<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 10, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SABRATEK CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 36-3700639
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
5601 WEST HOWARD STREET, NILES, ILLINOIS 60714
(847) 647-2760
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
K. SHAN PADDA
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SABRATEK CORPORATION
5601 WEST HOWARD STREET, NILES, ILLINOIS 60714
(847) 647-2760
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
SCOTT HODES, ESQ.
DAVID S. GUIN, ESQ.
ROSS & HARDIES
150 NORTH MICHIGAN AVENUE, CHICAGO, ILLINOIS 60601
(312) 558-1000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the securities
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
PROSPECTUS
SABRATEK CORPORATION
$85,000,000 PRINCIPAL AMOUNT OF
6% NOTES DUE 2005
AND 2,100,840 SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION THEREOF
------------------------
This prospectus (the "Prospectus") relates to the offer and sale from time
to time by the holders named herein or by their transferees, pledgees, donees or
successors (collectively, the "Selling Security Holders") of up to $85,000,000
aggregate principal amount of 6% Convertible Notes due 2005 (the "Notes") of
Sabratek Corporation (the "Company" or "Sabratek") and the shares of Common
Stock of the Company into which the Notes are convertible (the "Shares" and,
together with the Notes, the "Securities"). The Notes were acquired from the
Company by Salomon Smith Barney as the Initial Purchaser in April 1998 in
connection with a private offering.
The Notes are convertible at the option of the holder into shares of Common
Stock of the Company, at any time prior to redemption or maturity, at a
conversion price of $40.46 per share, representing in the aggregate 2,100,840
shares, subject to adjustment under certain circumstances. Interest on the Notes
is payable semi-annually in arrears on April 15 and October 15 of each year,
commencing on October 15, 1998.
The Notes do not provide for a sinking fund. The Notes are unsecured
obligations of the Company and rank pari passu with all existing and future
unsecured Indebtedness (as such term is defined below) and other liabilities of
the Company but subordinated to all existing and future secured obligations of
the Company and to all existing and future Indebtedness of the Company and any
liabilities of any subsidiaries of the Company. The Notes will mature on April
15, 2005, and may be redeemed, at the option of the Company, in whole or in
part, at any time on or after April 19, 2001, at the redemption prices set forth
herein plus accrued interest. Each holder of Notes will have the right to cause
the Company to repurchase all of such holder's Notes, payable in cash at a
purchase price equal to 100% of the principal amount thereof, plus accrued
interest or, at the Company's option, in Common Stock, in the event the Common
Stock is no longer publicly traded or in certain circumstances involving a
Change of Control (as defined in the Indenture).
The Notes and the Shares are being registered to permit public secondary
trading of the Notes and, upon conversion, the underlying Shares, by the holders
thereof from time to time after the date of this Prospectus. The Securities may
be offered by the Selling Security Holders from time to time in transactions
(which may include block transactions in the case of the Shares) on any exchange
or market on which such securities are listed or quoted, as applicable, in
negotiated transactions, through a combination of such methods of sale, or
otherwise, at sale, at prices related to prevailing market prices, or at
negotiated prices. The Selling Security Holders may effect such transactions by
selling the Notes or Shares directly to or through broker-dealers, who may
receive compensation in the form of discounts, concessions or commissions from
the Selling Security Holders and/or the purchasers of the Notes or Shares for
whom such broker-dealers may act as agents or to whom they may sell as
principals, or both (which compensation as to a particular broker-dealer might
be in excess of customary commissions). The Company will not receive any of the
proceeds from the sale of the Notes or Shares by the Selling Security Holders.
The Company has agreed to pay all expenses incident to the offer and sale of the
Securities offered by the Selling Security Holders hereby, except that the
Selling Security Holders will pay all underwriting discounts and selling
commissions, if any. See "Plan of Distribution".
The Notes have been designated for trading on the Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") Market. Notes sold
pursuant to this Prospectus are not expected to remain eligible for trading on
the PORTAL Market. The Common Stock is traded in the over-the-counter market and
is quoted on the National Association of Securities Dealers Automated
Quotation -- National Market System ("NASDAQ -- NMS"), under the symbol SBTK. On
June 11, 1998, the last sale price for the Common Stock, as reported on
NASDAQ -- NMS, was $24 1/8 per share.
PROSPECTIVE INVESTORS SHOULD CONSIDER AND REVIEW THE INFORMATION UNDER THE
CAPTION "RISK FACTORS" COMMENCING ON PAGE 5 PRIOR TO AN INVESTMENT IN THE SHARES
OFFERED HEREBY.
------------------------
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 July 10, 1998
<PAGE> 3
TABLE OF CONTENTS
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PAGE
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Available Information....................................... 1
Forward Looking Statements.................................. 1
Incorporation of Certain Documents by Reference............. 2
The Company................................................. 3
Risk Factors................................................ 5
Use of Proceeds............................................. 13
Ratio of Earnings to Fixed Charges.......................... 13
Selling Security Holders.................................... 14
Plan of Distribution........................................ 15
Description of Notes........................................ 17
Certain United States Federal Income Tax Considerations..... 27
Legal Matters............................................... 32
Experts..................................................... 32
</TABLE>
iii
<PAGE> 4
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional
Offices of the Commission: New York Regional Office, Seven World Trade Center,
Suite 1300, New York, New York 10048; and Chicago Regional Office, Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates.
The Company's Common Stock is listed on the NASDAQ-NMS and reports and
other information concerning the Company can be inspected at the library of
NASDAQ Stock Market, Inc. at 1735 K Street N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act") , with respect to the Securities offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further information with
respect to the Company and the Securities offered hereby, reference is hereby
made to the Registration Statement, exhibits and schedules.
The Company's principal executive offices are located at 5601 West Howard
Street, Niles, Illinois and its telephone number is (847) 647-2760.
The Company has registered or applied to register the following trademarks:
SABRATEK(R) and its logo, AutoRamp(R), HOMERUN(R), Seamless Delivery System(R),
PumpMaster(R), MediVIEW(R), and TCS Total Compliance System(TM), VHR Virtual
Hospital Room(TM) and Communicator(TM). The Company has also received foreign
trademark registration for the name SABRATEK(R) and its logo in Japan. Unitron
Medical Communications, Inc. ("Unitron") has filed a trademark application for
the term MOON(TM) (an abbreviation for Medically Oriented Operating Network)
which appears in this Prospectus. Stat-Site(R), which appears in this
Prospectus, is a registered trademark of GDS Technology, Inc.("GDS").
FORWARD-LOOKING STATEMENTS
When included in this Prospectus or in documents incorporated herein by
reference, the words "expects," "intend," "anticipates," "plans," "projects" and
"estates," and analogous or similar expressions, are intended to identify
forward-looking statements. Such statements, which include (without limitation)
statements contained in "Risk Factors" are subject to a variety of risks and
uncertainties that could cause actual results to differ materially from those
reflected in such forward-looking statements. Such risks and uncertainties
include, among others, changes in the medical device and drug regulatory
environment, delays or difficulties in introducing new products, increased
competition, the success of the Company's research and development and
acquisition strategies and various other matters, many of which are beyond the
Company's control. These forward-looking statements speak only as of the date of
this Prospectus. The Company expressly disclaims any obligation or undertaking
to release publicly any updates or revisions to any forward-looking statement
contained herein to reflect any change in the Company's expectations with regard
thereto or any change in events, conditions or circumstances on which any such
statement is based.
<PAGE> 5
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have been filed with the Commission are
incorporated herein by reference: (i) the Company's Annual Report on Form 10-K
filed by the Company pursuant to the Exchange Act for the year ended December
31, 1997, (ii) all other reports filed by the Company pursuant to Section 13(a)
or 15(d) of the Exchange Act since December 31, 1997, including but not limited
to, (a) the Quarterly Report on Form 10-Q for the quarter ended March 31, 1998,
and (b) the description of the Company's Common Stock, $.01 par value per share,
as contained in its registration statement on Form 8-A, declared effective by
the Commission on June 21, 1996.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act, subsequent to the date hereof and prior to the
filing of a post-effective amendment to the Registration Statement which
indicates that all shares of Common Stock offered hereby have been sold or which
deregisters all shares of Common Stock then remaining unsold, shall be deemed to
be incorporated by reference into this Prospectus and to be a part hereof from
the date of filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that such statement is modified or superseded by a statement contained
herein or in a subsequently filed document which also is or is deemed to be
incorporated by reference herein. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, TO EACH PERSON (INCLUDING ANY
BENEFICIAL OWNER) TO WHOM THIS PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL
REQUEST OF SUCH PERSON, A COPY OF ANY AND ALL OF THE INFORMATION THAT HAS BEEN
INCORPORATED BY REFERENCE IN THIS PROSPECTUS (NOT INCLUDING EXHIBITS TO SUCH
INFORMATION UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO
SUCH INFORMATION). SUCH REQUESTS SHOULD BE DIRECTED TO SCOTT SKOOGLUND, VICE
PRESIDENT -- FINANCE, AT THE COMPANY'S PRINCIPAL EXECUTIVE OFFICES AT 5601 WEST
HOWARD STREET, NILES, ILLINOIS 60714, TELEPHONE (847) 647-2760.
2
<PAGE> 6
THE COMPANY
Sabratek Corporation (the "Company" or "Sabratek") develops, produces and
markets technologically-advanced, user-friendly and cost-effective therapeutic
and diagnostic medical systems designed specifically to meet the unique needs of
the alternate-site health care market. The Company's multi-therapy infusion and
other systems incorporate advanced communications technology which is designed
to reduce provider operating costs while maintaining the integrity and quality
of care. Sabratek's proprietary health care information system provides remote
programming as well as real-time diagnostic and therapeutic data capture
capabilities, allowing caregivers to monitor patient compliance more effectively
and allowing providers to develop outcome analyses and optimal clinical
protocols. The Company has designed its integrated hardware and software system
to permit providers of infusion therapy to achieve cost-effective movement of
patients along the continuum of alternate-site health care settings. The Company
intends to expand its product line beyond infusion therapy to become a leading
developer and marketer of a variety of interactive therapeutic and diagnostic
medical systems for the delivery of high-quality, cost-effective health care in
alternate sites. The Company believes that its current and future products and
related software will facilitate the ability of alternate-site providers to
create a "virtual" hospital room, thereby affording the delivery of a wide range
of care previously provided primarily in an acute-care setting. Substantially
all of the Company's revenues have historically been derived from the sale of
its multi-therapy infusion pumps and related disposable supplies. Since August,
1996, the Company has commercially introduced its proprietary medical software
system ("MediVIEW"), its proprietary infusion pump testing device (the
"PumpMaster") and prepackaged injectable prescription products and pre-filled
I.V. tubing flush syringes which further the Company's strategy of creating a
virtual hospital room.
Sabratek's strategy focuses primarily on the alternate-site health care
market, which it believes will continue to experience significant growth as
managed care payors continue to move patients to the lowest-cost care setting.
Such growth may be attributed to increasing cost-containment pressures, along
with advances in medical technology, that have transitioned the delivery of
health care away from the traditional acute-care setting to more cost-effective
sites. The alternate-site market includes, among other things, the provision of
infusion services in various settings, including the patient's residence,
sub-acute care facilities, nursing homes, outpatient clinics, dialysis centers
and hospice facilities. According to POV, Incorporated, an industry tracking and
consulting firm, the infusion therapy segment of this market is expected to grow
in revenue from $3.2 billion in 1992 to $7.9 billion in 1997, representing an
average annual compounded growth rate of approximately 20%.
The Company believes that for alternate-site health care providers, the
management of costly resources such as nursing staff and infusion equipment
inventories is critical to their operating viability. The Company's strategic
response to the need to achieve cost-effective movement of patients along the
continuum of alternate-site care has been to develop the Seamless Delivery
System which integrates stationary and ambulatory multi-therapy infusion pumps,
disposable supplies, a proprietary interactive software system and a proprietary
infusion pump testing device. Sabratek's Seamless Delivery System maximizes the
similarities in operating features and range of therapeutic applications of the
Company's stationary and ambulatory infusion devices, thereby reducing the
costly time requirements of training and infusion administration as well as
minimizing equipment inventories. The Company's interactive software system
augments the utilization of Sabratek's infusion pumps and allows providers to
program therapies and monitor compliance on a real-time basis from a remote
location. The Company's portable, automatic infusion pump testing device enables
providers to perform on-site diagnostic tests on Sabratek's infusion pumps and
thereby reduces costs by eliminating the traditional reliance on third-party
testing services and in-house biomedical engineering capabilities. The Company
believes that competing infusion therapy products do not meet the diverse needs
of payors, alternate-site health care providers and their patients within the
managed care environment to the same extent as the Company's Seamless Delivery
System.
In 1992, the Company commercially launched its multi-therapy stationary
infusion device (the "3030 Stationary Pump"), and in 1995 introduced its
multi-therapy ambulatory infusion device (the "6060 Ambulatory Pump"). In
addition, the Company markets a comprehensive line of related disposable tubing
sets. Both the 3030 Stationary Pump and the 6060 Ambulatory Pump have received
510(k) clearance from
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<PAGE> 7
the Food and Drug Administration (the "FDA"). In 1996, the Company began
marketing MediVIEW and the PumpMaster. The Company currently markets its
products domestically to national, regional and local alternate-site and
acute-care providers through a dedicated sales force composed of 24 direct sales
professionals, 9 clinical support staff members and 2 full-time sales
consultants who work closely with a network of specialized alternate-site
medical products distributors. The Company also markets its products
internationally through distributors in Europe, Asia, Africa, South America and
the Middle East.
In February, 1997, the Company began producing and marketing prepackaged
injectable prescription products and pre-filled I.V. tubing flush syringes
through the operation of Rocap, Inc. The Rocap product line expands the scope of
the Company's product offering to alternative-site and acute-care providers.
In July, 1997, the Company entered into a licensing agreement with Unitron
Medical Communications, Inc. ("Unitron"), a privately held company which has
developed MOON, a proprietary clinical patient information management network.
Unitron is in the process of deploying the MOON network on a national basis.
MOON provides for continuous, real-time monitoring and reporting of clinical
patient information from any site, including the patient's home. Unlike in an
acute care setting, patients in the alternate-site health care environment are
often not in close physical proximity to their health care providers. As a
result, patient information from the point of care is often communicated to the
health care provider in a less timely and complete manner. In addition,
physicians generally are less able to monitor the patient, including compliance
with prescribed therapy and the management of care delivered by other providers.
The goal of MOON is to enable health care providers to more effectively treat
higher acuity patients in an alternate-site health care setting by maintaining
the provider's ability to direct the patient's care, monitor compliance with
prescribed therapies and have access to timely clinical information. MOON is
designed to allow the provider to reduce the need for on-site visits without
compromising the quality of patient care. MOON allows caregivers to input
patient information into a data repository which is immediately available to
other providers, including physicians. The Company anticipates that its
interactive medical devices will, in the future, transit patient information
directly to MOON without human interaction. The immediate availability of
patient information is a significant improvement over the current paper-based
reporting system which often lags two or more weeks behind the initial
collection of such information. MOON allows providers immediate access to
patient information. Additionally, the individual health care provider tracking
information is useful to payors and the agencies/companies managing the
provider. The Company intends to combine its proprietary MediVIEW medical device
management and telemedicine software with Unitron's clinical patient information
management network. The Company believes that this combination is likely to
accelerate the realization of the data management aspects of the virtual
hospital room.
In August, 1997, the Company entered into a supply and distribution
agreement with GDS Technology, Inc. ("GDS"), a privately held medical device
company. GDS manufactures bulk and specific enzymes and reagents for the
diagnostic testing industry, as well as Stat-Site, a unique test system for the
point of care market. GDS has 510(k) approval for its Stat-Site device and a
limited number of tests. The Stat-Site system provides immediate availability of
certain critical information which can be used for diagnosis or monitoring the
efficacy of a patient's drug therapy. For certain disease states, this
information is important to determine the regimen of care. The Company intends
to integrate the GDS Stat-Site system and the data that it provides with its
other medical devices as part of the virtual hospital room in order to enhance
its capabilities to serve the alternate-site health care market.
The Company plans to continue to develop and market interactive therapeutic
and diagnostic medical systems designed to improve the delivery of high-quality,
cost-effective health care at alternate sites. The Company intends to achieve
its goal by continuing to: (i) offer advanced medical products and related
software systems that maximize the cost-effective provision of alternate-site
health care, (ii) offer an integrated system of therapeutic and diagnostic
information-based medical products supported by the Company's proprietary health
care information system platform, (iii) create a proprietary outcomes database
through the Company's products and information system platform and (iv) pursue
strategic partnerships and acquisitions which further the realization of the
virtual hospital room and expand the Company's product offering.
4
<PAGE> 8
RISK FACTORS
In addition to the other information in this Prospectus, the following
should be considered carefully by potential purchasers of the Notes or the
Shares. Prospective purchasers are cautioned that statements in this Prospectus
(including the documents incorporated by reference herein) that are not
descriptions of historical facts should be considered as forward-looking
statements. Such statements reflect management's current views, are based on
many assumptions and are subject to risks and uncertainties. Actual results
could differ materially from those currently anticipated due to a number of
factors, including but not limited to those discussed below.
HISTORY OF LOSSES
The Company was formed in 1989, introduced its first product in 1992, has
incurred operating and net losses of approximately $3.6 million, $6.0 million
and $858,000 for the years 1994, 1995 and 1996, respectively, and, at December
31, 1997, had an accumulated deficit of $7.1 million. For the year ended
December 31, 1997 the Company reported net income of approximately $7.2 million.
The Company's losses resulted primarily from expenditures relating to research
and development, product engineering, obtaining FDA clearance for its products,
development of its initial sales and marketing organization, and establishment
of manufacturing capability. Although the Company has experienced revenue growth
in recent periods and has operated at a profit since the third quarter of 1996,
such recent growth and profitability may not be sustainable and may not be
indicative of future results. The Company's ability to increase sales and
generate profits will depend on numerous factors, and there can be no assurance
that the Company's revenues will continue to grow or that the Company will
remain profitable.
DEPENDENCE ON PRINCIPAL PRODUCT LINE AND NEW PRODUCT DEVELOPMENT
The Company currently derives substantially all of its revenues from the
sale of its multi-therapy infusion pumps and related disposable supplies and
expects that revenues from these products will continue to account for a
significant portion of the Company's revenues in the future. Although the
commercial introduction of MediVIEW and PumpMaster along with the acquisition of
Rocap reduce the Company's reliance on its principal product line, future
declines in the demand for the Company's infusion pumps and related disposable
supplies, whether due to increased competition, technological changes, or other
factors, could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company's execution of its
business strategy and its future financial performance will depend in large part
on the Company's ability to meet the increasingly sophisticated needs of its
customers through the timely development and successful introduction or
acquisition of new infusion therapy products, enhanced versions of existing
products, and new complementary products. The success of new or enhanced
products is subject to certain risks inherent in the development of products and
materials based upon new technologies. These risks include the possibilities
that (i) certain of the products developed may require and fail to receive
regulatory clearance or approval, (ii) the products may be difficult to
manufacture on a commercial scale or may be uneconomical to manufacture or
market, (iii) the proprietary rights of third parties may preclude the Company
from marketing such products, (iv) the Company's competitors may market
superior, more cost-effective or equivalent products and may do so on a more
timely basis, (v) errors and malfunctions may be found in products after their
commercial introduction and may not be corrected in a timely manner, and (vi)
customers may not accept or use the products. The Company has historically
expended a significant amount on product development and believes that
significant continuing product development efforts will be required to sustain
the Company's growth. There can be no assurance that the market will continue to
accept the Company's existing products, or that product enhancements or new
products will be developed in a timely and cost-effective manner, meet the needs
and requirements of alternate-site health care providers or achieve market
acceptance. In addition, the Company may be unable to acquire additional
products and technologies.
HIGHLY COMPETITIVE MARKETS; TECHNOLOGICAL RISK
The medical products industry in general and the infusion therapy products
industry in particular are characterized by intense competition. Large
competitors, such as Abbott Laboratories; Alaris Medical, Inc.;
5
<PAGE> 9
Baxter International Inc.; I-Flow Corp.; McGaw, Inc., an indirect subsidiary of
B. Braun Melsungen AG; and SIMS Deltec, Inc., a subsidiary of Smiths Industries,
PLC ("SIMS Deltec"), among others, have significant market shares and installed
bases of products in the infusion pump and related disposable supplies industry.
Many of the Company's competitors have substantially greater capital resources,
research and development staffs, regulatory experience, sales and marketing
capabilities, manufacturing facilities and broader product offerings than the
Company. The Company expects that these competitors will continue to compete
aggressively with tactics such as offering volume discounts based on "bundled"
purchases of a broader range of medical equipment and supplies, a tactic that
the Company can currently only pursue on a more limited basis. There can be no
assurance that such competition will not adversely affect the Company's results
of operations or its ability to maintain or increase sales and market share. As
a consequence of the foregoing, the Company may not be able to successfully
execute its business strategies.
The market for infusion therapy products is affected by continuing
improvements and enhancements in technology. There can be no assurance that the
Company's competitors or potential competitors will not succeed in developing or
marketing products that provide more desirable characteristics, or are more
effective or less expensive than those developed or marketed by the Company. In
addition, technological advances in drug delivery systems, the development of
therapies that can be administered by methods other than infusion therapy, and
the development of new medical treatments that cure certain complex diseases or
reduce the need for infusion therapy could adversely impact the Company's
business.
ABILITY TO SERVICE DEBT; FINANCIAL CONDITION
The funds generated by existing operations may not be at levels sufficient
to enable the Company to meet its debt service obligations on the Notes (which
initially will be $ 5.1 million annual and other fixed charges.) If the Company
fails to achieve and maintain sufficient cash flows from operations, its ability
to make payments required with respect to the Notes, including interest and
principal payments, will depend on its ability to secure funds from other
sources. There can be no assurance that cash flows from future operations of the
Company (including earnings from the interim investment of a portion of the net
proceeds from the offering), together with funds from such other sources, if
any, will be sufficient to enable the Company to meet its debt service
obligations.
UNCERTAIN PROTECTION OF INTELLECTUAL PROPERTY
There can be no assurance that the common law, statutory and contractual
rights on which the Company relies to protect its intellectual property and
confidential and proprietary information will provide it with meaningful
protection. Third parties may independently develop products, techniques or
information which are substantially equivalent to the products, techniques and
information which the Company considers proprietary. In addition, proprietary
information regarding the Company could be disclosed in a manner against which
the Company has no meaningful remedy.
Disputes regarding the Company's intellectual property could force the
Company into expensive and protracted litigation or costly agreements with third
parties. An adverse determination in a judicial or administrative proceeding or
failure to reach an agreement with a third party regarding intellectual property
rights could prevent the Company from manufacturing and selling certain of its
products, which could have a material adverse effect on the Company's business,
financial condition and results of operations.
PENDING LITIGATION
On February 5, 1997, SIMS Deltec filed a complaint in the United States
District Court for the District of Minnesota alleging that Sabratek's
manufacture, use and/or sale of the MediVIEW software in conjunction with its
infusion pumps infringes on a patent entitled "Systems and Methods of
Communicating with Ambulatory Medical Devices Such as Drug Delivery Devices"
previously issued to SIMS Deltec. Subsequently, SIMS Deltec filed other
pleadings that raised additional claims against Sabratek and three of its
employees including trade secret misappropriation, unfair competition and
interference with SIMS Deltec's customers. SIMS Deltec seeks injunctive relief,
unspecified monetary damages and costs. In addition, SIMS
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<PAGE> 10
Deltec filed for a preliminary injunction against Sabratek seeking to prevent on
a preliminary basis Sabratek's manufacture and sale of the MediVIEW system. On
August 4, 1997, the District Court denied the motion for preliminary injunction.
The Company and the individual defendants intend to vigorously defend against
the allegations made by SIMS Deltec. Protracted litigation or an adverse outcome
in this matter could have a material adverse impact on the Company's business,
financial condition and results of operations.
In addition, Sabratek has filed a complaint against SIMS Deltec in the
United States District Court for the Northern District of Illinois alleging that
SIMS Deltec employees have made misstatements about Sabratek's products.
Sabratek has stated claims under the Federal Lanham Act to stop SIMS Deltec's
improper disparagement and has requested preliminary and permanent injunctive
relief, monetary damages and costs.
LIMITED SALES AND MARKETING EXPERIENCE
The Company's sales and marketing staff will require additional personnel
in the future. There can be no assurance that the Company will be able to
continue to successfully expand its sales and marketing staff, that such an
expanded sales and marketing staff will be cost-effective, or that the Company's
increased direct sales and marketing efforts will be successful. The Company
also sells its products through domestic and international distributors of
medical products. There can be no assurance that the Company or its distributors
will be successful in marketing or selling the Company's products.
LIMITED ASSEMBLY/MANUFACTURING EXPERIENCE
Most of the Company's products are currently assembled/manufactured by the
Company at its facilities. To be successful, the Company must
assemble/manufacture its products in compliance with regulatory requirements, in
sufficient quantities and on a timely basis, while maintaining product quality
and acceptable assembly/manufacturing costs. There can be no assurance that the
Company will be able to continue to assemble/manufacture products in large
commercial quantities on a timely basis and at an acceptable cost. If the
Company becomes unable to assemble/manufacture its products at its facility in a
timely and efficient manner, the Company's ability to supply product to its
distributors and direct customers may be adversely affected until such time as
the Company is able to establish alternative assembly/manufacture arrangements.
INTERRUPTION IN SOURCES OF SUPPLY
The Company could face problems in supplying its equipment and disposable
products to distributors and customers if its primary sources of supply were
interrupted and it faced delays in activating its secondary sources of supply.
Any such interruption or delays could have an adverse effect on the Company.
There can be no assurance that the Company will be able to maintain a sufficient
and adequate supply of products in its own inventory or that the Company will be
able to cause its distributors to maintain a sufficient and adequate supply of
products to avoid such a disruption.
INCREASED LEVERAGE
As a result of the sale of the Notes, the Company's ratio of total debt to
total capitalization would have increased on a pro forma basis from
approximately .4% to approximately 57.0% at December 31, 1997. As a result of
this increased debt level, the Company's principal and interest obligations
increased substantially. The degree to which the Company has borrowed funds
pursuant to the Notes could limit the amount of additional financing the Company
may obtain, and/or may result in terms and conditions less favorable than it
currently has or would have for any additional financing. Increased borrowings
could make it more vulnerable to economic downturns and competitive pressures.
The Company's increased leverage could also materially and adversely affect its
liquidity, as a substantial portion of available cash from operations may have
to be applied to meet debt service requirements, and, in the event of a cash
shortfall, the Company could be forced to reduce other expenditures to be able
to meet such requirements.
7
<PAGE> 11
DEPENDENCE ON THIRD-PARTY REIMBURSEMENT
The Company's products are generally purchased by health care providers,
which then seek reimbursement from various public and private third-party
payors, such as Medicare, Medicaid and indemnity insurers, for health care
services provided to patients. Government and private third-party payors are
increasingly attempting to contain health care costs by limiting both the extent
of coverage and the reimbursement rate for new diagnostic and therapeutic
products and services. The Health Care Financing Administration of the United
States Department of Health and Human Services ("HCFA"), which administers
Medicare, and most private insurance companies do not provide reimbursement for
services that they determine to be experimental in nature or that are not
considered "reasonable and necessary" for diagnosis or treatment. Many private
insurers are influenced by HCFA actions in making their own coverage decisions
on new products or services. There can be no assurance that third-party
reimbursement for the services provided using the Company's products will
continue to be available to its customers or that any such reimbursement will be
adequate. Disapproval of, or limitations in, coverage by HCFA or other
third-party payors could materially and adversely affect market acceptance of
the Company's products which could, in turn, have a material adverse effect on
the Company's business, financial condition and results of operations.
NO ASSURANCE OF REGULATORY CLEARANCE; STRICT GOVERNMENTAL REGULATION
The production and marketing of the Company's current products and the
products the Company intends to introduce in the future are subject to
regulations by numerous governmental authorities, including the Food and Drug
Administration ("FDA") and corresponding state and foreign agencies. In the
United States, the development, manufacture and promotion of medical devices are
regulated by the FDA under the Federal Food, Drug, and Cosmetic Act (the
"FFDCA"). Adverse FDA action could have a material adverse effect on the
Company.
The Company's 3030 Stationary Pump and 6060 Ambulatory Pump, and the
related disposable tubing sets for use with these systems, have been cleared by
the FDA under a premarket notification procedure known as a "510(k) Submission,"
which generally takes less time to complete, and requires less information, than
the FDA's lengthy and expensive premarket approval ("PMA") process.
The Company's Rocap division is currently registered with the FDA as a drug
manufacturer and repackager, and as a device manufacturer. Rocap intends to
develop new products and to make modifications to existing products. Such new or
modified products may require obtaining 510(k) clearance, new drug application
approval, or other FDA clearance. If it were determined that any such new or
modified products required prior FDA approval, the Company could be prohibited
from marketing such products until the necessary approvals were obtained as
would any other manufacturer. Such approvals could prove costly and time
consuming to obtain. In addition, there can be no assurance the Company will
obtain such clearances on a timely basis, if at all, for any new product and/or
modification to an existing product. If any such clearance is granted, there can
be no assurance that it will not contain significant limitations in the form of
warnings, precautions, or contraindications with respect to conditions of use.
The Company believes that the original 510(k) clearance for the 6060
Ambulatory Pump permits the Company to market the MediVIEW software with the
6060 Ambulatory Pump in the United States without a new 510(k) Submission.
However, there can be no assurance that the FDA would agree with the Company's
determination. If in the future the FDA concludes that the MediVIEW software
system for use with the 6060 Ambulatory Pump required a new 510(k) Submission,
the FDA could prohibit the Company from marketing the MediVIEW software system
for this use until the Company filed a new 510(k) Submission and obtained
clearance from the FDA. If this occurs, the FDA could also take regulatory
action against the Company for its prior distribution of the MediVIEW software
system with the 6060 Ambulatory Pump.
The Company has determined that the PumpMaster does not constitute a
medical device under the statutory definition and, therefore, did not file a
510(k) Submission with respect to this product. There can be no assurance that
the FDA will agree with the Company's determination in this regard. If the FDA
were to determine that the PumpMaster is a medical device that requires a 510(k)
Submission prior to its commercial
8
<PAGE> 12
distribution, the FDA could suspend further commercial distribution of the
PumpMaster and take regulatory action against the Company for its prior
distribution of the product.
The Company's new products and new applications for existing products may
require FDA clearance or approval prior to marketing. The FDA regulatory
requirements and review criteria for software-related medical devices could
adversely effect the Company's introduction of new software products, or devices
that incorporate software, in the future. The product clearance process for
future products can be lengthy, expensive and uncertain. There can be no
assurance that market clearances will be forthcoming in a timely manner, if at
all, or that the FDA will not require more extensive clinical evaluations, other
information or a PMA submission. Moreover, the clearances, if granted, could
limit the uses for which the product could be marketed. Failure to obtain, or
delays caused by, regulatory clearances or approvals could have a material
adverse affect on the Company's business, financial condition and results of
operations.
In October, 1996, the Company learned of a defect in a software feature of
certain units of the 6060 Ambulatory Pump. The Company initiated a recall of
these units to correct the problem with an upgrade of the software. Pursuant to
FDA regulations, the Company notified the FDA of the recall and has updated the
FDA of the progress of the recall, which is now approximately 98% complete. The
FDA reported this recall in the January 15, 1997, issue of the FDA Enforcement
Report. In addition, in April, 1997, the FDA notified the Company of changes to
its classification of certain drugs and devices produced by the Company. In
June, 1997, the FDA responded to the Company's reply by noting that the Company
has addressed the regulatory issues raised in April. There can be no assurance
that the FDA will not take further action with respect to these matters.
The Company is also subject to strict domestic and foreign regulation and
supervision regarding the development, manufacturing, marketing, labeling,
distribution, and promotion of its products. This includes periodic inspections
of the Company's manufacturing facility by the FDA to determine compliance with
GMP requirements, which are set forth in the FDA's Quality System ("QS")
regulations. There can be no assurance that the Company will be able to attain
or maintain compliance with GMP requirements.
Failure to comply with the regulations outlined above may result in severe
governmental sanctions. Noncompliance with applicable requirements can result
in, among other things, rejection or withdrawal of premarket clearance or
approval for devices, recall or seizure of products, total or partial suspension
of production, fines, injunctions, and civil and criminal penalties. The FDA
also has the authority to request repair, replacement or refund of the cost of
any devices manufactured or sold by the Company. Any of these sanctions could
have a material adverse effect on the Company's business, financial condition or
results of operations.
PRODUCT LIABILITY EXPOSURE
Manufacturers of medical devices face the possibility of substantial
liability for damages in the event that the use of their products is alleged to
have resulted in adverse effects to a patient. The Company maintains product
liability insurance with coverage limits of $12.0 million per occurrence with an
annual aggregate policy limit of $7.0 million. The Company's product liability
insurance provides coverage only for products currently manufactured and
distributed. There can be no assurance that liability claims will not exceed the
limits of such coverage or that such insurance will continue to be available on
commercially reasonable terms or at all. Furthermore, the Company does not
maintain insurance that would provide coverage for any costs or losses resulting
from any required recall of its products due to alleged defects, whether
instituted by the Company or a regulatory agency.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
During the year ended December 31, 1997, the Company derived approximately
3% of its revenues from international sales, resulting in exposure to certain
risks. Fluctuations in exchange rates of the U.S. dollar against foreign
currencies may reduce demand for, or the profitability of, the Company's
products sold overseas. In addition, the Company's international sales may be
affected by economic or political instability and domestic and foreign
governmental regulations, including export license requirements, trade
restrictions,
9
<PAGE> 13
changes in tariffs, regulatory approval for marketing products or similar
factors. Finally, the laws of certain foreign countries may not protect the
Company's intellectual property rights to the same extent as do the laws of the
United States.
QUARTERLY FLUCTUATIONS
The Company's quarterly revenues and operating results have varied
significantly in the past and may continue to do so in the future. In
particular, the Company's distributors and other customers may purchase several
months of inventory at one time which may cause fluctuations in quarterly
revenues. Future revenues and operating results may also fluctuate significantly
from quarter to quarter and will depend upon, among other factors: (i) demand
for the Company's products and new product introductions by the Company or its
competitors or transitions to new products, (ii) the timing of orders and
shipments, (iii) the mix of sales between products, (iv) competition, including
pricing pressures, (v) the timing of regulatory and third-party reimbursement
approvals, (vi) expansion of the Company's assembly capacity and the Company's
ability to assemble or manufacture its products efficiently, and (vii) the
timing of research and development expenditures. Accordingly, period-to-period
comparisons of the Company's revenues and operating results should not be relied
upon as an indication of future performance, and the results of any quarterly
period may not be indicative of results to be expected for a full year.
DEPENDENCE ON KEY PERSONNEL
The Company's future performance depends in significant part upon the
continued service of its senior management and other key personnel. Because the
Company has a relatively small number of employees when compared to other
companies in the same industry, its dependence on maintaining its employees is
particularly significant. There can be no assurance that the Company's current
employees will continue to work for the Company. Loss of services of key
employees could have a material adverse effect on the Company's business,
results of operations and financial condition. The Company is also dependent on
its ability to attract and retain additional high quality personnel. The Company
may need to grant additional options to key employees and provide other forms of
incentive compensation to attract and retain key personnel.
INFLUENCE OF LIMITED NUMBER OF STOCKHOLDERS
The directors and executive officers of the Company and certain existing
stockholders may be able to influence the Company's affairs and business,
including any determination with respect to a change in control of the Company,
future issuances of Common Stock or other securities by the Company, declaration
of dividends on the Company's Common Stock and the election of directors. Such
influence could have the effect of delaying, deferring or preventing a change in
control of the Company which could deprive the Company's stockholders of the
opportunity to sell their shares of Common Stock at prices higher than
prevailing market prices.
ABSENCE OF PUBLIC MARKET FOR NOTES
There is no existing trading market for the Notes and there can be no
assurance as to the liquidity of any such market that may develop for the Notes,
the ability of the holders of Notes to sell such securities, the price at which
the holders of the Notes would be able to sell such securities or whether a
trading market, if it develops, will continue. The Notes have been designated
for trading on the PORTAL Market. The Notes sold pursuant to this Prospectus are
not expected to remain eligible for trading on the PORTAL Market. The Company
does not intend to apply for listing of the Notes on any securities exchange or
for inclusion of the Notes on any automated quotation system. If a liquid market
for the Notes fails to develop or be maintained, the trading price of the Notes
could be adversely affected. If a trading market were to develop, the Notes
could trade at prices higher or lower than their principal amount, depending
upon many factors, including prevailing interest rates, the price of the Common
Stock, the market for similar securities and the operating results of the
Company.
10
<PAGE> 14
POSSIBLE VOLATILITY OF STOCK PRICE
The securities markets have, from time to time, experienced extreme price
and volume fluctuations which often have been unrelated to the operating
performance of particular companies. The market prices of the common stock of
many publicly-held medical device companies have been in the past, and are
expected to be, volatile. Announcements of technological or medical innovations
or new commercial products by the Company or its competitors, developments or
disputes concerning patents or proprietary rights, changes in regulatory or
medical reimbursement policies, and economic and other external factors, as well
as period-to-period fluctuations in the financial results of the Company, may
have a significant impact on the market price and marketability of the Common
Stock.
ANTI-TAKEOVER CONSIDERATIONS
Certain provisions of the Company's Certificate of Incorporation and Bylaws
and the Delaware General Corporation Law may have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
attempting to acquire, control of the Company. Such provisions could limit the
price that certain investors might be willing to pay in the future for shares of
the Company's Common Stock. Pursuant to the Company's Certificate of
Incorporation, the Board of Directors is authorized to fix the rights,
preferences, privileges and restrictions, including voting rights, of unissued
shares of the Company's preferred stock and to issue such stock without any
further vote or action by the Company's stockholders. The rights of the holders
of Common Stock will be subject to and may be adversely affected by the rights
of the holders of any preferred stock that may be created and issued in the
future. In addition, stockholders do not have the right to cumulative voting for
the election of directors. The Company's Bylaws include a number of provisions
which may have the effect of discouraging persons from pursuing non-negotiated
takeover attempts. Specifically, the Company's Bylaws provide for a staggered
board whereby only one-third of the total number of directors are replaced or
re-elected each year. The Bylaws also require the affirmative vote of two-thirds
of the Company's issued and outstanding capital stock to remove a director.
In certain circumstances involving a Change In Control, each holder may
require the Company to repurchase all or a portion of such holder's Notes. The
repurchase obligation could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from attempting to
acquire, control of the Company.
The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203"), which restricts certain transactions and business
combinations between a corporation and an "Interested Stockholder" owning 15% or
more of the corporation's outstanding voting stock for a period of three years
from the date the stockholder becomes an Interested Stockholder. Subject to
certain exceptions, unless the transaction is approved in a prescribed manner,
Section 203 prohibits significant business transactions such as a merger with,
disposition of assets to or receipt of disproportionate financial benefits by
the Interested Stockholder, or any other transactions that would increase the
Interested Stockholder's proportionate ownership of any class or series of the
corporation's stock.
LIMITATION ON REPURCHASE OF NOTES
In certain circumstances involving a Change of Control (as such term is
defined below), each holder may require the Company to repurchase all or a
portion of such holder's Notes. In such event, there can be no assurance that
the Company would have sufficient financial resources or would be able to
arrange financing to pay the repurchase price. The Company's ability to
repurchase the Notes in such event may be limited by law, the Indenture and the
terms of other agreements relating to borrowings that constitute Indebtedness,
as such Indebtedness or agreements may be entered into, replaced, supplemented
or amended at any time or from time to time. The Company may not have the
financial ability to repurchase the Notes in the event payment of Indebtedness
is accelerated. See "Description of Notes -- Repurchase at the Option of
Holders."
11
<PAGE> 15
SUBORDINATION
The Notes are unsecured obligations of the Company and rank pari passu with
all existing and future unsecured Indebtedness and other liabilities of the
Company but are effectively subordinated to all existing and future secured
obligations of the Company and to all existing and future Indebtedness and other
liabilities of any Subsidiaries of the Company. At March 31, 1998, the aggregate
amount of outstanding secured obligations of the Company and outstanding
Indebtedness and other liabilities of Subsidiaries of the Company to which the
Notes are effectively subordinated was zero. The Indenture does not limit the
amount of additional Indebtedness which the Company can create, incur, assume or
guaranty. Because the Notes are unsecured, in the event of insolvency,
bankruptcy, liquidation, reorganization or winding up of the business of the
Company or upon default in payment with respect to any secured Indebtedness or
an event of default with respect to such Indebtedness resulting in the
acceleration thereof, the assets of the Company will be available to pay the
amounts due on the Notes only after all secured Indebtedness has been paid in
full.
ORIGINAL ISSUE DISCOUNT: POSSIBLE UNFAVORABLE TAX CONSEQUENCES FOR HOLDERS OF
NOTES
The Company currently expects that the Notes will not be sold by the
Selling Security Holders with original issue discount ("OID"). Potential
purchasers should be aware, however, that if the Notes are sold by the Selling
Security Holders pursuant to this offer at a substantial discount from the
stated principal amount at maturity, OID (that is, the difference between the
stated redemption price at maturity and the price of the Notes) will be
includible as interest income periodically in a United States Holders' gross
income in advance of receipt of the cash payments to which the income is
attributable. See "Certain United States Federal Income Tax Considerations."
Similar rules may apply under state and other tax laws.
The Company is required to furnish certain information to the Internal
Revenue Service, and will furnish annually to record holders of Notes,
information with respect to interest and OID, if any, accruing during the
calendar year. No assurance can be given that the Internal Revenue Service will
not challenge the accuracy of the reported information. Subsequent holders who
purchase Notes for an amount other than the adjusted issue price and/or on a
date other than the last day of an accrual period will be required to determine
for themselves the amount of OID, if any, they are required to include in gross
income for United States federal income tax purposes.
12
<PAGE> 16
USE OF PROCEEDS
All proceeds from any sales of the Notes or the Shares by the Selling
Security Holders will inure to the benefit of the Selling Security Holders. The
Company will receive none of the proceeds from the sale of the Notes or the
Shares offered hereby.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's consolidated ratio of earnings
to fixed charges for the periods shown.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
- --------------------------------- THREE MONTHS ENDED
1993 1994 1995 1996 1997 MARCH 31, 1998
- ---- ---- ---- ---- ---- ------------------
<S> <C> <C> <C> <C> <C>
- -122% -12% -25% -2% 122% 179%
</TABLE>
For the purposes of calculating ratio of earnings to fixed charges, (i)
earnings consist of consolidated income (loss) before income taxes, plus fixed
charges, and (ii) fixed charges consist of interest expense incurred and the
portion of rental expense under operating lease deemed by the Company to be
representative of the interest factor.
Earnings were inadequate to cover fixed charges for the years ended
December 31, 1993, 1994, 1995 and 1996 by $2,821,000, $3,555,000, $6,036,000 and
$858,000, respectively.
13
<PAGE> 17
SELLING SECURITY HOLDERS
The Notes were originally issued by the Company in a private placement and
were resold by the Initial Purchaser thereof to qualified institutional buyers
(within the meaning of Rule 144A under the Securities Act) or other
institutional accredited investors (as defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act) in transactions exempt from registration under the
Securities Act, and in sales outside the United States to persons other than
U.S. persons in reliance upon Regulation S under the Securities Act. The
Securities that may be offered pursuant to this Prospectus will be offered by
the Selling Security Holders. The following table sets forth certain information
as of June 1, 1998, concerning the principal amount of Notes beneficially owned
by each Selling Security Holder and the number of Shares that may be offered
from time to time pursuant to this Prospectus.
From time to time, Salomon Smith Barney or its affiliates have provided,
and may continue to provide, investment banking services to the Company, for
which they received or will receive customary fees. None of the other Selling
Security Holder has had any position, office or other material relationship with
the Company or its affiliates within the past three years.
<TABLE>
<CAPTION>
NUMBER OF
PRINCIPAL OUTSTANDING
AMOUNT NUMBER OF PRINCIPAL SHARES
OF NOTES SHARES PRINCIPAL AMOUNT OF COMMON
BENEFICIALLY BENEFICIALLY AMOUNT OF NUMBER OF OF NOTES STOCK
OWNED OWNED NOTES THAT SHARES OWNED BENEFICIALLY
PRIOR TO PRIOR TO MAY BE THAT MAY AFTER AFTER
NAME OF SELLING SECURITY HOLDER OFFERING OFFERING SOLD BE SOLD(1) OFFERING OFFERING(2)
------------------------------- ------------ ------------ ---------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
AAM/Zazove Institutional Income
Fund, L.P........................ 2,000,000 49,431 2,000,000 49,431 0 0
Aim Balanced Fund.................. 1,500,000 37,073 1,500,000 37,073 0 0
Argent Classic Convertible
Arbitrage Fund (Bermuda), L.P.... 2,700,000 66,732 2,700,000 66,732 0 0
BNP Arbitrage SNC.................. 2,950,000 75,611 2,950,000 72,911 0 2,700
Century National Insurance Co...... 500,000 12,357 500,000 12,357 0 0
Delaware State Employees'
Retirement Fund.................. 2,000,000 49,431 2,000,000 49,431 0 0
Equi-Select Growth & Income Fund... 2,000,000 124,431 2,000,000 49,431 0 75,000
First Options of Chicago, Inc...... 2,000,000 49,431 2,000,000 49,431 0 0
Forest Alternative Strategies Fund
A5............................... 3,090,000 76,371 3,090,000 76,371 0 0
Forest Alternative Strategies Fund
II LP A-5I....................... 50,000 1,235 50,000 1,235 0 0
Forest Alternative Strategies Fund
II LP A-5M....................... 30,000 741 30,000 741 0 0
Forest Global Convertible Fund
A-5.............................. 5,300,000 130,993 5,300,000 130,993 0 0
Fort Dearborn Life Insurance Co.... 150,000 3,707 150,000 3,707 0 0
General Motors Employee Domestic
Group Trust...................... 11,600,000 286,702 11,600,000 286,702 0 0
General Motors Employees Domestic
Group Pension Trust.............. 4,686,000 115,818 4,686,000 115,818 0 0
General Motors Foundation, Inc..... 174,000 4,300 174,000 4,300 0 0
GPZ Trading LLC.................... 7,000,000 173,010 7,000,000 173,010 0 0
Highbridge International LLC....... 4,300,000 106,277 4,300,000 106,277 0 0
Hillside Capital Incorporated
Corporate Account................ 400,000 9,886 400,000 9,886 0 0
Laterman & Co...................... 100,000 2,471 100,000 2,471 0 0
Laterman Strategies 90s LLC........ 150,000 3,707 150,000 3,707 0 0
Lincoln National Convertible
Securities....................... 1,355,000 33,489 1,355,000 33,489 0 0
LLT Limited........................ 30,000 741 30,000 741 0 0
Merrill Lynch International Ltd.... 2,200,000 54,374 2,200,000 54,374 0 0
Motors Insurance Corporation....... 1,140,000 28,175 1,140,000 28,175 0 0
Offshore Strategies, Ltd........... 250,000 6,178 250,000 6,178 0 0
</TABLE>
14
<PAGE> 18
<TABLE>
<CAPTION>
NUMBER OF
PRINCIPAL OUTSTANDING
AMOUNT NUMBER OF PRINCIPAL SHARES
OF NOTES SHARES PRINCIPAL AMOUNT OF COMMON
BENEFICIALLY BENEFICIALLY AMOUNT OF NUMBER OF OF NOTES STOCK
OWNED OWNED NOTES THAT SHARES OWNED BENEFICIALLY
PRIOR TO PRIOR TO MAY BE THAT MAY AFTER AFTER
NAME OF SELLING SECURITY HOLDER OFFERING OFFERING SOLD BE SOLD(1) OFFERING OFFERING(2)
------------------------------- ------------ ------------ ---------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Ohio National Fund, Inc, Growth &
Income Portfolio................. 500,000 34,357 500,000 12,357 0 22,000
Pace Setter 1 LLP.................. 1,000,000 24,715 1,000,000 24,715 0 0
QSA, LLC........................... 2,000,000 49,431 2,000,000 49,431 0 0
Shepard Investment International
Ltd.............................. 500,000 12,357 500,000 12,357 0 0
Smith Barney Inc................... 5,700,000 140,879 5,700,000 140,879 0 0
Societe Generale Securities
Corp............................. 5,250,000 129,757 5,250,000 129,757 0 0
Sound Shore Partners LP............ 500,000 12,357 500,000 12,357 0 0
Stark International................ 3,000,000 74,147 3,000,000 74,147 0 0
The Robertson Stephens Growth &
Income Fund...................... 1,500,000 127,073 1,500,000 37,073 0 90,000
Thermo Electron Balanced Investment
Fund............................. 1,000,000 24,715 1,000,000 24,715 0 0
Walker Art Center.................. 175,000 4,325 175,000 4,325 0 0
Weirton Trust...................... 470,000 11,616 470,000 11,616 0 0
Zazove Convertible Fund, L.P....... 1,350,000 33,366 1,350,000 33,366 0 0
Zazove Hedged Convertible Fund,
LP............................... 1,000,000 24,715 1,000,000 24,715 0 0
</TABLE>
- -------------------------
(1) Assumes conversion of the full amount of the Notes held by such holder at
the initial conversion price of $40.46 per share; such conversion price is
subject to adjustment as described under "Description of the Notes --
Conversion." Accordingly, the number of shares of Common Stock issuable upon
conversion of the Notes may increase or decrease from time to time. Under
the terms of the Indenture, fractional shares will not be issued upon
conversion of the Notes; cash will be paid in lieu of fractional shares, if
any.
(2) None of the Selling Security Holders will own more than 1% of the total
outstanding shares of Common Stock after completion of the offering. The
percentage was computed in accordance with Rule 13(d)-3(i) promulgated under
the Exchange Act based upon 10,578,524 shares of Common Stock outstanding as
of June 1, 1998.
The preceding table has been prepared based upon the information furnished
to the Company by the Selling Security Holders. The names of such Selling
Security Holders were provided to the Company by LaSalle National Bank, as
trustee (the "Trustee") under the Indenture, and by The Depository Trust Company
("DTC").
The Selling Security Holders identified above may have sold, transferred or
otherwise disposed of, in transactions exempt from the registration requirements
of the Securities Act, all or a portion of their Notes since the date on which
the information in the preceding table is presented. Information concerning the
Selling Security Holders may change from time to time and any such changed
information will be set forth in supplements to this Prospectus if and when
necessary. Because the Selling Security Holders may offer all or only a portion
of the Notes or the Shares that they hold pursuant to the offering contemplated
by this Prospectus, no definitive determination can be made as to the amount of
the Notes or the Shares that will be held by the Selling Security Holders upon
the termination of the offering. The information provided above regarding
holdings of Notes and Shares following the offering contemplated by this
Prospectus assumes that all of the Notes and Shares covered hereby are sold. See
"Plan of Distribution."
PLAN OF DISTRIBUTION
Pursuant to a Registration Agreement dated as of April 14, 1998 (the
"Registration Agreement"), between the Company and Salomon Smith Barney (the
"Initial Purchaser"), the Company filed the Registration Statement, of which
this Prospectus forms a part, filed with the Commission covering the resale of
the Securities. The Company has agreed to use all reasonable efforts to keep the
Registration Statement
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<PAGE> 19
effective until April 14, 2000 (or such earlier date when the holders of the
Shares are able to sell all such Shares immediately without restriction pursuant
to Rule 144(k) under the Securities Act or any successor rule thereto or
otherwise). The Company will be permitted to suspend the use of this Prospectus
in connection with sales of Shares by holders during certain periods of time
under certain circumstances relating to pending corporate developments and
public filings with the SEC and similar events. The specific provisions relating
to the registration rights described above are contained in the Registration
Agreement, and the foregoing summary is qualified in its entirety by reference
to the provisions of such agreement.
Sales of the Securities may be effected by or for the account of the
Selling Security Holders from time to time in transactions (which may include
block transactions in the case of the Shares) on any exchange or market on which
such securities are listed or quoted, as applicable, in negotiated transactions,
through a combination of such methods of sale, or otherwise, at fixed prices
that may be changed, at market prices prevailing at the time of sale, at prices
related to prevailing market prices, or at negotiated prices. The Selling
Security Holders may effect such transactions by selling the Notes or Shares
directly to purchasers, through broker-dealers acting as agents for the Selling
Security Holders, or to broker-dealers who may purchase Notes or Shares as
principals and thereafter sell the Notes or Shares from time to time in
transactions (which may include block transactions in the case of the Shares) on
any exchange or market on which such securities are listed or quoted, as
applicable, in negotiated transactions, through a combination of such methods of
sale, or otherwise. In effecting sales, broker-dealers engaged by Selling
Security Holders may arrange for other broker-dealers to participate. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Security Holders and/or the
purchasers of the Notes or Shares from whom such broker-dealers may act as
agents or to whom they may sell as principals, or both (which compensation as to
a particular broker-dealer might be in excess of customary commissions).
The Selling Security Holders and any broker-dealers, agents or underwriters
that participate with the Selling Security Holders in the distribution of the
Notes or Shares may be deemed to be "underwriters" within the meaning of the
Securities Act. Any commissions paid or any discounts or concessions allowed to
any such persons, and any profits received on the resale of the Notes or Shares
offered hereby and purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
At the time a particular offering of the Notes or the Shares is made and to
the extent required, the aggregate principal amount of Notes and number of
Shares being offered, the name or names of the Selling Security Holders, and the
terms of the offering, including the name or names of any underwriters, broker-
dealers or agents, any discounts, concessions or commissions and other terms
constituting compensation from the Selling Security Holders, and any discounts,
concessions or commissions allowed or reallowed or paid to broker-dealers, will
be set forth in an accompanying Prospectus Supplement.
Pursuant to the Registration Agreement, the Company has agreed to pay all
expenses incident to the offer and sale of the Securities offered by the Selling
Security Holders hereby, except that the Selling Security Holders will pay all
underwriting discounts and selling commissions, if any. The Company has agreed
to indemnify the Selling Security Holders against certain liabilities, including
liabilities under the Securities Act, and to contribute to payments the Selling
Security Holders may be required to make in respect thereof. Each Selling
Security Holder severally agrees to indemnify and hold harmless (i) the Company,
(ii) each of its directors, (iii) each of its officers who signed the
Registration Statement and (iv) each person who controls the Company within the
meaning of either the Securities Act or the Exchange Act to the same extent as
the foregoing indemnity from the Company to each such Selling Security Holder,
but only with reference to written information relating to such Selling Security
Holder furnished to the Company by or on behalf of such Selling Security Holder.
To comply with the securities laws of certain jurisdictions, if applicable,
the Securities offered hereby will be offered or sold in such jurisdictions only
through registered or licensed brokers or dealers.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the Notes or the Shares may be limited in its
ability to engage in market activities with respect to such Notes or Shares. In
addition and without limiting the foregoing, each Selling Security Holder will
be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, which provisions may
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<PAGE> 20
limit the timing of purchase and sales of any of the Securities by the Selling
Security Holders. The foregoing may affect the marketability of the Securities.
From time to time, Salomon Smith Barney or its affiliates have provided,
and may continue to provide, investment banking services to the Company for
which they received or will receive customary fees. See "Selling Security
Holders".
DESCRIPTION OF NOTES
GENERAL
The Notes were issued pursuant to an Indenture dated as of April 14, 1998
(the "Indenture"), between the Company and LaSalle National Bank, as trustee
(the "Trustee"). A copy of the Indenture and the Registration Agreement is
available from the Trustee or the Company upon request by a registered holder of
Notes. The following summary of certain provisions of the Indenture and the
Registration Agreement does not purport to be complete and is qualified in its
entirety by reference to the Indenture and the Registration Agreement, including
the definitions in the Indenture of certain terms used in the following summary.
The definitions of certain terms used in the following summary are set forth
below under "-- Certain Definitions."
The Notes are unsecured obligations of the Company and rank pari passu with
all existing and future unsecured Indebtedness and other liabilities of the
Company but are subordinated to all existing and future secured obligations of
the Company and to all existing and future Indebtedness and other liabilities of
any subsidiaries of the Company. At March 31, 1998, the aggregate amount of
outstanding secured obligations of the Company and outstanding Indebtedness and
other liabilities of Subsidiaries of the Company to which the Notes are
effectively subordinated was zero. The Indenture does not restrict the
incurrence of any other Indebtedness or liabilities by the Company or its
Subsidiaries.
The Notes have been designated for trading on the PORTAL Market.
PRINCIPAL, MATURITY AND INTEREST
The Notes bear interest from April 14, 1998, at the rate of 6% per annum,
and will mature on April 15, 2005.
Interest on the Notes are payable semiannually on April 15 and October 15
of each year (each an "Interest Payment Date"), commencing on October 15, 1998,
to holders of record at the close of business on the April 1 or October 1 (each
a "Regular Record Date") immediately preceding such Interest Payment Date.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from April 14, 1998.
The Notes are payable both as to principal and interest at the office or
agency of the Company maintained for such purpose within Chicago, Illinois or,
subject to applicable laws and regulations, at the office of any Paying Agent,
or, at the option of the Company, payment of interest may be made by check
mailed to the holders of the Notes at their respective addresses set forth in
the register of holders of Notes. Until otherwise designated by the Company, the
Company's office or agency in Chicago, Illinois, will be the office of the
Trustee maintained for such purpose. The Notes were issued in registered form,
without coupons, and in denominations of $1,000 and integral multiples thereof.
If a payment date is not a Business Day at a place of payment, payment may
be made at that place on the next succeeding Business Day, and no interest shall
accrue for the intervening period.
The Company has initially appointed the Trustee at its corporate trust
office in the City of Chicago as the Paying Agent and Conversion Agent. The
Company may at any time terminate the appointment of the Paying Agent or
Conversion Agent and appoint additional or other Paying Agents and Conversion
Agents, provided that until the Notes have been delivered to the Trustee for
cancellation, or moneys sufficient to pay the principal of, premium, if any, and
interest on the Notes have been made available for payment and either paid or
returned to the Company as provided in the Indenture, it will maintain an office
or agency in Chicago,
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<PAGE> 21
Illinois for payments with respect to the Notes and for the surrender of Notes
for conversion. Notice of any such termination or appointment and of any change
in the office through which the Paying Agent or Conversion Agent will act will
be given in accordance with "-- Selection and Notices" below.
OPTIONAL REDEMPTION
The Notes will not be subject to redemption prior to April 19, 2001 and
will be redeemable on such date and thereafter at the option of the Company, in
whole or in part (in any integral multiple of $1,000), upon not less than 30 nor
more than 60 days' prior notice by mail at the following redemption prices
(expressed as percentages of the principal amount), in each case, together with
accrued interest to the redemption date (subject to the right of holders of
record on the relevant record date to receive interest due on an Interest
Payment Date). If redeemed during the 12-month period beginning April 15 of the
years indicated (April 19 in the case of the year 2001), such redemption price
shall be as indicated:
<TABLE>
<CAPTION>
YEAR
- ----
<S> <C>
2001...................................................... 103.43%
2002...................................................... 102.57%
2003...................................................... 101.71%
2004...................................................... 100.86%
2005...................................................... 100.00%
</TABLE>
On or after the redemption date, interest will cease to accrue on the
Notes, or portion thereof, called for redemption.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
Upon the occurrence of a Designated Event (as such term is defined below),
each holder of Notes shall have the right to require the Company to repurchase
all or any part (equal to $1,000 or an integral multiple thereof) of such
holder's Notes pursuant to the offer described below (the "Designated Event
Offer") at a purchase price equal to 100% of the principal amount thereof,
together with accrued and unpaid interest thereon to the Designated Event
Payment Date (the "Designated Event Payment"). Within 30 days following any
Designated Event, the Company shall mail a notice to each holder stating: (1)
that the Designated Event Offer is being made pursuant to the covenant described
in this paragraph and that all Notes tendered will be accepted for payment; (2)
the purchase price and the purchase date, which shall be no earlier than 30 days
nor later than 60 days from the date such notice is mailed (the "Designated
Event Payment Date"); (3) that any Notes not tendered will continue to accrue
interest; (4) that, unless the Company defaults in the payment of the Designated
Event Payment, all Notes accepted for payment pursuant to the Designated Event
Offer shall cease to accrue interest after the Designated Event Payment Date;
(5) that holders electing to have any Notes purchased pursuant to a Designated
Event Offer will be required to surrender the Notes, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes completed, to a
Paying Agent at the address specified in the notice prior to the close of
business on the third Business Day preceding the Designated Event Payment Date;
(6) that holders will be entitled to withdraw their election if a Paying Agent
receives, not later than the close of business on the second Business Day
preceding the Designated Event Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the holder, the principal
amount of Notes delivered for purchase, and a statement that such holder is
withdrawing his election to have all or a portion of such Notes purchased and
specifying the amount of such Notes (which must be equal to $1,000 in principal
amount or an integral multiple thereof) with respect to which such withdrawal is
effective; and (7) that holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered, which unpurchased portion must be equal to $1,000 in
principal amount or an integral multiple thereof.
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<PAGE> 22
The Company will comply with the requirements of Rules 13e-4 and 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of the Notes in connection with a Designated Event.
On the Designated Event Payment Date, the Company will, to the extent
lawful, (1) accept for payment Notes or portions thereof duly tendered pursuant
to the Designated Event Offer, (2) deposit with the Trustee or a Paying Agent an
amount equal to the Designated Event Payment in respect of all Notes or portions
thereof so tendered and (3) deliver or cause to be delivered to the Trustee the
Notes so tendered together with an Officers' Certificate identifying the Notes
or portions thereof tendered to the Company. The Trustee or a Paying Agent shall
promptly mail to each holder of Notes so tendered payment in an amount equal to
the purchase price for such Notes, and the Trustee shall promptly authenticate
and mail to each holder a new certificate representing a Note equal in principal
amount to any unpurchased portion of the Notes surrendered, if any; provided
that each such new certificate representing a Note shall be in a principal
amount of $1,000 or an integral multiple thereof. The Company will publicly
announce the results of the Designated Event Offer on or as soon as practicable
after the Designated Event Payment Date.
Except as described above with respect to a Designated Event, the Indenture
does not contain any other provisions that permit the holders of the Notes to
require that the Company repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar restructuring.
The Designated Event purchase feature of the Notes may in certain
circumstances make more difficult or discourage a takeover of the Company, and,
thus, the removal of incumbent management. The Designated Event purchase
feature, however, is not the result of management's knowledge of any specific
effort to accumulate the Company's stock or to obtain control of the Company by
means of a merger, tender offer, solicitation or otherwise, or part of a plan by
management to adopt a series of anti-takeover provisions. Instead, the
Designated Event purchase feature is a result of negotiations between the
Company and the Initial Purchaser. Management has no current intention to engage
in a transaction involving a Designated Event, although it is possible that the
Company could decide to do so in the future. Subject to the limitations on
mergers, consolidations and sales of assets described herein, the Company could,
in the future, enter into certain transactions, including acquisitions,
refinancings or other recapitalizations, that would not constitute a Designated
Event under the Indenture.
The Company's ability to repurchase Notes upon the occurrence of a
Designated Event is subject to limitations. If a Designated Event were to occur,
there can be no assurance that the Company would have sufficient financial
resources, or would be able to arrange financing, to pay the repurchase price
for all Notes tendered by holders thereof. In addition, the terms of certain of
the Company's existing or future debt agreements and lease facilities may
prohibit the Company from purchasing any Notes under certain circumstances and
may also identify certain events that would constitute a Change in Control, as
well as certain other events with respect to the Company or certain of its
subsidiaries, which would constitute an event of default under such debt
agreements and lease facilities. In the event a Designated Event occurs at a
time when such prohibitions or restrictions are in effect, the Company could
seek the consent of its lenders or lessors to the purchase of Notes or could
attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain such a consent or repay such borrowings or leases, the
Company will be effectively prohibited from purchasing Notes. In such case, the
Company's failure to purchase tendered Notes would constitute an Event of
Default under the Indenture. Any such default may, in turn, cause a default
under other debt agreements or lease facilities of the Company.
A "Designated Event" will be deemed to have occurred upon a Change of
Control or a Termination of Trading.
A "Change of Control" will be deemed to have occurred when: (i) any
"person" or "group" (as such terms are used in Section 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rules 13d-3
and 13d-5 under the Exchange Act) of shares representing more than 50% of the
combined voting power of the then outstanding securities entitled to vote
generally in elections of directors of the Company ("Voting Stock"), (ii) the
Company consolidates with or merges into any other corporation, or any other
corporation merges into the Company, and, in the case of any such transaction,
the outstanding
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<PAGE> 23
Common Stock of the Company is reclassified into or exchanged for any other
property or security, unless the stockholders of the Company immediately before
such transaction own, directly or indirectly immediately following such
transaction, at least a majority of the combined voting power of the outstanding
voting securities of the corporation resulting from such transaction in
substantially the same proportion as their ownership of the Voting Stock
immediately before such transaction, (iii) the Company conveys, transfers or
leases all or substantially all of its assets (other than to one or more
wholly-owned subsidiaries of the Company) or (iv) any time the Continuing
Directors do not constitute a majority of the Board of Directors of the Company
(or if applicable, a successor corporation to the Company).
The definition of Change of Control includes a phrase relating to the
lease, transfer or conveyance of "all or substantially all" of the assets of the
Company. Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a holder of Notes to require
the Company to repurchase such Notes as a result of a lease, transfer or
conveyance of less than all of the assets of the Company to another person or
group may be uncertain.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
A "Termination of Trading" will be deemed to have occurred if the Common
Stock (or other common stock into which the Notes are then convertible) is
neither listed for trading on a United States national securities exchange nor
approved for trading on an established automated over-the-counter trading market
in the United States.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate, provided
that no Notes of $1,000 or less shall be redeemed in part. Notice of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each holder of Notes to be redeemed at its registered
address. If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the holder thereof upon
cancellation of the original Note. On and after the redemption date, interest
ceases to accrue on Notes or portions thereof called for redemption.
REGISTRATION RIGHTS
The Company entered into a registration agreement with the Initial
Purchaser (the "Registration Agreement"), pursuant to which the Company is
required to use reasonable efforts to cause the Registration Statement of which
this Prospectus is a part to remain effective under the Securities Act until the
earlier of (a) April 14, 2000, (b) the date on which the Notes or the Shares may
be sold by non-affiliates of the Company pursuant to paragraph (k) of Rule 144
(or any successor provision) promulgated by the Commission under the Securities
Act and (c) the date as of which all the Notes or the Shares have been sold
pursuant to the Registration Statement. If the Company fails to keep the
Registration Statement continuously effective for the period specified above
(other than as a result solely of actions of any holders of securities covered
by the Registration Statement), then at such time as the Registration Statement
is no longer effective and on each date thereafter that is the successive 30th
day subsequent to such time and until the earliest of (i) the date that the
Registration Statement is again deemed effective, (ii) the date on which the
Notes or the Shares may be sold by non-affiliates of the Company pursuant to
paragraph (k) of Rule 144 (or any successor provision) promulgated by the
Commission under the Securities Act, (iii) April 14, 2000 and (iv) the date as
of which the Notes and/or the Shares are sold pursuant to the Registration
Statement, the per annum interest
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<PAGE> 24
rate on the Notes will increase by an additional 25 basis points; provided,
however, that the interest rate will not increase by more than 50 basis points
pursuant to this sentence. The Company shall have the right, however, to suspend
the use of this Prospectus, as more fully described below. For any period during
which the per annum interest rate on the Notes is increased pursuant to this
paragraph, each holder of restricted Common Stock issued upon conversion of the
Notes shall be entitled to receive liquidated damages from the Company as
follows: (i) for every 25 basis points by which the interest rate is increased
pursuant to this paragraph, such liquidated damages shall accrue at a rate equal
to $2.50 per annum per 24.7158 shares of Common Stock (subject to adjustment in
the event of a stock split, stock recombination, stock dividend and the like);
and (ii) any liquidated damages which have accrued pursuant to this paragraph
prior to the record date relating to any interest payment date shall be payable
on such interest payment date to the holders of record on such record date.
The Company will provide or cause to be provided to each holder of the
Notes, or the Shares, copies of this Prospectus, notify or cause to be notified
each such holder when the Registration Statement for the Notes or the Shares has
become effective and take certain other actions as are required to permit
unrestricted resales of the Notes or the Shares. A holder of the Notes or the
Shares that sells such securities pursuant to this Prospectus will be required
to deliver a Prospectus to purchasers, will be subject to certain of the civil
liability provisions under the Securities Act in connection with such sales and
will be bound by the provisions of the Registration Agreement that are
applicable to such holder (including certain indemnification and contribution
rights or obligations).
The Company will be permitted to suspend the use of the Prospectus for a
period not to exceed 30 days in any thee-month period or for three periods not
to exceed an aggregate of 90 days in any twelve-month period under certain
circumstances relating to pending corporate developments, public filings with
the Commission and similar events.
CONVERSION
The holder of any Note has the right, exercisable at any time after 90
days following the date of original issuance thereof and prior to the close of
business on the Business Day immediately preceding the maturity date of the
Notes, to convert the principal amount thereof (or any portion thereof that is
an integral multiple of $1,000) into shares of Common Stock at a conversion
price of $40.46 per share, subject to adjustment as described below (the
"Conversion Price"), except that if a Note is called for redemption, the
conversion right will terminate at the close of business on the Business Day
immediately preceding the date fixed for redemption. Except as described below,
no adjustment will be made on conversion of any Notes for interest accrued
thereon or for dividends on any Common Stock issued. If Notes not called for
redemption are converted after a record date for the payment of interest and
prior to the next succeeding Interest Payment Date, such Notes must be
accompanied by funds equal to the interest payable on such succeeding Interest
Payment Date on the principal amount so converted. No fractional shares will be
issued upon conversion but a cash adjustment will be made for any fractional
shares.
Beneficial owners of interests in a Note may exercise their right of
conversion by delivering to DTC the appropriate instruction form for conversion
pursuant to DTC's conversion program and, in the case of conversions through
Euroclear or Cede Bank, in accordance with Euroclear's or Cede Bank's normal
operating procedures when application has been made to make the underlying
Common Stock eligible for trading on Cede Bank or Euroclear. To convert a Note
held in certificated form into shares of Common Stock, a holder must (i)
complete and manually sign the conversion notice on the back of the Note (or
complete and manually sign a facsimile thereof) and deliver such notice to the
Trustee in Chicago, Illinois, (ii) surrender the Note to the Trustee in Chicago,
Illinois, (iii) if required, furnish appropriate endorsements and transfer
documents, (iv) if required, pay all transfer or similar taxes, and (v) if
required, pay funds equal to interest payable on the next interest payment date.
Pursuant to the Indenture, the date on which all of the foregoing requirements
have been satisfied is the date of surrender for conversion. Such notice of
conversion can be obtained from the Trustee at its corporate trust office or the
of lice of the Conversion Agent. As promptly as practicable on or after the
conversion date, the Company will issue and deliver to the Trustee a certificate
or certificates for the number of full shares of Common Stock issuable upon
conversion, together with payment
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<PAGE> 25
in lieu of any fraction of a share in an amount determined as set forth below.
Such certificate will be sent by the Trustee to the Conversion Agent for
delivery to the holder. Such Common Stock issuable upon conversion of the Notes
will be fully paid and nonassessable. Any Note surrendered for conversion during
the period from the close of business on any Regular Record Date to the opening
of business on the next succeeding Interest Payment Date (except Notes called
for redemption on a redemption date or to be repurchased on a Designated Event
Payment Date during such period) must be accompanied by payment of an amount
equal to the interest payable on such Interest Payment Date on the principal
amount of Notes being surrendered for conversion. In the case of any Note which
has been converted after any Regular Record Date, but on or before the next
Interest Payment Date, interest on such Note shall be payable on such Interest
Payment Date notwithstanding such conversion. Such interest shall be paid to the
holder of such Note on such Regular Record Date. No other payment or adjustment
for interest, or for any dividends in respect of Common Stock, will be made upon
conversion. Holders of Common Stock issued upon conversion will not be entitled
to receive any dividends payable to holders of Common Stock as of any record
time before the close of business on the conversion date.
The Conversion Price is subject to adjustment upon the occurrence of
certain events, including: (i) the issuance of shares of Common Stock as a
dividend or distribution on the Common Stock; (ii) the subdivision or
combination of the outstanding Common Stock, (iii) the issuance to substantially
all holders of Common Stock of rights or warrants to subscribe for or purchase
Common Stock (or securities convertible into Common Stock) at a price per share
less than the then Current Market Price per share, as defined; (iv) the
distribution of shares of capital stock of the Company (other than Common
Stock), evidences of Indebtedness or other assets (excluding dividends in cash,
except as described in clause (v) below) to all holders of Common Stock; (v) the
distribution, by dividend or otherwise, of cash to all holders of Common Stock
in an aggregate amount that, together with the aggregate of any other
distributions of cash that did not trigger a Conversion Price adjustment to all
holders of its Common Stock within the 12 months preceding the date fixed for
determining the stockholders entitled to such distribution and all Excess
Payments in respect of each tender offer or other negotiated transaction by the
Company or any of its Subsidiaries for Common Stock concluded within the
preceding 12 months not triggering a Conversion Price adjustment, exceeds 15% of
the product of the Current Market Price per share (determined as set forth
below) on the date fixed for the determination of stockholders entitled to
receive such distribution times the number of shares of Common Stock outstanding
on such date; (vi) payment of an Excess Payment in respect of a tender offer or
other negotiated transaction by the Company or any of its Subsidiaries for
Common Stock, if the aggregate amount of such Excess Payment, together with the
aggregate amount of cash distributions made within the preceding 12 months not
triggering a Conversion Price adjustment and all Excess Payments in respect of
each tender offer or other negotiated transaction by the Company or any of its
Subsidiaries for Common Stock concluded within the preceding 12 months not
triggering a Conversion Price adjustment, exceeds 15% of the product of the
Current Market Price per share (determined as set forth below) on the expiration
of such tender offer or the date of payment of such negotiated transaction
consideration times the number of shares of Common Stock outstanding on such
date; and (vii) the distribution to substantially all holders of Common Stock of
rights or warrants to subscribe for securities (other than those securities
referred to in clause (iii) above). In the event of a distribution to
substantially all holders of Common Stock of rights to subscribe for additional
shares of the Company's capital stock (other than those securities referred to
in clause (iii) above), the Company may, instead of making any adjustment in the
Conversion Price, make proper provision so that each holder of a Note who
converts such Note after the record date for such distribution and prior to the
expiration or redemption of such rights shall be entitled to receive upon such
conversion, in addition to shares of Common Stock, an appropriate number of such
rights. No adjustment of the Conversion Price will be made until cumulative
adjustments amount to one percent or more of the Conversion Price as last
adjusted.
If the Company reclassifies or changes its outstanding Common Stock, or
consolidates with or merges into any person or transfers or leases all or
substantially all its assets, or is a party to a merger that reclassifies or
changes its outstanding Common Stock, the Notes will become convertible into the
kind and amount of securities, cash or other assets which the holders of the
Notes would have owned immediately after the transaction if the holders had
converted the Notes immediately before the effective date of the transaction.
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<PAGE> 26
The Indenture also provides that if rights, warrants or options expire
unexercised the Conversion Price shall be readjusted to take into account the
actual number of such warrants, rights or options which were exercised.
In the Indenture, the "Current Market Price" per share of Common Stock on
any date shall be deemed to be the average of the Daily Market Prices for the
shorter of (i) 30 consecutive Business Days ending on the last full trading day
on the exchange or market referred to in determining such Daily Market Prices
prior to the time of determination (as defined in the Indenture) or (ii) the
period commencing on the date next succeeding the first public announcement of
the issuance of such rights or warrants or such distribution through such last
full trading day prior to the time of determination.
"Excess Payment" means the excess of (A) the aggregate of the cash and fair
market value of other consideration paid by the Company or any of its
Subsidiaries with respect to the shares acquired in the tender offer or other
negotiated transaction over (B) the Daily Market Price on the Trading Day
immediately following the completion of the tender offer or other negotiated
transaction multiplied by the number of acquired shares.
The Company from time to time may to the extent permitted by law reduce the
Conversion Price by any amount for any period of at least 20 days (each such
reduction, an "Induced Conversion Adjustment"), in which case the Company shall
give at least 15 days' notice of such reduction, if the Board of Directors has
made a determination that such reduction would be in the best interests of the
Company, which determination shall be conclusive. The Company may, at its
option, make such reductions in the Conversion Price, in addition to those set
forth above, as the Board of Directors deems advisable to avoid or diminish any
income tax to holders of Common Stock resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any event treated as
such for income tax purposes.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indenture provides that the Company may not consolidate or merge with
or into any Person (whether or not the Company is the surviving corporation), or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets unless (i) (a) the Company is the
surviving or continuing corporation or (b) the Person formed by or surviving any
such consolidation or merger (if other than the Company) or the Person which
acquires by sale, assignment, transfer, lease, conveyance or other disposition
the properties and assets of the Company is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia; (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or the Person to which such
sale, assignment, transfer, lease, conveyance or other disposition will have
been made assumes all the Obligations of the Company, pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee, under the Notes and
the Indenture; (iii) such sale, assignment, transfer, lease, conveyance or other
disposition of all or substantially all of the Company's properties or assets
shall be as an entirety or virtually as an entirety to one Person and such
Person shall have assumed all the obligations of the Company, pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee, under
the Notes and the Indenture; (iv) immediately after such transaction no Default
or Event of Default exists; and (v) the Company or such Person shall have
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that such transaction and the supplemental indenture comply with
the Indenture and that all conditions precedent in the Indenture relating to
such transaction have been satisfied.
REPORTS
Whether or not required by the rules and regulations of the Commission, so
long as any Notes are outstanding, the Company will file with the Commission and
furnish to the holders of Notes all quarterly and annual financial information
required to be contained in a filing with the Commission on Forms 10-Q and 10-K,
including a "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and, with respect to the annual consolidated financial
statements only, a report thereon by the Company's independent auditors.
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EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default; (i) default for 30 days in the payment when due of interest on the
Notes; (ii) default in payment when due of principal on the Notes; (iii) failure
by the Company to comply with the provisions described above under
"-- Repurchase at the Option of Holders"; (iv) failure by the Company for 60
days after the receipt of written notice to comply with certain other covenants
and agreements contained in the Indenture or the Notes; (v) default under any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness for money borrowed by the
Company or any of its Material Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Material Subsidiaries), whether such
Indebtedness or guarantee now exists or is created after the date on which the
Notes are first authenticated and issued, which default (a) is caused by a
failure to pay when due principal or interest on such Indebtedness within the
grace period provided in such Indebtedness (which failure continues beyond any
applicable grace period) (a "Payment Default") or (b) results in the
acceleration of such Indebtedness prior to its express maturity without such
acceleration being rescinded or annulled and, in each case, the principal amount
of any such Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity of
which has been so accelerated, aggregates $10 million or more; (vi) failure by
the Company or any Material Subsidiary of the Company to pay final
non-appealable judgments (other than any judgment as to which a reputable
insurance company has accepted full liability) aggregating in excess of $5
million, which judgments are not stayed within 60 days after their entry; and
(vii) certain events of bankruptcy or insolvency with respect to the Company or
any of its Material Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the
holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Company or any Material
Subsidiary, all outstanding Notes will become due and payable without further
action or notice. Holders of the Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
By notice to the Trustee, the holders of a majority in aggregate principal
amount of the Notes then outstanding may, on behalf of the holders of all of the
Notes, waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
the Designated Event Payment or interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required, upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
TRANSFER AND EXCHANGE
The Company has initially appointed the Trustee as Registrar in Chicago,
Illinois. The Company reserves the right to vary or terminate the appointment of
the Registrar or to appoint additional or other Registrars or to approve any
change in the office through which the Registrar acts.
A holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar may require a holder, among other things, to furnish appropriate
endorsements and transfer documents and the Company may require a holder to pay
any taxes and fees required by law or permitted by the Indenture. The Company is
not required to exchange or register the transfer of any Note selected for
redemption. Also, the Company is not required to exchange or register the
transfer of any Note for a period of 15 days before a selection of Notes to be
redeemed.
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The registered holder of a Note is treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next succeeding paragraph, the Indenture or the
Notes may be amended or supplemented with the consent of the holders of at least
a majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for Notes), and any
existing default or compliance with any provision of the Indenture or the Notes
may be waived with the consent of the holders of a majority in principal amount
of the then outstanding Notes (including consents obtained in connection with a
tender offer or exchange offer for Notes).
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any Notes held by a nonconsenting holder of Notes) (i) reduce
the amount of Notes whose holders must consent to an amendment, supplement or
waiver, (ii) reduce the principal of or change the fixed maturity of any Note or
alter the provisions with respect to the redemption of the Notes, (iii) reduce
the rate of or change the time for payment of interest on any Note, (iv) waive a
default in the payment of principal of or interest on any Notes (except a
rescission of acceleration of the Notes by the holders of at least a majority in
aggregate principal amount of the Notes and a waiver of the payment default that
resulted from such acceleration), (v) make any Note payable in money other than
that stated in the Notes, (vi) make any change in the provisions of the
Indenture relating to waivers of past Defaults or the rights of holders of Notes
to receive payments of principal of or interest on the Notes, (vii) waive a
redemption payment with respect to any Note, (viii) impair the right to convert
the Notes into Common Stock, (ix) modify the conversion provisions of the
Indenture in a manner adverse to the holders of the Notes or (x) make any change
in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to holders of the Notes in the case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the holders of the Notes or that does not adversely affect
the legal rights under the Indenture of any such holder, or to comply with
requirements of the Commission in order to qualify, or maintain the
qualification of, the Indenture under the Trust Indenture Act.
NOTICES
Notice to holders of the Notes will be given by mail to the addresses of
such holders as they appear in the Register (as such term is defined in the
Indenture). Such notices will be deemed to have been given on the date of such
mailing.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee are permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign. The Trustee is the lender under the Company's Credit Agreement.
The holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that, in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any holder of Notes, unless such holder shall have the offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
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CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Business Day" means any day that is not a Legal Holiday.
"Capital Stock" means any and all shares, interests, participations, rights
or other equivalents (however designated) of equity interests in any entity,
including, without limitation, corporate stock and partnership interests.
"Default" means any event that is or, with the passage of time or the
giving of notice or both, would be an Event of Default.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect from time to time.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Indebtedness" means, with respect to any person, all obligations, whether
or not contingent, of such person (i) for borrowed money (including, but not
limited to, any indebtedness secured by a security interest, mortgage or other
lien on the assets of such person which is (1) given to secure all or part of
the purchase price of property subject thereto, whether given to the vendor of
such property or to another, or (2) existing on property at the time of
acquisition thereof), (b)evidenced by a note, debenture, bond or other written
instrument, (c) under a lease required to be capitalized on the balance sheet of
the lessee under GAAP or under any lease or related document (including a
purchase agreement) which provides that such person is contractually obligated
to purchase or to cause a third party to purchase such leased property, (d) in
respect of letters of credit, bank guarantees or bankers' acceptances (including
reimbursement obligations with respect to any of the foregoing), (e) with
respect to Indebtedness secured by a mortgage, pledge, lien, encumbrance, charge
or adverse claim affecting title or resulting in an encumbrance to which the
property or assets of such person are subject, whether or not the obligation
secured thereby shall have been assumed or guaranteed by or shall otherwise be
such person's legal liability, (f) in respect of the balance of deferred and
unpaid purchase price of any property or assets and (g) under interest rate or
currency swap agreements, cap, floor and collar agreements, spot and forward
contracts and similar agreements and arrangements; (ii) with respect to any
obligation of others of the type described in the preceding clause (i) or under
clause (iii) below assumed by or guaranteed in any manner by such person or in
effect guaranteed by such person through an agreement to purchase (including,
without limitation, "take or pay" and similar arrangements), contingent or
otherwise (and the obligations of such person under any such assumptions,
guarantees or other such arrangements); and (iii) any and all deferrals,
renewals, extensions, refinancings and refundings of, or amendments,
modifications or supplements to, any of the foregoing.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the State of New York are not required to be open. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period. If any other operative date for purposes of
the Indenture shall occur on a Legal Holiday then for all purposes the next
succeeding day that is not a Legal Holiday shall be such operative date.
"Material Subsidiary" means any Subsidiary of the Company which at the date
of determination is a "significant subsidiary" as defined in Rule 1-02(w) of
Regulation S-X under the Securities Act and the Exchange Act (as such Regulation
is in effect on the date hereof).
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"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages, and other liabilities payable under
the documentation governing any Indebtedness.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization, limited
liability company or government or agency or political subdivision thereof.
"Subsidiary" of a person means any corporation, association or other
business entity of which more than 50% of the total voting power of shares of
Capital Stock entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by that person or one or more of
the other Subsidiaries of that person or a combination thereof.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of the principal United States
federal income tax considerations relevant to purchasers of the Notes from the
Selling Security Holders pursuant to the offering. This discussion is based on
currently existing provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), existing and proposed Treasury regulations promulgated thereunder
and administrative and judicial interpretations thereof, all as in effect or
proposed on the date hereof and all of which are subject to change, possibly
with retroactive effect, or different interpretations.
This discussion does not deal with all aspects of United States federal
income taxation that may be important to holders of the Notes or shares of the
Common Stock received upon conversion thereof, and it does not include any
description of the tax laws of any state, local or foreign government. This
discussion does not address the tax consequences to subsequent beneficial owners
of the Notes, and is limited to beneficial owners who hold the Notes and the
shares of Common Stock received upon conversion thereof as capital assets within
the meaning of Section 1221 of the Code. Moreover, this discussion is for
general information only and does not purport to address all of the United
States federal income tax consequences that may be relevant to particular
purchasers (such as certain financial institutions, insurance companies,
tax-exempt entities, dealers in securities or persons who have hedged the risk
of owning a Note or a share of Common Stock) that may be subject to special
rules.
For the purpose of this discussion, a "United States Holder" refers to a
beneficial owner of a Note who or which is (i) a citizen or resident of the
United States for United States federal income tax purposes, (ii) a corporation,
partnership or other entity created or organized in or under the laws of the
United States or of any political subdivision thereof (iii) any other person who
is subject to United States federal income tax on a net income basis in respect
of the Notes, or (iv) a trust if, and only if, (A) a court within the United
States is able to exercise primary supervision over the administration of the
trust and (B) one or more U.S. persons have the authority to control all
substantial decisions of the trust. The term "Non-United States Holder" refers
to any beneficial owner of a Note who or which is not a United States Holder.
PROSPECTIVE PURCHASERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO
THE PARTICULAR FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE
ACQUISITION, OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING THE CONVERSION OF
THE NOTES INTO SHARES OF COMMON STOCK, AND THE EFFECT THAT THEIR PARTICULAR
CIRCUMSTANCES MAY HAVE ON SUCH TAX CONSEQUENCES.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS APPLICABLE TO UNITED STATES HOLDERS
Interest on Notes. Interest paid on the Notes will be taxable to a United
States Holder as ordinary interest income in accordance with such holder's
method of tax accounting.
Original Issue Discount. In general, a debt instrument has original issue
discount ("OID") to the extent that its "stated redemption price at maturity"
exceeds its "issue price." A Note's "redemption price" at
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maturity is its principal (face) amount. The "issue price" of the Notes will be
equal to the initial offering price to the public (not including any bond house,
broker or similar person or organization acting in the capacity of an
underwriter, placement agent or wholesaler) at which a substantial amount of the
Notes are sold. However, if the OID with respect to a debt instrument is less
than one-fourth of one percent of the stated redemption price at maturity
multiplied by the number of full years from the issue date to the maturity date,
then the amount of OID shall be considered zero.
The Company expects that the Notes will not be sold by the Selling Security
Holders with OID. However, if it is determined that the Notes have OID, a United
States Holder will be required to include in gross income for United States
federal income tax purposes an amount equal to the sum of the "daily portions"
of such OID for all days during the taxable year on which the holder holds the
debt instrument. The daily portions of OID required to be included in a holder's
gross income in a taxable year will be determined on a constant yield basis by
allocating to each day during the taxable year on which the holder holds the
debt instrument a pro rata portion of the OID on such debt instrument which is
attributable to the "accrual period" in which such day is included. Accrual
periods with respect to a Note may be any set of periods (which may be of
varying lengths) selected by a United States Holder as long as (i) no accrual
period is longer than one year and (ii) each scheduled payment of interest or
principal on the Note occurs on either the first or final day of an accrual
period. The amount of OID attributable to each "accrual period" will be equal to
the product of (i) the "adjusted issue price" at the beginning of such accrual
period and (ii) the "yield to maturity" of the debt instrument stated in a
manner appropriately taking into account the length of the accrual period. The
"yield to maturity" is the discount rate that, when used in computing the
present value of all payments to be made under the Notes, produces an amount
equal to the issue price of the Notes. The "adjusted issue price" of a Note at
the beginning of an accrual period is generally defined as the issue price of
the Note plus the aggregate amount of OID that accrued in all prior accrual
periods, less any cash payments on the Note. Accordingly, a United States Holder
of a Note will be required to include OID thereon in gross income for United
States federal tax purposes in advance of the receipt of cash in respect of such
income. The amount of OID allocable to an initial short accrual period may be
computed using any reasonable method if all other accrual periods, other than a
final short accrual period, are of equal length. The amount of OID allocable to
the final accrual period at maturity of a Note is the difference between (x) the
amount payable at the maturity of the Note and (y) the Note's adjusted issue
price as of the beginning of the final accrual period.
Upon the occurrence of a Designated Event, each holder of Notes shall have
the right to require the Company to repurchase all or any part of such holder's
Notes at a purchase price equal to 100% of the principal amount thereof,
together with accrued and unpaid interest thereon to the Designated Event
Payment Date. Computation of the yield and maturity of the Notes is not affected
by such redemption rights and obligations if, based on all the facts and
circumstances as of the issue date, the stated payment schedule of the Notes is
significantly more likely than not to occur. The Company has determined that,
based on all of the facts and circumstances as of the issue date, it is
significantly more likely than not that the Notes will be paid according to
their stated schedule.
The Company may redeem the Notes, in whole or in part, at any time on or
after April 19, 2001 at redemption prices specified elsewhere herein plus
accrued and unpaid interest, if any, on the Notes so redeemed to but excluding
the date of redemption. The Regulations contain rules for determining the
"maturity date" and the stated redemption price at maturity of an instrument
that may be redeemed prior to its stated maturity date at the option of the
issuer. Under the Regulations, solely for purposes of the accrual of OID, it is
assumed that the issuer will exercise any option to redeem a debt instrument if
such exercise will lower the yield-to-maturity of the debt instrument. The
Company believes that it will not be presumed to redeem the Notes prior to their
stated maturity under these rules because the exercise of such option would not
lower the yield-to-maturity of the Notes.
Constructive Dividend. Certain corporate transactions, such as
distributions of assets to holders of Common Stock, may cause a deemed
distribution to the holders of the Notes if the conversion price or conversion
ratio of the Notes is adjusted to reflect such corporate transaction. Such
deemed distributions will be taxable as a dividend, return of capital, or
capital gain in accordance with the earnings and profits rules discussed under
"Dividends on Shares of Common Stock."
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Sale or Exchange of Notes or Shares of Common Stock. In general, a United
States Holder of Notes will recognize gain or loss upon the sale, redemption,
retirement or other disposition of the Notes measured by the difference between
(i) the amount of cash and the fair market value of any property received
(except to the extent attributable to the payment accrued interest) and (ii) the
United States Holder's tax basis in the Notes. A United States Holder's tax
basis in Notes generally will equal the cost of the Notes to the holder. In
general, each United States Holder of Common Stock into which the Notes have
been converted will recognize gain or loss upon the sale, exchange, redemption,
or other disposition of the Common Stock under rules similar to those applicable
to the Notes. Special rules may apply to redemptions of the Common Stock which
may result in the amount paid being treated as a dividend. Assuming the
requirements of Section 1221 of the Code are satisfied, the gain or loss on the
disposition of the Notes or shares of Common Stock will be capital gain or loss
and will be taxable at various preferential rates depending on the extent to
which a United States Holder's holding period for the notes or shares of Common
Stock exceeds one year. (For the basis and holding period of shares of Common
Stock, see "-- Conversion of Notes.")
Conversion of Notes. A United States Holder of Notes generally will not
recognize gain or loss on the conversion of the Notes solely into shares of
Common Stock. The United States Holder's tax basis in the shares of Common Stock
received upon conversion of the Notes will be equal to the holder's aggregate
basis in the Notes exchanged therefor (less any portion thereof allocable to
cash received in lieu of a fractional share). The holding period of the shares
of Common Stock received by the holder upon conversion of Notes will generally
include the period during which the holder held the Notes prior to the
conversion.
Cash received in lieu of a fractional share of Common Stock should be
treated as a payment in exchange for such fractional share rather than as a
dividend. Gain or loss recognized on the receipt of cash paid in lieu of such
fractional shares generally will equal the difference between the amount of cash
received and the amount of tax basis allocable to the fractional shares.
Dividends on Shares of Common Stock. Distributions on shares of Common
Stock will constitute dividends for United States federal income tax purposes to
the extent of current or accumulated earnings and profits of the Company as
determined under United States federal income tax principles. Dividends paid to
holders that are United States corporations may qualify for the
dividends-received deduction.
To the extent, if any, that a United States Holder receives distributions
on shares of Common Stock that would otherwise constitute dividends for United
States federal income tax purposes but that exceed current and accumulated
earnings and profits of the Company, such distributions will be treated first as
a non-taxable return of capital reducing the holder's basis in the shares of
Common Stock. Any such distributions in excess of the holder's basis in the
shares of Common Stock will be treated as capital gain.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS APPLICABLE TO NON-UNITED STATES
HOLDERS
The following summary describes certain United States federal income and
estate tax consequences of the ownership of Notes as of the date hereof by a
Non-United States Holder.
Under present United States federal income and estate tax law, and subject
to the discussion below concerning backup withholding:
Interest and OID on Notes. Generally interest paid on the Notes (including
OID) to a Non-United States Holder will not be subject to United States income
tax and no withholding of United States federal income tax will be required with
respect to the payment by the Company or any Paying Agent of principal or
interest (including OID) on a Note owned by a Non-United States Holder, provided
(i) that the beneficial owner does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of the Company
entitled to vote within the meaning of section 871(h)(3) of the Code and the
regulations thereunder, (ii) the beneficial owner is not a "controlled foreign
corporation" (as defined in Section 957 of the Code) that is related directly,
indirectly or constructively to the Company through stock ownership and (iii)
the beneficial owner satisfies the statement requirement (described generally
below) set forth in section 871(h) and section 881(c) of the Code and the
regulations thereunder.
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To satisfy the requirement referred to in (a)(iii) above (the "Portfolio
Interest Exception"), the beneficial owner of such Note, or a financial
institution holding the Note on behalf of such owner, must provide, in
accordance with specified procedures, the Company or the Paying Agent with a
statement to the effect that the beneficial owner is not a United States person.
Pursuant to current temporary Regulations, these requirements will be met if (1)
the beneficial owner provides the payor his name and address, and certifies,
under penalties of perjury, that he is not a United States person (which
certification may be made on an Internal Revenue Service Form W-8 (or successor
or substitute form)) or (2) a financial institution that holds customer's
securities in the ordinary course of its trade or business and holds the Note on
behalf of the beneficial owner certifies, under penalties of perjury, that such
statement has been received by it (or by another financial institution acting on
behalf of the Non-United States Holder), and furnishes the Paying Agent with a
copy thereof.
Regulations recently issued by the Internal Revenue Service, which will be
effective for payments made after December 31, 1998 (subject to certain
transition rules), made modifications to the certification procedures applicable
to Non-United States Holders. In general, these regulations unify certification
procedures and forms and clarify and modify reliance standards. A Non-United
States Holder should consult its own advisor regarding the effect of the new
Regulations.
If a Non-United States Holder cannot satisfy the requirements of the
Portfolio Interest Exception, payments of interest (including OID) made to
Non-United States Holders will generally be subject to a 30% withholding tax, or
such lower rate as may be specified by an applicable income tax treaty, unless
the beneficial owner of the Note provides the Company or the Paying Agent, as
the case may be, with a properly executed (1) Internal Revenue Service Form 1001
(or successor form) claiming an exemption from withholding under the benefit of
a tax treaty or (2) Internal Revenue Service Form 4224 (or successor form)
stating that interest (including OID) paid on the Note is not subject to
withholding tax because it is effectively connected with the beneficial owner's
conduct of a trade or business in the United States.
If a Non-United States Holder is engaged in a trade or business in the
United States and interest (including OID) on the Note is effectively connected
with the conduct of such trade or business, the Non-United States Holder,
although exempt from the withholding tax discussed above, will generally be
subject to United States federal income tax on such interest (including OID) on
a net income basis in the same manner as if it were a United States person. In
addition, if such holder is a foreign corporation, it may be subject to a branch
profits tax equal to 30% of its effectively connected earnings and profits for
the taxable year, or such lower rate as may be specified by an applicable income
tax treaty, subject to adjustments.
Sale or Exchange of Notes or Shares of Common Stock. A Non-United States
Holder generally will not be subject to United States federal income tax on gain
realized upon the sale or other disposition of the Notes or shares of Common
Stock unless (i) such gain or income is effectively connected with a trade or
business in the United States of the Non-United States Holder, or (ii) in the
case of a Non-United States Holder who is a nonresident alien individual, such
Holder is present in the United States for 193 days or more in the taxable year
of such sale, exchange or retirement, and certain other conditions apply.
Conversion of Notes. A Non-United States Holder generally will not be
subject to United States federal income tax on the conversion of a Note into
shares of Common Stock. To the extent a Non-United States Holder receives cash
in lieu of a fractional share on conversion, such cash may give rise to gain
that would be subject to the rules described above with respect to the sale or
exchange of a Note or Common Stock.
Dividends on Shares of Common Stock. Generally, any distribution on shares
of Common Stock to a Non-United States Holder will be subject to United States
federal income tax withholding at a rate of 30% unless the dividend is
effectively connected with the conduct of a trade or business within the United
States by the Non-United States Holder, in which case the dividend will be
subject to the United States federal income tax on net income that applies to
United States persons generally (and, with respect to corporate Holders and
under certain circumstances, the branch profits tax). Non-United States Holders
should consult any applicable income tax treaties, which may provide for a lower
rate of withholding or other rules different from those described above. A
NonUnited States Holder may be required to satisfy certain certification
requirements in order to claim a reduction of or exemption from withholding
under the foregoing rules.
30
<PAGE> 34
Estate Tax Consideration. A Note beneficially owned by an individual who at
the time of death is a Non-United States Holder generally will not be includible
in the individual's gross estate for the purposes of the United States federal
estate tax as a result of such individual's death, provided that such individual
does not at the time of death actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the Company entitled to
vote within the meaning of section 871(h)(3) of the Code and provided that the
interest payments with respect to such Note will not have been, if received at
the time of such individual's death, effectively connected with the conduct of a
United States trade or business by such individual.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The "backup" withholding and information reporting requirements may apply
to certain payments of principal and interest (including OID) on a Note and to
certain payments or proceeds of the sale or retirement of a Note. The Company,
its agent, a broker, the Trustee or the Paying Agent, as the case may be, is
required to withhold tax from any payment that is subject to backup withholding
at a rate of 31% of such payment if the holder fails to furnish his taxpayer
identification number (social security number or employee identification
number), to certify that such holder is not subject to backup withholding, or to
otherwise comply with the applicable requirements of the backup withholding
rules. Certain holders (including, among others, all corporations) are not
subject to the backup withholding and reporting requirements.
Under current Treasury Regulations, backup withholding and information
reporting do not apply to payments made by the Company or any agent thereof (in
its capacity as such) to a holder of a Note who has provided the required
certification under penalties of perjury that it is not United States Holder or
has otherwise established an exemption (provided that neither the Company nor
such agent has actual knowledge that the holder is a United States Holder or
that the conditions of any other exemption are not in fact satisfied). Payments
of the proceeds from the sale by a holder who is not a United States Holder of a
Note made to or through a foreign office of a broker will not be subject to
United States information reporting or backup withholding, except that if the
broker is a United States person, a controlled foreign corporation for U.S. tax
purposes or a foreign person 50% or more of whose gross income is effectively
connected with a United States trade or business for a specified three-year
period, United States information reporting may apply to such payments.
Payments of the proceeds from the sale of a Note to or through the United
States office of a broker is subject to United States information reporting and
backup withholding unless the holder or beneficial owner certifies as to its
non-United States status or otherwise establishes an exemption from United
States information reporting and backup withholding.
In October 1997, Regulations were issued which alter the foregoing rules in
certain respects and which generally will apply to any payments (including OID)
in respect of a Note or proceeds from the sale of a Note that are made after
December 31, 1998. Among other things, such regulations expand the number of
foreign intermediaries that are potentially subject to information reporting and
address certain documentary evidence requirements relating to exemption from the
general backup withholding requirements. Holders of the Notes should consult
their tax advisors concerning possible application of the final regulations to
amounts of OID that they are required to include as well as the possible
application of such regulation to any payments made on or with respect to the
Notes.
Any amounts withheld under the backup withholding rules from a payment to a
holder may be claimed as a credit against such holder's United States federal
income tax liability.
The Company is required to furnish certain information to the Internal
Revenue Service, and will furnish annually to record holders of Notes,
information with respect to interest and OID, if any, accruing during the
calendar year. The OID information will be based upon the issue price of the
debt instrument as if the holder were the original holder of the debt
instrument. No assurance can be given that the Internal Revenue Service will not
challenge the accuracy of the reported information. Subsequent holders who
purchase Notes for an amount other than the adjusted issue price and/or on a
date other than the last day of an accrual period will be
31
<PAGE> 35
required to determine for themselves the amount of OID, if any, they are
required to include in gross income for United States federal income tax
purposes.
LEGAL MATTERS
The legality of the Securities offered hereby has been passed on for the
Company by Ross & Hardies, Chicago, Illinois. A member of this firm owns shares
of the Company's Common Stock.
EXPERTS
The financial statements of Sabratek Corporation as of December 31, 1997
and 1996 and for each of the years in the three-year period ended December 31,
1997, have been incorporated by reference herein in reliance upon the report of
KPMG Peat Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
32
<PAGE> 36
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth an itemized estimate of fees and expenses
payable by the Registrant in connection with the offering of the securities
described in this registration statement.
<TABLE>
<S> <C>
SEC registration fee........................................ $25,075
Legal fees and expenses..................................... $15,000
Accounting fees and expenses................................ $ 5,000
Miscellaneous............................................... $ 5,425
Printing expenses........................................... $ 2,500
-------
Total.................................................. $53,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Amended and Restated Certificate of Incorporation provides
for indemnification to the full extent permitted by the laws of the State of
Delaware against and with respect to threatened, pending or completed actions,
suits or proceedings arising from or alleged to arise from, a party's actions or
omissions as a director, officer, employee or agent of the Company or of any
other corporation, partnership, joint venture, trust or other enterprise which
has served in such capacity at the request of the Company if such acts or
omissions occurred or were or are alleged to have occurred, while said party was
a director or officer of the Company; provided, however, the Company shall not
indemnify any director or officer in an action against the Company unless the
Company shall have consented to such action. Generally, under Delaware law,
indemnification will only be available where an officer or director can
establish that he/she acted in good faith and in a manner which was reasonably
believed to be in or not opposed to the best interests of the Company.
Section 145 of the Delaware Law provides that a corporation may indemnify a
director, officer, employee or agent made a party to an action by reason of the
fact that such person was a director, officer, employee or agent of the
corporation or was serving at the request of the corporation against expenses
actually incurred by such person in connection with such action if such person
acted in good faith and in a manner such person reasonably believed to be in, or
not opposed to, the best interest of the corporation with respect to any
criminal action, and had no reasonable cause to believe his conduct was
unlawful. Delaware Law does not permit a corporation to eliminate a director's
duty of care, and the provisions of the Company's Amended and Restated
Certificate of Incorporation have no effect on the availability of equitable
remedies such as injunction or rescission, based upon a director's breach of the
duty of care. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the Company pursuant to the foregoing provisions and agreements, the Company has
been informed that in the opinion of the Staff of the Securities and Exchange
Commission such indemnification is against policy as expressed in the Securities
Act and is therefore unenforceable.
The Company maintains a director's and officer's liability insurance policy
which indemnifies directors and officers for certain losses arising from a claim
by reason of a wrongful act, as defined, under certain circumstances where the
Company does not provide indemnification.
ITEM 16. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
(a)(1) and (2). The Company's audited financial statements are incorporated
herein by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997.
II-1
<PAGE> 37
Exhibits (numbered in accordance with Item 601 of Regulation S-K).
<TABLE>
<CAPTION>
INCORPORATION
EXHIBIT PAGE NUMBER BY REFERENCE
NUMBER DESCRIPTION OF DOCUMENTS (IF APPLICABLE) (IF APPLICABLE)
- ------- ------------------------ --------------- ---------------
<S> <C> <C> <C>
1.1 Purchase Agreement, dated April 8, 1998, by and between the
Company and Salomon Smith Barney, as Initial Purchaser...... *
3.1 Articles of Incorporation................................... +
3.2 ByLaws...................................................... +
4.1 Registration Agreement, dated April 14, 1998 by and between
the Company and Salomon Smith Barney as Initial Purchaser... *
4.2 Indenture, dated April 14, 1998 by and between the Company
and LaSalle National Bank, as Trustee....................... *
5.1 Opinion of Ross & Hardies regarding legality of shares of
Common Stock................................................ *
10.1 Agreement with Americorp Financial, Inc. re: Leasing
Services, dated March 22, 1995.............................. +
10.1.1 Amendment, dated September 16, 1996, to Agreement with
Americorp Financial, Inc. .................................. +++
10.2 Agreement with Clintec Nutrition Company re: Development
Agreement, dated September 1, 1995.......................... +
10.3 Intentionally Omitted.......................................
10.4 Intentionally Omitted.......................................
10.5 Distributorship Agreement with CO-Medical, Inc., dated
February 17, 1992........................................... +
10.6 Distributorship Agreement with Clinical Technology Inc.,
dated August 1, 1992........................................ +
10.7 Intentionally Omitted.......................................
10.8 Intentionally Omitted.......................................
10.9 Distributorship Agreement with Advanced Medical, Inc., dated
September 1, 1991........................................... +
10.10 Distributorship Agreement with Healthcare Technology, dated
October 9, 1991............................................. +
10.11 Intentionally Omitted.......................................
10.12 Intentionally Omitted.......................................
10.13 Pump Contract with Chartwell Home Therapies, dated November
22, 1993.................................................... +
10.14 Sales Agreement with Pharmacy Corporation of America, dated
March 17, 1995.............................................. +
10.15 Sales & Marketing Agreement with Alpha Group, dated November
6, 1995..................................................... +
10.16 Foreign Distributorship Agreement with MED-O-GEN INC., dated
September 22, 1995.......................................... +
10.17 Foreign Distributorship Agreement with Yoon Duk Separation
Technology, dated April 17, 1995............................ +
10.18 Foreign Distributorship Agreement with Upwards Biosystems
Ltd., dated March 8, 1995................................... +
</TABLE>
II-2
<PAGE> 38
<TABLE>
<CAPTION>
INCORPORATION
EXHIBIT PAGE NUMBER BY REFERENCE
NUMBER DESCRIPTION OF DOCUMENTS (IF APPLICABLE) (IF APPLICABLE)
- ------- ------------------------ --------------- ---------------
<S> <C> <C> <C>
10.19 Foreign Distributorship Agreement with Grupo Grifols, S.A.,
dated September 17, 1993.................................... +
10.20 Foreign Distributorship Agreement with JMS Company, dated
March 22, 1996.............................................. +
10.21 Foreign Distributorship Agreement with Brasimpex............ +
10.22 Foreign Distributorship Agreements with Medicare (s) PTE
LTD., dated February 10, 1995............................... +
10.23 Intentionally Omitted.......................................
10.24 Intentionally Omitted.......................................
10.25 Master Lease Agreement with Comdisco, Inc., dated August 9,
1994........................................................ +
10.26 Stock Option Plan........................................... +
10.27 Lease for Real Property located at 5601 West Howard, Niles,
Illinois, dated as of May 31, 1994.......................... +
10.27.1 Amendment, dated October 30, 1996, to Lease for Real
Property located at 5601 West Howard, Niles, Illinois....... +++
10.28 Employment Agreement for K. Shan Padda...................... +
10.29 Employment Agreement for Anil Rastogi....................... +
10.30 Asset Purchase Agreement, dated February 25, 1997, by and
among Sabratek Corporation; Rocap, Inc. and Elliott
Mandell..................................................... ++
10.31 Employment Agreement for Stephen L. Holden.................. ++++
10.32 Employment Agreement for Elliott Mandell.................... ++
10.33 Lease Agreement for property located at 11 Sixth Road,
Woburn, Massachusetts, dated February 1, 1997............... ++++
10.34 Lease Agreement for property located at 5 Constitution Way,
Woburn, Massachusetts, dated June 26, 1995.................. ++++
10.35 Lease Agreement for property located at 1629 Prime Court,
Suite 100, Orlando, Florida, dated March 11, 1997........... +++++
10.36 Credit Agreement, dated as of March 26, 1997, by and between
the Company as Borrower and LaSalle National Bank (formerly
known as LaSalle Bank NI) as Lender......................... *
23.1 Consent of KPMG Peat Marwick LLP............................ E-1
23.2 Consent of Ross & Hardies (included in Exhibit 5.1).........
24.1 Powers of Attorney (included on the signature page
hereto).....................................................
25.1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 or a Corporation Designated to Act as
Trustee on Form T-1......................................... *
</TABLE>
- -------------------------
* Previously filed on June 12, 1998 as part of the original Registration
Statement.
+ Incorporated by reference to the Company's Registration Statement on Form
S-1, declared effective by the Commission on June 21, 1996 (File No.
333-3866).
++ Incorporated by reference to the Company's Current Report on Form 8-K
filed with the Commission on March 11, 1997.
+++ Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 filed with the Commission on
March 31, 1997.
II-3
<PAGE> 39
++++ Incorporated by reference to the Company's Registration Statement on Form
S-1 declared effective by the Commission on April 4, 1997
+++++ Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1997 filed with the Commission on May 15,
1997.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a) (3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in the volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement:
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
the periodic reports filed by the Registrant pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934 that are incorporated by reference
in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in this Registration Statement shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-4
<PAGE> 40
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Niles, State of Illinois, on July 10, 1998.
SABRATEK CORPORATION
By: /s/ K. SHAN PADDA
------------------------------------
K. Shan Padda
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed by the following persons in the
capacities indicated on July 10, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ K. SHAN PADDA Chairman of the Board and Chief Executive
- --------------------------------------------------- Officer
K. Shan Padda
/s/ STEPHEN L. HOLDEN Senior Vice President, Chief Financial Officer,
- --------------------------------------------------- Treasurer and Principal Financial Officer
Stephen L. Holden
/s/ SCOTT SKOOGLUND Vice President - Finance and Assistant Secretary
- --------------------------------------------------- and Principal Accounting Officer
Scott Skooglund
/s/ DORON C. LEVITAS* Director, Vice Chairman of the Board, Chief
- --------------------------------------------------- Administrative Officer, Vice President of
Doron C. Levitas International Operations and Secretary
/s/ FRANCIS V. COOK, M.D.* Director
- ---------------------------------------------------
Francis V. Cook, M.D.
/s/ MARK LAMPERT* Director
- ---------------------------------------------------
Mark Lampert
/s/ WILLIAM D. LAUTMAN* Director
- ---------------------------------------------------
William D. Lautman
/s/ WILLIAM H. LOMICKA* Director
- ---------------------------------------------------
William H. Lomicka
/s/ MARVIN SAMSON* Director
- ---------------------------------------------------
Marvin Samson
/s/ L. PETER SMITH* Director
- ---------------------------------------------------
L. Peter Smith
/s/ EDSON W. SPENCER, JR.* Director
- ---------------------------------------------------
Edson W. Spencer, Jr.
</TABLE>
* Signed by Stephen L. Holden pursuant to power of attorney.
<PAGE> 41
SABRATEK CORPORATION
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
23.1 Consent of KPMG Peat Marwick LLP
</TABLE>
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITOR'S CONSENT
The Board of Directors
Sabratek Corporation
We consent to incorporation by reference in the registration statement on
Form S-3 of Sabratek Corporation of our report dated March 17, 1998, relating to
the balance sheets of Sabratek Corporation as of December 31, 1997 and 1996, and
the related statements of operations, stockholders' equity (deficit), and cash
flows for each of the years in the three-year period ended December 31, 1997,
which report appears in the December 31, 1997 annual report on Form 10-K of
Sabratek Corporation, and to the reference to our firm under the heading
"Experts" in the registration statement.
KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Chicago, Illinois
July 9, 1998
