FILED PURSUANT TO RULE 424(b)(3)
PROSPECTUS REGISTRATION NO. 333-118102
LEUCADIA NATIONAL CORPORATION
[LEUCADIA LOGO]
$350,000,000
3 3/4% CONVERTIBLE SENIOR SUBORDINATED NOTES DUE 2014
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We previously issued and sold $350,000,000 aggregate principal amount of
3 3/4% Convertible Senior Subordinated Notes due 2014 in a private placement in
reliance on an exemption from registration under the Securities Act of 1933, as
amended. The initial purchaser of the notes in that offering resold the notes in
reliance on an exemption from registration under Rule 144A under the Securities
Act.
The notes and the common shares into which the notes are convertible may be
offered and sold from time to time pursuant to this prospectus by the holders of
those securities or by their transferees, pledgees, donees, or successors, all
of which we refer to as dealers or agents. If required at the time of a
particular offering of securities by a selling security holder, a supplement to
this prospectus will be circulated setting forth the name or names of any
underwriters, broker-dealers or agents, any discounts, commissions or other
terms constituting compensation for underwriters and any discounts, commissions
or concessions that will be allowed or reallowed or paid to agents or
broker-dealers. The selling security holders will receive all of the net
proceeds from the sale of the securities pursuant to this prospectus and will
pay all underwriting discounts and selling commissions, if any, applicable to
any sale. We are responsible for the payment of other expenses incident to the
registration of the securities. The selling security holders and any
broker-dealers, agents or underwriters that participate in the distribution of
any securities pursuant to this prospectus may be deemed to be 'underwriters'
within the meaning of Section 2(11) of the Securities Act. Any discounts,
commissions, concessions or profit they earn on any sale of the securities may
be deemed to be underwriting compensation under the Securities Act.
The notes bear interest at the rate of 3 3/4% per year. Interest on the
notes is payable on April 15 and October 15 of each year, beginning October 15,
2004. The notes will mature on April 15, 2014.
Subject to restrictions on conversion described below, holders may convert
the notes into our common shares at any time before their maturity unless we
have previously repurchased them. The conversion rate is 14.5138 shares per each
$1,000 principal amount of notes, subject to adjustment. This is equivalent to
an initial conversion price of $68.90 per share. Our common shares are quoted on
the New York Stock Exchange and the Pacific Exchange, Inc. under the symbol
'LUK.' On August 30, 2004, the closing price for our common shares on the New
York Stock Exchange was $52.94 per share. Notwithstanding the above, a holder
of a note may not convert all or any portion of the note into our common shares
if and to the extent, and only to the extent, that, as a result of the
conversion, under applicable tax law, either any person or group of persons
would become the owner of 5% of our capital stock, or the percentage of capital
stock of our company owned by an existing 5% owner would be increased.
The notes are our senior subordinated unsecured obligations and are
subordinated in right of payment to all of our existing and future senior
indebtedness. The notes rank equally in right of payment to all of our existing
and future senior subordinated indebtedness and senior in right of payment to
all of our existing and future subordinated indebtedness. The notes are
effectively subordinated to all existing and future indebtedness of our
subsidiaries.
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INVESTING IN THE NOTES INVOLVES RISKS. SEE 'RISK FACTORS' BEGINNING ON PAGE 5.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS AUGUST 31, 2004
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS AND
THOSE DOCUMENTS INCORPORATED BY REFERENCE HEREIN. WE HAVE NOT AUTHORIZED ANYONE
TO PROVIDE YOU WITH DIFFERENT INFORMATION. THE SELLING SECURITY HOLDERS ARE NOT
MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS
PROSPECTUS OR ANY DOCUMENT INCORPORATED BY REFERENCE IS ACCURATE AS OF ANY DATE
OTHER THAN THE DATE ON THE FRONT COVER OF THE APPLICABLE DOCUMENT.
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TABLE OF CONTENTS
PAGE
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Forward-Looking Statements.................................. ii
Where You Can Find More Information......................... iii
Summary..................................................... 1
Risk Factors................................................ 5
Use of Proceeds............................................. 8
Ratio of Earnings to Fixed Charges.......................... 8
Price of Our Common Shares.................................. 8
Dividend Policy............................................. 8
Description of Certain Indebtedness and Other Obligations... 9
Description of Notes........................................ 10
Description of Our Capital Stock............................ 21
Transfer Restrictions on Our Common Shares.................. 21
Certain U.S. Federal Income Tax Consequences................ 25
Selling Security Holders.................................... 30
Plan of Distribution........................................ 35
Legal Matters............................................... 36
Incorporation by Reference.................................. 36
Experts..................................................... 37
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Our logo which appears on the front and back cover page of this prospectus
is registered in the United States Patent and Trademark Office.
i
FORWARD-LOOKING STATEMENTS
Some of the statements contained in or incorporated by reference in this
prospectus contain forward-looking statements within the meaning of the federal
securities laws. These forward-looking statements are made pursuant to the
safe-harbor provisions of the Private Securities Litigation Reform Act of 1995.
These statements may relate, but are not limited, to projections of revenues,
income or loss, capital expenditures, plans for growth and future operations,
competition and regulation, as well as assumptions relating to the foregoing.
Forward-looking statements are inherently subject to risks and
uncertainties, many of which cannot be predicted or quantified. The words
'estimates,' 'expects,' 'anticipates,' 'believes,' 'plans,' 'intends' and
variations of these words and similar expressions are intended to identify
forward-looking statements that involve risks and uncertainties. Future events
and actual results could differ materially from those set forth in, contemplated
by or underlying the forward-looking statements.
The factors that could cause actual results to differ materially from those
suggested by any of these statements include, but are not limited to, those
discussed or identified from time to time in our public filings, including:
A WORSENING OF GENERAL ECONOMIC AND MARKET CONDITIONS OR INCREASES IN
PREVAILING INTEREST RATE LEVELS, which may result in reduced sales of our
products and services, lower valuations for our associated companies and
investments or a negative impact on the credit quality of our assets;
CHANGES IN FOREIGN AND DOMESTIC LAWS, REGULATIONS AND TAXES, which may
result in higher costs and lower revenue for our businesses, including as
a result of unfavorable political and diplomatic developments, currency
fluctuations, changes in governmental policies, expropriation,
nationalization, confiscation of assets and changes in legislation
relating to non-U.S. ownership;
INCREASED COMPETITION AND CHANGES IN PRICING ENVIRONMENTS, which may
result in decreasing revenues and/or margins, increased raw materials
costs for our plastics business, loss of market share or significant price
erosion;
CONTINUED INSTABILITY AND UNCERTAINTY IN THE TELECOMMUNICATIONS INDUSTRY,
associated with increased competition, aggressive pricing and
overcapacity;
DEPENDENCE ON KEY PERSONNEL, in particular, our Chairman and our
President, the loss of whom would severely affect our ability to develop
and implement our business strategy;
INABILITY TO ATTRACT AND RETAIN HIGHLY SKILLED PERSONNEL, which would make
it difficult to conduct the businesses of certain of our subsidiaries,
including WilTel Communications Group, Inc. and Symphony Health Services,
LLC;
ADVERSE LEGAL AND REGULATORY DEVELOPMENTS THAT MAY AFFECT PARTICULAR
BUSINESSES, such as regulatory developments in the telecommunications and
healthcare industries, or in the environmental area, which could affect
our real estate development activities and telecommunications business, as
well as our other operations;
WEATHER RELATED CONDITIONS AND SIGNIFICANT NATURAL DISASTERS, INCLUDING
HURRICANES, TORNADOES, WINDSTORMS, EARTHQUAKES AND HAILSTORMS, which may
impact our wineries, real estate holdings and reinsurance operations;
THE INABILITY TO REINSURE CERTAIN RISKS ECONOMICALLY, which could result
in us having to self-insure business risks;
CHANGES IN U.S. REAL ESTATE MARKETS, including the residential market in
Southern California and the commercial market in Washington D.C., which
are sensitive to mortgage interest rate levels, and the vacation market in
Hawaii;
ADVERSE ECONOMIC, POLITICAL OR ENVIRONMENTAL DEVELOPMENTS IN SPAIN, which
could delay or preclude the issuance of permits necessary to develop our
copper mineral rights or which could result in increased costs of bringing
the project to completion and increased costs in financing the development
of the project;
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THE INABILITY TO OBTAIN THE NECESSARY FINANCING FOR THE LAS CRUCES COPPER
MINING PROJECT, which could delay or prevent completion of the project;
DECREASES IN WORLD WIDE COPPER PRICES, which could adversely affect the
commercial viability of our mineral rights in Spain;
WILTEL'S DEPENDENCE ON A SMALL NUMBER OF SUPPLIERS AND HIGH-VOLUME
CUSTOMERS (INCLUDING SBC COMMUNICATIONS INC.), the loss of any of which
could adversely affect WilTel's ability to generate operating profits and
positive cash flows;
CHANGES IN TELECOMMUNICATIONS LAWS AND REGULATIONS, which could adversely
affect WilTel and its customers through, for example, higher costs,
increased competition and a loss of revenue;
WILTEL'S ABILITY TO ADAPT TO TECHNOLOGICAL DEVELOPMENTS OR CONTINUED OR
INCREASED PRICING COMPETITION IN THE TELECOMMUNICATIONS INDUSTRY, which
could adversely affect WilTel's ability to generate operating profits and
positive cash flows;
WILTEL'S INABILITY TO GENERATE OPERATING PROFITS AND POSITIVE CASH FLOWS,
which could result in a default under WilTel's credit agreement, pursuant
to which substantially all of its assets are pledged;
CURRENT AND FUTURE LEGAL AND ADMINISTRATIVE CLAIMS AND PROCEEDINGS AGAINST
WILTEL, which may result in increased costs and diversion of management's
attention;
WILTEL'S ABILITY TO ACQUIRE OR MAINTAIN RIGHTS OF WAY NECESSARY FOR THE
OPERATION OF ITS NETWORK, which could require WilTel to find alternate
routes or increase WilTel's costs to provide services to its customers;
CHANGES IN ECONOMIC CONDITIONS INCLUDING THOSE AFFECTING REAL ESTATE AND
OTHER COLLATERAL VALUES, the continued financial stability of our
borrowers and their ability to make loan principal and interest payments;
REGIONAL OR GENERAL INCREASES IN THE COST OF LIVING, particularly in the
regions in which we have operations or sell our products or services,
which may result in lower sales of such products and service; and
RISKS ASSOCIATED WITH FUTURE ACQUISITIONS AND INVESTMENTS, including
changes in the composition of our assets and liabilities through such
acquisitions, diversion of management's attention from normal daily
operations of the business and insufficient revenues to offset increased
expenses associated with acquisitions.
WE DO NOT HAVE ANY OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKING
STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE,
EXCEPT AS REQUIRED BY LAW.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any document we file at the SEC's public reference room located at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference room. Our SEC
filings are also available to the public at the SEC's web site at
http://www.sec.gov. Our common shares, 7 3/4% Senior Notes due 2013, 8 1/4%
Senior Subordinated Notes due 2005 and 7 7/8% Senior Subordinated Notes due 2006
are listed on the New York Stock Exchange. Our reports, proxy statements and
other information can also be inspected at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.
We have filed with the Commission a Registration Statement on Form S-3 with
respect to the notes and common shares issuable upon conversion of the notes to
be offered and sold by this prospectus. This prospectus, which is a part of the
registration statement, omits some of the information included in the
registration statement. Statements made in this prospectus as to the contents of
any contract, agreement or other document are not necessarily complete. With
respect to each contract, agreement or other document, we refer you to the
relevant exhibit for a more complete description of the matter involved, and
each statement is deemed qualified in its entirety to the reference.
iii
SUMMARY
The following summary is qualified in its entirety by the more detailed
information included elsewhere in this prospectus. Because this is a summary, it
may not contain all of the information that may be important to you. Before
making an investment decision, you should carefully read this entire prospectus.
Unless otherwise expressly stated herein or the context otherwise requires, all
references in this prospectus to 'Leucadia,' 'we,' 'us,' 'our,' 'our company' or
'the company' refer to Leucadia National Corporation, a New York corporation and
its direct and indirect subsidiaries.
OUR COMPANY
We are a diversified holding company engaged in a variety of businesses,
including telecommunications, healthcare services, banking and lending,
manufacturing, real estate activities, winery operations, development of a
copper mine and property and casualty reinsurance. We concentrate on return on
investment and cash flow to build long-term shareholder value, rather than
emphasizing volume or market share. Additionally, we continuously evaluate the
retention and disposition of our existing operations and investigate possible
acquisitions of new businesses in order to maximize shareholder value. In
identifying possible acquisitions, we tend to seek assets and companies that are
troubled or out of favor and, as a result, are selling substantially below the
values we believe to be present.
Our telecommunications operations consist of WilTel Communications Group,
Inc., which operates in two segments, Network and Vyvx. Network owns or leases
and operates a nationwide inter-city fiber-optic network providing Internet,
data, voice and video services. Vyvx transmits audio and video programming over
the network and distributes advertising media in physical and electronic form.
Our healthcare services operations consists of Symphony Health Services,
LLC. Symphony is primarily engaged in the provision of physical, occupational,
speech and respiratory therapy services.
Our banking and lending operations have historically consisted of making
instalment loans to niche markets primarily funded by customer banking deposits
insured by the Federal Deposit Insurance Corporation. We sold substantially all
of our loan portfolio during the second quarter of 2004 and are liquidating the
remaining business in an orderly and cost efficient manner.
Our manufacturing operations manufacture and market lightweight plastic
netting used for a variety of purposes including, among other things, building
and construction, erosion control, agriculture, packaging, carpet padding,
filtration and consumer products.
Our domestic real estate operations include a mixture of commercial
properties, residential land development projects and other unimproved land, all
in various stages of development and all available for sale.
Our winery operations consist of Pine Ridge Winery in Napa Valley,
California and Archery Summit in the Willamette Valley of Oregon. These wineries
primarily produce and sell wines in the luxury segment of the premium table wine
market.
Our copper mine development operations consist of our 72.5% interest in MK
Resources Company (formerly MK Gold Company), a publicly traded company listed
on the NASD OTC Bulletin Board (Symbol: MKRR).
Our property and casualty reinsurance business is conducted through our
common stock interest in Olympus Re Holdings, Ltd., a Bermuda reinsurance
company primarily engaged in the property excess, marine and aviation
reinsurance business.
RECENT DEVELOPMENTS
On July 8, 2004, we filed a notification and report pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 with the Federal Trade
Commission and the Department of Justice with respect to acquiring 50% or more
of the outstanding common stock of MCI Inc., a telecommunications company
(formerly know as WorldCom Inc.). We currently own 15,738,100 shares of MCI
common stock, representing approximately 4.96% of MCI common stock reflected as
being outstanding on MCI's Form 10-Q for the quarter ended June 30, 2004. Our
investment in these securities is approximately $245.9 million. The waiting
period expired on August 9, 2004. We cannot assure you that we will acquire
control of MCI.
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Our principal executive offices are located at 315 Park Avenue South, New
York, New York 10010. Our telephone number is (212) 460-1900.
1
THE OFFERING
The following summary is not intended to be complete. For a more complete
description of the terms of the notes, see 'Description of Notes' in this
prospectus. All references under the heading 'The Offering' in this summary to
'we,' 'our' or 'us' refer only to Leucadia National Corporation and not to its
subsidiaries.
Issuer.................................... Leucadia National Corporation.
Notes Offered............................. $350,000,000 aggregate principal amount 3 3/4%
Convertible Senior Subordinated Notes due 2014.
Maturity Date............................. April 15, 2014.
Interest Rate............................. We will pay interest on the notes at an annual rate of
3 3/4%.
Interest Payment Dates.................... We will make interest payments on the notes
semiannually, on each April 15 and October 15, beginning
on October 15, 2004.
Conversion................................ Subject to restrictions on conversion described below,
holders may convert the notes into our common shares at
any time before their maturity unless we have previously
repurchased them. The conversion rate is 14.5138 shares
per each $1,000 principal amount of notes, subject to
adjustment. This is equivalent to an initial conversion
price of $68.90 per share. Our common shares are quoted
on the New York Stock Exchange and the Pacific Exchange,
Inc. under the symbol 'LUK.' On August 30, 2004, the
closing price for our common shares on the New York
Stock Exchange was $52.94 per share.
Notwithstanding the above, a holder of a note may not
convert all or any portion of the note into our common
shares if and to the extent, and only to the extent,
that, as a result of the conversion, under applicable
tax law, either any person or group of persons would
become the owner of 5% of our capital stock, or the
percentage of capital stock of our company owned by an
existing 5% owner would be increased. See 'Description
of Notes -- Limitations on Convertibility' and 'Transfer
Restrictions on Our Common Shares.'
Ranking................................... The notes are our senior subordinated unsecured
obligations and are subordinated in right of payment to
all of our existing and future senior indebtedness. The
notes rank equally in right to all of our existing and
future senior subordinated indebtedness and senior in
right of payment to all of our existing and future
subordinated indebtedness. The notes are effectively
subordinated to all existing and future indebtedness of
our subsidiaries. As of June 30, 2004, we had
$475.7 million of senior indebtedness and $390.8 million
of senior subordinated indebtedness, including the
notes. As of June 30, 2004, the notes were effectively
subordinated to approximately $1.5 billion of
indebtedness and other liabilities of our subsidiaries,
including trade payables but excluding intercompany
obligations.
Optional Redemption....................... The notes are not redeemable at our option prior to
maturity.
Mandatory Redemption...................... The notes are not subject to sinking fund payments.
Change of Control Offer................... If we experience a change of control, each holder of
notes will have the right to sell to us all or a portion
of such holder's
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notes at 101% of their principal amount, plus accrued
but unpaid interest, if any, to the date of repurchase.
A change of control will occur at the time Ian M.
Cumming, our chairman of the board, and Joseph S.
Steinberg, a director and our president, cease to
beneficially own, in the aggregate, a specified
percentage of our outstanding common shares, coupled in
various circumstances with the notes being rated below
investment grade. See 'Description of Notes -- Repurchase
at Option of Holders Upon a Change of Control.'
Registration Rights....................... We have, for the benefit of holders, filed with the SEC
a shelf registration statement, of which this prospectus
is a part, covering resales of the notes and the common
shares issuable upon conversion of the notes. We will
use our reasonable best efforts to cause the shelf
registration statement to become effective within 180
days after the date of original issuance and keep such
shelf registration statement effective until the
earliest of (i) the sale pursuant to Rule 144 under the
Securities Act or a shelf registration statement of all
the notes and the shares of common stock issuable upon
conversion of the notes and (ii) the expiration of the
holding period applicable to such securities held by our
non affiliates under Rule 144(k) under the Securities
Act, or any successor provision, subject to certain
permitted exceptions. See 'Description of Notes --
Registration Rights.'
Book-Entry Form........................... The notes were issued in book-entry form and are
represented by global certificates deposited with, or on
behalf of, The Depositary Trust Company (DTC) and
registered in the name of a nominee of DTC. Beneficial
interests in any of the notes are shown on, and
transfers will be effected only through, records
maintained by DTC or its nominee, and any such interests
may not be exchanged for certificated securities except
in limited circumstances.
Trading................................... The notes originally sold in private placement
transactions are eligible for trading in the PORTALSM
Market of the National Association of Securities
Dealers, Inc. Notes sold using this prospectus, however,
will no longer be eligible for trading in the PORTALSM
Market. We do not intend to list the notes on any other
national securities exchange or in any automated
quotation system.
Listing of our Common Shares.............. Our common shares are listed on the New York Stock
Exchange and the Pacific Exchange, Inc. under the symbol
'LUK.'
Transfer Restrictions on Our Common Shares
and Limitations on Convertibility....... In order to protect our significant tax loss
carryforwards and other tax attributes, our certificate
of incorporation contains restrictions on the transfer
of our stock and certain of our securities, and the
notes contain a restriction on the amount of our common
shares into which a note may be converted. See 'Transfer
Restrictions on Our Common Shares' and 'Description of
Notes -- Limitations on Convertibility.' The notes
provide that a holder of a note may not convert all or
any
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portion of such note into our common shares if and to
the extent, and only to the extent, that, as a result of
such conversion, under applicable tax law, either any
person or group of persons would become the owner of 5%
of our capital stock, or the percentage of capital stock
of our company owned by an existing 5% owner would be
increased. If those circumstances exist, a holder of a
note will be unable to convert all or a portion of its
notes into common shares.
Use of Proceeds........................... We will not receive any of the proceeds of the sale by
the selling security holders of the notes or the common
shares into which the notes may be converted.
Risk Factors.............................. You should read 'Risk Factors' beginning on page 5 of
this prospectus so that you understand the risks
associated with an investment in the notes and common
shares.
4
RISK FACTORS
In deciding whether to purchase the notes, you should carefully consider the
risks described below, as well as other information and data included or
incorporated by reference in this prospectus, including under 'Forward-Looking
Statements.'
RISKS RELATED TO THE NOTES
INCREASED LEVERAGE IN THE FUTURE MAY HARM OUR FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
As of June 30, 2004, we had approximately $1.6 billion of outstanding debt,
including the notes. We may incur additional indebtedness in the future. Our
level of indebtedness will have several important effects on our future
operations, including, without limitation:
a portion of our cash flow from operations will be dedicated to the payment
of any interest or amortization required with respect to outstanding
indebtedness;
increases in our outstanding indebtedness and leverage will increase our
vulnerability to adverse changes in general economic and industry
conditions, as well as to competitive pressure; and
depending on the levels of our outstanding debt, our ability to obtain
additional financing for working capital, general corporate and other
purposes may be limited.
Our ability to make payments of principal and interest on our indebtedness
depends upon our future performance, which is subject to general economic
conditions, industry cycles and financial, business and other factors affecting
our operations, many of which are beyond our control. Our business might not
continue to generate cash flow at or above current levels. If we are unable to
generate sufficient cash flow from operations in the future to service our debt,
we may be required, among other things:
to seek additional financing in the debt or equity markets;
to refinance or restructure all or a portion of our indebtedness, including
the notes offered by this offering circular; or
to sell selected assets.
Such measures might not be sufficient to enable us to service our debt. In
addition, any such financing, refinancing or sale of assets may not be available
on commercially reasonable terms, or at all.
THE NOTES ARE UNSECURED AND SUBORDINATED AND THERE ARE NO FINANCIAL COVENANTS IN
THE INDENTURE.
The notes are unsecured and are subordinated in right of payment to all of
our existing and future senior indebtedness. As of June 30, 2004, we had $475.7
million of senior indebtedness. The notes are effectively subordinated in right
of payment to all existing and future indebtedness and other liabilities of our
subsidiaries. As of June 30, 2004, the notes were effectively subordinated to
approximately $1.5 billion of indebtedness and other liabilities of our
subsidiaries, including trade payables but excluding intercompany obligations.
By reason of such subordination, in the event of the insolvency, bankruptcy,
liquidation, reorganization, dissolution or winding up of our business, our
assets will be available to pay the amounts due on the notes only after all
senior indebtedness has been paid in full, and, therefore, there may not be
sufficient assets remaining to pay amounts due on any or all of the notes then
outstanding. In addition, we will not make any payments on the notes in the
event of payment defaults on our senior indebtedness.
The indenture governing the notes does not restrict the incurrence of senior
indebtedness or other debt by us or our subsidiaries. If we or our subsidiaries
were to incur additional debt or liabilities, our ability to pay our obligations
on the notes could be adversely affected. In addition, we are not restricted
from paying dividends or issuing or repurchasing our securities under the
indenture.
OUR DEPENDENCE ON OUR SUBSIDIARIES FOR CASH FLOW MAY NEGATIVELY AFFECT OUR
BUSINESS AND OUR ABILITY TO PAY THE PRINCIPAL, INTEREST AND OTHER AMOUNTS DUE ON
THE NOTES.
We conduct substantially all of our business through our subsidiaries. Our
ability to meet our cash obligations in the future will be dependent upon the
ability of our subsidiaries to make cash distributions
5
to us. The ability of our subsidiaries to make these distributions is and will
continue to be restricted by, among other limitations, applicable provisions of
governing law and contractual provisions. The indenture governing the notes does
not limit the ability of our subsidiaries to agree to contractual restrictions
in the future.
YOU WILL BE UNABLE TO CONVERT ALL OR A PORTION OF YOUR NOTES INTO COMMON SHARES
UNDER CERTAIN CIRCUMSTANCES.
In order to protect our significant tax loss carryforwards and other tax
attributes, the indenture governing the notes will contain a restriction on the
amount of our common shares into which a note may be converted. As a result, the
notes will provide that a holder of a note may not convert all or any portion of
such note into our common shares if and to the extent, and only to the extent,
that, as a result of such conversion, under applicable tax law, either any
person or group of persons would become the owner of 5% of our capital stock, or
the percentage of capital stock of our company owned by an existing 5% owner
would be increased. If those circumstances exist, a holder of a note will be
unable to convert all or a portion of its notes into common shares.
WE MAY NOT HAVE SUFFICIENT CASH TO PURCHASE THE NOTES, IF REQUIRED, UPON A
CHANGE OF CONTROL.
You may require us to purchase all or any portion of your notes upon the
occurrence of a change of control, as that term is defined in this prospectus.
We may not have sufficient cash funds to purchase the notes upon such a change
of control. Although there are currently no restrictions on our ability to
repurchase the notes, future debt agreements may prohibit us from repurchasing
the notes, unless we were to obtain a waiver or refinance such debt. If we were
unable to obtain a waiver or refinance we would be prohibited from purchasing
the notes. If we were unable to purchase the notes upon a change of control, it
would result in an event of default under the indenture. An event of default
under the indenture could result in a further event of default under our other
then existing debt. Moreover, the occurrence of the change of control may be an
event of default under our other debt. As a result, we could be prohibited from
paying amounts due on the notes under the subordination provisions of the
indenture.
WE CANNOT ASSURE YOU THAT AN ACTIVE TRADING MARKET WILL DEVELOP FOR THE NOTES.
There is no established trading market for the notes. Although the initial
purchaser of the notes has advised us that it intends to make a market in the
notes, it is not obligated to do so. The initial purchaser could stop making a
market at any time without notice. Accordingly, no market for the notes may
develop, and any market that develops may not last. We do not intend to apply
for listing of the notes on any securities exchange or other stock market.
If a market were to develop, the notes could trade at prices that may be
lower than their initial offering price depending on many factors, including the
market price of our common shares into which the notes are convertible,
prevailing interest rates, our operating results and the market for similar
securities.
WE EXPECT THAT THE TRADING VALUE OF THE NOTES WILL BE SIGNIFICANTLY AFFECTED BY
THE PRICE OF OUR COMMON SHARES.
The market price of the notes is expected to be significantly affected by
the market price of our common shares. This may result in greater volatility in
the trading value of the notes than would be expected for any non-convertible
debt securities we may issue.
RISKS RELATED TO OUR COMMON SHARES
CONVERSION OF THE NOTES WILL DILUTE THE OWNERSHIP INTEREST OF EXISTING
SHAREHOLDERS.
The conversion of notes into our common shares will dilute the ownership
interests of existing shareholders. Any sales in the public market of the common
shares issuable upon conversion of the notes could adversely affect prevailing
market prices of our common shares. In addition, the existence of the
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notes may encourage short selling by market participants due to this dilution or
facilitate trading strategies involving the notes and our common shares.
THE VALUE OF THE CONVERSION RIGHT ASSOCIATED WITH THE NOTES MAY BE SUBSTANTIALLY
LESSENED OR ELIMINATED IF WE ARE PARTY TO A MERGER, CONSOLIDATION OR OTHER
SIMILAR TRANSACTION.
If we are party to a consolidation, merger or binding share exchange or
transfer or lease of all or substantially all of our assets pursuant to which
our common shares are converted into cash, securities or other property, at the
effective time of the transaction, the right to convert a note into our common
shares will be changed into a right to convert the note into the kind and amount
of cash, securities or other property which the holder would have received if
the holder had converted its note immediately prior to the transaction. This
change could substantially lessen or eliminate the value of the conversion
privilege associated with the notes in the future. For example, if we were
acquired in a cash merger, each note would become convertible solely into cash
and would no longer be convertible into securities whose value would vary
depending on our future prospects and other factors.
FUTURE SALES OF OUR COMMON SHARES IN THE PUBLIC MARKET COULD ADVERSELY AFFECT
THE TRADING PRICE OF OUR COMMON SHARES, THE VALUE OF THE NOTES AND OUR ABILITY
TO RAISE FUNDS IN NEW STOCK OFFERINGS.
Future sales of substantial amounts of our common shares in the public
market, or the perception that such sales are likely to occur, could affect
prevailing trading prices of our common shares and, as a result, the value of
the notes. As of August 30, 2004, we had 71,309,502 shares of common stock
outstanding. Because the notes generally are convertible into common shares only
at a conversion price in excess of the recent trading price, a decline in our
common share price may cause the value of the notes to decline.
THE PRICE AT WHICH OUR COMMON SHARES MAY BE PURCHASED ON THE NEW YORK STOCK
EXCHANGE IS CURRENTLY LOWER THAN THE CONVERSION PRICE OF THE NOTES AND MAY
REMAIN LOWER IN THE FUTURE.
Prior to electing to convert the notes, the note holder should compare the
price at which our common shares are trading in the market to the conversion
price of the notes. Our common shares trade on the New York Stock Exchange under
the symbol 'LUK.' On August 30, 2004, the closing price of our common shares was
$52.94 per share. The initial conversion price of the notes is $68.90 per share.
The market prices of our securities are subject to fluctuations. Such
fluctuations, as well as economic conditions generally, may adversely affect
the market price of our securities, including our common shares and the notes.
7
USE OF PROCEEDS
We will not receive any proceeds from the sale by the selling security
holders of the notes or the common shares usable upon conversion of the notes.
RATIO OF EARNINGS TO FIXED CHARGES
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
------------------ -----------------------------------
2004 2003 2003 2002 2001 2000 1999
---- ---- ---- ---- ---- ---- ----
Ratio of earnings to fixed charges (a):
Excluding interest on Deposits........................... 1.16x 2.71x .71x .69x 6.25x 6.99x 7.22x
Including interest on Deposits........................... 1.15x 2.26x .75x .81x 3.42x 4.32x 5.66x
---------
(a) For purposes of computing these ratios, earnings represent consolidated
pre-tax income (loss) before cumulative effects of changes in accounting
principles and equity in undistributed earnings or losses of associated
companies accounted for under the equity method of accounting, plus 'fixed
charges.' Fixed charges excluding interest on Deposits include interest
expense (other than on Deposits), the portion of net rental expense
representative of the interest factor and amortization of debt expense.
Fixed charges including interest on Deposits include all interest expense,
the portion of net rental expense representative of the interest factor and
amortization of debt expense. For the years ended December 31, 2003 and
2002 in which the ratios indicated a less than one-to-one coverage, the
amount of the deficiencies were approximately $13,300,000 and $8,300,000,
respectively.
PRICE RANGE OF OUR COMMON SHARES
Our common shares are traded on the New York Stock Exchange and the Pacific
Exchange, Inc. under the symbol LUK. The following table sets forth, for the
calendar periods indicated, the high and low price per common share on the
consolidated transaction reporting system, as reported by the Bloomberg
Professional Service provided by Bloomberg L.P.
COMMON SHARE
---------------
HIGH LOW
---- ---
2002
First Quarter........................................... $36.04 $28.00
Second Quarter.......................................... 38.16 30.95
Third Quarter........................................... 36.37 27.62
Fourth Quarter.......................................... 40.27 32.85
2003
First Quarter........................................... $38.60 $32.59
Second Quarter.......................................... 39.44 35.79
Third Quarter........................................... 39.40 36.33
Fourth Quarter.......................................... 46.19 37.78
2004
First Quarter........................................... $53.95 $46.03
Second Quarter.......................................... 56.61 45.05
Third Quarter (through August 30, 2004)................. 53.66 48.35
As of August 30, 2004, the last reported sale price of our common shares on
the NYSE was $52.94.
DIVIDEND POLICY
In 2003 and 2002, we paid cash dividends of $.25 per common share. The
payment of dividends in the future is subject to the discretion of our Board of
Directors and will depend upon general business conditions, legal and
contractual restrictions on the payment of dividends and other factors that the
Board of Directors may deem to be relevant.
In connection with the declaration of dividends or the making of
distributions on, or the purchase, redemption or other acquisition of common
shares, we are required to comply with certain restrictions contained in certain
of our debt instruments. Our regulated subsidiaries are restricted in the amount
of distributions that can be made to us without regulatory approval. For further
information, see Item 7, 'Management's Discussion and Analysis of Financial
Condition and Results of Operations' incorporated by reference in this offering
circular from our Annual Report on Form 10-K for the fiscal year ended
December 31, 2003.
8
DESCRIPTION OF CERTAIN INDEBTEDNESS AND OTHER OBLIGATIONS
7% SENIOR NOTES
We currently have outstanding $375 million aggregate principal amount of 7%
senior notes due 2013 issued pursuant to an indenture dated as of November 5,
2003, with JPMorgan Chase as trustee. The 7% senior notes are our senior
unsecured obligations and rank senior in right of payment to all of our existing
and future subordinated indebtedness, including the notes offered hereby, and
pari passu in right of payment with all of our existing and future senior
indebtedness, including our outstanding 7 3/4% senior notes.
7 3/4% SENIOR NOTES
We currently have outstanding $100 million aggregate principal amount of
7 3/4% senior notes due 2013. The 7 3/4% senior notes were issued pursuant to an
indenture dated as of August 15, 1993, with U.S. Bank (formerly, Continental
Bank, National Association), as trustee. The 7 3/4% senior notes are our senior
unsecured obligations and rank senior in right of payment to all of our existing
and future subordinated indebtedness, including the notes offered hereby, and
pari passu in right of payment with all of our existing and future senior
indebtedness, including our outstanding 7% senior notes. The terms of the
indenture governing the 7 3/4% senior notes are substantially identical to the
terms of the indenture governing the 7% senior notes.
7 7/8% SENIOR SUBORDINATED NOTES
We currently have outstanding $21.7 million aggregate principal amount of
7 7/8% senior subordinated notes due 2006. The 7 7/8% senior subordinated notes
were issued pursuant to an indenture dated as of October 21, 1996, with Fleet
National Bank, as trustee. The 7 7/8% senior subordinated notes are subordinated
to all of our existing and future senior indebtedness, including our outstanding
7% senior notes and the 7 3/4% senior notes, and rank pari passu with the notes
offered hereby and the 8 1/4% senior subordinated notes. The 7 7/8% senior
subordinated notes are not redeemable by us prior to maturity. Upon a change of
control, each noteholder will have the right, subject to various conditions and
restrictions, to require us to repurchase such holder's 7 7/8% senior
subordinated notes at 101% of their principal amount, plus accrued interest.
8 1/4% SENIOR SUBORDINATED NOTES
We currently have outstanding $19.1 million aggregate principal amount of
8 1/4% senior subordinated notes due 2005. The 8 1/4% senior subordinated notes
were issued pursuant to an indenture dated as of June 13, 1995, with U.S. Bank
(formerly, The First National Bank of Boston), as trustee. The 8 1/4% senior
subordinated notes are subordinated to all of our existing and future senior
indebtedness, including our outstanding 7% senior notes and the 7 3/4% senior
notes, and rank pari passu with the notes offered hereby and the 7 7/8% senior
subordinated notes. The terms of the indenture governing the 8 1/4% senior
subordinated notes are substantially identical to the terms of the indenture
governing the 7 7/8% senior subordinated notes.
8.65% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES DUE 2027
We currently have outstanding $98.2 million principal amount of 8.65% Junior
Subordinated Deferrable Interest Debentures due 2027. These debentures were
issued pursuant to an indenture dated as of January 21, 1997, with JPMorgan
Chase as trustee. The debentures are subordinated to all of our existing and
future senior indebtedness, including the notes offered hereby, our outstanding
7% senior notes, the 7 3/4% senior notes, the 7 7/8% senior subordinated notes
and the 8 1/4% senior subordinated notes.
BANK CREDIT FACILITY
We currently have a $110 million unsecured bank credit facility which bears
interest based on the Eurocurrency Rate or the prime rate and matures in 2007.
As of the date of this prospectus, no amounts were outstanding under this bank
credit facility.
9
DESCRIPTION OF NOTES
We issued the notes under an indenture dated as of April 29, 2004 (the
'Indenture'), between us and HSBC Bank USA, as trustee (the 'Trustee'). For the
purposes of this 'Description of Notes' section, references to 'the Company'
refer to Leucadia National Corporation only and not to its subsidiaries,
references to 'the Notes' refer to the notes being offered hereby and references
to 'Common Shares' refer to the Company's common shares, par value $1.00 per
share.
The following summaries of certain provisions of the Notes and the Indenture
do not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all the provisions of the Notes and the Indenture,
including the definitions therein of certain terms which are not otherwise
defined in this prospectus. Wherever particular provisions or defined terms of
the Indenture or of the form of Note which is a part of the Indenture, are
referred to, such provisions or defined terms are incorporated herein by
reference.
GENERAL
The Notes represent unsecured general obligations of the Company subordinate
in right of payment to all existing and future senior indebtedness of the
Company as described under ' -- Subordination.' The Indenture does not limit the
maximum principal amount of notes that the Company may issue thereunder. As of
the date of this prospectus, the Company has issued notes in an aggregate
principal amount at maturity of $350 million. The Company may issue Additional
Notes from time to time after the date of the prospectus. The Notes offered
hereby and any Additional Notes subsequently issued under the Indenture will be
treated as a single class for all purposes under the Indenture, including,
without limitation, security, interests, waivers, amendments and offers to
purchase. The Notes have been issued in fully registered form only in
denominations of $1,000 or any multiple thereof and will mature on April 15,
2014 unless earlier repurchased by the Company at the option of the holder upon
a Change of Control (as defined).
The Notes bear interest from date of issuance at 3 3/4% per annum, payable
semi-annually on April 15 and October 15, commencing on October 15, 2004, to
holders of record at the close of business on the preceding April 1 and
October 1, respectively (subject to certain exceptions in the case of conversion
or repurchase of such Notes prior to the applicable interest payment date).
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months. The Company will not be required to make any payment on the Notes
due on any day which is not a business day until the next succeeding business
day. The payment made on the next succeeding business day will be treated as
though it were paid on the original due date and no interest will accrue on the
payment for the additional period of time.
Subject to limitations in the circumstances described under ' -- Limitations
on Convertibility,' the Notes are convertible into Common Shares at any time
prior to the close of business on their maturity date, unless previously
repurchased. The initial conversion price is $68.90 per share. The initial
conversion price is subject to adjustment as described below under
' -- Conversion.'
Principal and premium, if any, will be payable, and the Notes may be
presented for conversion, registration of transfer and exchange, without service
charge, at the office of the Company maintained by the Company for such purposes
in the Borough of Manhattan, the City of New York, which until otherwise
designated by the Company shall be an office or agency of the Trustee. In
addition, interest may, at the Company's option, be paid by check mailed to such
holders or by wire transfer of immediately available funds if such holder has
provided us with wire transfer instructions at least 10 business days prior to
the payment date.
The Indenture does not contain any financial covenants or any restrictions
on the payment of dividends, the repurchase of securities of the Company or the
incurrence of Senior Indebtedness or other indebtedness. The Indenture does not
contain any covenants or other provisions to afford protection to holders of
Notes in the event of a highly leveraged transaction or a change in control of
the Company except to the limited extent described under ' -- Repurchase at
Option of Holders Upon a Change of Control' below.
No service charge will be made for any registration or transfer or exchange
of the Notes, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable
10
in connection therewith. The Company is not required to exchange or register the
transfer of (1) any Note or portion thereof surrendered for conversion, or
(2) any Note or portion thereof surrendered for repurchase (and not withdrawn)
in connection with a Change of Control.
CONVERSION
Subject to limitations in the circumstances described under ' -- Limitations
on Convertibility,' the holders of the Notes will be entitled at any time or
from time to time through the close of business on April 15, 2014, subject to
prior repurchase, to convert all or part of their Notes (in denominations of
$1,000 or multiples thereof) into Common Shares of the Company, at the
conversion price of $68.90 per share, subject to adjustment as described below.
Except as described below, no adjustment will be made on conversion for interest
(including liquidated damages, if any) accrued on the Notes or for dividends on
any Common Shares issued, and upon delivery of the Common Shares into which a
Note is convertible, the accrued but unpaid interest (including liquidated
damages, if any) on the Note will be deemed to be paid in full rather than
cancelled, extinguished or forfeited. If the Notes are converted after a record
date for the payment of interest and prior to the next succeeding interest
payment date, the Notes must be accompanied by funds equal to the interest
payable on such succeeding interest payment date on the principal amount so
converted. The Company is not required to issue fractional Common Shares upon
conversion of the Notes and, in lieu thereof, will pay a cash adjustment based
upon the market price of the Common Shares on the last trading day prior to the
date of conversion. A holder that has elected to have its Notes purchased by the
Company upon a Change of Control may only convert its Notes if such election is
withdrawn by a written notice of withdrawal delivered by the holder to the
Company prior to the close of business on the business day immediately preceding
the date fixed for repurchase.
A holder may convert its Notes by delivering the Note at the specified
office of a conversion agent, accompanied by a duly signed and completed notice
of conversion (which will include confirmation that the exercise of such
conversion feature will not violate the restrictions on conversion contained in
the Notes), together with any funds that may be required as described in the
preceding paragraph. The conversion date shall be the date on which the Note,
the duly signed and completed notice of conversion, and any funds that may be
required as described in the preceding paragraph shall have been so delivered. A
holder delivering a Note for conversion will not be required to pay any taxes or
duties payable in respect of the issue or delivery of Common Shares on
conversion, but will be required to pay any tax or duty which may be payable in
respect of any transfer involved in the issue or delivery of the Common Shares
in a name other than the holder of the Note. Certificates representing Common
Shares will not be issued or delivered unless all taxes and duties, if any,
payable by the holder have been paid.
The initial conversion price is generally subject to adjustment (under
formulae set forth in the Indenture) in certain events, including:
(1) the issuance of Common Shares as a dividend or distribution on Common
Shares;
(2) certain subdivisions and combinations of the Common Shares;
(3) the issuance to all holders of Common Shares of certain short-term
rights or warrants to purchase Common Shares at less than the current
market price of the Common Shares at the time of such issuance; and
(4) an Excess Dividend.
The adjustment referred to in clause (3) above in respect of rights or warrants
will be subject to a readjustment to the extent that any such rights or warrants
expire unexercised. With respect to the adjustment referred to in clause (4)
above, if we declare an Excess Dividend, the conversion price shall be decreased
by the Dividend Adjustment Amount. 'Dividend Adjustment Amount' means the
amount, applicable to one Common Share, by which the Excess Dividend exceeds the
Permitted Dividend. 'Permitted Dividend' means for the period from April 29,
2004, the issue date of the Notes, to and including April 15, 2014, the maturity
date of the Notes, one or more dividends or distributions payable in cash or
capital shares of the Company (other than Common Shares) or, in certain
instances evidences of indebtedness of the Company or assets (including
securities, but excluding those rights and warrants referred to in clause (3)
above) in an aggregate amount of $2.50 per share; provided that such amount
shall be subject to adjustment (under formulae set forth in the Indenture) in
the event of the issuance of
11
Common Shares as a dividend or distribution on Common Shares and certain
subdivisions and combinations of the Common Shares. 'Excess Dividend' means one
or more dividends or distributions payable in cash or capital shares of the
Company (other than Common Shares) or, in certain instances evidences of
indebtedness of the Company or assets (including securities, but excluding those
rights and warrants referred to in clause (3) above) in excess of the Permitted
Dividend.
The Indenture provides that if the Company implements a shareholders' rights
plan, such rights plan must provide that, prior to the rights becoming fully
exercisable for the maximum amount of capital shares provided for therein, upon
conversion of the Notes the holders will receive, in addition to the Common
Shares issuable upon such conversion, such rights whether or not such rights
have separated from the Common Shares at the time of such conversion, unless
prior to conversion, the rights have expired or have been terminated or
redeemed.
In the case of (1) any reclassification or change of the Common Shares
(other than changes in par value or resulting from a subdivision or combination)
or (2) a consolidation, merger or combination involving the Company or a sale or
conveyance to another corporation of all or substantially all of the assets of
the Company (i.e., 90% or more), in each case as a result of which holders of
Common Shares shall be entitled to receive shares, other securities, other
property or assets (including cash) with respect to or in exchange for such
Common Shares, each Note then outstanding will become convertible only into the
kind and amount of shares, other securities or other property or assets which
they would have owned or been entitled to receive upon such reclassification,
change, consolidation, merger, combination, sale or conveyance had such Notes
been converted into Common Shares immediately prior to such reclassification,
change, consolidation, merger, combination, sale or conveyance (assuming, in a
case in which the Company's shareholders may exercise rights of election, that a
holder of the Notes would not have exercised any rights of election as to the
shares, other securities or other property or assets (including cash) receivable
in connection therewith and received per share the kind and amount received per
share by non-electing shares).
In the event of a taxable distribution to holders of Common Shares (or other
transaction) which results in any adjustment of the conversion price, the
holders of the Notes may, in certain circumstances, be deemed to have received a
distribution subject to U.S. federal income tax as a dividend; in certain other
circumstances, the absence of such an adjustment may result in a taxable
dividend to the holders of Common Shares. See 'Certain U.S. Federal Income Tax
Consequences.'
The Company from time to time may, to the extent permitted by law, reduce
the conversion price of the Notes by any amount for any period of at least 20
days, in which case the Company shall give at least 15 days' notice of such
decrease, if the Board of Directors has made a determination that such decrease
would be in the best interests of the Company, which determination shall be
conclusive. The Company may, at its option, make such reductions in the
conversion price, in addition to those set forth above, as the Board of
Directors deems advisable to avoid or diminish any U.S. federal income tax to
holders of Common Shares resulting from any dividend or distribution of shares
(or rights to acquire shares) or from any event treated as such for U.S. federal
income tax purposes. See 'Certain U.S. Federal Income Tax Consequences.'
No adjustment in the conversion price will be required unless such
adjustment would require a change of at least 1% in the conversion price then in
effect; provided that any adjustment that would otherwise be required to be made
shall be carried forward and taken into account in any subsequent adjustment.
Except as stated above, the conversion price will not be adjusted for the
issuance of Common Shares or any securities convertible into or exchangeable for
Common Shares or carrying the right to purchase any of the foregoing.
LIMITATIONS ON CONVERTIBILITY
In order to prevent or reduce the likelihood of an 'ownership change,' as
defined in Section 382 of the Internal Revenue Code, which would result in a
significant reduction in the value of our tax loss carryforwards and other tax
attributes, the Notes will provide that a holder of a Note may not convert all
or any portion of such Note into our common shares if and to the extent, and
only to the extent, that, as a result of such conversion, under applicable tax
law, either any person or group of persons would
12
become the owner of 5% of our capital stock, or the percentage of capital stock
of our company owned by an existing 5% owner would be increased. If those
circumstances exist, a holder of a Note will be unable to convert all or a
portion of its Notes into Common Shares. For additional information, see
'Transfer Restrictions on Our Common Shares' below.
ANY ATTEMPTED OR PURPORTED CONVERSION IN VIOLATION OF THIS LIMITATION ON
CONVERTIBILITY WILL BE INEFFECTIVE, WILL NOT BE REGISTERED ON OUR STOCK
REGISTER, WILL NOT ENTITLE THE PURPORTED HOLDER OF OUR COMMON SHARES TO ANY
RIGHTS OF STOCK OWNERSHIP, AND, AS TO THE PURPORTED HOLDER'S CLAIMS OR RIGHTS
HEREUNDER, SHALL BE VOID AB INITIO. IN ANY SUCH CIRCUMSTANCE, WE WILL EFFECT A
SALE OF THE COMMON SHARES ISSUED IN VIOLATION OF THIS LIMITATION ON
CONVERTIBILITY (THE 'EXCESS SHARES') TO A PARTY WE SELECT, AND THE PURPORTED
HOLDER OF THE EXCESS SHARES WILL BE TREATED AS HOLDING THE EXCESS SHARES
ENTIRELY FOR THE BENEFIT OF SUCH PARTY. THE PURPORTED HOLDER WILL BE ENTITLED TO
THE PROCEEDS OF ANY SUCH SALE THAT WE IMPLEMENT, REDUCED BY ANY EXPENSES
INCURRED IN CONNECTION WITH OUR DISCOVERY AND CORRECTION OF THE IMPROPER AND
NULL ISSUANCE OF THE EXCESS SHARES TO THE PURPORTED HOLDER, BUT IN NO EVENT
SHALL SUCH HOLDER RECEIVE ANY AMOUNT IN EXCESS OF THE PORTION OF THE FACE AMOUNT
OF THE NOTES APPLICABLE TO THE EXCESS SHARES.
SUBORDINATION
The payment of all Obligations (as defined below) with respect to the Notes
will be subordinated in right of payment to the prior payment in full of all
Senior Indebtedness (as defined below) of the Company whether outstanding on the
date of the Indenture or thereafter created, incurred, assumed or guaranteed.
Upon (a) the maturity of Senior Indebtedness by lapse of time, acceleration or
otherwise or (b) any distribution of the assets of the Company upon any
dissolution, winding up, liquidation or reorganization of the Company, the
holders of Senior Indebtedness will be entitled to receive payment in full
before the Noteholders are entitled to receive any payment. In addition, the
Indenture will provide that no payments in respect of any Obligations with
respect to the Notes may be made if (1) any payment default on any Senior
Indebtedness shall have occurred or (2) any other default under any Senior
Indebtedness shall have occurred which would permit the holders thereof to
accelerate such Indebtedness and the Company shall have received notice of such
default, unless, in the case of clauses (1) or (2), such default shall have been
cured or waived; provided, that (a) payments on the Notes may resume in the case
of any default described in clause (2) on the date which is 179 days after the
giving of such notice (provided there is not then a default under clause (1))
and (b) in no event shall such payment blockage be applicable for more than 179
days in each 360-day period. If in any of the situations referred to in clause
(1) or (2) above a payment is made to the Trustee or to Noteholders before all
Senior Indebtedness has been paid in full or provision has been made for such
payment, the payment to the Trustee or Noteholders must be paid over to the
holders of the Senior Indebtedness.
The Indenture defines 'Senior Indebtedness' to mean all Obligations of the
Company with respect to the following, whether outstanding at the date of
original execution of the Indenture or thereafter incurred, created or assumed:
(a) indebtedness of the Company for money borrowed, including, without
limitation, indebtedness of the Company for money borrowed which is evidenced by
notes, debentures, bonds or other securities issued under the provisions of an
indenture or other instrument, and also including indebtedness represented by
Purchase Money Obligations (as defined), but only to the extent such
indebtedness is enforceable by a money judgment; (b) guarantees or assumptions
by the Company of indebtedness of others of any of the kinds described in the
preceding clause (a); and (c) renewals, extensions and refundings of, and
indebtedness of a successor corporation issued in exchange for or in replacement
of, indebtedness, guarantees and assumptions of the kinds described in the
preceding clauses (a) or (b), unless, in the case of any particular
indebtedness, obligation, guarantee, assumption, renewal, extension or
refunding, the instrument creating or evidencing the same expressly provides
that such indebtedness, obligation, guarantee, assumption, renewal, extension or
refunding is not superior in right of payment to the Notes; provided, that
Senior Indebtedness shall not be deemed to include (1) any indebtedness of the
Company to any Subsidiary, (2) any liability for taxes, (3) any amounts payable
or other liabilities to trade creditors arising in the ordinary course of
business, (4) any indebtedness which is subordinate or junior by its terms to
any other indebtedness of the Company, (5) the 8 1/4% Senior Subordinated Notes
due 2005, (6) the 7 7/8% Senior Subordinated Notes due 2006 or (7) the 8.65%
Junior
13
Subordinated Deferrable Interest Debentures due 2027. At June 30, 2004, the
amount of outstanding Senior Indebtedness of the Company was $475.7 million and
the amount of indebtedness and other liabilities of Subsidiaries of the Company,
to which the Notes are effectively subordinated, was $1.5 billion, including
trade payables but excluding intercompany obligations. The Indenture provides
that no indebtedness of the Company shall be senior in right of payment to the
Notes unless such indebtedness is pari passu in right of payment with the
Company's other Senior Indebtedness.
'Obligations' means any principal, interest, penalties, fees, indemnities
and other obligations and liabilities payable under the documentation governing
the applicable Indebtedness.
By reason of such subordination, in the event of insolvency, general
creditors of the Company may recover less, ratably, than holders of Senior
Indebtedness and may recover more, ratably, than Noteholders or holders of other
subordinated indebtedness of the Company.
The Notes will rank senior in right of payment to the 8.65% Junior
Subordinated Deferrable Interest Debentures due 2027 and pari passu with the
8 1/4% Senior Subordinated Notes due 2005 and the 7 7/8% Senior Subordinated
Notes due 2006.
REPURCHASE AT OPTION OF HOLDERS UPON A CHANGE OF CONTROL
In the event of any Change of Control, each noteholder shall have the right,
at such noteholder's option, to require the Company to purchase all or any
portion (in integral multiples of $1,000) of such noteholder's notes on the date
(the 'Change of Control Payment Date') which is 20 business days after the date
the Change of Control Notice (as defined below) is mailed (or such later date as
is required by applicable law) at 101% of the principal amount (excluding
premium) thereof, plus accrued interest to the Change of Control Payment Date:
provided that the Company will not be obligated to purchase any of such notes
unless noteholders of at least 10% of the notes outstanding at the Change of
Control Payment Date (other than notes held by the Company and its Affiliates)
shall have tendered their notes for repurchase.
The Company is obligated to send to all noteholders, within five business
days after the occurrence of each Change of Control, a notice of the occurrence
of such Change of Control (the 'Change of Control Notice'), specifying a date by
which a noteholder must notify the Company of such noteholder's intention to
exercise the repurchase right and describing the procedure that such noteholder
must follow to exercise such right. The Company is required to deliver a copy of
such notice to the Trustee and to cause a copy of such notice to be published in
a daily newspaper of national circulation. To exercise the repurchase right, the
noteholder must deliver, on or before the fifth calendar day prior to the Change
of Control Payment Date, written notice (which shall be irrevocable, except as
provided below) to the Company (or an agent designated by the Company for such
purpose) of the noteholder's exercise of such right, together with (i) the note
or notes with respect to which the right is being exercised, duly endorsed for
transfer with the form entitled 'Option of Holder to Elect Purchase' on the
reverse of the note completed, and (ii) if the Change of Control Payment Date
falls between any record date for the payment of interest on the notes and the
next succeeding interest payment date, an amount equal to the interest which the
noteholder is entitled to receive on such interest payment date. The Company
will comply with all applicable Federal and state securities laws, including
Rule 14e-1 of the Exchange Act and other applicable tender offer rules, in
connection with each Change of Control Notice.
A 'Change of Control' shall be deemed to occur if (i) the Company has any
other Indebtedness outstanding (other than Indebtedness under a bank credit
agreement or similar bank financing) which provides for a Change of Control (as
defined in the instrument governing such Indebtedness) if Ian M. Cumming or
Joseph S. Steinberg ceases to beneficially own, in the aggregate, a certain
percentage of the outstanding Common Shares, which percentage ownership
requirement is in excess of 10%, and a Change of Control (as defined in the
instrument governing such Indebtedness) occurs under such Indebtedness or (ii)
at any time when the Company does not have any other Indebtedness outstanding of
the type referred to in clause (i), Ian M. Cumming or Joseph S. Steinberg,
individually or in the aggregate, sells, transfers or otherwise disposes of (a
'Disposition'), after the date hereof, Common Shares so that, after giving
effect thereto, the sole beneficial ownership of outstanding Common Shares by
Mr. Cumming and/or Mr. Steinberg would, in the aggregate, fall below 10% of the
then outstanding Common Shares; provided that
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no Change of Control shall be deemed to have occurred under clause (ii) if the
Company's 7 3/4% Senior Notes due 2013 and 7% Senior Notes due 2014 are rated by
both Moody's and S&P as Investment Grade both at the time of such Disposition
and for a period of 90 days from the date of such Disposition (it being
understood that, with respect to the foregoing proviso, a Change of Control
shall be deemed to occur on the first date during such 90-day period when the
notes are no longer rated as Investment Grade by Moody's and S&P). The term
'Common Shares' shall include any securities issued as dividends or
distributions on the Common Shares. For purposes hereof, 'sole beneficial
ownership' of Common Shares shall be deemed to include (i) all Common Shares
received after June 15, 1992 from Mr. Cumming or Mr. Steinberg by any member of
their respective immediate families or by any trust for the benefit of either of
them or any member of their respective immediate families (a 'Recipient'), which
Common Shares remain held by a Recipient during the lifetime of Mr. Cumming or
Mr. Steinberg (unless sold, transferred or disposed of by such Recipient during
the lifetime of Mr. Cumming or Mr. Steinberg, as the case may be, in which case
such Disposition by such Recipient shall constitute a Disposition by Mr. Cumming
or Mr. Steinberg, as the case may be) and (ii) after the death of Mr. Cumming
and/or Mr. Steinberg, all Common Shares owned as of the date of death by the
decedent, and any Recipient of the decedent, regardless of whether such
Recipient continues to own such Common Shares after the date of death. In
determining the number of outstanding Common Shares then held by Messrs. Cumming
and Steinberg and the total number of outstanding Common Shares, there shall be
excluded Common Shares issued by the Company after December 31, 1991, or the
conversion into or exchange for, after December 31, 1991, Common Shares or
securities convertible into or exchangeable for Common Shares. As calculated
pursuant to this provision, Messrs. Cumming and Steinberg beneficially own, in
the aggregate, approximately 43% of the Common Shares as of December 31, 2003.
As of the date hereof, the Company does not have any Indebtedness
outstanding of the type referred to in clause (i) of the preceding paragraph.
There can be no assurance that the Company will have sufficient funds or the
financing to satisfy its obligations to repurchase the notes and other
Indebtedness that may come due upon a Change of Control. In such case, the
Company's failure to purchase tendered notes would constitute an Event of
Default under the Indenture.
The holders of majority in principal amount of notes then outstanding may
waive compliance by the Company of the repurchase of notes upon a Change of
Control. The Company may not waive such provisions. See 'Modification of the
Indenture.'
The term 'Investment Grade' is defined as BBB - or higher by S&P or Baa3 or
higher by Moody's or the equivalent of such ratings by Moody's or S&P.
TRANSACTIONS WITH AFFILIATES
The Company shall not, and shall not permit any Subsidiary to, directly or
indirectly, enter into any transaction or series of related transactions with
any Affiliate (other than with the Company or a Wholly-Owned Subsidiary),
including, without limitation, any loan, advance or investment or any purchase,
sale, lease or exchange of property or the rendering of any service, unless such
transaction or series of transactions is in good faith and at arm's-length and
on terms which are at least as favorable as those available in a comparable
transaction from an unrelated Person. Any such transaction that involves in
excess of $10,000,000 shall be approved by a majority of the Independent
Directors on the Board of Directors of the Company; or, in the event that at the
time of any such transaction or series of related transactions there are no
Independent Directors serving on the Board of Directors of the Company, such
transaction or series of related transactions shall be approved by a nationally
recognized expert with experience in appraising the terms and conditions of the
type of transaction for which approval is required.
SUCCESSOR CORPORATION
The Company may not consolidate with, merge into or transfer all or
substantially all of its assets (i.e., 90% or more) to another corporation
unless (a) the successor corporation shall be existing under the laws of the
United States, any state thereof or the District of Columbia, (b) there shall
not be any Default or Event of Default under the Indenture, (c) such successor
corporation assumes all of the Obligations of
15
the Company under the notes and the Indenture and (d) after giving effect to
such transaction, such successor corporation shall have a Consolidated Net Worth
equal to or greater than the Company. Thereafter all such obligations of the
Company will terminate.
REPORTS TO NOTEHOLDERS
The Company will mail copies of its annual reports and quarterly reports
mailed to its shareholders to noteholders. If the Company is not required to
furnish annual or quarterly reports to its shareholders, the Company will, upon
request, mail to each noteholder, at such noteholder's address as appearing on
the note register, audited annual financial statements prepared in accordance
with United States generally accepted accounting principles and unaudited
condensed quarterly financial statements. Such financial statements shall be
accompanied by management's discussion and analysis of the results of operations
and financial condition of the Company for the period reported upon in
substantially the form required under the rules and regulations of the
Commission currently in effect.
EVENTS OF DEFAULT AND NOTICE THEREOF
The term 'Event of Default' when used in the Indenture shall mean any one of
the following: (i) failure to pay interest for 30 days or principal (including
premium, if any); (ii) failure to perform any covenants not described in clause
(i) for 30 days after receipt of notice; (iii) the occurrence of a default in
the payment when due of principal of, or interest on, or other amounts payable
in respect of, any instrument evidencing or securing other Indebtedness of the
Company or any Material Subsidiary of the Company in the aggregate principal
amount of $15,000,000 or more; (iv) the occurrence of any other event of default
under an instrument evidencing or securing other indebtedness of the Company or
any Material Subsidiary of the Company in the aggregate principal amount of
$15,000,000 or more resulting in the acceleration of such indebtedness, which
acceleration is not rescinded or annulled pursuant to the terms of such
instrument; and (v) certain events of bankruptcy, insolvency or reorganization
relating to the Company or any Material Subsidiary of the Company.
The Indenture provides that the Trustee shall, within 90 days after the
occurrence of a default, provide to the noteholders notice of all uncured
defaults known to it (the term default to include the events specified above
without grace or notice); provided, that, except in the case of default in the
payment of principal of, premium, if any, or interest on any of the notes, the
Trustee shall be protected in withholding such notice if and so long as a
committee of its Trust Officers in good faith determines that the withholding of
such notice is in the interests of the noteholders.
In case an Event of Default (other than an Event of Default with respect to
the Company specified in clause (v) above) shall have occurred and be
continuing, the Trustee or the holders of at least 25% in aggregate principal
amount of the notes then outstanding, by notice in writing to the Company and to
the Trustee, may declare to be due and payable immediately the outstanding
principal amount and accrued interest, premiums, penalties and other amounts in
respect of the notes and the Indenture. Such declaration may be annulled and
past defaults (except, unless theretofore cured (1) a default in payment of
principal, premium, if any, or interest on the notes or (2) a failure by the
Company to convert any Notes into Common Shares in accordance with their terms)
may be waived by the holders of a majority in principal amount of the notes,
upon the conditions provided in the Indenture.
If an Event of Default with respect to the Company specified in clause (v)
above occurs, all unpaid principal of, premium, if any, and accrued interest on
the notes then outstanding shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
holder of notes.
The Indenture includes a covenant that the Company will file annually with
the Trustee a statement regarding compliance by the Company with the terms
thereof and specifying any defaults of which the signers may have knowledge.
MODIFICATION OF THE INDENTURE
Under the Indenture, the rights and obligations of the Company and the
rights of noteholders may be modified by the Company and the Trustee only with
the consent of the noteholders holding a majority in principal amount of the
notes then outstanding; but no extension of the maturity of any notes, or
16
reduction in the interest rate or premium, if any, or extension of the time of
payment of principal of (including premium, if any) or interest on, or any
change that adversely affects the right of a noteholder to convert any notes, or
any change in the subordination of the notes that is adverse to the noteholders,
or any other modification in the terms of payment of the principal of, or
premium, if any, or interest on the notes or reduction of the percentage
required for modification will be effective against any noteholder without its
consent. The holders of a majority in principal amount of notes then outstanding
may waive compliance by the Company with certain covenants, including those
described under 'Repurchase at Option of Holders Upon a Change of Control.' The
Company may make other changes or modifications to the Indenture and the terms
of the Notes which do not adversely affect the noteholders, including, without
limitation, a reduction of the conversion price as noted above.
REGISTRATION RIGHTS
We entered into a registration rights agreement with the initial purchaser
of the notes pursuant to which we agreed to file a shelf registration statement
under the Securities Act not later than 120 days after the closing of original
issuance of the Notes to register resales of the Notes and the Common Shares
into which the Notes are convertible. We will use all reasonable efforts to have
this shelf registration statement declared effective as promptly as practicable
but not later than 180 days after the closing of this offering, and to keep it
effective until the earliest of:
(1) two years from the date we file the shelf registration statement;
(2) the date when all Notes and Common Shares issuable upon conversion of
the Notes shall have been registered under the Securities Act and
disposed of; and
(3) the date on which all Notes and Common Shares issuable upon conversion
of the Notes held by non-affiliates of the Company are eligible to be
sold to the public pursuant to Rule 144(k) under the Securities Act.
We will be permitted to suspend the use of the prospectus which is a part of
the registration statement for a period not to exceed an aggregate of 135 days
in any twelve-month period under certain circumstances relating to pending
corporate developments, public filings with the SEC and similar events.
A holder that sells Notes and Common Shares issuable upon conversion of the
Notes pursuant to the shelf registration statement generally will be required to
provide information about itself and the specifics of the sale, be named as a
selling securityholder in the related prospectus, deliver a prospectus to
purchasers, be subject to relevant civil liability provisions under the
Securities Act in connection with such sales and be bound by the provisions of
the registration rights agreements which are applicable to such holder.
If:
(1) on or prior to the 120th day from the date of original issuance of the
Notes, the shelf registration statement has not been filed with the SEC;
(2) on or prior to the 180th day from the date of original issuance of the
Notes, the shelf registration statement has not been declared effective
by the SEC; or
(3) after the shelf registration statement has been declared effective, such
shelf registration statement ceases to be effective or usable (subject
to certain exceptions) in connection with resales of the Notes and the
Common Shares issuable upon the conversion of the Notes in accordance
with and during the periods specified in the registration rights
agreement and (A) unless we declare a suspension period to be in effect,
we do not cure the shelf registration statement within five business
days by a post-effective amendment or a report filed pursuant to the
Securities Exchange Act of 1934, which we refer to in this offering
circular as the Exchange Act, or (B) if applicable, we do not terminate
the suspension period described above by the 135th day,
(we refer to each such event described above in clauses (1) through (3) as a
registration default), liquidated damages will accrue on the Notes in addition
to the interest on the Notes at an amount per week per $1,000 principal amount
of Notes equal to $0.05 for the first 90 days immediately following the
registration default, with such liquidated damages increasing by an additional
$0.05 per week per $1,000 principal amount of Notes with respect to each
subsequent 90-day period, up to a maximum of $0.25 per
17
week per $1,000 principal amount of Notes. We will have no other liabilities for
monetary damages with respect to our registration obligations. Liquidated
damages shall be paid on the interest payment dates to holders of record for the
payment of interest.
We will give notice of our intention to file the shelf registration
statement, which we refer to in this offering circular as a 'filing notice,' to
each of the holders of the Notes in the same manner as we would give notice to
holders of Notes under the Indenture. The filing notice will seek, among other
things, a determination from each of such holders as to whether such holder
elects to have its Notes and the Common Shares issuable upon conversion thereof
registered for sale pursuant to the shelf registration statement.
A holder who elects to sell any registrable securities pursuant to the shelf
registration statement will be required to be named as a selling security holder
in the related prospectus, may be required to deliver a prospectus to
purchasers, may be subject to certain civil liability provisions under the
Securities Act in connection with those sales and will be bound by the
provisions of the registration rights agreement that apply to a holder making
such an election, including certain indemnification provisions.
We will give notice to all holders who have provided us with the notice and
questionnaire described below of the effectiveness of the shelf registration
statement.
No holder of registrable securities will be entitled to be named as a
selling security holder in the shelf registration statement as of the date on
which the shelf registration statement is declared effective, such time is
referred to as the 'effective time,' and no holder of registrable securities
will be entitled to use the prospectus that is part of the shelf registration
statement for offers and resales of registrable securities at any time, unless
such holder has returned a completed and signed notice and questionnaire to us
by the deadline for response set forth in the notice and questionnaire.
Beneficial owners of registrable securities who have not returned a notice
and questionnaire by the questionnaire deadline described above may receive
another notice and questionnaire from us upon request. When we receive a
completed and signed notice and questionnaire prior to the effective date of the
registration statement, we will include the registrable securities covered
thereby in the shelf registration statement.
THE FOREGOING SUMMARY OF THE REGISTRATION RIGHTS PROVIDED IN THE
REGISTRATION RIGHTS AGREEMENT IS SUBJECT TO, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO, THE REGISTRATION RIGHTS AGREEMENT.
BOOK ENTRY, DELIVERY AND FORM
Each Note has been issued as a book-entry note in fully registered form
without coupons and is represented by a global note that we have deposited with
and registered in the name of a financial institution or its nominee that we
selected. The financial institution that we selected for this purpose is called
the depositary. The Depositary Trust Company, or DTC, is the depositary for all
notes issued in book-entry form. Owners of beneficial interests in book-entry
notes will not be entitled to physical delivery of Notes in certificated form.
We will make payments of principal of, and premium, if any, and interest, if
any, on the Notes through the applicable trustee to the depositary for the
notes.
DTC has advised us as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a clearing corporation within the meaning of the New York
Uniform Commercial Code and a 'clearing agency' registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities of institutions that have accounts with DTC, or 'participants,' and
to facilitate the clearance and settlement of securities transactions among its
participants through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. DTC's participants include securities brokers and dealers, banks,
trust companies, clearing corporations and may include certain other
organizations. Indirect access to DTC's book-entry system is also available to
others such as banks, brokers, dealers and trust companies, which we
collectively refer to in this offering circular as 'indirect participants,' that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly.
18
The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and laws may impair the ability to transfer or pledge beneficial
interests in the global notes.
So long as DTC (or its nominee) is the registered holder and owner of a
global note, DTC (or such nominee) will be considered the sole legal owner and
holder of the Notes evidenced by such global note for all purposes of such Notes
and the Indenture. Except as set forth below, as an owner of a beneficial
interest in a global note, you will not be entitled to receive physical delivery
of certificated notes and will not be considered to be the owner or holder of
any Notes under such global note. We understand that, under existing industry
practice, in the event an owner of a beneficial interest in a global note
desires to take any action that DTC, as the holder of such global note, is
entitled to take, DTC would authorize the participants to take such action, and
the participants would authorize beneficial owners owning through such
participants to take such action or would otherwise act upon the instructions of
beneficial owners owning through them.
We will make payments of principal, premium, if any, and interest on the
Notes represented by the global notes registered in the name of and held by DTC
or its nominee to DTC or its nominee, as the case may be, as the registered
owner and holder of the global notes.
We expect that DTC (or its nominee), upon receipt of any payment of
principal, premium, if any, or interest on the global notes will credit the
accounts of their relevant participants or account holders, as applicable, with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of the applicable global note as shown on the records of
DTC (or its nominee). Ownership of beneficial interests in the global notes will
be limited to participants or persons that may hold interests through
participants. Ownership of beneficial interests in the global notes will be
shown on, and the transfer of those ownership interests will be effected only
through, records maintained by DTC (with respect to participants' interests),
the participants and the indirect participants (with respect to the owners of
beneficial interests in the global notes other than participants). All interests
in a global note deposited with DTC are subject to the procedures and
requirements of DTC.
We also expect that payments by participants or indirect participants or
account holders, as applicable, to owners of beneficial interests in the global
notes held through such participants or indirect participants or account holders
will be governed by standing instructions and customary practices and will be
the responsibility of such participants or indirect participants or account
holders, as applicable. We will not have any responsibility or liability for any
aspect of the records relating to, payments made on account of, beneficial
ownership interests in the global notes for any notes or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests or for any other aspect of the relationship between DTC and its
participants or indirect participants, or the relationship between such
participants or indirect participants, and the owners of beneficial interests in
the global notes owning through such participants.
All amounts payable under the Notes will be payable in U.S. dollars, except
as may otherwise be stated in this offering circular or agreed between any
applicable securities clearing system and any holders. Payments will be subject
in all cases to any fiscal or other laws and regulations (including any
regulations of any applicable securities clearing system) applicable thereto.
None of the trustee, us, or any of our respective agents shall be liable to any
holder of a global note or other person for any commissions, costs, losses or
expenses in relation to or resulting from any currency conversion or rounding
effected in connection therewith. Investors may be subject to foreign exchange
risks that may have important economic and tax consequences to them.
Subject to certain conditions, the Notes represented by the global notes are
exchangeable for certificated notes in definitive form of like tenor in
denominations of $1,000 principal amount and multiples thereof if:
DTC provides notification that it is unwilling or unable to continue as
depositary for the global notes or DTC ceases to be a clearing agency
registered under the Exchange Act and, in either case, a successor is not
appointed within 90 days; or
a default entitling Note holders to accelerate the maturity date has
occurred and is continuing.
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Any Note that is exchangeable as described above is exchangeable for
certificated notes issuable in authorized denominations and registered in such
names as DTC shall direct. Subject to the foregoing, a global note is not
exchangeable, except for a global note of the same aggregate denomination to be
registered in the name of DTC (or its nominee).
GOVERNING LAW
The Indenture and the Notes provide that they are to be governed in
accordance with the laws of the State of New York, without regard to choice of
law provisions.
THE TRUSTEE
HSBC Bank USA is the trustee under the Indenture. If an Event of Default
occurs, and is continuing, the trustee is required to use the degree of care of
a prudent person in the conduct of his own affairs in the exercise of its
powers. Subject to these provisions, the trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request of any
of the holders of Notes, unless they shall have offered to the trustee
reasonable security or indemnity to the reasonable satisfaction of the trustee
and certain other conditions are met pursuant to the terms of the Indenture.
The trustee makes no representation or warranty, express or implied, as to
the accuracy or completeness of any information contained in this offering
circular, except for certain information pertaining solely to the trustee, or
incorporated by reference into this offering circular.
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DESCRIPTION OF OUR CAPITAL STOCK
AUTHORIZED CAPITAL
As of August 30, 2004, our amended and restated articles of incorporation
provide that we have authority to issue the following capital stock:
150,000,000 common shares, $1.00 par value, of which 71,309,502 shares are
issued and outstanding; and
6,000,000 preferred shares, $1.00 par value, of which no shares are issued
and outstanding.
COMMON SHARES
Subject to the rights of the holders of any preferred shares that may be
outstanding, holders of our common shares are entitled to receive dividends as
may be declared by our board of directors out of funds legally available to pay
dividends, and, in the event of liquidation, dissolution or winding up of our
affairs, to share in any distribution of our assets after payment or providing
for the payment of liabilities and the liquidation preference of any outstanding
preferred shares. Each holder of common shares is entitled to one vote for each
share held of record on the applicable record date for all matters submitted to
a vote of shareholders. Holders of common shares have no cumulative voting
rights or preemptive rights to purchase or subscribe for any stock or other
securities, and there are no conversion rights or redemption, purchase,
retirement or sinking fund provisions with respect to our common shares. Our
common shares are traded on the New York Stock Exchange and the Pacific
Exchange, Inc. under the symbol 'LUK.'
PREFERRED SHARES
We are authorized by our amended and restated certificate of incorporation
to issue up to 6,000,000 shares of preferred stock in one or more series. The
board of directors has the authority, without any vote or action by our
stockholders, to (a) authorize the issuance of preferred stock up to the limit
set by our certificate of incorporation, (b) create new series of preferred
stock and (c) fix the terms of each series, including any rights related to
dividends, voting, conversion, redemption and liquidation preference. The
issuance of preferred stock could adversely affect the voting and other rights
of holders of the common stock and may have the effect of delaying or preventing
a change in control of our company.
THE TRANSFER RESTRICTIONS ON OUR COMMON SHARES
There are certain restrictions on the transferability of our common shares.
For a description of the transfer restrictions, see 'Transfer Restrictions on
our Common Shares' below.
TRANSFER AGENT
American Stock Transfer & Trust Company is the Transfer Agent and Registrar
for our common shares.
TRANSFER RESTRICTIONS ON OUR COMMON SHARES
GENERAL
In order to protect our significant tax loss carryforwards and other tax
attributes, our common shares are subject to certain transfer restrictions
contained in our certificate of incorporation. The transfer restriction imposes
restrictions on the transfer of our common shares (and any other capital stock
that we issue in the future) to designated persons.
TAX LAW LIMITATIONS
The benefit of a company's existing tax loss and credit carryovers, as well
as the benefit of built-in losses, can be reduced or eliminated under Section
382 of the Internal Revenue Code. Section 382 limits the use of losses and other
tax benefits by a company that has undergone an 'ownership change,' as defined
in Section 382 of the Code. Generally, an 'ownership change' occurs if one or
more shareholders,
21
each of whom owns 5% or more in value of a company's capital stock, increase
their aggregate percentage ownership by more than 50 percentage points over the
lowest percentage of stock owned by such shareholders over the preceding
three-year period. For this purpose, all holders who each own less than 5% of a
company's capital stock are generally treated together as one 5% shareholder. In
addition, certain attribution rules, which generally attribute ownership of
stock to the ultimate beneficial owner thereof without regard to ownership by
nominees, trusts, corporations, partnerships or other entities, are applied in
determining the level of stock ownership of a particular shareholder. Options
(including warrants and other rights) to acquire capital stock may be treated as
if they had been exercised, on an option-by-option basis, if the issuance,
transfer or structuring of the option meets certain tests. All percentage
determinations are based on the fair market value of a company's capital stock,
including any preferred stock which is voting or convertible (or otherwise
participates in corporate growth).
If an 'ownership change' were to occur in respect of Leucadia or any of its
subsidiaries or subsidiary groups, the amount of taxable income in any year (or
portion of a year) subsequent to the ownership change that could be offset by
net operating loss ('NOLs') or other tax attributes existing (or 'built-in')
prior to such 'ownership change' could not exceed an amount equal to the product
obtained by multiplying (1) the aggregate value of Leucadia, the subsidiary or
the subsidiary group that underwent the 'ownership change' by (2) the federal
long-term tax exempt rate. Because the aggregate value of Leucadia or any of its
subsidiaries, as well as the federal long-term tax-exempt rate, fluctuate, it is
impossible to predict with any accuracy the annual limitation upon the amount of
taxable income that could be offset by such NOLs or other tax attributes (and
'built-in' losses) were an 'ownership change' to occur in the future. However,
if such limitation were to exceed the taxable income against which it otherwise
would be applied for any year following an 'ownership change,' the limitation
for the ensuing year would be increased by the amount of such excess.
DESCRIPTION OF THE TRANSFER RESTRICTION
Our certificate of incorporation generally restricts until December 31, 2024
(or earlier, in certain events) any attempted transfer of our common shares or
any other securities that would be treated as our 'stock' under the applicable
tax regulations (which we refer to herein as 'Leucadia Stock') to a person or
group of persons who own, or who would own as a result of such transfer, 5% or
more of the Leucadia Stock. The transfer restriction also restricts any other
attempted transfer of Leucadia Stock that would result in the identification of
a new '5-percent shareholder' of our company, as determined under applicable tax
regulations. This would include, among other things, an attempted acquisition of
Leucadia Stock from an existing 5-percent shareholder. For these purposes,
numerous rules of attribution, aggregation and calculation prescribed under the
Internal Revenue Code (and related regulations) will be applied in determining
whether the 5% threshold has been met and whether a group exists. The transfer
restriction may also apply to proscribe the creation or transfer of certain
'options,' which are broadly defined, in respect of the Leucadia Stock.
Acquisitions of Leucadia Stock directly from us, whether by way of option
exercise or otherwise, are not subject to the transfer restriction.
Consequently, persons or entities who are able to acquire our common shares
directly from us, including our employees, officers and directors, may do so
without application of the transfer restriction, irrespective of the number of
our common shares they are acquiring. As a result, those persons or entities
dealing directly with us may be seen to receive an advantage over persons or
entitles who are not able to acquire our common shares directly from us and,
therefore, are restricted by the terms of the transfer restriction. It should be
noted, however, that any direct acquisitions of our common shares from us first
requires board approval and in granting such approval, the board will review the
implications of any such issuance for our NOLs and other tax attributes.
Our board of directors has the discretion to approve a transfer of Leucadia
Stock that would otherwise violate the transfer restriction. Nonetheless, if the
board of directors decides to permit a transfer that would otherwise violate the
transfer restriction, that transfer or later transfers may result in an
'ownership change' that would limit the use of the tax attributes of Leucadia.
The board of directors intends to consider any attempted transfer individually
and determine at the time whether it is in the best interest of our company,
after consideration of any factors that the board deems relevant, to permit the
transfer notwithstanding that an 'ownership change' may occur.
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The transfer restriction will restrict a shareholder's ability to acquire
additional Leucadia Stock in excess of the specified limitations. Furthermore, a
shareholder's ability to dispose of his Leucadia Stock, or any other Leucadia
Stock which the shareholder may acquire, may be restricted as a result of the
transfer restriction.
Generally, the restriction is imposed only with respect to the number of
shares of Leucadia Stock, or options with respect to Leucadia Stock (the 'Excess
Stock'), purportedly transferred in excess of the threshold established in the
transfer restriction. In any event, the restriction does not prevent a valid
transfer if either the transferor or the purported transferee obtains the
approval of our board of directors.
The transfer restriction restricts any person or entity, or group of persons
or entities, from acquiring sufficient Leucadia Stock to cause that person or
entity to become the owner of 5% of the Leucadia Stock, and prohibits the
current 5-percent shareholders, as determined under applicable tax regulations,
from increasing their ownership of Leucadia Stock without obtaining the approval
of our board of directors.
The transfer restriction does not restrict the ability of Ian M. Cumming,
our Chairman of the Board and the beneficial holder of approximately 13.1% of
our outstanding common shares (including shares issuable on exercise of common
share purchase warrants), to exercise his warrants, because the acquisition of
our common shares from us is not within the scope of the transfer restriction.
These issuances of common shares have been excluded from the operation of the
transfer restriction because our board previously determined that the issuance
of our common shares under these circumstances would not adversely affect our
NOL and other tax attributes. In addition, since our board will be able to
consider the effect on our NOLs and other tax attributes of future issuances of
our common shares at the time of the issuance, whether as a result of
transactions with third parties, or the issuance of our common shares in a
private placement or public offering, or as compensation to our employees,
officers or directors, or otherwise, future issuances of our common shares, as
well as grants of options or warrants, by us also have been excluded from the
transfer restriction. The transfer restriction does, however, restrict the
ability of Mr. Cumming and Joseph S. Steinberg, our President and the beneficial
holder of approximately 13.5% of our outstanding shares, to acquire additional
Leucadia Stock from persons other than us.
Our certificate of incorporation further provides that all certificates
representing Leucadia Stock bear the following legend: 'THE SHARES OF STOCK
REPRESENTED HEREBY ARE SUBJECT TO RESTRICTIONS PURSUANT TO PART III OF ARTICLE
FOURTH OF THE CERTIFICATE OF INCORPORATION OF THE CORPORATION REPRINTED IN ITS
ENTIRETY ON THE BACK OF THIS CERTIFICATE.'
In accordance with the transfer restriction, we will not permit any of our
employees or agents, including the transfer agent, to record any transfer of our
common shares purportedly transferred in excess of the threshold established in
the transfer restriction. As a result, requested transfers of Leucadia Stock may
be delayed or refused.
Our certificate of incorporation provides that any transfer attempted in
violation of the restrictions would be void ab initio, even if the transfer has
been recorded by the transfer agent and new certificates issued. The purported
transferee of the Leucadia Stock would not be entitled to any rights of
shareholders with respect to the Excess Stock, including the right to vote the
Excess Stock, or to receive dividends or distributions in liquidation in respect
thereof, if any.
If our board of directors determines that a purported transfer has violated
the transfer restriction, we will require the purported transferee to surrender
the Excess Stock, and any dividends the purported transferee has received on the
Excess Stock, to an agent designated by the board of directors. The agent will
then sell the Excess Stock in one or more arm's-length transactions, executed on
the NYSE, if possible, to a buyer or buyers, which may include us; provided that
nothing will require the agent to sell the Excess Stock within any specific time
frame if, in the agent's discretion, the sale would disrupt the market for the
Leucadia Stock or have an adverse effect on the value of the Leucadia Stock. If
the purported transferee has resold the Excess Stock before receiving our demand
to surrender the Excess Stock, the purported transferee generally will be
required to transfer to the agent the proceeds of the sale and any distributions
the purported transferee has received on the Excess Stock. From such proceeds,
the agent will pay any amounts remaining after repaying its own expenses and
reimbursing the purported transferee for the price paid for the Excess Stock (or
the fair market value of the Excess Stock at the time of the attempted transfer
to the purported transferee by gift, inheritance or similar transfer) to a named
charity or, in certain circumstances, charities selected by the Board of
Directors.
23
The transfer restriction and related provisions contained in our amended and
restated bylaws may be deemed to have an 'anti-takeover' effect because they
restrict the ability of a person or entity, or group of persons or entities,
from accumulating in the aggregate at least 5% of the Leucadia Stock and the
ability of persons, entities or groups now owning at least 5% of the Leucadia
Stock from acquiring additional Leucadia Stock. The transfer restriction
discourages or prohibits accumulations of substantial blocks of shares for which
shareholders might receive a premium above market value.
Notwithstanding the restrictions, however, there remains a risk that certain
changes in relationships among shareholders or other events will cause a change
of ownership to occur under Section 382 of the Internal Revenue Code. Further,
there can be no assurance, in the event transfers in violation of the transfer
restriction are attempted, that the IRS will not assert that those transfers
have federal income tax significance notwithstanding the transfer restriction.
As a result, the transfer restriction serves to reduce, but not necessarily
eliminate, the risk that Section 382 will cause the limitations described above
on the use of tax attributes of Leucadia.
We have been advised by our counsel, Weil, Gotshal & Manges LLP, that,
absent a court determination, (1) there can be no assurance that the transfer
restriction will be enforceable against all of our shareholders and (2) the
transfer restriction may be subject to challenge on equitable grounds. However,
it should be noted that the existing transfer restriction has been in place
since December 31, 1992 and has not been challenged to date.
The determination of 5% shareholder status is based upon the outstanding
Leucadia Stock, which currently consists of only common shares. Consequently, in
determining the existence of a 5% shareholder, a holder's percentage ownership,
taking into account certain rules of attribution, would be calculated with
reference to outstanding common shares (increased, for such holder, by the
number of common shares deemed to be, but not actually outstanding). Future
changes in the capitalization of Leucadia may affect who will be deemed a 5%
shareholder, thereby affecting the applicability of the transfer restriction to
future transfers of common shares (or notes, if the principal purpose described
above is present). However, because the transfer restriction generally applies
(with certain exceptions) to a person or group of persons who owns (including by
attribution) at least 5% of all 'stock' of Leucadia, a change in capitalization
that increases the 'stock' of Leucadia likely would result in a reduction in the
number of individuals or groups who would be subject to the transfer
restriction, while a diminution of 'stock' of Leucadia would have the opposite
effect.
Holders are advised to carefully monitor their ownership of notes and common
shares (and any future securities of Leucadia that may constitute 'Leucadia
Stock' for purposes of the transfer restriction) and should consult their own
legal advisors and/or Leucadia to determine whether their ownership approaches
the prohibited level.
24
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion describes certain U.S. federal income tax
consequences of the ownership and disposition of the notes, and with respect to
Non-U.S. Holders (as defined below), of common shares. This discussion applies
only to notes and shares held as capital assets (in general, assets held for
investment).
This discussion does not describe all of the tax consequences that may be
relevant to a holder in light of its particular circumstances or to holders
subject to special rules, such as:
dealers in securities or securities traders electing to mark to market;
tax-exempt organizations;
banks, insurance companies, regulated investment companies and other
financial institutions;
persons holding notes as part of a straddle, hedge, integrated or
constructive sale or similar transaction;
U.S. Holders (as defined below) whose functional currency is not the U.S.
dollar;
certain former citizens or residents of the United States; and
partnerships or other entities classified as partnerships for U.S. federal
income tax purposes or investors in partnerships or other entities
classified as partnerships for U.S. federal income tax purposes.
In addition, this discussion does not address any tax consequences under
state, local or foreign tax laws, or under U.S. estate and gift tax law or any
U.S. federal alternative minimum tax consequences. This summary is based on the
Internal Revenue Code of 1986 (the 'Code'), administrative pronouncements,
judicial decisions and final, temporary and proposed Treasury regulations,
changes to any of which, subsequent to the date of this prospectus, may affect
the tax consequences described herein.
THIS SUMMARY IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE.
ACCORDINGLY, EACH INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR AS TO
PARTICULAR TAX CONSEQUENCES TO IT OF PURCHASING, OWNING AND DISPOSING OF THE
NOTES OR COMMON SHARES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE,
LOCAL OR FOREIGN OR OTHER TAX LAWS, AND OF ANY PROPOSED CHANGES IN APPLICABLE
LAW.
TAX CONSEQUENCES TO U.S. HOLDERS
As used herein, the term 'U.S. Holder' means a beneficial owner of a note
that is, for U.S. federal income tax purposes:
a citizen or resident of the United States;
a corporation (or other entity taxable as a corporation for U.S. federal
income tax purposes), created or organized in or under the laws of the
United States or any political subdivision thereof, any state or the
District of Columbia;
a trust if (1) a court within the United States is able to exercise primary
jurisdiction over its administration and one or more U.S. persons have the
authority to control all of the substantial decisions of the trust, or (2)
it has a valid election in effect under applicable Treasury regulations to
be treated as a U.S. person; or
an estate, the income of which is subject to U.S. federal income taxation
regardless of its source.
PAYMENTS OF INTEREST
Interest paid on a note will be taxable to a U.S. Holder as ordinary
interest income at the time it accrues or is received in accordance with the
U.S. Holder's method of accounting for U.S. federal income tax purposes.
CONVERSION INTO COMMON SHARES
A U.S. Holder's conversion of a note into common shares will not be a
taxable event, except that the receipt of any cash in lieu of a fractional share
of common shares will result in capital gain or loss
25
(measured by the difference between the cash received in lieu of the share and
the U.S. Holder's tax basis attributable to the share, as described below), and
the fair market value of common shares received with respect to accrued and
unpaid interest will be taxed as a payment of interest (as described above).
A U.S. Holder's aggregate tax basis in common shares received upon a
conversion of a note will be the same as the U.S. Holder's basis in the note at
the time of conversion, reduced by any basis allocated to a fractional common
share in lieu of which cash was received and increased, for a cash method
holder, by the amount of the fair market value of common shares received with
respect to accrued interest. The U.S. Holder's holding period for the common
shares received will include the holder's holding period for the note converted,
except that the holding period of any common shares received with respect to
accrued and unpaid interest will commence on the day after the date of
conversion.
MARKET DISCOUNT
If a U.S. Holder purchases a note at a price that is less than its principal
amount at maturity, then, subject to a de minimis exception, the note will be
deemed to carry 'market discount.' A U.S. Holder that acquires a note having
market discount is generally required to treat as ordinary income any gain
recognized on the disposition or partial or full principal payment of that note
to the extent of the market discount that is treated as having accrued on that
note during the period such U.S. Holder held the note, unless the U.S. Holder
elects to include such market discount in income as it accrues, as described
below.
The election to include market discount in income as it accrues, once made,
applies to all market discount obligations acquired on or after the first day of
the first taxable year to which the election applies and may not be revoked
without the consent of the IRS. In general, market discount will be treated as
accruing on a straight-line basis over the remaining term of the note at the
time of acquisition, or, at the election of the U.S. Holder, under a constant
yield method. If a constant yield election is made, it will apply only to the
note with respect to which it is made and may not be revoked. A U.S. Holder that
acquires a note carrying market discount and that does not elect to include
market discount in income as it accrues may be required to defer the deduction
of the interest on any indebtedness allocable to such note in an amount not
exceeding the deferred income until such income is realized. If an election is
made to include market discount in income currently, the basis of the note in
the hands of the U.S. Holder will be increased by the market discount thereon as
it is included in income (as described below). U.S. Holders should consult their
tax advisors regarding the tax consequences to them of market discount and the
desirability of making any of the elections described above.
Upon a conversion into common shares any accrued and unrecognized market
discount with respect to a note will carry over to the common shares received
upon the conversion, and gain recognized on the subsequent disposition of such
common shares will be treated as ordinary income to the extent of such market
discount.
AMORTIZABLE PREMIUM
A U.S. Holder that purchases a note at a premium over its principal amount
generally may elect to amortize that premium over the remaining term of the note
under a constant yield method as an offset to interest, in an amount not to
exceed the stated interest, when includible in income under its regular
accounting method. Amortizable premium, however, will not include any premium
attributable to a note's conversion feature. The premium attributable to the
conversion feature is the excess, if any, of the note's purchase price over what
the note's fair market value would be if there were no conversion feature. The
election to amortize premium on a constant yield method, once made, applies to
all debt obligations held or subsequently acquired by the electing U.S. Holder
on or after the first day of the first taxable year to which the election
applies and may not be revoked without the consent of the IRS. A U.S. Holder's
adjusted tax basis (as described below) in a note will be reduced by the amount
of any amortized premium. U.S. Holders should consult their tax advisors
regarding the tax consequences to them of amortizable premium and the
desirability of making the election described above.
SALE, EXCHANGE, REDEMPTION OR RETIREMENT OF THE NOTES
Unless a non-recognition provision applies, upon the sale, exchange,
redemption or retirement of a note (other than a conversion into common shares),
a U.S. Holder will recognize taxable gain or loss
26
equal to the difference between the amount realized on the sale, exchange,
redemption or retirement and the holder's adjusted tax basis in the note. The
adjusted tax basis in a note will generally equal its cost, decreased by any
amortizable premium previously amortized by the U.S. Holder with respect to the
note, and increased, if applicable, by any market discount previously included
in income by the U.S. Holder. For these purposes, the amount realized does not
include any amount attributable to accrued and unpaid interest. Amounts
attributable to accrued and unpaid interest are treated as interest, as
described under ' -- Payments of Interest' above. Gain or loss realized on the
sale, exchange, redemption or retirement of a note will generally be capital
gain or loss and will be long-term capital gain or loss if at the time of sale,
exchange, redemption or retirement the note has been held for more than one
year, provided that any gain to the extent of accrued and unrecognized market
discount will be treated as ordinary income, as described under ' -- Market
Discount.' The deductibility of capital losses is subject to limitations.
CONSTRUCTIVE DIVIDENDS ON THE NOTES
If we were to make certain distributions of property to shareholders (for
example, taxable distributions of cash or distributions of evidences of
indebtedness or assets, but generally not stock dividends or rights to subscribe
for our common shares) and the conversion price underlying the notes were
reduced pursuant to the anti-dilution provisions of the indenture, such
reduction would be deemed to be a distribution to U.S. Holders. In addition,
other reductions in (or failures to adjust) the conversion price of the notes
may, depending on the circumstances, be deemed to be distributions to U.S.
Holders, taxable as a dividend to the extent of our current or accumulated
earnings and profits, even though the U.S. Holder will not have received any
cash or property as a result of the adjustment. In particular, any reduction in
the conversion price of the notes to compensate holders of notes for taxable
distributions of cash on any of our outstanding common shares will be treated as
a deemed distribution to such holders in an amount equal to the value of the
additional shares issuable upon conversion, which will be taxable as a dividend
to the extent of our current and accumulated earnings and profits. It is not
clear whether a constructive dividend deemed paid to you would be eligible for
the preferential rates of U.S. federal income tax applicable to certain
dividends under recently enacted legislation. It is also unclear whether
corporate holders would be entitled to claim the dividends received deduction
with respect to any such constructive dividends. In certain circumstances, the
failure to make an adjustment of the conversion price under the indenture may
result in a taxable distribution to holders of our common shares.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
Our failure to fulfill our obligation concerning registration of the notes,
as described under 'Description of Notes -- Registration Rights,' will cause
liquidated damages to accrue on the notes in the manner described therein.
According to the applicable Treasury regulations, the possibility of a change in
the interest rate on the notes will not affect the amount or timing of interest
income recognized by a holder of a note if the likelihood of the change, as of
the date the notes are issued, is remote. We intend to take the position, which
is not binding on the Internal Revenue Service ('IRS'), that the possibility of
payment of liquidated damages under the notes is remote and do not intend to
treat that possibility as affecting the yield to maturity of the notes (for
purposes of the original issue discount provisions of the Code). Accordingly,
any liquidated damages payable to holders of the notes should be includible in
gross income as interest income by a U.S. Holder at the time the payment is made
or accrues in accordance with such U.S. Holder's regular method of tax
accounting. In the event that the IRS were to successfully challenge our
position, the amount or timing of interest income recognized by a holder of a
note may have to be redetermined.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Unless you are an exempt recipient such as a corporation, information
returns will be filed with the IRS in connection with payments on the notes and
the proceeds from a sale or other disposition of the notes. A U.S. Holder may be
subject to U.S. backup withholding tax on these payments if the U.S. Holder
fails to provide its taxpayer identification number to the paying agent and
comply with certain certification procedures or otherwise establish an exemption
from backup withholding. The amount of any backup withholding from a payment to
a U.S. Holder will be allowed as a credit against the
27
U.S. Holder's U.S. federal income tax liability and may entitle the U.S. Holder
to a refund, provided that the required information is timely furnished to the
IRS.
TAX CONSEQUENCES TO NON-U.S. HOLDERS
As used herein, the term 'Non-U.S. Holder' means a beneficial owner that is,
for U.S. federal income tax purposes:
an individual who is classified as a nonresident alien;
foreign corporation; or
a foreign estate or trust.
Special rules may apply to certain Non-U.S. Holders such as 'controlled
foreign corporations,' 'passive foreign investment companies' and 'foreign
personal holding companies.' Such entities should consult their tax advisors to
determine the U.S. federal, state, local and other tax consequences that may be
relevant to them.
PAYMENTS ON THE NOTES
Subject to the discussion below concerning backup withholding, principal and
interest payments (including liquidated damages, if any) will not be subject to
U.S. federal withholding tax if:
the certification requirements described below have been fulfilled with
respect to the beneficial owner, and either:
interest is U.S. trade or business income (as defined below); or
each of the following two conditions has been satisfied:
the holder does not own, actually or constructively, 10 percent or
more of the total combined voting power of all classes of our stock
entitled to vote; and
the holder is not a controlled foreign corporation (as defined in
the Code) related, directly or indirectly, to us through stock
ownership.
CERTIFICATION REQUIREMENT
Except as provided below with respect to U.S. trade or business income (as
defined below), interest with respect to a note will not be exempt from
withholding tax unless the beneficial owner of the note provides a
properly-executed IRS Form W-8BEN and certifies on such form, under penalties of
perjury, that it is not a U.S. person.
If a Non-U.S. Holder of a note is engaged in a trade or business in the
United States, and if interest on the note is effectively connected with the
conduct of this trade or business, or, in the case of treaty resident,
attributable to a permanent establishment (or, in the case of an individual, a
fixed base) in the United States, although exempt from the withholding tax as
discussed in the preceding paragraphs, the income will be 'U.S. trade or
business income' and will generally be taxed in the same manner as if the holder
were a U.S. Holder (see ' -- Tax Consequences to U.S. Holders' above), except
that the holder will be required to provide a properly-executed IRS Form W-8ECI
in order to claim an exemption from withholding tax. These holders are urged to
consult their own tax advisors with respect to other U.S. tax consequences of
the ownership and disposition of notes, including, in the case of corporations,
the possible imposition of a branch profits tax at a 30% rate (or a lower
applicable treaty rate).
Payments of interest on the notes that do not meet the foregoing
requirements generally will be subject to U.S. federal withholding tax at a rate
of 30% (or a lower applicable treaty rate, provided certain certification
requirements are met).
SALE, EXCHANGE OR OTHER DISPOSITION OF THE NOTES OR COMMON SHARES
Subject to the discussion below concerning backup withholding, a Non-U.S.
Holder generally will not be subject to U.S. federal income tax (or any
withholding thereof) on gain realized upon sale or other disposition of notes or
common stock, unless:
the note holder is an individual who is present in the U.S. for 183 days or
more in the taxable year of disposition and certain other conditions are
met;
the gain is U.S. trade or business income; or
28
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, and
if we are or have been a U.S. real property holding corporation within that
time, the note holder owns more than 5% of our common shares.
We believe that we are not, and do not anticipate becoming, a U.S. real
property holding corporation for U.S. federal income tax purposes.
CONVERSION INTO COMMON SHARES
A Non-U.S. Holder's conversion of a note into common shares will not be a
taxable event. However, a Non-U.S. Holder that receives cash in lieu of a
fractional share upon conversion may have gain that is subject to the rules
described under ' -- Sale, Exchange or Other Disposition of the Notes or Common
Shares,' and a Non-U.S. Holder that receives common stock in respect of accrued
and unpaid interest would be subject to the rules described under ' -- Payments
on the Notes.'
DIVIDENDS
Dividends paid to a Non-U.S. Holder of common shares (and deemed dividends
on the notes described above under ' -- Tax Consequences to U.S. Holders --
Constructive Dividends on the Notes') generally will be subject to
withholding tax at a 30% rate or a reduced rate specified by an applicable
income tax treaty. Non-U.S. Holders should note, as discussed above under
' -- Tax Consequences to U.S. Holders -- Constructive Dividends on the Notes,'
that any reduction in the conversion price of the notes to compensate holders of
notes for taxable distributions of cash on any of our outstanding common shares
will be treated as a deemed distribution to such holders in an amount equal to
the value of the additional shares issuable upon conversion, which will be
taxable as a dividend to the extent of our current and accumulated earnings and
profits. Except as described below with respect to U.S. trade or business
income, in order to obtain a reduced rate of withholding, a Non-U.S. Holder will
be required to provide an IRS Form W-8BEN certifying its entitlement to benefits
under a treaty.
The withholding tax does not apply to dividends paid to a Non-U.S. Holder
who provides a Form W-8ECI, certifying that the dividends are U.S. trade or
business income. Instead, such dividends will be subject to regular U.S. federal
income tax as if the Non-U.S. Holder were a U.S. Holder. A Non-U.S. corporation
receiving such dividends may also be subject to an additional 'branch profits
tax' imposed at a rate of 30% (or a lower applicable treaty rate).
BACKUP WITHHOLDING AND INFORMATION REPORTING
Information returns will be filed with the IRS in connection with payments
of interest on the notes and dividends on the common shares. Unless the Non-U.S.
Holder complies with certification procedures to establish that it is not a U.S.
person, information returns may be filed with the IRS in connection with the
proceeds from a sale or other disposition of the notes and common shares, and
the Non-U.S. Holder may be subject to U.S. backup withholding tax on payments of
interest on the notes or on dividends or the proceeds from a sale or other
disposition of the notes or common shares. The certification procedures required
to claim the exemption from U.S. federal withholding tax on interest described
above will satisfy the certification requirements necessary to avoid the backup
withholding tax as well. The amount of any backup withholding from a payment to
a Non-U.S. Holder will be allowed as a credit against the Non-U.S. Holder's U.S.
federal income tax liability and may entitle the Non-U.S. Holder to a refund,
provided that the required information is timely furnished to the IRS.
THE PRECEDING DISCUSSION OF CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF
THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE NOTES OR OUR COMMON SHARES IS
GENERAL INFORMATION ONLY AND NOT TAX ADVICE. ACCORDINGLY, EACH INVESTOR IS URGED
TO CONSULT THAT INVESTOR'S OWN TAX ADVISER AS TO PARTICULAR TAX CONSEQUENCES TO
IT OF PURCHASING, HOLDING AND DISPOSING OF NOTES AND, WHERE APPLICABLE, OUR
COMMON SHARES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY FEDERAL, STATE,
LOCAL OR FOREIGN TAX LAWS AND OF ANY PROPOSED CHANGES IN APPLICABLE LAW.
29
SELLING SECURITY HOLDERS
We originally sold the notes to Jefferies & Company, Inc. (which we refer to
as the initial purchaser in this prospectus) in a private placement in April
2004. The notes were immediately resold by the initial purchaser in transactions
exempt from registration under Rule 144A under the Securities Act. Selling
security holders, which term includes their transferees, pledgees, donees or
their successors, may from time to time offer and sell the notes and the common
shares into which the notes are convertible pursuant to this prospectus or any
applicable prospectus supplement.
The following table sets forth certain information concerning the principal
amount of notes beneficially owned and the number of common shares issuable upon
conversion of those notes that may be offered from time to time under this
prospectus by the selling holders named in the table. We prepared this table
based on the information supplied to us by the selling security holders named in
the table and we have not sought to verify such information. This table only
reflects information regarding selling security holders who have provided us
with such information. We expect that we will update this table as we receive
more information from holders of the notes who have not yet provided us with
their information. Any such updating will be effected through an amendment to
the registration statement of which this prospectus forms a part and not by
means of a prospectus supplement, unless otherwise permited by the SEC.
The number of common shares issuable upon conversion of the notes shown in
the table below assumes conversion of the full amount of notes held by each
selling security holder at an initial conversion rate of 14.5138 shares per
$1,000 principal amount of notes. This conversion rate is subject to adjustment
in certain events. Accordingly, the number of conversion shares may increase or
decrease from time to time. Because the selling security holders may offer all
or some portion of the notes or the common shares issuable upon conversion of
the notes pursuant to this prospectus, we have assumed for purposes of the table
below that the selling security holders will sell all of the notes and all of
the common shares offered by this prospectus pursuant to this prospectus. In
addition, the selling security holders identified below may have sold,
transferred or otherwise disposed of all or a portion of their notes in
transactions exempt form the registration requirements of the Securities Act
since the date on which they provided the information to us regarding their
holdings. As of August 30, 2004, we had $350,000,000 in principal amount of the
notes and 71,309,502 common shares outstanding.
Based on information provided by the selling security holders, none of the
selling security holders has held any position or office or has had any material
relationship with us within the past three years except as described below:
PRINCIPAL COMMON
AMOUNT SHARES
OF NOTES BENEFICIALLY CONVERSION
BENEFICIALLY PERCENTAGE OWNED COMMON
OWNED AND OF NOTES BEFORE THE SHARES
NAME OFFERED OUTSTANDING OFFERING(1) OFFERED(2)
---- ------- ----------- ----------- ----------
GLG Market Neutral Fund...................... $ 36,000,000 10.29% -- 522,496
UBS AG London -- f/b/o HFS................... 15,000,000 4.28% -- 217,707
CALAMOS Convertible Fund-CALAMOS'r'
Investment Trust........................... 14,000,000 4.00% -- 203,193
Whitebox Convertible Arbitrage Partners,
LP......................................... 13,000,000 3.71% -- 188,679
Sunrise Partners Limited Partnership......... 12,450,000 3.56% -- 180,696
The Northwestern Mutual Life Insurance
Company -- General Account(3).............. 9,200,000 2.63% -- 133,526
Nomura Securities International Inc.......... 9,000,000 2.57% 68,900 130,624
Franklin Convertible Securities Fund......... 7,500,000 2.14% -- 108,853
FrontPoint Convertible Arbitrage Fund,
L.P........................................ 7,500,000 2.14% -- 108,853
AG Offshore Convertibles, Ltd................ 7,490,000 2.14% -- 108,708
Aristeia International Limited............... 7,055,000 2.01% -- 102,394
Whitebox Diversified Convertible Arbitrage
Partners LP................................ 6,600,000 1.89% -- 95,791
Sagamore Hill Hub Fund, Ltd.................. 6,500,000 1.86% -- 94,339
Lakeshore International, Ltd................. 6,000,000 1.71% -- 87,082
Nations Convertible Securities Fund.......... 5,975,000 1.71% -- 86,719
(table continued on next page)
30
(table continued from previous page)
PRINCIPAL COMMON
AMOUNT SHARES
OF NOTES BENEFICIALLY CONVERSION
BENEFICIALLY PERCENTAGE OWNED COMMON
OWNED AND OF NOTES BEFORE THE SHARES
NAME OFFERED OUTSTANDING OFFERING(1) OFFERED(2)
---- ------- ----------- ----------- ----------
Beamtenversicherungskasse des Kantons
Zuerich.................................... $ 5,000,000 1.43% -- 72,569
Royal Bank of Canada......................... 5,000,000 1.43% 15,106 72,569
Tribeca Investments L.T.D.................... 5,000,000 1.43% -- 72,569
State of Oregon/SAIF Corporation............. 4,950,000 1.41% -- 71,843
Context Convertible Arbitrage Offshore,
Ltd........................................ 4,850,000 1.39% -- 70,391
Massachusetts Mutual Life Insurance
Company.................................... 4,800,000 1.37% -- 69,666
State of Oregon/Equity....................... 4,560,000 1.30% -- 66,182
Nuveen Preferred & Convertible Fund JQC...... 4,075,000 1.16% -- 59,143
Argent Classic Convertible Arbitrage
(Bermuda) Fund Ltd......................... 4,000,000 1.14% -- 58,055
Putnam Convertible Income-Growth Trust....... 4,000,000 1.14% -- 58,055
UBS O'Connor LLC f/b/o O'Connor Global
Convertible Arbitrage Master Ltd........... 4,000,000 1.14% -- 58,055
Mariner LDC.................................. 3,500,000 1.00% -- 50,798
Maystone Continuum Master Fund, Ltd.......... 3,500,000 1.00% -- 50,798
Boilermaker-Blacksmith Pension Trust......... 3,300,000 * -- 47,895
AG Domestic Convertibles, L.P................ 3,210,000 * -- 46,589
Nuveen Preferred & Convertible Income Fund
JPC........................................ 3,100,000 * -- 44,992
Argent LowLev Convertible Arbitrage Fund
Ltd........................................ 3,000,000 * -- 43,541
Global Bermuda Limited Partnership........... 3,000,000 * -- 43,541
Mill River Master Fund, L.P.................. 3,000,000 * -- 43,541
The Dow Chemical Company Employees'
Retirement Plan............................ 2,600,000 * -- 37,735
Citigroup Global Markets Inc................. 2,540,000 * -- 36,865
MLQA Convertible Securities Arbitrage Ltd.... 2,500,000 * -- 36,284
Plexus Fund Ltd.............................. 2,500,000 * -- 36,284
C.M. Life Insurance Company.................. 2,200,000 * -- 31,930
Boilermakers Blacksmith Pension Trust........ 2,175,000 * -- 31,567
SPT.......................................... 2,100,000 * -- 30,478
Allstate Insurance Company................... 2,000,000 * 36,500 29,027
NMIC Gartmore/CODA Convertible Portfolio..... 2,000,000 * -- 29,027
Bancroft Convertible Fund, Inc............... 2,000,000 * -- 29,027
Ellsworth Convertible Growth and Income Fund,
Inc........................................ 2,000,000 * -- 29,027
Peoples Benefit Life Insurance Company
TEAMSTERS.................................. 2,000,000 * -- 29,027
S.A.C. Capital Associates, LLC............... 2,000,000 * 2,600 29,027
St. Albans Partners Ltd...................... 2,000,000 * -- 29,027
Universal Investment Gesellschaft MBH, ref.
Aventis.................................... 1,900,000 * -- 27,576
Context Convertible Arbitrage Fund, L.P...... 1,825,000 * -- 26,487
Jefferies Umbrella Fund Global Convertible
Bonds...................................... 1,800,000 * -- 26,124
Jefferies & Company, Inc..................... 1,780,000 * 402,300(4) 25,834
Arkansas PERS................................ 1,775,000 * -- 25,761
Victus Capital, LP........................... 1,600,000 * -- 23,222
CooperNeff Convertible Strategies (Cayman)
Master Fund, LP............................ 1,552,000 * -- 22,525
Fore Convertible Master Fund, Ltd............ 1,545,000 * -- 22,423
Barnet Partners, Ltd......................... 1,500,000 * -- 21,770
DuckBill & Co................................ 1,500,000 * -- 21,770
BNP Paribas Equity Strategies, SNC........... 1,472,000 * 7,215 21,364
Aristeia Trading LLC......................... 1,445,000 * -- 20,972
Union Carbide Retirement Account............. 1,400,000 * -- 20,319
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31
(table continued from previous page)
PRINCIPAL COMMON
AMOUNT SHARES
OF NOTES BENEFICIALLY CONVERSION
BENEFICIALLY PERCENTAGE OWNED COMMON
OWNED AND OF NOTES BEFORE THE SHARES
NAME OFFERED OUTSTANDING OFFERING(1) OFFERED(2)
---- ------- ----------- ----------- ----------
Delta Airlines Master Trust.................. $ 1,375,000 * -- 19,956
Guggenheim Portfolio XXXI, LLC............... 1,300,000 * -- 18,867
KBC Financial Products USA Inc............... 1,167,000 * -- 16,937
Lyxor/Context Fund LTD....................... 1,150,000 * -- 16,690
Delaware PERS................................ 1,025,000 * -- 14,876
Mellon HBV Master Convertible Arbitrage Fund
LP......................................... 1,020,000 * -- 14,804
Barclays Global Investors Ltd................ 1,000,000 * -- 14,513
CNH CA Master Account, L.P................... 1,000,000 * -- 14,513
Coastal Convertibles Ltd..................... 1,000,000 * -- 14,513
DKR SoundShore Opportunity Holding Fund
Ltd........................................ 1,000,000 * -- 14,513
MassMutual Corporate Investors............... 1,000,000 * -- 14,513
Retail Clerks Pension Trust #2............... 1,000,000 * -- 14,513
Xavex Convertible Arbitrage 10 Fund.......... 1,000,000 * -- 14,513
CODA Capital Management, LLC................. 970,000 * -- 14,078
TQA Master Plus Fund, Ltd.................... 958,000 * -- 13,904
Dorinco Reinsurance Company.................. 950,000 * -- 13,788
Bernische Lehrerversicherungskasse........... 900,000 * -- 13,062
Silvercreek Limited Partnership.............. 840,000 * -- 12,191
Argent Classic Convertible Arbitrage Fund
L.P........................................ 810,000 * -- 11,756
Century National Ins. Co. Investment Grade... 750,000 * -- 10,885
Port Authority of Allegheny County Retirement
and Disability Allowance Plan for the
Employees Represented by Local 85 of the
Amalgamated Transit Union.................. 730,000 * -- 10,595
Gartmore Convertible Fund.................... 700,000 * -- 10,159
Xavex -- Convertible Arbitrage 7 Fund c/o TQA
Investors, LLC............................. 680,000 * -- 9,869
Royal Bank of Canada (Norshield)............. 650,000 * -- 9,433
Mellon HBV Master Multi-Strategy Fund LP..... 640,000 * -- 9,288
TQA Master Fund, Ltd......................... 613,000 * -- 8,896
WPG Convertible Arbitrage Overseas Master
Fund....................................... 580,000 * -- 8,418
Delta Airlines Master Trust.................. 550,000 * -- 7,982
Man Mac 1 Ltd.(5)............................ 530,000 * -- 7,692
Astrazeneca Holdings Pension................. 525,000 * -- 7,619
DLB High Yield Fund.......................... 500,000 * -- 7,256
MassMutual Participation Investors........... 500,000 * -- 7,256
Millenco, L.P................................ 500,000 * 43,000 7,256
Yield Strategies Fund I, L.P................. 500,000 * -- 7,256
Yield Strategies Fund II, L.P................ 500,000 * -- 7,256
Duke Endowment............................... 475,000 * -- 6,894
Silvercreek II Limited....................... 465,000 * -- 6,748
CODA-KHPE Convertible Portfolio.............. 450,000 * -- 6,531
Delta Pilots Disability and Survivorship
Trust...................................... 450,000 * -- 6,531
Alexian Brothers Medical Center.............. 425,000 * -- 6,168
Louisiana Workers' Compensation
Corporation................................ 425,000 * -- 6,168
Singlehedge US Convertible Arbitrage Fund.... 412,000 * -- 5,979
Genesee County Employees' Retirement
System..................................... 400,000 * -- 5,805
NORCAL Mutual Insurance Company.............. 400,000 * -- 5,805
Univar USA Inc. Retirement Account........... 400,000 * -- 5,805
Vicis Capital Master Fund.................... 400,000 * -- 5,805
ICI American Holdings Trust.................. 385,000 * -- 5,587
Macomb County Employees' Retirement System... 360,000 * -- 5,224
(table continued on next page)
32
(table continued from previous page)
PRINCIPAL COMMON
AMOUNT SHARES
OF NOTES BENEFICIALLY CONVERSION
BENEFICIALLY PERCENTAGE OWNED COMMON
OWNED AND OF NOTES BEFORE THE SHARES
NAME OFFERED OUTSTANDING OFFERING(1) OFFERED(2)
---- ------- ----------- ----------- ----------
US Bank FBO Benedictine Health Systems....... $ 350,000 * -- 5,079
National Bank of Canada...................... 350,000 * -- 5,079
American Fidelity Assurance Company.......... 320,000 * -- 4,644
Aventis Pension Master Trust................. 310,000 * -- 4,499
Syngenta AG.................................. 300,000 * -- 4,354
Sturgeon Limited............................. 300,000 * -- 4,354
The Northwestern Mutual Life Insurance
Company -- Group Annuity Separate
Account(6)................................. 300,000 * -- 4,354
Guggenheim Portfolio Company VIII (Cayman)
Ltd........................................ 270,000 * -- 3,918
Lyxor/Convertible Arbitrage Fund Limited..... 264,000 * -- 3,831
Gemini Sammlerstiftung zur Foerderung der
Personalvorsorge........................... 250,000 * -- 3,628
Sage Capital Management, LLC................. 250,000 * -- 3,628
Jackson County Employees' Retirement
System..................................... 235,000 * -- 3,410
Personalfuersorgestiftung der
Gebaeudeversicherung des Kantons Bern...... 230,000 * -- 3,338
C & H Sugar Company Inc...................... 220,000 * -- 3,193
Aloha Airlines Non-Pilots Pension Trust...... 200,000 * -- 2,902
Associated Electric & Gas Insurance
Services Limited........................... 200,000 * -- 2,902
Hawaiian Airlines Pilots Retirement Plan..... 200,000 * -- 2,902
Louisiana CCRF............................... 200,000 * -- 2,902
Mint Master Fund Ltd......................... 200,000 * -- 2,902
R&C Alternative Assets-Conv Arb.............. 200,000 * -- 2,902
Newport Alternative Income Fund.............. 195,000 * -- 2,830
Argent Classic Convertible Arbitrage Fund II,
L.P........................................ 190,000 * -- 2,757
Personalvorsorge der PV Promea............... 190,000 * -- 2,757
Univest Convertible Arbitrage Fund II LTD
(Norshield)................................ 175,000 * -- 2,539
CEMEX Pension Plan........................... 160,000 * -- 2,322
Knoxville Utilities Board Retirement
System..................................... 160,000 * -- 2,322
Fore Plan Asset Fund, Ltd.................... 155,000 * -- 2,249
Prisma Foundation............................ 150,000 * -- 2,177
Univest Multistrategy-Conv Arb............... 150,000 * -- 2,177
Mellon HBV Master Leveraged Multi-Strategy
Fund LP.................................... 140,000 * -- 2,031
The Fondren Foundation....................... 140,000 * -- 2,031
Zurich Institutional Benchmarks Master Fund,
Ltd.
c/o TQA Investors, LLC..................... 129,000 * -- 1,872
Pensionkasse der EMS-Dottikon AG............. 120,000 * -- 1,741
Pensionkasse Vantico......................... 120,000 * -- 1,741
Froley Revy Investment Convertible Security
Fund....................................... 115,000 * -- 1,669
Kettering Medical Center Funded Depreciation
Account.................................... 110,000 * -- 1,596
Aloha Pilots Retirement Trust................ 100,000 * -- 1,451
Prudential Insurance Co of America........... 100,000 * -- 1,451
LW Paxson CRUT Convertible Portfolio......... 100,000 * 1,451
Van Eck WW Absolute RTN Fund................. 100,000 * -- 1,451
The Cockrell Foundation...................... 85,000 * -- 1,233
Pensionkasse der EMS-Chemie AG............... 80,000 * -- 1,161
Pensionkasse der Rockwell Automation AG...... 80,000 * -- 1,161
Pensionkasse Pluess-Staufer AG............... 70,000 * -- 1,015
(table continued on next page)
33
(table continued from previous page)
PRINCIPAL COMMON
AMOUNT SHARES
OF NOTES BENEFICIALLY CONVERSION
BENEFICIALLY PERCENTAGE OWNED COMMON
OWNED AND OF NOTES BEFORE THE SHARES
NAME OFFERED OUTSTANDING OFFERING(1) OFFERED(2)
---- ------- ----------- ----------- ----------
Richard Mueller.............................. $ 70,000 * -- 1,015
WPG MSA Convertible Arbitrage Fund........... 70,000 * -- 1,015
Hawaiian Airlines Employees Pension
Plan-IAM................................... 65,000 * -- 943
LDG Limited.................................. 63,000 * -- 914
Pensionkasse der Antalis AG.................. 60,000 * -- 870
Port Authority of Allegheny County
Consolidated Trust Fund.................... 60,000 * -- 870
Sphinx Fund c/o TQA Investors, LLC........... 53,000 * -- 769
James Mellor Trust........................... 50,000 * -- 725
OCLC Online Computer Library Center Inc...... 50,000 * -- 725
Convertible Securities Fund.................. 25,000 * -- 362
Lexington Vantage Fund c/o TQA Investors,
LLC........................................ 14,000 * -- 203
Hawaiian Airlines Pension Plan for Salaried
Employee's................................. 10,000 * -- 145
MSS Convertible Arbitrage I c/o TWA
Investors, LLC............................. 4,000 * -- 58
Additional Selling Security Holders that may
be identified in an amendment hereto....... 15,959,000 231,625
---------
* Less than one percent.
(1) Figures in this column do not include the common shares
issuable upon conversion of the notes listed in the column
to the right.
(2) Figures in this column represent the number of common shares
issuable upon conversion of all of the notes owned by the
security holders based on the initial conversion rate of
14.5138 shares per $1,000 principal amount of notes. This
conversion rate is subject to adjustment as described under
'Description of Notes -- Conversion.' Accordingly, the
number of our common shares to be sold may increase or
decrease from time to time. Fractional shares will not be
issued upon conversion of the notes. Cash will be paid
instead of fractional shares, if any.
(3) Northwestern Investment Management Company, LLC, a wholly
owned company of the selling security holder, is the
investment advisor for the selling security holder with
respect to the securities being registered for the selling
security holder. Northwestern Investment Management Company,
LLC may therefore be deemed to be an indirect beneficial
owner with shared voting power/investment power with respect
to these securities.
Mason Street Advisors, LLC, a wholly owned subsidiary of the
selling security holder, is an investment advisor to the
selling security holder's affiliated entities, and therefore
may be deemed to be the indirect beneficial owner with
shared voting power/investment power of the common shares
currently held by: (1) Mason Street Funds, Inc. (11,400
shares/Index 400 Stock Fund) and (2) Northwestern Mutual
Series Fund, Inc. (24,100 shares/Index 400 Stock Portfolio).
These shares are not included in the table.
(4) Includes 400,000 common shares issuable upon exercise of
currently exercisable warrants to purchase common shares.
(5) The selling security holder is controlled by Man-Diversified
Fund II Ltd. The manager shares of Man-Diversified Fund II
Ltd. are owned 75% by Albany Management Company Limited and
25% by Man Holdings Limited. The registered shareholder of
Albany Management Company Limited is Argonaut Limited, a
Bermuda company which is controlled by Michael Collins, a
resident of Bermuda. Man Holdings Limited is a subsidiary of
Man Group plc, which is a public company listed on the
London Stock Exchange.
(6) Northwestern Investment Management Company, LLC, a wholly
owned company of the selling security holder, is the
investment advisor for the selling security holder for its
Group Annuity Separate Account with respect to these
securities. Northwestern Investment Management Company, LLC
therefore may be deemed to be an indirect beneficial owner
with shared voting power/investment power with respect to
such securities.
34
PLAN OF DISTRIBUTION
The selling security holders, which term includes all transferees, pledges,
donees or their successors, may from time to time sell the notes and the common
shares into which the notes are convertible covered by this prospectus, which we
collectively refer to in this section as the securities, directly to purchasers
or offer the securities through underwriters, broker-dealers or agents, who may
receive compensation in the form of underwriting discounts, concessions or
commissions from the selling security holders and/or the purchasers of
securities for whom they may act as agent, which discounts, concessions or
commissions as to any particular underwriter, broker-dealer or agent may be in
excess of those customary in the types of transactions involved.
The securities may be sold in one or more transactions:
at fixed prices;
at prevailing market prices at the time of sale;
at varying prices determined at the time of sale; or
at negotiated prices.
The sales may be effected in transactions that may involve crosses or block
transactions, in the following manner:
on any national securities exchange or quotations service on which the
securities may be listed or quoted at the time of sale, including the
New York Stock Exchange in the case of our common shares;
in the over-the-counter-market;
in transactions otherwise than on these exchanges or services or in the
over-the-counter market; or
through the writing and exercise of options, whether these options are
listed on any options exchange or otherwise.
In connection with the sale of the securities, the selling security holders
may enter into hedging transactions with broker-dealers or other financial
institutions, which may in turn engage in short sales of the securities in the
course of hedging position they assume. The selling security holders may sell
the securities short and deliver securities to close out short positions, or
loan or pledge the securities or broker-dealer that in turn may sell these
securites.
Our outstanding common shares are listed for trading on the New York Stock
Exchange and the Pacific Exchange, Inc. under the symbol 'LUK.' We do not intend
to list the notes on any securities exchange. We cannot assure you as to the
liquidity of any trading market for the notes that may develop.
In order to comply with the securites laws of some jurisidicitons, if
applicable, the holders of securities may offer and sell those securites in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, under certain circumstances, in some jurisdictions the securities may
not be offered or sold unless they have been registered or qualified for sale in
the applicable jurisdiction or an exemption from registration or qualification
requirements is available and is complied with.
The selling security holders, and any underwriters, broker-dealers or agents
that participate in the sale of the securities, may be 'underwriters' within the
meaning of Section 2(11) of the Securities Act. Any discounts, commissions,
concessions or profit they earn on any sale of the securities may be
underwriting compensation under the Securities Act. The selling security holders
have acknowledged that they understand their obligaitons to comply with the
provisions of the Exchange Act and the rules thereunder relating to stock
manipulation, particularly Regulation M, and have agreed that they will not
engage in any transaction in violation of such provisions.
If required, at the time of a particular offering of securities by a selling
security holder, a supplement to this prospectus will be circulated setting
forth the name or names of any underwriters, broker-dealers or agents, any
discounts, commissions or other terms constituting compensation for underwriters
and any discounts, commissions or concessions allowed or reallowed or paid to
agents or broker-dealers.
We entered into a registration rights agreement for the benefit of holders
of the securities to register their securities under applicable federal and
state securities laws under specific circumstances and at
35
specific times. The registration rights agreements provided for cross
indemnification of the selling security holders and us and their and our
respective directors, officers and controlling persons against specific
liabilities in connection with the offer and sale of the securities, including
liabilities under the Securities Act. In the event the selling security holders
sell their securities through any underwriter, the registration rights agreement
provides for indemnification by us of those underwriters and their respective
directors, officers and controlling persons against specified liabilities in
connection with the offer and sale of those securities. Pursuant to the
registration rights agreement, we will bear all fees and expenses incurred in
connection with the registration of the securities, except that selling security
holders will pay all broker's commissions and, in connection with any
underwritten offering, underwriting discounts and commissions.
LEGAL MATTERS
Weil, Gotshal & Manges LLP has passed upon the validity of the notes and the
common shares issuable upon conversion of the notes on behalf of us. Members of
Weil, Gotshal & Manges LLP beneficially own, in the aggregate, approximately
108,000 common shares, representing less than .1% of the outstanding common
shares.
INCORPORATION BY REFERENCE
The Commission allows us to 'incorporate by reference' information that we
file with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus. This prospectus and the information that
we file later with the Commission may update and supersede the information we
incorporate by reference. We incorporate by reference the documents listed below
and any future filings made with the Commission under Section 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934 by us until the exchange offer
is complete:
our Annual Report on Form 10-K for the fiscal year ended December 31, 2003,
as amended on Form 10-K/A;
our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2004
and June 30, 2004;
our Current Reports on Form 8-K filed with the Commission on March 15,
2004, March 22, 2004, March 26, 2004, April 22, 2004, May 7, 2004, August
6, 2004 and August 17, 2004; and
all documents that we file with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 until all notes have been
sold.
You may also request a copy of these filings, at no cost, by writing or
telephoning us at the following:
Leucadia National Corporation
315 Park Avenue South
New York, New York 10010
Attention: Corporate Secretary
Telephone: (212) 460-1900
In order to obtain timely delivery, holders must request the information no
later than five business days before the expiration date of the exchange offer.
36
EXPERTS
The financial statements of Leucadia National Corporation incorporated by
reference in this prospectus and elsewhere in the registration statement of
which this prospectus is a part to our Annual Report on Form 10-K, as amended,
for the year ended December 31, 2003, except as they relate to WilTel
Communications Group, Inc. for the period from January 1, 2003 through
November 5, 2003, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, an independent registered public accounting firm,
and, insofar as they relate to WilTel Communications Group, Inc., in reliance
upon the report of Ernst & Young LLP, an independent registered public
accounting firm, given on the authority of said firms as experts in accounting
and auditing.
The financial statements of Olympus Re Holdings, Ltd. incorporated by
reference in this prospectus and elsewhere in the registration statement of
which this prospectus is a part to our Form 10-K, as amended, for the year ended
December 31, 2003 have been so incorporated in reliance on the report of
PricewaterhouseCoopers, independent accountants, given on the authority of said
firm as experts in accounting and auditing.
The financial statements of Berkadia LLC and The FINOVA Group Inc. appearing
in Leucadia's Annual Report on Form 10-K and Form 10-K/A, respectively, for the
year ended December 31, 2003, have been audited by Ernst & Young LLP,
independent auditors, as stated in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.
The financial statements of Jefferies Partners Opportunities Fund II, LLC as
of December 31, 2003 and 2002 and for each of the years in the three year period
ended December 31, 2003, appearing in the December 31, 2003 Annual Report on
Form 10-K of Leucadia, have been audited by KPMG LLP, an independent registered
public accounting firm, as set forth in their report thereon included therein
and incorporated herein by reference. Such financial statements are incorporated
herein by reference in reliance upon such report and upon the authority of said
firm as experts in accounting and auditing.
The consolidated financial statements of WilTel as of November 5, 2003 and
December 31, 2002 (Successor Company), and for the periods from January 1, 2003
through November 5, 2003, and November 1, 2002 through December 31, 2002
(Successor Company) and the period January 1, 2002 through October 31, 2002, and
for the year ended December 31, 2001 (Predecessor Company), have been audited by
Ernst & Young LLP, an independent registered public accounting firm, as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
The financial statements of EagleRock Capital Partners (QP), LP as of
December 31, 2003 and 2002 and for the year ended December 31, 2003 and for the
period from January 1, 2002 (commencement of operations) to December 31, 2002
and the financial statements of EagleRock Master Fund as of December 31, 2003
and 2002 and for the year ended December 31, 2003 and for the period from
May 1, 2002 (commencement of operations) to December 31, 2002, have been audited
by BDO Seidman, LLP, an independent registered public accounting firm, as set
forth in their report thereon included therein and incorporated herein by
reference. Such financial statements are incorporated herein by reference in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
37
STATEMENT OF DIFFERENCES
------------------------
The registered trademark symbol shall be expressed as ................... 'r'