PROSPECTUS
1,400,000 (TIDES) SM*
DT CAPITAL TRUST
7.16% Convertible Preferred Securities
Term Income Deferrable Equity Securities (TIDES) SM*
(liquidation preference $50 per Convertible Preferred Security)
fully and unconditionally guaranteed by, and convertible into Common Stock of,
DT INDUSTRIES, INC.
Distributions payable March 31, June 30, September 30 and December 31
This Prospectus relates to the 7.16% Convertible Preferred Securities, Term
Income Deferrable Equity Securities (TIDES)SM* or (TIDES)SM* (the "Convertible
Preferred Securities"), liquidation preference $50 per Convertible Preferred
Security, which represent undivided beneficial ownership interests in the assets
of DT Capital Trust, a statutory business trust formed under the laws of the
State of Delaware (the "Trust" or the "Issuer"), and the shares of the common
stock, par value $0.01 per share, including the accompanying preferred stock
purchase rights as described herein ("DT Common Stock") of DT Industries, Inc.,
a Delaware corporation ("DT" or the "Company"), issuable upon conversion of the
Convertible Preferred Securities. The Convertible Preferred Securities were
issued and sold (the "Original Offering") on June 12, 1997 (the "Original
Offering Date") to the initial purchasers (see "Selling Holders") in
transactions exempt from the registration requirements of the Securities Act of
1933, as amended (the "Securities Act"), in the United States to persons
reasonably believed by the Issuer to be "qualified institutional buyers" (as
defined in Rule 144A under the Securities Act), to a limited number of
institutional "accredited investors" (as defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act) or to certain persons in offshore transactions in
reliance on Regulation S. DT directly or indirectly owns all the common
securities issued by the Trust (the "Common Securities" and, together with the
Convertible Preferred Securities, the "Trust Securities"). The Issuer exists for
the sole purpose of issuing the Trust Securities and using the proceeds thereof
to purchase from DT its 7.16% Convertible Junior Subordinated Deferrable
Interest Debentures Due 2012 (the "Convertible Junior Subordinated Debentures")
having the terms described herein. The holders of the Convertible Preferred
Securities will have a preference with respect to cash distributions and amounts
payable upon liquidation, redemption or otherwise over the holders of the Common
Securities of the Issuer.
"Term Income Deferrable Equity Securities" and "TIDES" are service marks of
Credit Suisse First Boston Corporation.
For a discussion of certain factors that should be considered in connection with
an investment in the Convertible Preferred Securities, see "Risk Factors"
beginning on page 5.
(Continued on following page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is September 2, 1997.
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(continued from front cover)
The Convertible Preferred Securities and the DT Common Stock issuable upon
conversion thereof (the "Offered Securities") may be offered and sold from time
to time by the holders named herein or by their transferees, pledgees, donees or
their successors (collectively, the "Selling Holders") pursuant to this
Prospectus. The Offered Securities may be sold by the Selling Holders from time
to time directly to purchasers or through agents, underwriters or dealers. See
"Plan of Distribution" and "Selling Holders." If required, the names of any such
agents or underwriters involved in the sale of the Offered Securities and the
applicable agent's commission, dealer's purchase price or underwriter's
discount, if any, will be set forth in an accompanying supplement to this
Prospectus (the "Prospectus Supplement"). The Selling Holders will receive all
of the net proceeds from the sale of the Offered Securities and will pay all
underwriting discounts and selling commissions, if any, applicable to any such
sale. The Company is responsible for payment of all other expenses incident to
the offer and sale of the Offered Securities. The Selling Holders and any
broker/dealers, agents or underwriters which participate in the distribution of
the Offered Securities may be deemed to be "underwriters" within the meaning of
the Securities Act, and any commission received by them and any profit on the
resale of the Offered Securities purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act. See "Plan of
Distribution" for a description of indemnification arrangements.
Holders of the Convertible Preferred Securities are entitled to receive
cumulative cash distributions at an annual rate of 7.16% of the liquidation
preference of $50 per Convertible Preferred Security, accruing from the Original
Offering Date and payable quarterly in arrears on each March 31, June 30,
September 30 and December 31, commencing June 30, 1997. See "Description of the
Convertible Preferred Securities--Distributions". Pursuant to a guarantee (the
"Guarantee") by DT, the payment of distributions and payments on liquidation of
the Issuer or the redemption of Convertible Preferred Securities, as described
below, but only to the extent of funds of the Trust available therefor, are
guaranteed by DT to the extent described herein. DT's obligations under the
Guarantee are subordinate and junior to all other liabilities of DT except any
liabilities that may be made pari passu expressly by their terms, but are pari
passu with the most senior preferred stock issued from time to time, if any, by
DT and certain other related guarantees. See "Description of the Guarantee". If
DT fails to make interest payments on the Convertible Junior Subordinated
Debentures, the Issuer will have insufficient funds to pay distributions on the
Convertible Preferred Securities. The Guarantee does not cover payment of
distributions when the Issuer does not have sufficient funds to pay such
distributions. In such event, the remedy of a holder of Convertible Preferred
Securities is to enforce the rights of the Issuer under the Convertible Junior
Subordinated Debentures held by the Issuer. DT has, however, through the
Guarantee, the Convertible Junior Subordinated Debentures, the Indenture and the
Declaration (each as defined herein), taken together, fully, irrevocably and
unconditionally guaranteed all of the Issuer's obligations under the Convertible
Preferred Securities. No single document standing alone or operating in
conjunction with fewer than all of the other documents constitutes such
guarantee. It is only the combined operation of these documents that provides a
full, irrevocable and unconditional guarantee of the Issuer's obligations under
the Convertible Preferred Securities. See "Effect of Obligations Under the
Convertible Junior Subordinated Debentures and the Guarantee." The obligations
of DT under the Convertible Junior Subordinated Debentures are subordinate and
junior in right of payment to Senior Indebtedness (as defined herein) of DT. At
March 30, 1997, Senior Indebtedness of DT aggregated approximately $130.5
million (or $63.0 million of Senior Indebtedness after giving pro forma effect
to the Original Offering). See "Capitalization" and "Pro Forma Selected
Consolidated Financial Data". The terms of the Convertible Junior Subordinated
Debentures place no limitation on the amount of Senior Indebtedness that may be
incurred by DT.
DT has the right under the Indenture (as defined herein) for the Convertible
Junior Subordinated Debentures to defer the interest payments due from time to
time on the Convertible Junior Subordinated Debentures for successive periods
not exceeding 20 consecutive quarters for each such period, and, as a
consequence, quarterly distributions on the Convertible Preferred Securities
would be deferred by the Issuer (but would continue to accumulate quarterly and
accrue interest) until the end of any such interest deferral period. See "Risk
Factors--Option to Extend Interest Payment Period; Tax Consequences",
"Description of the Convertible Preferred Securities--Distributions" and
"Description of the Convertible Junior Subordinated Debentures--Option to Extend
Interest Payment Period".
Each Convertible Preferred Security is convertible in the manner described
herein at the option of the holder into shares of DT Common Stock at the rate of
1.2903 shares of DT Common Stock for each Convertible
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Preferred Security (equivalent to a conversion price of $38.75 per share of DT
Common Stock), subject to adjustment in certain circumstances. See "Description
of the Convertible Preferred Securities--Conversion Rights". The last reported
sale price of DT Common Stock, which is quoted under the symbol "DTII" on The
Nasdaq Stock Market's National Market ("NNM"), on August 29, 1997, was $29.75
per share. Whenever DT issues shares of DT Common Stock upon conversion of the
Convertible Preferred Securities, DT will, subject to certain conditions, issue,
together with each share of DT Common Stock, one Right (as defined herein)
entitling the holder thereof, under certain circumstances, to purchase one
one-hundredth of a share of Series A Preferred Stock. See "Description of the
Convertible Preferred Securities-- Conversion Rights."
The Convertible Preferred Securities are effectively redeemable at the option of
the Company, in whole or in part, from time to time, after June 1, 2000, at the
prices set forth herein, plus accrued and unpaid distributions thereon to the
date fixed for redemption (the "Redemption Price"). See "Description of the
Convertible Preferred Securities--Optional Redemption". Upon the repayment of
the Convertible Junior Subordinated Debentures at maturity or upon any
acceleration, earlier redemption or otherwise, the proceeds from such repayment
will be applied to redeem the Convertible Preferred Securities and Common
Securities on a pro rata basis. In addition, upon the occurrence of certain
events arising from a change in law or a change in legal interpretation, DT will
liquidate the Trust and cause to be distributed to the holders of the
Convertible Preferred Securities, on a pro rata basis, Convertible Junior
Subordinated Debentures or, in certain limited circumstances, will cause the
redemption of the Convertible Preferred Securities in whole at the liquidation
preference of $50 per security plus accrued and unpaid distributions. See
"Description of the Convertible Preferred Securities--Tax Event or Investment
Company Event Redemption or Distribution". See "Description of the Convertible
Junior Subordinated Debentures".
In the event of the liquidation of the Trust, the holders of the Convertible
Preferred Securities, after satisfaction of liabilities to creditors of the
Trust, will be entitled to receive for each Convertible Preferred Security a
liquidation preference of $50 plus accrued and unpaid distributions thereon to
the date of payment, unless, in connection with such liquidation, Convertible
Junior Subordinated Debentures are distributed to the holders of the Convertible
Preferred Securities. See "Description of the Convertible Preferred
Securities--Liquidation Distribution Upon Dissolution".
End of Cover Page
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AVAILABLE INFORMATION
DT is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"SEC" or the "Commission"). Such reports, proxy statements, and other
information filed by DT can be inspected and copied at the public reference
facilities of the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, DC 20549, and at the following Regional Offices of the Commission:
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and Seven
World Trade Center, 13th Floor, New York, New York 10048. Copies of such
material may also be obtained from the Public Reference Section of the SEC at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549, at prescribed
rates. The Commission maintains a website (http://www.sec.gov) that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. Copies of such
information may also be inspected at the reading room of the library of the
National Association of Securities Dealers, Inc., 1735 K Street, N.W., 2nd
Floor, Washington, D.C. 20006.
DT has filed with the Commission a Registration Statement on Form S-3
(herein together with all amendments and exhibits thereto, called the
"Registration Statement") under the Securities Act with respect to the
securities offered by this Prospectus. This Prospectus does not contain all of
the information set forth or incorporated by reference in the Registration
Statement and the exhibits and schedules relating thereto, certain portions of
which have been omitted as permitted by the rules and regulations of the
Commission. For further information with respect to DT and the securities
offered by this Prospectus, reference is made to the Registration Statement and
the exhibits filed or incorporated as a part thereof, which are on file at the
offices of the Commission and may be obtained upon payment of the fee prescribed
by the Commission, or may be examined without charge at the offices of the
Commission. Statements contained in this Prospectus as to the
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contents of any documents referred to are necessarily summaries thereof, and, in
each such instance, are qualified in all respects by reference to the applicable
documents filed with the Commission.
No separate financial statements of the Issuer have been included herein.
DT does not consider that such financial statements would be material to holders
of the Convertible Preferred Securities because (i) all of the voting securities
of the Issuer will be owned, directly or indirectly, by DT, a reporting company
under the Exchange Act, (ii) the Issuer has no independent operations but exists
for the sole purpose of issuing securities representing undivided beneficial
interests in the assets of the Issuer and investing the proceeds thereof in
Convertible Junior Subordinated Debentures issued by DT and (iii) the
obligations of the Issuer under the Trust Securities are fully and
unconditionally guaranteed by DT as described herein. See "Description of the
Convertible Junior Subordinated Debentures" and "Description of the Guarantee".
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents or portions of documents filed by DT (File No.
0-23400) with the SEC are incorporated in this Prospectus by reference: (a)
Annual Report on Form 10-K for the year ended June 30, 1996, filed with the
Commission on September 30, 1996, as amended by Amendment No. 1 to Annual Report
on Form 10-K/A, filed with the Commission on October 10, 1996; (b) Current
Report on Form 8-K, filed with the Commission on August 5, 1996, as amended by
Amendment No. 1 to Current Report on Form 8-K/A, filed with the Commission on
September 23, 1996; (c) Quarterly Reports on Form 10-Q for the quarters ended
September 29, 1996, December 29, 1996 and March 30, 1997; (d) Current Report on
Form 8-K, filed with the Commission on November 21, 1996; (e) the description of
DT's Common Stock which is contained in the Company's Registration Statement on
Form 8-A; (f) Current Report on Form 8-K, filed with the Commission on May 23,
1997; (g) Current Report on Form 8-K, filed with the Commission on June 18,
1997; (h) Current Report on Form 8-K, filed with the Commission on August 5,
1997; and (i) DT's Registration Statement on Form 8-A, filed with the Commission
on August 19, 1997 (relating to the Rights), and the related Current Report on
Form 8-K, filed with the Commission on August 19, 1997.
All documents filed by DT with the SEC pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of this offering shall be deemed to be incorporated by
reference in this Prospectus and to be a part of this Prospectus from the date
of filing of such documents.
Any statement contained in a document, all or a portion of which is
incorporated or deemed to be incorporated by reference herein, or contained in
this Prospectus, shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
DT will provide without charge to each person to whom a copy of this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the documents referred to above which have been or may be
incorporated by reference in this Prospectus and any other information requested
thereby as described above under "Available Information". Such written or oral
request should be directed to the attention of Bruce P. Erdel, Vice
President--Finance, DT Industries, Inc., Corporate Centre, Suite 2-300, 1949 E.
Sunshine, Springfield, Missouri 65804, telephone: (417) 890-0102.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Statements contained in this Prospectus, and in the documents incorporated
by reference herein, that are not historical facts are forward-looking
statements that are subject to the safe harbor created by the Private Securities
Litigation Reform Act of 1995. When used in this Prospectus the words
"anticipate," "believe," "estimate," "expect" and similar expressions are
intended to identify such forward-looking statements. A number of important
factors could cause the Company's actual results for fiscal 1997 and beyond to
differ materially from those expressed in, or implied by, such forward-looking
statements. These factors include, without limitation, those listed below in
"Risk Factors."
RISK FACTORS
Prospective purchasers of the Convertible Preferred Securities should
carefully review the information contained elsewhere in this Prospectus and
should particularly consider the following matters:
Factors Relating to the Company and the Business
Rapid Growth; Integration of Recently-Acquired Operations. The Company has
made 14 acquisitions since its formation in 1992, including four acquisitions in
fiscal 1996 and two acquisitions, Mid-West Automation Enterprises, Inc.
("Mid-West") and Hansford Manufacturing Corporation ("Hansford"), subsequent to
June 30, 1996. Primarily as a result of these acquisitions, the Company's
historical consolidated net sales have increased from $50.6 million for fiscal
1993 to $235.9 million for fiscal 1996, and $286.7 million for the nine months
ended March 30, 1997. There can be no assurance that the Company will continue
to experience such rapid growth, that the Company will be successful in
integrating these operations or that such rapid growth and integration will not
divert management resources, cause temporary disruptions in the management of
the business or otherwise have a material adverse effect on the Company's
business, financial condition or results of operations. See "The Company."
Acquisition Strategy. The Company expects to continue a strategy of
identifying and acquiring companies with complementary products and services
which could be expected to enhance the Company's operations and profitability.
There can be no assurance that the Company will continue to identify suitable
new acquisition candidates, obtain financing necessary to complete such
acquisitions or acquire businesses on satisfactory terms or that any business
acquired by the Company will be integrated successfully into the Company's
operations or prove to be profitable.
Dependence on Significant Customers. The Company's sales are concentrated.
After giving effect to the acquisition of Mid-West, on a pro forma basis, sales
to a significant customer in the electronics industry accounted for 22.7% of pro
forma consolidated net sales for fiscal 1996 and the Company's top five
customers in fiscal 1996 accounted for 44.3% of the Company's pro forma
consolidated net sales. For the nine months ended March 30, 1997, sales to a
significant customer in the electronics industry accounted for 24.1% of
consolidated net sales and the Company's top five customers for the nine months
ended March 30, 1997 accounted for 45.7% of the Company's consolidated net
sales. The loss of, or reduced orders for products from, one or more of the
Company's significant customers could have a material adverse effect on the
Company's business, financial condition or results of operations. See "The
Company --Customers".
Fluctuations in Quarterly Results; Profitability of Fixed Price Contracts.
Because orders for certain of the Company's products can be several million
dollars, a relatively limited number of orders can constitute a meaningful
percentage of the Company's revenue in any one quarterly period. As a result, a
relatively small reduction or delay in the number of orders can have a material
impact on the timing of recognition of the Company's revenues. Certain of the
Company's revenues are derived from fixed price contracts. To the extent that
original cost estimates prove to be inaccurate, profitability from a particular
contract may be adversely affected. Gross margins in the Special Machines
segment may also vary between comparable periods as a result of the variations
in product mix between the various types of custom and proprietary equipment
manufactured by the Company. Accordingly, results of operations of the Company
for any particular quarter are not necessarily indicative of results that may be
expected for any subsequent quarter or related fiscal year.
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Susceptibility to General Economic Conditions. The Company's revenues and
results of operations will be subject to fluctuations based upon general
economic conditions. If there were to be a general economic downturn or a
recession in the United States or certain other markets, the Company believes
that certain of its customers may reduce or delay orders for the Company's
products, leading to a reduction in the Company's revenues and/or backlog. Most
of the factors that might influence customers and prospective customers to
reduce their capital budgets under these circumstances are beyond the Company's
control. In the event of such an economic downturn, the Company's business,
financial condition and operating results could be materially and adversely
affected. There can be no assurance that growth in the markets for the Company's
products will occur or that such growth will result in increased demand for the
Company's products. See "The Company".
Anti-Takeover Provisions. The existence of authorized but unissued capital
stock and the preferred sotck purchase rights may have the effect of making more
difficult or discouraging an acquisition of the Company deemed undesirable by
its Board of Directors. The Rights (defined herein) will cause substantial
dilution to a person or group that attempts to acquire the Company without
conditioning the offer on redemption of the Rights or on a substantial number of
Rights being acquired. See "Description of the Convertible Preferred
Securities--Conversion Rights" and "Description of DT Capital Stock--DT
Preferred Stock". In addition, the issuance of authorized but unissued preferred
stock, which can be effected by the Company's Board of Directors without
stockholder approval, may adversely affect the market price of, and voting and
other rights attributable to, the Common Stock. Provisions in the Company's
Restated Certificate of Incorporation permitting the Board to amend the Bylaws
without stockholder vote and provisions in the Bylaws permitting the Board to
increase or decrease the size of the Board could, alone or in combination with
the authorized but unissued capital stock, also deter or discourage acquisitions
deemed undesirable by the Board. Furthermore, the Company's Restated Certificate
of Incorporation, as amended, divides the Company's Board of Directors into
three classes with staggered terms, which could have the effect of making more
difficult or discouraging an acquisition of the Company deemed undesirable by
the Board. In addition, certain provisions of Delaware law applicable to the
Company, including Section 203 of the Delaware General Corporation Law, could
have the effect of delaying, deferring or preventing a change of control of the
Company.
Stock Price Volatility. The market price of the DT Common Stock could
continue to fluctuate substantially due to a variety of factors, including
quarterly fluctuations in results of operations, the impact of acquisitions,
adverse circumstances affecting the introduction or market acceptance of new
products and services offered by the Company or its customers, changes in the
general economic environment, changes in earnings estimates by analysts, changes
in accounting principles, sales of DT Common Stock by existing holders, loss of
key personnel and other factors. The market price for the DT Common Stock may
also be affected by the Company's ability to meet analysts' expectations, and
any failure to meet such expectations, even if minor, could have a material
adverse effect on the market price of the DT Common Stock. In addition, the
stock market is subject to extreme price and volume fluctuations. This
volatility has had a significant effect on the market prices of securities
issued by many companies for reasons unrelated to the operating performance of
these companies. In the past, following periods of volatility in the market
price of a company's securities, securities class action litigation has often
been instituted against such a company. Any such litigation instigated against
the Company could result in substantial costs and a diversion of management's
attention and resources, which could have a material adverse effect on the
Company's business, operating results and financial condition.
Recent Surrender of Voting Control. Prior to November 25, 1996, certain
entities ("Harbour Group Affiliates"), all of whom are under the common control
of Sam Fox, collectively owned approximately 32.2% of the outstanding Common
Stock of the Company and, as a result, were able, as a practical matter, to
elect all of the directors of the Company and to exercise control over the
management and policies of the Company. In addition, Harbour Group Affiliates
have entered into certain agreements with the Company whereby such entities
provide the Company with operations consulting and corporate development
services as requested from time to time by the Company. Such affiliates have had
a significant role in assisting the Company in its pursuit of its acquisition
strategy. As a result of the equity offering completed on November 25, 1996 (the
"Equity Offering"), these entities reduced their collective ownership of Common
Stock to less than 4.1% of the shares outstanding. Subsequent to the Equity
Offering, three of the four directors of the Company who were executives or
employees of Harbour Group Affiliates have resigned from the Board of Directors
of the
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Company. Although Harbour Group Affiliates continue to provide the
Company with operations consulting and corporate development services, the
Company anticipates that such services are likely to diminish over time. There
can be no assurance that the surrender of practical control or the diminution in
involvement in the Company's affairs by Harbour Group Affiliates will not have a
material adverse effect on the Company.
Factors Relating to the Convertible Preferred Securities
Subordination of Guarantee and Convertible Junior Subordinated Debentures.
DT's obligations under the Guarantee are unsecured, subordinate and junior in
right of payment to all other liabilities of DT, with certain limited
exceptions. The obligations of DT under the Convertible Junior Subordinated
Debentures are subordinate and junior in right of payment to Senior Indebtedness
(as defined herein) of DT. As of March 30, 1997, DT had approximately $130.5
million principal amount of Senior Indebtedness (or $63.0 million of Senior
Indebtedness after giving pro forma effect to the Original Offering). See
"Capitalization" and "Pro Forma Selected Consolidated Financial Data". There are
no terms of the Convertible Preferred Securities, the Convertible Junior
Subordinated Debentures or the Guarantee that limit DT's ability to incur
additional unsecured or secured indebtedness or liabilities, including
indebtedness or liabilities that would rank senior to the Convertible Junior
Subordinated Debentures and the Guarantee. See "Description of the
Guarantee--Status of the Guarantee; Subordination" and "Description of the
Convertible Junior Subordinated Debentures--Subordination".
The ability of the Issuer to pay amounts due on the Convertible Preferred
Securities is wholly dependent upon DT's making payments on the Convertible
Junior Subordinated Debentures as and when required.
Option to Extend Interest Payment Period; Tax Consequences. DT has the
right under the Indenture to defer interest payments from time to time on the
Convertible Junior Subordinated Debentures for successive periods (a "Deferral
Period") not exceeding 20 consecutive quarters for each such period. Upon the
termination of any Deferral Period and the payment of all amounts then due, DT
may select a new Deferral Period, subject to the requirements described herein.
As a consequence, during any such Deferral Period, quarterly distributions on
the Convertible Preferred Securities would be deferred (but would continue to
accrue with interest thereon) by the Issuer. In the event that DT exercises this
right, during such period DT (i) shall not declare or pay dividends on, make
distributions with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of its capital stock (other than stock
dividends paid by DT which consist of stock of the same class as that on which
the dividend is being paid and other than redemptions or repurchases of any
Rights and the declaration of a dividend of such Rights in the future), (ii)
shall not make any payment of interest, principal or premium, if any, on or
repay, repurchase or redeem any debt securities issued by DT that rank pari
passu with or junior to the Convertible Junior Subordinated Debentures, and
(iii) shall not make any guarantee payments with respect to the foregoing (other
than pursuant to the Guarantee). Prior to the termination of any such Deferral
Period, DT may further extend the Deferral Period; provided that such Deferral
Period, together with all previous and further extensions thereof, may not
exceed 20 consecutive quarters and that such Deferral Period may not extend
beyond the maturity date of the Convertible Junior Subordinated Debentures. See
"Description of the Convertible Preferred Securities--Distributions" and
"Description of the Convertible Junior Subordinated Debentures--Option to Extend
Interest Payment Period".
As a result of the existence of DT's option to defer interest payments, a
holder will be required to include interest in gross income for United States
Federal income tax purposes in advance of the receipt of cash. In addition, a
holder will not receive the cash from the Issuer related to accrued income
attributable to unpaid distributions on the Convertible Preferred Securities if
such holder disposes of or converts its Convertible Preferred Securities prior
to the record date for payment of distributions. Should a Deferral Period occur,
a holder of a Convertible Preferred Security will continue to accrue interest
income for United States Federal income tax purposes. See "United States
Taxation--Potential Extension of Interest Payment Period and Original Issue
Discount".
DT has no current intention of exercising its right to defer payments of
interest. However, should DT elect to exercise such right in the future, the
market price of the Convertible Preferred Securities is likely to be adversely
affected. A holder that disposes of its Convertible Preferred Securities during
a Deferral Period, therefore, might not receive the same return on its
investment as a holder that continues to hold its Convertible
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Preferred Securities. In addition, as a result of the existence of DT's right to
defer interest payments, the market price of the Convertible Preferred
Securities (which represent a preferred undivided beneficial interest in the
Convertible Junior Subordinated Debentures) may be more volatile than other
securities on which original issue discount accrues that do not have such
rights.
Rights Under the Guarantee. The Guarantee Trustee (as defined herein) holds
the Guarantee for the benefit of the holders of the Convertible Preferred
Securities. The Guarantee guarantees to the holders of the Convertible Preferred
Securities the payment of (i) any accrued and unpaid distributions on the
Convertible Preferred Securities to the extent of funds of the Trust available
therefor, (ii) the amount payable upon redemption, including all accrued and
unpaid distributions, of the Convertible Preferred Securities called for
redemption by the Issuer, to the extent of funds of the Trust available therefor
and (iii) upon a voluntary or involuntary dissolution, winding up or termination
of the Issuer (other than in connection with a redemption of all of the
Convertible Preferred Securities), the lesser of (a) the aggregate of the
liquidation amount and all accrued and unpaid distributions on the Convertible
Preferred Securities to the date of payment to the extent of funds of the Trust
available therefor and (b) the amount of assets of the Issuer remaining
available for distribution to holders of the Convertible Preferred Securities
upon the liquidation of the Issuer. The holders of a majority in liquidation
amount of the Convertible Preferred Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Guarantee Trustee or to direct the exercise of any trust or power conferred
upon the Guarantee Trustee under the Guarantee. In the event of a payment
default on the Convertible Preferred Securities, any holder of the Convertible
Preferred Securities may institute a legal proceeding directly against DT to
enforce its rights under the Guarantee without first instituting a legal
proceeding against the Issuer, the Guarantee Trustee or any other person or
entity. If DT were to default on its obligations under the Convertible Junior
Subordinated Debentures, the Issuer would lack available funds for the payment
of distributions or amounts payable on redemption of the Convertible Preferred
Securities or otherwise, and, in each such event, holders of the Convertible
Preferred Securities would not be able to rely upon the Guarantee for payment of
such amounts. Instead, the remedy of holders of the Convertible Preferred
Securities is to enforce the rights of the Issuer under the Convertible Junior
Subordinated Debentures held by the Issuer against DT pursuant to the terms of
the Convertible Junior Subordinated Debentures. Such holders may also vote to
appoint a Special Trustee who shall have the same rights, powers and privileges
of the DT Trustees (each as defined herein). See "Description of the
Guarantee--Status of the Guarantee; Subordination" and "Description of the
Convertible Junior Subordinated Debentures--Subordination" herein. The
Declaration provides that each holder of Convertible Preferred Securities by
acceptance thereof agrees to the provisions of the Guarantee (including the
subordination provisions thereof) and the Indenture (as defined herein).
Tax Event or Investment Company Event Redemption or Distribution. Upon the
occurrence of a Tax Event or Investment Company Event (as defined herein) DT
will, except in certain limited circumstances, cause the DT Trustees to
liquidate the Issuer and, after satisfaction of liabilities to creditors of the
Trust, cause Convertible Junior Subordinated Debentures to be distributed pro
rata to the holders of the Convertible Preferred Securities. In certain
circumstances, DT will have the right to redeem the Convertible Junior
Subordinated Debentures, in whole (but not in part), at par plus accrued and
unpaid interest, in lieu of a distribution of the Convertible Junior
Subordinated Debentures, in which event, after satisfaction of liabilities to
creditors of the Trust, the Convertible Preferred Securities will be redeemed in
whole at the liquidation preference of $50 per Convertible Preferred Security
plus accrued and unpaid distributions. In the case of a Tax Event, DT may also
elect to cause the Convertible Preferred Securities to remain outstanding and
pay Additional Interest (as defined herein) on the Convertible Junior
Subordinated Debentures. See "Description of the Convertible Preferred
Securities--Tax Event or Investment Company Event Redemption or Distribution"
and "Description of the Convertible Junior Subordinated Debentures--General".
Under current United States Federal income tax law, a distribution of the
Convertible Junior Subordinated Debentures would not be a taxable event to
holders of the Convertible Preferred Securities. However, if the relevant
Special Event (as defined herein) is a Tax Event which results in the Issuer
being treated as an association taxable as a corporation, the distribution would
likely constitute a taxable event to holders of the Convertible Preferred
Securities. See "United States Taxation--Receipt of Convertible Junior
Subordinated Debentures or Cash Upon Liquidation of the Issuer".
There can be no assurance as to the market prices for Convertible Preferred
Securities or Convertible Junior Subordinated Debentures that may be distributed
in exchange for Convertible Preferred Securities if
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a dissolution or liquidation of the Issuer were to occur. Accordingly, the
Convertible Preferred Securities that an investor may purchase or the
Convertible Junior Subordinated Debentures that a holder of the Convertible
Preferred Securities may receive on dissolution and liquidation of the Issuer,
may trade at a discount to the price that the investor paid to purchase the
Convertible Preferred Securities offered hereby. Because holders of Convertible
Preferred Securities may receive Convertible Junior Subordinated Debentures upon
the occurrence of a Tax Event or an Investment Company Event, prospective
purchasers of Convertible Preferred Securities are also making an investment
decision with regard to the Convertible Junior Subordinated Debentures and
should carefully review all the information regarding the Convertible Junior
Subordinated Debentures contained herein. See "Description of Convertible
Preferred Securities--Tax Event or Investment Company Event Redemption or
Distribution" and "Description of the Convertible Junior Subordinated
Debentures--General".
Limited Voting Rights. Holders of Convertible Preferred Securities will
generally have limited voting rights and, except upon the occurrence of certain
events described herein, will not be entitled to vote to appoint, remove or
replace the Issuer Trustees (as defined herein), the right to which is vested
exclusively in the holder of the Common Securities.
Trading Characteristics of Convertible Preferred Securities. The
Convertible Preferred Securities may trade at a price that does not fully
reflect the value of accrued but unpaid distributions. A holder who disposes of
its Convertible Preferred Securities between record dates for payments of
distributions thereon will be required to include accrued but unpaid interest on
the Convertible Junior Subordinated Debentures through the date of disposition
in income as ordinary income (i.e., original issue discount), and to add such
amount to its adjusted tax basis in its pro rata share of the underlying
Convertible Junior Subordinated Debentures deemed disposed of. To the extent the
selling price is less than the holder's adjusted tax basis (which will include,
in the form of original issue discount, all accrued but unpaid interest), a
holder will recognize a capital loss. Subject to certain limited exceptions,
capital losses cannot be applied to offset ordinary income for United States
Federal income tax purposes. See "United States Taxation".
Lack of Public Market for the Convertible Preferred Securities. There is no
existing trading market for the Convertible Preferred Securities, and there can
be no assurance regarding the future development of a market for the Convertible
Preferred Securities, or the ability of holders of the Convertible Preferred
Securities to sell their Convertible Preferred Securities or the price at which
such holders may be able to sell their Convertible Preferred Securities. If such
a market were to develop, the Convertible Preferred Securities could trade at
prices that may be higher or lower than the initial offering price depending on
many factors, including prevailing interest rates, the price of the DT Common
Stock, the Company's operating results and the market for similar securities.
Credit Suisse First Boston Corporation, the placement agent in the Original
Offering (the "Placement Agent"), currently makes a market in the Convertible
Preferred Securities. The Placement Agent is not obligated to do so, however,
and any market making with respect to the Convertible Preferred Securities may
be discontinued at any time without notice. Therefore, there can be no assurance
as to the liquidity of any trading market for the Convertible Preferred
Securities or that an active public market for the Convertible Preferred
Securities will develop. The Company does not intend to apply for listing or
quotation of the Convertible Preferred Securities on any securities exchange or
stock market; however, the Convertible Preferred Securities are eligible for
trading in the Private Offerings, Resale and Trading through Automated Linkages
(PORTAL) Market of the Nasdaq Stock Market, Inc.
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RECENT ACQUISITION
On July 29, 1997, the Company acquired the assets of the Lucas Assembly and
Test Systems business ("LATS") of Lucas Varity plc. LATS is a designer and
manufacturer of assembly line and test equipment for the automotive industry
with four locations: two in Michigan, one in England and one in Germany. For the
twelve months ended January 31, 1997, LATS recorded net sales of approximately
$112 million and an operating profit of approximately $4.4 million before
nonrecurring items. For the five months ended June 30, 1997, LATS' sales totaled
approximately $47 million, with operating profit of approximately $2.3 million.
The 500-employee LATS business has net assets of approximately $39 million. The
results of LATS will be included with those of the Company for periods
subsequent to the Company's fiscal year ended June 29, 1997. The purchase price
for the LATS assets was approximately $49 million, subject to final balance
sheet adjustments. Dollar conversions of these figures, actually recorded in
British pounds, assumes an exchange rate of $1.63 per pound. The acquisition was
funded through utilization of borrowing availability under the Company's
recently negotiated $175 million multi-currency credit facility.
DT CAPITAL TRUST
DT Capital Trust is a statutory business trust that was formed under the
Delaware Business Trust Act on May 21, 1997. The Trust's original declaration of
trust was amended and restated in its entirety as of June 1, 1997 by DT, as
sponsor of the Trust, and the trustees of the Issuer (the "Issuer Trustees") (as
so amended and restated, the "Declaration"). DT directly or indirectly owns
Common Securities in an aggregate liquidation amount equal to 3% of the total
capital of the Issuer. The Common Securities rank pari passu, and payment will
be made thereon pro rata, with the Convertible Preferred Securities, except
that, upon the occurrence and during the continuance of an event of default
under the Declaration, the rights of the holders of the Common Securities to
payment in respect of distributions and payments upon liquidation, redemption
and otherwise will be subordinated to the rights of the holders of the
Convertible Preferred Securities. The assets of the Trust consist of the
Convertible Junior Subordinated Debentures, and payments under the Convertible
Junior Subordinated Debentures will be the sole revenue of the Issuer. The
Issuer exists for the exclusive purposes of (i) issuing the Trust Securities
representing undivided beneficial interests in the assets of the Trust, (ii)
investing the gross proceeds of the Trust Securities in the Convertible Junior
Subordinated Debentures and (iii) engaging in only those other activities
necessary or incidental thereto.
Pursuant to the Declaration, the number of Issuer Trustees initially is
five. Three of the Issuer Trustees (the "DT Trustees") are individuals who are
employees or officers of or who are affiliated with DT. The fourth trustee is a
financial institution that is unaffiliated with DT (the "Trustee"). The fifth
trustee is an entity which maintains its principal place of business in the
State of Delaware (the "Delaware Trustee"). Initially, The Bank of New York, a
New York banking corporation, acts as Trustee for purposes of the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act") and its affiliate,
The Bank of New York (Delaware), a Delaware banking corporation, acts as
Delaware Trustee until, in each case, removed or replaced by the holder of the
Common Securities. The Bank of New York also acts as indenture trustee under the
Guarantee (the "Guarantee Trustee") and under the Indenture (the "Indenture
Trustee") for purposes of the Trust Indenture Act. See "Description of the
Guarantee" and "Description of the Convertible Preferred Securities". In certain
circumstances, the holders of a majority of the Convertible Preferred Securities
will be entitled to appoint one additional trustee (a "Special Trustee"), who
need not be an officer or employee of or otherwise affiliated with DT, who will
have the same rights, powers and privileges as the DT Trustees. See "Description
of the Convertible Preferred Securities--Voting Rights".
The Trustee holds title to the Convertible Junior Subordinated Debentures
for the benefit of the holders of the Trust Securities and the Trustee has the
power to exercise all rights, powers and privileges under the Indenture (as
defined herein) as the holder of the Convertible Junior Subordinated Debentures.
In addition, the Trustee maintains exclusive control of a segregated
non-interest bearing bank account (the "Property Account") to hold all payments
made in respect of the Convertible Junior Subordinated Debentures for the
benefit of the holders of the Trust Securities. The Guarantee Trustee holds the
Guarantee for the benefit of the holders of the Convertible Preferred
Securities. Subject to the right of the holders of the Convertible Preferred
Securities to appoint a Special Trustee, DT, as the direct or indirect holder of
all the Common Securities, has the right to appoint, remove or replace any of
the Issuer Trustees and to increase or decrease the number of trustees, provided
that the number of trustees shall be at least three, a majority
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of which shall be DT Trustees. DT will pay all fees and expenses related to the
Trust and the offering of the Convertible Preferred Securities. See "Description
of the Convertible Junior Subordinated Debentures".
The rights of the holders of the Convertible Preferred Securities,
including economic rights, rights to information and voting rights, are as set
forth in the Declaration and the Delaware Business Trust Act, as amended (the
"Trust Act"). See "Description of the Convertible Preferred Securities". The
Declaration, the Indenture and the Guarantee also incorporate by reference the
terms of the Trust Indenture Act, and each will be qualified thereunder.
The place of business and the telephone number of the Trust are the
principal executive offices and telephone number of DT. See "Incorporation of
Certain Documents by Reference."
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THE COMPANY
General
DT is an engineering-driven designer, manufacturer and integrator of
automated production equipment and systems used to manufacture, test or package
a variety of industrial and consumer products. The Company believes it is the
largest manufacturer of integrated assembly and test systems in North America.
Substantial growth opportunities are believed to be provided by certain trends
among its customers, including increased emphasis on productivity, quality,
flexibility, globalization, outsourcing, downsizing and vendor rationalization.
To capitalize on these trends, DT has implemented a business strategy to
provide, develop and acquire complementary technologies and capabilities to
supply customers with integrated processing, assembly, testing and packaging
systems for their products. As part of this strategy, the Company seeks to cross
sell the products produced by acquired companies through its larger company-wide
sales force providing for greater geographic and customer coverage. The Company
operates in two business segments: Special Machines and Components. Through
acquisitions and product development, the Company's Special Machines business
has grown from historical consolidated net sales of $28.5 million in the fiscal
year ended June 30, 1993 to fiscal 1996 historical consolidated net sales of
$193.9 million, and net sales of $252.7 million for the nine months ended March
30, 1997. In addition, the Company's Components business, which produces
precision metal components and wear parts for a broad range of industrial
applications, has grown from historical consolidated net sales of $22.1 million
in fiscal 1993 to historical consolidated net sales of $42.0 million in fiscal
1996, and net sales of $34.0 million for the nine months ended March 30, 1997,
primarily as a result of internal growth.
Special Machines Segment. The Special Machines segment's products are used
principally in the electronics, automotive, pharmaceutical, nutritional and food
processing, consumer products, appliance and tire industries. Sales of these
products also produce a stream of recurring revenues from replacement parts and
service as the Company's substantial installed base of equipment is maintained
and upgraded over time. The Special Machines segment, which accounted for
approximately 87% of the Company's pro forma consolidated fiscal 1996 net sales,
after giving effect to the acquisition of Mid-West, and approximately 88% of the
Company's consolidated net sales for the nine months ended March 30, 1997,
consists of two groups: DT Automation and DT Packaging. Each group offers a
class of products and services that complement one another in terms of markets,
engineering requirements, product needs and systems capabilities.
DT Automation. DT Automation designs and builds a complete line of
integrated automated assembly and testing systems. Integrated systems combine a
variety of manufacturing technologies into a complete automated manufacturing
system. Core capabilities of DT Automation include the design and manufacture of
small to large automated assembly systems, high-speed precision assembly
systems, flexible assembly systems, automated resistance and arc welding systems
and large thermoforming systems. The Company believes DT is the largest
manufacturer of integrated assembly and test systems in North America.
DT Packaging. DT Packaging designs and builds proprietary machines and
integrated systems used to perform processing and packaging tasks. Core
capabilities of DT Packaging include the design and manufacture of
thermoforming, blister packaging and foam extrusion systems, and a complete line
of tablet processing and packaging systems. The Company believes it is the
largest manufacturer of tablet packaging equipment in North America.
Components Segment. The Components segment, which accounted for
approximately 13% of pro forma consolidated fiscal 1996 net sales and
approximately 12% of the Company's consolidated net sales for the nine months
ended March 30, 1997, stamps and fabricates a range of standard and custom metal
components for the transportation, appliance, heavy equipment, agricultural
equipment and electrical industries as well as wear parts for the textile
industry.
The Company is a Delaware corporation organized in January 1993 and the
successor to Peer Corporation, Detroit Tool Group, Inc. ("DTG") and Detroit Tool
and Engineering Company ("DTE"). Peer Corporation was organized in June 1992 to
acquire the Peer Division of Teledyne, Inc. ("Peer") and the stock of DTG, the
sole stockholder of DTE and Detroit Tool Metal Products Co. ("DTMP"). Through
acquisitions and product development, the Company has grown from historical
consolidated net sales of $50.6 million in fiscal 1993 to $235.9 million in
fiscal 1996.
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During fiscal 1994, the Company completed the acquisitions of Sencorp
Systems, Inc. ("Sencorp") in August 1993 and the business and assets of
Stokes-Merrill, Inc. ("Stokes-Merrill") in December 1993. During fiscal 1995,
the Company completed the acquisitions of Advanced Assembly Automation, Inc.
("AAA") in August 1994, the Lakso division of Packaging Machinery Company
("Lakso") and Armac Industries, Ltd. ("Armac") in February 1995. During fiscal
1996, the Company completed the acquisitions of H.G. Kalish, Inc. ("Kalish") in
August 1995, Arrow Precision Elements, Inc. ("Arrow") in September 1995,
Swiftpack Automation Limited ("Swiftpack") in November 1995 and Assembly
Machines, Inc. ("AMI") in January 1996.
On July 19, 1996, following the end of the Company's fiscal year, the
Company acquired the issued and outstanding stock of Mid-West, a designer and
manufacturer of integrated precision assembly systems. Mid-West's revenues for
its fiscal year ended May 26, 1996 were approximately $88.2 million and its
operating income, before certain nonrecurring charges, was approximately $18.4
million. On September 30, 1996, the Company acquired the issued and outstanding
stock of Hansford, also a designer and manufacturer of integrated precision
assembly systems.
Business Strategy
The business strategy of DT is to provide, develop and acquire
complementary technologies and capabilities to supply customers with integrated
assembly, testing and packaging systems for their products. Key elements of the
Company's strategy include the following:
Acquisitions. The assembly, testing and packaging equipment markets are
highly fragmented. Special machines, for example, are characterized by a number
of industry niches in which few manufacturers compete. The Special Machines
segment has established its presence in particular niches through acquisitions,
and the Company intends to pursue additional acquisitions, or strategic
alliances, with companies which are established technical and market leaders.
The Company can provide its customers more complete integrated automation
systems by continuing to expand the breadth of its products and engineering
expertise, a capability the Company believes will enable it to benefit from its
customers' increasing demand for complete systems. Additionally, the Company
will continue to pursue acquisitions, or strategic alliances, with companies
which provide significant potential for cross-selling among the various product
lines, margin improvement through greater use of in-house manufacturing and cost
savings through more efficient utilization of manufacturing and engineering
capacity.
Product Line Expansion. Through acquisitions, product license arrangements
and strategic alliances, the Company has increased, and plans to continue to
increase, its engineering capabilities and product offerings. DT Packaging now
has the capability to provide customers with fully integrated tablet processing
and packaging systems. DT Automation has increased its assembly systems
capabilities as more fully described in "Markets and Products" below. The
Company's objective is to provide customers with integrated automation solutions
rather than single use equipment. The Company also uses its engineering
expertise and manufacturing capability to develop new products and technology
for markets the Company currently serves and to provide entree into new markets.
Cross-Selling. The Company believes substantial cross-selling opportunities
exist across the product lines of the Special Machines segment. As the Company
implements its acquisition strategy and integrates acquired operations, it is
able to expand its product offerings and customer base. For example, the
combined marketing efforts and engineering capabilities of AAA and AMI were
successful in obtaining from a significant customer an $8 million project that
otherwise would have been awarded to a competitor. While AAA had established a
strong customer relationship, the project required certain technologies provided
by AMI.
Engineering Expertise. The Company's engineering strategy is to satisfy the
growing demand for small, medium and large complex, integrated automation
solutions by utilizing the versatile engineering expertise of its Special
Machines businesses. Additionally, the custom tool and die engineering expertise
of the Company's Special Machines segment provides the Components segment with
the ability to offer customers complex precision stamping solutions. The Company
expects to continue to acquire engineering and design expertise through
acquisitions and licensing arrangements.
Manufacturing Synergies. The Company intends to utilize its manufacturing
capacity and engineering capabilities fully by directing work to facilities with
specific capabilities and manufacturing strengths.
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International. The Company seeks to increase its international sales
through strategic alliances, international agents, foreign offices and
acquisitions. The Company acquired Kalish, and the U.K.-based Swiftpack during
fiscal 1996, significantly enhancing its international packaging presence. Also,
continued international sales growth by DT Packaging has resulted from the
strategic alliance with Davis Standard Corporation for the sales of foam
extrusion systems. DT Automation continued to expand its international presence
by forming an alliance with a subsidiary of Claas KGaA to open a sales and
service office in Beelen, Germany. This alliance also allows the Company to
market Claas KGaA's highly regarded automation systems to the Company's existing
customer base. International sales accounted for less than 25% of the Company's
historical consolidated net sales for fiscal 1996 and approximately 33% of
consolidated net sales for the nine months ended March 30, 1997.
Markets and Products
Special Machines. The Special Machines segment designs and builds a
complete line of automated production systems used to manufacture, test and/or
package products for a range of industries, including electronics, automotive,
pharmaceutical, nutritional and food processing, consumer products, appliances
and tires. The Company also manufactures custom production equipment for
specific customer applications, proprietary machines for specific industrial
applications and integrated systems which may combine features of custom and
proprietary equipment. The Special Machines segment consists of two core
business groups: DT Automation and DT Packaging.
DT Automation. DT Automation designs and builds a complete line of
automated assembly and test systems, special machines and large complex dies. DT
Automation is ideally suited for time-sensitive, concurrent engineering projects
where changes in tooling and processes can occur in an advanced stage of system
design. Sales from DT Automation accounted for approximately 63% of historical
consolidated net sales for the nine months ended March 30, 1997, and 45%, 45%
and 47% of historical consolidated net sales for fiscal 1996, 1995 and 1994,
respectively.
Integrated Systems. Integrated systems combine a wide variety of
manufacturing technologies into a complete automated manufacturing system.
Utilizing advanced computers, robotics, vision systems and other technologies,
the Company provides small to large automated assembly systems, high-speed
precision assembly systems, flexible assembly systems and automated resistance
and arc welding systems for the electronics, automotive, appliance, electrical
and hardware industries. The Company's expansion in providing a full range of
integrated, automated systems has been enhanced by the acquisition of AMI during
fiscal 1996 and has been further accelerated with the recent acquisitions of
Mid-West and Hansford. These acquisitions offer a variety of precision assembly
equipment to industry, utilizing proprietary modular building blocks which
facilitate time-sensitive, concurrent engineering projects where changes in
tooling and processes can occur in an advanced stage of system design and
standardized components in carousel, in-line and rotary assembly systems.
Custom Machines. The Company's custom machine building capabilities
include: engineering, project management, machining and fabrication of
components, installation of electrical controls, final assembly and testing. A
customer will usually approach the Company with a manufacturing objective, and
DT will work with the customer to design, engineer, assemble, test and install a
machine to meet the objective. The customer often retains rights to the design
after delivery of the machine since the purchase contract typically includes the
design of the machine; however, the engineering and manufacturing expertise
gained in designing and building the machine is often reapplied by the Company
in projects for other customers.
RIGO Thermoformers. Under a license agreement with RIGO Group, S.r.l., COMI
S.r.l. and PMM S.r.l., the Company has the rights to use certain deep-draw
thermoforming ("RIGO") technology. The Company is utilizing the RIGO technology
in a line of machines designed to produce the inner liners for refrigerators.
The Company believes the RIGO technology provides significant advantages over
competing technology, such as quicker changeover of tooling, lower material
costs, higher productivity and greater end product efficiency. The license
agreement continues until terminated in accordance with its provisions and may
be terminated by either party upon 90 days' notice to the other.
Automated Resistance and Arc Welding Systems. The Company manufactures and
sells a line of standard resistance welding equipment as well as special
automated welding systems designed and built for
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specific applications. Marketed under the brand name PeerTM, the Company's
products are used in the automotive, appliance and electrical industries to
fabricate and assemble components and subassemblies. The Company's resistance
welding equipment is also used in the manufacture of file cabinets, school and
athletic lockers, store display shelves, metal furniture and material storage
products.
Tooling and Dies. The Company possesses considerable expertise in the
design, engineering and production of precision tools and dies. In addition,
personnel trained as tool and die makers often apply their skills to the
manufacture of the Company's special machines.
DT Packaging. The DT Packaging group designs and builds proprietary
machines and integrated systems which are marketed under individual brand names
and manufactured for specific industrial applications using designs owned or
licensed by the Company. Although these machines are generally cataloged as
specific models, they are usually modified for specific customer requirements
and often combined with other machines into integrated systems. Many customers
also request additional accessories and features which typically generate higher
revenues and enhanced profit opportunities. DT Packaging products include
thermoformers, blister packaging systems, extrusion systems, rotary presses and
complete packaging systems. Packaging systems include: bottle unscrambling,
tablet counting, filling, cottoning, capping, labeling, collating, cartoning and
liquid filling, electronic filling and tube filling, many of which have been
added during fiscal 1996. The Company believes this equipment maintains a strong
reputation among its customers for quality, reliability and ease of operation
and maintenance. The Company also sells replacement parts and accessories for
its substantial installed base of machines. Sales from DT Packaging accounted
for approximately 25% of historical consolidated net sales for the nine months
ended March 30, 1997, and 37%, 31% and 24% of historical consolidated net sales
for fiscal 1996, 1995 and 1994, respectively.
Thermoformers. A thermoformer heats plastic material and uses pressure
and/or a vacuum to mold it into a product. Marketed under the brand names
Sencorp(R) and ArmacTM, the Company's thermoformers are used by customers in
North America, Europe and Asia to form a variety of products including:
specialized cups, plates and food containers, trays for food and medical
products and other plastics applications.
The Company's thermoformers are sold primarily to custom formers who use
the machines to create thermoformed items which are sold to a variety of end
users. The Company also sells thermoformers directly to end users, including
large producers of electrical and healthcare products, cosmetics, hardware and
other consumer products.
The Company produces a line of thermoformers of different sizes, heating
ovens, maximum draw depths and press capacities. Certain thermoformers produced
by the Company feature a fully integrated process control system to regulate the
thermoformer's functions. Depending upon the customer's requirements, the
control system is capable of networking with, or downloading to, the customer's
computers or other equipment and the Company's service center. This on-line
diagnostic capability allows the Company to provide real-time service and
support to its customers.
Blister Packaging Systems. Blister packaging is an increasingly common
method of displaying consumer products for sale in hardware stores, convenience
stores, warehouse stores, drug stores and similar retail outlets. Batteries,
cosmetics, hardware items, electrical components, razor blades and toys are
among the large variety of products sold in a clear plastic blister or two-sided
package. The Company designs and manufactures machinery marketed under the brand
names Sencorp(R) and ArmacTM, which performs blister packaging by heat-sealing a
clear plastic bubble, or blister, onto coated paperboard, or by sealing
two-sided packages using heat or microwave technology.
The Company's blister packaging systems are primarily sold to manufacturers
of the end products. These customers, with higher volume production
requirements, may use a thermoformer in-line with a blister sealer to form
blisters, insert their product and seal the package in one continuous process,
referred to as a form/fill/seal configuration. Customers having relatively low
volume production often use a stand-alone blister sealing machine to seal
products in a package using blisters purchased from a custom former.
Extruders. An extrusion process is used to convert plastic resin and
additives into a continuous melt and to force such melt through a die to produce
a desired shape that is then cooled. Marketed under the brand name Sencorp(R),
the Company's foam extruders are used to produce products such as building
insulation,
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display board, meat trays, bottle wrap protection labels and egg cartons. The
Company's foam extruders are primarily sold to large plastics companies that use
the machines to create end products and sheet products. The Company also
manufactures reclaim extruders which process a variety of plastic materials from
ground form to finished pellet form.
Rotary Presses. The Company believes it is the largest U.S. designer and
manufacturer of rotary tablet presses. The Company designs and manufactures
rotary presses used by customers in the airbag, candy, food supplement, ceramic,
ordnance, specialty chemical and pharmaceutical industries to produce tablets.
Marketed under the brand name StokesTM, the Company's line of rotary presses
includes machines capable of producing 17,000 tablets per minute and other
machines capable of applying up to 40 tons of pressure. Products produced on the
Company's rotary presses include Lifesavers(R) and Breathsavers(R) brand mints,
Centrum(R) brand vitamins and inflation pellets for automotive airbags.
During fiscal 1996, the Company entered into an agreement with Horn & Noack
Pharmatechnik GmbH for the purpose of licensing German rotary press technology
designed primarily for the pharmaceutical and nutritional markets. The agreement
gives the Company the exclusive right to manufacture and market this press
technology under the StokesTM brand in North and Central America and
non-exclusively in the rest of the world, excluding Europe. The Company plans to
market the pharmaceutical press through DT Packaging, a leader in pharmaceutical
filling and packaging systems.
Packaging Systems. The Company designs, manufactures or distributes a
complete line of products utilized for packaging, liquid filling or tube filling
applications. The Company's expansion in providing integrated packaging lines
was accelerated by the acquisition of Kalish in August 1995 and Swiftpack in
November 1995. The equipment manufactured by the Company, which includes bottle
unscramblers, slat tablet counters, electronic counters, liquid fillers,
cottoners, cappers and labelers, collators and cartoners, can be sold as an
integrated system or individual units. These machines are marketed under the
brand names of KalishTM, Lakso(R), Merrill(R) and Swiftpack and are primarily
delivered to customers in the pharmaceutical, nutritional, food, cosmetic, toy
and chemical industries.
The Company benefits from a substantial installed base of Lakso(R) and
Merrill(R) slat counters in the aftermarket sale of slats. Slat counting
machines use a set of slats to meter the number of tablets or capsules to be
inserted into bottles. Each size or shape of tablet or capsule requires a
different set of slats. In addition, the practice in the pharmaceutical industry
is to use a different set of slats for each product, even if the tablets are the
same size.
Laboratory Machines, Tooling, Parts and Accessories. The Company produces a
line of small scale blister sealers and a line of tablet pressing equipment used
to test new materials and techniques, for quality control, laboratory or other
small run uses. The Company also sells parts and accessories for its proprietary
machines. In addition, the Company designs and builds special tools and dies
used in custom applications of its thermoforming systems, rotary presses and
slat counters.
Components. The Company's Components segment produces custom and precision
components for the transportation, agricultural equipment, appliance, heavy
equipment and electrical industries, as well as wear parts for the textile
industry. Sales from Components accounted for approximately 12% of historical
consolidated net sales for the nine months ended March 30, 1997, and 18%, 24%
and 29% of historical consolidated net sales for fiscal 1996, 1995 and 1994,
respectively.
Custom Stamping and Fabrication. The Company produces precision-stamped
steel and aluminum components through its stamping and fabrication operations.
The Company's stamping presses range in size from 32 tons to 1,500 tons, giving
the Company the flexibility to stamp flat rolled metal ranging in thickness from
.015 inches to .750 inches. Certain of the Company's presses can accommodate
dies up to 190 inches in length to perform several stamping functions in a
single press.
Through its Special Machines segment, the Company possesses considerable
expertise in the design, engineering and production of precision tools and dies.
The Company produces tools and dies for use in its own blanking and stamping
operations as well as for sale to other industrial customers. The Company
16
<PAGE>
believes its tool and die design and engineering capabilities give it an
important competitive advantage in its Components segment.
Wear Parts. The Company is the only full-line U.S. manufacturer of
precision wear parts for industrial knitting machines. Marketed under the brand
names PotterTM, Arrow(R), S&WTM and DURA-TECHTM, these products are components
of circular knitting machines which produce tee shirts, socks, pantyhose and
other knit fabrics. The Company's branded products, which are included as
original equipment in certain circular industrial knitting machines sold in the
United States, are consumed in use and must be regularly replaced. The Company
believes that its PotterTM, Arrow(R), S&WTM and DURA-TECHTM products have a
reputation for high quality.
Marketing and Distribution
Special Machines. The Company's special machines and systems are sold
primarily through the Company's approximately 60 person direct sales force and
to a lesser extent through manufacturers' representatives and agents. Sales of
special machines and integrated systems require the Company's sales personnel to
have a high degree of technical expertise and extensive knowledge of the
industry served. The Company's sales force consists of specialists in each
primary market in which the Company's special machines are sold. Each of DTE,
Peer, Sencorp, Stokes-Merrill, AAA, Lakso, Armac, Kalish, AMI, Swiftpack,
Mid-West and Hansford has a sales force experienced in the marketing of the
equipment historically produced by each respective business. The Company
believes that cross-selling among the members of the Special Machines segment
and integration of proprietary technology and custom equipment into total
production automation systems for selected industries provide the Company with
expanded sales opportunities.
The Company's special machines are sold throughout the world by more than
60 manufacturers' representatives and sales agents to customers in nearly 50
countries. The Company has sales and service offices in China and in fiscal 1996
added offices in Canada, England and Germany. International sales continue to
grow as the business grows and more resources are focused in the international
arena. International sales were approximately 22% of historical consolidated net
sales for fiscal 1996 compared to 10% and 8% of historical consolidated net
sales in fiscal 1995 and fiscal 1994, respectively. International sales were
approximately 33% of consolidated net sales for the nine months ended March 30,
1997 compared to approximately 22% of consolidated net sales for the nine months
ended March 24, 1996.
Components. The Company's custom stamping products are sold by the
Company's direct sales force. The Company's wear parts are sold to original
equipment manufacturers directly and to the textile industry directly and
through independent domestic distributors.
17
<PAGE>
Facilities
The Company's administrative headquarters are located in Springfield,
Missouri. Set forth below is certain information with respect to the Company's
significant manufacturing facilities as of March 30, 1997:
<TABLE>
<CAPTION>
Square
Footage
Location (approximate) Owned/Leased Lease Expiration Products
-------- ------------- ------------ ------------------ --------
<S> <C> <C> <C> <C> <C>
Special Machines Segment
DTI Automation:
Lebanon, Missouri 300,000 Owned Special machines,
integrated systems,
tools and dies
Dayton, Ohio 160,000 Leased July 1, 2016 (3) Integrated systems,
special machines
Benton Harbor, Michigan 43,000 Owned Resistance arc
welding equipment
and systems
Erie, Pennsylvania 56,000 Owned High-speed
assembly systems
Buffalo Grove, Illinois 323,000(1) Leased July 31, 2003(4) Integrated precision
assembly systems
Rochester, New York 139,000 Leased Sept. 30, 2006(3) Integrated precision
assembly systems
DTI Packaging:
Montreal, Quebec 66,000(2) Leased Oct. 31, 1997 Tablet packaging,
liquid filling and
tube filling
equipment and
systems
Leominster, Massachusetts 60,000 Owned Tablet packaging,
equipment
Niles, Illinois 30,000 Leased July 15, 1998 Tablet counters
Bristol, Pennsylvania 43,000 Leased April 30, 2000(4) Rotary presses
Hyannis, Massachusetts 98,000 Leased Dec. 31, 1997(4) Plastics processing
and packaging
equipment
Fall River, Massachusetts 37,000 Leased Jan. 31, 2000(4) Plastics processing
and packaging
equipment
Alcester, United Kingdom 22,000 Owned Electronic counters
Components Segment
Lebanon, Missouri 171,000 Owned Metal products
Winsted, Connecticut 28,000 Leased Dec. 31, 1997(4) Wear parts
Asheboro, North Carolina 15,000 Leased Sept. 26, 2000(5) Wear parts
</TABLE>
- ------------------
(1) Two adjacent buildings of approximately 260,000 square feet and 63,000
square feet, respectively.
(2) Two adjacent buildings of approximately 40,000 square feet and 26,000
square feet, respectively.
(3) The Company has an option to renew such lease for two additional terms of
five years.
(4) The Company has an option to renew such lease for one additional five-year
term.
(5) The Company has an option to renew such lease for three additional five-
year terms.
The Company also leases other office, warehouse and service facilities in
Missouri, New Jersey, Canada, the United Kingdom and China. The Company
anticipates no significant difficulty in leasing alternate space at reasonable
rates in the event of the expiration, cancellation or termination of a lease
relating to any of the Company's leased properties.
18
<PAGE>
To accommodate growth occurring at two of the Special Machines facilities,
the Company has entered into a new operating lease for a facility to be
constructed in Montreal and is reviewing its alternatives to expand the facility
in Hyannis. Upon adding additional capacity with leased facilities, the Company
believes that its principal owned and leased manufacturing facilities will have
sufficient capacity to accommodate future internal growth without major
additional capital improvements.
Manufacturing and Raw Materials
Special Machines Segment. The principal raw materials and components used
in the manufacturing of the Company's special machines include carbon steel,
stainless steel, aluminum, electronic components, pumps and compressors,
programmable logic controls, hydraulic components, conveyor systems, visual and
mechanical sensors, precision bearings and lasers. The Company is not dependent
upon any one supplier for raw materials or components used in the manufacture of
special machines. Certain customers specify sole source suppliers for components
of custom machines or systems. The Company believes there are adequate
alternative sources of raw materials and components of sufficient quantity and
quality.
DT Automation. Integrated systems to assemble and test various products are
designed and manufactured at the Company's facilities in Illinois, New York,
Ohio and Pennsylvania where manufacturing activity primarily consists of
fabrication and assembly and, to a lesser extent, machining. The facilities in
Missouri house the machining, assembly and test operations primarily used in the
manufacture of tools and dies, custom special machines, RIGO systems and certain
other integrated systems. The facility in Michigan houses the machining,
assembly and test operations used in the manufacture of resistance welding
equipment and systems. A number of manufacturing technologies are employed at
these facilities including: fabrication of stainless steel, direct numerically
controlled machinery, computer generated surface modeling of contoured
components and fully networked CAD/CAM capabilities.
DT Packaging. Special machines, integrated systems and related parts for
the Company's tablet packaging and liquid-filling equipment are designed and
assembled at the Company's facilities in Canada, Massachusetts, Illinois and the
United Kingdom from components made to the Company's specifications by
unaffiliated vendors. Rotary presses are assembled at the Company's leased
facility in Pennsylvania. Special machines and integrated systems for the
plastics packaging industry are primarily manufactured at the two Company
manufacturing facilities in Massachusetts which include machining, fabrication
and assembly.
Components Segment. The principal raw materials used in the Company's
components manufacturing processes include carbon steel, aluminum, stainless
steel, copper and other metals in coil or sheet form. The Company is not
dependent upon any one supplier for raw materials used in the manufacture of its
metal products. The Company believes there are adequate alternative sources of
raw materials of sufficient quantity and quality.
The Company's components manufacturing operations are primarily located at
the Company's recently expanded facilities in Missouri. Operations conducted at
that facility include blanking, heavy and precision stamping using precision
single stage, progressive and transfer dies, cutting, punching, forming,
welding, cleaning, bonderizing and painting. With the addition in fiscal 1996 of
a Metalsoft(R) FabriVision optical scanning system, the Company's quality focus
and prototyping capabilities were greatly enhanced. At the Company's Connecticut
and North Carolina facilities, manufacturing processes include precision
stamping of wear parts, heat treating, drawing, tumbling, casting, straightening
and grinding.
Financial Information Relating to Business Segments, Foreign and Domestic
Operations and Export Sales
The Company operates predominantly in the business segments classified as
Special Machines and Components. The Company's principal foreign operations
consist of manufacturing, sales and service operations in Canada and the United
Kingdom. For certain other financial information concerning the Company's
business segments, foreign and domestic operations and export sales, see Note 15
of the Notes to Consolidated Financial Statements of the Company for its fiscal
year ended June 30, 1996.
19
<PAGE>
Customers
The majority of the Company's sales is attributable to repeat customers,
some of which have been customers of the Company or its acquired businesses for
over twenty years. The Company believes such repeat business is indicative of
the Company's engineering capabilities, the quality of its products and overall
customer satisfaction.
The Goodyear Tire & Rubber Company, a customer of the Company's Special
Machines segment, accounted for over 10% of the Company's consolidated net sales
in fiscal 1996 and 1994. PACCAR, Inc., a customer of the Company's Components
segment, accounted for over 10% of the Company's consolidated net sales in
fiscal 1995 and 1994. The Company's five largest customers during fiscal 1996
accounted for 32% of the Company's consolidated net sales and 45.7% of the
Company's consolidated net sales for the nine months ended March 30, 1997. For
additional information regarding dependence on a significant customer in the
electronics industry on a pro forma basis, after giving effect to the
acquisition of Mid-West, see "Risk Factors -- Dependence on Significant
Customers."
Certain purchasers of the Company's special machines make advance and
progress payments to the Company in connection with the manufacture of the
equipment. Sales of the Company's components are typically made without advance
or progress payments.
Competition
The market for the Company's special machines is highly competitive, with a
large number of companies advertising the sale of production machines. However,
the market for special machines is fragmented and characterized by a number of
industry niches in which few manufacturers compete. The market for products
produced by the Components segment is also highly regionally competitive and
fragmented. The Company's competitors vary in size and resources; most are
smaller privately held companies or subsidiaries of larger companies, some of
which are larger than the Company; and none competes with the Company in all
product lines. In addition, the Company may encounter competition from new
market entrants. The Company believes that the principal competitive factors in
the sale of the Company's special machines are quality, technology, on-time
delivery, price and service. The Company believes that the principal competitive
factors in the sale of the Company's components are price, technical capability,
quality and on-time delivery. The Company believes that it competes favorably
with respect to each of these factors.
Engineering, Research and Development
The Company maintains research and engineering departments at all of its
manufacturing locations. The Company employs more than 350 people with
experience in the design of production equipment. In addition to design work
relating to specific customer projects, the Company's engineers develop new
products and product improvements designed to address the needs of the Company's
target market niches and to enhance the reliability, efficiency, ease of
operation and safety of its proprietary machines.
Trademarks and Patents
The Company owns and maintains the registered trademarks Sencorp(R),
Merrill(R), Lakso(R) and Mid-West(R). The Company's use of the registered
trademark Arrow(R) is under a license and the licensor has agreed to assign
ownership of the mark for such use to the Company. Registrations for Company
trademarks are also owned and maintained in countries where such products are
sold and such registrations are considered necessary to preserve the Company's
proprietary rights therein.
The Company also has the rights to use the unregistered trademarks
SwiftpackTM, KalishTM, ArmacTM, StokesTM, PotterTM and PeerTM. The trademarks
KalishTM, ArmacTM, Sencorp(R), Merrill(R), PeerTM, Lakso(R) and
20
<PAGE>
StokesTM are used in connection with the machines and systems marketed by the
Special Machines segment. The trademarks Arrow(R) and PotterTM are used in
connection with the products of the Components segment.
The Company applies for and maintains patents where the Company believes
such patents are necessary to maintain the Company's interest in its inventions.
The Company does not believe that any single patent or group of patents is
material to either its Special Machines business or its Components business, nor
does it believe that the expiration of any one or a group of its patents would
have a material adverse effect upon its business or ability to compete in either
line of business. The Company believes that its existing patent and trademark
protection, however, provides it with a modest competitive advantage in the
marketing and sale of its proprietary products.
Environmental and Safety Regulation
The Company is subject to environmental laws and regulations that impose
limitations on the discharge of pollutants into the environment and establish
standards for the treatment, storage and disposal of toxic and hazardous wastes.
The Company is also subject to the federal Occupational Safety and Health Act
and other state statutes. Except for costs incurred in connection with the
environmental cleanup of its property in Lebanon, Missouri, which was completed
in October 1995, costs of compliance with environmental, health and safety
requirements have not been material to the Company.
The Company believes it is in material compliance with all applicable
environmental and safety laws and regulations.
Employees
At March 30, 1997, the Company had approximately 2,600 employees. None of
the Company's employees are covered under collective bargaining agreements. The
Company has not experienced any work stoppages in the last five years and
considers its relations with employees to be good.
Legal Proceedings
Product liability claims are asserted against the Company from time to time
for various injuries alleged to have resulted from defects in the manufacture
and/or design of the Company's products. At March 30, 1997, there were 26 such
claims pending. The Company does not believe that the resolution of such suits,
either individually or in the aggregate, will have a material adverse effect on
the Company's results of operations or financial condition. Product liability
claims are covered by the Company's comprehensive general liability policies,
subject to certain deductible amounts. The Company has established reserves for
such deductible amounts, which it believes to be adequate based on its previous
claims experience. However, there can be no assurance that resolution of product
liability claims in the future will not have a material adverse effect on the
Company.
In addition to product liability claims, from time to time, the Company is
the subject of legal proceedings, including claims involving employee matters,
commercial matters and similar claims. There are no material claims currently
pending. The Company maintains comprehensive general liability insurance which
it believes to be adequate for the continued operation of its business.
21
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
The following table sets forth DT's ratio of earnings to fixed charges on a
historical basis for each of the five years in the period ended June 30, 1996
and the nine months ended March 30, 1997 and on a pro forma basis after giving
effect to the Pro Forma Transactions (as herein defined) for the year ended June
30, 1996 and the nine months ended March 30, 1997.
<TABLE>
<CAPTION>
Pro Forma Historical Pro Forma Historical
--------- ---------- --------- -------------------------------------------------------------------
Fiscal Year Ended
--------- ---------- --------- -------------------------------------------------- -----------
Predecessor
Nine Months Nine Months Fiscal Year Fiscal Year
Ended Ended Ended Ended
March 30, March 30, June 30, June 30, June 25, June 26, June 30, July 30,
1997 1997 1996 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
5.14 3.94 5.69 4.97 6.66 3.68 1.66 1.30
</TABLE>
For purposes of computing the historical ratio of earnings to fixed
charges, earnings include pre-tax earnings before an extraordinary charge,
interest expense and the interest portion of rent expense, which the Company
estimates is equivalent to one-third of total rent expense. Fixed charges
include interest expense and the interest portion of rent expense. For purposes
of computing the pro forma ratio of earnings to fixed charges, earnings include
pre-tax earnings, interest expense, dividends on the Convertible Preferred
Securities and the interest portion of rent expense, which the Company estimates
is equivalent to one-third of total rent expense. Fixed charges include interest
expense, dividends on the Convertible Preferred Securities and the interest
portion of rent expense. See "Pro Forma Selected Consolidated Financial Data".
22
<PAGE>
CAPITALIZATION
(Unaudited)
The following table sets forth the capitalization of DT and its
consolidated subsidiaries as of March 30, 1997, on an historical basis and as
adjusted to give effect to the Original Offering and the application of the
estimated gross proceeds therefrom to repay indebtedness of the Company. See
"Pro Forma Selected Consolidated Financial Data". The table should be read in
conjunction with the consolidated financial statements and notes thereto and
other financial data of DT incorporated herein by reference.
<TABLE>
<CAPTION>
March 30, 1997
-------------------------------
(dollars in thousands)
Actual As Adjusted 1
---------- -------------
<S> <C> <C>
Indebtedness:
Short-term debt $ 8,915 $ 1,533
Long-term debt (net of current portion) 121,611 61,493
---------- ----------
Total debt 130,526 63,026
Company-obligated mandatorily redeemable convertible preferred
securities of subsidiary DT Capital Trust holding solely Convertible
Junior Subordinated Debentures of the Company 2 -- 70,000
Stockholders' Equity:
Preferred stock; $0.01 par value; 1,500,000 shares authorized; issued
and outstanding: none -- --
Common stock; $0.01 par value; 100,000,000 shares authorized; issued
and outstanding: 11,272,125 shares 113 113
Additional paid-in capital 135,014 132,514
Retained earnings 43,756 43,756
---------- ----------
Total stockholders' equity 178,883 176,383
---------- ----------
Total capitalization $ 309,409 $ 309,409
========== ==========
Total debt to capitalization 3 42.0% 20.37%
</TABLE>
- ------------------
1 Assumes the sale of the Convertible Preferred Securities and the
application of the estimated net proceeds therefrom to repay indebtedness.
2 As described herein, the sole assets of the Trust are the 7.16% Convertible
Junior Subordinated Debentures due May 31, 2012 with a principal amount of
$72,165,000, and upon redemption of such debt, the Convertible Preferred
Securities will be mandatorily redeemable.
3 Debt to capitalization ratio equals total indebtedness divided by total
capitalization.
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust will be treated as a subsidiary
of DT and, accordingly, the accounts of the Trust will be included in the
consolidated financial statements of DT. The Convertible Preferred Securities
will be presented as a separate line item in the consolidated balance sheet of
DT entitled "Company-obligated mandatorily redeemable convertible preferred
securities of subsidiary DT Capital Trust holding solely Convertible Junior
Subordinated Debentures of the Company", and appropriate disclosures about the
Convertible Preferred Securities, the subsidiary Guarantee and the Convertible
Junior Subordinated Debentures will be included in the notes to the Company's
consolidated financial statements. For financial
23
<PAGE>
reporting purposes, DT will record distributions payable on the Convertible
Preferred Securities as a financing charge to earnings in DT's consolidated
statement of operations.
USE OF PROCEEDS
The Selling Holders will receive all of the proceeds from the sale of the
Offered Securities. Neither DT nor the Trust will receive any proceeds from the
sale of the Offered Securities.
PRO FORMA SELECTED CONSOLIDATED FINANCIAL DATA
The following pro forma unaudited consolidated statements of operations of
the Company for the fiscal year ended June 30, 1996 and for the nine months
ended March 30, 1997, respectively, were prepared to illustrate (i) the
acquisition of Mid-West in July 1996 and the financing thereof, (ii) the Equity
Offering in November 1996 and the application of the net proceeds to the Company
therefrom to prepay outstanding indebtedness and (iii) the estimated effects of
the Original Offering and the application of the estimated net proceeds to the
Company therefrom to prepay outstanding indebtedness (collectively, the "Pro
Forma Transactions"), as if the Pro Forma Transactions had occurred at the
beginning of the respective period. The following pro forma unaudited
consolidated balance sheet of the Company at March 30, 1997, was prepared to
illustrate the estimated effects of the Original Offering and the application of
the estimated net proceeds therefrom to prepay outstanding indebtedness as if it
had occurred on March 30, 1997. The Pro Forma effects of the acquisition of
Hansford on the Company's results of operations and financial position are not
material.
The Pro Forma Statements do not purport to represent (i) the actual results
of operations or financial position of the Company had the Pro Forma
Transactions occurred on the dates assumed or (ii) the results or financial
position to be expected in the future.
The pro forma unaudited consolidated statements of operations and pro forma
unaudited consolidated balance sheet (collectively, the "Pro Forma Statements")
and accompanying notes should be read in conjunction with the historical
financial statements of the Company, including the notes thereto, and the other
financial information pertaining to the Company, including the information set
forth under "Capitalization" and "Selected Consolidated Financial Data",
included elsewhere or incorporated by reference in this Prospectus.
24
<PAGE>
Pro Forma Unaudited Consolidated Statement of Operations
For the Year Ended June 30, 1996
<TABLE>
<CAPTION>
Mid-West
Consolidated
Balances for
the Fiscal
Year Pro Forma Equity
Ended Purchase Equity Offering
DT May 26, 1996 Accounting Mid-West Offering Pro Forma
as Reported as Reported Adjustments Pro Forma Adjustments As Adjusted
----------- ------------ ----------- --------- ----------- -----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 235,946 $ 88,152 $ 324,098 $ 324,098
Cost of Sales 172,568 58,053 $ 1,055(1) 231,676 231,676
--------- --------- --------- --------- --------- ---------
Gross Profit 63,378 30,099 (1,055) 92,422 92,422
Selling, general and
administrative
expenses 35,445 15,214 (2,102)(2) 48,557 48,557
--------- --------- --------- --------- --------- ---------
Operating income 27,933 14,885 1,047 43,865 43,865
Interest expense
(income) net 4,799 (65) 6,605(3) 11,339 (6,057)(5) 5,282
Dividends on
Company-obligated
mandatorily
redeemable
convertible
preferred
securities of
subsidiary DT
Capital Trust
holding solely
Convertible Junior
Subordinated
Debentures of
the Company
--------- --------- --------- --------- --------- ---------
Income before
provision for
income taxes 23,134 14,950 (5,558) 32,526 6,057 38,583
Provision for
income taxes 9,643 5,994 (1,643)(4) 13,994 2,423(4) 16,417
--------- --------- --------- --------- --------- ---------
Income from
continuing
operations $ 13,491 $ 8,956 $ (3,915) $ 18,532 $ 3,634 $ 22,166
--------- --------- --------- --------- --------- ---------
Primary earnings
per common share
from continuing
operations $ 1.50 $ 2.06 $ 1.97
--------- --------- ---------
Fully diluted earnings
per common share
from continuing
operations
Weighted average
number of common
shares - primary 9,000,257 9,000,257 2,250,000 11,250,257
Weighted average
number of common
shares - fully diluted
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Original
Original Offering
Offering Pro Forma
Adjustments As Adjusted
----------- -----------
(Dollars in thousands, except per share data)
<S> <C> <C>
Net Sales $ 324,098
Cost of Sales 231,676
--------- ---------
Gross Profit 92,422
Selling, general and
administrative
expenses 48,557
--------- ---------
Operating income 43,865
Interest expense
(income) net (3,434)(6) 1,848
Dividends on
Company-obligated
mandatorily
redeemable
convertible
preferred
securities of
subsidiary DT
Capital Trust
holding solely
Convertible Junior
Subordinated
Debentures of
the Company 5,012(7) 5,012
--------- ---------
Income before
provision for
income taxes (1,578) 37,005
Provision for
income taxes (631)(4) 15,786
--------- ---------
Income from
continuing
operations $ (947) $ 21,219
--------- ---------
Primary earnings
per common share
from continuing
operations $ 1.89
---------
Fully diluted earnings
per common share
from continuing
operations $ 1.86(8)
---------
Weighted average
number of common
shares - primary 11,250,257
Weighted average
number of common
shares - fully diluted 13,056,709(8)
</TABLE>
25
<PAGE>
Footnotes to the Pro Forma Unaudited Consolidated Statement of Operations
For the Year Ended June 30, 1996
(1) Cost of sales has been increased (reduced) for
the following:
Elimination of capitalized building lease
depreciation $ (303)
Increase in operating lease expense related to
the building 1,358
----------
$ 1,055
==========
Prior to its acquisition by the Company, Mid-West
leased its primary manufacturing facility under
a lease treated as a capital lease for financial
reporting purposes. The Company has entered into
a new lease for the facility, oncurrent with the
acquisition, that will be treated as an operating
lease for financial reporting purposes.
(2) Selling, general and administrative expenses have
been increased (reduced) for the following:
Elimination of sales commissions paid to a company
related to Mid-West via common ownership $ (3,522)
Elimination of capitalized building lease depreciation $ (32)
Increase in goodwill amortization (based on a 40-year life) 1,452
----------
$ (2,102)
==========
(3) Interest expense has been increased for the following:
Financing of purchase, including acquisition
costs and deferred financing costs, net of cash
acquired $ 80,800
Weighted average DT interest rate for 1996 7.50%
----------
6,060
Additional amortization related to deferred financing
fees (five-year amortization period) 480
Elimination of historical Mid-West interest income, net 65
----------
$ 6,605
==========
The adjustment does not reflect the effect of the
write-off of deferred financing fees related to the
Company's existing credit facility, which was replaced
with the Amended Facility. Such write-off, net of
related tax benefits, of approximately $324 is presented
as an extraordinary item in the historical unaudited
consolidated statement of operations for the nine
months ended March 30, 1997.
(4) Amount reflects the estimated income tax effect
of pro forma adjustments (excluding non-deductible
goodwill amortization).
(5) The reduction in interest expense reflects the
application of the net proceeds from the Equity
Offering to repay approximately $73,500 of the
outstanding indebtedness of the Company. Further,
the reduction reflects the terms of the Company's
Second Amended and Restated Credit Facilities Agreement
(the "Amended Facility") which resulted in a reduction
in interest rates of 0.75% per annum on borrowings
outstanding under the Amended Facility upon prepayment
of indebtedness with net proceeds from the Equity Offering.
26
<PAGE>
(6) Amount represents the interest savings relative to
the repayment of certain outstanding indebtedness with
the Original Offering net proceeds. Given the
Company's level of outstanding debt in 1996 and the
fact that certain immaterial acquisitions have not been
reflected in the pro forma statement of operations for
the fiscal year ended June 30, 1996, the pro forma effects
of the application of net proceeds from the Original
Offering, in conjunction with the pro forma effects of
the Equity Offering, results in an excess cash position
for the Company throughout the fiscal year ended June 30,
1996 on a pro forma basis. The pro forma effects of any
interest income earned on such excess cash balances (and
any related increase in primary and fully diluted earnings
per share) have not been included herein.
(7) Amount represents the dividends on the Company-obligated
mandatorily redeemable convertible preferred securities
of subsidiary DT Capital Trust at a rate per annum of 7.16%.
(8) Fully diluted earnings per share is calculated on an
"as converted" basis for Company-obligated mandatorily
redeemable convertible preferred securities of subsidiary
DT Capital Trust.
27
<PAGE>
Pro Forma Unaudited Consolidated Statement of Operations
For the Nine Months Ended March 30, 1997
<TABLE>
<CAPTION>
Mid-West
Consolidated
Balances for
the Period
from Pro Forma Equity
DT July 1, 1996 to Purchase Equity Offering
March 30, 1997 July 18, 1996 Accounting Mid-West Offering Pro Forma
as Reported as Reported Adjustments Pro Forma Adjustments As Adjusted
-------------- --------------- ----------- --------- ----------- -----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 286,687 $ 7,172 $ 293,859 $ 293,859
Cost of Sales 206,545 5,183 $ 88(1) 211,816 211,816
--------- --------- --------- --------- --------- ---------
Gross Profit 80,142 1,989 (88) 82,043 $ 0 82,043
Selling, general and
administrative
expenses 40,105 739 118(2) 40,962 40,962
--------- --------- --------- --------- --------- ---------
Operating income 40,037 1,250 (206) 41,081 0 41,081
Interest expense
(income) net 8,825 19 545(3) 9,389 (2,598)(5) 6,791
Dividends on
Company-obligated
mandatorily
redeemable
convertible
preferred
securities of
subsidiary DT
Capital Trust
holding solely
Convertible Junior
Subordinated
Debentures of
the Company
--------- --------- --------- --------- --------- ---------
Income before
provision for income
taxes 31,212 1,231 (751) 31,692 2,598 34,290
Provision for income
taxes 13,085 492 (252)(4) 13,325 1,039(4) 14,364
--------- --------- --------- --------- --------- ---------
Income from
continuing
operations $ 18,127 $ 739 $ (499) $ 18,367 $ 1,559 $ 19,926
--------- --------- --------- --------- --------- ---------
Primary earnings
per common share
from continuing
operations $ 1.70 $ 1.73 $ 1.68
--------- --------- ---------
Fully diluted earnings
per common share
from continuing
operations
Weighted average
number of common
shares - primary 10,633,899 10,633,899 1,228,022 11,861,921
Weighted average
number of common
shares - fully diluted
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Original
Original Offering
Offering Pro Forma
Adjustments As Adjusted
----------- -----------
(Dollars in thousands, except per share data)
<S> <C> <C>
Net Sales $ 293,859
Cost of Sales 211,816
----------- ---------
Gross Profit 82,043
Selling, general and
administrative
expenses 40,962
----------- ---------
Operating income 41,081
Interest expense
(income) net (3,797)(6) 2,994
Dividends on
Company-obligated
mandatorily
redeemable
convertible
preferred
securities of
subsidiary DT
Capital Trust
holding solely
Convertible Junior
Subordinated
Debentures of
the Company 3,759(7) 3,759
----------- ---------
Income before
provision for income
taxes 38 34,328
Provision for income
taxes 15(4) 14,379
----------- ---------
Income from
continuing
operations $ 23 $ 19,949
----------- ---------
Primary earnings
per common share
from continuing
operations $ 1.68
---------
Fully diluted earnings
per common share
from continuing
operations $ 1.62(8)
---------
Weighted average
number of common
shares - primary 11,861,921
Weighted average
number of common
shares - fully diluted 13,668,373(8)
</TABLE>
28
<PAGE>
Footnotes to Pro Forma Unaudited Consolidated Statement of Operations
For the Nine Months Ended March 30, 1997
(1) Cost of sales has been increased (reduced) for
the following:
Elimination of capitalized building lease
depreciation $ (25)
Increase in operating lease expense related to
the building 113
----------
$ 88
==========
Prior to its acquisition by the Company, Mid-West
leased its primary manufacturing facility under
a lease treated as a capital lease for financial
reporting purposes. The Company has entered into
a new lease for the facility, oncurrent with the
acquisition, that will be treated as an operating
lease for financial reporting purposes.
(2) Selling, general and administrative expenses have
been increased (reduced) for the following:
Elimination of capitalized building lease depreciation $ (3)
Increase in goodwill amortization (based on a 40-year life) 121
----------
$ 118
==========
(3) Interest expense has been increased for the following:
Financing of purchase, including acquisition costs and
deferred financing costs, net of cash acquired $ 505
Additional amortization related to deferred financing
fees (five-year amortization life) 40
----------
545
==========
The adjustment does not reflect the effect of the
write-off of deferred financing fees related to the
Company's existing credit facility, which was replaced
with the Amended Facility. Such write-off, net of
related tax benefits, of approximately $324 is presented
as an extraordinary item in the historical unaudited
consolidated statement of operations for the nine
months ended March 30, 1997.
(4) Amount reflects the estimated income tax effect
of pro forma adjustments (excluding non-deductible
goodwill amortization).
(5) The reduction in interest expense reflects the
application of the net proceeds from the Equity
Offering to repay approximately $73,500 of the
outstanding indebtedness of the Company. Further,
the reduction reflects the terms of the Amended
Facility which resulted in a reduction in interest
rates of 0.75% per annum on borrowings outstanding
under the Amended Facility upon prepayment of
indebtedness with net proceeds from the Equity Offering.
(6) Amount represents the interest savings relative to
the repayment of certain outstanding indebtedness
with the Original Offering net proceeds.
(7) Amount represents the dividends on the Company-
obligated mandatorily redeemable convertible
preferred securities of subsidiary DT Capital
Trust at a rate per annum of 7.16%.
(8) Fully diluted earnings per share is calculated
on an "as converted" basis for the Company-
obligated mandatorily redeemable convertible
preferred securities of subsidiary DT Capital Trust.
29
<PAGE>
Pro Forma Unaudited Consolidated Balance Sheet
March 30, 1997
<TABLE>
<CAPTION>
DT
Consolidated Original
Balances at Original Offering
March 30, 1997 Offering Pro Forma
as Reported Adjustments As Adjusted
-------------- ----------- -----------
(Dollars in Thousands)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 730 $ 730
Accounts receivable, net 47,490 47,490
Costs and estimated earnings in excess
of amounts billed 72,143 72,143
Inventories, net 44,204 44,204
Prepaid expenses and other 6,852 6,852
--------- ---------
Total current assets 171,419 171,419
Property, plant & equipment, net 49,020 49,020
Goodwill, net 168,783 168,783
Other assets, net 3,690 3,690
--------- ---------
$ 392,912 $ 392,912
========= =========
Liabilities and stockholders' equity
Current liabilities:
Current portion of long term debt $ 8,915 ($7,382)(a) $ 1,533
Accounts payable 24,772 24,772
Customer advances 19,191 19,191
Accrued liabilities 30,017 30,017
--------- --------- ---------
Total current liabilities 82,895 (7,382) 75,513
Long-term debt 121,611 (60,118)(a) 61,493
Deferred income taxes 5,282 5,282
Other long-term liabilities 4,241 4,241
Company-obligated mandatorily redeemable
convertible preferred securities of
subsidiary DT Capital Trust holding
solely Convertible Junior Subordinated
Debentures of the Company 70,000 (a) 70,000
Stockholders' equity 178,883 (2,500)(a) 176,383
--------- --------- ---------
$ 392,912 $ 0 $ 392,912
========= ========= =========
</TABLE>
(a) Amount reflects the proceeds of the Original Offering, net of expenses, and
the related repayment of debt.
DESCRIPTION OF THE CONVERTIBLE PREFERRED SECURITIES
The following summary of the material terms and provisions of the
Convertible Preferred Securities is subject to, and qualified in its entirety by
reference to, the Declaration. The Convertible Preferred Securities were issued
pursuant to the terms of the Declaration. The Declaration incorporates by
reference terms of the Trust Indenture Act and will be qualified thereunder. The
Bank of New York, as Trustee, acts as indenture trustee for the Declaration for
purposes of compliance with the Trust Indenture Act. Capitalized terms not
otherwise defined herein have the meanings assigned to them in the Declaration.
30
<PAGE>
General
The Convertible Preferred Securities were issued in fully registered form
without interest coupons.
The Convertible Preferred Securities represent undivided beneficial
ownership interests in the assets of the Issuer and entitle the holders thereof
to a preference in certain circumstances with respect to distributions and
amounts payable on redemption or liquidation over the Common Securities, as well
as other benefits as described in the Declaration.
All of the Common Securities are owned, directly or indirectly, by DT. The
Common Securities rank pari passu, and payments are made thereon pro rata, with
the Convertible Preferred Securities except as described under "--Subordination
of Common Securities". The Convertible Junior Subordinated Debentures are owned
by the Trustee and held for the benefit of the holders of the Trust Securities.
The Guarantee is a full and unconditional guarantee with respect to the
Convertible Preferred Securities, but does not guarantee payment of
distributions or amounts payable on redemption or liquidation of the Convertible
Preferred Securities when the Issuer does not have funds available to make such
payments.
DT has, through the Guarantee, the Convertible Junior Subordinated
Debentures, the Indenture and the Declaration, taken together, fully,
irrevocably and unconditionally guaranteed all of the Issuer's obligations under
the Convertible Preferred Securities. No single document standing alone or
operating in conjunction with fewer than all of the other documents constitutes
such guarantee. It is only the combined operation of these documents that
provides a full, irrevocable and unconditional guarantee of the Issuer's
obligations under the Convertible Preferred Securities. See "Effect of
Obligations Under the Convertible Junior Subordinated Debentures and the
Guarantee".
Distributions
The distributions payable on each Convertible Preferred Security are fixed
at a rate per annum of 7.16% of the stated liquidation preference of $50 per
Convertible Preferred Security. Deferred distributions (and interest thereon)
will accrue interest (compounded quarterly) at the same rate. The term
"distributions" as used herein includes any such distributions payable unless
otherwise stated. The amount of distributions payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months.
Distributions on the Convertible Preferred Securities are cumulative,
accruing from the Original Offering Date and are payable quarterly in arrears on
each March 31, June 30, September 30 and December 31, commencing June 30, 1997,
when, as and if available. DT has the right under the Indenture to defer
interest payments from time to time on the Convertible Junior Subordinated
Debentures for successive periods not exceeding 20 consecutive quarters for each
such period, and, as a consequence, quarterly distributions on the Convertible
Preferred Securities would be deferred by the Issuer (but would continue to
accrue with interest) during any such Deferral Period. In the event that DT
exercises this right, during such period DT (i) shall not declare or pay
dividends on, make distributions with respect to, or redeem, purchase or
acquire, or make a liquidation payment with respect to, any of its capital stock
(other than stock dividends paid by DT which consist of stock of the same class
as that on which the dividend is being paid and other than redemptions or
repurchases of any Rights and the declaration of a dividend of such Rights in
the future), (ii) shall not make any payment of interest, principal or premium,
if any, on or repay, repurchase or redeem any debt securities issued by DT that
rank pari passu with or junior to the Convertible Junior Subordinated
Debentures, and (iii) shall not make any guarantee payments with respect to the
foregoing (other than pursuant to the Guarantee). Prior to the termination of
any Deferral Period, DT may further extend such Deferral Period; provided that
such Deferral Period together with all previous and further deferrals thereof
may not exceed 20 consecutive quarters. Upon the termination of any Deferral
Period, DT is required to pay all amounts then due and, upon such payment, DT
may select a new Deferral Period, Period extend beyond the maturity of the
Convertible Junior Subordinated Debentures. See "Description of the Convertible
Junior Subordinated Debentures--Interest" and "--Option to Extend Interest
Payment Period".
Distributions on the Convertible Preferred Securities must be paid
quarterly on the dates payable to the extent of funds of the Trust available for
the payment of such distributions. Amounts available to the Trust for
31
<PAGE>
distribution to the holders of the Convertible Preferred Securities will be
limited to payments under the Convertible Junior Subordinated Debentures. See
"Description of the Convertible Junior Subordinated Debentures". The payment of
distributions, to the extent of funds of the Trust available therefor, is
guaranteed by DT on a limited basis, as set forth under "Description of the
Guarantee".
Distributions on the Convertible Preferred Securities are payable to the
holders thereof as they appear on the books and records of the Issuer on the
relevant record dates, which will be one day prior to the relevant payment
dates. Subject to any applicable laws and regulations and the provisions of the
Declaration, each such payment will be made as described under
"--Book-Entry-Only Issuance--The Depository Trust Company" below. In the event
that any date on which distributions are payable on the Convertible Preferred
Securities is not a Business Day, payment of the distribution payable on such
date will be made on the next succeeding day which is a Business Day (without
any distribution or other payment in respect of any such delay) except that, if
such Business Day is in the next succeeding calendar year, such payment shall be
made on the immediately preceding Business Day, in each case with the same force
and effect as if made on such date. A "Business Day" shall mean any day other
than a day on which banking institutions in The City of New York are authorized
or required by law to close.
Conversion Rights
General. Convertible Preferred Securities are convertible at any time
(except in the case of Convertible Preferred Securities called for redemption
which shall be convertible at any time prior to the close of business on the
Business Day prior to the Redemption Date), at the option of the holder thereof
and in the manner described below, into shares of DT Common Stock at an initial
conversion rate of 1.2903 shares of DT Common Stock for each Convertible
Preferred Security (equivalent to a conversion price of $38.75 per share of DT
Common Stock), subject to adjustment as described under "--Conversion Price
Adjustments" below. The Issuer has agreed in the Declaration not to convert
Convertible Junior Subordinated Debentures held by it except pursuant to a
notice of conversion delivered to the Conversion Agent by a holder of
Convertible Preferred Securities. A holder of a Convertible Preferred Security
wishing to exercise its conversion right shall deliver an irrevocable conversion
notice, together, if the Convertible Preferred Security is a Certificated
Security (as defined herein), with such Certificated Security, to the Conversion
Agent which shall, on behalf of such holder, exchange such Convertible Preferred
Security for a portion of the Convertible Junior Subordinated Debentures and
immediately convert such Convertible Junior Subordinated Debentures into DT
Common Stock. Holders may obtain copies of the required form of the conversion
notice from the Conversion Agent.
Whenever DT issues shares of DT Common Stock upon coversion of Convertible
Preferred Securities, DT will issue, together with each such share of DT Common
Stock, one right entitling the holder thereof, under certain circumstances, to
purchase one one-hundredth of a share of DT's Series A Preferred Stock ("Series
A Preferred Stock") pursuant to, and upon the terms indicated in, the Rights
Agreement dated as of August 18, 1997 (the "Rights Agreement"), between DT and
ChaseMellon Shareholder Services, L.L.C., as Rights Agent, or any similar rights
issued to holders of DT Common Stock in addition thereto or in replacement
thereof (such rights, together with any additional or replacement rights, being
collectively referred to as the "Rights"), whether or not such Rights shall be
exercisable at such time, but only if such Rights are issued and outstanding and
held by holders of DT Common Stock (or are evidenced by outstanding share
certificates representing DT Common Stock) at such time and have not expired or
been redeemed. As distributed, the Rights trade together with DT Common Stock.
The Rights may be exercised or traded separately only after the earlier to occur
of: (i) the tenth business day after the commencement of a tender or exchange
offer by a person or group other than DT or any subsidiary or employee benefit
plan of DT or any subsidiary if, upon consummation of the offer, such person or
group would acquire beneficial ownership of 15% or more of the outstanding DT
Common Stock or (ii) the tenth day after the first public announcement that an
Acquiring Person (as such term is defined in the Rights Agreement) has acquired
the beneficial ownership of 15% or more of the shares of DT Common Stock
outstanding. The Rights will expire on August 18, 2007, unless earlier redeemed
by DT as provided in the Rights Agreement. Until a Right is exercised, the
holder thereof will have no additional rights as a shareholder of DT, including,
without limitation, the right to vote or receive dividends on shares of DT
Common Stock subject to the Rights. The foregoing description of the Rights is
qualified in its entirety by reference to the Rights Agreement, which is an
exhibit to DT's Current Report on Form 8-K dated as of August 18, 1997,
incorporated by reference herein.
32
<PAGE>
Holders of Convertible Preferred Securities at the close of business on a
distribution record date will be entitled to receive the distribution payable on
such Convertible Preferred Securities on the corresponding distribution payment
date notwithstanding the conversion of such Convertible Preferred Securities
following such distribution record date but prior to such distribution payment
date. Except as provided in the immediately preceding sentence, neither the
Issuer nor DT will make, or be required to make, any payment, allowance or
adjustment for accumulated and unpaid distributions, whether or not in arrears,
on converted Convertible Preferred Securities. DT will make no payment or
allowance for distributions on the shares of DT Common Stock issued upon such
conversion, except to the extent that such shares of DT Common Stock are held of
record on the record date for any such distributions. Each conversion will be
deemed to have been effected immediately prior to the close of business on the
day on which the related conversion notice was received by the Issuer.
No fractional shares of DT Common Stock will be issued as a result of
conversion, but in lieu thereof such fractional interest will be paid by DT in
cash.
Conversion Price Adjustments--General. The conversion price will be subject
to adjustment in certain events including, without duplication: (i) the payment
of dividends (and other distributions) payable in DT Common Stock on any class
of capital stock of DT; (ii) the issuance to all holders of DT Common Stock of
rights or warrants entitling holders of such rights or warrants to subscribe for
or purchase DT Common Stock at less than the then current market price; (iii)
subdivisions and combinations of DT Common Stock; (iv) the payment of dividends
(and other distributions) to all holders of DT Common Stock consisting of
evidences of indebtedness of DT, securities or capital stock, cash or assets
(including securities, but excluding those rights, warrants, dividends and
distributions referred to in clauses (i) and (ii) and dividends and
distributions paid exclusively in cash); (v) the payment of dividends (and other
distributions) on DT Common Stock paid exclusively in cash, excluding (A) cash
dividends that do not exceed the per share amount of the immediately preceding
regular cash dividend (as adjusted to reflect any of the events referred to in
clauses (i) through (vi) of this sentence) and (B) cash dividends if the
annualized per share amount thereof does not exceed 15% of the current market
price of DT Common Stock as of the trading day immediately preceding the date of
declaration of such dividend; and (vi) payment to holders of DT Common Stock in
respect of a tender or exchange offer (other than an odd-lot offer) by DT or any
subsidiary of DT for DT Common Stock at a price in excess of 110% of the current
market price of DT Common Stock as of the trading day next succeeding the last
date tenders or exchanges may be made pursuant to such tender or exchange offer.
DT may, at its option, make such reductions in the conversion price as the
DT Board of Directors deems advisable to avoid or diminish any income tax to
holders of DT Common Stock resulting from any dividend or distribution of stock
(or rights to acquire stock) or from any event treated as such for income tax
purposes. See "United States Taxation--Adjustment of Conversion Price".
No adjustment of the conversion price will be made upon the issuance of any
shares of DT Common Stock pursuant to any present or future plan providing for
the reinvestment of dividends or interest payable on securities of DT and the
investment of additional optional amounts in shares of DT Common Stock under any
such plan or the issuance of any shares of DT Common Stock or options or rights
to purchase such shares pursuant to any present or future employee, director or
consultant benefit plan or program of DT or pursuant to any option, warrant,
right, or exercisable, exchangeable or convertible security outstanding as of
the date the Convertible Preferred Securities were first issued. There shall
also be no adjustment of the conversion price in case of the issuance of any DT
Common Stock (or securities convertible into or exchangeable for DT Common
Stock), except as specifically described above. If any action would require
adjustment of the conversion price pursuant to more than one of the
anti-dilution provisions, only one adjustment shall be made and such adjustment
shall be the amount of adjustment that has the highest absolute value to holders
of the Convertible Preferred Securities. No adjustment in the conversion price
will be required unless such adjustment would require an increase or decrease of
at least 1% of the conversion price, but any adjustment that would otherwise be
required to be made shall be carried forward and taken into account in any
subsequent adjustment.
Conversion Price Adjustments--Merger, Consolidation or Sale of Assets of
DT. In the event that DT is a party to any transaction (including, without
limitation, a merger, consolidation, sale of all or substantially all of the
assets of DT, recapitalization or reclassification of DT Common Stock or any
compulsory share exchange (each of the foregoing being referred to as a "DT
Transaction")), in each case, as a result of which shares of DT
33
<PAGE>
Common Stock shall be converted into the right (i) in the case of any DT
Transaction other than a DT Transaction involving a Common Stock Fundamental
Change (as defined herein), to receive securities, cash or other property, each
Convertible Preferred Security shall thereafter be convertible into the kind and
amount of securities, cash and other property receivable upon the consummation
of such DT Transaction by a holder of that number of shares of DT Common Stock
into which a Convertible Preferred Security was convertible immediately prior to
such DT Transaction, with such adjustments as provided below, or (ii) in the
case of a DT Transaction involving a Common Stock Fundamental Change, to receive
common stock of the kind received by holders of DT Common Stock (but in each
case after giving effect to any adjustment discussed below relating to a
Fundamental Change if such DT Transaction constitutes a Fundamental Change). The
holders of Convertible Preferred Securities will have no voting rights with
respect to any DT Transaction described in this section.
If any Fundamental Change (as defined herein) occurs, the conversion price
in effect will be adjusted immediately after such Fundamental Change as
described below. In addition, in the event of a Common Stock Fundamental Change,
each Convertible Preferred Security shall be convertible solely into common
stock of the kind received by holders of DT Common Stock as a result of such
Common Stock Fundamental Change.
The conversion price in the case of any DT Transaction involving a
Fundamental Change will be adjusted immediately after such Fundamental Change:
(i) in the case of a Non-Stock Fundamental Change (as defined herein),
the conversion price of the Convertible Preferred Securities will thereupon
become the lower of (A) the conversion price in effect immediately prior to
such Non-Stock Fundamental Change, but after giving effect to any other
prior adjustments, and (B) the result obtained by multiplying the greater
of the Applicable Price (as defined herein) or the then applicable
Reference Market Price (as defined herein) by a fraction of which the
numerator will be $50 and the denominator will be the then current
Redemption Price or, prior to June 1, 2000, an amount per Convertible
Preferred Security determined by DT in its sole discretion, after
consultation with an investment banking firm, to be the equivalent of the
hypothetical redemption price that would have been applicable if the
Convertible Preferred Securities had been redeemable during such period;
and
(ii) in the case of a Common Stock Fundamental Change, the conversion
price of the Convertible Preferred Securities in effect immediately prior
to such Common Stock Fundamental Change, but after giving effect to any
other prior adjustments, will thereupon be adjusted by multiplying such
conversion price by a fraction of which the numerator will be the Purchaser
Stock Price (as defined herein) and the denominator will be the Applicable
Price; provided, however, that in the event of a Common Stock Fundamental
Change in which (A) 100% of the value of the consideration received by a
holder of DT Common Stock is common stock of the successor, acquiror or
other third party (and cash, if any, is paid only with respect to any
fractional interests in such common stock resulting from such Common Stock
Fundamental Change) and (B) all of the DT Common Stock will have been
exchanged for, converted into, or acquired for common stock (and cash with
respect to fractional interests) of the successor, acquiror or other third
party, the conversion price of the Convertible Preferred Securities in
effect immediately prior to such Common Stock Fundamental Change will
thereupon be adjusted by multiplying such conversion price by a fraction of
which the numerator will be one and the denominator will be the number of
shares of common stock of the successor, acquiror, or other third party
received by a holder of one share of DT Common Stock as a result of such
Common Stock Fundamental Change.
In the absence of the Fundamental Change provisions, in the case of a DT
Transaction each Convertible Preferred Security would become convertible into
the securities, cash, or property receivable by a holder of the number of shares
of DT Common Stock into which such Convertible Preferred Security was
convertible immediately prior to such DT Transaction. Thus, in the absence of
the Fundamental Change provisions, a DT Transaction could substantially lessen
or eliminate the value of the conversion privilege associated with the
Convertible Preferred Securities. For example, if DT were acquired in a cash
merger, each Convertible Preferred Security would become convertible solely into
cash and would no longer be convertible into securities whose value would vary
depending on the future prospects of DT and other factors.
34
<PAGE>
The foregoing conversion price adjustments are designed, in "Fundamental
Change" transactions where all or substantially all the DT Common Stock is
converted into securities, cash, or property and not more than 50% of the value
received by the holders of DT Common Stock consists of stock listed or admitted
for listing subject to notice of issuance on a national securities exchange or
quoted on the NNM (a "Non-Stock Fundamental Change", as defined herein), to
increase the securities, cash, or property into which each Convertible Preferred
Security is convertible.
In a Non-Stock Fundamental Change transaction in which the initial value
received per share of DT Common Stock (measured as described in the definition
of Applicable Price below) is lower than the then applicable conversion price of
a Convertible Preferred Security but greater than or equal to the "Reference
Market Price" (initially $21.00 but subject to adjustment in certain events as
described below), the conversion price will be adjusted as described above with
the effect that each Convertible Preferred Security will be convertible into
securities, cash or property of the same type received by the holders of DT
Common Stock in such transaction with the conversion price adjusted as though
such initial value had been the Applicable Price.
In a Non-Stock Fundamental Change transaction in which the initial value
received per share of DT Common Stock (measured as described in the definition
of Applicable Price below) is lower than both the Applicable Conversion Price of
a Convertible Preferred Security and the Reference Market Price, the conversion
price will be adjusted as described above but calculated as though such initial
value had been the Reference Market Price.
In a Fundamental Change transaction in which all or substantially all of
the DT Common Stock is converted into securities, cash, or property and more
than 50% of the value received by the holders of DT Common Stock consists of
listed or NNM traded common stock (a "Common Stock Fundamental Change", as
defined herein), the foregoing adjustments are designed to provide in effect
that (a) where DT Common Stock is converted partly into such common stock and
partly into other securities, cash or property, each Convertible Preferred
Security will be convertible solely into a number of shares of such common stock
determined so that the initial value of such shares (measured as described in
the definition of "Purchaser Stock Price" below) equals the value of the shares
of DT Common Stock into which such Convertible Preferred Security was
convertible immediately before the transaction (measured as aforesaid) and (b)
where DT Common Stock is converted solely into such common stock, each
Convertible Preferred Security will be convertible into the same number of
shares of such common stock receivable by a holder of the number of shares of DT
Common Stock into which such Convertible Preferred Security was convertible
immediately before such transaction.
The term "Applicable Price" means (i) in the case of a Non-Stock
Fundamental Change in which the holder of the DT Common Stock receives only
cash, the amount of cash received by the holder of one share of DT Common Stock
and (ii) in the event of any other Non-Stock Fundamental Change or any Common
Stock Fundamental Change, the average of the Closing Prices (as defined herein)
for the DT Common Stock during the ten trading days prior to and including the
record date for the determination of the holders of DT Common Stock entitled to
receive such securities, cash, or other property in connection with such
Non-Stock Fundamental Change or Common Stock Fundamental Change or, if there is
no such record date, the date upon which the holders of the DT Common Stock
shall have the right to receive such securities, cash, or other property (such
record date or distribution date being hereinafter referred as the "Entitlement
Date"), in each case as adjusted in good faith by DT to appropriately reflect
any of the events referred to in clauses (i) through (vi) of the first paragraph
under "--Conversion Price Adjustments--General".
The term "Closing Price" means on any day the last reported sale price on
such day or in case no sale takes place on such day, the average of the reported
closing bid and asked prices in each case on the NNM or, if the stock is not
quoted on such system, on the principal national securities exchange on which
such stock is listed or admitted to trading or if not listed or admitted to
trading on any national securities exchange, the average of the closing bid and
asked prices as furnished by any independent registered broker-dealer firm,
selected by DT for that purpose.
The term "Common Stock Fundamental Change" means any Fundamental Change in
which more than 50% of the value (as determined in good faith by the Board of
Directors of DT) of the consideration received by holders of DT Common Stock
consists of common stock that for each of the ten consecutive trading days prior
35
<PAGE>
to the Entitlement Date has been admitted for listing or admitted for listing
subject to notice of issuance on a national securities exchange or quoted on the
NNM; provided, however, that a Fundamental Change shall not be a Common Stock
Fundamental Change unless DT continues to exist after the occurrence of such
Fundamental Change and the outstanding Convertible Preferred Securities continue
to exist as outstanding Convertible Preferred Securities.
The term "Fundamental Change" means the occurrence of any transaction or
event in connection with a plan pursuant to which all or substantially all of
the DT Common Stock shall be exchanged for, converted into, acquired for or
constitute solely the right to receive securities, cash or other property
(whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization or
otherwise); provided that, in the case of a plan involving more than one such
transaction or event, for purposes of adjustment of the conversion price, such
Fundamental Change shall be deemed to have occurred when substantially all of
the DT Common Stock shall be exchanged for, converted into, or acquired for or
constitute solely the right to receive securities, cash, or other property, but
the adjustment shall be based upon the highest weighted average per share
consideration that a holder of DT Common Stock could have received in such
transaction or event as a result of which more than 50% of the DT Common Stock
shall have been exchanged for, converted into, or acquired for or constitute
solely the right to receive securities, cash or other property.
The term "Non-Stock Fundamental Change" means any Fundamental Change other
than a Common Stock Fundamental Change.
The term "Purchaser Stock Price" means, with respect to any Common Stock
Fundamental Change, the average of the Closing Prices for the common stock
received in such Common Stock Fundamental Change for the ten consecutive trading
days prior to and including the Entitlement Date, as adjusted in good faith by
DT to appropriately reflect any of the events referred to in clauses (i) through
(vi) of the first paragraph under "--Conversion Price Adjustments--General".
The term "Reference Market Price" initially means $21.00 (which is an
amount equal to 662/3% of the last reported sale price for the DT Common Stock
on the NNM on June 2, 1997) and, in the event of any adjustment to the
conversion price other than as a result of a Non-Stock Fundamental Change, the
Reference Market Price shall also be adjusted so that the ratio of the Reference
Market Price to the conversion price after giving effect to any such adjustment
shall always be the same as the ratio of $21.00 to the initial conversion price
of the Convertible Preferred Securities.
Optional Redemption
DT is permitted to redeem the Convertible Junior Subordinated Debentures as
described herein under "Description of the Convertible Junior Subordinated
Debentures--Optional Redemption", in whole or in part, from time to time, after
June 1, 2000, upon not less than 30 nor more than 60 days' notice. See
"Description of the Convertible Junior Subordinated Debentures--Optional
Redemption". Upon any redemption in whole or in part of the Convertible Junior
Subordinated Debentures at the option of DT, the Issuer will, to the extent of
the proceeds of such redemption, redeem Convertible Preferred Securities and
Common Securities at the Redemption Price. In the event that fewer than all the
outstanding Convertible Preferred Securities are to be so redeemed, the
Convertible Preferred Securities to be redeemed will be selected as described
under "--Book-Entry-Only Issuance--The Depository Trust Company" below.
In the event of any redemption in part, the Trust shall not be required to
(i) issue, register the transfer of or exchange any Convertible Preferred
Security during a period beginning at the opening of business 15 days before any
selection for redemption of Convertible Preferred Securities and ending at the
close of business on the earliest date in which the relevant notice of
redemption is deemed to have been given to all holders of Convertible Preferred
Securities to be so redeemed and (ii) register the transfer of or exchange any
Convertible Preferred Securities so selected for redemption, in whole or in
part, except for the unredeemed portion of any Convertible Preferred Securities
being redeemed in part.
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Tax Event or Investment Company Event Redemption or Distribution
If a Tax Event (as defined herein) shall occur and be continuing, DT shall
cause the DT Trustees to liquidate the Issuer and, after satisfaction of
liabilities to creditors of the Trust, cause Convertible Junior Subordinated
Debentures to be distributed to the holders of the Convertible Preferred
Securities in liquidation of the Issuer within 90 days following the occurrence
of such Tax Event; provided, however, that such liquidation and distribution
shall be conditioned on (i) the DT Trustees' receipt of an opinion of nationally
recognized independent tax counsel (reasonably acceptable to the DT Trustees)
experienced in such matters, which opinion may rely on published revenue rulings
of the Internal Revenue Service (the "Service"), to the effect that the holders
of the Convertible Preferred Securities will not recognize any income, gain or
loss for United States Federal income tax purposes as a result of such
liquidation and distribution of Convertible Junior Subordinated Debentures (a
"No Recognition Opinion"), and (ii) DT being unable to avoid such Tax Event
within such 90-day period by taking some ministerial action or pursuing some
other reasonable measure that, in the sole judgment of DT, will have no adverse
effect on the Issuer, DT or the holders of the Convertible Preferred Securities
and will involve no material cost. Furthermore, if (i) DT has received an
opinion of nationally recognized independent tax counsel (reasonably acceptable
to the DT Trustees) experienced in such matters that, as a result of a Tax
Event, there is more than an insubstantial risk that DT would be precluded from
deducting the interest on the Convertible Junior Subordinated Debentures for
United States Federal income tax purposes, even after the Convertible Junior
Subordinated Debentures were distributed to the holders of the Convertible
Preferred Securities upon liquidation of the Issuer as described above (a
"Redemption Tax Opinion"), or (ii) the DT Trustees shall have been informed by
such tax counsel that it cannot deliver a No Recognition Opinion, DT shall have
the right, upon not less than 30 nor more than 60 days' notice and within 90
days following the occurrence of the Tax Event, to redeem the Convertible Junior
Subordinated Debentures, in whole (but not in part) for cash, at par plus
accrued and unpaid interest and, following such redemption, after satisfaction
of liabilities to creditors of the Trust, all the Convertible Preferred
Securities will be redeemed by the Issuer at the liquidation preference of $50
per Convertible Preferred Security plus accrued and unpaid distributions;
provided, however, that, if at the time there is available to DT or the Issuer
the opportunity to eliminate, within such 90-day period, the Tax Event by taking
some ministerial action or pursuing some other reasonable measure that, in the
sole judgment of DT, will have no adverse effect on the Issuer, DT or the
holders of the Convertible Preferred Securities and will involve no material
cost, the Issuer or DT will pursue such measure in lieu of redemption. See
"--Mandatory Redemption". In lieu of the foregoing options, DT will also have
the option of causing the Convertible Preferred Securities to remain outstanding
and pay Additional Interest (as defined herein) on the Convertible Junior
Subordinated Debentures. See "Description of the Convertible Junior Subordinated
Debentures--Additional Interest".
"Tax Event" means that DT shall have obtained an opinion of nationally
recognized independent tax counsel (reasonably acceptable to the DT Trustees)
experienced in such matters to the effect that, as a result of (a) any amendment
to or change (including any announced prospective change (which shall not
include a proposed change), provided that a Tax Event shall not occur more than
90 days before the effective date of any such prospective change) in the laws
(or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein or (b) any amendment to or
change in an interpretation or application of such laws or regulations by any
legislative body, court, governmental agency or regulatory authority (including
the enactment of any legislation and the publication of any judicial decision or
regulatory determination on or after the Original Offering Date), which
amendment or change is effective or which interpretation or pronouncement is
announced on or after the Original Offering Date, there is more than an
insubstantial risk that (i) the Issuer is or will be subject to United States
Federal income tax with respect to interest received on the Convertible Junior
Subordinated Debentures, (ii) interest paid in cash to the Issuer on the
Convertible Junior Subordinated Debentures is not or will not be deductible for
United States Federal income tax purposes or (iii) the Issuer is or will be
subject to more than a de minimis amount of other taxes, duties, assessments or
other governmental charges.
If an Investment Company Event (as hereinafter defined) shall occur and be
continuing, DT shall cause the DT Trustees to liquidate the Issuer and, after
satisfaction of liabilities to creditors of the Trust, cause the Convertible
Junior Subordinated Debentures to be distributed to the holders of the
Convertible Preferred Securities in liquidation of the Issuer within 90 days
following the occurrence of such Investment Company Event.
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The distribution by DT of the Convertible Junior Subordinated Debentures
will effectively result in the cancellation of the Convertible Preferred
Securities.
"Investment Company Event" means the occurrence of a change in law or
regulation or a written change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law") to the effect that the Issuer is or will
be considered an "investment company" which is required to be registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), which Change in
1940 Act Law becomes effective on or after the Original Offering Date.
A "Special Event" means either an Investment Company Event or a Tax Event.
After the date fixed for any distribution of Convertible Junior
Subordinated Debentures (i) the Convertible Preferred Securities will no longer
be deemed to be outstanding, (ii) The Depository Trust Company ("DTC") or its
nominee, as the record holder of the Global Certificates, will receive a
registered global certificate or certificates representing the Convertible
Junior Subordinated Debentures to be delivered upon such distribution
and (iii) any certificates representing Convertible Preferred Securities not
held by DTC or its nominee will be deemed to represent Convertible Junior
Subordinated Debentures having a principal amount equal to the aggregate of the
stated liquidation preference of such Convertible Preferred Securities, with
accrued and unpaid interest equal to the amount of accrued and unpaid
distributions on such Convertible Preferred Securities, until such certificates
are presented to DT or its agent for transfer or reissuance.
There can be no assurance as to the market prices for the Convertible
Preferred Securities or the Convertible Junior Subordinated Debentures that may
be distributed in exchange for Convertible Preferred Securities if a dissolution
and liquidation of an Issuer were to occur. Accordingly, the Convertible
Preferred Securities that an investor may purchase, or the Convertible Junior
Subordinated Debentures that the investor may receive on dissolution and
liquidation of an Issuer, may trade at a discount to the price that the investor
paid to purchase the Convertible Preferred Securities offered hereby.
Mandatory Redemption
The Convertible Junior Subordinated Debentures will mature on May 31, 2012,
and may be redeemed, in whole or in part, at any time after June 1, 2000 or at
any time in certain circumstances upon the occurrence of a Special Event. Upon
the repayment or payment of the Convertible Junior Subordinated Debentures,
whether at maturity or upon redemption or otherwise, the proceeds from such
repayment or redemption shall simultaneously be applied to redeem Trust
Securities having an aggregate liquidation amount equal to the Convertible
Junior Subordinated Debentures so repaid or redeemed at the applicable
redemption price together with accrued and unpaid distributions through the date
of redemption; provided that holders of the Trust Securities shall be given not
less than 30 nor more than 60 days' notice of such redemption. See "--Tax Event
or Investment Company Event Redemption or Distribution" and "Description of the
Convertible Junior Subordinated Debentures--General" and "Optional Redemption".
Redemption Procedures
The Convertible Preferred Securities will not be redeemed unless all
accrued and unpaid distributions have been paid on all Convertible Preferred
Securities for all quarterly distribution periods terminating on or prior to the
date of redemption.
If the Issuer gives a notice of redemption in respect of Convertible
Preferred Securities (which notice will be irrevocable), then, by 12:00 noon,
New York time, on the redemption date, the Issuer will irrevocably deposit with
DTC funds sufficient to pay the amount payable on redemption and will give DTC
irrevocable instructions and authority to pay such amount in respect of
Convertible Preferred Securities represented by the Global Certificates and will
irrevocably deposit with the paying agent for the Convertible Preferred
Securities funds sufficient to pay such amount in respect of any Certificated
Securities and will give such paying agent irrevocable instructions and
authority to pay such amount to the holders of Certificated Securities upon
surrender of their certificates. Notwithstanding the foregoing, distributions
payable on or prior to the redemption date for
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any Convertible Preferred Securities called for redemption shall be payable to
the holders of such Convertible Preferred Securities on the relevant record
dates for the related distribution dates. If notice of redemption shall have
been given and funds are deposited as required, then upon the date of such
deposit, all rights of holders of such Convertible Preferred Securities so
called for redemption will cease, except the right of the holders of such
Convertible Preferred Securities to receive the redemption price, but without
interest on such redemption price. In the event that any date fixed for
redemption of Convertible Preferred Securities is not a Business Day, then
payment of the amount payable on such date will be made on the next succeeding
day which is a Business Day (without any interest or other payment in respect of
any such delay), except that, if such Business Day falls in the next calendar
year, such payment will be made on the immediately preceding Business Day. In
the event that payment of the redemption price in respect of Convertible
Preferred Securities is improperly withheld or refused and not paid either by
the Issuer or by DT pursuant to the Guarantee described under "Description of
the Guarantee", distributions on such Convertible Preferred Securities will
continue to accrue at the then applicable rate, from the original redemption
date to the date of payment, in which case the actual payment date will be
considered the date fixed for redemption for purposes of calculating the amount
payable upon redemption (other than for purposes of calculating any premium).
Subject to the foregoing and applicable law (including, without limitation,
United States Federal securities laws), DT or its subsidiaries may at any time
and from time to time purchase outstanding Convertible Preferred Securities by
tender, in the open market or by private agreement.
Subordination of Common Securities
Payment of distributions on, and the amount payable upon redemption of, the
Trust Securities, as applicable, shall be made pro rata based on the liquidation
preference of the Trust Securities; provided, however, that, if on any
distribution date or redemption date a Declaration Event of Default (as defined
herein under "--Declaration Events of Default") under the Declaration shall have
occurred and be continuing, no payment of any distribution on, or amount payable
upon redemption of, any Common Security, and no other payment on account of the
redemption, liquidation or other acquisition of Common Securities, shall be made
unless payment in full in cash of all accumulated and unpaid distributions on
all outstanding Convertible Preferred Securities for all distribution periods
terminating on or prior thereto, or in the case of payment of the amount payable
upon redemption of the Convertible Preferred Securities, the full amount of such
amount in respect of all outstanding Convertible Preferred Securities shall have
been made or provided for, and all funds available to the Trustee shall first be
applied to the payment in full in cash of all distributions on, or the amount
payable upon redemption of, Convertible Preferred Securities then due and
payable.
In the case of any Declaration Event of Default, the holder of Common
Securities will be deemed to have waived any such Declaration Event of Default
until the effect of all such Declaration Events of Default with respect to the
Convertible Preferred Securities have been cured, waived or otherwise
eliminated. Until any such Declaration Events of Default with respect to the
Convertible Preferred Securities have been so cured, waived or otherwise
eliminated, the Trustee shall act solely on behalf of the holders of the
Convertible Preferred Securities and not the holder of the Common Securities,
and only the holders of the Convertible Preferred Securities will have the right
to direct the Trustee to act on their behalf.
Liquidation Distribution Upon Dissolution
Pursuant to the Declaration, the Issuer shall be dissolved and its affairs
shall be wound up upon the earliest to occur of the following: (i) May 31, 2022,
the expiration of the term of the Issuer, (ii) the bankruptcy of DT or the
holder of the Common Securities, (iii) the filing of a certificate of
dissolution or its equivalent with respect to DT or such holder, or the
revocation of DT's or such holder's charter and the expiration of 90 days after
the date of notice to DT or such holder of revocation without a reinstatement of
its charter, (iv) upon the occurrence of a Tax Event, except in the limited
circumstance described under "-- Tax Event or Investment Company Event
Redemption or Distribution" above, (v) the entry of a decree of a judicial
dissolution of DT, the Trust or such holder, or (vi) the redemption of all the
Trust Securities.
In the event of any voluntary or involuntary liquidation or dissolution of
the Issuer, the holders of the Convertible Preferred Securities at the time will
be entitled to receive out of the assets of the Issuer available
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for distribution to holders of Trust Securities, after satisfaction of
liabilities to creditors of the Trust, before any distribution of assets is made
to the holders of the Common Securities, an amount equal to the aggregate of the
stated liquidation preference of $50 per Convertible Preferred Security and
accrued and unpaid distributions thereon to the date of payment (the
"Liquidation Distribution"), unless, in connection with such liquidation or
dissolution, Convertible Junior Subordinated Debentures in an aggregate
principal amount equal to the Liquidation Distribution have been distributed on
a pro rata basis to the holders of the Trust Securities.
Merger, Consolidation or Amalgamation of the Issuer
The Issuer may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other entity or person,
except as described below. The Issuer may, without the consent of the holders of
the Convertible Preferred Securities, consolidate, amalgamate, merge with or
into, or be replaced by, a trust organized as such under the laws of any state
of the United States of America or of the District of Columbia; provided that
(i) if the Issuer is not the survivor, such successor entity either (x)
expressly assumes all of the obligations of the Issuer under the
Convertible Preferred Securities or (y) substitutes for the Convertible
Preferred Securities other securities having substantially the same terms as the
Convertible Preferred Securities (the "Successor Securities") as long as the
Successor Securities rank, with respect to participation in the profits and
distributions or in the assets of the successor entity, at least as high as the
Convertible Preferred Securities rank with respect to participation in the
profits and dividends or in the assets of the Issuer, (ii) DT expressly
acknowledges such successor entity as the holder of the Convertible Junior
Subordinated Debentures, (iii) the Convertible Preferred Securities or any
Successor Securities are listed, or any Successor Securities will be listed upon
notification of issuance, on any national securities exchange or other
organization on which the Convertible Preferred Securities are then listed, (iv)
such merger, consolidation, amalgamation or replacement does not cause the
Convertible Preferred Securities (including any Successor Securities) to be
downgraded by any nationally recognized statistical rating organization, (v)
such merger, consolidation, amalgamation or replacement does not adversely
affect the powers, preferences and other special rights of the holders of the
Convertible Preferred Securities (including any Successor Securities) in any
material respect, (vi) such successor entity has a purpose substantially
identical to that of the Issuer, (vii) DT has provided a guarantee to the
holders of the Successor Securities with respect to such successor entity having
substantially the same terms as the Guarantee and (viii) prior to such merger,
consolidation, amalgamation or replacement, DT has received an opinion of
nationally recognized independent counsel (reasonably acceptable to the Trustee)
to the Issuer experienced in such matters to the effect that (x) such successor
entity will be treated as a grantor trust for United States Federal income tax
purposes, (y) following such merger, consolidation, amalgamation or replacement,
neither DT nor such successor entity will be required to register as an
investment company under the 1940 Act and (z) such merger, consolidation,
amalgamation or replacement will not adversely affect the limited liability of
the holders of the Convertible Preferred Securities. Notwithstanding the
foregoing, the Issuer shall not, except with the consent of holders of 100% in
liquidation amount of the Common Securities, consolidate, amalgamate, merge with
or into, or be replaced by any other entity or permit any other entity to
consolidate, amalgamate, merge with or into, or replace it, if such
consolidation, amalgamation, merger or replacement would cause the Issuer or the
Successor Entity to be classified as other than a grantor trust for United
States Federal income tax purposes.
Declaration Events of Default
An event of default under the Indenture (an "Event of Default") or a
default by DT under the Guarantee constitutes an event of default under the
Declaration with respect to the Trust Securities (a "Declaration Event of
Default"); provided that, pursuant to the Declaration, the holder of the Common
Securities will be deemed to have waived any Declaration Event of Default with
respect to the Common Securities until all Declaration Events of Default with
respect to the Convertible Preferred Securities have been cured, waived or
otherwise eliminated. Until such Declaration Events of Default with respect to
the Convertible Preferred Securities have been so cured, waived or otherwise
eliminated, the Trustee will be deemed to be acting solely on behalf of the
holders of the Convertible Preferred Securities and only the holders of the
Convertible Preferred Securities will have the right to direct the Trustee with
respect to certain matters under the Declaration and, therefore, the Indenture.
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As long as the Convertible Preferred Securities are outstanding, upon the
occurrence of a Declaration Event of Default, the Trustee as the sole holder of
the Convertible Junior Subordinated Debentures will have the right under the
Indenture to declare the principal of and interest on the Convertible Junior
Subordinated Debentures to be immediately due and payable. DT and the Issuer are
each required to file annually with the Trustee an officer's certificate as to
its compliance with all conditions and covenants under the Declaration.
Voting Rights; Amendment of Declaration
Except as described herein, under the Trust Act and under "Description of
the Guarantee--Amendments and Assignment", and as otherwise required by law and
the Declaration, the holders of the Convertible Preferred Securities have no
voting rights.
In the event of a payment default on the Convertible Preferred Securities,
any holder of the Convertible Preferred Securities may institute a legal
proceeding directly against DT to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Issuer, the Guarantee Trustee
or any other person or entity. In addition to the rights of the holders of the
Convertible Preferred Securities with respect to the enforcement of payment by
DT to the Issuer of principal of or interest on the Convertible Junior
Subordinated Debentures as provided under "Description of the
Guarantee--General" and "Description of Convertible Junior Subordinated
Debentures--Events of Default", if (i) the Issuer fails to pay distributions in
full on the Convertible Preferred Securities for six consecutive quarterly
distribution periods (whether or not a Deferral Period is in effect) or (ii) a
Declaration Event of Default occurs and is continuing (each an "Appointment
Event"), then the holders of the Convertible Preferred Securities, acting as a
single class, will be entitled by the vote of holders of a majority in aggregate
liquidation amount of the Convertible Preferred Securities to appoint a Special
Trustee. For purposes of determining whether the Issuer has failed to pay
distributions in full for six consecutive quarterly distribution periods,
distributions shall be deemed to remain in arrears, notwithstanding any payments
in respect thereof, until full cumulative distributions have been or
contemporaneously are paid with respect to all quarterly distribution periods
terminating on or prior to the date of payment of such cumulative distributions.
Any holder of Convertible Preferred Securities (other than DT or any of its
affiliates) shall be entitled to nominate any person to be appointed as Special
Trustee. Not later than 30 days after such right to appoint a Special Trustee
arises, the DT Trustees shall convene a meeting of the holders of Convertible
Preferred Securities for the purpose of appointing a Special Trustee. If the DT
Trustees fail to convene such meeting within such 30-day period, the holders of
not less than 10% of the aggregate stated liquidation amount of the outstanding
Convertible Preferred Securities will be entitled to convene such meeting. The
provisions of the Declaration relating to the convening and conduct of the
meetings of the holders will apply with respect to any such meeting. Any Special
Trustee so appointed shall cease to be a Special Trustee if the Appointment
Event pursuant to which the Special Trustee was appointed and all other
Appointment Events cease to be continuing. Notwithstanding the appointment of
any such Special Trustee, DT shall retain all rights under the Indenture,
including the right to defer payments of interest by extending the interest
payment period as provided under "Description of the Convertible Junior
Subordinated Debentures--Option to Extend Interest Payment Period". If such an
extension occurs, there will be no Event of Default under the Indenture and,
consequently, no Declaration Event of Default for failure to make any scheduled
interest payment during the Deferral Period on the date originally scheduled.
Subject to the requirement of the Trustee obtaining a tax opinion in
certain circumstances set forth in the last sentence of this paragraph, the
holders of a majority in aggregate liquidation amount of the Convertible
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or direct the
exercise of any trust or power conferred upon the Trustee under the Declaration
including the right to direct the Trustee, as holder of the Convertible Junior
Subordinated Debentures, to (i) exercise the remedies available under the
Indenture with respect to the Convertible Junior Subordinated Debentures, (ii)
waive any past Event of Default that is waiveable under the Indenture, (iii)
exercise any right to rescind or annul a declaration that the principal of all
the Convertible Junior Subordinated Debentures shall be due and payable; or (iv)
consent to any amendment, modification or termination of the Indenture or such
Convertible Junior Subordinated Debentures, where such consent shall be
required; provided, however, that, where a consent or action under the Indenture
would require the consent or act of the holders of more than a majority of the
aggregate principal amount of Convertible Junior Subordinated Debentures
affected thereby, only the holders of the percentage of the aggregate stated
liquidation preference of the Convertible Preferred Securities which is at least
equal to the percentage required under the Indenture may direct the Trustee to
give
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such consent or take such action. The Issuer Trustees shall not revoke any
action previously authorized or approved by a vote of the Convertible Preferred
Securities except by subsequent vote of the holders of the Convertible Preferred
Securities. A holder of Convertible Preferred Securities may also directly
institute a proceeding on behalf of the Issuer for enforcement of payment to the
Issuer of the principal of or interest on the Convertible Junior Subordinated
Debentures on or after the respective due dates specified in the Convertible
Junior Subordinated Debentures. The holders of the Convertible Preferred
Securities would not be able to exercise directly any other remedies available
to the holder of the Convertible Junior Subordinated Debentures unless the
Trustee or the Indenture Trustee, acting for the benefit of the Trustee, fails
to do so. In such event, the holders of at least 25% in aggregate liquidation
preference of outstanding Convertible Preferred Securities would have a right to
institute such proceedings. The Trustee shall notify all holders of the
Convertible Preferred Securities of any notice of default received from the
Indenture Trustee with respect to the Convertible Junior Subordinated
Debentures. Such notice shall state that such Event of Default also constitutes
a Declaration Event of Default. Except with respect to directing the time,
method and place of conducting a proceeding for a remedy, the Trustee shall not
take any of the actions described in clause (i), (ii), (iii) or (iv) above
unless the Trustee has obtained an opinion of nationally recognized independent
tax counsel to the effect that, as a result of such action, the Issuer will not
fail to be classified as a grantor trust for United States Federal income tax
purposes.
In the event the consent of the Trustee, as the holder of the Convertible
Junior Subordinated Debentures, is required under the Indenture with respect to
any amendment, modification or termination of the Indenture, the Trustee shall
request the direction of the holders of the Trust Securities with respect to
such amendment, modification or termination and shall vote with respect to such
amendment, modification or termination as directed by a majority in liquidation
amount of the Trust Securities voting together as a single class; provided,
however, that, where a consent under the Indenture would require the consent of
the holders of more than a majority of the aggregate principal amount of the
Convertible Junior Subordinated Debentures, the Trustee may only give such
consent at the direction of the holders of at least the same proportion in
aggregate stated liquidation preference of the Trust Securities. The Trustee
shall not take any such action in accordance with the directions of the holders
of the Trust Securities unless the Trustee has obtained an opinion of nationally
recognized independent tax counsel to the effect that for the purposes of United
States Federal income tax the Issuer will not be classified as other than a
grantor trust.
A waiver of an Event of Default under the Indenture will constitute a
waiver of the corresponding Declaration Event of Default.
The Declaration may be amended from time to time by the Issuer Trustees,
without the consent of the holders of the Convertible Preferred Securities (i)
to cure any ambiguity, correct or supplement any provisions in the Declaration
that may be defective or inconsistent with any other provision, (ii) to add to
the covenants, restrictions or obligations of DT, (iii) to conform to any change
in Rule 3a-5 of the 1940 Act or written change in interpretation or application
of Rule 3a-5 of the 1940 Act by any legislative body, court, government agency
or regulatory authority, (iv) to modify, eliminate or add to any provisions of
the Declaration to such extent as shall be necessary to ensure that the Issuer
will be classified for United States Federal income tax purposes as a grantor
trust at all times that any Convertible Preferred Securities and Common
Securities are outstanding; provided, however, that in the case of (iii) and
(iv), such amendment shall not adversely affect in any material respect the
interests of any holder of Convertible Preferred Securities or Common
Securities. In addition, if any proposed amendment to the Declaration provides
for (i) any action that would adversely affect the powers, preferences or
special rights of the holders of the Convertible Preferred Securities or the
Common Securities, whether by way of amendment to the Declaration or otherwise,
or (ii) the dissolution, winding-up or termination of the Trust, other than as
described in the Declaration, then the holders of outstanding Convertible
Preferred Securities or Common Securities as a class, will be entitled to vote
on such amendment or proposal (but not on any other amendment or proposal) and
such amendment or proposal shall not be effective except with the approval of
the holders of at least 662/3% in liquidation amount of the Convertible
Preferred Securities or Common Securities, voting together as a single class
provided, however, that, the rights of holders of Convertible Preferred
Securities to appoint, remove or replace a Special Trustee shall not be amended
without the consent of each holder of Convertible Preferred Securities;
provided, however, if any amendment or proposal referred to in clause (i) above
would adversely affect only the Convertible Preferred Securities or only the
Common Securities, then only the affected class will be entitled to vote on such
amendment or proposal and such
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amendment or proposal shall not be effective except with the approval of 662/3%
in liquidation amount of such class.
Any required approval or direction of holders of Convertible Preferred
Securities may be given at a separate meeting of holders of Convertible
Preferred Securities convened for such purpose, at a meeting of all of the
holders of Trust Securities or pursuant to written consent. The DT Trustees will
cause a notice of any meeting at which holders of Convertible Preferred
Securities are entitled to vote, or of any matter upon which action by written
consent of such holders is to be taken, to be mailed to each holder of record of
Convertible Preferred Securities. Each such notice will include a statement
setting forth the following information: (i) the date of such meeting or the
date by which such action is to be taken; (ii) a description of any resolution
proposed for adoption at such meeting on which such holders are entitled to vote
or of such matter upon which written consent is sought; and (iii) instructions
for the delivery of proxies or consents. No vote or consent of the holders of
Convertible Preferred Securities will be required for the Issuer to redeem and
cancel Convertible Preferred Securities or distribute Convertible Junior
Subordinated Debentures in accordance with the Declaration.
Notwithstanding that holders of Convertible Preferred Securities are
entitled to vote or consent under any of the circumstances described above, any
of the Convertible Preferred Securities that are owned at such time by DT or any
entity directly or indirectly controlling or controlled by, or under direct or
indirect common control with, DT, shall not be entitled to vote or consent and
shall, for purposes of such vote or consent, be treated as if such Convertible
Preferred Securities were not outstanding.
The procedures by which holders of Convertible Preferred Securities may
exercise their voting rights are described below. See "--Book-Entry-Only
Issuance--The Depository Trust Company" below.
Except in the limited circumstances described above, in connection with the
appointment of a Special Trustee, holders of the Convertible Preferred
Securities have no rights to appoint or remove the Issuer Trustees, who may be
appointed, removed or replaced solely by DT as the indirect or direct holder of
all of the Common Securities.
Registration Rights
In connection with the Original Offering, the Company entered into a
registration rights agreement dated June 12, 1997 (the "Registration Rights
Agreement") with the initial purchasers, for the benefit of the holders of the
Convertible Preferred Securities, pursuant to which the Company agreed that it
would, at its cost, (a) file a Registration Statement on Form S-3 (a "Shelf
Registration Statement") covering resales of the Convertible Preferred
Securities (together with the Convertible Junior Subordinated Debentures, the
Guarantee and the related DT Common Stock) pursuant to Rule 415 under the
Securities Act, (b) use its best efforts to cause the Shelf Registration
Statement to be declared effective under the Securities Act and (c) keep the
Shelf Registration Statement effective after its effective date for as long as
shall be required under Rule 144(k) under the Securities Act or any successor
rule or regulation thereto. In addition, the Company agreed that it would, in
the event a Shelf Registration Statement is filed, among other things, provide
to each holder for whom such Shelf Registration Statement was filed copies of
the prospectus which is a part of the Shelf Registration Statement, notify each
such holder when the Shelf Registration Statement has become effective and take
certain other actions as are required to permit unrestricted resales of such
Securities. A holder selling such Securities pursuant to the Shelf Registration
Statement generally will be required to be named as a selling security holder in
the prospectus and to deliver such prospectus to purchasers, would be subject to
certain of the civil liability provisions under the Securities Act in connection
with such sales and would be bound by the provisions of the Registration Rights
Agreement which are applicable to such holder (including certain indemnification
obligations).
If (i) by August 15, 1997, the Shelf Registration Statement had not been
filed with the SEC; (ii) by December 15, 1997, the Shelf Registration Statement
had not been declared effective by the SEC; or (iii) after the Shelf
Registration Statement had been declared effective, such Registration Statement
ceases to be effective or usable (subject to certain exceptions) in connection
with resales of Convertible Preferred Securities in accordance with and during
the periods specified in the Registration Rights Agreement (each such event
referred to in clauses (i) through (iii) a "Registration Default"), the
Convertible Junior Subordinated Debentures will bear interest at the rate per
annum of 7.66% and, therefore, distributions would accrue on the Convertible
Preferred
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Securities at the rate of 7.66% per annum, from and including the date on which
any such Registration Default shall have occurred to but excluding the date on
which all Registration Defaults have been cured. At all other times, interest
will accrue on the Convertible Junior Subordinated Debentures and distributions
will accrue on the Convertible Preferred Securities at a rate of 7.16% per
annum.
The summary herein of the material provisions of the Registration Rights
Agreement is subject to, and is qualified in its entirety by reference to, all
the provisions of the Registration Rights Agreement, a copy of which has been
filed with the Commission as an exhibit to the Registration Statement and is
incorporated by reference herein.
Book-Entry-Only Issuance--The Depository Trust Company
The description of book-entry procedures in this Prospectus includes
summaries of certain rules and operating procedures of DTC that affect transfers
of interests in the global certificate or certificates issued in connection with
sales of Convertible Preferred Securities made pursuant to this Prospectus. One
or more fully registered global Convertible Preferred Security certificates
(without restrictive legends) (the "Global Certificates") will be issued in the
name of Cede & Co. (as nominee for DTC), representing, in the aggregate,
Convertible Preferred Securities sold in the Original Offering and/or pursuant
to this Prospectus, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Participants in DTC
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. DTC is owned by a number of its
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as securities brokers and
dealers and banks and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on file
with the Commission.
Purchases of Convertible Preferred Securities within the DTC system must be
made by or through Participants, which will receive a credit for the Convertible
Preferred Securities on DTC's records. The ownership interest of each actual
purchaser of Convertible Preferred Securities ("Beneficial Owner") is in turn to
be recorded on the Participants' and Indirect Participants' records. Beneficial
Owners will not receive written confirmation from DTC of their purchases, but
Beneficial Owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of their holdings,
from the Participants or Indirect Participants through which the Beneficial
Owners purchased Convertible Preferred Securities. Transfers of ownership
interests in the Convertible Preferred Securities are to be accomplished by
entries made on the books of Participants and Indirect Participants acting on
behalf of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in Convertible Preferred Securities,
except in the event that use of the book-entry system for the Convertible
Preferred Securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Convertible
Preferred Securities; DTC's records reflect only the identity of the
Participants to whose accounts such Convertible Preferred Securities are
credited, which may or may not be the Beneficial Owners. The Participants and
Indirect Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Participants, by
Participants to Indirect Participants, and by Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
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Redemption notices in respect of the Convertible Preferred Securities held
in book-entry form shall be sent to Cede & Co. If less than all of the
Convertible Preferred Securities are being redeemed, DTC will determine the
amount of the interest of each Participant to be redeemed in accordance with its
procedures.
Although voting with respect to the Convertible Preferred Securities is
limited, in those cases where a vote is required, neither DTC nor Cede & Co.
will itself consent or vote with respect to Convertible Preferred Securities.
Under its usual procedures, DTC would mail an Omnibus Proxy to the Issuer as
soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Participants to whose accounts the
Convertible Preferred Securities are credited on the record date (identified in
a listing attached to the Omnibus Proxy).
Distributions on the Convertible Preferred Securities held in book-entry
form will be made to DTC in immediately available funds. DTC's practice is to
credit Direct Participants' accounts on the relevant payment date in accordance
with their respective holdings shown on DTC's records unless DTC has reason to
believe that it will not receive payments on such payment date. Payments by
Participants and Indirect Participants to Beneficial Owners will be governed by
standing instructions and customary practices and will be the responsibility of
such Participants and Indirect Participants and not of DTC, the Issuer or DT,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of distributions to DTC is the responsibility of the
Issuer, disbursement of such payments to Participants is the responsibility of
DTC, and disbursement of such payments to the Beneficial Owners is the
responsibility of Participants and Indirect Participants.
Except as provided herein, a Beneficial Owner of an interest in a global
Convertible Preferred Security will not be entitled to receive physical delivery
of Convertible Preferred Securities. Accordingly, each Beneficial Owner must
rely on the procedures of DTC to exercise any rights under the Convertible
Preferred Securities.
DTC may discontinue providing its services as securities depository with
respect to the Convertible Preferred Securities at any time by giving notice to
the Issuer. Under such circumstances, in the event that a successor securities
depository is not obtained, Convertible Preferred Security certificates are
required to be printed and delivered. Additionally, the Issuer (with the consent
of DT) may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor depository). In that event, certificates for the
Convertible Preferred Securities will be printed and delivered. In each of the
above circumstances, DT will appoint a paying agent with respect to the
Convertible Preferred Securities.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that DT and the Issuer believe to be reliable,
but none of DT, the Issuer or the Issuer Trustees takes responsibility for the
accuracy thereof.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in the global
Convertible Preferred Securities as represented by a Global Certificate.
Payment and Paying Agency
Payments in respect of the Convertible Preferred Securities shall be made
to DTC, which shall credit the relevant accounts at DTC on the applicable
distribution dates or, in the case of Certificated Securities, such payments
shall be made by check mailed to the address of the holder entitled thereto as
such address shall appear on the Register. The Paying Agent shall initially be
The Bank of New York. The Paying Agent shall be permitted to resign as Paying
Agent upon 30 days' written notice to the Issuer Trustees. In the event that The
Bank of New York shall no longer be the Paying Agent, the Trustee shall appoint
a successor to act as Paying Agent (which shall be a bank or trust company).
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Registrar, Transfer Agent, Paying Agent and Conversion Agent
The Bank of New York acts as Registrar, Transfer Agent, Paying Agent and
Conversion Agent for the Convertible Preferred Securities.
Registration of transfers of Convertible Preferred Securities will be
effected without charge by or on behalf of the Issuer, but upon payment (with
the giving of such indemnity as the Issuer or DT may require) in respect of any
tax or other government charges which may be imposed in relation to it.
The Issuer will not be required to register or cause to be registered the
transfer of Convertible Preferred Securities after such Convertible Preferred
Securities have been called for redemption.
Information Concerning the Trustee
The Trustee, prior to the occurrence of a default with respect to the Trust
Securities, undertakes to perform only such duties as are specifically set forth
in the Declaration and, after default, shall exercise the same degree of care as
a prudent individual would exercise in the conduct of his or her own affairs.
Subject to such provisions, the Trustee is under no obligation to exercise any
of the powers vested in it by the Declaration at the request of any holder of
Convertible Preferred Securities, unless offered reasonable indemnity by such
holder against the costs, expenses and liabilities which might be incurred
thereby. The holders of Convertible Preferred Securities will not be required to
offer such indemnity in the event such holders, by exercising their voting
rights, direct the Trustee to take any action following a Declaration Event of
Default.
Governing Law
The Declaration and the Convertible Preferred Securities are governed by,
and construed in accordance with, the internal laws of the State of Delaware.
Miscellaneous
The Issuer Trustees are authorized and directed to conduct the affairs of
and to operate the Issuer in such a way that the Issuer will not be deemed to be
an "investment company" required to be registered under the 1940 Act or
characterized as other than a grantor trust for Federal income tax purposes and
so that the Convertible Junior Subordinated Debentures will be treated as
indebtedness of DT for United States Federal income tax purposes. In this
connection, the Issuer Trustees are authorized to take any action, not
inconsistent with applicable law, the certificate of trust or the Declaration
that the Issuer Trustees determine in their discretion to be necessary or
desirable for such purposes as long as such action does not adversely affect the
interests of the holders of the Convertible Preferred Securities.
Holders of the Convertible Preferred Securities have no preemptive rights.
The Issuer may not borrow money or issue debt or mortgage or pledge any of
its assets.
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the Guarantee which
was executed and delivered by DT for the benefit of the holders from time to
time of Convertible Preferred Securities. The summary is subject in all respects
to the provisions of, and is qualified in its entirety by reference to, the
Guarantee. The Guarantee incorporates by reference the terms of the Trust
Indenture Act and will be qualified thereunder. The Bank of New York acts as
trustee under the Guarantee for purposes of the Trust Indenture Act. The Bank of
New York, as the Guarantee Trustee, holds the Guarantee for the benefit of the
holders of the Convertible Preferred Securities.
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General
Pursuant to the Guarantee, DT has irrevocably agreed, to the extent set
forth herein, to pay in full on a subordinated basis, to the holders of the
Convertible Preferred Securities, the Guarantee Payments (as defined herein), as
and when due, regardless of any defense, right of set off or counterclaim that
the Issuer may have or assert. The following payments with respect to the
Convertible Preferred Securities, to the extent not paid by or on behalf of the
Issuer (the "Guarantee Payments"), are subject to the Guarantee (without
duplication): (i) any accrued and unpaid distributions which are required to be
paid on the Convertible Preferred Securities to the extent of funds of the Trust
available therefor, (ii) the amount payable upon redemption of the Convertible
Preferred Securities, to the extent of funds of the Trust available therefor,
with respect to any Convertible Preferred Securities called for redemption by
the Issuer and (iii) upon a voluntary or involuntary dissolution, winding up or
termination of the Issuer (other than in connection with the distribution of
Convertible Junior Subordinated Debentures to the holders of the Convertible
Preferred Securities in exchange for Convertible Preferred Securities as
provided in the Declaration), the lesser of (a) the aggregate of the liquidation
preference and all accrued and unpaid dividends on the Convertible Preferred
Securities to the date of payment, to the extent of funds of the Trust available
therefor, and (b) the amount of assets of the Issuer remaining available for
distribution to holders of Convertible Preferred Securities upon the liquidation
of the Issuer. DT's obligation to make a Guarantee Payment may be satisfied by
direct payment of the required amounts by DT to the holders of Convertible
Preferred Securities or by causing the Issuer to pay such amounts to such
holders.
Because the Guarantee is a guarantee of payment and not of collection,
holders of the Convertible Preferred Securities may proceed directly against DT
as guarantor, rather than having to proceed against the Issuer before attempting
to collect from DT, and DT waives any right or remedy to require that any action
be brought against the Issuer or any other person or entity before proceeding
against DT. Such obligations will not be discharged except by payment of the
Guarantee Payments in full.
If DT fails to make interest payments on the Convertible Junior
Subordinated Debentures or pay amounts payable upon the redemption, acceleration
or maturity of the Convertible Junior Subordinated Debentures, the Issuer will
have insufficient funds to pay distributions on or to pay amounts payable upon
the redemption or repayment of the Convertible Preferred Securities. The
Guarantee does not cover payment of distributions or the amount payable upon
redemption or repayment in respect of the Convertible Preferred Securities when
the Issuer does not have sufficient funds to pay such distributions or such
amount. However, the Guarantee, when taken together with DT's obligations under
the Convertible Junior Subordinated Debentures, the Indenture and the
Declaration, provides a full, irrevocable and unconditional guarantee of all of
the Issuer's obligations under the Convertible Preferred Securities. No single
document standing alone or operating in conjunction with fewer than all of the
other documents constitutes such guarantee. It is only the combined operation of
these documents that provides a full, irrevocable and unconditional guarantee of
the Issuer's obligations under the Convertible Preferred Securities. See "Effect
of Obligations Under the Convertible Junior Subordinated Debentures and the
Guarantee".
Certain Covenants of DT
In the Guarantee, DT has covenanted that, so long as any Convertible
Preferred Securities remain outstanding, if at such time (i) DT has exercised
its option to defer interest payments on the Convertible Junior Subordinated
Debentures and such deferral is continuing, (ii) DT shall be in default with
respect to its payment or other obligations under the Guarantee or (iii) there
shall have occurred any event that, with the giving of notice or the lapse of
time or both, would constitute an Event of Default under the Indenture, then DT
(a) shall not declare or pay dividends on, make distributions with respect to,
or redeem, purchase or acquire, or make a liquidation payment with respect to,
any of its capital stock (other than stock dividends paid by DT which consist of
the stock of the same class as that on which the dividend is being paid and
other than redemptions or repurchases of any Rights and the declaration of a
dividend of such Rights in the future), (b) shall not make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities issued by DT that rank pari passu with or junior to the
Convertible Junior Subordinated Debentures, and (c) shall not make any guarantee
payments with respect to the foregoing (other than pursuant to the Guarantee).
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As part of the Guarantee, DT has agreed that it will honor all obligations
described therein relating to the conversion of the Convertible Preferred
Securities into DT Common Stock as described in "Description of the Convertible
Preferred Securities--Conversion Rights".
Amendments and Assignment
Except with respect to any changes which do not adversely affect the rights
of holders of Convertible Preferred Securities (in which case no consent of the
holders of the Convertible Preferred Securities will be required), the Guarantee
may be changed only with the prior approval of the holders of not less than
662/3% in aggregate stated liquidation preference of the outstanding Convertible
Preferred Securities. The manner of obtaining any such approval of holders of
the Convertible Preferred Securities is as set forth under "Description of the
Convertible Preferred Securities--Voting Rights; Amendment of Declaration". All
guarantees and agreements contained in the Guarantee shall bind the successors,
assigns, receivers, trustees and representatives of DT and shall inure to the
benefit of the holders of the Convertible Preferred Securities then outstanding.
Except in connection with any permitted merger or consolidation of DT with or
into another entity or any permitted sale, transfer or lease of DT's assets to
another entity as described below under "Description of the Convertible Junior
Subordinated Debentures--Restrictions", DT may not assign its rights or delegate
its obligations under the Guarantee without the prior approval of the holders of
at least 662/3% of the aggregate stated liquidation preference of the
Convertible Preferred Securities then outstanding.
Termination of the Guarantee
The Guarantee will terminate as to each holder of Convertible Preferred
Securities and be of no further force and effect upon (a) full payment of the
applicable redemption price of such holder's Convertible Preferred Securities or
(b) the distribution of DT Common Stock to such holder in respect of the
conversion of such holder's Convertible Preferred Securities into DT Common
Stock or (c) the distribution of the Convertible Junior Subordinated Debentures
to all holders of the Convertible Preferred Securities, and will terminate
completely upon full payment of the amounts payable upon liquidation of the
Issuer. The Guarantee will continue to be effective or will be reinstated, as
the case may be, if at any time any holder of Convertible Preferred Securities
must restore payment of any sums paid under such Convertible Preferred
Securities or the Guarantee.
Status of the Guarantee; Subordination
The Guarantee constitutes an unsecured obligation of DT and ranks (i)
subordinate and junior in right of payment to all liabilities of DT, except any
liabilities that may be made pari passu expressly by their terms, (ii) pari
passu with the most senior preferred or preference stock now or hereafter issued
by DT and with any guarantee now or hereafter entered into by DT in respect of
any preferred or preference stock or preferred securities of any affiliate of DT
and (iii) senior to DT Common Stock. Upon the bankruptcy, liquidation or winding
up of DT, its obligations under the Guarantee will rank junior to all its other
liabilities (except as aforesaid) and, therefore, funds may not be available for
payment under the Guarantee.
The Declaration provides that each holder of Convertible Preferred
Securities by acceptance thereof agrees to the subordination provisions and
other terms of the Guarantee.
Information Concerning the Guarantee Trustee
The Guarantee Trustee, prior to the occurrence of a default, has undertaken
to perform only such duties as are specifically set forth in the Guarantee and,
after default with respect to the Guarantee, shall exercise the same degree of
care as a prudent individual would exercise in the conduct of his or her own
affairs. Subject to such provision, the Guarantee Trustee is under no obligation
to exercise any of the powers vested in it by the Guarantee at the request of
any holder of Convertible Preferred Securities unless it is offered reasonable
indemnity against the costs, expenses and liabilities that might be incurred
thereby.
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Governing Law
The Guarantee is governed by and construed in accordance with the laws of
the State of New York, without regard to conflicts of laws principles thereof.
DESCRIPTION OF THE CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES
Set forth below is a description of the specific terms of the Convertible
Junior Subordinated Debentures in which the Issuer invested the proceeds of the
issuance and sale of (i) the Convertible Preferred Securities and (ii) the
Common Securities. The following summary is qualified in its entirety by
reference to the Indenture dated as of June 1, 1997 (the "Indenture"), between
DT and The Bank of New York, as Indenture Trustee. The Indenture will be
qualified under the Trust Indenture Act. The Bank of New York acts as trustee
under the Indenture for purposes of the Trust Indenture Act. Whenever particular
provisions or defined terms in the Indenture are referred to herein, such
provisions or defined terms are incorporated by reference herein.
Under certain circumstances involving the dissolution of the Issuer
following the occurrence of a Tax Event or Investment Company Event, Convertible
Junior Subordinated Debentures may be distributed to the holders of the
Convertible Preferred Securities in liquidation of the Issuer. See "Description
of the Convertible Preferred Securities--Tax Event or Investment Company Event
Redemption or Distribution".
General
The Convertible Junior Subordinated Debentures were issued as a series of
Convertible Junior Subordinated Debentures under the Indenture. The Trustee is
the initial holder of the Convertible Junior Subordinated Debentures. The
Convertible Junior Subordinated Debentures are limited in aggregate principal
amount to approximately 103.092857% of the aggregate stated liquidation
preference of the Convertible Preferred Securities, such amount being the sum of
the aggregate stated liquidation preference of the Convertible Preferred
Securities and the Common Securities. The Indenture does not limit the aggregate
principal amount of Convertible Junior Subordinated Debentures which may be
issued thereunder and provides that the Convertible Junior Subordinated
Debentures may be issued thereunder from time to time in one or more series.
The entire principal amount of the Convertible Junior Subordinated
Debentures will become due and payable, together with any accrued and unpaid
interest thereon, including Additional Interest (as defined herein), if any, on
May 31, 2012.
The Convertible Junior Subordinated Debentures are unsecured and rank
junior and are subordinate in right of payment to all Senior Indebtedness of DT.
See "--Subordination".
The Convertible Junior Subordinated Debentures, if distributed to holders
of Convertible Preferred Securities in a dissolution of the Issuer, will
initially be issued as a global security to the extent of any Global
Certificates at the time representing any Convertible Preferred Securities and
otherwise in fully registered, certificated form. In the event that Convertible
Junior Subordinated Debentures are issued in certificated form, such Convertible
Junior Subordinated Debentures will be in denominations of $50 and integral
multiples thereof and may be transferred or exchanged at the offices described
below.
Payments on Convertible Junior Subordinated Debentures issued as a global
security will be made to DTC, as the depository for the Convertible Junior
Subordinated Debentures. In the event Convertible Junior Subordinated Debentures
are issued in certificated form, principal and interest will be payable, the
transfer of the Convertible Junior Subordinated Debentures will be registrable
and Convertible Junior Subordinated Debentures will be exchangeable for
Convertible Junior Subordinated Debentures of other denominations of a like
aggregate principal amount at the corporate trust office of the Indenture
Trustee in The City of New York; provided that, unless the Convertible Junior
Subordinated Debentures are held by the Issuer or any successor permissible
under "Description of the Convertible Preferred Securities--Merger,
Consolidation or Amalgamation of the Issuer", payment of interest may be made at
the option of DT by check mailed to the address of the persons entitled thereto.
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The Indenture does not contain any provisions that afford holders of
Convertible Junior Subordinated Debentures protection in the event of a highly
leveraged transaction involving DT. The Convertible Junior Subordinated
Debentures are not entitled to the benefit of any sinking fund.
Interest
Each Convertible Junior Subordinated Debenture bears interest at the rate
of 7.16% per annum from the Original Offering Date, payable quarterly in arrears
on March 31, June 30, September 30 and December 31 (each, an "Interest Payment
Date"), commencing June 30, 1997, to the person in whose name such Convertible
Junior Subordinated Debenture is registered at the close of business on the day
immediately preceding such Interest Payment Date. Interest compounds quarterly
and accrues at the annual rate of 7.16% on any interest installment not paid
when due.
The amount of interest payable for any period is computed on the basis of a
360-day year of twelve 30-day months. In the event that any date on which
interest is payable on the Convertible Junior Subordinated Debentures is not a
Business Day, then payment of the interest payable on such date will be made on
the next succeeding day which is a Business Day (without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date.
Option to Extend Interest Payment Period
DT shall have the right at any time during the term of the Convertible
Junior Subordinated Debentures to defer interest payments from time to time for
successive periods not exceeding 20 consecutive quarters for each such period.
At the end of each Deferral Period, DT shall pay all interest then accrued and
unpaid (together with interest thereon at the rate specified for the Convertible
Junior Subordinated Debentures to the extent permitted by applicable law). In no
event shall any Deferral Period extend beyond the maturity of the Convertible
Junior Subordinated Debentures. During any Deferral Period, DT (i) shall not
declare or pay dividends on, make distributions with respect to, or redeem,
purchase or acquire, or make a liquidation payment with respect to, any of its
capital stock (other than stock dividends paid by DT which consist of stock of
the same class as that on which the dividend is being paid and other than
redemptions or repurchases of any Rights and the declaration of a dividend of
such Rights in the future), (ii) shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities issued by DT that rank pari passu with or junior to the Convertible
Junior Subordinated Debentures, and (iii) shall not make any guarantee payments
with respect to the foregoing (other than pursuant to the Guarantee). Prior to
the termination of any such Deferral Period, DT may further extend such Deferral
Period; provided that such Deferral Period together with all previous and
further extensions thereof may not exceed 20 consecutive quarters. Upon the
termination of any Deferral Period and the payment of all amounts then due, DT
may select a new Deferral Period, subject to the above requirements. No interest
during a Deferral Period, except at the end thereof, shall be due and payable.
If the Issuer shall be the sole holder of the Convertible Junior Subordinated
Debentures, DT shall give the Issuer notice of its selection of such Deferral
Period at least one Business Day prior to the earlier of (i) the date the
distributions on the Convertible Preferred Securities are payable or (ii) the
date the Issuer is required to give notice to any applicable self-regulatory
organization or to holders of the Convertible Preferred Securities on the record
date or the date such distribution is payable, but in any event not less than
ten Business Days prior to such record date. DT shall cause the Issuer to give
notice of DT's selection of such Deferral Period to the holders of the
Convertible Preferred Securities. If the Issuer shall not be the sole holder of
the Convertible Junior Subordinated Debentures, DT shall give the holders of the
Convertible Junior Subordinated Debentures notice of its selection of such
Deferral Period at least ten Business Days prior to the earlier of (i) the
Interest Payment Date or (ii) the date DT is required to give notice to any
applicable self-regulatory organization or to holders of the Convertible Junior
Subordinated Debentures on the record or payment date of such related interest
payment, but in any event not less than two Business Days prior to such record
date.
Additional Interest
If the Issuer would be required to pay any taxes, duties, assessments or
governmental charges of whatever nature (other than withholding taxes) imposed
by the United States, or any other taxing authority, then,
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in any such case, DT will pay as additional interest ("Additional Interest")
such amounts as shall be required so that the net amounts received and retained
by the Issuer after paying any such taxes, duties, assessments or governmental
charges will be not less than the amounts the Issuer would have received had no
such taxes, duties, assessments or governmental charges been imposed.
Conversion of the Convertible Junior Subordinated Debentures
The Convertible Junior Subordinated Debentures are convertible into DT
Common Stock at the option of the holders of the Convertible Junior Subordinated
Debentures at any time at the initial conversion price of $38.75 subject to the
conversion price adjustments described under "Description of the Convertible
Preferred Securities--Conversion Rights". The Issuer has agreed not to convert
Convertible Junior Subordinated Debentures held by it except pursuant to a
notice of conversion delivered to the Conversion Agent by a holder of
Convertible Preferred Securities. Upon surrender of a Convertible Preferred
Security to the Conversion Agent for conversion, the Issuer will distribute $50
principal amount of the Convertible Junior Subordinated Debentures to the
Conversion Agent on behalf of the holder of the Convertible Preferred Securities
so converted, whereupon the Conversion Agent will convert such Convertible
Junior Subordinated Debentures into DT Common Stock on behalf of such holder.
DT's delivery to the holders of the Convertible Junior Subordinated Debentures
(through the Conversion Agent) of the fixed number of shares of DT Common Stock
into which the Convertible Junior Subordinated Debentures are convertible
(together with the cash payment, if any, in lieu of fractional shares) will be
deemed to satisfy DT's obligation to pay the principal amount of the Convertible
Junior Subordinated Debentures so converted, and the accrued and unpaid interest
thereon attributable to the period from the last date to which interest has been
paid or duly provided for; provided, however, that if any Convertible Junior
Subordinated Debenture is converted after a record date for payment of interest,
the interest payable on the related interest payment date with respect to such
Convertible Junior Subordinated Debenture shall be paid to the Issuer (which
will distribute such interest to the converting holder) or other holder of
Convertible Junior Subordinated Debentures, as the case may be, despite such
conversion.
Optional Redemption
DT shall have the right to redeem the Convertible Junior Subordinated
Debentures, in whole or in part, at any time or from time to time after June 1,
2000, upon not less than 30 nor more than 60 days' notice, at the following
prices per $50 principal amount of the Convertible Junior Subordinated
Debentures to be redeemed plus any accrued and unpaid interest, including
Additional Interest, if any, to the redemption date, if redeemed during the
12-month period ending June 1:
Price per $50
Principal
Year Amount
---- -------------
2001 ...................... $ 52.51
2002 ...................... 52.15
2003 ...................... 51.79
2004 ...................... 51.43
2005 ...................... 51.07
2006 ...................... 50.72
2007 ...................... 50.36
and thereafter at $50 per $50 principal amount of Convertible Junior
Subordinated Debentures plus, in each case, accrued and unpaid interest,
including Additional Interest, if any, to the redemption date.
In the event of any redemption in part, DT shall not be required to (i)
issue, register the transfer of or exchange any Convertible Junior Subordinated
Debenture during a period beginning at the opening of business 15 days before
any selection for redemption of Convertible Junior Subordinated Debentures and
ending at the close of business on the earliest date on which the relevant
notice of redemption is deemed to have been given to all holders of Convertible
Junior Subordinated Debentures to be so redeemed and (ii) register the transfer
of
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or exchange any Convertible Junior Subordinated Debentures so selected for
redemption, in whole or in part, except the unredeemed portion of any
Convertible Junior Subordinated Debenture being redeemed in part.
Tax Event or Investment Company Event Redemption or Distribution
Under certain circumstances, DT shall have the right, upon not less than 30
nor more than 60 days' notice and within 90 days following the occurrence of a
Tax Event to redeem the Convertible Junior Subordinated Debentures, in whole
(but not in part) for cash, at par plus accrued and unpaid interest. See
"Description of the Convertible Preferred Securities-Tax Event or Investment
Company Event Redemption or Distribution".
Subordination
The Indenture provides that the Convertible Junior Subordinated Debentures
are subordinate and junior in right of payment to all Senior Indebtedness of DT
as provided in the Indenture. No payment of principal of (including redemption
payments), or interest on, the Convertible Junior Subordinated Debentures may be
made (i) if any Senior Indebtedness is not paid when due, any applicable grace
period with respect to such default has ended and such default has not been
cured or waived, or (ii) if the maturity of any Senior Indebtedness has been
accelerated because of a default. Upon any distribution of assets of DT to
creditors upon any dissolution, winding up, liquidation or reorganization,
whether voluntary or involuntary or in bankruptcy, insolvency, receivership or
other proceedings, all principal of, and premium, if any, and interest due or to
become due on, all Senior Indebtedness must be paid in full before the holders
of the Convertible Junior Subordinated Debentures are entitled to receive or
retain any payment. In the event that, notwithstanding the foregoing, any
payment or distribution of cash, property or securities shall be received or
collected by a holder of the Convertible Junior Subordinated Debentures in
contravention of the foregoing provisions, such payment or distribution shall be
held for the benefit of and shall be paid over to the holders of Senior
Indebtedness or their representative or representatives or to the trustee or
trustees under any indenture under which any instrument evidencing Senior
Indebtedness may have been issued, as their respective interests may appear, to
the extent necessary to pay in full all Senior Indebtedness then due, after
giving effect to any concurrent payment to the holders of Senior Indebtedness.
Subject to the payment in full of all Senior Indebtedness, the rights of the
holders of the Convertible Junior Subordinated Debentures will be subrogated to
the rights of the holders of Senior Indebtedness to receive payments or
distributions applicable to Senior Indebtedness until all amounts owing on the
Convertible Junior Subordinated Debentures are paid in full.
The term "Senior Indebtedness" shall mean in respect of DT (i) the
principal, premium, if any, and interest in respect of (A) indebtedness of such
obligor for money borrowed and (B) indebtedness evidenced by securities,
debentures, bonds or other similar instruments issued by such obligor, (ii) all
capital lease obligations of such obligor, (iii) all obligations of such obligor
issued or assumed as the deferred purchase price of property, all conditional
sale obligations of such obligor and all obligations of such obligor under any
title retention agreement (but excluding trade accounts payable arising in the
ordinary course of business), (iv) all obligations of such obligor for the
reimbursement of any letter of credit, banker's acceptance, security purchase
facility or similar credit transaction, (v) all obligations of the type referred
to in clauses (i) through (iv) above of other persons for the payment of which
such obligor is responsible or liable as obligor, guarantor or otherwise, and
(vi) all obligations of the type referred to in clauses (i) through (v) above of
other persons secured by any lien on any property or asset of such obligor
(whether or not such obligation is assumed by such obligor), except for (1) any
such indebtedness that is by its terms subordinated to or pari passu with the
Convertible Junior Subor dinated Debentures and (2) any indebtedness (including
all other debt securities and guarantees in respect of those debt securities)
initially issued to any other trust, or a trustee of such trust, partnership or
other entity affiliated with DT that is, directly or indirectly, a financing
vehicle of DT (a "Financing Entity") in connection with the issuance by such
Financing Entity of preferred securities or other similar securities. Senior
Indebtedness will also include interest accruing subsequent to events of
bankruptcy of DT and its subsidiaries at the rate provided for in the
documentation governing such Senior Indebtedness, whether or not such interest
is an allowed claim enforceable against the debtor in a bankruptcy case under
relevant bankruptcy law. Such Senior Indebtedness shall continue to be Senior
Indebtedness and entitled to the benefits of the subordination provisions
irrespective of any amendment, modification or waiver of any term of such Senior
Indebtedness.
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The Indenture does not limit the aggregate amount of Senior Indebtedness DT
may issue. At March 30, 1997, Senior Indebtedness of DT aggregated approximately
$130.5 million (or $63.0 million of Senior Indebtedness after giving pro forma
effect to the Original Offering). See "Capitalization" and "Pro Forma Selected
Consolidated Financial Data" .
Certain Covenants
If (i) there shall have occurred any event that would constitute an Event
of Default, (ii) DT shall be in default with respect to its payment of any
obligations under the Guarantee, or (iii) DT shall have given notice of its
election to defer payments of interest on the Convertible Junior Subordinated
Debentures by extending the interest payment period as provided in the Indenture
and such period, or any extension thereof, shall be continuing, then DT (a)
shall not declare or pay dividends on, make distributions with respect to, or
redeem, purchase or acquire, or make a liquidation payment with respect to, any
of its capital stock (other than stock dividends paid by DT which consist of
stock of the same class as that on which the dividend is being paid and other
than redemptions or repurchases of any Rights and the declaration of a dividend
of such Rights in the future), (b) shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities issued by DT that rank pari passu with or junior to the Convertible
Junior Subordinated Debentures, and (c) shall not make any guarantee payments
with respect to the foregoing (other than pursuant to the Guarantee).
DT has agreed (i) to directly or indirectly maintain 100% ownership of the
Common Securities of the Trust; provided, however, that any permitted successor
of DT under the Indenture may succeed to DT's ownership of such Common
Securities and (ii) to use its reasonable efforts to cause the Trust (x) to
remain a statutory business trust, except in connection with the distribution of
Convertible Junior Subordinated Debentures to the holders of Trust Securities in
liquidation of the Trust, the redemption of all of the Trust Securities of the
Trust, or certain mergers, consolidations or amalgamations, each as permitted by
the Declaration, and (y) to otherwise continue to be classified as a grantor
trust for United States Federal income tax purposes.
Restrictions
The Indenture provides that DT shall not consolidate with or merge with or
into any other corporation, or, directly or indirectly, convey, transfer or
lease all or substantially all of the properties and assets of DT on a
consolidated basis to any Person, unless either DT is the continuing corporation
or such corporation or Person assumes by supplemental indenture all the
obligations of DT under the Indenture and the Convertible Junior Subordinated
Debentures, no default or Event of Default shall exist immediately after the
transaction, and the surviving corporation or such Person is a corporation,
partnership or trust organized and validly existing under the laws of the United
States of America, any state thereof or the District of Columbia.
Events of Default
The Indenture provides that any one or more of the following described
events, which has occurred and is continuing, constitutes an "Event of Default"
with respect to the Convertible Junior Subordinated Debentures: (i) failure for
30 days to pay interest on the Convertible Junior Subordinated Debentures,
including any Additional Interest in respect thereof, when due; or (ii) failure
to pay principal of or premium, if any, on the Convertible Junior Subordinated
Debentures when due whether at maturity, upon redemption, by declaration or
otherwise; or (iii) failure by DT to issue and deliver shares of DT Common Stock
upon an election by a holder of Convertible Preferred Securities to convert such
Convertible Preferred Securities; or (iv) failure to observe or perform any
other covenant contained in the Indenture for 90 days after notice; or (v) the
dissolution, winding up or termination of the Issuer, except in connection with
the distribution of Convertible Junior Subordinated Debentures to the holders of
Convertible Preferred Securities in liquidation of the Issuer, the redemption of
all of the outstanding Convertible Preferred Securities of the Issuer or in
connection with certain mergers, consolidations or amalgamations permitted by
the Declaration; or (vi) certain events in bankruptcy, insolvency or
reorganization of DT. A default under any other indebtedness of DT or the Issuer
would not constitute an Event of Default under the Convertible Junior
Subordinated Debentures.
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The Indenture Trustee or the holders of not less than 25% in aggregate
outstanding principal amount of the Convertible Junior Subordinated Debentures
may declare the principal of and interest (including any Additional Interest) on
the Convertible Junior Subordinated Debentures due and payable immediately on
the occurrence of an Event of Default and, should the Indenture Trustee or such
holders of Convertible Junior Subordinated Debentures fail to make such
declaration, the holders of at least 25% in aggregate liquidation preference of
outstanding Convertible Preferred Securities shall have such right. After such
acceleration, but before a judgment or decree based on acceleration, the holders
of a majority in aggregate principal amount of outstanding Convertible Junior
Subordinated Debentures may, under certain circumstances, rescind and annul such
acceleration if all Events of Default, other than the nonpayment of accelerated
principal, have been cured or waived as provided in the Indenture and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Indenture Trustee.
No holder of any Convertible Junior Subordinated Debenture will have any
right to institute any proceeding with respect to the Indenture or for any
remedy thereunder, unless such holder shall have previously given to the
Indenture Trustee written notice of a continuing Event of Default and, if the
Issuer is not the sole holder of Convertible Junior Subordinated Debentures,
unless the holders of at least 25% in aggregate principal amount of the
Convertible Junior Subordinated Debentures then outstanding shall also have made
written request, and offered reasonable indemnity, to the Indenture Trustee to
institute such proceeding as Indenture Trustee, and the Indenture Trustee shall
not have received from the holders of a majority in aggregate principal amount
of the outstanding Convertible Junior Subordinated Debentures a direction
inconsistent with such request and shall have failed to institute such
proceeding within 60 days. However, such limitations do not apply to a suit
instituted by a holder of a Convertible Junior Subordinated Debenture or a
holder of a Convertible Preferred Security for enforcement of payment of the
principal of or interest on such Convertible Junior Subordinated Debenture on or
after the respective due dates specified in such Convertible Junior Subordinated
Debenture or for the conversion of a Convertible Preferred Security or a
Convertible Junior Subordinated Debenture.
Notwithstanding the foregoing, a holder of Convertible Preferred Securities
may directly institute a proceeding on behalf of the Issuer for enforcement of
payment to such holder of such holder's ratable portion of the principal of or
interest on the Convertible Junior Subordinated Debentures on or after the
respective due dates specified in the Convertible Junior Subordinated Debentures
or for the conversion of a Convertible Preferred Security or Convertible Junior
Subordinated Debenture. The holders of the Convertible Preferred Securities
would not be able to exercise directly any other remedies available to the
holder of the Convertible Junior Subordinated Debentures unless the Trustee or
the Indenture Trustee, acting for the benefit of the Trustee, fails to do so. In
such event, the holders of at least 25% in aggregate liquidation preference of
outstanding Convertible Preferred Securities would have such right to institute
proceedings.
Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee in case an Event of Default shall occur and be continuing, the
Indenture Trustee will be under no obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any holders of
Convertible Junior Subordinated Debentures, unless such holders shall have
offered to the Indenture Trustee reasonable indemnity. Subject to such
provisions for the indemnification of the Indenture Trustee, the holders of a
majority in aggregate principal amount of the Convertible Junior Subordinated
Debentures then outstanding will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Indenture
Trustee, or exercising any trust or power conferred on the Indenture Trustee
with respect to such series.
The holders of a majority in aggregate outstanding principal amount of all
series of the Convertible Junior Subordinated Debentures affected thereby may,
on behalf of the holders of all the Convertible Junior Subordinated Debentures
of such series, waive any past default, except a default in the payment of
principal, premium, if any, or interest (unless such default has been cured and
a sum sufficient to pay all matured installments of principal, premium, if any,
and interest due otherwise than by acceleration has been deposited with the
Indenture Trustee) or a default in respect of a covenant or provision which
under the Indenture cannot be modified or amended without the consent of the
holder of each Convertible Junior Subordinated Debenture. DT is required to file
annually with the Indenture Trustee and the Trustee a certificate as to whether
or not DT is in compliance with all the conditions and covenants under the
Indenture.
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Modification of the Indenture
From time to time, DT and the Trustee may, without the consent of the
holders of the Convertible Junior Subordinated Debentures, amend, waive or
supplement the Indenture for specified purposes, including, among other things,
curing ambiguities, defects or inconsistencies (provided that any such action
does not adversely affect the interests of the holders of the Convertible Junior
Subordinated Debentures). The Indenture contains provisions permitting DT and
the Indenture Trustee, with the consent of the holders of not less than a
majority in principal amount of the Convertible Junior Subordinated Debentures
of each series which are affected by the modification, to modify the Indenture
or any supplemental indenture affecting that series or the rights of the holders
of that series of Convertible Junior Subordinated Debentures; provided that no
such modification may, without the consent of the holder of each outstanding
Convertible Junior Subordinated Debenture affected thereby, (i) extend the fixed
maturity of any Convertible Junior Subordinated Debentures of any series, or
reduce the principal amount thereof, or reduce the rate or extend the time of
payment of interest thereon, or reduce any premium payable upon the redemption
thereof, or adversely affect the right to convert Convertible Junior
Subordinated Debentures, without the consent of the holder of each Convertible
Junior Subordinated Debenture so affected, or (ii) reduce the percentage of
Convertible Junior Subordinated Debentures, the holders of which are required to
consent to any such supplemental indenture, without the consent of the holders
of each Convertible Junior Subordinated Debenture then outstanding and affected
thereby, provided that, so long as any of the Convertible Preferred Securities
remains outstanding, no such modification may be made that adversely affects the
holders of such Convertible Preferred Securities, and no termination of the
Indenture may occur, and no waiver of any Event of Default or compliance with
any covenant under the Indenture shall be effective, without the prior consent
of the holders of the percentage of the aggregate stated liquidation preference
of the outstanding Convertible Preferred Securities which is at least equal to
the percentage of aggregate stated liquidation preference of the outstanding
Convertible Junior Subordinated Debentures required to make such modification.
In addition, DT and the Indenture Trustee may execute, without the consent
of any holder of Convertible Junior Subordinated Debentures, any supplemental
indenture for certain other usual purposes including the creation of any new
series of Convertible Junior Subordinated Debentures.
Set off
Notwithstanding anything contained to the contrary in the Indenture, DT
shall have the right to set off any payment with respect to the Convertible
Junior Subordinated Debentures it is otherwise required to make thereunder with
and to the extent DT has theretofore made, or is concurrently on the date of
such payment making, a payment under the Guarantee.
Information Concerning the Indenture Trustee
The Indenture Trustee, prior to default, undertakes to perform only such
duties as are specifically set forth in the Indenture and, after default, shall
exercise the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. Subject to such provision, the Indenture
Trustee is under no obligation to exercise any of the powers vested in it by the
Indenture at the request of any holder of Convertible Junior Subordinated
Debentures, unless offered reasonable indemnity by such holder against the
costs, expenses and liabilities which might be incurred thereby. The Indenture
Trustee is not required to expend or risk its own funds or otherwise incur
personal financial liability in the performance of its duties if the Indenture
Trustee reasonably believes that repayment or adequate indemnity is not
reasonably assured to it.
Governing Law
The Indenture and the Convertible Junior Subordinated Debentures are
governed by, and construed in accordance with, the laws of the State of New
York, without regard to conflicts of laws principles thereof.
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EFFECT OF OBLIGATIONS UNDER THE
CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE
As set forth in the Declaration, the sole purpose of the Issuer is to issue
the Trust Securities and use the proceeds thereof to purchase from DT the
Convertible Junior Subordinated Debentures.
As long as payments of interest and other payments are made when due on the
Convertible Junior Subordinated Debentures, such payments will be sufficient to
cover distributions and payments due on the Convertible Preferred Securities
primarily because (i) the aggregate principal amount of Convertible Junior
Subordinated Debentures will be equal to the sum of the aggregate stated
liquidation preference of the Convertible Preferred Securities and the Common
Securities; (ii) the interest rate and interest and other payment dates on the
Convertible Junior Subordinated Debentures will match the distribution rate and
distribution and other payment dates for the Convertible Preferred Securities;
(iii) the Declaration provides that DT, as originator, shall pay for all, and
the Issuer shall not be obligated to pay, directly or indirectly, for any, costs
and expenses of the Issuer; and (iv) the Declaration further provides that the
holders of Common Securities and the Issuer Trustees shall not cause or permit
the Issuer to, among other things, engage in any activity that is not consistent
with the purposes of the Issuer. In addition, DT has also guaranteed payment of
the costs and expenses of the Issuer.
A holder of Convertible Preferred Securities may directly institute a
proceeding on behalf of the Issuer for enforcement of payment to such holder of
such holder's ratable portion of the principal of or interest on the Convertible
Junior Subordinated Debentures on or after the respective due dates specified in
the Convertible Junior Subordinated Debentures. The holders of the Convertible
Preferred Securities would not be able to exercise directly any other remedies
available to the holder of the Convertible Junior Subordinated Debentures unless
the Trustee or the Indenture Trustee, acting for the benefit of the Trustee,
fails to do so. In such event, the holders of at least 25% in aggregate
liquidation preference of outstanding Convertible Preferred Securities would
have such right to institute proceedings. In addition, if DT fails to make
interest or other payments on the Convertible Junior Subordinated Debentures
when due, the Declaration provides a mechanism whereby the holders of the
Convertible Preferred Securities may (i) appoint a Special Trustee and (ii)
direct the Trustee to enforce its rights under the Convertible Junior
Subordinated Debentures. If the Trustee fails to enforce its rights under the
Convertible Junior Subordinated Debentures, the Indenture provides that a holder
of Convertible Preferred Securities may, after a holder makes written request to
the Trustee to enforce such rights, institute a legal proceeding directly
against DT to enforce the Trustee's right under the Convertible Junior
Subordinated Debentures without first instituting any legal proceeding against
the Trustee or any other person or entity.
Payments of distributions and other payments due on the Convertible
Preferred Securities out of moneys held by the Issuer are irrevocably guaranteed
by DT to the extent set forth under "Description of the Guarantee", although the
Guarantee does not cover payment of distributions or the amount payable upon
redemption or repayment in respect of the Convertible Preferred Securities when
the Issuer does not have sufficient funds to pay such distributions or such
amount. If and to the extent that DT does not make payments on the Convertible
Junior Subordinated Debentures, it is expected that the Issuer will not have
sufficient funds to pay distributions or other payments due on the Convertible
Preferred Securities. However, the Guarantee, when taken together with DT's
obligations under the Convertible Junior Subordinated Debentures, the Indenture
and the Declaration, provides a full, irrevocable and unconditional guarantee of
payments of distributions and other amounts due on the Convertible Preferred
Securities. No single document standing alone or operating in conjunction with
fewer than all of the other documents constitutes such guarantee. It is only the
combined operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of the Issuer's obligations under the
Convertible Preferred Securities.
If DT fails to make payments under the Guarantee, any holder of a
Convertible Preferred Security may institute a legal proceeding directly against
DT to enforce its rights under the Guarantee without first instituting a legal
proceeding against the Issuer or any other person or entity. Such payment would
be made directly to the holders of the Convertible Preferred Securities. If DT
fails to make payments in respect of the Issuer's costs and expenses as required
by the Declaration, a creditor of the Issuer may institute a legal proceeding
directly against DT to enforce such payments.
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DESCRIPTION OF DT CAPITAL STOCK
General
The Amended and Restated Certificate of Incorporation of the Company (the
"Certificate") authorizes 1,500,000 shares of Preferred Stock, $.01 par value
("DT Preferred Stock") and 100,000,000 shares of DT Common Stock. At June 27,
1997, there were outstanding (a) no shares of DT Preferred Stock, (b) 11,300,875
shares of DT Common Stock and (c) stock options to purchase an aggregate of
approximately 952,150 shares of DT Common Stock.
DT Common Stock
Subject to the rights, if any, of holders of DT Preferred Stock, holders of
DT Common Stock are entitled to receive dividends out of funds legally available
therefor when, as and if declared by the Board of Directors of the Company and
to receive pro rata the net assets of the Company legally available for
distribution upon liquidation or dissolution.
Holders of DT Common Stock are entitled to one vote for each share of DT
Common Stock held on each matter submitted to a vote of stockholders including
the election of directors. Holders of DT Common Stock are not entitled to
cumulative voting, which means that the holders of more than 50% of the
outstanding DT Common Stock can elect all of the directors if they choose to do
so. All shares of outstanding DT Common Stock of the Company are, and the shares
to be issued by the Company upon conversion of the Convertible Junior
Subordinated Debentures will be, fully paid and nonassessable. Holders of DT
Common Stock do not have preemptive or other subscription rights.
The DT Common Stock is quoted on the NNM. ChaseMellon Shareholder Services,
L.L.C. is the Registrar and Transfer Agent for the DT Common Stock.
DT Preferred Stock
The Board of Directors of the Company is authorized to fix the number of
shares and determine the designation of any series of the authorized shares of
the DT Preferred Stock and to determine or alter the rights, preferences,
privileges and restrictions granted to or imposed upon any unissued series of DT
Preferred Stock.
The Series A Preferred Stock is issuable pursuant to the Rights Agreement
described herein. See "Description of the Convertible Preferred
Securities--Conversion Rights."
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attemps to acquire the Company
without conditioning the offer on redemption of the Rights or on a substantial
number of Rights being acquired. The Rights should not interfere with any merger
or other business combination approved by the Board of Directors of the Company
prior to the time that the Rights may not be redeemed since the Board of
Directors may, at its option, at any time until such date redeem all but not
less than all of the then outstanding Rights. The Rights are designed to provide
additional protection against abusive takeover tactics such as offers for all
shares at less than full value, partial tender offers and selective open-market
purchases. The Rights are intended to assure that the Company's Board of
Directors has the ability to protect stockholders and the Company if efforts are
made to gain control of the Company in a manner that is not in the best
interests of the Company and its stockholders.
Certain Certificate of Incorporation and By-law Provisions
The Certificate provides that the Company's directors are not liable to the
Company or its stockholders for monetary damages for breach of their fiduciary
duties, except under certain circumstances, including breach of the director's
duty of loyalty, acts or omissions not in good faith or involving intentional
misconduct or a knowing violation of law or any transaction from which the
director derived improper personal benefit. The inclusion of this provision in
the Certificate may have the effect of reducing the likelihood of derivative
litigation
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against directors and may discourage or deter stockholders or management from
bringing a lawsuit against directors for breach of their duty of care.
The Certificate grants to the Board of Directors of the Company the power
to amend, adopt or repeal the Company's By-Laws without stockholder vote. The
Company's By-Laws provide that the number of directors shall be as from time to
time fixed by resolution of the Board of Directors of the Company, not less than
3 nor more than 11. The Certificate divides the Company's Board of Directors
into three classes with staggered terms. These provisions, in addition to the
existence of authorized but unissued capital stock, may have the effect, either
alone or in combination with each other, of discouraging an acquisition of the
Company even if such an acquisition is desired by certain stockholders of the
Company.
Certain Effects of Authorized but Unissued Stock
At June 27, 1997, there were 88,699,125 shares of DT Common Stock and
1,500,000 shares of DT Preferred Stock available for future issuance without
stockholder approval. These additional shares may be utilized for a variety of
corporate purposes, including future public offerings to raise additional
capital or to facilitate corporate acquisitions. The Company does not currently
have any plans to issue additional shares of capital stock, other than shares of
DT Common Stock which may be issued (i) upon conversion of the Convertible
Junior Subordinated Debentures, (ii) pursuant to the purchase agreement relating
to the acquisition of Kalish, (iii) upon the exercise of options or (iv)
pursuant to management incentive compensation plans.
One of the effects of the existence of unissued and unreserved DT Common
Stock and undesignated DT Preferred Stock may be to enable the Board of
Directors of the Company to issue shares to persons friendly to current
management which could render more difficult or discourage an attempt to obtain
control of the Company by means of a merger, tender offer, proxy contest or
otherwise, and thereby protect the continuity of the Company's management. The
Board of Directors of the Company can issue DT Preferred Stock with voting and
conversion rights which could adversely affect the voting power of holders of DT
Common Stock.
Delaware Takeover Statute
Section 203 of the Delaware General Corporation Law, as amended ("Section
203"), provides that, subject to certain exceptions specified therein, an
"interested stockholder" of a Delaware corporation shall not engage in any
business combination, including mergers or consolidations or acquisitions of
additional shares of the corporation with the corporation for a three-year
period following the date that such stockholder becomes an "interested
stockholder" unless (i) prior to such date, the board of directors of the
corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an "interested stockholder", (ii) upon
consummation of the transaction which resulted in the stockholder becoming an
"interested stockholder", the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding certain shares) or (iii) on or subsequent to such dates,
the business combination is approved by the board of directors of the
corporation and authorized at an annual or special meeting of stockholders by
the affirmative vote of at least 662/3% of the outstanding voting stock which is
not owned by the "interested stockholder". Except as otherwise specified in
Section 203, an "interested stockholder" is defined to include (x) any person
that is the owner of 15% or more of the outstanding voting stock of the
corporation, or is an affiliate or associate of the corporation and was the
owner of 15% or more of the outstanding voting stock of the corporation at any
time within three years immediately prior to the relevant date and (y) the
affiliates and associates of any such person.
These provisions could have the effect of delaying, deferring or preventing
a change of control of the Company. The Company's stockholders, by adopting an
amendment to its Certificate or By-Laws, may elect not to be governed by Section
203, effective twelve months after adoption. Neither the Certificate nor the
By-Laws presently exclude the Company from the restrictions imposed by Section
203.
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UNITED STATES TAXATION
General
The following summary of the material United States Federal income tax
consequences of the purchase, ownership and disposition of Convertible Preferred
Securities represents the opinion of Dickstein Shapiro Morin & Oshinsky LLP,
special counsel to DT and the Trust, as confirmed by an opinion letter filed as
an exhibit to the Registration Statement of which this Prospectus forms a part.
Investors should be aware that the opinion of Dickstein Shapiro Morin & Oshinsky
LLP is not binding on the Service or the courts. Unless otherwise stated, this
summary deals only with Convertible Preferred Securities held as capital assets.
It does not deal with special classes of holders such as banks, thrifts, real
estate investment trusts, regulated investment companies, insurance companies,
dealers in securities or currencies, tax-exempt investors, or persons that will
hold the Convertible Preferred Securities as other than a capital asset. This
summary also does not address the tax consequences to persons that have a
functional currency other than the U.S. Dollar or the tax consequences to
shareholders, partners or beneficiaries of a holder of Convertible Preferred
Securities. Further, it does not include any description of any alternative
minimum tax consequences or the tax laws of any state or local government or of
any foreign government that may be applicable to the Convertible Preferred
Securities. This summary is based on the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury regulations thereunder (the "Treasury
Regulations") and administrative and judicial interpretations thereof, as of the
date hereof, all of which are subject to change, possibly on a retroactive
basis.
Classification of the Convertible Junior Subordinated Debentures
In connection with the issuance of the Convertible Junior Subordinated
Debentures, Dickstein Shapiro Morin & Oshinsky LLP, special counsel to DT and
the Trust, rendered its opinion generally to the effect that, under then current
law and assuming full compliance with the terms of the Convertible Junior
Subordinated Debenture Indenture (and certain other documents), and based on
certain facts and assumptions contained in such opinion, the Convertible Junior
Subordinated Debentures to be held by the Trust will be classified for United
States Federal income tax purposes as indebtedness of DT.
Classification of the Trust
In connection with the issuance of the Convertible Preferred Securities,
Dickstein Shapiro Morin & Oshinsky LLP, special counsel to DT and the Trust,
rendered its opinion generally to the effect that, under then current law and
assuming full compliance with the terms of the Declaration and the Convertible
Junior Subordinated Debenture Indenture (and certain other documents), and based
on certain facts and assumptions contained in such opinion, the Trust will be
classified for United States Federal income tax purposes as a grantor trust and
not as a partnership, an association taxable as a corporation, or a publicly
traded partnership taxable as a corporation. Accordingly, for United States
Federal income tax purposes, each holder of Convertible Preferred Securities
generally will be considered the owner of an undivided interest in the
Convertible Junior Subordinated Debentures, and each holder will be required to
include in its gross income any original issue discount ("OID") accrued with
respect to its allocable share of those Convertible Junior Subordinated
Debentures.
Potential Extension of Interest Payment Period and Original Issue Discount
Because DT has the option, under the terms of the Convertible Junior
Subordinated Debentures, to defer payments of interest by extending interest
payment periods for up to 20 quarters, all of the stated interest payments on
the Convertible Junior Subordinated Debentures will be treated as "original
issue discount". Holders of debt instruments issued with OID must include that
discount in income on an economic accrual basis before the receipt of cash
attributable to the interest, regardless of their method of tax accounting.
Generally, all of a holder's taxable interest income with respect to the
Convertible Junior Subordinated Debentures will be accounted for as OID. Actual
payments and distributions of stated interest will not, however, be separately
reported as taxable income. The amount of OID that accrues in any quarter will
approximately equal the amount
59
<PAGE>
of the interest that accrues on the Convertible Junior Subordinated Debentures
in that quarter at the stated interest rate. In the event that the interest
payment period is extended, holders will continue to accrue OID approximately
equal to the amount of the interest payment due at the end of the extended
interest payment period on an economic accrual basis over the length of the
extended interest payment period.
Because income on the Convertible Preferred Securities will constitute OID,
corporate holders of Convertible Preferred Securities will not be entitled to a
dividends-received deduction with respect to any interest earned with respect to
the Convertible Preferred Securities.
Market Discount and Bond Premium
To the extent a holder acquires Convertible Preferred Securities subsequent
to original issuance at a price that is greater or less than the adjusted issue
price of such holder's share of the Convertible Junior Subordinated Debentures
(which generally should approximate par plus accrued but unpaid interest), the
holder will be deemed to have acquired its interest in the Convertible Preferred
Securities with acquisition premium or with market discount, as the case may be.
Such holders are advised to consult their tax advisors as to the income tax
consequences of the acquisition, ownership and disposition of the Convertible
Preferred Securities.
A holder acquiring Convertible Preferred Securities at a premium will be
permitted to reduce the amount of OID required to be included in income to
reflect the acquisition premium. A holder acquiring Convertible Preferred
Securities at a market discount generally will be required to recognize ordinary
income to the extent of accrued market discount upon the retirement of the
underlying Convertible Junior Subordinated Debentures or, to the extent of any
gain, upon the disposition of the Convertible Preferred Securities. Such market
discount would accrue ratably, or, at the election of the holder, under a
constant yield method over the remaining term of the Convertible Junior
Subordinated Debentures. A holder will also be required to defer the deduction
of a portion of the interest paid or accrued on indebtedness incurred to
purchase or carry Convertible Preferred Securities acquired with market
discount. In lieu of the foregoing, a holder may elect to include market
discount in income currently as it accrues on all market discount instruments
acquired by such holder in the taxable year of the election or thereafter, in
which case the interest deferral rule will not apply. A holder may elect, in
lieu of applying the market discount or premium rules described above, to
account for all income under the Convertible Preferred Securities as if it were
OID.
Receipt of Convertible Junior Subordinated Debentures or Cash Upon Liquidation
of the Trust
Under certain circumstances, as described under the caption "Description of
the Convertible Preferred Securities--Tax Event or Investment Company Event
Redemption or Distribution", Convertible Junior Subordinated Debentures may be
distributed to holders in exchange for the Convertible Preferred Securities and
in liquidation of the Trust. Under current law, such a distribution to holders,
for United States Federal income tax purposes, would be treated as a nontaxable
event to each holder, and each holder would receive an aggregate tax basis in
the Convertible Junior Subordinated Debentures equal to such holder's aggregate
tax basis in its Convertible Preferred Securities. A holder's holding period in
the Convertible Junior Subordinated Debentures so received in liquidation of the
Trust would include the period during which the Convertible Preferred Securities
were held by such holder. If, however, the exchange is caused by a Tax Event
which results in the Trust being treated as an association taxable as a
corporation, the distribution would likely constitute a taxable event to holders
of the Convertible Preferred Securities.
Under certain circumstances described herein (see "Description of the
Convertible Preferred Securities"), the Convertible Junior Subordinated
Debentures may be redeemed for cash and the proceeds of such redemption
distributed to holders in redemption of their Convertible Preferred Securities.
Under current law, such a redemption would, for United States Federal income tax
purposes, constitute a taxable disposition of the redeemed Convertible Preferred
Securities, and a holder would recognize gain or loss as if it sold such
redeemed Convertible Preferred Securities for cash. See "--Sale of Convertible
Preferred Securities".
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<PAGE>
Sale of Convertible Preferred Securities
A holder that sells Convertible Preferred Securities will recognize gain or
loss equal to the difference between the amount realized on the sale of the
Convertible Preferred Securities and the holder's adjusted tax basis in such
Convertible Preferred Securities. A holder's adjusted tax basis in the
Convertible Preferred Securities generally will be its initial purchase price
increased by OID (and accrued market discount, if any) previously includible in
such holder's gross income to the date of disposition and decreased by payments
received on the Convertible Preferred Securities to the date of disposition.
Subject to the market discount rules described above, any such gain or loss will
be a capital gain or loss and will be a long-term capital gain or loss if the
Convertible Preferred Securities have been held for more than one year at the
time of sale.
The Convertible Preferred Securities may trade at a price that does not
accurately reflect the value of accrued but unpaid interest with respect to the
underlying Convertible Junior Subordinated Debentures. A holder who disposes of
his Convertible Preferred Securities between record dates for payments of
distributions thereon will be required to include accrued but unpaid interest on
the Convertible Junior Subordinated Debentures through the date of disposition
in income as ordinary income, and to add such amount to his adjusted tax basis
in his pro rata share of the underlying Convertible Junior Subordinated
Debentures deemed disposed of. To the extent the selling price is less than the
holder's adjusted tax basis (which basis will include, in the form of OID, all
accrued but unpaid interest), a holder will recognize a capital loss. Subject to
certain limited exceptions, capital losses cannot be applied to offset ordinary
income for United States Federal income tax purposes.
Conversion of Convertible Preferred Securities Into DT Common Stock
A holder of Convertible Preferred Securities will not recognize income,
gain or loss upon the conversion, through the Conversion Agent, of Convertible
Junior Subordinated Debentures into DT Common Stock (although the holder will be
required to continue to accrue OID through the date of conversion). The holder
will recognize gain upon the receipt of cash in lieu of a fractional share of DT
Common Stock equal to the amount of cash received less the holder's tax basis in
such fractional share. A holder's tax basis in the DT Common Stock received upon
conversion would generally be equal to the holder's tax basis in the Convertible
Preferred Securities delivered to the Conversion Agent for exchange less the
basis allocated to any fractional share for which cash is received, and a
holder's holding period in the DT Common Stock received upon conversion would
generally begin on the date following the date the holder acquired the
Convertible Preferred Securities delivered to the Conversion Agent for exchange.
If a holder of Convertible Preferred Securities as to which there is
accrued market discount converts the Convertible Preferred Securities into DT
Common Stock, such accrued market discount will carry over to the DT Common
Stock (to the extent such accrued market discount has not been included in
income), and any gain realized upon the subsequent disposition of such DT Common
Stock will, to the extent of such accrued market discount, be taxable as
ordinary interest income.
Adjustment of Conversion Price
Treasury Regulations promulgated under Section 305 of the Code would treat
holders of Convertible Preferred Securities as having received a constructive
distribution from DT in the event the conversion ratio of the Convertible Junior
Subordinated Debentures were adjusted if (i) as a result of such adjustment, the
proportionate interest (measured by the quantum of DT Common Stock into which
the Convertible Junior Subordinated Debentures are convertible) of the holders
of the Convertible Preferred Securities in the assets or earnings and profits of
DT were increased, and (ii) the adjustment was not made pursuant to a bona fide,
reasonable antidilution formula. An adjustment in the conversion ratio would not
be considered made pursuant to such a formula if the adjustment was made to
compensate for certain taxable distributions with respect to the DT Common
Stock. Thus, under certain circumstances, a reduction in the conversion price
for the holders may result in deemed dividend income to holders to the extent of
the current or accumulated earnings and profits of DT. Holders of the
Convertible Preferred Securities would be required to include their allocable
share of such deemed dividend income in gross income but will not receive any
cash related thereto.
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United States Alien Holders
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is, as to the United
States, a foreign corporation, a non-resident alien individual, a foreign
partnership, or a foreign estate or trust. Proposed Treasury Regulations were
issued on April 15, 1996 (the "Proposed Regulations") which, if adopted, could
affect the United States Federal income tax consequences to United States Alien
Holders of the Convertible Preferred Securities. The Proposed Regulations are
generally proposed to be effective after December 31, 1997, subject to certain
transition rules. Prospective investors are urged to consult their tax advisors
with respect to the effect the Proposed Regulations may have if adopted.
Under present United States Federal income tax law, (i) payments by the
Trust or any of its paying agents to any holder of a Convertible Preferred
Security who or which is a United States Alien Holder will not be subject to
withholding of United States Federal income tax; provided that (a) the
beneficial owner of the Convertible Preferred Security does not actually or
constructively (including by virtue of its interest in the underlying
Convertible Junior Subordinated Debentures) own 10% or more of the total
combined voting power of all classes of stock of DT entitled to vote, (b) the
beneficial owner of the Convertible Preferred Security is not a controlled
foreign corporation that is related to DT through stock ownership, and (c)
either (A) the beneficial owner of the Convertible Preferred Security certifies
to the Trust or its agent, under penalties of perjury, that it is not a United
States holder and provides its name and address or (B) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "Financial
Institution"), and holds the Convertible Preferred Security in such capacity,
certifies to the Trust or its agent, under penalties of perjury, that such
statement has been received from the beneficial owner by it or by a Financial
Institution between it and the beneficial owner and furnishes the Trust or its
agent with a copy thereof; and (ii) a United States Alien Holder of a
Convertible Preferred Security will generally not be subject to withholding of
United States Federal income tax on any gain realized upon the sale or other
disposition of a Convertible Preferred Security.
However, a United States Alien Holder of a Convertible Preferred Security
would be subject to United States Federal income tax (including, in the case of
a corporate United States Alien Holder, possibly the branch profits tax) on gain
realized on the sale, exchange or other disposition of the security if (i) the
United States Alien Holder is an individual who is present in the United States
for 183 days or more in the taxable year of disposition, and certain other
conditions apply, (ii) the gain is effectively connected with the conduct by the
United States Alien Holder of a trade or business in the United States, or (iii)
DT is, or during the preceding five years has been, a "United States real
property holding corporation" within the meaning of Section 897(c)(2) of the
Code and either (a) if the Convertible Preferred Securities are considered to be
"regularly traded interests," the United States Alien Holder beneficially owns
(actually or constructively), or during the preceding five years has
beneficially owned (actually or constructively), more than five percent of the
Convertible Preferred Securities or (b) if the Convertible Preferred Securities
are not considered to be regularly traded interests, the United States Alien
Holder beneficially owned (actually or constructively), on the date it acquired
any Convertible Preferred Security, Convertible Preferred Securities having a
fair market value greater than the fair market value of five percent of DT
Common Stock.
DT believes that it is not, has not been, and does not presently expect to
become a United States real property holding corporation. However, there can be
no assurance that DT will not be a United States real property holding
corporation in the future. It is also unclear whether the Convertible Preferred
Securities are now or will become regularly traded interests. Accordingly,
United States Alien Holders should consult their tax advisors regarding the
disposition of the Convertible Preferred Securities.
If a United States Alien Holder is treated as receiving a deemed dividend
as a result of an adjustment of the conversion price of the Convertible Junior
Subordinated Debentures, as described above under "Adjustment of Conversion
Price", such deemed dividend generally will be subject to United States Federal
withholding tax at a 30% (or lower treaty) rate.
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Information Reporting and Backup Withholding
Annual information reporting generally will apply to interest accrued and
sale or redemption proceeds received on the Convertible Preferred Securities,
and such amounts may be subject to a "backup" withholding tax of 31% unless the
holder complies with certain identification requirements. Any withheld amounts
will be allowed as a credit against the holder's United States Federal income
tax, provided the required information is provided to the Service.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE MAY NOT BE
APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF THE CONVERTIBLE PREFERRED SECURITIES,
INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS
AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Code impose certain requirements on employee benefit plans and certain
other retirement plans and arrangements, including individual retirement
accounts and annuities, that are subject to ERISA and the Code (all of which are
hereinafter referred to as "Plans") and on persons who are fiduciaries with
respect to such Plans. In accordance with ERISA's general fiduciary standards,
before investing in Convertible Preferred Securities, a Plan fiduciary should
determine whether such an investment is permitted under the governing Plan
instruments and is appropriate for the Plan in view of its overall investment
policy and the composition and diversification of its portfolio. Other
provisions of ERISA and the Code prohibit certain transactions involving the
assets of a Plan and persons who have certain specified relationships to the
Plan ("parties in interest" within the meaning of ERISA or "disqualified
persons" within the meaning of the Code). Accordingly, any Plan with respect to
which DT or any of its affiliates would be considered a party in interest or a
disqualified person should not purchase Convertible Preferred Securities.
In addition, under United States Department of Labor Regulation Section
2510.3-101 (the "Regulation"), if immediately after any acquisition of
Convertible Preferred Securities, 25 percent or more of the value of the
Convertible Preferred Securities is held by Plans, employee benefit plans not
subject to ERISA (for example, governmental plans) and entities whose underlying
assets include plan assets by reason of a plan's investment in the entity, then
the assets of the Issuer would be treated as assets of Plans holding Convertible
Preferred Securities, unless another exemption applied.
Any Plan proposing to purchase Convertible Preferred Securities should
consult with its counsel regarding the application of ERISA, the Code and the
Regulation with respect to investment in Convertible Preferred Securities.
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SELLING HOLDERS
The Convertible Preferred Securities were originally issued and sold by the
Trust in a transaction exempt from the registration requirements of the
Securities Act, to persons reasonably believed by the Trust to be "qualified
institutional buyers" (as defined in Rule 144A under the Securities Act), to a
limited number of institutional "accredited investors" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) or outside the United
States to non-U.S. persons in offshore transactions in reliance on Regulation S
under the Securities Act. The Selling Holders may from time to time offer and
sell pursuant to this Prospectus any or all of the Convertible Preferred
Securities, any Convertible Junior Subordinated Debentures and DT Common Stock
issued upon conversion of the Convertible Preferred Securities.
The following table sets forth information with respect to the holders of
the Convertible Preferred Securities as of June 27, 1997. Such information has
been obtained from DTC, the Selling Holders and the Property Trustee. The term
Selling Holder includes the beneficial owners of the Convertible Preferred
Securities and their transferees, pledgees, donees or other successors.
NUMBER OF CONVERTIBLE
SELLING HOLDER PREFERRED SECURITIES
-------------- ---------------------
1. The Northwestern Mutual Life Insurance Company 600,000
2. The Travelers Insurance Company 168,000
3. The Travelers Indemnity Company 232,000
4. Massachusetts Mutual Life Insurance Company 160,000
5. MassMutual Participation Investors 20,000
6. MassMutual Corporate Investors 40,000
7. MassMutual Corporate Value Partners Limited 80,000
8. MassMutual High Yield Partners LLC 100,000
---------
Total 1,400,000
No Selling Holder has, or within the past three years has had, any
position, office or other material relationship with the Trust or the Company or
any of their predecessors or affiliates. Because the Selling Holders may,
pursuant to this Prospectus, offer all or some portion of the Convertible
Preferred Securities, the Convertible Junior Subordinated Debentures or the DT
Common Stock issuable upon conversion of the Convertible Preferred Securities,
no estimate can be given as to the amount of the Convertible Preferred
Securities, the Convertible Junior Subordinated Debentures or the DT Common
Stock issuable upon conversion of the Convertible Preferred Securities that will
be held by the Selling Holders upon termination of any such sales. In addition,
the Selling Holders identified above may have sold, transferred or otherwise
disposed of all or a portion of their Convertible Preferred Securities since the
date on which they provided the information regarding their Convertible
Preferred Securities, in transactions exempt from the registration requirements
of the Securities Act.
PLAN OF DISTRIBUTION
The Offered Securities may be sold from time to time to purchasers directly
by the Selling Holders. Alternatively, the Selling Holders may from time to time
offer the Offered Securities to or through underwriters, broker/dealers or
agents, who may receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Holders or the purchasers of such
securities for whom they may act as agents.
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The Selling Holders and any underwriters, broker/dealers or agents that
participate in the distribution of Offered Securities may be deemed to be
"underwriters" within the meaning of the Securities Act and any profit on the
sale of such securities and any discounts, commissions, concessions or other
compensation received by any such underwriter, broker/dealer or agent may be
deemed to be underwriting discounts and commissions under the Securities Act.
The Offered Securities may be sold from time to time 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
sale of the Offered Securities may be effected in transactions (which may
involve crosses or block transactions) (i) on any national securities exchange
or quotation service on which the Offered Securities may be listed or quoted at
the time of sale, (ii) in the over-the-counter market or (iii) in transactions
otherwise than on such exchanges or in the over-the-counter market. At the time
a particular offering of the Offered Securities is made, a Prospectus
Supplement, if required, will be distributed which will set forth the aggregate
amount and type of Offered Securities being offered and the terms of the
offering, including the name or names of any underwriters, broker/dealers or
agents, any discounts, commissions and other terms constituting compensation
from the Selling Holders and any discounts, commissions or concessions allowed
or reallowed or paid to broker/dealers.
To comply with the securities laws of certain jurisdictions, if applicable,
the Offered Securities will be offered or sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
jurisdictions the Offered Securities may not be offered or sold unless they have
been registered or qualified for sale in such jurisdictions or any exemption
from registration or qualification is available and is complied with.
The Selling Holders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the Offered Securities by the
Selling Holders. The foregoing may affect the marketability of such securities.
Pursuant to the Registration Rights Agreement, all expenses of the
registration of the Offered Securities will be paid by the Company, including,
without limitation, Commission filing fees and expenses of compliance with state
securities or "blue sky" laws; provided, however, that the Selling Holders will
pay all underwriting discounts and selling commissions, if any. The Selling
Holders will be indemnified by the Company and the Trust, jointly and severally
against certain civil liabilities, including certain liabilities under the
Securities Act, or will be entitled to contribution in connection therewith. The
Company and the Trust will be indemnified by the Selling Holders severally
against certain civil liabilities, including certain liabilities under the
Securities Act, or will be entitled to contribution in connection therewith.
LEGAL MATTERS
The validity of the Convertible Preferred Securities was passed upon for
the Issuer by Morris, Nichols, Arsht & Tunnell, special Delaware counsel to the
Issuer. The validity of the Convertible Junior Subordinated Debentures, the
Guarantee, DT Common Stock issuable upon conversion of such Convertible Junior
Subordinated Debentures and certain United States federal income taxation
matters were passed upon for DT and the Issuer by Dickstein Shapiro Morin &
Oshinsky LLP. Sidney Dickstein, a partner of Dickstein Shapiro Morin & Oshinsky
LLP serves as a trustee of a trust which, at September 2, 1997, owned 15,624
shares of DT Common Stock. Mr. Dicktein disclaims beneficial ownership of such
shares.
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EXPERTS
The consolidated financial statements of the Company incorporated in this
Prospectus by reference to the Annual Report on Form 10-K for the year ended
June 30, 1996 have been so incorporated in reliance on the reports of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
The consolidated financial statements of Mid-West incorporated in this
Prospectus by reference to the Amendment No. 1 to the Current Report on Form
8-K/A, filed with the Commission on September 23, 1996 have been so incorporated
in reliance on the reports of Altschuler, Melvoin and Glasser LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
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INDEX OF DEFINED TERMS
Page
1940 Act............................. 38
AAA.................................. 13
Additional Interest.................. 51
Amended Facility..................... 26
AMI.................................. 13
Applicable Price..................... 35
Appointment Event.................... 41
Armac................................ 13
Arrow................................ 13
Beneficial Owner..................... 44
Business Day......................... 32
Certificate.......................... 57
Change in 1940 Act Law............... 38
Closing Price........................ 35
Code................................. 59
Commission........................... 3
Common Securities.................... 1
Common Stock Fundamental Change...... 35
Company.............................. 1
Convertible Junior Subordinated
Debentures......................... 1
Convertible Preferred Securities..... 1
DT................................... 1
DT Common Stock...................... 1
DT Preferred Stock................... 57
DT Transaction....................... 33
DT Trustees.......................... 10
DTC.................................. 38
DTE.................................. 12
DTG.................................. 12
DTMP................................. 12
Declaration.......................... 10
Declaration Event of Default......... 40
Deferral Period...................... 7
Delaware Trustee..................... 10
Entitlement Date..................... 35
Equity Offering...................... 6
ERISA................................ 63
Event of Default..................... 40
Exchange Act......................... 3
Financial Institution................ 62
Financing Entity..................... 52
Fundamental Change................... 36
Global Certificates.................. 44
Guarantee............................ 2
Guarantee Payments................... 46
Guarantee Trustee.................... 10
Hansford............................. 5
Harbour Group Affiliates ............ 6
Indenture............................ 48
Indenture Trustee.................... 10
Indirect Participants................ 44
Interest Payment Date................ 50
interested stockholder............... 58
Investment Company Event............. 38
Issuer............................... 1
Issuer Trustees...................... 10
<PAGE>
Kalish............................... 13
Lakso................................ 13
LATS................................. 10
Liquidation Distribution............. 40
Mid-West............................. 5
NNM.................................. 3
No Recognition Opinion............... 37
Non-Stock Fundamental Change......... 36
Offered Securities................... 2
Original Offering.................... 1
Original Offering Date............... 1
OID.................................. 59
Participants......................... 44
Peer................................. 12
Placement Agent...................... 9
Plans................................ 63
PORTAL............................... 9
Pro Forma Statements................. 24
Pro Forma Transactions............... 24
Property Account..................... 10
Proposed Regulations................. 62
Prospectus Supplement................ 2
Purchaser Stock Price................ 36
qualified institutional buyer........ 64
Redemption Price..................... 3
Redemption Tax Opinion............... 37
Reference Market Price............... 36
Registration Default................. 43
Registration Rights Agreement........ 43
Registration Statement............... 3
Regulation........................... 63
Rights .............................. 32
Rights Agreement .................... 32
RIGO................................. 14
SEC.................................. 3
Section 203.......................... 58
Securities Act....................... 1
Selling Holders...................... 2
Sencorp.............................. 13
Senior Indebtedness.................. 52
Series A Preferred Stock ............ 32
Service.............................. 37
Shelf Registration Statement......... 43
Special Event........................ 38
Special Trustee...................... 10
Stokes-Merrill....................... 13
Successor Securities................. 40
Swiftpack............................ 13
Tax Event............................ 37
Treasury Regulations................. 59
Trust................................ 1
Trust Act............................ 11
Trust Indenture Act.................. 10
Trustee.............................. 10
United States Alien Holder........... 62
67
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==================================== ====================================
No dealer, salesperson or other
person has been authorized to give
any information or to make any DT Capital Trust
representation not contained in this
Prospectus and, if given or made,
such information or representation
must not be relied upon as having
been authorized by the Company, the
Issuer or any of their agents. This 1,400,000 TIDES (SM)
This Prospectus does not constitute
an offer to sell or a solicitation 7.16% Convertible Preferred
of an offer to buy any of the Securities
securities offered hereby in any
jurisdiction to any person to Term Income Deferrable
whom it is unlawful to make such Equity Securities (TIDES)(SM)
offer in such jurisdiction. Neither
the delivery of this Prospectus nor fully and unconditionally guaranteed
any sale made hereunder shall, under by, and convertible into Common
any circumstances, create any impli- Stock of,
cation that the information herein
is correct as of any time subsequent
to the date hereof or that there has
been no change in the affairs of the
Company since such date.
---------------
TABLE OF CONTENTS
Page
Available Information 3
Incorporation of Certain DT Industries, Inc.
Documents by Reference 4
Prospectus Summary 3
Cautionary Statement
Regarding Forward-Looking
Statements 5
Risk Factors 5
Recent Acquisition 10
DT Capital Trust 10
The Company 12 PROSPECTUS
Ratio of Earnings to
Fixed Charges 22
Capitalization 23
Accounting Treatment 23
Use of Proceeds 24
Pro Forma Selected
Consolidated Financial
Data 24
Description of the
Convertible Preferred
Securities 30
Description of the Guarantee 46
Description of the
Convertible Junior
Subordinated Debentures 49 Dated September 2, 1997
Effects of Obligations
Under the Convertible
Junior Subordinated
Debentures and the
Guarantee 56
Description of DT Capital
Stock 57
United States Taxation 59
ERISA Considerations 63
Selling Holders 64
Plan of Distribution 64
Legal Matters 65
Experts 66
Index of Defined Terms 67
