividends since
1995, and we do not expect to declare or pay any dividends on our common stock
in the foreseeable future. The payment of future dividends is within the
discretion of our board and will depend upon our future earnings, if any, our
capital requirements, financial condition and other relevant
factors.
Our
existing revolving credit facility
allows the payment of dividends on our common stock provided we are in
compliance with certain financial covenants both before and immediately after
the payment of such dividends.
DESCRIPTION
OF NOTES
We
issued the notes under the
indenture, dated as of April 30, 2007,between us and Wells Fargo
Bank, National Association, as trustee. The notes and thecommon stock
issuable upon conversion of the notes, if any, will be covered by
theregistration rights agreement. Each holder may request a copy of
the
indenture andthe registration rights agreement from the trustee at the
address providedherein.
The
following description is a
summary of the material provisions of the notes, theindenture and the
registration rights agreement and does not purport to be complete.This
summary is subject to and is qualified by reference to all the provisions of
thenotes and the indenture, including the definitions of certain terms
used in theindenture, and to all provisions of the registration rights
agreement. Whereverparticular provisions or defined terms of the
indenture or the notes are referred to,these provisions or defined
terms are incorporated in this prospectus byreference. We urge you to
read the indenture because it, and not this description,defines each
holder’s rights as a holder of the notes.
As
used in this “Description of
Notes” section, references to “Charming Shoppes,” the“company,” “we,”
“us” and “our” refer only to Charming Shoppes, Inc. and do notinclude
its subsidiaries.
General
We
issued $275 million aggregate
principal amount of notes.
The
notes will mature on May 1,
2014 unless earlier converted or repurchased. Each holder of notes has the
option, subject to certain qualifications and the satisfaction of certain
conditions, to convert its notes based on an initial conversion rate of
65.0233 shares per $1,000 principal amount of notes, subject to adjustment;
provided that at any time before November 15, 2013, we may
irrevocably elect to satisfy all of our conversion obligations in shares of
our
common stock as described under “— Conversion Rights — Payment upon
Conversion — Settlement in Shares” below. This is equivalent to an initial
conversion price of approximately $15.38 per share of common stock. Unless
we elect to satisfy our conversion obligation entirely in shares of our common
stock, upon a surrender of a holder’s notes for conversion, we will deliver a
settlement amount that will consist of an amount of cash not to exceed the
aggregate principal amount of notes to be converted, and, to the extent the
daily conversion value exceeds the relevant portion of the principal amount
as
described under “— Payment upon Conversion” below, shares of our common
stock. If we elect to satisfy our total conversion obligation entirely in shares
of our common stock, we will deliver to holders upon conversion of their notes
a
number of shares of our common stock equal to (1) the aggregate principal
amount of notes to be converted divided by $1,000, multiplied by (2) the
applicable conversion rate as described below under “— Conversion
Rights — Payment upon Conversion — Settlement in Shares.” We will not
issue any fractional shares upon conversion of the notes and instead will pay
cash in lieu of fractional shares as described under “— Payment upon
Conversion” below. A holder will not receive any cash payment for interest (or
additional amounts, if any) accrued and unpaid to the conversion date except
under the limited circumstances described below, including under
“— Registration Rights” below.
The
notes are subject to repurchase by
us at the option of the holder upon a fundamental change as described under
“— Repurchase of Notes by Us at Option of Holder upon a Fundamental Change”
below at a repurchase price equal to 100% of the principal amount of the notes
to be repurchased, plus accrued and unpaid interest to, but excluding, the
fundamental change repurchase date.
The
notes were issued only in
denominations of $1,000 principal amount and integral multiples thereof.
References to “a note” or “each note” in this prospectus refer to $1,000
principal amount of the notes.
As
used in this prospectus, “business
day” means any day, other than a Saturday or Sunday, that is neither a legal
holiday nor a day on which commercial banks are authorized or required by law,
regulation or executive order to close in the City of New York.
Notes
may be presented for conversion
at the office of the conversion agent and for exchange or registration of
transfer at the office of the paying agent.
Any
reference to “common stock” means
our common stock, par value $0.10 per share.
Interest
The
notes bear interest at a rate of
1.125% per year. We will pay interest on the notes on May 1 and November 1
of each year, beginning on November 1, 2007.
Interest
on a note, including
additional amounts, if any, will be paid to the person in whose name the note
is
registered at the close of business on the April 15 or October 15, as the
case may be (each, a “record date”), immediately preceding the relevant interest
payment date (whether or not such day is a business day), subject to certain
exceptions described below. Interest will be calculated on the basis of a
360-day year consisting of twelve 30-day months and will accrue from
April 30, 2007 or from the most recent date to which interest has been paid
or duly provided for.
Upon
conversion of a note, a holder
will not receive any cash payment of interest (including additional amounts,
if
any) unless, as described below, such conversion occurs between a record date
and the interest payment date to which that record date relates or such
conversion occurs during a registration default as described under
“— Registration Rights” below. If we deliver common stock upon surrender of
a note for conversion, we will not issue fractional shares of common stock.
Instead, we will pay cash in lieu of fractional shares as described under
“— Payment upon Conversion” below. Our delivery to a holder of the full
amount of common stock or cash and common stock, if any, as described below
under “— Conversion Rights — Payment upon Conversion,” together with
any cash payment for any fractional share, will be deemed to satisfy our
obligation to pay:
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the
principal amount of the
note; and
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•
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accrued
but unpaid interest (including additional amounts, if any) up to
but
excluding the conversion date.
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As
a result, accrued but unpaid
interest (including additional amounts, if any) up to but excluding the
conversion date will be deemed to be paid in full rather than cancelled,
extinguished or forfeited. For a general discussion of the U.S. federal
income tax treatment upon receipt of our common stock upon conversion, see
“Certain United States Federal Tax Considerations.”
If
notes are converted after the close
of business on a record date but before the opening of business on the interest
payment date to which that record date relates, holders of such notes at the
close of business on the record date will receive accrued but unpaid interest,
including additional amounts, if any, payable on the notes on the corresponding
interest payment date notwithstanding the conversion. Such notes, upon surrender
for conversion, must be accompanied by funds equal to the amount of interest
(including additional amounts, if any) payable on the notes so converted on
the
next succeeding interest payment date. However, no such payment need be made
(i) to the extent of any overdue interest (including any overdue additional
amounts) if any such amount exists at the time of conversion with respect to
such note, (ii) for conversions on or after November 15, 2013, or
(iii) if we have specified a fundamental change repurchase date after the
close of business on a record date and before the opening of business on the
corresponding interest payment date.
If
any interest payment date, maturity
date, repurchase date or settlement date (including upon the occurrence of
a
fundamental change, as described below) falls on a day that is not a business
day, then the required payment will be made on the next succeeding business
day
with the same force and effect as if made on the date that the payment was
due,
and no additional interest will accrue on that payment for the period from
and
after the interest payment date, maturity date, repurchase date or settlement
date as the case may be, to that next succeeding business day.
Ranking
The
notes are our general, unsecured
obligations ranking equally in right of payment with all of our existing and
future unsecured, unsubordinated indebtedness and senior in right of payment
to
all of our existing and future indebtedness that is expressly subordinated
in
right of payment to the notes. The notes are effectively subordinated to all
of
our existing and future secured indebtedness to the extent of the value of
the
assets securing such indebtedness. In addition, the notes are structurally
subordinated to the liabilities, including trade payables, of our
subsidiaries.
In
the event of bankruptcy,
liquidation, reorganization or other winding up of the company, our assets
that
secure secured debt will be available to pay obligations on the notes only
after
all indebtedness under our secured debt has been repaid in full from such
assets. In such event, there may not be sufficient assets remaining to pay
amounts due on any or all of the notes then outstanding.
As
of May 5, 2007, we had approximately
$439 million of total debt outstanding on a consolidated basis, including
$250 million principal amount of our 1.125% Senior Convertible Notes
due 2014, $150 million principal amount of our 4.75% Senior Convertible Notes
due 2012 and $39 million of other indebtedness. On May 11, 2007,
pursuant to the initial purchasers’ over-allotment option, we issued an
additional $25 million principal amount of our 1.125% Senior Convertible Notes
due 2014. On April 30, 2007, we called for redemption our 4.75%
Senior Convertible Notes due 2012 (the “2012 Notes”). Holders of
$149,956,000 aggregate principal amount of these notes exercised their right to
convert their notes into an aggregate of 15,145,556 shares of our common stock
and holders of the remaining $43,000 aggregate principal amount of the 2012
Notes who did not convert redeemed their 2012 Notes for an aggregate of
$44,040.19 in cash. As of May 5, 2007, there was no debt outstanding
under our existing revolving credit facility.
Conversion
Rights
General
Subject
to our election to satisfy our
conversion obligation entirely in shares of our common stock and subject to
the
qualifications and the satisfaction of the conditions and during the periods
described below, you may convert each of your notes before the close of business
on the second business day immediately preceding the maturity date into cash
in
an amount described below or cash and common stock, if applicable, based on
an
initial conversion rate of 65.0233 shares per $1,000 principal amount of
notes, which is equivalent to an initial conversion price of approximately
$15.38 per share of common stock.
The
conversion rate in effect at any
given time is referred to in this prospectus as the “applicable conversion rate”
and will be subject to adjustments as described under “— Conversion Rate
Adjustments,” but it will not be adjusted for accrued interest. The “applicable
conversion price” at any given time is equal to the principal amount of a note
divided by the applicable conversion rate. You will be entitled to convert
your
notes, in denominations of $1,000 principal amount or multiples thereof. Subject
to the immediately following paragraph, upon surrender of a note for conversion,
we will deliver cash and shares of our common stock, if any, as described below
under “— Payment upon Conversion.”
At
any time before November 15,
2013, we may irrevocably elect, in our sole discretion and without the consent
of the holders of the notes, by notice to the trustee and the holders, to
satisfy all of our conversion obligations arising after the time of such notice
in shares of our common stock. Any such election will apply to all notes
tendered for conversion following the date of such notice.
A
holder may convert its notes in whole
or in part under the following circumstances:
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upon
satisfaction of the sale price
condition;
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•
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upon
satisfaction of the trading price
condition;
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•
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at
any time on or after November 15,
2013; or
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•
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upon
the occurrence of specified corporate
transactions.
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Upon
any determination by us, the
conversion agent or the trustee, as applicable, that you are or will be entitled
to convert your notes into shares of our common stock in accordance with the
foregoing provisions, we will (1) issue a press release and use our
reasonable efforts to post the information on our website or otherwise publicly
disclose this information or (2) provide notice to the holders of the notes
in a manner contemplated by the indenture, including through the facilities
of
The Depository Trust Company (“DTC”).
If
a holder converts its notes, we will
pay any documentary, stamp or similar issue or transfer tax due on any shares
of
our common stock issued by us upon conversion of the notes, unless the tax
is
due because a holder requests the shares to be issued or delivered to another
person, in which case that holder will pay that tax.
Conversion
upon Satisfaction of Sale Price Condition
Before
November 15, 2013, holders
may surrender notes for conversion during any fiscal quarter, and only during
that fiscal quarter, after the fiscal quarter ending May 5, 2007, if the
closing sale price per share of our common stock for at least 20 trading days
during the period of 30 consecutive trading days ending on the last trading
day
of the preceding fiscal quarter is more than 130% of the applicable conversion
price on the last trading day of that preceding fiscal quarter. Unless we elect
to satisfy our conversion obligation entirely in shares of our common stock,
upon surrender by a holder of its notes for conversion, we will deliver cash
and
common stock, if applicable, as described below under “— Payment upon
Conversion.”
The
“closing
sale price” of our common
stock on any date means the closing sale price per share (or, if no closing
sale
price is reported, the average of the bid and asked prices or, if more than
one
in either case, the average of the average bid and the average asked prices)
on
such date as reported by the NASDAQ Global Select Market or, if our common
stock
is not reported by the NASDAQ Global Select Market, in composite transactions
for the principal U.S. national or regional securities exchange on which
our common stock is traded. If our common stock is not listed for trading on
a
U.S. national or regional securities exchange, the closing sale price will
be the last quoted bid price for our common stock in the over-the-counter market
on the relevant date as reported by the National Quotation Bureau Incorporated
or similar organization. If our common stock is not so quoted, the closing
sale
price will be the average of the mid-point of the last bid and asked prices
for
our common stock on the relevant date from each of at least three independent
nationally recognized investment banking firms selected by us for this
purpose.
“Trading
day” means a day on which
(i) trading in securities generally occurs on the NASDAQ Global Select
Market or, if our common stock is not then listed on the NASDAQ Global Select
Market, on the principal other U.S. national or regional securities
exchange on which our common stock is then listed or, if our common stock is
not
then listed on a U.S. national or regional securities exchange, in the
principal other market on which our common stock is then traded and (ii) a
closing sale price for our common stock is available on such securities exchange
or market. If our common stock (or other security for which a closing sale
price
must be determined) is not so listed or quoted, “trading day” means a “business
day.”
The
conversion agent, Wells Fargo Bank,
National Association, will, on our behalf, determine daily whether the notes
are
convertible as a result of the closing sale price of our common stock and notify
us and the trustee.
Conversion
upon Satisfaction of Trading Price Condition
Holders
may surrender notes for
conversion during the five business day period immediately following any five
consecutive trading day period in which the trading price per $1,000 principal
amount of notes (as determined following a request by a holder of the notes
in
accordance with the procedures described below) for each day of the five trading
day period was less than 98% of the product of the closing sale price of our
common stock and the current applicable conversion rate of the notes on each
such day.
The
“trading
price” of the notes on any
date of determination means the average of the secondary market bid quotations
obtained by the bid solicitation agent for $5 million aggregate principal
amount of the notes at approximately 3:30 p.m., New York City time, on the
determination date from three independent nationally recognized securities
dealers we select, provided that if:
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three
such bids cannot reasonably be obtained by the bid solicitation agent,
but
two such bids are obtained, then the average of the two bids shall
be
used, and
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•
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only
one such bid can reasonably be obtained by the bid solicitation agent,
that one bid shall be used;
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provided
further, if no bids can reasonably be obtained, then for purposes of
determining whether the trading price condition has been met, the trading price
per $1,000 principal amount of the notes will be deemed to be less than 98%
of
the product of the closing sale price of our common stock and the applicable
conversion rate of the notes on that day.
The
trustee will have no obligation to
determine the trading price of the notes as described in this section unless
we
have requested such determination, and we shall have no obligation to make
such
request unless a holder provides us with reasonable evidence that the trading
price per $1,000 principal amount of notes would be less than 98% of the product
of the closing sale price of our common stock and the conversion rate of the
notes on that day. At such time, we will instruct the trustee to determine
the
trading price of the notes beginning on the next trading day and on each
successive trading day until the trading price per $1,000 principal amount
of
notes is greater than or equal to 98% of the product of the closing price of
our
common stock and the conversion rate of the notes.
Conversion
On or After November 15, 2013
Holders
may surrender notes for
conversion at any time on or after November 15, 2013 until the close of
business on the second business day immediately preceding the maturity
date.
Conversion
upon Specified Corporate Transactions
Certain
Distributions
If
we elect to distribute to all or
substantially all holders of our common stock:
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certain
rights or warrants entitling them to purchase, for a period expiring
within 60 days after the date of the distribution, shares of our
common stock at less than the average of the closing sale prices
of a
share of our common stock for the five consecutive trading days ending
on
the trading day immediately preceding the public announcement date
of the
distribution; or
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cash,
debt securities, rights or warrants to purchase our securities, or
other
assets (excluding dividends or distributions described in clause (1)
under “— Conversion Rate Adjustments”), which distribution has a per
share value as determined by our board of directors exceeding 10%
of the
average of the closing sale prices for the five consecutive trading
days
ending on the trading day immediately preceding the public announcement
date for such distribution,
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we
must
notify holders of the notes at least 30 calendar days before the
ex-dividend date for such distribution. Once we have given such notice, holders
may surrender their notes for conversion at any time until the earlier of the
close of business on the business day immediately before the ex-dividend date
or
any announcement that such distribution
will
not
take place. No holder may exercise this right to convert its notes if the holder
is entitled to participate in the distribution (based on the applicable
conversion rate) without conversion. The “ex-dividend” date is the first date
upon which a sale of the common stock does not automatically transfer the right
to receive the relevant distribution from the seller of the common stock to
its
buyer.
Certain
Corporate Transactions
If
a transaction or event that
constitutes a “fundamental change” (as defined below under “— Repurchase of
Notes by Us at Option of Holder upon a Fundamental Change”) occurs, regardless
of whether a holder has the right to require us to repurchase the notes as
described under “— Repurchase of Notes by Us at Option of Holder upon a
Fundamental Change,” a holder may surrender notes for conversion at any time
from and after the date that is 30 calendar days before the anticipated
effective date of the transaction until and including the date that is 30
calendar days after the actual effective date of such transaction (or, if such
transaction also results in holders having a right to require us to repurchase
their notes, until the close of business on the business day before the
fundamental change repurchase date). We will notify holders and the trustee
as
promptly as practicable following the date we publicly announce such transaction
(but in no event less than 30 calendar days before the anticipated
effective date of such transaction).
If
a holder elects to convert its notes
in connection with a fundamental change, we will deliver upon conversion of
the
notes an additional number of shares of our common stock as described below
under “— Conversion Rate Adjustments — Additional Shares” or, in lieu
thereof, we may in certain circumstances elect to adjust the applicable
conversion rate and related conversion obligation so that the notes are
convertible into shares of the acquiring or surviving entity.
If
a fundamental change occurs, a
holder may also have the right to require us to repurchase all or a portion
of
its notes, as described under “— Repurchase of Notes by Us at Option of
Holder upon a Fundamental Change.”
Conversion
Procedures
To
convert a note, a holder must do
each of the following:
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complete
and manually sign the conversion notice on the back of the note,
or a
facsimile of the conversion notice, and deliver the irrevocable
conversion
notice to the conversion
agent;
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if
the notes are in certificated form, surrender the note to the conversion
agent;
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if
required, furnish appropriate endorsements and transfer documents
required
by the conversion agent;
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if
required, pay all transfer or similar
taxes; and
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if
required, pay funds equal to interest payable on the next interest
payment
date.
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The
date a holder complies with these
requirements is the “conversion date” under the indenture. The notes will be
deemed to have been converted immediately before the close of business on the
conversion date. If a holder’s interest is a beneficial interest in a global
note, to convert, a holder must comply with the last three requirements listed
above and comply with the depositary’s procedures for converting a beneficial
interest in a global note.
The
conversion agent will initially be
the trustee. Subject to our election to satisfy our conversion obligation
entirely in shares of our common stock, the conversion agent will, on a holder’s
behalf, convert the notes based on an initial conversion rate of
65.0233 shares per $1,000 principal amount of notes, subject to adjustment.
A holder may obtain copies of the required form of the conversion notice from
the conversion agent. Payments of cash and/or, if applicable, a stock
certificate or certificates representing shares of our common stock will be
delivered to the holder, or a book-entry transfer through DTC will be made,
by
the conversion agent for the number of shares of common stock as set forth
below
under “— Payment upon Conversion.”
Payment
upon Conversion
Net
Share Settlement
Unless
we
elect to satisfy our conversion obligation entirely in shares of our common
stock as described under “— Settlement in Shares,” upon a conversion of
notes, we will satisfy our obligation to convert the notes (the “conversion
obligation”) by delivering to holders in respect of each $1,000 aggregate
principal amount of notes being converted a “settlement amount” equal to the sum
of the daily settlement amounts for each of the 50 consecutive trading days
of
the cash settlement averaging period.
The
“daily
settlement amount” for each
of the 50 consecutive trading days of the cash settlement averaging period,
shall consist of:
(1) cash
equal to the lesser of $20 and the daily conversion value; and
(2) to
the extent the daily conversion value exceeds $20, a number of shares equal
to,
(A) the difference between the daily conversion value for such day and $20
(such difference being referred to as the “daily excess amount”), divided by
(B) the daily VWAP (as defined below) for such day (or the consideration
into which our common stock has been converted in connection with certain
corporate transactions).
We
will not issue any fractional shares
of common stock upon conversion of the notes. Instead, we will pay the cash
value of such fractional shares based upon the daily VWAP on the final trading
day of the cash settlement averaging period. Upon conversion of a note, a holder
will not receive any cash payment of interest (including additional amounts,
if
any) unless such conversion occurs between a record date and the interest
payment date to which that record date relates. We will deliver the settlement
amount on the third business day following the date the settlement amount is
determined.
The
“daily
conversion value” means, for
each of the 50 consecutive trading days during the cash settlement averaging
period, one-fiftieth (1/50) of the product of (1) the applicable conversion
rate on such trading day and (2) the daily VWAP on such day.
The
“daily
VWAP” means, for each of the
50 consecutive trading days during the observation period, the per share
volume-weighted average price as displayed under the heading “Bloomberg VWAP” on
Bloomberg page “CHRS.UQ AQR” (or its equivalent successor if such page is not
available) in respect of the period from scheduled open of trading until the
scheduled close of trading of the primary trading session on that trading day
(or if such volume-weighted average price is unavailable, the market value
of
one share of our common stock on that trading day determined, using a
volume-weighted average method, by a nationally recognized independent
investment banking firm retained for this purpose by us). The daily VWAP will
be
determined without regard to after hours trading or any other trading outside
of
the regular trading session trading hours.
The
“cash
settlement averaging period”
with respect to any notes means the 50 consecutive trading days beginning on
the
second trading day after the conversion date for those notes, except that with
respect to any note with a conversion date occurring on or after
November 15, 2013, the “cash settlement averaging period” means the 50
consecutive trading days beginning on, and including, the 52nd scheduled
trading day before the maturity date.
For
the purposes of determining the
amount of payment upon conversion only, “trading day” means a day on which
(i) there is no market disruption event (as defined below) and
(ii) trading generally in our common stock occurs on the NASDAQ Global
Select Market or, if our common stock is not then listed on the NASDAQ Global
Select Market, on the principal other U.S. national or regional securities
exchange on which our common stock is then listed or, if our common stock is
not
then listed on a U.S. national or regional securities exchange, in the
principal other market on which our common stock is then traded. If our common
stock (or other security for which a daily VWAP must be determined) is not
so
traded, “trading day” means a “business day.”
“Scheduled
trading day” means a day
that is scheduled to be a trading day on the primary U.S. national or
regional securities exchange or market on which our common stock is listed
or
admitted to trading.
For
the purposes of determining the
amount of payment upon conversion, “market disruption event” means (i) a
failure by the NASDAQ Global Select Market or, if our common stock is not then
listed on the NASDAQ Global Select Market, by the principal other
U.S. national or regional securities exchange on which our common stock is
then listed or, if our common stock is not then listed on a U.S. national
or regional securities exchange, by the principal other market on which our
common stock is then traded, to open for trading during its regular trading
session, or (ii) the occurrence or existence before 1:00 p.m., New
York City time, on any trading day for our common stock for an aggregate one
half hour period of any suspension or limitation imposed on trading (by reason
of movements in price exceeding limits permitted by the stock exchange or
otherwise) in our common stock or in any options, contracts or future contracts
relating to our common stock.
If
a holder surrenders notes for
conversion and the daily conversion value is being determined at a time when
the
notes are convertible into other property in addition to or in lieu of our
common stock, the daily conversion value of each note will be determined based
on the kind and amount of shares of stock, securities or other property or
assets (including cash or any combination thereof) that a holder of a number
of
shares of our common stock equal to the applicable conversion rate would have
owned or been entitled to receive in such transaction and the value thereof
(in
the case of assets other than cash or traded securities, as determined by our
board of directors) during the cash settlement averaging period.
If
a holder elects to convert its notes
in connection with a fundamental change, the applicable conversion rate will
be
subject to further adjustment as described below under “— Conversion Rate
Adjustments — Additional Shares.”
Settlement
in Shares
We
may irrevocably elect to satisfy our
conversion obligations entirely in shares of our common stock (plus cash in
lieu
of fractional shares) at any time before November 15, 2013 by notice to the
trustee and the holders informing them of such irrevocable election.
Simultaneously with providing this notice, we will disseminate a press release
through Dow Jones & Company, Inc. or Bloomberg Business News or another
newswire service announcing such election or publish that information in the
Wall Street Journal or another newspaper of general circulation in the City
of
New York or on our website. If we so elect, we will deliver to holders tendering
their notes for conversion following such notice a number of shares of our
common stock (the “settlement shares”) equal to (i) the aggregate principal
amount of notes to be converted divided by $1,000, multiplied by (ii) the
applicable conversion rate on the conversion date (which will include any
increases to reflect any additional shares which you may be entitled to receive
as described under “Conversion Rate Adjustments — Additional
Shares”).
We
will deliver the settlement shares
to converting holders on the third business day immediately following the
related conversion date for such notes, except that in respect of notes with
a
conversion date on or after November 15, 2013, we will deliver the
settlement shares to converting holders on the maturity date. If holders are
entitled to receive additional shares as described under “— Conversion Rate
Adjustments — Additional Shares,” then we will deliver the shares on the
third business day immediately following the date the number of additional
shares is determined.
We
will deliver cash in lieu of any
fractional shares of our common stock deliverable in connection with delivery
of
the settlement shares based on the daily VWAP on the third scheduled trading
day
before the settlement date.
Conversion
Rate Adjustments
The
applicable conversion rate will be
subject to adjustment, without duplication, upon the occurrence of any of the
following events, except that if a holder is entitled to participate on the
relevant distribution or payment date in a distribution described in
clause (2), (3) or (4) below without converting its notes (based on the
applicable conversion
rate
in
effect immediately before the relevant ex-dividend date) then no additional
conversion rate adjustment shall be made in connection with such
distribution:
(1) If
we issue our common stock as a dividend or distribution on our common stock,
or
if we effect a share split or share combination, the applicable conversion
rate
will be adjusted based on the following formula:
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CR(1)
= CR(1) ×
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OS(1)
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OS(0)
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where
CR(0)
=
the conversion rate in effect immediately before the ex-dividend date for such
dividend or distribution, or the effective date of such share split or share
combination;
CR(1)
=
the new conversion rate in effect immediately after the ex-dividend date for
such dividend or distribution, or the effective date of such share split or
share combination;
OS(0)
=
the number of shares of our common stock outstanding immediately before such
ex-dividend date, or effective date; and
OS(1)
=
the number of shares of our common stock outstanding immediately before such
ex-dividend date, or effective date but after giving effect to such dividend,
distribution, share split or share combination.
If
any dividend or distribution
described in this clause (1) is declared but not so paid or made, the
new conversion rate shall be readjusted, as of the date that is the earlier
of
(i) the public announcement of the non-payment of the dividend or
distribution and (ii) the date that the dividend or distribution was to be
paid, to the conversion rate that would then be in effect if such dividend
or
distribution had not been declared.
(2) If
we distribute to all, or substantially all, holders of our common stock any
rights, warrants or options entitling them for a period of not more than
60 days after the date of issuance thereof to subscribe for or purchase our
common stock at an exercise price per share of our common stock less than the
average of the closing sale prices of our common stock for the 10 consecutive
trading day period ending on the business day immediately preceding the time
of
announcement of such issuance, the applicable conversion rate will be adjusted
based on the following formula:
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CR(1)
= CR(0) ×
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(OS(0)
+ X)
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(OS(0)
+ Y)
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where
CR(0)
=
the conversion rate in effect immediately before the ex-dividend date for such
distribution;
CR(1)
=
the new conversion rate in effect immediately after the ex-dividend date for
such distribution;
OS(0) =
the number of shares of our common stock outstanding immediately before the
ex-dividend date for such distribution;
X
= the
number of shares of our common stock issuable pursuant to such rights, warrants
or options; and
Y
= the
number of shares of our common stock equal to the quotient of (A) the
aggregate price payable to exercise such rights, warrants or options divided
by
(B) the average of the closing sale prices of our common stock for the 10
consecutive trading days ending on the trading day immediately preceding the
date of announcement for the issuance of such rights, warrants or
options.
If
any right, warrant or option
described in this clause (2) is not exercised or converted before the
expiration of the exercisability or convertibility thereof, the new conversion
rate shall be readjusted, as of such expiration date, to the conversion rate
that would then be in effect if such right, warrant or option had not been
so
issued.
(3) If
we distribute shares of our capital stock, evidences of indebtedness or other
assets or property to all, or substantially all, holders of our common stock,
excluding:
(A) dividends,
distributions, rights, warrants or options referred to in clauses (1) or
(2) above;
(B) dividends
or distributions paid exclusively in cash; and
(C) spin-offs
described below in this clause (3),
then
the
applicable conversion rate will be adjusted based on the following
formula:
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CR(1)
= CR(0) ×
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SP(0)
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(SP(0) -
FMV)
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where
CR(0) =
the conversion rate in effect immediately before the ex-dividend date for such
distribution;
CR(1)
=
the new conversion rate in effect immediately after the ex-dividend date for
such distribution;
SP(0) =
the average of closing sale prices of our common stock over the 10 consecutive
trading day period ending on the trading day immediately preceding the
ex-dividend date for such distribution; and
FMV
= the
fair market value (as determined in good faith by our board of directors) of
the
shares of capital stock, evidences of indebtedness, assets or property
distributed with respect to each outstanding share of our common stock on the
earlier of the record date or the ex-dividend date for such
distribution.
Where
there has been a payment of a dividend or other distribution of our common
stock
or shares of capital stock of any class or series, or similar equity interest,
of or relating to our subsidiaries or other business units (a “spin-off”), the
conversion rate in effect immediately before close of business on the
10th trading day immediately following the effective date of the spin-off
will be adjusted based on the following formula:
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CR(1)
= CR(0) ×
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(FMV(0)
+ MP(0))
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MP(0)
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where
CR(0) =
the conversion rate in effect on the 10th trading day immediately
following, and including, the effective date of the spin-off;
CR(1)
=
the new conversion rate immediately after the 10th trading day immediately
following, and including, the effective date of the spin-off;
FMV(0) =
the average of the closing sale prices of the capital stock or similar equity
interest distributed to holders of our common stock applicable to one share
of
our common stock over the first 10 consecutive trading days after, and
including, the effective date of the spin-off; and
MP(0) =
the average of the closing sale prices of our common stock over the first 10
consecutive trading days after the effective date of the spin-off.
An
adjustment to the applicable
conversion rate made pursuant to the immediately preceding paragraph will occur
on the 10th trading day following the effective date of the spin-off;
provided that in respect of any conversion within the 10 trading days
following the effective date of any spin-off, references within this
clause (3) to 10 trading days shall be deemed replaced with such lesser
number of trading days as have elapsed between the effective date of such
spin-off and the conversion date in determining the applicable conversion
rate.
If
any such dividend or distribution
described in this clause (3) is declared but not paid or made, the new
conversion rate shall be readjusted, as of the date that is the earlier of
(i) the public announcement of the non-payment of the dividend or
distribution and (ii) the date that the dividend or distribution was to be
paid, to be the conversion rate that would then be in effect if such dividend
or
distribution had not been declared.
(4) If
we make any cash dividend or distribution to all, or substantially all, of
the
holders of our outstanding common stock, the applicable conversion rate will
be
adjusted based on the following formula:
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CR(1)
= CR(0) ×
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SP(0)
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(SP(0) -
C)
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where
CR(0)
=
the conversion rate in effect immediately before the ex-dividend date for such
distribution;
CR(1)
=
the new conversion rate immediately after the ex-dividend date for such
distribution;
SP(0)
=
the closing sale price of our common stock on the trading day immediately
preceding the earlier of the record date and the day immediately preceding
the
ex-dividend date for such distribution; and
C
= the
amount in cash per share that we distribute to holders of our common
stock.
If
any dividend or distribution
described in this clause (4) is declared but not so paid or made, the
new conversion rate shall be readjusted, as of the date that is the earlier
of
(i) the public announcement of the non-payment of the dividend or
distribution and (ii) the date that the dividend or distribution was to be
paid, to the conversion rate that would then be in effect if such dividend
or
distribution had not been declared.
(5) If
we or any of our subsidiaries makes a payment in respect of a tender offer
or
exchange offer for our common stock, to the extent that the cash and value
(which will be, except for the value of traded securities, as determined by
our
board of directors) of any other consideration included in the payment per
share
of our common stock exceeds the closing sale price of a share of our common
stock on the trading day next succeeding the last date on which tenders or
exchanges may be made pursuant to such tender or exchange offer, the applicable
conversion rate will be adjusted as of the 10th trading day following the
date the tender or exchange offer expires based on the following
formula:
|
CR(1)
= CR(0) ×
|
(AC
+ (SP(1) × OS(1)))
|
|
(SP(1)
× OS(0))
|
where
CR(0)
=
the conversion rate in effect on the 10th day immediately following, and
including, the date such tender or exchange offer expires;
CR(1)
=
the conversion rate in effect immediately after the 10th trading day
immediately following, and including, the date such tender or exchange offer
expires;
AC
= the
aggregate value of all cash and any other consideration (as determined by our
board of directors) paid or payable for our common stock purchased in such
tender or exchange offer;
OS(0)
=
the number of shares of our common stock outstanding on the trading day
immediately before the date such tender or exchange offer expires;
OS(1)
=
the number of shares of our common stock outstanding on the trading day
immediately after the date such tender or exchange offer expires (after giving
effect to the purchase or exchange of shares pursuant to such tender or exchange
offer); and
SP(1)
=
the average closing sale prices of our common stock over the 10 consecutive
trading day period commencing on the trading day next succeeding the date such
tender or exchange offer expires.
The
adjustment to the applicable
conversion rate under the preceding clause will occur on the 10th trading
day from, and including, the trading day next succeeding the date such tender
or
exchange offer expires; provided that in respect of any conversion
within 10 trading days immediately following, and including, the expiration
date
of any tender or exchange offer, references with respect to 10 trading days
shall be deemed replaced with such lesser number of trading days as have elapsed
between the expiration date of such tender or exchange offer and the conversion
date in determining the applicable conversion rate.
In
addition to these adjustments, we
may in our sole discretion increase the applicable conversion rate as our board
of directors deems advisable to avoid or diminish any income tax to holders
of
our notes resulting from any dividend or distribution of capital stock issuable
upon conversion of the notes (or rights to acquire capital stock) or from any
event treated as such for income tax purposes. We may also, from time to time
in
our sole discretion, to the extent permitted by applicable law, increase the
applicable conversion rate by any amount for any period of at least 20 days
if our board of directors has determined that such increase would be in our
best
interests. If our board of directors makes that determination, it will be
conclusive. We will give holders of notes at least 15 days’ prior notice of
the increase in the conversion rate. For a general discussion of the
U.S. federal income tax treatment of an adjustment to the conversion rate
of the notes, see “Certain United States Federal Tax Considerations — Tax
Consequences to U.S. Holders — Constructive
Distributions.”
To
the extent that we have a rights
plan in effect upon any conversion of the notes into common stock, a holder
will
receive, in addition to the common stock, the rights under the rights plan,
unless, before any conversion, the rights have separated from the common stock,
in which case the applicable conversion rate will be adjusted at the time of
separation as described in clause (3) above. A further adjustment will
occur as described in clause (3) above if such rights become exercisable to
purchase different securities, evidences of indebtedness or assets, subject
to
readjustment in the event of the expiration, termination or redemption of such
rights.
In
the
event of:
|
|
•
|
any
reclassification of our common
stock;
|
|
|
•
|
a
consolidation, merger, binding share exchange or combination involving
us; or
|
|
|
•
|
a
sale or conveyance to another person or entity of all or substantially
all
of our property or assets;
|
then,
from the effective date of such transaction, the daily conversion value and
the
amounts received in settlement of our conversion obligation will be computed
as
set forth under “— Payment upon Conversion” above and will be determined
based on the kind and amount of shares of stock, securities, assets or other
property (including cash or any combination thereof) that a holder of a number
of shares of our common stock equal to the applicable conversion rate multiplied
by the number of notes owned would have been entitled to receive in such
transaction. However, if in any such transaction holders of common stock would
be entitled to elect the consideration for their common stock, we will make
adequate provisions so that upon conversion the holders of the notes will be
entitled to elect, voting as a class, the consideration that they will receive
upon conversion of the notes subject to cash settlement as described under
“— Payment upon Conversion” above, if applicable.
Notwithstanding
the foregoing, the
applicable conversion rate will not be adjusted:
|
|
•
|
upon
the issuance of any shares of our common stock pursuant to any present
or
future plan providing for the reinvestment of dividends or interest
payable on our securities and the investment of additional optional
amounts in shares of our common stock under any
plan;
|
|
|
•
|
upon
the issuance of any shares of our common stock or options or rights
to
purchase those shares pursuant to any present or future employee,
director
or consultant benefit plan or program of or assumed by us or any
of our
subsidiaries;
|
|
|
•
|
upon
the issuance of any shares of our common stock pursuant to any option,
warrant, right or exercisable, exchangeable or convertible security
not
described in the preceding bullet and outstanding as of the date
the notes
were first issued;
|
|
|
•
|
for
a change in the par value of the common
stock; or
|
|
|
•
|
for
accrued and unpaid interest, including additional amounts, if
any.
|
In
addition, we will not be required to
adjust the conversion rate unless the adjustment would result in a change of
at
least 1% of the conversion rate. We will, however, carry forward any adjustments
that are less than 1% of the conversion rate and take them into account when
determining subsequent adjustments. In addition, we will make any carry forward
adjustments not otherwise effected upon required purchases of the notes in
connection with a fundamental change, upon any conversion of the notes, on
every
one year anniversary from the original issue date and on the record date
immediately prior to the maturity date of the notes.
Adjustments
to the applicable
conversion rate will be rounded to the nearest ten-thousandth, with five
one-hundred-thousandths rounded upward (e.g., 0.76545 would be rounded
up to 0.7655).
Additional
Shares
If
a fundamental change (as defined
below under “— Repurchase of Notes by Us at Option of Holder upon a
Fundamental Change”) occurs prior to the maturity date and a holder elects to
convert its notes in connection with such transaction, we will deliver a number
of additional shares (the “additional shares”) for the notes surrendered for
conversion in connection with the fundamental change as described below. Those
additional shares will constitute a make-whole premium by increasing the
applicable conversion rate for the notes surrendered for conversion if and
as
required below. A conversion of the notes will be deemed for these purposes
to
be “in connection with a fundamental change” if the notice of conversion is
received by the conversion agent from and including the date that is
30 calendar days prior to the anticipated effective date of the fundamental
change to the close of business on the date that is 30 calendar days after
the actual effective date of the fundamental change. The number of additional
shares will be determined by reference to the table below, based on the date
on
which the transaction becomes effective (the “effective date”) and the price
(the “stock price”) paid per share for our common stock in the transaction. If
holders of our common stock receive only cash in the corporate transaction,
the
stock price will be the cash amount paid per share. Otherwise, the stock price
will be the average of the closing sale prices (as defined under
“— Conversion upon Satisfaction of Sale Price Condition” above) of our
common stock on the five trading days immediately before but not including
the
effective date of the transaction.
The
stock prices set forth in the first
row of the table below (i.e., column headers) will be adjusted as of
any date on which the conversion rate of the notes is adjusted, as described
above under “— Conversion Rate Adjustments.” The adjusted stock prices will
equal the stock prices applicable immediately before such adjustment multiplied
by a fraction, the numerator of which is the conversion rate immediately before
the adjustment giving rise to the stock price adjustment and the denominator
of
which is the conversion rate as so adjusted. The number of additional shares
will be adjusted in the same manner as the conversion rate as set forth under
“— Conversion Rate Adjustments.”
The
following table sets forth the
stock price, effective date and number of additional shares per $1,000 principal
amount of notes:
| |
Stock
Price
|
|
Effective
Date
|
$12.71
|
$15.00
|
$18.00
|
$21.00
|
$24.00
|
$27.00
|
$30.00
|
$33.00
|
$36.00
|
$39.00
|
$42.00
|
$45.00
|
|
April 30,
2007
|
13.6549
|
10.5034
|
6.9294
|
4.7851
|
3.4082
|
2.4837
|
1.8404
|
1.3799
|
1.0423
|
0.7901
|
0.5989
|
0.4521
|
|
May 1,
2008
|
13.6549
|
10.4900
|
6.8105
|
4.6103
|
3.2232
|
2.3085
|
1.6829
|
1.2423
|
0.9242
|
0.6900
|
0.5147
|
0.3819
|
|
May 1,
2009
|
13.6549
|
10.4370
|
6.5813
|
4.3379
|
2.9575
|
2.0690
|
1.4754
|
1.0663
|
0.7770
|
0.5680
|
0.4144
|
0.2999
|
|
May 1,
2010
|
13.6549
|
10.1862
|
6.1762
|
3.9177
|
2.5757
|
1.7415
|
1.2029
|
0.8435
|
0.5967
|
0.4233
|
0.2990
|
0.2084
|
|
May 1,
2011
|
13.6549
|
9.7072
|
5.5454
|
3.3137
|
2.0574
|
1.3191
|
0.8676
|
0.5812
|
0.3936
|
0.2669
|
0.1793
|
0.1174
|
|
May 1.
2012
|
13.6549
|
8.8074
|
4.5288
|
2.4245
|
1.3539
|
0.7884
|
0.4770
|
0.2974
|
0.1888
|
0.1199
|
0.0742
|
0.0427
|
|
May 1,
2013
|
13.6549
|
7.1555
|
2.8498
|
1.1341
|
0.4693
|
0.2115
|
0.1074
|
0.0610
|
0.0367
|
0.0213
|
0.0101
|
0.0016
|
|
May 1,
2014
|
13.6549
|
2.0349
|
0.0000
|
0.0000
|
0.0000
|
0.0000
|
0.0000
|
0.0000
|
0.0000
|
0.0000
|
0.0000
|
0.0000
|
The
maximum amount of additional shares
is 13.6549 per $1,000 principal amount of notes, subject to adjustment in the
same manner as in the conversion rate as set forth under “— Conversion Rate
Adjustments.”
Notwithstanding
the foregoing, in no
event will the total number of shares of common stock issuable upon conversion
exceed 78.6782 per $1,000 principal amount of notes, subject to adjustments
in
the same manner as the conversion rate as set forth under “— Conversion
Rate Adjustments.”
The
exact stock prices and effective
dates may not be set forth in the table above, in which case:
|
|
•
|
If
the stock price is between two stock price amounts in the table
or the
effective date is between two effective dates in the
table, the number of additional shares will be determined by straight-line
interpolation between the number of additional shares set forth
for the
higher and lower stock price amounts and the two dates, as applicable,
based on a 365-day
year.
|
|
|
•
|
If
the stock price is in excess of $45.00 per share (subject to
adjustment), no additional shares will be added to the conversion
rate.
|
|
|
•
|
If
the stock price is less than $12.71 per share (subject to
adjustment), no additional shares will be added to the conversion
rate.
|
Our
obligation to increase the
conversion rate in connection with a fundamental change transaction could be
considered a penalty, in which case the enforceability thereof would be subject
to general principles of reasonableness of economic remedies.
Repurchase
of Notes by Us at Option of Holder upon a Fundamental
Change
Except
as provided below, if a
fundamental change, as defined below, occurs, each holder will have the right
on
the fundamental change repurchase date to require us to repurchase for cash
all
of its notes or any portion of those notes that is equal to $1,000 in principal
amount or integral multiples thereof, at a fundamental change repurchase price
equal to 100% of the principal amount of the notes plus any accrued and unpaid
interest, including additional amounts, if any, on the notes to but not
including the fundamental change repurchase date. If the fundamental change
repurchase date is on a date that is after a record date and on or before the
corresponding interest payment date, we will pay such interest (including
additional amounts, if any) to the person to whom principal is
payable.
Within
15 calendar days after the
occurrence of a fundamental change, we are required to give notice to each
holder and the trustee of such occurrence and of each holder’s resulting
repurchase right and the procedures that each holder must follow to require
us
to repurchase its notes as described below. Simultaneously with providing such
notice, we will issue a press release. The fundamental change repurchase date
specified by us will be 30 calendar days after the date on which we give
this notice.
The
fundamental change repurchase
notice given by a holder electing to require us to repurchase its notes shall
be
given so as to be received by the paying agent no later than the close of
business on the business day immediately preceding the fundamental change
repurchase date and must state:
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|
•
|
if
certificated notes have been issued, the certificate numbers of the
holder’s notes to be delivered for repurchase (or, if the notes are not
issued in certificated form, the fundamental change repurchase notice
must
comply with appropriate DTC
procedures);
|
|
|
•
|
the
portion of the principal amount of notes to be repurchased, which
must be
$1,000 or an integral multiple thereof;
and
|
|
|
•
|
that
the notes are to be repurchased by us pursuant to the applicable
provisions of the indenture.
|
A
holder may withdraw its fundamental
change repurchase notice by delivering a written notice of withdrawal to the
paying agent before the close of business on the business day immediately
preceding the fundamental change repurchase date. The notice of withdrawal
must
state:
|
|
•
|
the
principal amount at maturity of notes being
withdrawn;
|
|
|
•
|
if
certificated notes have been issued, the certificate numbers of the
notes
being withdrawn (or, if the notes are not issued in certificated
form, the
notice of withdrawal must comply with appropriate DTC
procedures); and
|
|
|
•
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the
principal amount of the notes, if any, that remain subject to the
fundamental change repurchase
notice.
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A
“fundamental change” will be deemed to have occurred at such time after
the original issuance of the notes
as:
|
(1) a
“person” or “group” within the meaning of Section 13(d)(3) of the Exchange
Act files a Schedule TO or any schedule, form or report under the Exchange
Act disclosing that such person or group has become the direct or indirect
“beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of
shares of our common stock representing more than 50% of the voting power of
our
common stock entitled to vote generally in the election of
directors; or
(2) the
first day on which a majority of the members of our board of directors does
not
consist of continuing directors; or
(3) a
consolidation, merger or binding share exchange, or any conveyance, transfer,
sale, lease or other disposition of all or substantially all of our properties
and assets to another person, other than:
|
|
(i)
|
that
does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of our capital
stock; or
|
|
|
(ii)
|
pursuant
to which holders of our capital stock immediately before the transaction
have the entitlement to exercise, directly or indirectly, 50% or
more of
the total voting power of all shares of capital stock entitled to
vote
generally in elections of directors of the continuing or surviving
or
successor person immediately after giving effect to such
issuance; or
|
|
|
•
|
any
merger, share exchange, transfer of assets or similar transaction
solely
for the purpose of changing our jurisdiction of incorporation and
resulting in a reclassification, conversion or exchange of outstanding
common stock, if at all, solely into common stock, ordinary shares
or
American Depositary Shares of the surviving entity or a direct or
indirect
parent of the surviving
corporation; or
|
|
|
•
|
any
consolidation or merger with or into any of our subsidiaries, so
long as
such merger or consolidation is not part of a plan or a series of
transactions designed to or having the effect of merging or consolidating
with any other person; or
|
(4) a
termination of trading.
A
“continuing
director” means a
director who either was a member of our board of directors on the date of
original issuance of the notes or who becomes a member of our board of directors
subsequent to that date and whose appointment, election or nomination for
election by our shareholders is duly approved by a majority of the continuing
directors on our board of directors at the time of such approval, either by
specific vote or by approval of the proxy statement issued by us on behalf
of
the board of directors in which such individual is named as nominee for
director.
A
“termination
of trading” will be
deemed to have occurred if our common stock (or other common stock into which
the notes are then convertible) at any time is not listed for trading on a
U.S. national or regional securities exchange.
The
term “person” includes any
syndicate or group that would be deemed to be a “person” under
Section 13(d)(3) of the Exchange Act.
The
definition of fundamental change
includes a phrase relating to the conveyance, transfer, sale, lease or
disposition of “all or substantially all” of our assets. There is no precise,
established definition of the phrase “substantially all” under applicable law.
Accordingly, a holder’s ability to require us to repurchase its notes as a
result of a conveyance, transfer, sale, lease or other disposition of less
than
all our assets may be uncertain.
Notwithstanding
the foregoing, a holder
will not have the right to require us to repurchase its notes upon a fundamental
change described in clause (3) above if more then 90% of the consideration
in the transaction or transactions consists of common stock traded or to be
traded immediately following the change of control on a U.S. national or
regional securities exchange, and, as a result of the transaction or
transactions, the notes become convertible into that common stock (and any
rights attached thereto).
Rule 13e-4
under the Exchange Act
requires the dissemination of certain information to security holders if an
issuer tender offer occurs and may apply if the repurchase option becomes
available to holders of the notes. We will comply with this rule and file
Schedule TO (or any similar schedule) to the extent required at that
time.
If
the paying agent holds money
sufficient to pay the fundamental change repurchase price of the notes which
holders have elected to require us to repurchase on the business day following
the fundamental change repurchase date in accordance with the terms of the
indenture, then, immediately after the fundamental change repurchase date,
those
notes will cease to be outstanding, and interest, including additional amounts,
if any, on the notes will cease to accrue, whether or not the notes are
transferred by book entry or delivered to the paying agent. Thereafter, all
other rights of the holders will terminate, other than the right to receive
the
fundamental change repurchase price upon book-entry transfer of the notes or
delivery of the notes.
The
term “fundamental change” is
limited to specified transactions and does not include other events that might
adversely affect our financial condition or business operations. The foregoing
provisions would not necessarily protect holders of the notes if highly
leveraged or other transactions involving us occur that may affect holders
adversely. We could, in the future, enter into certain transactions, including
certain recapitalizations, that would not constitute a fundamental change with
respect to the fundamental change repurchase feature of the notes but that
would
increase the amount of our (or our subsidiaries’) outstanding
indebtedness.
Our
ability to repurchase notes for
cash upon the occurrence of a fundamental change is subject to important
limitations. Our ability to repurchase the notes for cash may be limited by
restrictions on our ability to obtain funds for such repurchase through
dividends from our subsidiaries, the terms of our then existing borrowing
arrangements or otherwise.
The
fundamental change purchase feature
of the notes may in certain circumstances make it more difficult or discourage
a
takeover of our company. The fundamental change purchase feature, however,
is
not the result of our knowledge of any specific effort:
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|
•
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to
accumulate shares of our common
stock;
|
|
|
•
|
to
obtain control of us by means of a merger, tender offer solicitation
or
otherwise; or
|
|
|
•
|
by
management to adopt a series of anti-takeover
provisions.
|
Instead,
the fundamental change repurchase feature is a standard term contained in
securities similar to the notes.
Merger
or Sale of Assets
The
indenture provides that we may not
consolidate with or merge with or into any other person or convey, transfer
or
lease all or substantially all our assets to another person,
unless:
|
|
•
|
the
resulting, surviving or transferee person (the “successor company”) will
be a corporation organized and existing under (i) the laws of the
United States of America, any state thereof or the District of Columbia,
or (ii) any other jurisdiction so long as the successor company
agrees to submit to service of process in any state in the United
States
of America or the District of Columbia and, in the case of clause
(ii) above, the successor company provides a full and unconditional
indemnity and provision for additional amounts for any incremental
amounts
required to be withheld from payments or deliveries to holders under
applicable United States or foreign laws, rules, regulations or
authorities, and any other incremental tax liabilities or costs of
such
holders as a result of such merger or other transaction and the successor
company (if not us) will expressly assume, by a supplemental indenture,
executed and delivered to the trustee, in form reasonably satisfactory
to
the trustee, all of our obligations under the notes and the
indenture;
|
|
|
•
|
immediately
after giving effect to such transaction, no default under the indenture
shall have occurred and be
continuing;
|
|
|
•
|
we
shall have delivered to the trustee an officers’ certificate and an
opinion of counsel, each stating that the consolidation, merger or
transfer and such supplemental indenture (if any) comply with the
indenture; and
|
|
|
•
|
we
shall have delivered to the trustee an opinion of counsel to the
effect
that the holders of the notes will not recognize income, gain or
loss for
U.S. federal income tax purposes as a result of such transaction and
will be subject to U.S. federal income tax on the same amounts, in
the same manner and at the same times as would have been the case
if the
transaction had not occurred, except where any of the foregoing are
subject to the indemnification provided for
above.
|
The
successor company will succeed to,
and be substituted for, and may exercise every right and power of us under
the
indenture, but in the case of a conveyance, transfer or lease of all or
substantially all our assets, we will not be released from the obligation to
pay
the principal of and interest on the notes.
Events
of Default; Notice and Waiver
The
following will constitute defaults
under the indenture, subject to any additional limitations, qualifications
and
cure periods included in the indenture:
|
|
•
|
a
default in the payment of principal of the notes when due at maturity,
upon repurchase or otherwise;
|
|
|
•
|
a
default in the payment of any interest, including additional amounts,
if
any, on the notes when due and such failure continues for a period
of
30 days past the applicable due
date;
|
|
|
•
|
we
fail to provide notice of the occurrence of a fundamental change
as
required by the indenture;
|
|
|
•
|
a
default in our obligation to deliver the settlement amount upon conversion
of the notes, together with cash in lieu thereof in respect of any
fractional shares, upon conversion of any
notes;
|
|
|
•
|
the
failure by us to comply with our obligation to repurchase the notes
at the
option of a holder upon a fundamental change as required by the indenture
or on any other repurchase date;
|
|
|
•
|
the
failure by us to perform or observe any of our other covenants or
warranties in the indenture or in the notes for 60 days after written
notice to us from the trustee or to us and the trustee from the holders
of
at least 25% in principal amount of the outstanding notes has been
received by us;
|
|
|
•
|
the
failure by us to make any payment by the end of any applicable grace
period after maturity or acceleration of indebtedness for borrowed
money
of us or our subsidiaries in an amount in excess of $40 million and
continuance of such failure;
|
|
|
•
|
the
failure by us or any of our significant subsidiaries to pay final
judgments aggregating in excess of $40 million, which judgments are
not paid, discharged or stayed for a period of
60 days; and
|
|
|
•
|
certain
events of bankruptcy, insolvency and reorganization of us or any
of our
significant subsidiaries.
|
The
foregoing will constitute events of
default whatever the reason for any such event of default and whether it is
voluntary or involuntary or is 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.
If
a default under the indenture occurs
and is continuing and is known to the trustee, the trustee must mail to each
holder of the notes notice of the default within 90 days after it occurs.
The trustee may withhold notice to the holders of the notes of a default, except
defaults in non-payment of principal or interest (including additional amounts,
if any) on the notes. The trustee must, however, consider it to be in the
interest of the holders of the notes to withhold this notice.
If
an event of default (other than an
event of default relating to certain events of bankruptcy, insolvency or
reorganization of us) occurs and continues, the trustee or the holders of at
least 25% in principal amount of the outstanding notes may declare the principal
and accrued and unpaid interest, including additional amounts, if any, on the
outstanding notes to be immediately due and payable. In case of certain events
of bankruptcy, insolvency or reorganization as described above, the principal
and accrued and unpaid interest, including additional amounts, if any, on the
notes will automatically become immediately due and payable. Under certain
circumstances, the holders of a majority in aggregate principal amount of the
outstanding notes may rescind such acceleration with respect to the notes and,
as is discussed below, waive these past defaults.
Notwithstanding
the foregoing, the
indenture for the notes provides that, to the extent elected by us, the sole
remedy for an event of default relating to the failure by us to file any
documents or reports that we are required to file with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act and for any failure to comply with
the requirements of Section 314(a)(1) of the Trust Indenture Act will
for the first 60 days after the occurrence of such an event of default
consist exclusively of the right to receive additional interest on the notes
equal to 0.25% per annum of the principal amount of the notes. If we so elect,
such additional amounts will be payable in the same manner and on the same
dates
as the stated interest payable on the notes. These additional amounts will
accrue on all outstanding notes from and including the date on which such event
of default first occurs to but not including the 60th day thereafter (or such
earlier date on which such event of default shall have been cured or waived).
On
such 60th day after such event of default (if the event of default relating
to
the reporting obligations is not cured or waived prior to such 60th day), the
notes will be subject to acceleration as provided above. The provisions of
the
indenture described in this paragraph will not affect the rights of holders
of
notes in the event of the occurrence of any other event of
default.
In the event we do not elect to pay the additional amounts upon an event of
default in accordance with this paragraph, the notes will be subject to
acceleration as provided above.
In
order to elect to pay the additional
amounts as the sole remedy during the first 60 days after the occurrence of
an event of default relating to the failure to comply with the reporting
obligations in accordance with the immediately preceding paragraph, we must
notify all holders of notes and the trustee and paying agent of such election.
Upon our failure to timely give such notice or pay the additional amounts,
the
notes will be subject immediately to acceleration as provided
above.
The
holders of a majority in aggregate
principal amount of outstanding notes will have the right to direct the time,
method and place of any proceedings for any remedy available to the trustee
or
of exercising any trust or power conferred on the trustee, subject to
limitations specified in the indenture. The trustee, however, may refuse to
follow any direction that conflicts with law or the indenture or that the
trustee determines is unduly prejudicial to the rights of any other holder
of
the notes or that would involve the trustee in personal liability. Before taking
any action under the indenture, the trustee will be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking the action.
The
holders of a majority in aggregate
principal amount of outstanding notes may waive any past defaults under the
indenture, except a default due to the non-payment of principal or interest,
including additional amounts, if any, a failure to convert any notes into common
stock, a default arising from our failure to repurchase any notes when required
pursuant to the terms of the indenture or a default in respect of any covenant
that cannot be amended without the consent of each holder affected.
No
holder of the notes may pursue any
remedy under the indenture, except in the case of a default due to the
non-payment of principal or interest, including additional amounts, if any,
on
the notes, unless:
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the
holder has given the trustee written notice of a
default;
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the
holders of at least 25% in principal amount of outstanding notes
make a
written request to the trustee to pursue the
remedy;
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the
trustee does not receive an inconsistent direction from the holders
of a
majority in aggregate principal amount of outstanding
notes; and
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the
trustee fails to comply with the request within 60 days after receipt
of the request and offer of
indemnity.
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The
indenture will require us every
year to deliver to the trustee a statement as to performance of our obligations
under the indenture and as to any default.
A
default in the payment of the notes,
or a default with respect to the notes that causes them to be accelerated,
may
give rise to a cross-default under our existing borrowing
arrangements.
Legal
Defeasance and Covenant Defeasance
The
notes will not be subject to any
defeasance provisions under the indenture.
Amendment
and Modification
Except
as provided below, the consent
of the holders of a majority in aggregate principal amount of the outstanding
notes (voting as a single class) is required to modify or amend the indenture.
However, a modification or amendment requires the consent of the holder of
each
outstanding note affected by such modification or amendment if it
would:
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reduce
the principal amount of or change the stated maturity of any
note;
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reduce
the rate or extend the time for payment of interest, including additional
amounts, if any, on any note;
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reduce
any amount payable upon repurchase of any note (including upon the
occurrence of a fundamental change) or change the time at which or
circumstances under which the notes may or shall be
repurchased;
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impair
the right of a holder to institute suit for payment on any
note;
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change
the currency in which any note is
payable;
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impair
the right of a holder to convert any note or reduce the number of
shares
of common stock or any other property receivable upon
conversion;
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reduce
the quorum or voting requirements under the
indenture;
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change
our obligation to maintain an office or agency in the places and
for the
purposes specified in the
indenture;
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subject
to specified exceptions, amend or modify certain of the provisions
of the
indenture relating to amendment or modification or waiver of provisions
of
the indenture; or
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reduce
the percentage of notes required for consent to any amendment or
modification of the indenture.
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We
and the trustee may modify certain
provisions of the indenture without the consent of the holders of the notes,
including to:
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add
guarantees with respect to the notes or secure the
notes;
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evidence
the assumption of our obligations by a successor person under the
provisions of the indenture relating to consolidations, mergers and
sales
of assets;
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surrender
any of our rights or powers under the
indenture;
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add
covenants or events of default for the benefit of the holders of
notes;
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cure
any ambiguity or correct any inconsistency in the
indenture;
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modify
or amend the indenture to permit the qualification of the indenture
or any
supplemental indenture under the Trust Indenture Act of 1939 as then
in
effect;
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establish
the forms or terms of the notes;
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evidence
the acceptance of appointment by a successor
trustee;
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provide
for uncertificated notes in addition to or in place of certificated
notes;
provided, however, that the uncertificated notes are issued in registered
form for purposes of Section 163(f) of the Internal Revenue Code of
1986, as amended (the “Code”), or in a manner such that the uncertificated
notes are described in Section 163(f)(2)(B) of the
Code;
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conform,
as necessary, the indenture and the form or terms of the notes, to
the
“Description of Notes” as set forth in this
prospectus; and
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make
other changes to the indenture or forms or terms of the notes, provided
no
such change individually or in the aggregate with all other such
changes
has or will have a material adverse effect on the interests of the
holders
of the notes.
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Calculations
in Respect of Notes
We
are responsible for making all
calculations called for under the notes, unless otherwise set forth above.
These
calculations include, but are not limited to, determinations of the market
prices of our common stock, the amount of accrued interest (including additional
amounts, if any) payable on the notes and the conversion price of the notes.
We
will make all these calculations in good faith, and, absent manifest error,
our
calculations will be final and binding on holders of notes. We will provide
a
schedule of our calculations to each of the trustee and the conversion agent,
and each of the trustee and the conversion agent is entitled to rely upon the
accuracy of our calculations without independent verification. The trustee
will
forward our calculations to any holder of notes upon the request of that
holder.
Trustee,
Paying Agent and Conversion Agent
We
have appointed Wells Fargo Bank,
National Association, the trustee under the indenture, as paying agent,
conversion agent, note registrar and custodian for the notes. The trustee or
its
affiliates may also provide banking and other services to us in the ordinary
course of their business.
Notices
Except
as otherwise described herein,
notices to registered holders of the notes will be given by mail to the
addresses as they appear in the security register. Notices will be deemed to
have been given on the date of mailing.
Governing
Law
The
notes and the indenture are
governed by, and will be construed in accordance with, the laws of the State
of
New York.
Registration
Rights
We
entered into a registration rights
agreement, dated as of April 30, 2007, with the initial purchasers pursuant
to
which we agreed to, for the benefit of the holders of the notes and the common
stock issuable upon conversion of the notes, at our cost:
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(x) file
a shelf registration statement with the SEC covering resales of the
notes
and the shares of our common stock issuable on conversion of the
notes
(which shall be an automatic shelf registration statement if we are
eligible to use an automatic shelf registration at the time of filing)
no
later than 120 days after the first date of original issuance of the
notes and (y) (if we are not eligible to use an automatic shelf
registration statement) use our reasonable efforts to cause the shelf
registration statement to become effective under the Securities Act,
no
later than 210 days after the first date of original issuance of the
notes; and
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use
reasonable efforts to keep the shelf registration statement effective
until the earlier of:
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(1) the
date when the holders of notes and holders of the common stock issuable upon
conversion of the notes are able to sell such notes and such shares immediately
without restriction pursuant to Rule 144(k) under the Securities
Act; and
(2) the
date when all of the notes and the common stock issuable upon conversion thereof
have been sold either pursuant to the shelf registration statement or pursuant
to Rule 144 under the Securities Act or any similar provision then in force
or the notes and the common stock issuable upon conversion of the notes cease
to
be outstanding.
We
may suspend the effectiveness of the
shelf registration statement or the use of the prospectus that is part of the
shelf registration statement during specified periods under certain
circumstances relating to pending corporate developments, public filings with
the SEC and similar events. Any suspension period may not exceed an aggregate
of:
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45 days
in any 90-day period; or
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120 days
in any 360-day period.
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Notwithstanding
the foregoing, we may
extend the suspension period from 45 days to 60 days under specified
circumstances relating to possible acquisitions, financings or other material
business transactions. We need not specify the nature of the event giving rise
to a suspension in any notice to holders of the notes of the existence of such
a
suspension. Each holder, by its acceptance of the notes, agrees to hold any
communication by us in response to a notice of a proposed sale in
confidence.
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Each
of the following is a registration
default:
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the
registration statement has not been filed before or on the 120th day
following the first date of original issuance of any of the
notes; or
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the
registration statement has not become effective before or on the
210th day following the first date of original issuance of any of the
notes, which is referred to as the “effectiveness target
date”; or
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we
do not, through our omission, name a holder as a selling stockholder
in
the prospectus through a prospectus supplement or file a post-effective
amendment within the required time period as described
below; or
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any
post-effective amendment required to be filed as described below
has not
become effective before the 45th day following the date such
post-effective amendment is required to be
filed; or
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at
any time after the effectiveness of the shelf registration statement,
the
registration statement ceases to be effective or is not usable in
accordance with and during the periods specified in the registration
rights agreement and (1) we do not cure the registration statement
within 10 business days by a post-effective amendment, prospectus
supplement or report filed pursuant to the Exchange Act (other than
in the
case of a suspension period described in the preceding paragraph),
(2) if applicable, we do not terminate the suspension period,
described in the preceding paragraph, by the 45th or 60th day,
as the case may be or (3) a suspension period, when aggregated with
other suspension periods during the prior 360-day period, continues,
unterminated, for more than
120 days.
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If
a registration default occurs,
predetermined “additional amounts” will accrue on the notes from and including
the day following the registration default to but excluding the earlier of
(1) the day on which the registration default has been cured and
(2) the date the registration statement is no longer required to be kept
effective. The additional amounts will be paid to those entitled to interest
payments on such dates semiannually in arrears on each May 1 and
November 1 and will accrue at a rate per year equal to:
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0.25%
of the principal amount of a note to and including the 90th day
following such registration
default; and
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0.50%
of the principal amount of a note from and after the 91st day
following such registration
default.
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In
no event will additional amounts
exceed 0.50% per year. If a holder converts some or all of its notes into
common stock when there exists a registration default with respect to the common
stock, the holder will not be entitled to receive additional amounts on such
common stock. However, such holder will receive, on the settlement date for
any
notes submitted for conversion during a registration default, accrued and unpaid
additional amounts to the conversion date relating to such settlement date.
If a
registration default with respect to the common stock occurs
after
a
holder has converted its notes into common stock, such holder will not be
entitled to any compensation with respect to such common stock. In addition,
in
no event will additional amounts be payable in connection with a registration
default relating to a failure to register the common stock deliverable upon
a
conversion of the notes. For the avoidance of doubt, if we fail to register
both
the notes and the common stock deliverable upon conversion of the notes, the
additional amounts will be payable in connection with the registration default
relating to the failure to register the notes.
A
holder who elects to sell
securities pursuant to the shelf registration statement will be:
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required
to be named as a selling security holder in the related
prospectus;
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required
to deliver a prospectus to
purchasers;
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subject
to the civil liability provisions under the Securities Act in connection
with the holder’s sales; and
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subject
to and bound by the provisions of the registration rights agreement
that
are applicable to the holder, including indemnification rights and
obligations.
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Under
the registration rights
agreement we will:
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pay
all expenses of the shelf registration
statement;
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provide
each holder named in the shelf registration statement with copies
of the
prospectus that is a part of the shelf registration
statement;
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notify
each such holder when the shelf registration statement has become
effective; and
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take
other reasonable actions as are required to permit unrestricted resales
of
the notes and common stock issued upon conversion of the notes in
accordance with the terms and conditions of the registration rights
agreement.
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Form,
Denomination, Exchange, Registration and Transfer
The
notes have been
issued:
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in
fully registered form;
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without
interest coupons; and
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in
denominations of $1,000 principal amount and integral multiples of
$1,000.
Holders may present notes for conversion, registration of transfer
and
exchange at the office maintained by us for such purpose, which will
initially be the Corporate Trust Office of the trustee in the City of
New York.
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Payment
and Paying Agent
We
will maintain an office or agent in
the Borough of Manhattan, the City of New York, where we will pay the principal
on the notes, and a holder may present the notes for conversion, registration
of
transfer or exchange for other denominations, which shall initially be an office
or agency of the trustee.
Payments
on the notes represented by
the global note referred to below will be made to The Depository Trust Company,
New York, New York, which is referred to herein as DTC, or its nominee, as
the
case may be, as the registered owner thereof, in immediately available funds.
We
expect that DTC or its nominee, upon receipt of any payment on the notes
represented by a global note, will credit participants’ accounts with payments
in amounts proportionate to their respective beneficial interests in the global
note as shown in the records of DTC or its
nominee.
We also expect that payments by participants to owners of beneficial interests
in the global note held through such participants will be governed by standing
instructions and customary practice as is now the case with securities held
for
the accounts of customers registered in the names of nominees for such
customers. The participants will be responsible for those payments. Transfers
between participants in DTC will be effected in accordance with DTC’s rules and
will be settled in immediately available funds.
Book-Entry
Delivery and Settlement
We
issued the notes in the form of one
or more permanent global notes in definitive, fully registered, book-entry
form,
deposited with or on behalf of DTC and registered in the name of Cede &
Co., as nominee of DTC.
DTC
has advised us as
follows:
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DTC
is a limited-purpose trust company organized under the New York Banking
Law, a “banking organization” within the meaning of the New York Banking
Law, 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.
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DTC
holds securities that its participants deposit with DTC and facilitates
the settlement among participants of securities transactions, such
as
transfers and pledges, in deposited securities, through electronic
computerized book-entry changes in participants’ accounts, thereby
eliminating the need for physical movement of securities
certificates.
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Direct
participants include securities brokers and dealers, trust companies,
clearing corporations and other
organizations.
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DTC
is owned by a number of its direct participants and by the New York
Stock
Exchange, Inc., the American Stock Exchange LLC and the National
Association of Securities Dealers,
Inc.
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Access
to the DTC system is also available to others, such as securities
brokers
and dealers, banks and trust companies that clear through or maintain
a
custodial relationship with a direct participant, either directly
or
indirectly.
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The
rules applicable to DTC and its participants are on file with the
Securities and Exchange Commission.
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We
are providing the following
descriptions of the operations and procedures of DTC to the holders solely
as a
matter of convenience. These operations and procedures are solely within the
control of DTC and are subject to change by DTC from time to time. None of
us,
the initial purchasers nor the trustee takes any responsibility for these
operations or procedures, and each holder is urged to contact DTC or its
participants directly to discuss these matters.
We
expect that under procedures
established by DTC:
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Upon
deposit of the global notes with DTC or its custodian, DTC will credit
on
its internal system the accounts of direct participants designated
by the
initial purchasers with portions of the principal amounts of the
global
notes.
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Ownership
of the notes will be shown on, and the transfer of ownership thereof
will
be effected only through, records maintained by DTC or its nominee,
with
respect to interests of direct participants, and the records of direct
and
indirect participants, with respect to interests of persons other
than
participants.
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The
laws of some jurisdictions require
that purchasers of securities take physical delivery of those securities in
definitive form. Accordingly, the ability to transfer interests in the notes
represented by a global note to those persons may be limited. In addition,
because DTC can act only on behalf of its participants, who in turn act on
behalf
of
persons who hold interests through participants, the ability of a person having
an interest in notes represented by a global note to pledge or transfer those
interests to persons or entities that do not participate in DTC’s system, or
otherwise to take actions in respect of such interest, may be affected by the
lack of a physical definitive security in respect of such interest.
So
long as DTC or its nominee is the
registered owner of a global note, DTC or that nominee will be considered the
sole owner or holder of the notes represented by that global note for all
purposes under the indenture and under the notes. Except as provided below,
owners of beneficial interests in a global note will not be entitled to have
notes represented by that global note registered in their names, will not
receive or be entitled to receive physical delivery of certificated notes and
will not be considered the owners or holders thereof under the indenture or
under the notes for any purpose, including with respect to the giving of any
direction, instruction or approval to the trustee. Accordingly, each holder
owning a beneficial interest in a global note must rely on the procedures of
DTC
and, if that holder is not a direct or indirect participant, on the procedures
of the participant through which that holder owns its interest, to exercise
any
rights of a holder of notes under the indenture or the global note.
Notes
represented by a global note will
be exchangeable for registered certificated securities with the same terms
only
if: (1) DTC is unwilling or unable to continue as depositary or if DTC
ceases to be a clearing agency registered under the Exchange Act and a successor
depositary is not appointed by us within 90 days; (2) we decide to
discontinue use of the system of book-entry transfer through DTC (or any
successor depositary); or (3) a default under the indenture occurs and is
continuing.
Neither
we, nor the trustee, will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of notes by DTC or for maintaining, supervising or
reviewing any records of DTC relating to the notes.
DESCRIPTION
OF CAPITAL STOCK
Pursuant
to our articles of
incorporation, our authorized capital stock consists of 301,000,000 shares,
of which:
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1,000,000 shares
are designated as preferred stock, $1.00 par value, of which
500,000 shares of Participating Series A Junior Preferred Stock
(the “Series A Preferred Shares”) have been authorized, none of which
are outstanding; and
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300,000,000 shares
are designated and authorized as common stock, $0.10 par value, of
which 123,078,645 shares were outstanding as of August 22,
2007.
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Common
Stock
Holders
of common stock are entitled to
one vote per share on all matters to be voted upon by shareholders generally,
including the election of directors. Shareholders are entitled to receive such
dividends as may be declared from time to time by our board out of funds legally
available for dividends and in the event of our liquidation, dissolution or
winding up, to share ratably in all assets remaining after the payment of
liabilities and any liquidation preference associated with outstanding preferred
stock. The holders of our common stock have no cumulative voting rights, no
preemptive rights and no conversion rights. Our common stock outstanding as
of
the date of this prospectus is fully paid and nonassessable.
The
transfer agent for our common stock
is American Stock Transfer and Trust Company.
Preferred
Stock
The
board is authorized under our
articles of incorporation to provide, without further shareholder action, for
the issuance of preferred stock in one or more series with such designations,
rights, qualifications, preferences, restrictions and special or relative rights
as may be set forth in resolutions adopted by our board. Accordingly, our board
may issue preferred stock with dividend, liquidation, conversion, voting or
other rights that could adversely affect the voting power or other rights of
the
holders of common stock. For example, the issuance of series preferred stock
could result in a class of securities outstanding that will have certain
preferences with respect to dividends and in liquidation over our common stock,
may enjoy certain voting rights, contingent or otherwise, in addition to that
of
our common stock, and could result in the dilution of the voting rights, net
income per share and net book value of our common stock.
Except
for the Series A Preferred
Shares (as described below), we have not authorized for issuance any preferred
stock.
Series A
Preferred Shares
In
connection with the adoption of the
Shareholder Rights Plan described below, our board authorized 500,000
Series A Preferred Shares. As of the date of this prospectus, there were no
Series A Preferred Shares outstanding.
As
of the date of this prospectus,
holders of Series A Preferred Shares are entitled to 300 votes per share on
all matters to be voted upon by our shareholders. If we, at any time after
the
date of this prospectus: (i) declare a dividend on common stock payable in
shares of common stock; (ii) subdivide the outstanding shares of common
stock; or (iii) combine the outstanding shares of common stock into a
smaller number of shares (with each of (i)-(iii) being a “Preferred Adjustment
Event”), then, in each such case, the number of votes per share to which a
holder of Series A Preferred Shares was entitled immediately before such
event will be adjusted by multiplying such number by a fraction, the numerator
of which will be the number of shares of common stock outstanding immediately
after such event and the denominator of which will be the number of shares
of
common stock outstanding immediately before such event (the “Preferred
Adjustment Factor”).
Dividends
on Series A Preferred
Shares accrue quarterly, on a cumulative basis and will be paid out of funds
legally available for such purpose. As of the date of this prospectus, the
rate
of dividends payable on the first day of March, June, September and December
or
such other quarterly date as may be specified by our board will be in an amount
per Series A Preferred Share equal to the greater of (i) $1.50 or
(ii) subject to the provision for adjustment set forth below, 300 times the
aggregate per share amount of cash dividends, and 300 times the aggregate per
share amount of all non-cash dividends or other distributions, other than a
dividend payable in shares of common stock or a subdivision of the outstanding
shares of common stock, declared on our common stock since the immediately
preceding quarterly dividend payment date, or with respect to the first
quarterly dividend payment date, since the first issuance of any share or
fraction of a share of the Series A Preferred Shares. If a Preferred
Adjustment Event occurs at any time after the date of this prospectus, the
amount of dividends specified in (ii) to which holders of Series A
Preferred Shares were entitled immediately before such event will be adjusted
by
multiplying such number by the Preferred Adjustment Factor.
In
the event of our liquidation,
dissolution or winding up, holders of Series A Preferred Shares will be
entitled to receive the greater of (i) $1.00 per Series A Preferred
Share, plus accrued dividends to the date of distribution, whether or not earned
or declared or (ii) an amount per share, subject to the provision for
adjustment set forth below, equal to 300 times the aggregate amount to be
distributed per share to the holders of common stock. If a Preferred Adjustment
Event occurs any time after the date of this prospectus, then the liquidation
payment contemplated by (ii) will be adjusted by multiplying such amount by
the Preferred Adjustment Factor.
If
the dividends upon the Series A
Preferred Shares are in arrears in an amount equal to six full quarterly
dividends thereon, the holders of such series will be entitled to elect two
directors. Such voting rights will continue until all accumulated and unpaid
dividends have been paid or set aside for such purpose. At any time when such
a
right to elect directors has vested, we may, and upon the written request of
not
less than 20% of the then outstanding total number of Series A Preferred
Shares having the right to elect directors in such circumstances will, call
a
special meeting of holders of such Series A Preferred Shares for the
election of directors; provided that we will not be required to call a special
meeting if the request is received less than 120 days before the next
scheduled annual meeting or special meeting of the shareholders.
The
Series A Preferred Stock is
not redeemable, and will rank junior with respect to payment of dividends and
on
liquidation to all other series of our preferred stock, except to the extent
that any such series specifically provides that it will rank on parity with
or
junior to the Series A Preferred Stock.
Shareholder
Rights Plan
In
February 1999, our board adopted a
Shareholder Rights Plan to replace our prior Shareholder Rights Plan. Our board
also authorized an increase of the Series A Preferred Shares from
300,000 shares to 500,000 shares and declared a dividend of one Right
for each outstanding share of our common stock, payable as of the close of
business on April 26, 1999 to shareholders of record as of the close of
business on April 12, 1999.
Each
Right entitles the registered
holder to purchase from us one three-hundredth of a share of Series A
Preferred Stock, or, under certain circumstances, a combination of securities
and assets of equivalent value, at a Purchase Price of $20.00 per share of
common stock or Right, subject to adjustment. The Purchase Price may be paid
in
cash or, if we permit, by the delivery of Rights under certain circumstances.
The description and terms of the Rights are set forth in an Amended and Restated
Rights Agreement (the “Rights Agreement”) between us and American Stock
Transfer & Trust Company, as Rights Agent. Each capitalized term in
this “— Shareholder Rights Plan” has the meaning assigned to it within the
Rights Agreement.
Initially,
ownership of the Rights will
be evidenced by the certificates representing shares of our common stock then
outstanding, and no separate Rights certificates will be distributed. The Rights
will separate from shares of our common stock and a “Distribution Date” will
occur upon the earlier of (i) 10 days following a public announcement
that (subject to certain exceptions) a person or group of affiliated or
associated persons (an “Acquiring Person”) has acquired, or obtained the right
to acquire, beneficial ownership of 20% or more of shares of our outstanding
common stock (the “Stock Acquisition Date”) or (ii) the close of business
on such date as may be fixed by our board, after the
commencement
of a tender or exchange offer that would result in a person or group
beneficially owning 20% or more of our outstanding common stock. Until the
Distribution Date, (i) the Rights will be evidenced by the certificates
representing shares of our common stock and will be transferred with and only
with such certificates; (ii) certificates issued after April 26, 1999
will contain a notation incorporating the Rights Agreement by reference; and
(iii) the surrender for transfer of any certificates for our common stock
outstanding will also constitute the transfer of the Rights associated with
the
common stock represented by such certificate. The Rights will not be exercisable
until the Distribution Date and will expire at the close of business on
April 25, 2009, unless earlier redeemed by us as provided in the Rights
Agreement.
If
at any time following the
Distribution Date a person becomes an Acquiring Person, each holder of a Right
will thereafter have the right to receive, upon exercise, our common stock
(or,
in certain circumstances, cash, property or other of our securities) having
a
value equal to two times the exercise price of the Right. Instead of requiring
payment of the purchase price upon exercise of the Rights following any such
event, we may permit the holders simply to surrender the Rights under certain
circumstances in which event they will be entitled to receive our common stock
(and other property, as the case may be) with a value of 50% of what could
be
purchased by payment of the full purchase price. Notwithstanding any of the
foregoing, all Rights that are, or (under certain circumstances specified in
the
Rights Agreement) were, beneficially owned by the Acquiring Person will be
null
and void. However, Rights are not exercisable until such time as the Rights
are
no longer redeemable by us as set forth in the Rights Agreement.
If
at any time following the Stock
Acquisition Date, (i) we are acquired in a merger or other business
combination transaction in which we are not the surviving corporation (other
than a merger that is described, or that follows a tender offer or exchange
offer described, above) or (ii) 50% or more of our assets or earning power
is sold or transferred, each holder of a Right (except Rights that previously
have been voided) will thereafter have the right to receive, upon exercise,
common shares of the acquiring company having a value equal to two times the
exercise price of the Right. Again, provision is made to permit the surrender
of
the Rights in exchange for one-half of the value otherwise purchasable. The
events set forth in this paragraph and in the preceding paragraph are referred
to as the “Triggering Events.”
The
purchase price payable, and the
number of shares of our common stock or other securities or property issuable,
upon exercise of the Rights are subject to adjustment from time to time to
prevent dilution as described in the Rights Agreement. With certain exceptions,
no adjustment in the purchase price will be required until cumulative
adjustments amount to at least 1% of the purchase price. No fractional share
of
common stock will be issued and, in lieu thereof, an adjustment in cash will
be
made based on the market price of the common stock on the last trading date
before the date of exercise.
At
any time until ten days following
the Stock Acquisition Date, we may redeem the Rights in whole, but not in part,
at a redemption price of $.01 per Right, subject to adjustment. The ten-day
period may be extended by our board so long as the Rights are still redeemable.
Immediately upon the action of the board ordering redemption of the Rights,
the
Rights will terminate and the only right of the holders of Rights will be to
receive the redemption price.
Anti-takeover
Provisions of Applicable Pennsylvania Law and our Articles
ofIncorporation and Bylaws
Certain
provisions of the Pennsylvania
Business Corporation Law of 1988, as amended (the “PBCL”), and our Restated
Articles of Incorporation and Bylaws, summarized in the following paragraphs,
may be deemed to have an anti-takeover effect and may delay, deter or prevent
a
tender offer or takeover attempt that a shareholder might consider in his or
her
best interest, including those attempts that might result in a premium over
the
market price for the shares of common stock held by shareholders.
Pennsylvania
Business Corporation Law
Generally,
Subchapters 25E, F, G and H
of the PBCL place certain procedural requirements and establish certain
restrictions upon the acquisition of voting shares of a corporation which would
entitle the acquiring person to
cast
or
direct the casting of a certain percentage of votes in an election of directors.
As a consequence of amendments to our bylaws that were effected in 1984 and
1990, only Subchapter 25F of the PBCL applies to us.
Subchapter 25F
applies to a
transaction between a publicly traded corporation and an interested shareholder
(defined generally to be any beneficial owner of 20% or more of the
corporation’s voting stock). Subchapter 25F prohibits such a corporation from
engaging in a “business combination” (as defined in the PBCL) with an interested
shareholder unless (i) the board of such corporation gives approval to the
proposed transaction or gives approval to the interested shareholder’s
acquisition of 20% of the shares entitled to vote in an election of directors
of
such corporation, in either case before the date on which the shareholder first
becomes an interested shareholder (the “Share Acquisition Date”); (ii) the
interested shareholder owns at least 80% of the stock of such corporation
entitled to vote in an election of directors and, no earlier than three months
after such interested shareholder reaches such 80% level, the majority of the
remaining shareholders approve the proposed transaction and shareholders receive
a minimum “fair price” for their shares (as set forth in the PBCL) in the
transaction and the other conditions of Subchapter 25F are met;
(iii) holders of all outstanding shares of common stock approve the
transaction; (iv) no earlier than five years after the Share Acquisition
Date, a majority of the remaining shares entitled to vote in an election of
directors approve the transaction; or (v) no earlier than five years after
the Share Acquisition Date, a majority of all the shares approve the
transaction, all shareholders receive a minimum “fair price” for their shares
(as set forth in the PBCL) and the other conditions of Subchapter 25F are
met.
Under
certain circumstances,
Subchapter 25F makes it more difficult for an interested shareholder to
effect various business combinations with a corporation for a five-year period
following a Share Acquisition Date. The provisions of Subchapter 25F should
encourage persons interested in acquiring us to negotiate in advance with our
board, since the higher shareholder voting requirements would not be invoked
if
such person, before acquiring 20% of our common stock, obtains the approval
of
our board for such acquisition or for the proposed business combination
transaction (unless such person acquires 80% or more of our voting shares in
such transaction, excluding certain shares as described above).
Subchapter 25F
will not prevent a
hostile takeover of us. It may, however, make more difficult or discourage
a
takeover of us or the acquisition of control of us by a significant shareholder
and thus the removal of incumbent management. Some shareholders may find this
disadvantageous in that they may not be afforded the opportunity to participate
in takeovers that are not approved as required by Subchapter 25F but in
which shareholders might receive, for at least some of their shares, a
substantial premium above the market price at the time of a tender offer or
other acquisition transaction.
Articles
of Incorporation and Bylaws Provisions
Certain
provisions of our Restated
Articles of Incorporation and Bylaws may have the effect of discouraging
unilateral tender offers or other attempts to takeover and acquire our business.
These provisions may discourage some potentially interested purchasers from
attempting a unilateral takeover bid for us on terms which some shareholders
might favor. These provisions may also reduce the likelihood of a change in
the
management or voting control of us without the consent of our then incumbent
board.
The
articles of incorporation and
bylaws provide for a classified board consisting of three classes as nearly
equal in number as practicable. The members of each class are elected for a
period of three years, and the term of at least one class will expire in each
year. The terms of the existing three classes expire in 2008, 2009 and 2010,
respectively. Our board, a class of our board, or any individual director may
be
removed from office without assigning cause by the vote of the holders of at
least 80% of the combined voting power of the then outstanding shares of stock
of all classes and series of our common stock then entitled to vote generally
in
the election of directors, voting together as a single class (“Voting
Power”).
Our
articles of incorporation provide
that at least 80% of the Voting Power will be required to approve any “business
combination” with an “interested shareholder” unless our board will have
approved by resolution, before the time such person became an “interested
shareholder,” a memorandum of understanding or agreement with the “interested
shareholder” setting forth, in general, the substance of the terms of the
“business combination”
transaction
to be consummated. The term “business combination” is broadly defined in our
articles of incorporation to include, among other things, the following
transactions involving us and an “interested shareholder”: (i) specified
mergers, consolidations, sales or similar dispositions involving $5 million
or more in consideration; (ii) issuances or transfers by us of any of our
securities involving $5 million or more in consideration;
(iii) liquidation or dissolution proposals; and (iv) reclassifications
or recapitalizations. The term “interested shareholder” is broadly defined in
our articles of incorporation to include, among other things, a person or
persons, and his, her, its or their affiliates and associates, who acquire
or
beneficially own 10% or more of our Voting Power, unless in certain
circumstances such Voting Power has been maintained for more than ten years.
A
majority of our board who are disinterested (i.e., unaffiliated with an
“interested shareholder” and on a board before such person became an “interested
shareholder”) have the power and duty to determine “interested shareholder,”
“Voting Power,” “affiliation,” “association” and “business combination” matters,
as such terms are defined or provided for in our articles of
incorporation.
At
least 80% of the Voting Power is
required to alter, amend or repeal, or adopt provisions inconsistent with,
the
provisions of our articles of incorporation described in the two preceding
paragraphs.
Our
articles of incorporation do not
permit cumulative voting in the election of directors. Under cumulative voting,
it is possible for representation on a class of our board to be obtained by
an
individual or group of individuals which owns less than a majority of the Voting
Power.
Our
bylaws establish advance notice
procedures with regard to the nomination, other than by or at the direction
of
our board or a committee thereof, of candidates for election as directors.
These
procedures generally provide that the notice of proposed shareholder nominations
for the election of directors must be given in writing to our Secretary not
later than the date on which a shareholder proposal would be required to be
submitted to us in order to be set forth in our proxy statement, in accordance
with Exchange Act rules. Such notice generally must (i) identify the name
and address of the nominating shareholder and nominee; (ii) contain
representations concerning the nominating shareholder’s ownership of common
stock and intention to appear at the meeting and make the nomination; and
(iii) include all relevant information concerning the nominee and his or
her relationship or transactions with us that are required to be disclosed
in
the proxy statement pursuant to Exchange Act rules.
PURCHASE
OF CONVERTIBLE NOTE HEDGE AND SALE OF WARRANTS
Concurrently
with the pricing of the
notes, we entered into privately negotiated convertible note hedge transactions
in the form of call options with affiliates of the initial purchasers (which
we
refer to collectively as the hedge participants). The call options cover,
subject to anti-dilution adjustments substantially identical to those in the
notes, approximately 17,881,408 shares of our common
stock. Separately and concurrently with entering into the convertible
note hedge transactions, we also entered into warrant transactions with the
hedge participants with respect to our common stock, whereby we sold to the
hedge participants warrants to acquire, subject to customary anti-dilution
adjustments, approximately 18,775,478 shares of our common stock.
The
convertible note hedge transactions
are expected to reduce the potential dilution upon conversion of the notes
in
the event that the market value per share of our common stock, as measured
under
the convertible note hedge transactions, at the time of exercise is greater
than
the strike price of the convertible note hedge transactions, which corresponds
to the initial conversion price of the notes and is subject to certain
adjustments. If, however, the market value per share of our common stock, as
measured under the warrant transactions, exceeds the strike price of the
warrants, the warrants will have a dilutive effect on our earnings per
share.
The
convertible note hedge transactions
and warrant transactions are separate transactions, each entered into by us
with
the counterparties, are not part of the terms of the notes and will not affect
the holders’ rights under the notes. A holder of the notes will not have any
rights with respect to the convertible note hedge transactions or warrant
transactions.
In
connection with hedging these
transactions, the hedge participants or their affiliates entered into or may
enter into various derivative transactions with respect to our common stock
at,
and possibly after, the pricing of the notes and may have purchased or may
in
the future purchase our common stock in secondary market
transactions. These
activities
could have the effect of increasing the price of our common stock before and
possibly following the pricing of the notes.
For
a discussion of the hedging
arrangements that may be entered into in connection with the convertible note
hedge transactions and warrant transactions, see “Risk Factors — Risks
Related to an Investment in the Notes and our Common Stock — The
convertible note hedge and warrant transactions may affect the value of the
notes and our common stock.”
CERTAIN
UNITED STATES FEDERAL TAX CONSIDERATIONS
The
following summary of
U.S. federal income tax considerations was written to support the promotion
and marketing of the notes. Each person considering an investment in
the notes should seek advice based on the person’s particular circumstances from
an independent tax advisor.
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The
following is a description of
certain U.S. federal income tax consequences of the purchase, ownership and
disposition of the notes and of the common stock into which the notes may be
converted. It does not purport to be a comprehensive description of all of
the
tax considerations that may be relevant to a particular investor’s decision to
invest in the notes, and does not address certain tax rules that are generally
assumed to be understood by investors. This summary is based on the
U.S. Internal Revenue Code of 1986, as amended, referred to in this
prospectus as the “Code,” existing and proposed Treasury Regulations,
administrative rulings and judicial decisions, all as of the date of this
prospectus and all subject to change or differing interpretations, possibly
with
retroactive effect. This summary is limited to beneficial owners of notes that
will hold the notes and the common stock into which the notes may be converted
as capital assets within the meaning of Section 1221 of the
Code.
This
summary does not address the tax
consequences to investors that are subject to special rules, such as financial
institutions, banks, thrift institutions, real estate investment trusts,
personal holding companies, regulated investment companies, insurance companies,
tax-exempt entities, brokers and dealers in securities or currencies, traders
in
securities that elect to use mark-to-market method of accounting, persons that
hold the notes in a “straddle” or as part of a “hedging,” “conversion” or
constructive sale transaction, U.S. holders (as defined below) whose
functional currency is not the U.S. dollar, and persons who have ceased to
be citizens or residents of the United States. Further, we do not
address:
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the
U.S. federal income tax consequences to stockholders in, or partners
or beneficiaries of, an entity that is an
owner of the notes or our common stock;
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the
U.S. federal estate and gift or alternative minimum tax consequences
of the purchase, ownership or sale of
the notes or our common stock; or
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any
state, local or foreign tax consequences of the purchase, ownership
and
sale of the notes or our common stock.
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For
purposes of this summary, you are a
“U.S. holder” if you are a beneficial owner of a note or share of our
common stock for U.S. federal income tax purposes and you are:
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a
citizen or resident of the United
States;
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a
corporation (or other entity taxable as a corporation) created or
organized under the laws of the United States
or of any state thereof (including the District of
Columbia);
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an
estate, the income of which is subject to U.S. federal income tax
regardless of its source; or
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a
trust if a U.S. court can exercise primary supervision over the
trust’s administration and one or more U.S. persons
are authorized to control all substantial decisions of the trust
(or, if
certain other conditions are
met and you have elected to continue to be treated as a
U.S. trust).
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A
non-U.S. holder is a beneficial
owner of a note or share of our common stock that is not a U.S. holder. If
a partnership or other entity treated as a partnership for U.S. federal
income tax purposes owns notes or shares of our common stock, the tax treatment
of a partner in the partnership will generally depend upon the partner’s status
and the activities of the partnership. If you are a partnership investing in
notes or shares of our common stock (or if you
are
a
partner in such partnership), you are urged to consult your own tax advisors
about the U.S. federal income tax consequences of acquiring, owning and
disposing of the notes and the shares of our common stock.
This
summary is not binding on the
Internal Revenue Service, referred to in this prospectus as the “IRS.” We have
not sought, and will not seek, any ruling from the IRS with respect to the
statements made in this summary, and there can be no assurance that the IRS
will
not take a position contrary to these statements or that a contrary position
taken by the IRS will not be sustained by a court. If you are considering
purchasing the notes, you are urged to consult your own tax advisor with respect
to the application of the U.S. federal income tax laws to your particular
situation, as well as any tax consequences arising under the laws of any state,
local or foreign taxing jurisdiction or under any applicable tax
treaty.
Tax
Consequences to U.S. Holders
This
subsection describes material
U.S. federal income tax consequences to a U.S. holder. If you are not
a U.S. holder, this subsection does not apply to you and you should refer
to “— Tax Consequences to Non-U.S. Holders” below.
Payments
of Interest
You
will generally be required to
include stated interest in income as ordinary income at the time the interest
is
received or accrued, according to your method of tax accounting.
Additional
Amounts
We
may be required to pay you
additional amounts in circumstances described above under the heading
“Description of Notes — Registration Rights.” Because we believe the
likelihood that we will be obligated to make any such additional payments on
the
notes is remote, we believe (and this discussion assumes) that the notes will
not be treated as “contingent payment debt instruments” for Federal income tax
purposes. Assuming our position is respected, you would be required to include
in income any such additional amounts at the time they are received or accrued,
in accordance with your method of accounting for Federal income tax purposes.
However, if the notes were deemed to be contingent payment debt instruments,
U.S. holders would be required to accrue interest income based upon a
“comparable yield,” regardless of the holder’s method of accounting. Such yield
would be higher than the stated interest on the notes. Furthermore,
U.S. holders would generally be required to treat any gain on the sale or
other disposition of a note (including any gain realized on the conversion
of a
note) as ordinary income rather than as capital gain. U.S. holders of a
note are urged to consult their own tax advisers regarding the possible
application of the contingent payment debt instrument rules to the
notes.
Market
Discount
If
you purchase a note at a cost less
than the note’s principal amount, the amount of this difference will be treated
as market discount for Federal income tax purposes, unless the difference is
less than a specified de minimis amount. Under the market discount
rules, you will be required to treat any principal payment on the note and
any
gain realized on disposition of a note as ordinary income to the extent of
the
accrued market discount not previously included in income. In general, market
discount will be treated as accruing on a straight-line basis over the remaining
term of the note as of the time of acquisition or, at your election, under
a
constant-yield method. If such an election is made, it will apply only to the
note with respect to which it is made and cannot be revoked.
If
you acquire a note at a market
discount, you may also elect to include market discount in income over the
remaining term of the note. Once made, this election applies to all market
discount obligations acquired by you on or after the first taxable year to
which
the election applies and cannot be revoked without the consent of the IRS.
Your
tax basis in a note will be increased by any amount of market discount that
was
previously included in your income. If you acquire a note at a market discount
and do not elect to include accrued market discount in income over the remaining
term of the note, you may be required to defer until maturity or a taxable
disposition of the note your deduction of a portion of the interest on any
indebtedness you incur or maintain to purchase or to carry the
note.
Upon
a conversion of a note into our
common stock, any accrued market discount on the note not previously included
in
income will be carried over to the common stock received upon conversion of
the
note, and any gain recognized upon the disposition of the common stock will
be
treated as ordinary income to the extent of this carried-over accrued market
discount. If you receive a combination of cash and stock upon exercise of your
conversion right, you will recognize all or a portion of the accrued market
discount at that time, depending on the amount of cash you receive.
Amortizable
Bond Premium
If
you purchase a note at a price that
exceeds its principal amount, you generally will be considered to have acquired
the note with amortizable bond premium for Federal income tax purposes, except
to the extent the excess is attributable to the note’s conversion feature. The
amount attributable to the conversion feature of a note may be determined under
any reasonable method, including by comparing the note’s purchase price to the
market price of a similar note without a conversion feature.
You
may elect to amortize bond premium
from the acquisition date to the note’s maturity date under a constant-yield
method. The amount amortized in any taxable year generally is treated as an
offset to interest income on the note and not as a separate deduction. If you
elect to amortize bond premium, you must reduce your tax basis in the note
by
the amount of the premium amortized in any year. Once made, this election
applies to all debt obligations owned or subsequently acquired by you on or
after the first day of the first taxable year to which the election applies,
and
cannot be revoked without the consent of the IRS. If you do not make an election
to amortize bond premium, you will be required to include all amounts of
interest as income, and the premium will either reduce the gain or increase
the
loss you recognize upon the taxable disposition of the note.
Sale,
Exchange, Redemption or Repurchase of the Notes
Except
as set forth above under
“— Market Discount” or below under “— Conversion of the Notes,” you
will generally recognize gain or loss upon the sale, exchange, redemption or
repurchase of a note equal to the difference between (1) the amount of cash
proceeds and the fair market value of any property received and (2) your
adjusted tax basis in the note. Any gain or loss you recognize generally will
be
treated as a capital gain or loss (except to the extent the amount received
is
attributable to accrued unpaid interest not previously included in income,
which
will be taxable as ordinary interest income). The capital gain or loss will
be
long-term if your holding period is more than one year at the time of sale,
exchange, redemption or repurchase and will be short-term if your holding period
is one year or less. The deductibility of capital losses is subject to certain
limitations.
Conversion
of the Notes
You
generally will not recognize any
income, gain or loss upon conversion of the notes solely into our common stock
(other than cash received in lieu of a fractional share and in respect of
accrued interest) except to the extent any portion of the common stock is
attributable to accrued interest not previously included in income (which will
be taxable as ordinary income) and except with respect to cash received in
lieu
of a fractional share of our common stock (which generally will result in
capital gain or loss, measured by the difference between the cash received
for
the fractional share and your adjusted tax basis in the fractional share).
Your
tax basis in the common stock received on conversion of a note will be the
same
as your adjusted tax basis in the note at the time of conversion (reduced by
any
basis allocable to a fractional share) except that your tax basis in any common
stock received with respect to accrued interest on a note not previously
included in income will equal the fair market value of such common stock on
the
date received. Your holding period for the common stock received on conversion
will generally include your holding period for the note converted, except that
the holding period for any common stock received with respect to accrued
interest on a note not previously included in income will commence on the day
immediately following the date of receipt.
If
we satisfy the conversion option in
part cash and part common shares, the Federal income tax treatment will depend
upon whether the conversion is characterized as a recapitalization or as in
part
a conversion and in part a redemption of the notes.
If
the conversion of the notes is
characterized as a recapitalization, you will recognize as taxable income any
gain realized in the conversion to the extent of the cash received (excluding
amounts of shares allocable to interest, which will be taxable as ordinary
income if not previously included in your income, and cash received in lieu
of a
fractional common share), but no loss will be recognized on such conversion.
Your tax basis in the common shares received on conversion (other than shares
received in respect of interest) will equal your tax basis in the converted
note
(reduced by any tax basis allocable to a fractional common share), plus the
amount of taxable gain recognized on the conversion. Your holding period for
the
common shares received will include the holding period for the converted note
(except for any common shares received allocable to accrued but unpaid interest,
which will have a holding period beginning on the day after receipt). Cash
received in lieu of a fractional common share upon conversion of the notes
will
generally be treated as a payment in exchange for the fractional share.
Accordingly, the receipt of cash in lieu of a fractional common share generally
will result in capital gain or loss measured by the difference between the
cash
received for the fractional share and your adjusted tax basis allocable to
the
fractional share.
If
the conversion of the notes is
instead treated as in part a conversion into common shares and in part a payment
in redemption of the notes, your treatment with respect to the portion of a
note
considered to be converted into common shares (excluding shares allocable to
interest, which will be taxable as ordinary income if not previously included
in
your income, and cash received in lieu of a fractional common share) will be
as
described above. Cash received in lieu of a fractional common share upon
conversion of a note will generally be treated as a payment in exchange for
the
fractional share. Accordingly, the receipt of cash in lieu of a fractional
common share generally will result in capital gain or loss measured by the
difference between the cash received for the fractional share and your adjusted
tax basis allocable to the fractional share. The cash received with respect
to
the portion of the note considered to be redeemed would likely be treated as
received in redemption of such portion. In that event, you would generally
recognize gain or loss equal to the difference between the amount of cash
received (excluding amounts allocable to interest, which will be taxable as
ordinary income if not previously included in your income) and your adjusted
tax
basis allocable to such portion of the note exchanged therefor.
Alternatively,
in the event that we
satisfy the conversion obligation entirely in cash, you will recognize gain
or
loss equal to the difference between the proceeds received by you (excluding
amounts attributable to accrued but unpaid interest which will be taxable as
ordinary income if not previously included in your income) and your adjusted
tax
basis in the note. See “— Sale, Exchange, Redemption or Repurchase of the
Notes” above.
Constructive
Distributions
The
conversion rate of the notes will
be adjusted in certain circumstances, such as a stock split or stock dividend,
a
distribution of cash or other assets to our stockholders (including certain
self-tender transactions), and certain transactions that constitute a
fundamental change. See “Description of Notes — Conversion Rate
Adjustments.” Under Section 305(c) of the Code, adjustments (or failures to
make adjustments) that have the effect of increasing a note owner’s
proportionate interest in our assets or earnings may in some circumstances
result in a deemed distribution to the note owner. Adjustments to the conversion
rate made pursuant to a bona fide reasonable adjustment formula that
has the effect of preventing the dilution of the interests of the note owners,
however, will generally not be considered to result in a deemed distribution.
Conversion rate adjustments arising from a stock split or a stock dividend
are
generally considered to be pursuant to a bona fide reasonable
adjustment formula and thus will not give rise to a deemed dividend. However,
certain of the possible conversion rate adjustments (generally including
adjustments to the conversion rate to compensate holders for distributions
of
cash or property to our stockholders) will not qualify as being pursuant to
a
bona fide reasonable adjustment formula. If those kinds of adjustments
are made, the note owners will be deemed to have received a distribution even
though they will not have received any cash or property as a result of such
adjustments. Conversely, if an event occurs that increases the interests of
note
owners and the conversion rate is not adjusted, the resulting increase in the
proportionate interests of note owners could be treated as a taxable stock
dividend to them.
Constructive
distributions to note
owners or stockholders will result in dividend income to them to the extent
of
our current or accumulated earnings and profits (as determined for federal
income tax purposes) at that time, with any excess treated as a nontaxable
return of capital or as capital gain as more fully described in “— Taxation
of Distributions on Our Common Stock” below. It is not clear whether any such
constructive dividend would be eligible for the preferential rates
of federal income tax currently applicable to certain dividends received by
non-corporate holders or whether a corporate holder would be entitled to claim
the dividends-received deduction with respect to such a constructive dividend.
Any taxable constructive stock dividends resulting from a change to, or a
failure to change, the conversion rate would in other respects be treated in
the
same manner as dividends paid in cash or other property. Investors should
carefully review the conversion rate adjustment provisions and consult their
tax
advisors with respect to the tax consequences of any such adjustment, including
any potential consequences of a taxable stock dividend to basis and holding
period.
Taxation
of Distributions on Our Common Stock
After
you convert a note into our
common stock, any distributions you receive in respect of our common stock
will
be treated as a dividend, subject to tax as ordinary income, to the extent
payable out of our current or accumulated earnings and profits (as determined
for federal income tax purposes) at that time, then as a tax-free return of
capital to the extent of your tax basis in the shares of our common stock,
and
thereafter as capital gain from the sale or exchange of the stock. Dividends
received by a corporate U.S. shareholder will be eligible for the
dividends-received deduction if the shareholder meets certain holding period
and
other applicable requirements. Dividends received by a non-corporate
U.S. shareholder will qualify for taxation at reduced rates (effective for
tax years beginning before January 1, 2011) if the holder meets
certain holding period and other applicable requirements.
Sale,
Exchange or Other Disposition of Our Common Stock
Upon
a sale, exchange or other
disposition of shares of our common stock, you will generally recognize capital
gain or loss in an amount equal to the difference between (1) the cash
proceeds and the fair market value of any property received on the sale,
exchange or other disposition and (2) your adjusted tax basis in the shares
of our common stock. The gain or loss will be long-term capital gain or loss
if
your holding period for the common stock is more than one year at the time
of
sale, exchange or other disposition and will be short-term if your holding
period is one year or less. The deductibility of capital losses is subject
to
limitations.
Tax
Consequences to Non-U.S. Holders
This
subsection describes material
U.S. federal income tax consequences to a non-U.S. holder. If you are
not a non-U.S. holder, this subsection does not apply to you and you should
refer to “— Tax Consequences to U.S. Holders” above.
Special
rules may apply to certain
non-U.S. holders such as “controlled foreign corporations,” “passive
foreign investment companies,” or, in certain circumstances, individuals who are
U.S. expatriates. If you are a non-U.S. holder that falls within any
of the foregoing categories, you should consult your own tax advisors to
determine the U.S. federal, state, local and foreign tax consequences that
may be relevant to you. Further, this summary does not address all of the
special rules that may be applicable to foreign partnerships or partnerships
with foreign partners. If you are a partnership holding notes or shares of
our
common stock, you are urged to consult your own tax advisor concerning the
tax,
withholding and reporting rules that may apply to you.
Payments
with Respect to the Notes
Subject
to the discussion below under
“— Constructive Dividends,” if you are a non-U.S. holder, all payments
of principal or interest (including additional amounts, if any) made to you
on
the notes, and any gain realized on a sale, exchange, conversion, redemption
or
repurchase of the notes, will be exempt from U.S. federal income and
withholding tax, provided that:
|
|
•
|
you
do not (directly or indirectly, actually or constructively) own 10%
or
more of the total combined voting power
of all classes of our stock that are entitled to
vote;
|
|
|
|
•
|
you
are not a bank whose receipt of interest on a note is described in
Section 88l(c)(3)(A) of the
Code;
|
|
|
•
|
you
provide your name and address, and certify, under penalties of perjury,
that you are not a U.S. person (which
certification may be made on an IRS Form W-8BEN (or successor form))
or (2) you hold your notes
through certain qualified foreign intermediaries and you satisfy
the
certification requirements of applicable Treasury Regulations;
and
|
|
|
|
|
•
|
in
the case of a sale, exchange, conversion, redemption or repurchase
of the
notes:
|
|
|
•
|
if
you are an individual non-U.S. holder, you are present in the United
States for less than 183 days in
the taxable year of disposition; and
|
|
|
|
•
|
your
holding of the notes is not effectively connected with the conduct
of a
trade or business in the United States.
|
|
If
you cannot satisfy the requirements
described above with respect to interest payments, payments of interest will
be
subject to the 30% U.S. federal withholding tax, unless you provide us with
a properly executed (1) IRS Form W-8BEN (or successor form) claiming
an exemption from or reduction in withholding under the benefit of an applicable
income tax treaty or (2) IRS Form W-8ECI (or successor form) stating
that interest paid on the notes is not subject to withholding tax because it
is
effectively connected with your conduct of a trade or business in the United
States, and, if a tax treaty applies, are attributable to a U.S. permanent
establishment.
If
you are engaged in a trade or
business in the United States and interest on a note or gain recognized on
the
sale, exchange, conversion, repurchase or redemption of the note is effectively
connected with the conduct of that trade or business, you will be subject to
U.S. federal income tax (but not the 30% withholding tax if you provide a
Form W-8ECI as described above) on that interest or gain on a net income
basis in the same manner as if you were a U.S. person as defined under the
Code. In addition, if you are a foreign corporation, you may be subject to
a
“branch profits tax” equal to 30% (or lower applicable income tax treaty rate)
of your earnings and profits for the taxable year, subject to certain
adjustments, that are effectively connected with your conduct of a trade or
business in the United States. For this purpose, any such interest or gain
will
be included in the earnings and profits of a foreign corporation. An individual
non-U.S. holder who is in the United States for more than 183 days in
the taxable year in which the note is sold, exchanged, redeemed or repurchased,
and meets certain other conditions, will be subject to a flat 30%
U.S. federal income tax on any gain recognized on such a disposition, which
gain may be offset by such a person’s U.S.-source capital losses, if
any.
Constructive
Dividends
Under
certain circumstances, a
non-U.S. holder may be deemed to have received a constructive dividend
resulting from certain adjustments, or failure to make adjustments, to the
number of shares of our common stock to be issued upon conversion. Any
constructive dividend deemed paid to a non-U.S. holder will be subject to
withholding at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty. A non-U.S. holder who wishes to claim the
benefit of an applicable treaty rate is required to satisfy applicable
certification and other requirements, such as the provision of IRS
Form W-8BEN, as discussed above. It is possible that U.S. federal tax
on the constructive dividend would be withheld from interest paid to the
non-U.S. holder of the notes. Non-U.S. holders who are subject to
withholding tax under such circumstances should consult their own tax advisors
as to whether they can obtain a refund for all or a portion of the withholding
tax.
Payments
on Common Stock
Any
dividends paid to a
non-U.S. holder with respect to the shares of our common stock will
generally be subject to withholding tax at a rate of 30%, or such lower rate
as
may be specified by an applicable income tax treaty. Dividends that are
effectively connected with such a person’s conduct of a trade or business within
the United States, and, if a tax treaty applies, are attributable to a
U.S. permanent establishment, are not subject to the withholding tax, but
instead are subject to U.S. federal income tax on a net income basis at
applicable graduated individual or corporate rates, as the case may be. Certain
certification and disclosure requirements, such as the provision of
IRS Form W-8ECI, as discussed above, must be complied with for such
“effectively connected” income to be exempt from withholding. Any such
effectively connected dividends received by a foreign corporation may, under
certain circumstances, be subject to an additional branch profits tax at a
30%
rate or such lower rate as may be specified by an applicable income tax
treaty.
A
non-U.S. holder of shares of our
common stock who wishes to claim the benefit of an applicable treaty rate is
required to satisfy applicable certification and other requirements, such as
the
provision of IRS Form W-8BEN, as discussed above. Alternatively, if
you are eligible for a reduced rate of U.S. withholding tax pursuant to an
income tax treaty, you may obtain a refund of any excess amounts withheld by
filing an appropriate claim for refund with the IRS.
Sale,
Exchange or Other Disposition of Shares of Common
Stock
Any
gain recognized upon the sale,
exchange or other disposition of a share of our common stock generally will
not
be subject to U.S. federal income tax unless:
|
|
•
|
that
gain is effectively connected with your conduct of a trade or business
in
the United States or, where a tax treaty applies, is attributable
to a
U.S. permanent
establishment; or
|
|
|
•
|
you
are an individual who is present in the United States for 183 days or
more in the taxable year of that disposition, and certain other conditions
are met.
|
|
|
•
|
we
are or have been a U.S. real property holding corporation, as defined
in the Code, at any time within the five-year period preceding the
disposition or the non-U.S. holder’s holding period, whichever period
is shorter. We believe that we are not, and do not anticipate becoming,
a
U.S. real property holding
corporation.
|
An
individual non-U.S. holder
described in the first bullet point above will be subject to U.S. federal
income tax on a net income basis under regular graduated U.S. federal income
tax
rates. An individual non-U.S. holder described in the second bullet point
above will be subject to a flat 30% U.S. federal income tax on the gain
derived from the sale, which may be offset by the individual’s U.S.-source
capital losses, if any. A non-U.S. holder that is a foreign corporation and
is described in the first bullet point above will be subject to tax on gain
on a
net-income basis under regular graduated U.S. federal income tax rates and,
in addition, may be subject to a branch profits tax at a 30% rate or a lower
rate if so specified by an applicable income tax treaty.
Backup
Withholding and Information Reporting
If
you are a U.S. holder of notes
or shares of our common stock, information reporting requirements generally
will
apply to all payments we make to you and the proceeds from a sale of a note
or
share of our common stock made to you, unless you are an exempt recipient such
as a corporation. If you fail to supply your correct taxpayer identification
number, underreport your tax liability or otherwise fail to comply with
applicable U.S. information reporting or certification requirements, the
IRS may require us to backup withhold U.S. federal income tax at the rate
set by Section 3406 of the Code (currently 28%) from those
payments.
In
general, if you are a
non-U.S. holder, you will not be subject to backup withholding and
information reporting with respect to payments that we make to you, provided
that we do not have actual knowledge or reason to know that you are a
U.S. person and you have given us the certification that you are not a
U.S. person as described under “— Tax Consequences to
Non-U.S. Holders — Payments with Respect to the Notes.” In addition,
if you are a non-U.S. holder, you generally will be subject to backup
withholding and information reporting with respect to the proceeds of the sale
of a note or share of our common stock within the United States or conducted
through certain U.S.-related financial intermediaries, unless the payor receives
the certification that you are not a U.S. person as described above under
“— Tax Consequences to Non-U.S. Holders — Payments with Respect
to the Notes” and does not have actual knowledge or reason to know that you are
a U.S. person, as defined in the Code, or you otherwise establish an
exemption.
Any
amounts withheld under the backup
withholding rules will be allowed as a refund or a credit against your
U.S. federal income tax liability, provided the required information is
furnished to the IRS.
SELLING
SECURITYHOLDERS
The
notes were originally issued by us
and sold by Banc of America Securities LLC, J.P. Morgan Securities Inc. and
Wachovia Capital Markets, LLC (collectively, the “initial purchasers”) in
transactions exempt from the registration requirements of the Securities Act
to
persons reasonably believed by the initial purchasers to be “qualified
institutional buyers,” as defined by Rule 144A under the Securities
Act.
The
selling securityholders may from
time to time offer and sell pursuant to this prospectus any or all of the notes
listed below and any and all of the shares of common stock issuable upon
conversion of such notes. When we refer to the “selling securityholders”
in this prospectus, we mean those persons listed in the table below or in any
prospectus supplement, as well as the pledges, donees, assignees, transferees,
successors and others who later hold any of the selling securityholders’
interests.
The
table below sets forth the name of
each selling securityholder, the principal amount at maturity of the notes
beneficially owned by such selling securityholder that may be offered pursuant
to this prospectus and the common stock issuable upon conversion of the notes
beneficially owned by each selling securityholder before the offering and that
may be offered using this prospectus. In the below table, the number of
shares of our common stock that may be offered pursuant to this prospectus
is
calculated based on the current conversion rate of 65.0233 shares of common
stock per $1,000 principal amount of notes. The number of shares of common
stock into which the notes are convertible is subject to adjustment under
certain circumstances. Accordingly, the number of shares of common stock
issuable upon conversion of the notes and beneficially owned and offered by
selling securityholders pursuant to this prospectus may increase or decrease
from that set forth in the below table.
The
information set forth below is
based on information provided by or on behalf of the selling
securityholders. Information concerning the selling securityholders may
change from time to time. The selling securityholders may from time to
time offer and sell any or all of the securities under this prospectus.
Because the selling securityholders are not obligated to sell the notes or
any
shares of common stock issuable upon conversion of the notes, we cannot estimate
the amount of the notes or how many shares of common stock that the selling
securityholders will hold upon consummation of any such sales. In
addition, since the date on which a selling securityholder provided this
information to us, such selling securityholder may have sold, transferred or
otherwise disposed of all or a portion of its notes or common shares issuable
upon conversion of its notes.
|
Name
|
Principal
Amount at Maturity of Notes Beneficially Owned
($)
|
Percentage
of Notes Beneficially Owned
|
Number
of Shares of Common Stock Owned Prior to the Offering (1)
|
Number
of Shares of Common Stock That May be Sold (1)
|
Percentage
of Common Stock Outstanding (2)
|
|
Alpine
Associates (3)
|
$7,624,000
|
2.77%
|
0
|
495,737
|
*
|
|
Alpine
Associates II, L.P. (4)
|
$604,000
|
0.22%
|
0
|
39,274
|
*
|
|
Alpine
Partners, L.P. (5)
|
$1,111,000
|
0.40%
|
0
|
72,240
|
*
|
|
Bancroft
Fund LTD. (6)
|
$1,500,000
|
0.55%
|
0
|
97,534
|
*
|
|
CALAMOS
Market Neutral Income Fund – CALAMOS Investment Trust (7)
|
$15,000,000
|
5.45%
|
0
|
975,349
|
*
|
|
Canyon
Capital Arbitrage Master Fund, Ltd. (8)
|
$12,825,000
|
4.66%
|
0
|
833,923
|
*
|
|
Canyon
Value Realization Fund, L.P. (9)
|
$4,335,000
|
1.58%
|
0
|
281,876
|
*
|
|
The
Canyon Value Realization Fund (Cayman), Ltd. (10)
|
$11,410,000
|
4.15%
|
0
|
741,915
|
*
|
|
Canyon
Value Realization MAC 18, Ltd. (10)
|
$730,000
|
0.27%
|
0
|
47,467
|
*
|
|
Name
|
Principal
Amount at Maturity of Notes Beneficially Owned
($)
|
Percentage
of Notes Beneficially Owned
|
Number
of Shares of Common Stock Owned Prior to the Offering (1)
|
Number
of Shares of Common Stock That May be Sold (1)
|
Percentage
of Common Stock
|
|
ClearBridge
Asset Management, Inc. (11)
|
$8,850,000
|
3.22%
|
0
|
575,456
|
*
|
|
CNH
CA Master Account, L.P. (12)
|
$4,000,000
|
1.45%
|
0
|
260,093
|
*
|
|
D.E.
Shaw Valence Portfolios, L.L.C.(13)
|
$15,000,000
|
5.45%
|
0
|
975,349
|
*
|
|
Ellsworth
Fund LTD. (6)
|
$1,500,000
|
0.55%
|
0
|
97,534
|
*
|
|
Good
Steward Trading Co., SPC Class F (14)
|
$161,000
|
0.06%
|
0
|
10,468
|
*
|
|
Jabre
Capital Partners S.A. (15)
|
$10,000,000
|
3.64%
|
0
|
650,233
|
*
|
|
Institutional
Benchmark Series (Master Feeder) Limited in Respect of Electra Series
c/o
Quattro Global Capital, LLC
|
$500,000
|
0.18%
|
0
|
32,511
|
*
|
|
Lyxor/Canyon
Capital Arbitrage Fund Ltd. (10)
|
$7,700,000
|
2.80%
|
0
|
500,679
|
*
|
|
Lyxor/Canyon
Value Fund Ltd. (10)
|
$3,000,000
|
1.09%
|
0
|
195,069
|
*
|
|
Partners
Group Alternative Strategies PCC Limited, Red Delta Cell c/o Quattro
Global Capital, LLC
|
$400,000
|
0.15%
|
0
|
26,009
|
*
|
|
Quattro
Fund Ltd.
|
$3,800,000
|
1.38%
|
0
|
247,088
|
*
|
|
Quattro
Multistrategy Masterfund LP
|
$300,000
|
0.11%
|
0
|
19,506
|
*
|
|
Redbrick
Capital Master Fund LTD (16)
|
$20,000,000
|
7.27%
|
0
|
1,300,466
|
1.06%
|
|
S.A.C.
Arbitrage Fund, LLC (17)
|
$1,000,000
|
0.36%
|
0
|
65,023
|
*
|
|
Silvercreek
II Limited (18)
|
$2,000,000
|
0.73%
|
0
|
130,046
|
*
|
|
Silvercreek
Limited Partnership (18)
|
$3,000,000
|
1.09%
|
0
|
195,069
|
*
|
|
UBS
Securities LLC (19)
|
$2,500,000
|
0.91%
|
10,100
|
172,658
|
*
|
|
Vicis
Capital Master Fund (20)
|
$9,500,000
|
3.45%
|
0
|
617,721
|
*
|
|
Waterstone
Market Neutral Master Fund, Ltd.
|
$14,078,000
|
5.12%
|
0
|
915,398
|
*
|
|
Waterstone
Market Neutral MAC51 Fund, Ltd.
|
$7,922,000
|
2.88%
|
0
|
515,114
|
*
|
|
Total
|
$170,350,000
|
61.95%
|
10,100
|
11,086,805
|
9.01%
|
|
* Less
than 1%
|
|
(1)
|
Assumes
conversion of all of the holders notes at a conversion rate of 65.0233
shares per $1,000 principal amount of notes. The conversion
rate for the notes is subject to adjustment in certain
circumstances. As a result, the number of shares of common
stock issuable upon conversion of the notes may increase or decrease
in
the future. See “Description of the Notes – Conversion of the
Notes.”
|
|
(2)
|
Calculated
based on Rule 13d-3(d)(1)(i) of the Exchange Act using 123,078,645
shares
of common stock outstanding as of August 22, 2007.
|
|
(3)
|
The
Selling Securityholder has indicated that Victoria Eckert, its sole
shareholder, has voting and/or investment control over the Transfer
Restricted Securities. The full legal name of the registered
holder through which the Transfer Restricted Securities are held
is Cede
& Co. a/c Alpine Associates. Alpine Associates is a
registered broker-dealer pursuant to Section 15 of the Exchange
Act.
|
|
(4)
|
The
Selling Securityholder has indicated that Victoria Eckert, its sole
shareholder, has voting and/or investment control over the Transfer
Restricted Securities. The full legal name of the registered
holder through which the Transfer Restricted Securities are held
is Credit
Suisse a/c Alpine Associates II, L.P.
|
|
(5)
|
The
Selling Securityholder has indicated that Victoria Eckert, its sole
shareholder, has voting and/or investment control over the Transfer
Restricted Securities. The full legal name of the registered
holder through which the Transfer Restricted Securities are held
is Cede
& Co. a/c Alpine Partners, L.P. Alpine Partners, L.P. is a
registered broker-dealer pursuant to Section 15 of the Exchange
Act.
|
|
(6)
|
The
Selling Securityholder has indicated that it is an SEC reporting
company
and that Thomas H. Dinsmore, portfolio manager, has dispositive powers
with respect to the Notes and the voting and/or dispositive powers
with
respect to the shares. The registered holder through which the
Transfer Restricted Securities are held is Brown Brothers Harriman
&
Co.
|
|
(7)
|
The
Selling Securityholder has indicated that Nick Calamos CIO, Calamos
Advisors LLC, has voting and/or investment control over the Transfer
Restricted Securities. The full legal name of the Selling
Securityholder through which the Transfer Restricted Securities are
held
is Bank of New York.
|
|
(8)
|
The
Selling Securityholder has indicated that Canyon Capital Advisors
LLC is
the investment advisor of the Selling Securityholder and has sole
voting
and dispositive power over the Transfer Restricted
Securities. The managing partners of Canyon Capital Advisors
LLC are Joshua S. Friedman, Mitchell R. Julis, and K. Robert
Turner. The Selling Securityholder has indicated that it is an
affiliate of a broker-dealer registered pursuant to Section 15 of
the
Exchange Act.
|
|
(9)
|
The
Selling Securityholder has indicated Canpartners Investments III,
L.P. and
Canyon Capital Advisors, LLC have sole voting and dispositive power
over
the Transfer Restricted Securities. Canpartners Investments
III, L.P. is the General Partner of the Selling Securityholder and
Canyon
Capital Advisors, LLC is the General Partner of Canpartners Investments
III, L.P. The managing partners of Canyon Capital Advisors LLC
are Joshua S. Friedman, Mitchell R. Julis, and K. Robert
Turner. The Selling Securityholder has indicated that it is an
affiliate of a broker-dealer registered pursuant to Section 15 of
the
Exchange Act.
|
|
(10)
|
The
Selling Securityholder has indicated that Canyon Capital Advisors
LLC is
the investment advisor of the Selling Securityholder and has sole
voting
and dispositive power over the Transfer Restricted
Securities. The managing partners of Canyon Capital Advisors
LLC are Joshua S. Friedman, Mitchell R. Julis, and K. Robert
Turner. The Selling Securityholder has indicated that it is an
affiliate of a broker-dealer registered pursuant to Section 15 of
the
Exchange Act.
|
|
(11)
|
The
Selling Securityholder has indicated that it acts as the discretionary
investment advisor and that it is the beneficial owner of the Transfer
Restricted Securities. Legg Mason Inc. is the parent company of
the Selling Securityholder and it is a broker-dealer registered pursuant
to Section 15 of the Exchange Act. Therefore, the Selling
Securityholder is an affiliate of a broker-dealer registered pursuant
to
Section 15 of the Exchange Act.
|
|
(12)
|
The
Selling Securityholder has indicated that CNH Partners, LLC is the
investment advisor of the Selling Securityholder and has sole voting
and
dispositive power over the Transfer Restricted
Securities. Investment principals for the Advisor are Robert
Krail, Mark Mitchell and Todd Pulvino.
|
|
(13)
|
The
Selling Securityholder has indicated that D.E. Shaw & Co. L.P., as
either managing member or investment advisor, has voting and investment
control over any shares of common stock issuable upon conversion
of the
Notes owned by this Selling Securityholder. Julius Gaudio, Eric
Wepsic, and Anne Dinning, or their designees have voting and investment
control over the notes. The Selling Securityholder is an
affiliate of D.E. Shaw Valence, L.L.C. and D.E. Shaw Securities,
L.L.C.,
which are both registered broker-dealers pursuant to Section 15 of
the
Exchange Act.
|
|
(14)
|
The
Selling Securityholder has indicated that Robert Zoellner, its sole
shareholder, has voting and/or investment control over the Transfer
Restricted Securities. The full legal name of the registered
holder through which the Transfer Restricted Securities are held
is Credit
Suisse a/c Good Steward Trading Co., SPC Class F.
|
|
(15)
|
The
Selling Securityholder has indicated that JABCAP Multi Strategy Master
Fund Limited and J-Invest Ltd have the investment and voting power
over
the Transfer Restricted Securities. The full legal name of the
registered holder through which the Transfer Restricted Securities
are
held is UBS Stamford DTC 642.
|
|
(16)
|
The
Selling Securityholder has indicated that Tony Morgan and Jeff Morgan,
on
behalf of Redbrick Capital Master Fund LTD, have voting and/or investment
control over the Transfer Restricted
Securities.
|
|
(17)
|
The
Selling Securityholder has indicated that S.A.C. Captial Advisors,
LLC and
S.A.C. Capital Management, LLC share all investment and voting power
over
the Transfer Restricted Securities. Steven A. Cohen controls
both S.A.C. Captial Advisors, LLC and S.A.C. Capital Management,
LLC.
|
|
(18)
|
The
Selling Securityholder has indicated that Louise Morwick and Byrn
Joyns
have voting and/or investment control over the Transfer Restricted
Securities.
|
|
(19)
|
The
Selling Securityholder has indicated that it is an SEC reporting
company
and that John Dibacco, on behalf of UBS Securities LLC, has dispositive
powers with respect to the Notes and the voting and/or dispositive
powers
with respect to the shares. The full legal name of the
registered holder through which the Transfer Restricted Securities
are
held is 642 – UBS Securities LLC. The Selling Securityholder is
a broker-dealer registered pursuant to Section 15 of the Exchange
Act.
|
|
(20)
|
The
Selling Securityholder has indicated that Shad Stastney, John Succo
and
Sky Lucas have sole voting and dispositive power over the Transfer
Restricted Securities.
|
Before
a securityholder not named in
the above table may use this prospectus in connection with an offering of
securities, other than securities that were purchased pursuant to the
registration statement of which this prospectus is a part, this prospectus
will
be amended. In that amendment, we will include the name of the
holder, the amount of notes and common stock beneficially owned by the holder
and the amount of notes and common stock to be offered. Alternatively, we can
include that information in a report filed with the SEC pursuant to
Section 13 or Section 15(d) of the Exchange Act, and incorporate it by
reference into this prospectus or we can include that information in a
supplement to this prospectus filed with the SEC pursuant to Rule 424(b) under
the Securities Act. Any such amendment, report or prospectus supplement will
also disclose whether any selling securityholder named in the amendment, report
or prospectus supplement has held any position or office with us or any of
our
predecessors or affiliates, or had any other material relationship with us
or
any of our predecessors or affiliates, during the three years prior to the
date
of the amendment, report or prospectus supplement.
Because
the selling securityholders may
offer all or some of their notes or the common stock issuable upon conversion
of
the notes from time to time, we cannot estimate the amount of the notes or
common stock issuable upon conversion of the notes that will be held by the
selling securityholders upon termination of any particular
offering. See “Plan of Distribution” below.
PLAN
OF DISTRIBUTION
We
are registering the notes and the
underlying common stock to allow the selling securityholders and their
successors, including their transferees, pledges and donees and their
successors, to sell these securities to the public from time to time after
the
date of this prospectus. The selling securityholders may sell the
securities directly or through underwriters, broker-dealers or
agents. If the selling securityholders sell the securities through
underwriters or broker-dealers, the selling securityholders will be responsible
for underwriting discounts or commissions or agents’ commissions. We
have agreed to pay substantially all of the expenses incidental to the
registration, offering and sale of the securities to the public other than
commissions, fees and discounts of underwriters, brokers, dealers and
agents.
The
total proceeds to the selling
securityholders from selling the securities will be the purchase price of the
securities, less any discounts and commissions paid by the selling
securityholders. We will not receive any of the proceeds from the
sale of the securities offered by this prospectus.
The
SEC may deem the selling
securityholders and any broker-dealers or their affiliates or agents who
participate in the distribution of the securities to be
“underwriters.” As a result the SEC may deem any profits the selling
securityholders make by selling the securities and any discounts, commissions
or
concessions received by any broker-dealers or their affiliates or agents to
be
underwriting discounts and commissions under the Securities
Act. Selling securityholders who are “underwriters” will be subject
to the prospectus delivery requirements of the Securities Act and may also
be
subject to liabilities under the securities laws, including Sections 11, 12
and
17 of the Securities Act and Rule 10b-5 under the Exchange Act. The
following selling securityholders have identified themselves as registered
broker-dealers: Alpine Associates, Alpine Partners, L.P. and UBS Securities
LLC. Each of the following selling securityholders has identified
itself as an affiliate of a registered broker-dealer: Canyon Capital Arbitrage
Master Fund, Ltd., Canyon Value Realization Fund, L.P., The Canyon Value
Realization Fund (Cayman), Ltd., Canyon Value Realization MAC 18, Ltd.,
ClearBridge Asset Management, Inc., D.E. Shaw Valence Portfolios, L.L.C.,
Lyxor/Canyon Capital Arbitrage Fund Ltd. and Lyxor/Canyon Value Fund
Ltd. Accordingly, each of these selling securityholders is deemed to
be, under the interpretations of the SEC, an “underwriter” within the meaning of
the Securities Act. For details about the amount of notes and number
of shares beneficially owned and being offered by these selling securityholders,
see “Selling Securityholders” above.
The
selling securityholders and any
other person who participates in distributing the securities will be subject
to
the Exchange Act. The Exchange Act rules include Regulation M, which
may limit the timing of purchases and sales of any of the securities by the
selling securityholders and any other person. In addition, Regulation
M may restrict the ability of any person engaged in the distribution of the
securities to engage in market-making activities with respect to the particular
securities being distributed for a period of up to five business days before
beginning to distribute the securities. This may affect the
securities’ marketability and the ability of any person or entity to engage in
market-making activities with respect to the securities.
The
selling securityholders may sell
the securities in one or more transactions at:
|
|
prevailing
market prices at the time of sale;
|
|
|
varying
prices determined at the time of sale;
or
|
The
sales may be effected in
transactions:
|
|
on
any national securities exchange or quotation service on which the
securities are listed or quoted at the time of the sale, including
the
NASDAQ Global Select Market in the case of the common
stock;
|
|
|
in
the over-the-counter market;
|
|
|
in
transactions other than transactions on national securities exchanges,
quotation services or in the over-the-counter market;
or
|
|
|
through
the writing of options.
|
These
transactions may include block
transactions or crosses. Crosses are transactions in which the same
broker acts as an agent on both sides of the transaction.
In
connection with sales of the
securities or otherwise, any selling securityholder may:
|
|
enter
into hedging transactions with broker-dealers, who may in turn engage
in
short sales of the securities in the course of hedging the positions
they
assume;
|
|
|
sell
the securities short and deliver the securities to close out their
short
positions; or
|
|
|
loan
or pledge the securities to broker-dealers, who may in turn sell
the
securities.
|
We
cannot assure you any selling
securityholders will sell any or all of securities using this
prospectus. In addition, any securities covered by this prospectus
that qualify for sale under Rule 144 or Rule 144A of the Securities Act may
be
sold under Rule 144 or Rule 144A rather than under this
prospectus. The selling securityholders also may transfer, devise or
gift the securities by other means not described in this
prospectus.
To
comply with the securities laws of
some states, if applicable, the selling securityholders may only sell the
securities in these jurisdiction through registered or licensed brokers or
dealers.
Our
common stock trades on the NASDAQ
Global Select Market under the symbol “CHRS.” We do not intend to
apply for listing of the notes on any securities exchange or for quotation
through NASDAQ. Accordingly, we cannot assure you that selling
securityholders will be able to sell the notes or that any trading market for
the notes will develop.
With
respect to a particular offering
of the securities, to the extent required, we will file an accompanying
prospectus supplement or, if appropriate, a post-effective amendment to the
registration statement of which this prospectus is a part, disclosing the
following information:
|
|
the
specific notes or common stock to be offered and
sold;
|
|
|
the
names of the selling
securityholders;
|
|
|
the
respective purchase prices and public offering prices and other material
terms of the offering;
|
|
|
the
names of any participating agents, broker-dealers or underwriters;
and
|
|
|
any
applicable commissions, discounts, concessions and other items
constituting compensation from the selling
securityholders.
|
The
registration rights agreement filed
as an exhibit to this registration statement provides that we and the selling
securityholders will indemnify each other and each other’s directors, officers
and controlling persons against specified liabilities, including liability
under
the Securities Act, or that we will be entitled to contribution from each other
in connection with these liabilities.
LEGAL
MATTERS
Drinker
Biddle & Reath LLP, has
provided us with an opinion as to the validity of our issuance of the securities
offered by this prospectus.
EXPERTS
The
consolidated financial statements
of Charming Shoppes, Inc. appearing in Charming Shoppes Inc.’s Annual Report
(Form 10-K) for the year ended February 3, 2007 and Charming Shoppes, Inc.
management’s assessment of the effectiveness of internal control over financial
reporting as of February 3, 2007 included herein, have been audited by Ernst
& Young LLP, independent registered public accounting firm, as set forth in
their reports thereon, included therein, and incorporated herein by
reference. Such consolidated financial statements and management’s
assessment are incorporated herein by reference in reliance upon such reports
given on the authority of such firm as experts in accounting and
auditing.
WHERE
YOU CAN FIND MORE INFORMATION
Our
SEC filings are available to the
public over the internet at the SEC’s web site at http://www.sec.gov. You may
also read and copy any document we file at the SEC’s Public Reference Room at
100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the
SEC at 1-800-SEC-0330 for further information on the operation of the Public
Reference Room. You may also access these filings free of charge through our
Internet site at www.charmingshoppes.com. Other than information
specifically incorporated by reference in this prospectus, information on our
Internet site is not part of this prospectus. Our common stock is listed on
the
NASDAQ Global Select Market under the symbol “CHRS.” The reports, proxy
statements and other information that we file with the SEC are also available
at
the following NASDAQ address: NASDAQ Operations, 1735 K Street, N.W.,
Washington, D.C. 20006.
We
incorporate by reference into this
prospectus the documents listed below and any future filings we make with the
SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, including
any filings after the date of this prospectus, until we have sold all of the
notes to which this prospectus relates or the offering is otherwise terminated.
The information we incorporate by reference is an important part of this
prospectus. Any statement in a document incorporated by reference in this
prospectus will be deemed to be modified or superseded to the extent that a
statement contained in (1) this prospectus or (2) any other
subsequently filed document that is incorporated by reference in this prospectus
modifies or supersedes the statement.
|
|
•
|
Our
Annual Report on Form 10-K for our fiscal year ended February 3,
2007;
|
|
|
•
|
Our
Quarterly Report on Form 10-Q for our fiscal quarter ended May 5,
2007;
|
|
|
•
|
Our
Definitive Proxy Statement on Schedule 14A filed on May 14,
2007;
|
|
|
•
|
Current
Reports on Form 8-K filed on February 14, 2007, April 25, 2007, May
1,
2007, May 3, 2007, May 16, 2007 and June 7, 2007;
and
|
|
|
•
|
The
description of our common stock contained in the Registration Statement
on
Form S-3 filed by us with the SEC on July 1, 1996 (File
No. 333-4137), the description of the Shareholder Rights Plan
attached to common stock contained in our Amended Form 8A/12B filed
with the SEC on April 28, 1999 (File No. 000-07258), as amended
on May 3, 2002, and any description of our common stock, and rights
relating thereto, contained in any other of our registration statements
relating to our common stock or such rights filed with the SEC under
the
Exchange Act, including any amendment or report filed for the purpose
of
updating the description.
|
You
may request a copy, at no cost, of
any or all of the documents referred to above, other than exhibits to the
documents that are not specifically incorporated by reference in the documents.
You should direct written or telephone requests to Charming Shoppes, Inc.,
450
Winks Lane, Bensalem, Pennsylvania 19020, Attention: Colin D.
Stern, Esq., Executive Vice President, General Counsel and Secretary,
telephone (215) 245-9100.
Our
logo appearing on the front and
back covers of this prospectus and “FASHION BUG®”, “FASHION
BUG
PLUS®”,
“FIGURE®”,
“L.A. BLUES®”,
“CATHERINES®”,
“CATHERINES PLUS SIZES®”, “MAGGIE
BARNES®”, “ANNA
MAXWELL®”,
“LIZ&ME®”,
“SERENADA®”,
“LANE BRYANT®”,
“LANE BRYANT OUTLETtm”
“VENEZIA®”,
“CACIQUE®”,
“PETITE
SOPHISTICATE®”,
“PETITE SOPHISTICATE
OUTLETtm”, “OLD PUEBLO
TRADERS®”,
“BEDFORD
FAIR LIFESTYLES®”, “BEDFORD
FAIR
SHOESTYLES®”,
“WILLOW RIDGE®”,
“LEW
MAGRAM®”, “BROWNSTONE
STUDIO®”,
“REGALIA®”,
“INTIMATE APPEAL®”, “MONTEREY
BAY
CLOTHING COMPANY®”, “COWARD®”,
and “FIGI’S®”
are trademarks
of
Charming Shoppes, Inc. Other brands, names and trademarks contained in this
prospectus are the property of their respective owners.
PART
II
INFORMATION
NOT REQUIRED IN THE PROSPECTUS
Item
14. Other Expenses of Issuance and Distribution
The
following table sets forth our
estimated expenses payable in connection with this registration
statement.
|
Securities
and Exchange Commission registration fee
|
|
$ |
8,442.50
|
|
|
Accounting
fees
|
|
$ |
40,000.00
|
|
|
Legal
fees and expenses
|
|
$ |
25,000.00
|
|
|
Trustee’s
fees and expenses
|
|
$ |
10,000.00
|
|
|
Miscellaneous
|
|
$ |
5,000.00
|
|
|
Total
|
|
$ |
88,442.50
|
|
Item
15. Indemnification of Directors and Officers
Section
1741 of the Pennsylvania
Business Corporation Law provides us the power to indemnify any officer or
director acting in his capacity as a representative of us who was or is a party
or is threatened to be made a party to any action or proceeding against
expenses, judgments, penalties, fines and amounts paid in settlement in
connection with such action or proceeding whether the action was instituted
by a
third party or arose by or in the right of us. Generally, the only
limitation on the ability of us to indemnify our officers and directors is
if
the act or failure to act is finally determined by a court to have constituted
willful misconduct or recklessness.
The
bylaws provide a clear and
unconditional right to indemnification to the full extent permitted by law,
for
expenses (including attorneys’ fees), damages, punitive damages, judgments,
penalties, fines and amounts paid in settlement actually and reasonably incurred
by any person whether or not the indemnified liability arises or arose from
any
threatened, pending or completed proceeding by or in the right of us (a
derivative action) by reason of the fact that such person is or was serving
as
our director, officer or employee, or, at our request, as a director, officer,
partner, fiduciary or trustee of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, even if the act
or
failure to act giving rise to the claim for indemnification entails the
negligence or gross negligence of the indemnified party unless such act or
failure to act is finally determined by a court to have constituted willful
misconduct or recklessness. The bylaws provide for the advancement of
expenses to an indemnified party upon receipt of an undertaking by the party
to
repay those amounts if it is finally determined that the indemnified party
is
not entitled to indemnification. Indemnification is deemed a contract
right of our directors, officers and employees, as opposed to a matter within
the discretion of our board, as will the payment of expenses by us in advance
of
a proceeding’s final disposition.
The
bylaws authorize us to take steps
to ensure that all persons entitled to the indemnification are properly
indemnified, including, if our board so determines, purchasing and maintaining
insurance, entering into indemnification agreements, creating a reserve, trust,
escrow or other fund or account, granting security interests, obtaining a letter
of credit or using other means that may be available from time to
time.
We
maintain insurance covering our
directors and officers against certain liabilities incurred by them in their
capacities as such, including among other things, certain liabilities under
the
Securities Act of 1933.
Item
16. Exhibits
The
following exhibits are filed with
or incorporated by reference in this registration statement:
|
Exhibit
Number
|
Description
of Document
|
| |
|
|
3.1
|
Restated
Articles of Incorporation dated January 1, 1993, filed as Exhibit
3.1 to
the Company’s Form 10-K of the Registrant for the fiscal year ended
January 29, 1994, is incorporated herein by reference.
|
| |
|
|
3.2
|
Bylaws,
as Amended and Restated, dated as of July 1, 1999, filed as Exhibit
3.2 to
the Company’s Form 10-Q for the quarter ended July 31, 1999, is
incorporated herein by reference.
|
| |
|
|
4.1
|
Indenture
dated April 30, 2007 between the Charming Shoppes, Inc. and Wells
Fargo
Bank, National Association, filed as Exhibit 4.1 to the Company’s Form 8-K
filed on May 3, 2007, is incorporated herein by
reference.
|
| |
|
|
4.2
|
Form
of 1.125% Senior Convertible Note (included in Exhibit 4.1
above).
|
| |
|
|
4.3
|
Registration
Rights Agreement, dated as of April 30, 2007, among Charming Shoppes,
Inc., Banc of America Securities LLC and J.P. Morgan Securities,
Inc,
filed as Exhibit 10.1 to the Company’s Form 8-K filed on May 3, 2007, is
incorporated herein by reference.
|
| |
|
|
4.4
|
Amended
and Restated Rights Agreement, dated as of February 1, 2001, between
Charming Shoppes, Inc. and American Stock Transfer & Trust Company, as
Rights Agent, filed as Exhibit 4.1 to the Company’s Form 10-K for the
fiscal year ended February 3, 2001, is incorporated herein by
reference.
|
| |
|
|
5.1
|
Opinion
of Drinker Biddle & Reath LLP.
|
| |
|
|
12.1
|
Computation
of Ratio of Earnings to Fixed Charges.
|
| |
|
|
23.1
|
Consent
of Ernst & Young LLP, independent auditors.
|
| |
|
|
23.3
|
Consent
of Drinker Biddle & Reath LLP (included in Exhibit 5.1
above).
|
| |
|
|
24.1
|
Power
of Attorney of certain officers and directors of the Registrant (see
page
II-5 of this Form S-3).
|
| |
|
|
25.1
|
Form
T-1 Statement of Eligibility of Trustee for Indenture under the Trust
Indenture Act of 1939.
|
Item
17. Undertakings
(a) The
undersigned registrant hereby undertakes:
(1) To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To
include any prospectus required by section 10(a)(3) of the Securities Act of
1933;
(ii) To
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar of securities offered would
not exceed that which was registered) and any deviation from the low or high
end
of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20 percent
change in the maximum aggregate offering price set forth in the “Calculation of
Registration Fee” table in the effective registration statement;
(iii) To
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement.
provided,
however, that clauses (i), (ii), and (iii) do not apply if the information
required to be included in a post-effective amendment by such clauses is
contained in reports filed with or furnished to the Securities and Exchange
Commission by the registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the registration statement,
or is contained in a form of prospectus filed pursuant to Rule 424(b) that
is
part of the registration statement.
(2) That,
for the purpose of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
(4) That,
for the purpose of determining liability under the Securities Act of 1933 to
any
purchaser:
(i) Each
prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed
to
be part of the registration statement as of the date the filed prospectus was
deemed part of and included in the registration statement; and
(ii) Each
prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7)
as
part of a registration statement in reliance on Rule 430B relating to an
offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose
of
providing the information required by section 10(a) of the Securities Act of
1933 shall be deemed to be part of and included in the registration statement
as
of the earlier of the date such form of prospectus is first used after
effectiveness or the date of the first contract of sale of securities in the
offering described in the prospectus. As provided in Rule 430B, for
liability purposes of the issuer and any person that is at that date an
underwriter, such date shall be deemed to be a new effective date of the
registration statement relating to the securities in the registration statement
to which that prospectus relates, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering
thereof. Provided, however, that no statement made in a
registration statement or prospectus that is part of the registration statement
or made in a document incorporated or deemed incorporated by reference into
the
registration statement or prospectus that is part of the registration statement
will, as to a purchaser with a time of contract of sale prior to such effective
date, supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement or made
in
any such document immediately prior to such effective date.
(b) The
undersigned registrant hereby further undertakes that, for the purposes of
determining any liability under the Securities Act of 1933, each filing of
the
registrant’s annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan’s annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated
by
reference in this registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona
fide offering thereof.
(c) Insofar
as indemnification for liabilities arising under the Securities Act of 1933
may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted against the registrant by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
SIGNATURES
Pursuant
to the requirements of the
Securities Act of 1933, the registrant certifies that it has reasonable grounds
to believe that it meets all 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 Bensalem, Commonwealth
of
Pennsylvania, on August 24, 2007.
| |
CHARMING
SHOPPES, INC.
|
| |
|
| |
|
| |
By:/S/
DORRIT J. BERN
|
| |
Dorrit
J. Bern
|
| |
Chairman
of the Board, President and
|
| |
Chief
Executive Officer
|
POWER
OF
ATTORNEY
KNOW
ALL PERSONS BY THESE PRESENTS,
that each person whose signature appears below, does hereby constitute and
appoint Dorrit J. Bern and Colin D. Stern, and each of them, his or her true
and
lawful attorneys-in-fact and agents, with full power of substitution,
resubstitution and revocation, for him or her and in his or her name, place
and
stead, in any and all capacities, to sign and file any and all amendments
(including post-effective amendments) to this registration statement and to
file
the same with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to
do
and perform each and every act and thing requisite and necessary to be done
as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents,
or
his or their 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 and on the dates indicated:
|
Name
|
Capacity
|
Date
|
|
/S/
DORRIT J. BERN
Dorrit
J. Bern
|
Chairman
of the Board, President and Chief Executive Officer
|
August
24,
2007
|
|
/S/
ERIC M. SPECTER
Eric
M. Specter
|
Executive
Vice President, Chief Financial Officer
|
August
24,
2007
|
|
/S/
JOHN J. SULLIVAN
John
J. Sullivan
|
Vice
President, Corporate Controller, Chief Accounting Officer
|
August
24,
2007
|
|
/S/
WILLIAM O. ALBERTINI
William
O. Albertini
|
Director
|
August
24,
2007
|
|
/S/
YVONNE M. CURL
Yvonne
M. Curl
|
Director
|
August
24,
2007
|
|
/S/
CHARLES T. HOPKINS
Charles
T. Hopkins
|
Director
|
August
24,
2007
|
|
/S/
KATHERINE M. HUDSON
Katherine
M. Hudson
|
Director
|
August
24,
2007
|
|
/S/
PAMELA DAVIES
Pamela
Davies
|
Director
|
August
24,
2007
|
|
/S/
JEANNINE STRANDJORD
Jeannine
Strandjord
|
Director
|
August
24,
2007
|
|
/S/
ALAN ROSSKAMM
Alan
Rosskamm
|
Director
|
August
24,
2007
|
EXHIBIT
INDEX
|
Exhibit
Number
|
Description
of Document
|
| |
|
|
3.1
|
Restated
Articles of Incorporation dated January 1, 1993, filed as Exhibit
3.1 to
the Company’s Form 10-K of the Registrant for the fiscal year ended
January 29, 1994, is incorporated herein by reference.
|
| |
|
|
3.2
|
Bylaws,
as Amended and Restated, dated as of July 1, 1999, filed as Exhibit
3.2 to
the Company’s Form 10-Q for the quarter ended July 31, 1999, is
incorporated herein by reference.
|
| |
|
|
4.1
|
Indenture
dated April 30, 2007 between the Charming Shoppes, Inc. and Wells
Fargo
Bank, National Association, filed as Exhibit 4.1 to the Company’s Form 8-K
filed on May 3, 2007, is incorporated herein by
reference.
|
| |
|
|
4.2
|
Form
of 1.125% Senior Convertible Note (included in Exhibit 4.1
above).
|
| |
|
|
4.3
|
Registration
Rights Agreement, dated as of April 30, 2007, among Charming Shoppes,
Inc., Banc of America Securities LLC and J.P. Morgan Securities,
Inc,
filed as Exhibit 10.1 to the Company’s Form 8-K filed on May 3, 2007, is
incorporated herein by reference.
|
| |
|
|
4.4
|
Amended
and Restated Rights Agreement, dated as of February 1, 2001, between
Charming Shoppes, Inc. and American Stock Transfer & Trust Company, as
Rights Agent, filed as Exhibit 4.1 to the Company’s Form 10-K for the
fiscal year ended February 3, 2001, is incorporated herein by
reference.
|
| |
|
|
5.1
|
Opinion
of Drinker Biddle & Reath LLP.
|
| |
|
|
12.1
|
Computation
of Ratio of Earnings to Fixed Charges.
|
| |
|
|
23.1
|
Consent
of Ernst & Young LLP, independent auditors.
|
| |
|
|
23.3
|
Consent
of Drinker Biddle & Reath LLP (included in Exhibit 5.1
above).
|
| |
|
|
24.1
|
Power
of Attorney of certain officers and directors of the Registrant (see
page
II-5 of this Form S-3).
|
| |
|
|
25.1
|
Form
T-1 Statement of Eligibility of Trustee for Indenture under the Trust
Indenture Act of 1939.
|