<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 12, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
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. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
======================================================================================================================
PRINCIPAL PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTERED PER SHARE PRICE
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
6% Convertible Notes due 2005... $85,000,000 N/A $85,000,000
- ----------------------------------------------------------------------------------------------------------------------
Common Stock $.01 par value per share... 2,100,840 $40.46(1) $85,000,000
shares..........
======================================================================================================================
<CAPTION>
================================================== ================
AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTRATION FEE
<S> <C>
- --------------------------------------------------
6% Convertible Notes due 2005... $25,075
- --------------------------------------------------
Common Stock $.01 par value per share... (2)
==================================================
</TABLE>
(1) The Notes are convertible at the option of the holder, at any time 90 days
following the date of original issuance thereof and prior to maturity, into
shares of Common Stock at a conversion price of $40.46 per share, subject to
adjustments in certain events. See "Description of the Notes -- Conversion."
(2) No additional consideration will be received for the Common Stock issuable
upon conversion of the Notes and, therefore, no registration fee is required
pursuant to Rule 457(i).
------------------------
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.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION"). THESE SECURITIES MAY NOT
BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 12, 1998
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 June 12, 1998
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Available Information....................................... 1
Forward Looking Statement................................... 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
3
<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
6
<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
Aim Balanced Fund.................. 1,500,000 37,073 1,500,000 37,073 0
Argent Classic Convertible
Arbitrage Fund (Bermuda), L.P.... 2,700,000 66,732 2,700,000 66,732 0
BNP Arbitrage SNC.................. 2,950,000 75,611 2,950,000 72,911 0 2,700
Century National Insurance Co...... 500,000 12,537 500,000 12,357 0
Delaware State Employees'
Retirement Fund.................. 2,000,000 49,431 2,000,000 49,431 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
Forest Alternative Strategies Fund
A5............................... 3,090,000 76,371 3,090,000 76,371 0
Forest Alternative Strategies Fund
II LP A-5I....................... 50,000 1,235 50,000 1,235 0
Forest Alternative Strategies Fund
II LP A-5M....................... 30,000 741 30,000 741 0
Forest Global Convertible Fund
A-5.............................. 5,300,000 130,993 5,300,000 130,993 0
Fort Dearborn Life Insurance Co.... 150,000 3,707 150,000 3,707 0
Fresno County Employees Retirement
Association...................... 1,500,000 37,073 1,500,000 37,073 0
General Motors Employee Domestic
Group Trust...................... 11,600,000 286,702 11,600,000 286,702 0
General Motors Employees Domestic
Group Pension Trust.............. 4,686,000 115,818 4,686,000 115,818 0
General Motors Foundation, Inc..... 174,000 4,300 174,000 4,300 0
GPZ Trading LLC.................... 7,000,000 173,010 7,000,000 173,010 0
Highbridge International LLC....... 4,300,000 106,277 4,300,000 106,277 0
Hillside Capital Incorporated
Corporate Account................ 400,000 9,886 400,000 9,886 0
Laterman & Co...................... 100,000 2,471 100,000 2,471 0
Laterman Strategies 90s LLC........ 150,000 3,707 150,000 3,707 0
LLT Limited........................ 30,000 741 30,000 741 0
Merrill Lynch International Ltd.... 2,200,000 54,374 2,200,000 54,374 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>
Motors Insurance Corporation....... 1,140,000 28,175 1,140,000 28,175 0
Offshore Strategies, Ltd........... 250,000 6,178 250,000 6,178 0
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
QSA, LLC........................... 2,000,000 49,431 2,000,000 49,431 0
Shepard Investment International
Ltd.............................. 500,000 12,357 500,000 12,357 0
Societe Generale Securities
Corp............................. 5,250,000 129,757 5,250,000 129,757 0
Stark International................ 500,000 12,357 500,000 12,357 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
Zazove Convertible Fund, L.P....... 1,350,000 33,366 1,350,000 33,366 0
Zazove Hedged Convertible Fund,
LP............................... 1,000,000 24,715 1,000,000 24,715 0
</TABLE>
- -------------------------
(1) Assume conversion of the full amount of the Notes held by such holder or 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 assume 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
16
<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,
17
<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
20
<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 have 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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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...... E-1
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... E-31
4.2 Indenture, dated April 14, 1998 by and between the Company
and LaSalle National Bank, as Trustee....................... E-47
5.1 Opinion of Ross & Hardies regarding legality of shares of
Common Stock................................................ E-121
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......................... E-122
23.1 Consent of KPMG Peat Marwick LLP............................ B-173
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......................................... E-174
</TABLE>
- -------------------------
+ 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 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Niles, State of Illinois, on June 12, 1998.
SABRATEK CORPORATION
By: /s/ K. SHAN PADDA
------------------------------------
K. Shan Padda
Chairman and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
K. Shan Padda and/or Stephen L. Holden the true and lawful attorneys-in-fact and
agents of the undersigned, with full power of substitution and resubstitution,
for and in the name, place and stead of the undersigned, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in furtherance of the foregoing, as fully for all intents
and purposes as the undersigned might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or their substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on June 12, 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/ ANIL K. RASTOGI, PH.D. President and Chief Operating Officer
- ---------------------------------------------------
Anil K. Rastogi, Ph.D.
/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
</TABLE>
<PAGE> 41
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/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>
<PAGE> 42
SABRATEK CORPORATION
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
1.1 Purchase Agreement, dated April 8, 1998 by and between the
Company and Salomon Smith Barney, as Initial Purchaser
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
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
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>
<PAGE> 1
EXHIBIT 1.1
SABRATEK CORPORATION
$85,000,000 6% Convertible Notes Due 2005(1)
PURCHASE AGREEMENT
New York, New York
April 8, 1998
Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
Sabratek Corporation, a Delaware corporation (the "Company"), proposes
to issue and sell to the parties named in Schedule I hereto (the "Initial
Purchasers"), for whom you are acting as representative (the "Representative"),
$85,000,000 principal amount of its 6% Convertible Notes Due 2005 (the "Firm
Securities"). The Securities are convertible into shares of common stock of the
Company, par value $0.01 per share (the "Common Stock"), at the conversion price
set forth herein. The Company also proposes to grant to the Initial Purchasers
an option to purchase up to $12,750,000 additional principal amount of such
Notes to cover over-allotments, if any (the "Option Securities" and, together
with the Firm Securities, the "Securities"). The Securities are to be issued
under an indenture (the "Indenture") to be dated as of April 14, 1998, between
the Company and LaSalle National Bank, as trustee (the "Trustee"). If you are
the only Initial Purchasers, all references herein to the Representative shall
be deemed to be to the Initial Purchasers.
The sale of the Securities to the Initial Purchasers will be made
without registration of the Securities or the Common Stock issuable upon
conversion thereof under the Securities Act of 1933, as amended (the "Act"). You
have advised the Company that the Initial Purchasers will make an offering of
the Securities purchased by them hereunder in accordance with Section 4 hereof,
as soon as you deem advisable.
In connection with the sale of the Securities, the Company has prepared
an offering memorandum, dated April 8,1998 (the "Offering Memorandum"). The
Offering Memorandum sets forth certain information concerning the Company, the
Securities and the
- ------------------
(1) Plus an option to purchase up to $12,750,000 additional principal amount of
such Notes to cover over-allotments.
<PAGE> 2
Common Stock issuable upon conversion thereof. The Company hereby confirms that
it has authorized the use of the Offering Memorandum in connection with the
offering and resale of the Securities by the Initial Purchasers. Any references
herein to the Offering Memorandum shall be deemed to include all exhibits
thereto and all documents incorporated by reference therein that were filed
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), on
or before the date and time that this Agreement is executed and delivered by the
parties hereto (the "Execution Time"); and any reference herein to the terms
"amend", "amendment" or "supplement" with respect to the Offering Memorandum
shall be deemed to refer to and include the filing of any document under the
Exchange Act after the Execution Time that is incorporated by reference therein.
The holders of the Securities or the Common Stock issuable upon
conversion thereof will be entitled to the benefits of the Registration
Agreement to be dated April 14, 1998, between the Company and the Initial
Purchasers (the "Registration Agreement"), substantially in the form of Exhibit
C hereto.
1. Representations and Warranties. The Company represents and
warrants to, and agrees with, each Initial Purchaser as set forth below in this
Section 1.
(a) The Offering Memorandum as of its date did not, and (as the same
may have been amended or supplemented) as of the Closing Date will not,
contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the Company makes no representations or warranties as to the
information contained in or omitted from the Offering Memorandum in reliance
upon and in conformity with information furnished in writing to the Company
by or on behalf of the Initial Purchasers through the Representative
specifically for inclusion in the Offering Memorandum (and any amendment or
supplement thereof or thereto). All documents incorporated by reference in
the Offering Memorandum that were filed under the Exchange Act on or before
the Execution Time complied, and all such documents that are filed under the
Exchange Act after the Execution Time and on or before the Closing Date will
comply, in all material respects with the applicable requirements of the
Exchange Act and the rules thereunder in effect as of the date of filing.
(b) The Company has not taken and will not take, directly or
indirectly, any action prohibited by Regulation M under the Exchange Act in
connection with the offering of the Securities.
(c) Neither the Company, nor to the knowledge of the Company any of its
Affiliates (as defined in Rule 501(b) of Regulation D under the Act
("Regulation D")), nor any person acting on its or the knowledge of the
Company on the behalf of any of its
2
<PAGE> 3
Affiliates (other than the Initial Purchasers, as to whom the Company makes
no representation) has directly or indirectly (i) made offers or sales of
any security, or solicited offers to buy any security, under circumstances
that would require the registration of the Securities or the Common Stock
issuable upon conversion thereof under the Act or (ii) engaged in any form
of general solicitation or general advertising (within the meaning of
Regulation D) in connection with any offer or sale of the Securities in the
United States.
(d) Assuming compliance by each of the Initial Purchasers with their
agreements and the accuracy of their representations contained herein, it is
not necessary in connection with the offer, sale and delivery of the
Securities or the Common Stock issuable upon conversion thereof in the
manner contemplated by this Agreement and the Offering Memorandum to
register the Securities or such Common Stock under the Act or to qualify the
Indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act").
(e) None of the Company or any person acting on behalf of the Company,
or to the knowledge of the Company its Affiliates or any person acting on
behalf of its Affiliates (other than the Initial Purchasers, as to whom the
Company makes no representation) has engaged in any directed selling efforts
(as that term is defined in Regulation S under the Act ("Regulation S"))
with respect to the Securities or the Common Stock issuable upon conversion
thereof, and each of the Company, its Affiliates and any person acting on
its or their behalf has complied with the offering restrictions requirement
of Regulation S.
(f) The Company is subject to the reporting requirements of Section 13
or Section 15(d) of the Exchange Act and has timely filed all reports
required to be filed thereunder within the last 12 months.
(g) The Securities satisfy the requirements set forth in Rule
144A(d)(3) under the Act.
(h) The Company has agreed to permit the Securities to be designated
PORTAL eligible securities, will pay the requisite fees related thereto and
has been advised by the National Association of Securities Dealers, Inc.
PORTAL Market that as of the Closing Date the Securities will have been
designated PORTAL eligible securities in accordance with the rules and
regulations of the National Association of Securities Dealers, Inc.
(i) The Company is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended (the "Investment Company
Act"), without
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taking account of any exemption arising out of the number of holders of the
Company's securities, and, if the Company conducts its business as set forth
in the Offering Memorandum and complies with the covenants binding upon it
under the Indenture, will not become an "investment company" and will not be
required to be registered under the Investment Company Act.
(j) The Company has not paid or agreed to pay to any person any
compensation for soliciting another to purchase any securities of the
Company (except as contemplated by this Agreement).
(k) The information provided by the Company pursuant to Section 5(g)
hereof will not, at the date thereof, contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(l) Except with respect to the credit agreement dated March 26, 1997
by and between the Company and LaSalle National Bank NI (with respect to
which the Company shall receive a waiver prior to closing), neither the
issue and sale of the Securities (assuming compliance by the Company and the
Initial Purchasers with their covenants set forth in this Agreement), the
execution and delivery of the Indenture and the Registration Agreement, the
consummation of any other of the transactions contemplated in this Agreement
or the Registration Agreement nor the fulfillment of the terms of this
Agreement or the Registration Agreement will conflict with, result in a
breach or violation of, or constitute a default under any law or the
Certificate of Incorporation or by-laws of the Company or the terms of any
indenture or other agreement or instrument to which the Company or any of
its subsidiaries is a party or bound, or any judgment, order or decree
applicable to the Company or any of the Company's subsidiaries of any court,
regulatory body, administrative agency or governmental body having
jurisdiction over the Company or any of the Company's subsidiaries, which
breach, violation or default is reasonably likely to have a material adverse
effect on the financial condition, earnings, business or properties of the
Company and its subsidiaries on a consolidated basis (a "Material Adverse
Effect").
(m) The Indenture has been duly authorized, executed and delivered,
and constitutes a legal, valid and binding instrument enforceable against
the Company in accordance with its terms (subject, as to enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency, moratorium
or other laws affecting creditors' rights generally from time to time in
effect and assuming that the Indenture has been duly authorized, executed
and delivered by, and is a valid and binding agreement of the Trustee); and
the Securities have been duly authorized and, when executed and
authenticated in accordance with the provisions of the Indenture and
delivered to and
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<PAGE> 5
paid for by the Initial Purchasers pursuant to this Agreement, will
constitute legal, valid and binding obligations of the Company entitled to
the benefits of the Indenture; and the Notes will comply in all material
respects with the description thereof set forth under the heading
"Description of Notes" in the Offering Memorandum, insofar as such
statements purport to summarize certain provisions of the Securities and the
Indenture, provide a fair summary of such provisions.
(n) The shares of Common Stock issuable upon conversion the Securities
have been duly authorized for issuance, and when issued upon conversion of
the Securities in accordance with the terms of such Securities will be
validly issued, fully paid and nonassessable; and the capital stock of the
Company conforms in all material respects to the description thereof
contained in the Offering Memorandum.
(o) This Agreement and the Registration Agreement have been duly
authorized, executed and delivered by the Company.
(p) Each "significant subsidiary" (as defined in Rule 1-02(w) of
Regulation S-X under the Act and the Exchange Act) of the Company is listed
in Schedule II hereto.
2. Purchase and Sale. (a) Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the Company
agrees to sell to each Initial Purchaser, and each Initial Purchaser agrees,
severally and not jointly, to purchase from the Company, at a purchase price of
96.75% of the principal amount thereof, plus accrued interest, if any, from
April 14, 1998 to the Closing Date, the principal amount of the Firm Securities
set forth opposite such Initial Purchaser's name in Schedule I hereto. Each
Security will be convertible at the option of the holder into shares of Common
Stock at a conversion price of $40.46 ("Conversion Price"), which Conversion
Price is subject to adjustment in certain events, as provided in the Indenture.
(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company hereby grants an
option (the "Option") to the Initial Purchasers to purchase, severally and not
jointly, the Option Securities at a purchase price of 96.75% of the principal
amount thereof, plus accrued interest, if any, from April 14, 1998, to the
settlement date for the Option Securities. The Option may be exercised only to
cover over-allotments in the sale of the Firm Securities by the Initial
Purchasers. The Option may be exercised in whole or in part at any time (but not
more than once) on or before the 30th day after the date of the Offering
Memorandum upon written or telegraphic notice by the Representative to the
Company setting forth the principal amount of Option Securities as to which the
Initial Purchasers are exercising the Option and the settlement date therefor.
Delivery of certificates for the Option Securities, and payment therefor, shall
be made as provided in Section 3 hereof. The principal amount of Option
Securities to be purchased by each Initial
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<PAGE> 6
Purchaser shall be the same percentage of the total principal amount of Option
Securities to be purchased by the Initial Purchasers as such Initial Purchaser
is purchasing of the Firm Securities, subject to such adjustments as the
Representative shall deem advisable.
3. Delivery and Payment. Delivery of and payment for the Firm
Securities and Option Securities (if the Option provided for in Section 2(b)
hereof shall have been exercised on or before the first business day prior to
the Closing Date) shall be made at 10:00 AM, New York City time, on April 14,
1998, or such later date (not later than April 21, 1998) as the Representative
shall designate, which date and time may be postponed by agreement between the
Representative and the Company or as provided in Section 9 hereof (such date and
time of delivery and payment for the Securities being herein called the "Closing
Date"). Delivery of the Securities shall be made to the Representative for the
respective accounts of the Initial Purchasers against payment by the Initial
Purchasers through the Representative of the purchase price thereof to the
Company by wire transfer of same day funds to such account as the Company shall
designate at least two business days in advance of the Closing Date. Delivery of
the Securities shall be made at such location as the Representative shall
reasonably designate at least one business day in advance of the Closing Date
and payment for the Securities shall be made at the office of Ross & Hardies
("Counsel for the Company), 150 North Michigan Avenue, Suite 2500, Chicago,
Illinois 60601. Certificates for the Securities shall be registered in such
names and in such denominations as the Representative may request not less than
one full business day in advance of the Closing Date.
The Company agrees, if so requested by the Representative, to have the
Securities available for inspection, checking and packaging by the
Representative in New York, New York, not later than 1:00 PM on the business day
prior to the Closing Date.
If the Option is exercised after the first business day prior to the
Closing Date, the Company will deliver (at the expense of the Company) to the
Representative, at 388 Greenwich Street, New York, New York, on the date
specified by the Representative (which shall be within three business days after
exercise of the Option), certificates for the Option Securities in such names
and denominations as the Representative shall have requested against payment of
the purchase price thereof by wire transfer of same day funds to such account as
the Company shall designate at least two business days in advance of the date on
which such payment is required to be made. If settlement for the Option
Securities occurs after the Closing Date, the Company will deliver to the
Representative on the settlement date for the Option Securities, and the
obligation of the Initial Purchasers to purchase the Option Securities shall be
conditioned upon receipt of, supplemental opinions, certificates and letters
confirming as of such date the opinions, certificates and letters delivered on
the Closing Date pursuant to Section 6 hereof.
4. Offering of Securities; Restrictions on Transfer. Each Initial
Purchaser, severally and not jointly, represents and warrants to and agrees with
the Company that:
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(a) It has not offered or sold, and will not offer or sell, any
Securities except (i) to persons it reasonably believes to be qualified
institutional buyers (as defined in Rule 144A under the Act) and that, in
connection with each such sale, it has taken or will take reasonable steps
to ensure that the purchaser of such Securities is aware that such sale is
being made in reliance on Rule 144A or (ii) in accordance with the
restrictions set forth in Exhibit A hereto.
(b) It is an institution which is an "accredited investor" within the
meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
(c) Neither it nor any person acting on its behalf has made or will
make offers or sales of the Securities in the United States by means of any
form of general solicitation or general advertising (within the meaning of
Regulation D) in the United States.
5. Agreements. The Company agrees with each Initial Purchaser that:
(a) The Company will furnish to each Initial Purchaser and Mayer,
Brown & Platt ("Counsel for the Initial Purchasers"), without charge, during
the period mentioned in paragraph (b) below, as many copies of the Offering
Memorandum and any supplements and amendments thereof or thereto as they may
reasonably request. The Company will pay the expenses of printing or other
production of all documents relating to the offering.
(b) Prior to the completion of the distribution of the Securities by
the Initial Purchasers (as determined by the Initial Purchasers), the
Company will not amend or supplement the Offering Memorandum without your
prior consent, which consent shall not be unreasonably withheld.
(c) If at any time prior to the completion of the distribution of the
Securities by the Initial Purchasers (as determined and notified to the
Company by the Representative), any event occurs as a result of which the
Offering Memorandum as then amended or supplemented would include any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein in the light of the circumstances under which
they were made not misleading, or if it shall be necessary to amend or
supplement the Offering Memorandum (including any document incorporated by
reference therein which was filed under the Exchange Act) to comply with
applicable law, the Company promptly will notify the Representative of the
same and, subject to paragraph (b) of this Section 5, will prepare and
provide to the Representative pursuant to paragraph (a) of this Section 5 an
amendment or supplement which will correct such statement or omission or
effect such compliance and, in the case of such an amendment or supplement
which is to be filed under the Exchange Act and which is incorporated by
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<PAGE> 8
reference in the Offering Memorandum, will file such amendment or supplement
with the Commission.
(d) The Company will arrange for the qualification of the Securities
for sale under the laws of such jurisdictions as the Initial Purchasers may
designate, will maintain such qualifications in effect so long as required
for the sale of the Securities, provided that the Company by reason of any
such qualification for sale shall not be required to (i) qualify as a
foreign corporation or (ii) file a general consent to service of process in
any such jurisdiction where it is not presently qualified or (iii) become
subject to taxation as a foreign corporation. The Company will promptly
advise the Representative of the receipt by the Company of any notification
with respect to the suspension of the qualification of the Securities for
sale in any jurisdiction or the initiation or threatening of any proceeding
for such purpose.
(e) Neither the Company nor any person acting on its behalf, nor to
the knowledge of the Company any of its Affiliates nor any person acting on
their behalf, will directly or indirectly (i) make any offers or sales of
any security, or solicit offers to buy any security, under circumstances
that would require the registration of the Securities or the Common Stock
issuable upon conversion thereof under the Act or (ii) engage in any form of
general solicitation or general advertising (within the meaning of
Regulation D) in connection with any offer or sale of the Securities in the
United States.
(f) Neither the Company nor any person acting on its behalf, nor any
of its Affiliates nor any person acting on their behalf, will engage in any
directed selling efforts with respect to the Securities within the meaning
of Regulation S, and each of the Company, its Affiliates and each such
person acting on its or their behalf will comply with the offering
restrictions requirement of Regulation S.
(g) The Company shall, during any period prior to the Registration
Termination Date in which the Company is not subject to Section 13 or 15(d)
of the Exchange Act, make available, upon request, to any holder of
Securities or Common Stock issuable upon conversion thereof in connection
with any sale thereof and any prospective purchaser of Securities or Common
Stock issuable upon conversion thereof from such holder the information
specified in Rule 144A(d)(4) under the Act. The term "Registration
Termination Date" means the earliest of (i) the second anniversary date of
the Closing Date, (ii) the date on which the Securities and the Common Stock
issuable upon conversion thereof may be sold by non-affiliates of the
Company pursuant to paragraph (k) of Rule 144 (or any successor provision)
promulgated by the Securities and Exchange Commission (the "Commission")
under the Act and (iii) such earlier date on which all the Securities or the
Common Stock issuable upon conversion thereof have
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<PAGE> 9
been sold pursuant to the Shelf Registration Statement (as defined in the
Registration Agreement) to be filed pursuant to the Registration Agreement.
(h) The Company will not, and will use its best efforts to cause each
of its Affiliates not to, resell any Securities or the Common Stock issuable
upon conversion thereof which constitute "restricted securities" under Rule
144 that have been reacquired by any of them, except pursuant to a
registration statement.
(i) The Company shall include information substantially in the form
set forth in Exhibit B in the Offering Memorandum.
(j) The Company shall use its reasonable efforts in cooperation with
the Initial Purchasers to permit the Securities to be eligible for clearance
and settlement through The Depository Trust Company.
(k) The Company will not, for a period of 90 days following the date
of this Agreement, without the prior written consent of Smith Barney Inc.,
which consent shall not be unreasonably withheld, offer, sell or contract to
sell, or otherwise dispose of directly or indirectly, or announce the
offering of, any other shares of Common Stock; provided, however, that (a)
the Company may issue Common Stock, or grant options to purchase Common
Stock, to employees and directors of the Company, (b) the Company may issue
Common Stock or securities convertible into or exchangeable for Common Stock
or issue or assume warrants or options to purchase Common Stock in
connection with the acquisition of the assets, business, capital stock, or
securities convertible into or exchangeable for the capital stock, of any
person and (c) the Company may issue Common Stock, or issue options or
warrants to purchase Common Stock, in connection with any investment or
business arrangement entered into with any customer or vendor of the
Company.
(l) The Company shall use its best efforts to obtain the waiver from
LaSalle National Bank NI referred to in Section 1(l) of this Agreement.
(m) The Company will promptly advise the Representative when, prior to
the completion of the distribution of the Securities by the Initial
Purchasers, any document filed under the Exchange Act which is incorporated
by reference in the Offering Memorandum shall have been filed with the
Commission.
6. Conditions to the Obligations of the Initial Purchasers. The
obligations of the Initial Purchasers to purchase the Firm Securities and the
Option Securities, as the case may be, shall be subject to the accuracy of the
representations and warranties on the part of the Company contained herein as of
the Execution Time, the Closing Date and any settlement date
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<PAGE> 10
pursuant to Section 3 hereof, to the accuracy of the statements of the Company
made in any certificates pursuant to the provisions hereof, to the performance
by the Company of its obligations hereunder and to the following additional
conditions:
(a) The Company shall have furnished to the Representative the opinion
of Counsel for the Company, dated the Closing Date, addressing the following
matters:
(A) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Delaware, with full corporate power and authority to own
its properties and conduct its business as described or
incorporated by reference in the Offering Memorandum;
(B) the Company's authorized capital stock is as set forth or
incorporated by reference in the Offering Memorandum; the capital
stock of the Company conforms as to legal matters in all material
respects to the description thereof contained or incorporated by
reference in the Offering Memorandum; the outstanding shares of
Common Stock have been duly and validly authorized and issued and,
assuming receipt by the Company of the consideration therefor, are
fully paid and nonassessable; and the holders of outstanding
shares of Common Stock of the Company are not entitled to
preemptive rights;
(C) each of the Company's subsidiaries, has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of the state of its incorporation, with
full corporate power and authority to own its properties and
conduct its business as described or incorporated by reference in
the Offering Memorandum; and each of the Company and each of its
subsidiaries is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which
the conduct of its business requires such qualification or in
which it owns or leases material properties, in each case except
for those jurisdictions where the failure to so qualify or to be
in good standing would not have a Material Adverse Effect;
(D) All the outstanding shares of capital stock of each of
the Company's subsidiaries have been duly and validly authorized
and issued and, assuming receipt by such subsidiaries of the
consideration therefor, are fully paid and nonassessable, and,
except as otherwise set forth or incorporated by reference in the
Offering Memorandum, to the knowledge of such counsel, all
outstanding shares of capital stock of each of the
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<PAGE> 11
Company's subsidiaries are owned by the Company free and clear of
any perfected security interest and any other security interests,
claims, liens or encumbrances;
(E) the Indenture has been duly authorized, executed and
delivered, and constitutes a legal, valid and binding instrument
enforceable against the Company in accordance with its terms
(subject, as to enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium or other laws affecting
creditors' rights generally from time to time in effect and
assuming that the Indenture has been duly authorized, executed and
delivered by, and is a valid and binding agreement of the
Trustee); and the Securities have been duly authorized and, when
executed and authenticated in accordance with the provisions of
the Indenture and delivered to and paid for by the Initial
Purchasers pursuant to this Agreement, will constitute legal,
valid and binding obligations of the Company entitled to the
benefits of the Indenture; and the statements set forth under the
heading "Description of Notes" in the Offering Memorandum, insofar
as such statements purport to summarize certain provisions of the
Securities and the Indenture, provide a fair summary of such
provisions;
(F) the shares of Common Stock issuable upon conversion the
Securities have been duly authorized for issuance, and when issued
upon conversion of the Securities in accordance with the terms of
such Securities will be validly issued, fully paid and
nonassessable;
(G) this Agreement and the Registration Agreement have been
duly authorized, executed and delivered by the Company;
(H) to the knowledge of such counsel, there is no pending or
threatened action, suit or proceeding before any court or
governmental agency, authority or body involving the Company or
any of its subsidiaries of a character required to be disclosed in
the Offering Memorandum which is not adequately disclosed in the
Offering Memorandum, and, to the knowledge of such counsel, there
is no contract or other document of a character required to be
described in the Offering Memorandum which is not described as
required, and the statements set forth in the Offering Memorandum
under the headings "Risk Factors--No Assurance of Regulatory
Clearance; Strict Governmental Regulation," "Business--Strategic
Partnerships," "Business Intellectual Property,"
"Business--Litigation" and "Business--Government Regulation",
insofar
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as such statements constitute a summary of legal matters,
documents or proceedings referred to therein, provide a fair
summary of such legal matters, documents and proceedings;
(I) to the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental agency or body
is required for the consummation by the Company of the
transactions contemplated herein, except such as have been
obtained under the Act and such as may be required under the blue
sky laws (as to which such counsel need express no opinion) of any
jurisdiction in connection with the purchase and distribution of
the Securities by the Initial Purchasers and such other approvals
(specified in such opinion) as have been obtained;
(J) neither the issue and sale of the Securities (assuming
compliance by the Company and the Initial Purchasers with their
covenants set forth in this Agreement), the execution and delivery
of the Indenture and the Registration Agreement, the consummation
of any other of the transactions contemplated in this Agreement or
the Registration Agreement nor the fulfillment of the terms of
this Agreement or the Registration Agreement will conflict with,
result in a breach or violation of, or constitute a default under
any law or the Certificate of Incorporation or by-laws of the
Company or the terms of any indenture or other agreement or
instrument known to such counsel and to which the Company or any
of the Company's subsidiaries is a party or bound, or any
judgment, order or decree known to such counsel to be applicable
to the Company or to any of its subsidiaries of any court,
regulatory body, administrative agency or governmental body having
jurisdiction over the Company or any of the Company's
subsidiaries, which breach, violation or default is reasonably
likely to have a Material Adverse Effect;
(K) assuming the accuracy of the representations and
warranties of the Initial Purchasers and compliance thereby with
their agreements contained herein, it is not necessary in
connection with the offer, sale and delivery of the Securities in
the manner contemplated by this Agreement to register the
Securities under the Act or to qualify the Indenture under the
Trust Indenture Act; and
(L) the Company is not an "investment company" within the
meaning of the Investment Company Act, without taking account of
any exemption arising out of the number of holders of the
Company's securities, and, if the Company conducts its business as
set forth in the
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Offering Memorandum and complies with the covenants binding upon
it under the Indenture, will not become an "investment company"
and will not be required to be registered under the Investment
Company Act.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State of
New York, the General Corporation Law of the State of Delaware or the United
States, to the extent they deem proper and specified in such opinion, upon the
opinion of other counsel whom they believe to be reliable and who are reasonably
satisfactory to counsel for the Initial Purchasers and (B) as to matters of
fact, to the extent they deem proper, on certificates of responsible officers of
the Company and public officials. References to the Offering Memorandum in this
paragraph (a)(i) include any supplements thereto at the Closing Date.
In addition, such counsel shall state that in the course of the
preparation of the Offering Memorandum such counsel has participated in
discussions with Representative of the Company, the Company's accountants, the
Representative, and the Representative's counsel during which the contents of
drafts of the Offering Memorandum and portions of the documents incorporated by
reference therein were discussed and reviewed, and, although such counsel has
made no independent investigation or verification of the correctness or
completeness of the information included or incorporated by reference in the
Offering Memorandum and without assuming responsibility for the accuracy,
completeness or fairness of such information, nothing has come to such counsel's
attention that has caused such counsel to believe (except for financial
statements, schedules and other financial, market and statistical information
contained or incorporated by reference therein and information provided by the
Initial Purchasers for inclusion therein, as to all of which such counsel need
not express any belief) that the Offering Memorandum as of the date thereof or
the Closing Date contained or contains any untrue statement of a material fact
or omitted or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(b) The Representative shall have received from Counsel for the
Initial Purchasers such opinion or opinions, dated the Closing Date, with
respect to the issuance and sale of the Securities, the Indenture, the
Registration Agreement, the Offering Memorandum (together with any amendment
or supplement thereof or thereto) and other related matters as the
Representative may reasonably require, and the Company shall have furnished
to such counsel such documents as they request for the purpose of enabling
them to pass upon such matters.
(c) The Company shall have furnished to the Representative a
certificate of the Company, signed by the Chairman of the Board or the
President and the principal financial or accounting officer of the Company,
dated the Closing Date, to the effect that
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<PAGE> 14
the signers of such certificate have carefully examined the Offering
Memorandum, any amendment or supplement to the Offering Memorandum and
this Agreement and that:
(i) the representations and warranties of the Company in
this Agreement are true and correct on and as of the Closing
Date with the same effect as if made on the Closing Date and
the Company has complied with all the agreements and satisfied
all the conditions on its part to be performed or satisfied at
or prior to the Closing Date; and
(ii) since the date of the most recent financial
statements included in the Offering Memorandum (exclusive of
any amendment or supplement thereof or thereto), there has
been no change or development that would have a Material
Adverse Effect, whether or not arising from transactions in
the ordinary course of business, except as set forth in or
contemplated in the Offering Memorandum (exclusive of any
amendment or supplement thereof or thereto).
(d) At the Closing Date, KPMG Peat Marwick, LLP shall have
furnished to the Representative a letter or letters, dated as of the
Closing Date, in form and substance satisfactory to the Representative,
confirming that they are independent certified public accountants with
respect to the Company within the meaning of Rule 101 of the Code of
Professional Conduct of the American Institute of Certified Public
Accountants (the "AICPA") and stating in effect that:
(i) in their opinion the audited financial statements and
financial statement schedules included or incorporated by
reference in the Offering Memorandum and reported on by them
comply in form in all material respects with the applicable
accounting requirements of the Exchange Act and the related
published rules and regulations thereunder;
(ii) on the basis of a reading of the latest unaudited
financial statements made available by the Company and its
subsidiaries; their limited review in accordance with the
standards established by the AICPA of the unaudited interim
financial information as indicated in their report included or
incorporated by reference in the Offering Memorandum; carrying
out certain specified procedures (but not an examination in
accordance with generally accepted auditing standards) which
would not necessarily reveal matters of significance with
respect to the comments set forth in such letter; a reading of
the minutes of the meetings of the stockholders, directors and
executive, option, compensation and audit committees of the
Company and the Company's subsidiaries; and inquiries of
certain officials of the Company who have responsibility for
financial and accounting matters of the Company and its
subsidiaries as to transactions and events subsequent to
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December 31, 1997, nothing came to their attention which
caused them to believe that:
(1) any unaudited financial statements included or
incorporated by reference in the Offering Memorandum
do not comply in form in all material respects with
applicable accounting requirements and with the
published rules and regulations of the Commission
with respect to financial statements included or
incorporated by reference in quarterly reports on
Form 10-Q under the Exchange Act; and said unaudited
financial statements are not, in all material
respects, in conformity with generally accepted
accounting principles applied on a basis
substantially consistent with that of the audited
financial statements included or incorporated by
reference in the Offering Memorandum; or
(2) with respect to the period subsequent to December
31, 1997, there were any changes, at a specified date
not more than three business days prior to the date
of the letter, in the long-term debt of the Company
and its subsidiaries or capital stock of the Company
or decreases in the stockholders' equity of the
Company or working capital of the Company and its
subsidiaries as compared with the amounts shown on
the December 31, 1997 consolidated balance sheet
included or incorporated by reference in the Offering
Memorandum, or for the period from January 1, 1998 to
such specified date there were any decreases, as
compared with the corresponding period in the
preceding year, in net income before income taxes or
in total or per share amounts of net income or
operating income of the Company and its subsidiaries,
except in all instances for changes or decreases set
forth in such letter, in which case the letter shall
be accompanied by an explanation by the Company as to
the significance thereof unless said explanation is
not deemed necessary by the Representative.
(iii) they have performed certain other specified
procedures as a result of which they determined that certain
information of an accounting, financial or statistical nature
(which is limited to accounting, financial or statistical
information derived from the general accounting records of the
Company and its subsidiaries) set forth in the Offering
Memorandum agrees with the accounting records of the Company
and its subsidiaries, excluding any questions of legal
interpretation.
References to the Offering Memorandum in this paragraph (d)
include any amendment or supplement thereof or thereto at the date of
the letter.
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(e) Subsequent to the Execution Time or, if earlier, the dates
as of which information is given in the Offering Memorandum (exclusive
of any amendment or supplement thereof or thereto), there shall not
have been (i) any change or decrease specified in the letter or letters
referred to in paragraph (d) of this Section 6 or (ii) any change, or
any development involving a prospective change, in or affecting the
business or properties of the Company and its subsidiaries the effect
of which, in any case referred to in clause (i) or (ii) above, is, in
the judgment of the Representative, so material and adverse as to make
it impractical or inadvisable to market the Securities as contemplated
by the Offering Memorandum.
(f) Prior to the Closing Date, the Company shall have
furnished to the Representative such further information, certificates
and documents as the Representative may reasonably request.
(g) At the Closing Date, the Company shall execute and deliver
to the Representative the Registration Agreement in the form of Exhibit
C hereto.
(h) At the Closing Date, the Company shall have received from
LaSalle National Bank NI, the waiver referred to in Section1(l) of this
Agreement.
If any of the conditions specified in this Section 6 shall not
have been fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions and certificates mentioned above or
elsewhere in this Agreement shall not be in all material respects reasonably
satisfactory in form and substance to the Representative and Counsel for the
Initial Purchasers, this Agreement and all obligations of the Initial Purchasers
hereunder may be canceled at, or at any time prior to, the Closing Date by the
Representative. Notice of such cancellation shall be given to the Company in
writing or by telephone or telefax confirmed in writing and the Company shall
thereupon have no further obligation hereunder except as expressly provided in
Section 7 and Section 8 hereof.
The documents required to be delivered by this Section 6 shall
be delivered at the office of Counsel for the Company, 150 North Michigan
Avenue, Suite 2500, Chicago, Illinois 60601 on the Closing Date.
7. Reimbursement of Initial Purchasers' Expenses. If the sale
of the Securities provided for herein is not consummated because any condition
to the obligations of the Initial Purchasers set forth in Section 6 hereof is
not satisfied, because of any termination pursuant to Section 10 hereof or
because of any refusal, inability or failure on the part of the Company to
perform any agreement herein or comply with any provision hereof other than by
reason of a default by any of the Initial Purchasers in payment for the
Securities, the Company will reimburse the Initial Purchasers severally upon
demand for all out-of-pocket expenses
16
<PAGE> 17
(including reasonable fees and disbursements of counsel) that shall have been
reasonably incurred by them in connection with the proposed purchase and sale of
the Securities.
8. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each Initial Purchaser, the directors, officers,
employees and agents of each Initial Purchaser and each person who controls any
Initial Purchaser within the meaning of either the Act or the Exchange Act
against any and all losses, claims, damages or liabilities, joint or several, to
which they or any of them may become subject under the Act, the Exchange Act or
other Federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Offering Memorandum or any
information provided by the Company to any holder or prospective purchaser of
Securities pursuant to Section 5(g), or in any amendment thereof or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made in the Offering Memorandum, or in
any amendment thereof or supplement thereto, in reliance upon and in conformity
with written information furnished to the Company by or on behalf of any Initial
Purchasers through the Representative specifically for inclusion therein and
provided further that the Company shall not be liable to any Initial Purchaser
under the indemnity agreement in this subsection (a) with respect to the
Offering Memorandum to the extent that any such loss, claim, damage or liability
of such Initial Purchaser results from the fact that such Initial Purchaser sold
Securities to a person as to whom it shall be established that there was not
sent or given, at or prior to the written confirmation of such sale, a copy of
the Offering Memorandum or the Offering Memorandum as then amended or
supplemented if the Company has previously furnished copies thereof to such
Initial Purchaser and the loss, claim, damage or liability of such Initial
Purchaser results from an untrue statement or omission of a material fact
contained in the Offering Memorandum that was corrected in the Offering
Memorandum as then amended or supplemented. This indemnity agreement will be in
addition to any liability which the Company may otherwise have.
(b) Each Initial Purchaser severally agrees to indemnify and
hold harmless the Company, its directors, its officers, and each person who
controls the Company within the meaning of either the Act or the Exchange Act,
to the same extent as the foregoing indemnity from the Company to each Initial
Purchaser, but only with reference to written information
17
<PAGE> 18
relating to such Initial Purchaser furnished to the Company by or on behalf of
such Initial Purchaser through the Representative specifically for inclusion in
the Offering Memorandum, or in any amendment thereof or supplement thereto. This
indemnity agreement will be in addition to any liability which any Initial
Purchaser may otherwise have. The Company acknowledges that the statements set
forth in the last paragraph of the cover page, the last paragraph on the inside
front cover page and under the heading "Plan of Distribution" in the Offering
Memorandum constitute the only information furnished in writing by or on behalf
of the Initial Purchasers for inclusion in the Offering Memorandum, and you, as
the Representative, confirm that such statements are correct.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure results
in the forfeiture by the indemnifying party of substantial rights and defenses
and (ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided in paragraph (a) or (b) above. The indemnifying party shall be entitled
to appoint counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be satisfactory to the indemnified
party. Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel if (i) the use of counsel chosen by the indemnifying party to
represent the indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action or (iv) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party; provided, however, the indemnifying party shall not
be liable for the fees, costs or expenses of more than one separate counsel
(plus one local counsel in any jurisdiction), selected by Smith Barney Inc., in
any single action or proceeding for all of the indemnified parties unless the
indemnifying party consents or unless a
18
<PAGE> 19
bona fide conflict of interest requires separate counsel for particular
indemnified parties. An indemnifying party will not, without the prior written
consent of the indemnified parties, settle or compromise or consent to the entry
of any judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Initial Purchasers agree
to contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with
investigating or defending same) (collectively "Losses") to which the Company
and one or more of the Initial Purchasers may be subject in such proportion as
is appropriate to reflect the relative benefits received by the Company and by
the Initial Purchasers from the offering of the Securities; provided, however,
that in no case shall any Initial Purchaser be responsible for any amount in
excess of the purchase discount or commission applicable to the Securities
purchased by such Initial Purchaser hereunder. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the Company and
the Initial Purchasers shall contribute in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Company and of the Initial Purchasers in connection with the statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Company shall be deemed to be equal to
the total net proceeds from the offering (before deducting expenses), and
benefits received by the Initial Purchasers shall be deemed to be equal to the
total purchase discounts and commissions, in each case as set forth on the cover
page of the Offering Memorandum. Relative fault shall be determined by reference
to whether any alleged untrue statement or omission relates to information
provided by the Company or the Initial Purchasers. The Company and the Initial
Purchasers agree that it would not be just and equitable if contribution were
determined by pro rata allocation or any other method of allocation that does
not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (d), no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each person who
controls an Initial Purchaser within the meaning of either the Act or the
Exchange Act and each director, officer, employee and agent of an Initial
Purchaser shall have the same rights to contribution as such Initial Purchaser,
and each person who controls the Company within the meaning of either the Act or
the Exchange Act and each officer and director of the Company shall have the
same rights to contribution as the Company, subject in each case to the
applicable terms and conditions of this paragraph (d).
19
<PAGE> 20
9. Default by an Initial Purchaser. If any one or more Initial
Purchasers shall fail to purchase and pay for any of the Securities agreed to be
purchased by such Initial Purchaser hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Initial Purchasers shall be obligated severally to take
up and pay for (in the respective proportions which the principal amount of
Securities set forth opposite their names in Schedule I hereto bears to the
aggregate principal amount of Securities set forth opposite the names of all the
remaining Initial Purchasers) the Securities which the defaulting Initial
Purchaser or Initial Purchasers agreed but failed to purchase; provided,
however, that in the event that the aggregate principal amount of Securities
which the defaulting Initial Purchaser or Initial Purchasers agreed but failed
to purchase shall exceed 10% of the aggregate principal amount of Securities set
forth in Schedule I hereto, the remaining Initial Purchasers shall have the
right to purchase all, but shall not be under any obligation to purchase any, of
the Securities, and if such non-defaulting Initial Purchasers do not purchase
all the Securities, this Agreement will terminate without liability to any
non-defaulting Initial Purchaser or the Company. In the event of a default by
any Initial Purchaser as set forth in this Section 9, the Closing Date shall be
postponed for such period, not exceeding seven days, as the Representative shall
determine in order that the required changes in the Offering Memorandum or in
any other documents or arrangements may be effected. Nothing contained in this
Agreement shall relieve any defaulting Initial Purchaser of its liability, if
any, to the Company or any non-defaulting Initial Purchaser for damages
occasioned by its default hereunder.
10. Termination. This Agreement shall be subject to
termination in the absolute discretion of the Representative, by notice given to
the Company prior to delivery of and payment for the Securities, if prior to
such time (i) trading in or quotation of the Company's Common Stock shall have
been suspended by the Commission or the National Association of Securities
Dealers Automated Quotation National Market or trading in securities generally
on the New York Stock Exchange or the National Association of Securities Dealers
Automated Quotation National Market shall have been suspended or limited or
minimum prices shall have been established on either of such Exchange or Market
System, (ii) a banking moratorium shall have been declared either by Federal or
New York State authorities or (iii) there shall have occurred any outbreak or
escalation of hostilities, declaration by the United States of a national
emergency or war or other calamity or crisis the effect of which on financial
markets is such as to make it, in the judgment of the Representative,
impracticable or inadvisable to proceed with the offering or delivery of the
Securities as contemplated by the Offering Memorandum (exclusive of any
amendment or supplement thereof or thereto).
11. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or its officers and of the Initial Purchasers set forth in or made
pursuant to this Agreement will remain in full force
20
<PAGE> 21
and effect, regardless of any investigation made by or on behalf of the Initial
Purchasers or the Company or any of the officers, directors or controlling
persons referred to in Section 8 hereof, and will survive delivery of and
payment for the Securities. The provisions of Sections 7 and 8 hereof shall
survive the termination or cancellation of this Agreement.
12. Notices. All communications hereunder will be in writing
and effective only on receipt, and, if sent to the Representative, will be
mailed, delivered or telefaxed and confirmed to them in writing, care of Smith
Barney Inc. at 388 Greenwich Street, New York, New York, 10013; or, if sent to
the Company, will be mailed, delivered or telefaxed and confirmed to it in
writing at 5601 West Howard Street, Niles, Illinois 60714, attention: Stephen
L. Holden.
13. Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 8 hereof,
and, except as expressly set forth in Section 5(g) hereof, no other person will
have any right or obligation hereunder.
14. Applicable Law. This Agreement will be governed by and
construed in accordance with the laws of the State of New York without regard
to the conflicts of laws rules thereof.
15. Business Day. For purposes of this Agreement, "business
day" means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a
day on which banking institutions in the City of New York, New York are
authorized or obligated by law, executive order or regulation to close.
16. Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed to be an original, but all such
counterparts will together constitute one and the same instrument.
21
<PAGE> 22
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement between the
Company and the Initial Purchasers.
Very truly yours,
SABRATEK CORPORATION
By /s/ Stephen L. Holden
-------------------------------------
Name: Stephen L. Holden
Title: Senior Vice President, Chief
Financial Officer and Treasurer
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
SMITH BARNEY INC.
For itself and the other Initial
Purchasers named in Schedule I to the
foregoing Agreement
BY: SMITH BARNEY INC.
By /s/ Michael Giaquinto
------------------------------------------
Name: Michael Giaquinto
Title: Director
22
<PAGE> 23
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount of
Firm Securities
INITIAL PURCHASERS to be Purchased
------------------ ---------------
<S> <C>
Smith Barney Inc.................................................. $85,000,000
-----------
Total.......................................................... $85,000,000
===========
</TABLE>
<PAGE> 24
SCHEDULE II
List of Significant Subsidiaries
Pursuant to Section 1(p)
None.
<PAGE> 25
EXHIBIT A
SELLING RESTRICTIONS FOR OFFERS AND
SALES OUTSIDE THE UNITED STATES
(1)(a) The Securities have not been and will not be registered under
the Act and may not be offered or sold within the United States or to, or for
the account or benefit of, U.S. persons except in accordance with Regulation S
under the Act or pursuant to an exemption from the registration requirements of
the Act. Each Initial Purchaser represents and agrees that, except as otherwise
permitted by Section 4(a)(i) of the Agreement to which this is an exhibit, it
has offered and sold the Securities, and will offer and sell the Securities, (i)
as part of their distribution at any time and (ii) otherwise until 40 days after
the later of the commencement of the offering and the Closing Date, only in
accordance with Rule 903 of Regulation S under the Act. Accordingly, each
Initial Purchaser represents and agrees that neither it, nor any of its
affiliates nor any person acting on its or their behalf has engaged or will
engage in any directed selling efforts with respect to the Securities, and that
it and they have complied and will comply with the offering restrictions
requirements of Regulation S. Each Initial Purchaser agrees that, at or prior to
the confirmation of sale of Securities (other than a sale of Securities pursuant
to Section 4(a)(i) of the Agreement to which this is an exhibit), it shall have
sent to each distributor, dealer or person receiving a selling concession, fee
or other remuneration that purchases Securities from it during the restricted
period a confirmation or notice to substantially the following effect:
"The Securities covered hereby have not been registered under the
U.S. Securities Act of 1933 (the "Securities Act") and may not be
offered or sold within the United States or to, or for the account or
benefit of, U.S. persons (i) as part of their distribution at any time
or (ii) otherwise until 40 days after the later of the commencement of
the offering and December 10, 1997, except in either case in accordance
with Regulation S or Rule 144A under the Securities Act. Terms used
above have the meanings given to them by Regulation S."
(b) Each Initial Purchaser also represents and agrees that it has not
entered and will not enter into any contractual arrangement with any distributor
with respect to the distribution of the Securities, except with its affiliates
or with the prior consent of the Company.
(c) Terms used in this section have the meanings given to them by
Regulation S.
(2) Each Initial Purchaser represents and agrees that (i) it has not
offered or sold, and, prior to the expiry of six months from the closing of the
offering of the Notes, will not offer
A-1
<PAGE> 26
or sell, any Securities to persons in the United Kingdom except to persons whose
ordinary activities involve them in acquiring, holding, managing or disposing of
investments (as principal or as agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom, within the meaning of the Public
Offers of Securities Regulations 1995 (the "Regulations"), (ii) it has complied
and will comply with all applicable provisions of the Financial Services Act
1986 and the Regulations with respect to anything done by it in relation to the
Securities in, from or otherwise involving the United Kingdom, and (iii) it has
only issued or passed on and will only issue or pass on in the United Kingdom
any document received by it in connection with the issue of the Securities to a
person who is of a kind described in Article 11(3) of the Financial Services Act
1986 (Investment Advertisements) (Exemptions) Order 1996 (as amended) or is a
person to whom such document may otherwise lawfully be issued or passed on.
A-2
<PAGE> 27
EXHIBIT B
NOTICE TO INVESTORS
Because of the following restrictions, purchasers are advised to
consult legal counsel prior to making any offer, resale, pledge or other
transfer of the Notes offered hereby or the shares of Common Stock issuable upon
conversion thereof.
Each purchaser of Notes offered hereby will be deemed to have
represented and agreed as follows (terms used herein that are defined in Rule
144A ("Rule 144A"), Regulation D ("Regulation D") or Regulation S ("Regulation
S") under the Securities Act, are used herein as defined therein);
(1) The purchaser is (A)(i) a Qualified Institutional Buyer, (ii)
aware that the sale to it is being made in reliance on Rule 144A, and
(iii) acquiring such Notes for its own account or for the account of a
Qualified Institutional Buyer, or (B) not a U.S. Person and is
purchasing such Notes is an offshore transaction pursuant to Regulation
S.
(2) The purchaser understands that the Notes are being offered in
a transaction not involving any public offering in the United States
within the meaning of Securities Act, that the Notes and the Common
Stock issuable upon the conversion thereof have not been and, except as
described in this Offering Circular, will not be registered under the
Securities Act and that (A) if the future it decides to offer, resell,
pledge or otherwise transfer any Notes or Common Stock issued upon the
conversion thereof, such Notes or Common Stock may be offered, resold,
pledged or otherwise transferred only (i) inside the United States to a
person whom the seller reasonably believes is a Qualified Institutional
Buyer in a transaction meeting the requirements of Rule 144A, (ii)
outside the United States in a transaction complying with the
provisions of Rule 903 or Rule 904 under the Securities Act, (iii)
pursuant to an exemption from registration under the Securities Act
provided by Rule 144 (if available), or (iv) pursuant to an effective
registration statement under the Securities Act, in each of cases (i)
through (iv) in accordance with any applicable securities laws of any
state of the United States, and (B) the purchaser will, and such
subsequent holder is required to, notify any subsequent purchaser from
it of such Notes or Common Stock of the resale restrictions referred to
in (A) above.
(3) The purchaser understands that the Notes will, until the
second anniversary of their date of original issuance, unless otherwise
agreed by the Company and the Holder thereof, bear a legend
substantially to the following effect:
B-1
<PAGE> 28
THIS NOTE (OR, IT PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND
THIS NOTE AND THE COMMON STOCK ISSUABLE UPON THE CONVERSION
THEREOF MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED WITHIN
THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) IN
THE ABSENCE OF SUCH REGISTRATION OR IN A TRANSACTION EXEMPT FROM,
OR NOT SUBJECT TO, THE SECURITIES ACT. EACH PURCHASER OF THIS NOTE
THAT IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IS HEREBY NOTIFIED THAT THE SELLER OF
THIS NOTE AND THE COMMON STOCK ISSUABLE, UPON THE CONVERSION
THEREOF MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE COMPANY
THAT (A) THIS NOTE AND THE COMMON STOCK ISSUABLE UPON THE
CONVERSION THEREOF MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY (I) INSIDE THE UNITED STATES TO A PERSON WHOM THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE UNITED
STATES IN A TRANSACTION COMPLYING WITH THE PROVISIONS OF RULE 903
OR RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER (IF AVAILABLE), OR (IV) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH
OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE
HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THIS NOTE OF THE RESALE RESTRICTIONS REFERRED
TO IN (A) ABOVE.
The Common Stock issuable upon the conversion of the Notes will bear a
comparable legend.
B-2
<PAGE> 29
The Notes will be available initially only in book-entry form. The
Notes, whether sold pursuant to Rule 144A, Regulation S or otherwise; will be
issued in the form of a restricted Global Share Certificate (as defined herein)
bearing the legend (set forth above). The Global Share Certificate will be
deposited with, or on behalf of, DTC and registered in its name or in the name
of Cede & Co., its nominee. Beneficial interests in the Global Share Certificate
will be shown on, and transfer thereof will be effected through, records
maintained by DTC and its Participants (as defined herein). See "Description of
Notes--Book Entry; Delivery and Form; Global Certificate."
B-3
<PAGE> 30
EXHIBIT C
FORM OF REGISTRATION AGREEMENT
<PAGE> 1
EXHIBIT 4.1
SABRATEK CORPORATION
6% Convertible Notes Due 2005
REGISTRATION AGREEMENT
New York, New York
April 14, 1998
Smith Barney Inc.
As Representative of the Initial Purchasers Named in
Schedule I to the Purchase Agreement (as defined below)
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
Sabratek Corporation, a Delaware corporation (the "Company"),
proposes to issue and sell (such issuance and sale, the "Initial Placement") to
you (the "Initial Purchasers"), upon the terms set forth in a purchase agreement
of even date herewith (the "Purchase Agreement"), $85,000,000 principal amount
(plus an additional $12,750,000 principal amount to cover over-allotments, if
any) of its 6% Convertible Notes Due 2005 (the "Securities"). The Securities
will be convertible into shares of Common Stock, no par value (the "Common
Stock"), of the Company at the conversion price set forth in the Offering
Memorandum. As an inducement to you to enter into the Purchase Agreement and in
satisfaction of a condition to your obligations thereunder, the Company agrees
with you, (i) for your benefit and (ii) for the benefit of the holders from time
to time of the Securities or the Common Stock issuable upon conversion of the
Securities (including you) (each of the foregoing, a "Holder" and together, the
"Holders"), as follows:
1. Definitions. Capitalized terms used herein without
definition shall have the respective meanings set forth in the Purchase
Agreement. As used in this Agreement, the following capitalized terms shall have
the following meanings:
"Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Affiliate" of any specified person means any other person
that, directly or indirectly, is in control of, is controlled by, or is under
common control with, such specified person. For purposes of this definition,
control of a person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such person whether by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
<PAGE> 2
"Closing Date" has the meaning set forth in the Purchase
Agreement.
"Commission" means the Securities and Exchange Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"Holder" has the meaning set forth in the preamble hereto.
"Indenture" means the Indenture relating to the Securities
dated as of April 14, 1998, between the Company and LaSalle National Bank, as
trustee, as the same may be amended from time to time in accordance with the
terms thereof.
"Initial Placement" has the meaning set forth in the preamble
hereto.
"Initial Purchasers" has the meaning set forth in the preamble
hereto.
"Majority Holders" means the Holders of a majority of the then
outstanding aggregate principal amount of Securities registered under a Shelf
Registration Statement; provided that Holders of Common Stock issued upon
conversion of Securities shall be deemed to be Holders of the aggregate
principal amount of Securities from which such Common Stock was converted.
"Managing Underwriters" means the Underwriter or Underwriters
that shall administer an Underwritten Offering.
"Offering Memorandum" has the meaning set forth in the
Purchase Agreement.
"Prospectus" means the prospectus included in any Shelf
Registration Statement (including, without limitation, a prospectus that
discloses information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A under the Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Securities or Common Stock issuable upon
conversion thereof, covered by such Shelf Registration Statement, and all
amendments and supplements to such prospectus, including post-effective
amendments, in each case including all material incorporated by reference
therein.
"Purchase Agreement" has the meaning set forth in the preamble
hereto.
"Securities" has the meaning set forth in the preamble hereto.
"Shelf Registration" means a registration effected pursuant to
Section 2 hereof.
"Shelf Registration Period" has the meaning set forth in
Section 2(b) hereof.
2
<PAGE> 3
"Shelf Registration Statement" means a "shelf" registration
statement of the Company pursuant to the provisions of Section 2 hereof which
covers some or all of the Securities and the Common Stock issuable upon
conversion thereof, as applicable, on an appropriate form under Rule 415 under
the Act, or any similar rule that may be adopted by the Commission, and all
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"Trustee" means the trustee with respect to the Securities
under the Indenture.
"Underwriter" means any underwriter of Securities or Common
Stock issuable upon conversion thereof in connection with an offering thereof
under a Shelf Registration Statement.
"Underwritten Offering" means an offering in which the
Securities or Common Stock are sold to an Underwriter or with the assistance of
an Underwriter for reoffering to the public.
2. Shelf Registration; Suspension of Use of Prospectus.
(a) The Company shall prepare and, not later than 60 days
following the Closing Date, shall file with the Commission and
thereafter, but no later than 120 days following the Closing Date,
shall use its best efforts to cause to be declared effective under the
Act a Shelf Registration Statement relating to the offer and sale of
the Securities and the Common Stock issuable upon conversion thereof by
the Holders from time to time in accordance with the methods of
distribution elected by such Holders and set forth in such Shelf
Registration Statement.
(b) The Company shall use its best efforts to keep the Shelf
Registration Statement continuously effective in order to permit the
Prospectus forming part thereof to be usable by Holders until the
earliest of (i) the second anniversary of the Closing Date, (ii) the
date on which the Securities or Common Stock issuable upon conversion
thereof may be sold pursuant to paragraph (k) of Rule 144 (or any
successor provision) promulgated by the Commission under the Act and
(iii) such date as of which all the Securities or the Common Stock
issuable upon conversion thereof have been sold pursuant to the Shelf
Registration Statement (in any such case, such period being called the
"Shelf Registration Period"). The Company shall be deemed not to have
used its best efforts to keep the Shelf Registration Statement
effective during the requisite period if it voluntarily takes any
action that would result in Holders of Securities covered thereby not
being able to offer and sell such Securities during that period, unless
(x) the Company is advised by counsel that in the opinion of such
counsel such action is required by or is advisable under applicable law
or (y) such action is required pursuant to Section 2(c) hereof, and, in
either case, so long as the Company promptly thereafter complies with
the
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<PAGE> 4
requirements of Section 3(i) hereof, if applicable. The Company shall
not be deemed to have failed to use its best efforts to keep the Shelf
Registration Statement effective during the requisite period if any
such failure in the effectiveness of the Registration Statement is due
solely to the actions of one or more Holders.
(c) The Company may suspend the use of the Prospectus for a
period not to exceed 30 days in any three-month period or for three
periods not to exceed an aggregate of 90 days in any twelve-month
period for valid business reasons, to be determined by the Company in
its sole reasonable judgment (not including avoidance of the Company's
obligations hereunder), including, without limitation, the acquisition
or divestiture of assets, public filings with the Commission, pending
corporate developments and similar events; provided that the Company
promptly thereafter complies with the requirements of Section 3(i)
hereof, if applicable.
3. Registration Procedures. In connection with any Shelf
Registration Statement, the following provisions shall apply:
(a) The Company shall furnish to you, prior to the filing
thereof with the Commission, a copy of any Shelf Registration
Statement, and each amendment thereof and each amendment or supplement,
if any, to the Prospectus included therein and shall use its best
efforts to reflect in each such document, when so filed with the
Commission, such comments as Smith Barney Inc. reasonably may propose.
(b) The Company shall ensure that (i) any Shelf Registration
Statement and any amendment thereto and any Prospectus forming part
thereof and any amendment or supplement thereto comply in all material
respects with the Act and the rules and regulations thereunder, (ii)
any Shelf Registration Statement and any amendment thereto does not,
when it becomes effective, contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any
Prospectus forming part of any Shelf Registration Statement, and any
amendment or supplement to such Prospectus, does not include an untrue
statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided that no
representation or agreement is made hereby with respect to information
with respect to you, any Underwriter or any Holder required to be
included in any Shelf Registration or Prospectus pursuant to the Act or
the rules and regulations thereunder.
(c) (1) The Company shall advise you and the Holders and, if
requested by you or any such Holder, confirm such advice in writing:
4
<PAGE> 5
(i) when a Shelf Registration Statement and
any amendment thereto has been filed with the Commission and
when the Shelf Registration Statement or any post-effective
amendment thereto has become effective; and
(ii) of any request by the Commission for
amendments or supplements to the Shelf Registration Statement
or the Prospectus included therein or for additional
information.
(2) The Company shall advise you and the Holders and,
if requested by you or any such Holder, confirm such advice in writing:
(i) of the issuance by the Commission of any
stop order suspending the effectiveness of the Shelf
Registration Statement or the initiation of any proceedings
for that purpose;
(ii) of the receipt by the Company of any
notification with respect to the suspension of the
qualification of the Securities included in any Shelf
Registration Statement for sale in any jurisdiction or the
initiation or threat of any proceeding for such purpose; and
(iii) of the suspension of the use of the
Prospectus pursuant to Section 2(c) hereof or of the happening
of any event that requires the making of any changes in the
Shelf Registration Statement or the Prospectus so that, as of
such date, the statements therein are not misleading and do
not omit to state a material fact required to be stated
therein or necessary to make the statements therein (in the
case of the Prospectus, in light of the circumstances under
which they were made) not misleading (which advice shall be
accompanied by an instruction to suspend the use of the
Prospectus until the requisite changes have been made).
(d) The Company shall use its best efforts to obtain the
withdrawal of any order suspending the effectiveness of any Shelf
Registration Statement at the earliest possible time.
(e) The Company shall furnish to each Holder of Securities or
the Common Stock issued upon conversion thereof included within the
coverage of any Shelf Registration Statement, without charge, at least
one copy of such Shelf Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, and,
if the Holder so requests in writing, all exhibits (including those
incorporated by reference).
(f) The Company shall, during the Shelf Registration Period,
deliver to each Holder of Securities or the Common Stock issued upon
conversion thereof included
5
<PAGE> 6
within the coverage of any Shelf Registration Statement, without
charge, as many copies of the Prospectus (including each preliminary
Prospectus) included in such Shelf Registration Statement and any
amendment or supplement thereto as such Holder may reasonably request;
and the Company consents to the use of the Prospectus or any amendment
or supplement thereto by each of the selling Holders in connection with
the offering and sale of the Securities or the Common Stock issued upon
conversion thereof covered by the Prospectus or any amendment or
supplement thereto.
(g) Prior to any offering of Securities or the Common Stock
issued upon conversion thereof pursuant to any Shelf Registration
Statement, the Company shall register or qualify or cooperate with the
Holders of Securities or the Common Stock issued upon conversion
thereof included therein and their respective counsel in connection
with the registration or qualification of such Securities or Common
Stock for offer and sale under the securities or blue sky laws of such
jurisdictions as any such Holders reasonably request in writing and do
any and all other acts or things necessary or advisable to enable the
offer and sale in such jurisdictions of the Securities and the Common
Stock issued upon conversion thereof covered by such Shelf Registration
Statement; provided, however, that the Company will not be required to
qualify generally to do business in any jurisdiction where it is not
then so qualified or to take any action which would subject it to
general service of process or to taxation in any such jurisdiction
where it is not then so subject.
(h) Subject to the terms of the Indenture (which terms shall
control in the event of any conflict), The Company shall cooperate with
the Holders to facilitate the timely preparation and delivery of
certificates representing Securities or the Common Stock issued upon
conversion thereof to be sold pursuant to any Shelf Registration
Statement free of any restrictive legends and in such denominations and
registered in such names as Holders may request prior to sales of
Securities or the Common Stock issued upon conversion thereof pursuant
to such Shelf Registration Statement.
(i) Upon the occurrence of any event contemplated by paragraph
(c)(2)(iii) above, the Company shall promptly prepare a post-effective
amendment to any Shelf Registration Statement or an amendment or
supplement to the related Prospectus or file any other required
document so that, as thereafter delivered to purchasers of the
Securities or the Common Stock issued upon conversion thereof, the
Prospectus will not include an untrue statement of a material fact or
omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
(j) The Company shall use its best efforts to cause The
Depository Trust Company ("DTC") on the first Business Day following
the effective date of any Shelf Registration Statement hereunder or as
soon as possible thereafter to remove (i) from any existing CUSIP
number assigned to the Securities any designation indicating that the
6
<PAGE> 7
Securities are "restricted securities", which efforts shall include
delivery to DTC of a letter executed by the Company substantially in
the form of Exhibit A hereto and (ii) any other stop or restriction on
DTC's system with respect to the Securities. In the event the Company
is unable to cause DTC to take actions described in the immediately
preceding sentence, the Company shall take such actions as Smith Barney
Inc. may reasonably request to provide, as soon as practicable, a CUSIP
number for the Securities registered under such Shelf Registration
Statement and to cause such CUSIP number to be assigned to the
Securities (or to the maximum aggregate principal amount of the
securities to which such number may be assigned). Upon compliance with
the foregoing requirements of this Section 3(j), the Company shall
provide the Trustee with global certificates for such Securities, in a
form eligible for deposit with The Depository Trust Company.
(k) The Company shall use its best efforts to comply with all
applicable rules and regulations of the Commission and shall make
generally available to its security holders as soon as practicable
after the effective date of the applicable Shelf Registration Statement
an earnings statement satisfying the provisions of Section 11(a) of the
Act and Rule 158 promulgated by the Commission thereunder.
(l) The Company shall use its best efforts to cause the
Indenture to be qualified under the Trust Indenture Act in a timely
manner.
(m) The Company may require each Holder of Securities or the
Common Stock issued upon conversion thereof to be sold pursuant to any
Shelf Registration Statement to furnish to the Company such information
regarding the Holder and the distribution of such Securities or Common
Stock as may, from time to time, be required by the Act and the rules
and regulations promulgated thereunder, and the obligations of the
Company to any Holder hereunder shall be expressly conditioned on the
compliance of such Holder with such request.
(n) The Company shall, if requested, use its best efforts to
promptly incorporate in a Prospectus supplement or post-effective
amendment to a Shelf Registration Statement (i) such information as the
Majority Holders provide or, if the Securities or Common Stock are
being sold in an Underwritten Offering, as the Managing Underwriters
and the Majority Holders reasonably agree should be included therein
and provided to the Company in writing for inclusion in the Shelf
Registration Statement or Prospectus, and (ii) such information as a
Holder may provide from time to time to the Company in writing for
inclusion in a Prospectus or any Shelf Registration Statement
concerning such Holder and the distribution of such Holder's Securities
and Common Stock and, in either case, shall make all required filings
of such Prospectus supplement or post-effective amendment as soon as
practicable after being notified in writing of the matters to be
incorporated in such Prospectus supplement or post-effective amendment.
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<PAGE> 8
(o) The Company shall enter into such agreements (including
underwriting agreements) and take all other appropriate actions as may
be reasonably requested in order to expedite or facilitate the
registration or the disposition of the Securities or the Common Stock
issuable upon conversion thereof, and in connection therewith, if an
underwriting agreement is entered into, cause the same to contain
indemnification provisions and procedures no less favorable than those
set forth in Section 5 (or such other provisions and procedures
acceptable to the Majority Holders and the Managing Underwriters, if
any, with respect to all parties to be indemnified pursuant to Section
5 from Holders of Securities or the Common Stock issuable upon
conversion thereof to the Company).
(p) The Company shall (i) make reasonably available for
inspection by the Holders of Securities or the Common Stock issued upon
conversion thereof to be registered under a Shelf Registration
Statement, any Underwriter participating in any disposition pursuant to
such Shelf Registration Statement, and any attorney, accountant or
other agent retained by the Holders or any such Underwriter all
relevant financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries; (ii) cause the
Company's officers, directors and employees to supply all relevant
information reasonably requested by the Holders or any such
Underwriter, attorney, accountant or agent in connection with any such
Shelf Registration Statement as is customary for similar due diligence
examinations; provided, however, that any information that is
designated in writing by the Company, in its sole discretion, as
confidential at the time of delivery of such information shall be kept
confidential by the Holders or any such Underwriter, attorney,
accountant or agent, unless disclosure thereof is made in connection
with a court proceeding or required by law, or such information has
become available to the public generally through the Company or through
a third party without an accompanying obligation of confidentiality;
(iii) make such representations and warranties to the Holders of
Securities or the Common Stock issued upon conversion thereof
registered thereunder and the Underwriters, if any, in form, substance
and scope as are customarily made by issuers to Underwriters and
covering matters including, but not limited to, those set forth in the
Purchase Agreement; (iv) obtain opinions of counsel to the Company and
updates thereof (which counsel and opinions, in form, scope and
substance, shall be reasonably satisfactory to the Managing
Underwriters, if any) addressed to each selling Holder and the
Underwriters, if any, covering such matters as are customarily covered
in opinions requested in underwritten offerings and such other matters
as may be reasonably requested by such Holders and Underwriters; (v)
obtain "cold comfort" letters and updates thereof from the independent
certified public accountants of the Company (and, if necessary, any
other independent certified public accountants of any subsidiary of the
Company or of any business acquired by the Company for which financial
statements and financial data are, or are required to be, included in
the Shelf Registration Statement), addressed to each selling Holder of
Securities or the Common Stock issued upon conversion thereof
registered
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<PAGE> 9
thereunder (provided such Holder furnishes the accountants with such
representations as the accountants customarily require in similar
situations) and the Underwriters, if any, in customary form and
covering matters of the type customarily covered in "cold comfort"
letters in connection with primary underwritten offerings; and (vi)
deliver such documents and certificates as may be reasonably requested
by the Majority Holders and the Managing Underwriters, if any,
including those to evidence compliance with Section 3(i) and with any
customary conditions contained in the underwriting agreement or other
agreement entered into by the Company. The foregoing actions set forth
in clauses (iii), (iv), (v) and (vi) of this Section 3(p) shall be
performed at (A) the effectiveness of such Shelf Registration Statement
and each post-effective amendment thereto and (B) each closing under
any underwriting or similar agreement as and to the extent required
thereunder.
(q) From the date hereof until the end of the Shelf
Registration Period, the Company shall be obligated to file with the
Commission in a timely manner all reports required to be filed by it
under the Exchange Act and all such reports shall comply with the rules
and regulations of the Commission in all material respects and shall
not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading.
4. Registration Expenses. The Company shall bear all expenses
incurred in connection with the performance of its obligations under Sections 2
and 3 hereof and shall reimburse the Holders for the reasonable fees and
disbursements of one firm or counsel designated by the Majority Holders to act
as counsel for the Holders in connection therewith. Notwithstanding the
provisions of this Section 4, each Holder shall bear the expense of any broker's
commission, agency fee or Underwriter's discount or commission.
5. Indemnification and Contribution.
(a) (i) In connection with any Shelf Registration Statement,
the Company agrees to indemnify and hold harmless each Holder of
Securities or Common Stock issued upon conversion thereof covered
thereby (including the Initial Purchasers), the directors, officers,
employees and agents of each such Holder and each person who controls
any such Holder within the meaning of either the Act or the Exchange
Act against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the
Act, the Exchange Act or other Federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Shelf Registration Statement as
originally filed or in any amendment thereof, or in any preliminary
Prospectus or Prospectus, or in any amendment thereof or supplement
thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein
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<PAGE> 10
not misleading, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company will
not be liable in any case to the extent that any such loss, claim,
damage or liability arises out of or is based upon (A) any such untrue
statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any such Holder
or any Initial Purchaser specifically for inclusion therein, (B) use of
a Shelf Registration Statement or the related Prospectus during a
period when a stop order has been issued in respect of such Shelf
Registration or any proceedings for that purpose have been initiated or
use of a Prospectus when use of such Prospectus has been suspended
pursuant to Section 2(c); provided, further, in each case, that Holders
received prior notice of such stop order, initiation of proceedings or
suspension or (C) if the Holder fails to deliver a Prospectus or the
then current Prospectus. This indemnity agreement will be in addition
to any liability which the Company may otherwise have.
(ii) The Company also agrees to indemnify or
contribute to Losses, as provided in Section 5(d), of any Underwriters
of Securities or the Common Stock issued upon conversion thereof
registered under a Shelf Registration Statement, their officers and
directors and each person who controls such Underwriters on
substantially the same basis as that of the indemnification of the
Initial Purchasers and the selling Holders provided in this Section
5(a) and shall, if requested by any Holder, enter into an underwriting
agreement reflecting such agreement, as provided in Section 3(o)
hereof.
(b) Each Holder of Securities or Common Stock issued upon
conversion thereof covered by a Shelf Registration Statement (including
the Initial Purchasers) severally agrees to indemnify and hold harmless
(i) the Company, (ii) each of its directors, (iii) each of its officers
who signs such Shelf Registration Statement and (iv) each person who
controls the Company within the meaning of either the Act or the
Exchange Act to the same extent as the foregoing indemnity from the
Company to each such Holder, but only with reference to written
information relating to such Holder furnished to the Company by or on
behalf of such Holder specifically for inclusion in the documents
referred to in the foregoing indemnity. This indemnity agreement will
be in addition to any liability which any such Holder may otherwise
have.
(c) Promptly after receipt by an indemnified party under this
Section 5 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 5, notify the indemnifying party
in writing of the commencement thereof; but the failure so to notify
the indemnifying party (i) will not relieve it from liability under
paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the
forfeiture by the indemnifying party of substantial rights and
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<PAGE> 11
defenses and (ii) will not, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) or (b) above. The
indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to
represent the indemnified party in any action for which indemnification
is sought (in which case the indemnifying party shall not thereafter be
responsible for the fees and expenses of any separate counsel retained
by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory
to the indemnified party. Notwithstanding the indemnifying party's
election to appoint counsel to represent the indemnified party in an
action, the indemnified party shall have the right to employ separate
counsel (including local counsel), and the indemnifying party shall
bear the reasonable fees, costs and expenses of such separate counsel
(and local counsel) if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present
such counsel with a conflict of interest, (ii) the actual or potential
defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be legal defenses
available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, (iii)
the indemnifying party shall not have employed counsel satisfactory to
the indemnified party to represent the indemnified party within a
reasonable time after notice of the institution of such action or (iv)
the indemnifying party shall authorize the indemnified party to employ
separate counsel at the expense of the indemnifying party; provided
further, that the indemnifying party shall not be responsible for the
fees and expenses of more than one separate counsel (together with
appropriate local counsel) representing all the indemnified parties
under paragraph (a)(i), paragraph (a)(ii) or paragraph (b) above. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of
any judgment with respect to any pending or threatened claim, action,
suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified parties are
actual or potential parties to such claim or action) unless such
settlement, compromise or consent includes an unconditional release of
each indemnified party from all liability arising out of such claim,
action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 5 is unavailable to or insufficient to hold
harmless an indemnified party for any reason, then each applicable
indemnifying party, in lieu of indemnifying such indemnified party,
shall have a joint and several obligation to contribute to the
aggregate losses, claims, damages and liabilities (including legal or
other expenses reasonably incurred in connection with investigating or
defending same) (collectively "Losses") to which such indemnified party
may be subject in such proportion as is appropriate to reflect the
relative benefits received by such indemnifying party, on the one hand,
and such indemnified party, on the other hand, from the Initial
Placement and the Shelf
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<PAGE> 12
Registration Statement which resulted in such Losses; provided,
however, that in no case shall the Initial Purchasers be responsible,
in the aggregate, for any amount in excess of the purchase discount or
commission applicable to such Security, as set forth on the cover page
of the Offering Memorandum, nor shall any Underwriter be responsible
for any amount in excess of the underwriting discount or commission
applicable to the Securities and Common Stock issued upon conversion
thereof purchased by such Underwriter under the Shelf Registration
Statement which resulted in such Losses. If the allocation provided by
the immediately preceding sentence is unavailable for any reason, the
indemnifying party and the indemnified party shall contribute in such
proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of such indemnifying party, on the one
hand, and such indemnified party, on the other hand, in connection with
the statements or omissions which resulted in such Losses as well as
any other relevant equitable considerations. Benefits received by the
Company shall be deemed to be equal to the sum of (x) the total net
proceeds from the Initial Placement (before deducting expenses) as set
forth on the cover page of the Offering Memorandum and (y) the total
amount of additional interest which the Company was not required to pay
as a result of registering the Securities and Common Stock issued upon
conversion thereof covered by the Shelf Registration Statement which
resulted in such Losses. Benefits received by the Initial Purchasers
shall be deemed to be equal to the total purchase discounts and
commissions as set forth on the cover page of the Offering Memorandum,
and benefits received by any other Holders shall be deemed to be equal
to the value of receiving Securities or the Common Stock issuable upon
conversion thereof registered under the Act. Benefits received by any
Underwriter shall be deemed to be equal to the total underwriting
discounts and commissions, as set forth on the cover page of the
Prospectus forming a part of the Shelf Registration Statement which
resulted in such Losses. Relative fault shall be determined by
reference to whether any alleged untrue statement or omission relates
to information provided by the indemnifying party, on the one hand, or
by the indemnified party, on the other hand. The parties agree that it
would not be just and equitable if contribution were determined by pro
rata allocation or any other method of allocation which does not take
account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (d), no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this
Section 5, each person who controls a Holder within the meaning of
either the Act or the Exchange Act and each director, officer, employee
and agent of such Holder shall have the same rights to contribution as
such Holder, and each person who controls the Company within the
meaning of either the Act or the Exchange Act, each officer of the
Company who shall have signed the Shelf Registration Statement and each
director of the Company shall have the same rights to contribution as
the Company, subject in each case to the applicable terms and
conditions of this paragraph (d).
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<PAGE> 13
(e) The provisions of this Section 5 will remain in full force
and effect, regardless of any investigation made by or on behalf of any
Holder or the Company or any of the officers, directors or controlling
persons referred to in Section 5 hereof, and will survive the sale by a
Holder of Securities covered by a Shelf Registration Statement.
6. Miscellaneous.
(a) No Inconsistent Agreements. The Company has not, as of the
date hereof, entered into nor shall it, on or after the date hereof,
enter into, any agreement with respect to its Securities that is
inconsistent with the rights granted to the Holders herein or otherwise
conflicts with the provisions hereof.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended,
qualified, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, unless the
Company has obtained the written consent of the Majority Holders;
provided that with respect to any matter that directly or indirectly
affects the rights of the Initial Purchasers hereunder, the Company
shall obtain the written consent of the Initial Purchasers against
which such amendment, qualification, supplement, waiver or consent is
to be effective. Notwithstanding the foregoing (except the foregoing
proviso), a waiver or consent to departure from the provisions hereof
with respect to a matter that relates exclusively to the rights of
Holders whose Securities are being sold pursuant to a Shelf
Registration Statement and that does not directly or indirectly affect
the rights of other Holders may be given by the Majority Holders,
determined on the basis of Securities being sold rather than registered
under such Shelf Registration Statement.
(c) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery,
first-class mail, telex, telecopier, or air courier guaranteeing
overnight delivery:
(1) if to you, initially at the address set forth in the
Purchase Agreement;
(2) if to any other Holder, at the most current address
given by such Holder to the Company in accordance with the
provisions of this Section 6(c), which address initially is,
with respect to each Holder, the address of such Holder
maintained by the Registrar under the Indenture, with a copy
in like manner to Smith Barney Inc.; and
(3) if to the Company, initially at its address set forth
in the Purchase Agreement.
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<PAGE> 14
All such notices and communications shall be deemed to have
been duly given when received, if delivered by hand or air courier, and when
sent, if sent by first-class mail, telex or telecopier.
The Initial Purchasers or the Company by notice to the other
may designate additional or different addresses for subsequent notices or
communications.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of
the parties, including, without the need for an express assignment or
any consent by the Company thereto, subsequent Holders. The Company
hereby agrees to extend the benefits of this Agreement to any Holder
and any such Holder may specifically enforce the provisions of this
Agreement as if an original party hereto.
(e) Counterparts. This agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and
all of which taken together shall constitute one and the same
agreement.
(f) Headings. The headings in this agreement are for
convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
(g) Governing Law. This agreement shall be governed by and
construed in accordance with the laws of the State of New York
applicable to agreements made and to be performed in said State,
without regard to the conflicts of law rules thereof.
(h) Severability. In the event that any one of more of the
provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any respect
for any reason, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions hereof
shall not be in any way impaired or affected thereby, it being intended
that all of the rights and privileges of the parties shall be
enforceable to the fullest extent permitted by law.
(i) Securities Held by the Company, etc. Whenever the consent
or approval of Holders of a specified percentage of principal amount of
Securities or the Common Stock issuable upon conversion thereof is
required hereunder, Securities or the Common Stock issued upon
conversion thereof held by the Company or its Affiliates (other than
subsequent Holders of Securities or the Common Stock issued upon
conversion thereof if such subsequent Holders are deemed to be
Affiliates solely by reason of their holdings of such Securities) shall
not be counted in determining whether such consent or approval was
given by the Holders of such required percentage.
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<PAGE> 15
Please confirm that the foregoing correctly sets forth the
agreement between the Company and you.
Very truly yours,
SABRATEK CORPORATION
/s/ Stephen L. Holden
---------------------------
Name: Stephen L. Holden
Title: Senior Vice President, Chief
Financial Officer and
Treasurer
The foregoing Agreement is hereby
confirmed and accepted as of the date
first above written.
SMITH BARNEY INC.
For itself and the other Initial
Purchasers named in Schedule I to the
Purchase Agreement.
BY: SMITH BARNEY INC.
By /s/ Michael Giaquinto
-------------------------
Name: Michael Giaquinto
Title: Director
15
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EXHIBIT A
FORM OF LETTER TO BE PROVIDED BY ISSUER TO
THE DEPOSITORY TRUST COMPANY
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, NY 10004
Re: 6% Convertible Notes Due 2005 (the "Securities") of
Sabratek Corporation
Ladies and Gentlemen:
Please be advised that the Securities and Exchange Commission
has declared effective a Registration Statement on Form S-3 under the Securities
Act of 1933, as amended, with regard to all of the Securities referenced above.
Accordingly, there is no longer any restriction as to whom such Securities may
be sold and any restrictions on the CUSIP designation are no longer appropriate
and may be removed. I understand that upon receipt of this letter, DTC will
remove any stop or restriction on its system with respect to this issue.
As always, please do not hesitate to call if we can of further
assistance.
Very truly yours,
Authorized Officer
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EXHIBIT 4.2
================================================================================
SABRATEK CORPORATION
TO
LASALLE NATIONAL BANK
TRUSTEE
-----------
INDENTURE
DATED AS OF APRIL 14, 1998
6% CONVERTIBLE NOTES DUE 2005
================================================================================
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TABLE OF CONTENTS
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ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.01. Definitions ...........................................................1
SECTION 1.02. Other Definitions......................................................6
SECTION 1.03. Incorporation by Reference of Trust Indenture Act......................7
SECTION 1.04. Rules of Construction..................................................7
ARTICLE II
The Securities
SECTION 2.01. Form and Dating........................................................8
SECTION 2.02. Execution, Authentication and Delivery.................................9
SECTION 2.03. Registrars, Paying Agents and Conversion Agents.......................10
SECTION 2.04. Paying Agent to Hold Money in Trust...................................10
SECTION 2.05. Noteholder Lists......................................................10
SECTION 2.06. Transfer and Exchange.................................................10
SECTION 2.07. Replacement Securities................................................12
SECTION 2.08. Outstanding Securities................................................12
SECTION 2.09. Treasury Securities...................................................13
SECTION 2.10. Temporary Securities; Exchange of Global Security for Certificated
Securities......................................................13
SECTION 2.11. Cancellation..........................................................14
SECTION 2.12. Defaulted Interest....................................................14
ARTICLE III
Redemption
SECTION 3.01. Notices to Trustee....................................................14
SECTION 3.02. Selection of Securities to be Redeemed................................14
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SECTION 3.03. Notice of Redemption..................................................15
SECTION 3.04. Effect of Notice of Redemption........................................16
SECTION 3.05. Deposit of Redemption Price...........................................16
SECTION 3.06. Securities Redeemed in Part...........................................16
SECTION 3.07. Optional Redemption...................................................16
SECTION 3.08. Designated Event Offer................................................16
ARTICLE IV
Covenants
SECTION 4.01. Payment of Securities.................................................19
SECTION 4.02. SEC Reports ..........................................................19
SECTION 4.03. Compliance Certificate................................................19
SECTION 4.04. Stay, Extension and Usury Law.........................................20
SECTION 4.05. Corporate Existence...................................................20
SECTION 4.06. Taxes ................................................................21
SECTION 4.07. Designated Event......................................................21
SECTION 4.08. Investment Company Act................................................21
ARTICLE V
Conversion
SECTION 5.01. Conversion Privilege..................................................21
SECTION 5.02. Conversion Procedure..................................................22
SECTION 5.03. Fractional Shares.....................................................23
SECTION 5.04. Taxes on Conversion...................................................23
SECTION 5.05. Company to Provide Stock..............................................23
SECTION 5.06. Adjustment of Conversion Price........................................23
SECTION 5.07. No Adjustment.........................................................27
SECTION 5.08. Other Adjustments.....................................................27
SECTION 5.09. Adjustments for Tax Purposes..........................................28
SECTION 5.10. Adjustments by the Company............................................28
SECTION 5.11. Notice of Adjustment..................................................28
SECTION 5.12. Notice of Certain Transactions........................................28
SECTION 5.13. Effect of Reclassifications, Consolidations, Mergers or Sales on
Conversion Privilege............................................29
SECTION 5.14. Trustee's Disclaimer..................................................30
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ARTICLE VI
Successors
SECTION 6.01. Merger, Consolidation or Sale of Assets...............................30
SECTION 6.02. Successor Corporation Substituted.....................................31
ARTICLE VII
Defaults and Remedies
SECTION 7.01. Events of Default.....................................................31
SECTION 7.02. Acceleration..........................................................33
SECTION 7.03. Other Remedies........................................................33
SECTION 7.04. Waiver of Past Defaults...............................................33
SECTION 7.05. Control by Majority...................................................34
SECTION 7.06. Limitation on Suits...................................................34
SECTION 7.07. Rights of Noteholders to Receive Payment..............................34
SECTION 7.08. Collection Suit by Trustee............................................34
SECTION 7.09. Trustee May File Proofs of Claim......................................35
SECTION 7.10. Priorities............................................................35
SECTION 7.11. Undertaking for Costs.................................................35
ARTICLE VIII
Trustee
SECTION 8.01. Duties of Trustee.....................................................36
SECTION 8.02. Rights of Trustee.....................................................36
SECTION 8.03. Individual Rights of Trustee..........................................37
SECTION 8.04. Trustee's Disclaimer..................................................37
SECTION 8.05. Notice of Defaults....................................................37
SECTION 8.06. Reports by Trustee to Noteholders.....................................37
SECTION 8.07. Compensation and Indemnity............................................38
SECTION 8.08. Replacement of Trustee................................................39
SECTION 8.09. Successor Trustee by Merger, Etc......................................40
SECTION 8.10. Eligibility; Disqualification.........................................40
SECTION 8.11. Preferential Collection of Claims Against Company.....................40
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ARTICLE IX
Discharge of Indenture
SECTION 9.01. Termination of Company's Obligations..................................41
SECTION 9.02. Repayment to Company..................................................41
ARTICLE X
Amendments, Supplements and Waivers
SECTION 10.01. Without Consent of Noteholders.......................................41
SECTION 10.02. With Consent of Noteholders..........................................42
SECTION 10.03. Compliance with Trust Indenture Act..................................43
SECTION 10.04. Revocation and Effect of Consents....................................43
SECTION 10.05. Notation on or Exchange of Securities................................43
SECTION 10.06. Trustee Protected....................................................44
ARTICLE XI
Miscellaneous
SECTION 11.01. Trust Indenture Act Controls.........................................44
SECTION 11.02. Notices..............................................................44
SECTION 11.03. Communication by Noteholders with Other Noteholders..................45
SECTION 11.04. Certificate and Opinion as to Conditions Precedent...................45
SECTION 11.05. Statements Required in Certificate or Opinion........................45
SECTION 11.06. Rules by Trustee and Agents..........................................46
SECTION 11.07. Legal Holidays.......................................................46
SECTION 11.08. No Recourse Against Others...........................................46
SECTION 11.09. Counterparts.........................................................46
SECTION 11.10. Variable Provisions..................................................46
SECTION 11.11. GOVERNING LAW........................................................47
SECTION 11.12. No Adverse Interpretation of Other Agreements........................47
SECTION 11.13. Successors...........................................................47
SECTION 11.14. Severability.........................................................47
SECTION 11.15. Table of Contents, Headings, Etc.....................................47
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EXHIBIT A FORM OF CONVERTIBLE NOTE.....................................A-1
EXHIBIT B FORM OF REGISTRATION AGREEMENT...............................B-1
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INDENTURE dated as of April 14, 1998 between Sabratek Corporation, a
Delaware corporation (the "Company"), and LaSalle National Bank, as trustee (the
"Trustee").
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Noteholders of the Company's 6% Convertible
Notes Due 2005 (the "Securities"):
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.01. Definitions. "Affiliate" of any specified person means
any other person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified person. For the purposes
of this definition, "control" (including, with correlative meanings, the terms
"controlling", "controlled by" and "under common control with"), as used with
respect to any person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
person, whether through the ownership of voting securities or by agreement or
otherwise.
"Agent" means any Registrar, Paying Agent or Conversion Agent.
"Board of Directors" means the Board of Directors of the Company or any
authorized committee of the Board.
"Board Resolution" means a copy of a resolution of the Board of
Directors certified by the Secretary or an Assistant Secretary of the Company to
be in full force and effect on the date of such certification and delivery to
the Trustee.
"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.
"Change of Control" means any event where: (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 person merges into the Company,
and, in the case of any such transaction, the outstanding 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
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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 to any person (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).
"Common Stock" means the common stock of the Company as the same exists
at the date of the execution of this Indenture or as such stock may be
constituted from time to time.
"Company" means the party named as such above until a successor
replaces it in accordance with Article VII and thereafter means the successor.
"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 this 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.
"Daily Market Price" means the price of a share of Common Stock on the
relevant date, determined (a) on the basis of the last reported sale price
regular way of the Common Stock as reported on the Nasdaq Stock Market's
National Market (the "NNM"), or if the Common Stock is not then listed on the
NNM, as reported on such national securities exchange upon which the Common
Stock is listed, or (b) if there is no such reported sale on the day in
question, on the basis of the average of the closing bid and asked quotations
regular way as so reported, or (c) if the Common Stock is not listed on the NNM
or on any national securities exchange, on the basis of the average of the high
bid and low asked quotations regular way on the day in question in the
over-the-counter market as reported by the National Association of Securities
Dealers Automated Quotation System, or if not so quoted, as reported by National
Quotation Bureau, Incorporated, or a similar organization.
"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.
"Depositary" means The Depository Trust Company, its nominees and their
respective successors.
"Designated Event" means the occurrence of a Change of Control or a
Termination of Trading.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"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 approved by a significant segment of the accounting profession
within the United States, which are in effect from time to time.
"Global Securities Legend" means the legend labeled as such and that is
set forth in Exhibit A hereto.
"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)(a) 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 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 the 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.
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"Indenture" means this Indenture as amended from time to time.
"Initial Purchaser" means Smith Barney Inc.
"Issuance Date" means the date on which the Securities are first
authenticated and issued.
"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 of determination).
"Noteholder" or "holder" means a person in whose name a Security is
registered.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering Memorandum" means the offering memorandum relating to the
Securities dated April 8, 1998.
"Officers' Certificate" means a certificate signed by two Officers, one
of whom must be the Chairman of the Board, the Chief Executive Officer, the
President, the Chief Financial Officer or the Treasurer of the Company. See
Sections 11.04 and 11.05 hereof.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee. See Sections 11.04 and 11.05 hereof.
"person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"principal" of a debt security means the principal of the security.
"Registration Agreement" means the Registration Agreement relating to
the Securities dated April 14, 1998, between the Company and the Initial
Purchaser, a form of which is attached as Exhibit D hereto.
"Restricted Securities Legend" means the legend labeled as such and
that is set forth in Exhibit A hereto.
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"SEC" means the Securities and Exchange Commission.
"Securities" means the Securities described in the preamble above that
are issued, authenticated and delivered under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Shelf Registration Statement" shall have the meaning set forth in the
Registration Agreement.
"Subsidiary" 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 any person or one or more of the other
Subsidiaries of that person or a combination thereof.
"Termination of Trading" means an event where the Common Stock (or
other securities into which the Securities 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.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code ss.ss.
77aaa-77bbbb) as in effect on the date of execution of this Indenture.
"Trading Day" shall mean (A) if the applicable security is listed or
admitted for trading on the New York Stock Exchange or another national
securities exchange, a day on which the New York Stock Exchange or such other
national securities exchange is open for business, (B) if the applicable
security is quoted on the NNM, a day on which trades may be made thereon or (C)
if the applicable security is not so listed, admitted for trading or quoted, any
day other than a Saturday or Sunday or a day on which banking institutions in
the State of New York are authorized or obligated by law or executive order to
close.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor.
"Trust Officer" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer this Indenture.
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SECTION 1.02. Other Definitions.
Defined in
Term Section
- ---- -------
"Agent Members" 2.01
"Bankruptcy Law" 7.01
"Cedel Bank" 2.01
"Commencement Date" 3.08
"Conversion Agent" 2.03
"Conversion Date" 5.02
"Conversion Price" 5.01
"Conversion Shares" 5.06
"Current Market Price" 5.06
"Custodian" 7.01
"Designated Event Offer" 4.07
"Designated Event Payment" 4.07
"Designated Event Payment Date" 3.08
"Distribution Date" 5.06
"Distribution Record Date" 5.06
"Excess Payment" 5.06
"Euroclear" 2.01
"Event of Default" 7.01
"Global Security" 2.01
"Legal Holiday" 11.07
"Non-Global Purchasers" 2.01
"Offer Amount" 3.08
"Officer" 11.10
"Paying Agent" 2.03
"Payment Default" 7.01
"Purchase Agreement" 2.01
"Purchase Date" 5.06
"QIBs" 2.01
"Registrar" 2.03
"Regulation S" 2.01
"Rights" 5.06
"Rule 144A" 2.01
"Tender Period" 3.08
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SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Securities;
"indenture security holder" means a Noteholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Securities means the Company or any other obligor on
the Securities.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.04. Rules of Construction. Unless the context otherwise
requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP consistently applied;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and words in the plural
include the singular; and
(e) provisions apply to successive events and transactions.
ARTICLE II
The Securities
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SECTION 2.01. Form and Dating. The Securities and the Trustee's
certificate of authentication shall be substantially in the form of Exhibit A
which is hereby incorporated in and expressly made a part of this Indenture.
The Securities may have notations, legends or endorsements required by
law, stock exchange rule, agreements to which the Company is subject, if any, or
usage (provided that any such notation, legend or endorsement is in a form
acceptable to the Company). The Company shall furnish any such legend not
contained in Exhibit A to the Trustee in writing. Each Security shall be dated
the date of its authentication. The terms and provisions of the Securities set
forth in Exhibit A are part of the terms of this Indenture and to the extent
applicable, the Company and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound thereby.
(a) Global Securities. The Securities are being offered and sold by the
Company pursuant to a Purchase Agreement relating to the Securities, dated April
8, 1998, among the Company and the Initial Purchaser (the "Purchase Agreement").
Securities sold, whether in the United States to Qualified
Institutional Buyers ("QIBs") in reliance on Rule 144A under the Securities Act
("Rule 144A") or in offshore transactions in reliance on Regulation S under the
Securities Act ("Regulation S") shall be issued in the form of one or more
permanent global Securities (each, a "Global Security," and, collectively, the
"Global Securities") in definitive, fully registered form without interest
coupons with the Global Securities Legend and the Restricted Securities Legend
set forth in Exhibit A hereto. The Global Security shall be deposited on behalf
of the purchasers of the Securities represented thereby with the Trustee, at its
Chicago office, as custodian for the Depositary, and registered in the name of
the Depositary or a nominee of the Depositary (and, in the case of Regulation S,
for the accounts of designated agents holding on behalf of the Euroclear System
("Euroclear") or Cedel Bank, societe anonyme ("Cedel Bank")), duly executed by
the Company and authenticated by the Trustee as hereinafter provided. The
aggregate principal amount of the Global Security may from time to time be
increased or decreased by adjustments made on the records of the Trustee and the
Depositary or its nominee as hereinafter provided.
(b) Book-Entry Provisions. This Section 2.01(b) shall apply only to a
Global Security deposited with or on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance with
this Section 2.01(b) and the written order of the Company, authenticate and
deliver initially one or more Global Securities that (i) shall be registered in
the name of Cede & Co. or other nominee of such Depositary and (ii) shall be
delivered by the Trustee to such Depositary or pursuant to such
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Depositary's instructions or held by the Trustee as custodian for the Depositary
pursuant to a FAST Balance Certificate Agreement between the Depositary and the
Trustee.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depositary or by the Trustee as the custodian of the
Depositary or under such Global Security, and the Depositary may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or impair, as between the Depositary and its Agent Members, the operation of
customary practices of such Depositary governing the exercise of the rights of a
holder of a beneficial interest in any Global Security.
(c) Certificated Securities. Except as provided in Section 2.10, owners
of beneficial interests in Global Securities will not be entitled to receive
physical delivery of certificated Securities.
SECTION 2.02. Execution, Authentication and Delivery. Two Officers
shall sign the Securities for the Company by manual or facsimile signature.
If an Officer whose signature is on a Security no longer holds that
office at the time the Security is authenticated, the Security shall
nevertheless be valid.
A Security shall not be valid until authenticated by the manual
signature of an authorized officer of the Trustee. The signature shall be
conclusive evidence that the Security has been authenticated under this
Indenture.
Upon a written order of the Company signed by two Officers, the Trustee
shall authenticate the Securities for original issue up to an aggregate
principal amount of $97,750,000 and deliver such authenticated securities as
directed in such order. The aggregate principal amount of Securities outstanding
at any time shall not exceed such amount except as provided in Section 2.07.
The Trustee may appoint one or more authenticating agents acceptable to
the Company to authenticate Securities. An authenticating agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate.
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SECTION 2.03. Registrar, Paying Agent and Conversion Agent. The Company
shall maintain in Chicago, Illinois (i) an office or agency where Securities may
be presented for registration of transfer or for exchange (the "Registrar"),
(ii) an office or agency where Securities may be presented for payment (the
"Paying Agent") and (iii) an office or agency where Securities may be presented
for conversion (the "Conversion Agent"). The Registrar shall keep a register of
the Securities and of their transfer and exchange. The Company has initially
appointed the Trustee as its Registrar, Paying Agent and Conversion Agent in
Chicago. The Company may appoint one or more co-registrars, one or more
additional paying agents and one or more additional conversion agents in such
other locations as it shall determine. The term "Registrar" includes any
co-registrar, the term "Paying Agent" includes any additional paying agent and
the term "Conversion Agent" includes any additional conversion agent. The
Company may change any Paying Agent, Registrar or Conversion Agent without prior
notice to any Noteholder. The Company shall notify the Trustee of the name and
address of any newly-appointed Agent not a party to this Indenture. If the
Company fails to appoint or maintain another entity as Registrar, Paying Agent
or Conversion Agent, the Trustee shall act as such.
SECTION 2.04. Paying Agent to Hold Money in Trust. The Company shall
require each Paying Agent other than the Trustee to agree in writing that the
Paying Agent will hold in trust for the benefit of Noteholders or the Trustee
all money held by the Paying Agent for the payment of principal or interest on
the Securities, and will notify the Trustee of any default by the Company in
making any such payment. While any such default continues, the Trustee may
require a Paying Agent to pay all money held by it to the Trustee. The Company
at any time may require a Paying Agent to pay all money held by it to the
Trustee and to account for any money disbursed by it. Upon payment over to the
Trustee, the Paying Agent (if other than the Company or an Affiliate of the
Company) shall have no further liability for the money. If the Company or an
Affiliate of the Company acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Noteholders all money held by it as
Paying Agent.
SECTION 2.05. Noteholder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Noteholders. If the Trustee is not the Registrar,
the Company shall furnish to the Trustee on or before each interest payment date
and at such other times as the Trustee may request in writing a list in such
form and as of such date as the Trustee may reasonably require of the names and
addresses of Noteholders.
SECTION 2.06. Transfer and Exchange. Where Securities are presented to
the Registrar with a request to register a transfer or to exchange them for an
equal principal amount of Securities of other denominations, such Registrar
shall register the transfer or make the exchange if its requirements for such
transactions are met. To permit registrations of transfers
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and exchanges, the Company shall issue and the Trustee shall authenticate
Securities at the Registrar's request. No service charge shall be made for any
registration of transfer or exchange (except as otherwise expressly permitted
herein), but the Company may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable in connection therewith
(other than any such transfer tax or similar governmental charge payable upon
exchanges pursuant to Sections 2.10, 3.06, 3.08, 5.02 or 10.05 hereof).
The Company shall not be required (i) to issue, register the transfer
of, or exchange Securities during a period beginning at the opening of business
15 days before the day of any selection of Securities for redemption under
Section 3.02 hereof and ending at the close of business on the day of selection,
or (ii) to exchange or register the transfer of any Security so selected for
redemption in whole or in part, except the unredeemed portion of any Security
being redeemed in part.
(a) Notwithstanding any provision to the contrary herein, so long as a
Global Security remains outstanding and is held by or on behalf of the
Depositary, transfers of a Global Security, in whole or in part, or of any
beneficial interest therein, shall only be made in accordance with Section
2.01(b) and this Section 2.06(a); provided, however, that beneficial interests
in a Global Security may be transferred to persons who take delivery thereof in
the form of a beneficial interest in the same Global Security in accordance with
the transfer restrictions set forth under the heading "Notice to Investors" in
the Offering Memorandum and the Restricted Securities Legend.
(i) Transfer of Global Security. Transfers of a Global Security shall
be limited to transfers of such Global Security in whole, but not in part,
to nominees of the Depositary or to a successor of the Depositary or such
successor's nominee.
(ii) Other Exchanges. In the event that a Global Security is exchanged
for Securities in definitive registered form pursuant to Section 2.10,
prior to the effectiveness of a Shelf Registration Statement with respect
to such Securities, such Securities may be exchanged only in accordance
with such procedures as may from time to time be adopted by the Company are
(including procedures intended to ensure that such transfers comply with
Rule 144A or Regulation S under the Securities Act, as the case may be).
(b) Except in connection with a Shelf Registration Statement
contemplated by and in accordance with the terms of the Registration Agreement,
if Securities are issued upon the registration of transfer, exchange or
replacement of Securities bearing the Restricted Securities Legend set forth in
Exhibit A hereto, or if a request is made to remove such Restricted Securities
Legend on Securities, the Securities so issued shall bear the Restricted
Securities Legend, or the Restricted Securities Legend shall not be removed, as
the case may be, unless there is delivered
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to the Company such satisfactory evidence, which may include an opinion of
counsel licensed to practice law in the State of New York, as may be reasonably
required by the Company, that neither the legend nor the restrictions on
transfer set forth therein are required to ensure that transfers thereof comply
with the provisions of Rule 144A, Rule 144 or Regulation S under the Securities
Act or that such Securities are not "restricted" within the meaning of Rule 144
under the Securities Act. Upon provision to the Company of such satisfactory
evidence, the Trustee, at the written direction of the Company, shall
authenticate and deliver Securities that do not bear the legend.
(c) Neither the Trustee nor any Agent shall have any responsibility for
any actions taken or not taken by the Depositary.
SECTION 2.07. Replacement Securities. If the holder of a Security
claims that the Security has been lost, destroyed or wrongfully taken or if such
Security is mutilated and is surrendered to the Registrar, the Company shall
issue and the Trustee shall authenticate a replacement Security if the Trustee's
and the Company's requirements (as shall have been previously communicated to
the Trustee in a written letter of standing instruction) are met. If required by
the Trustee, the Registrar or the Company, an indemnity bond must be sufficient
in the judgment of each of the foregoing to protect the Company, the Trustee,
any Agent or any authenticating agent from any loss which any of them may suffer
if a Security is replaced. The Company may charge for its expenses in replacing
a Security.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, or is about to be redeemed or
purchased by the Company pursuant to Article III hereof or converted into shares
of Common Stock pursuant to Article V hereof, the Company in its discretion may,
instead of issuing a new Security, pay, redeem or convert such Security, as the
case may be.
Every replacement Security is an additional obligation of the Company.
SECTION 2.08. Outstanding Securities. The Securities outstanding at any
time are all the Securities authenticated by the Trustee except for those
canceled by it, those delivered to it for cancellation, and those described in
this Section as not outstanding.
If a Security is replaced, paid, redeemed or converted pursuant to
Section 2.07 hereof, it ceases to be outstanding unless, in the case of a
replaced Security, the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If Securities are considered paid under Section 4.01 hereof, they cease
to be outstanding and interest on them ceases to accrue.
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A Security does not cease to be outstanding because the Company or an
Affiliate of the Company holds the Security.
SECTION 2.09. Treasury Securities. In determining whether the
Noteholders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company or an Affiliate of
the Company shall be considered as though they are not outstanding, except that
for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent, only Securities which a Trust
Officer knows are so owned shall be so disregarded.
SECTION 2.10. Temporary Securities; Exchange of Global Security for
Certificated Securities. (a) Until definitive Securities are ready for delivery,
the Company may prepare and the Trustee shall authenticate temporary Securities.
Temporary Securities shall be substantially in the form of definitive Securities
but may have variations that the Company considers appropriate for temporary
Securities. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Securities in exchange for temporary
Securities.
(b) A Global Security deposited with the Depositary or with the Trustee
as custodian for the Depositary pursuant to Section 2.01 shall be transferred to
the beneficial owners thereof in the form of certificated securities only if (i)
the Depositary notifies the Company that it is unwilling or unable to continue
as Depositary for such Global Security or if at any time such Depositary ceases
to be a "clearing agency" registered under the Exchange Act and a successor
Depositary is not appointed by the Company within 90 days of such notice, or
(ii) an Event of Default has occurred and is continuing.
(c) Any Global Security that is transferable to the beneficial owners
thereof in the form of certificated Securities pursuant to this Section 2.10
shall be surrendered by the Depositary to the Trustee located in Chicago,
Illinois to be so transferred, in whole or from time to time in part, without
charge, and the Trustee shall authenticate and deliver, upon such transfer of
each portion of such Global Security, an equal aggregate principal amount at
maturity of Securities of authorized denominations in the form of certificated
Securities. Any portion of a Global Security transferred pursuant to this
Section shall be executed, authenticated and delivered only in denominations of
$1,000 and any integral multiple thereof and registered in such names as the
Depositary shall direct. Any Securities in the form of certificated Securities
delivered in exchange for an interest in the Global Security shall, except as
otherwise provided by Section 2.06(b), bear the Restricted Securities Legend set
forth in Exhibit A hereto.
(d) Prior to any transfer pursuant to Section 2.10(b), the registered
holder of a Global Security may grant proxies and otherwise authorize any
person, including Agent Members and persons that may hold interests through
Agent
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Members, to take any action which a holder is entitled to take under this
Indenture or the Securities.
(e) In the event of the occurrence of either of the events specified in
Section 2.10(b), the Company will promptly make available to the Trustee a
reasonable supply of certificated Securities in definitive form without interest
coupons.
SECTION 2.11. Cancellation. The Company at any time may deliver
Securities to the Registrar for cancellation. The Registrar, Paying Agent and
Conversion Agent shall forward to the Trustee any Securities surrendered to them
for registration of transfer, redemption, conversion, exchange or payment. The
Trustee shall promptly cancel all Securities surrendered for registration of
transfer, redemption, conversion, exchange, payment, replacement or cancellation
and shall destroy all canceled Securities unless the Company otherwise directs.
The Company may not issue new Securities to replace Securities that it has paid
or that have been delivered to the Registrar for cancellation or that any holder
has converted.
SECTION 2.12. Defaulted Interest. If the Company fails to make a
payment of interest on the Securities, it shall pay such defaulted interest plus
any interest payable on the defaulted interest, in any lawful manner. It may pay
such defaulted interest, plus any such interest payable on it, to the persons
who are Noteholders on a subsequent special record date. The Company shall fix
any such record date and payment date. At least 15 days before any such record
date, the Company shall mail to Noteholders a notice that states the record
date, payment date, and amount of such interest to be paid.
ARTICLE III
Redemption
SECTION 3.01. Notices to Trustee. If the Company elects to redeem
Securities pursuant to Section 3.07 hereof, it shall notify the Trustee of the
redemption date and the principal amount of Securities to be redeemed. The
Company shall give each notice provided for in this Section 3.01 at least 45
days before the redemption date (unless a shorter notice period shall be
satisfactory to the Trustee).
SECTION 3.02. Selection of Securities to be Redeemed. If less than all
the Securities are to be redeemed, the Trustee shall select the Securities to be
redeemed by a method that complies with the requirements of the principal
national securities exchange, if any, on which the Securities are listed, or, if
the Securities are not so listed, on a pro rata basis, by lot or by such other
method as the Trustee considers fair and appropriate. The Trustee shall make the
selection not more than 60 days and not less than 30 days before the redemption
date from
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Securities outstanding not previously called for redemption. The Trustee may
select for redemption portions of the principal of Securities that have
denominations larger than $1,000. Securities and portions of them it selects
shall be in amounts of $1,000 or integral multiples of $1,000. Provisions of
this Indenture that apply to Securities called for redemption also apply to
portions of Securities called for redemption. The Trustee shall notify the
Company promptly of the Securities or portions of Securities to be called for
redemption.
If any Security selected for partial redemption is converted in part
after such selection, the converted portion of such Security shall be deemed (so
far as may be) to be the portion to be selected for redemption. The Securities
(or portions thereof) so selected shall be deemed duly selected for redemption
for all purposes hereof, notwithstanding that any such Security is converted in
whole or in part before the mailing of the notice of redemption. Upon any
redemption of less than all the Securities, the Company and the Trustee may
treat as outstanding any Securities surrendered for conversion during the period
15 days next preceding the mailing of a notice of redemption and need not treat
as outstanding any Security authenticated and delivered during such period in
exchange for the unconverted portion of any Security converted in part during
such period.
SECTION 3.03. Notice of Redemption. At least 30 days but not more than
60 days before a redemption date, the Company shall mail a notice of redemption
to each holder whose Securities are to be redeemed at such holder's registered
address.
The notice shall identify the Securities to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
redemption date, upon cancellation of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion will be
issued in the name of the holder thereof;
(d) the name and address of the Paying Agent;
(e) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price plus accrued interest;
(f) that, unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment pursuant
to the terms of this
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Indenture, by law or otherwise, interest on Securities called for
redemption ceases to accrue on and after the redemption date; and
(g) the paragraph of the Securities pursuant to which the Securities
called for redemption are being redeemed.
Such notice shall also state the current Conversion Price and the date
on which the right to convert such Securities or portions thereof into Common
Stock of the Company will expire.
At the Company's request, the Trustee shall give notice of redemption
in the Company's name and at its expense.
SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption
is mailed, Securities called for redemption become due and payable on the
redemption date at the price set forth in the Security.
SECTION 3.05. Deposit of Redemption Price. On or before the redemption
date, the Company shall deposit with the Trustee or the Paying Agent money
sufficient to pay the redemption price of and accrued interest up to but not
including the redemption date on all Securities to be redeemed on that date
(subject to the right of holders of record on the relevant record date to
receive interest due on an interest payment date) unless theretofore converted
into Common Stock pursuant to the provisions hereof. The Trustee or such Paying
Agent shall return to the Company any money not required for that purpose.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of a Security
that is redeemed in part, the Company shall issue and the Trustee shall
authenticate for the holder at the expense of the Company a new Security equal
in principal amount to the unredeemed portion of the Security surrendered.
SECTION 3.07. Optional Redemption. The Company may redeem all or any
portion of the Securities, upon the terms and at the redemption prices set forth
in each of the Securities. Any redemption pursuant to this Section 3.07 shall be
made pursuant to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. Designated Event Offer. (a) In the event that, pursuant
to Section 4.07 hereof, the Company shall commence a Designated Event Offer, the
Company shall follow the procedures in this Section 3.08.
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(b) The Designated Event Offer shall remain open for a period specified
by the Company which shall be no less than 30 calendar days and no more than 60
calendar days following its commencement on the date of the mailing of notice in
accordance with Section 4.07(b) hereof (the "Commencement Date"), except to the
extent that a longer period is required by applicable law (the "Tender Period").
Upon the expiration of the Tender Period (the "Designated Event Payment Date"),
the Company shall purchase the principal amount of Securities required to be
purchased pursuant to Section 4.07 hereof (the "Offer Amount").
(c) If the Designated Event Payment Date is on or after an interest
payment record date and on or before the related interest payment date, any
accrued interest to the related interest payment date will be paid to the person
in whose name a Security is registered at the close of business on such record
date, and no additional interest will be payable to Noteholders who tender
Securities pursuant to the Designated Event Offer.
(d) The Company shall provide the Trustee with written notice of the
Designated Event Offer at least 10 Business Days before the Commencement Date.
(e) Subject to Section 4.07(b), on or before the Commencement Date, the
Company or the Trustee (at the request and expense of the Company) shall send,
by first class mail, a notice to each of the Noteholders, which shall govern
the terms of the Designated Event Offer and shall state:
(i) that the Designated Event Offer is being made pursuant to this
Section 3.08 and Section 4.07 hereof and that all Securities tendered will
be accepted for payment;
(ii) the Offer Amount, the purchase price (as determined in accordance
with Section 4.07 hereof), the length of time the Designated Event Offer
will remain open and the Designated Event Payment Date;
(iii) that any Security or portion thereof not tendered or accepted for
payment will continue to accrue interest;
(iv) that, unless the Company defaults in the payment of the Designated
Event Payment, any Security or portion thereof accepted for payment
pursuant to the Designated Event Offer shall cease to accrue interest after
the Designated Event Payment Date;
(v) that Noteholders electing to have a Security or portion thereof
purchased pursuant to any Designated Event Offer will be required to
surrender the Security, with the form entitled "Option of Noteholder To
Elect Purchase" on the reverse of the Security
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completed, to the 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;
(vi) that Noteholders will be entitled to withdraw their election if
the Paying Agent receives, not later than the close of business on the
second Business Day preceding the Designated Event Payment Date, or such
longer period as may be required by law, a letter or a telegram, telex,
facsimile transmission (receipt of which is confirmed and promptly followed
by a letter) setting forth the name of the Noteholder, the principal amount
of the Security or portion thereof the Noteholder delivered for purchase
and a statement that such Noteholder is withdrawing his election to have
the Security or portion thereof 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
(vii) that Noteholders whose Securities are being purchased only in
part will be issued new Securities equal in principal amount to the
unpurchased portion of the Securities surrendered, which unpurchased
portion must be equal to $1,000 in principal amount or an integral multiple
thereof.
In addition, the notice shall contain all instructions and materials
that the Company shall reasonably deem necessary to enable such Noteholders to
tender Securities pursuant to the Designated Event Offer.
(f) At least one Business Day prior to the Designated Event Payment
Date, the Company shall irrevocably deposit with the Trustee or the Paying Agent
in immediately available funds an amount equal to the Offer Amount to be held
for payment in accordance with the terms of this Section 3.08. On the Designated
Event Payment Date, the Company shall, to the extent lawful, (i) accept for
payment the Securities or portions thereof tendered pursuant to the Designated
Event Offer, (ii) deliver or cause to be delivered to the Trustee Securities so
accepted and (iii) deliver to the Trustee an Officers' Certificate stating such
Securities or portions thereof have been accepted for payment by the Company in
accordance with the terms of this Section 3.08. The Paying Agent shall promptly
(but in any case not later than five calendar days after the Designated Event
Payment Date) mail or deliver to each tendering Noteholder an amount equal to
the purchase price of the Securities tendered by such Noteholder, and the
Trustee shall promptly authenticate and mail or deliver to such Noteholders a
new Security equal in principal amount to any unpurchased portion of the
Security surrendered, if any; provided, that each new Security shall be in a
principal amount of $1,000 or an integral multiple thereof. Any Securities not
so accepted shall be promptly mailed or delivered by or on behalf of the Company
to the holder thereof. The Company will publicly announce the results of
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the Designated Event Offer on, or as soon as practicable after, the Designated
Event Payment Date.
(g) The Designated Event Offer shall be made by the Company in
compliance with all applicable provisions of the Exchange Act, and all
applicable tender offer rules promulgated thereunder, and shall include all
instructions and materials that the Company shall reasonably deem necessary to
enable such Noteholders to tender their Securities.
ARTICLE IV
Covenants
SECTION 4.01. Payment of Securities. The Company shall pay the
principal of and interest on the Securities on the dates and in the manner
provided in the Securities. Principal and interest shall be considered paid on
the date due if the Paying Agent (other than the Company or an Affiliate of the
Company) holds on that date money designated for and sufficient to pay all
principal and interest then due and such Paying Agent is not prohibited from
paying such money to the Noteholders on that date pursuant to the terms of this
Indenture. To the extent lawful, the Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest (without regard to any applicable grace period) at the
rate borne by the Securities, compounded semiannually.
SECTION 4.02. SEC Reports. Whether or not required by the rules and
regulations of the SEC, so long as any Securities are outstanding, the Company
will file with the SEC and furnish to the Trustee and to the holders of
Securities all quarterly and annual financial information required to be
contained in a filing with the SEC on Forms 10-Q and 10-K, including a
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations" and, with respect to annual information only, a report thereon by
the Company's certified independent accountants.
SECTION 4.03. Compliance Certificate. The Company shall deliver to the
Trustee, within 120 days after the end of each fiscal year of the Company, an
Officers' Certificate stating that a review of the activities of the Company and
its subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether the
Company has kept, observed, performed and fulfilled its obligations under, and
complied with the covenants and conditions contained in, this Indenture, and
further stating, as to each such Officer signing such certificate, that to the
best of such Officer's knowledge the Company has kept, observed, performed and
fulfilled each and every covenant, and complied with the covenants and
conditions contained in this Indenture and is not in default in the performance
or observance of any of the terms, provisions and conditions hereof (or, if a
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Default or Event of Default shall have occurred, describing all such Defaults or
Events of Default of which such Officer may have knowledge) and that to the best
of such Officer's knowledge no event has occurred and remains in existence by
reason of which payments on account of the principal or of interest, if any, on
the Securities are prohibited.
One of the Officers signing such Officers' Certificate shall be either
the Company's principal executive officer, principal financial officer or
principal accounting officer.
The Company will, so long as any of the Securities are outstanding,
deliver to the Trustee, forthwith upon becoming aware of any Default, Event of
Default or default in the performance of any covenant, agreement or condition
contained in this Indenture, an Officers' Certificate specifying such Default,
Event of Default or default.
Immediately upon the occurrence of any event giving rise to an increase
in the interest rate on the Securities in accordance with paragraph 10 of the
form thereof or the termination of any such increase, the Company shall give the
Trustee notice of such increase or termination, of the interest rate borne by
the Securities after giving effect to such increase or termination and of the
event giving rise to such increase or termination (such notice to be contained
in an Officers' Certificate), and prior to receipt of such Officers' Certificate
the Trustee shall be entitled to assume that no such increase or termination has
occurred, as the case may be.
SECTION 4.04. Stay, Extension and Usury Law. The Company covenants (to
the extent that it may lawfully do so) that it will not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law wherever enacted, now or at any time hereafter
in force, which may affect the covenants or the performance of this Indenture;
and the Company (to the extent it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not, by
resort to any such law, hinder, delay or impede the execution of any power
herein granted to the Trustee, but will suffer and permit the execution of every
such power as though no such law has been enacted.
SECTION 4.05. Corporate Existence. Except as provided in Article VII
hereof, the Company will do or cause to be done all things necessary to preserve
and keep in full force and effect its corporate existence and the corporate,
partnership or other existence of each Material Subsidiary of the Company in
accordance with the respective organizational documents of each Material
Subsidiary and the rights (charter and statutory), licenses and franchises of
the Company and its Material Subsidiaries; provided, however, that the Company
shall not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any Material Subsidiary, if the
Board of Directors shall determine that the
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preservation thereof is no longer desirable in the conduct of the business of
the Company and its Subsidiaries taken as a whole and that the loss thereof is
not adverse in any material respect to the Noteholders.
SECTION 4.06. Taxes. The Company shall, and shall cause each of its
Subsidiaries to, pay prior to delinquency all taxes, assessments and
governmental levies, except as contested in good faith and by appropriate
proceedings.
SECTION 4.07. Designated Event. (a) Upon the occurrence of a Designated
Event, each holder of Securities shall have the right, in accordance with this
Section 4.07 and Section 3.08 hereof, to require the Company to repurchase all
or any part (equal to $1,000 or an integral multiple thereof) of such holder's
Securities pursuant to the terms of Section 3.08 (the "Designated Event Offer")
at a purchase price equal to 100% of the principal amount thereof, plus accrued
and unpaid interest thereon to the Designated Event Payment Date (the
"Designated Event Payment").
(b) Within 30 days following any Designated Event, the Company shall
mail to each holder the notice provided by Section 3.08(e).
SECTION 4.08. Investment Company Act. As long as any Notes are
outstanding, the Company will conduct its business and operations so as not to
become an "investment company" within the meaning of the Investment Company Act
of 1940, as amended (the "Investment Company Act"), and will take all steps
required in order for it to continue not to be an "investment company" and not
to be required to be registered under the Investment Company Act, including, if
necessary, redeployment of the assets of the Company.
ARTICLE V
Conversion
SECTION 5.01. Conversion Privilege. A holder of a Security may convert
the principal amount thereof (or any portion thereof that is an integral
multiple of $1,000) into fully paid and nonassessable shares of Common Stock of
the Company at any time after 90 days following the Issuance Date and prior to
the close of business on the Business Day immediately preceding the maturity
date of the Security at the Conversion Price then in effect, except that, with
respect to any Security called for redemption, such conversion right shall
terminate at the close of business on the Business Day immediately preceding the
redemption date (unless the Company shall default in making the redemption
payment when it becomes due, in which case the conversion right shall terminate
on the date such default is cured). The number of shares of Common Stock
issuable upon conversion of a Security is determined by dividing the principal
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amount of the Security converted by the conversion price in effect on the
Conversion Date (the "Conversion Price").
The initial Conversion Price is stated in paragraph 9 of the Securities
and is subject to adjustment as provided in this Article V.
Provisions of this Indenture that apply to conversion of all of a
Security also apply to conversion of a portion of it. A holder of Securities is
not entitled to any rights of a holder of Common Stock until such holder of
Securities has converted such Securities into Common Stock, and only to the
extent that such Securities are deemed to have been converted into Common Stock
under this Article V.
SECTION 5.02. Conversion Procedure. To convert a Security, a holder
must satisfy the requirements in paragraph 9 of the Securities. The date on
which the holder satisfies all of those requirements is the conversion date (the
"Conversion Date"). As soon as practicable after the Conversion Date, the
Company shall deliver to the holder through the Conversion Agent a certificate
for the number of whole shares of Common Stock issuable upon the conversion and
a check for any fractional share determined pursuant to Section 5.03. The person
in whose name the certificate is registered shall become the stockholder of
record on the Conversion Date and, as of such date, such person's rights as a
Noteholder with respect to the converted Security shall cease; provided,
however, that no surrender of a Security on any date when the stock transfer
books of the Company shall be closed shall be effective to constitute the person
entitled to receive the shares of Common Stock upon such conversion as the
stockholder of record of such shares of Common Stock on such date, but such
surrender shall be effective to constitute the person entitled to receive such
shares of Common Stock as the stockholder of record thereof for all purposes at
the close of business on the next succeeding day on which such stock transfer
books are open; provided further, however, that such conversion shall be at the
Conversion Price in effect on the date that such Security shall have been
surrendered for conversion, as if the stock transfer books of the Company had
not been closed.
No payment or adjustment will be made for accrued and unpaid interest
on a converted Security or for dividends or distributions on shares of Common
Stock issued upon conversion of a Security, but if any holder surrenders a
Security for conversion after the close of business on the record date for the
payment of an installment of interest and prior to the opening of business on
the next interest payment date, then, notwithstanding such conversion, the
interest payable on such interest payment date shall be paid to the holder of
such Security on such record date. In such event, unless such Security has been
called for redemption on or prior to such interest payment date, such Security,
when surrendered for conversion, must be accompanied by payment in funds
acceptable to the Company of an amount equal to the interest payable on such
interest payment date on the portion so converted.
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If a holder converts more than one Security at the same time, the
number of whole shares of Common Stock issuable upon the conversion shall be
based on the total principal amount of Securities converted.
Upon surrender of a Security that is converted in part, the Trustee
shall authenticate for the holder a new Security equal in principal amount to
the unconverted portion of the Security surrendered.
SECTION 5.03. Fractional Shares. The Company will not issue fractional
shares of Common Stock upon conversion of a Security. In lieu thereof, the
Company will pay an amount in cash based upon the Daily Market Price of any such
fractional shares of Common Stock on the trading day prior to the date of
conversion.
SECTION 5.04. Taxes on Conversion. The issuance of certificates for
shares of Common Stock upon the conversion of any Security shall be made without
charge to the converting Noteholder for such certificates or for any tax in
respect of the issuance of such certificates, and such certificates shall be
issued in the respective names of, or in such names as may be directed by, the
holder or holders of the converted Security; provided, however, that in the
event that certificates for shares of Common Stock are to be issued in a name
other than the name of the holder of the Security converted, such Security, when
surrendered for conversion, shall be accompanied by an instrument of assignment
or transfer, in form satisfactory to the Company, duly executed by the
registered holder thereof or his duly authorized attorney; and provided further,
however, that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
such certificates in a name other than that of the holder of the converted
Security, and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid or is
not applicable.
SECTION 5.05. Company to Provide Stock. The Company shall at all times
reserve and keep available, free from preemptive rights, out of its authorized
but unissued Common Stock, solely for the purpose of issuance upon conversion of
Securities as herein provided, a sufficient number of shares of Common Stock to
permit the conversion of all outstanding Securities for shares of Common Stock.
All shares of Common Stock which may be issued upon conversion of the
Securities shall be duly authorized, validly issued, fully paid and
nonassessable when so issued.
SECTION 5.06. Adjustment of Conversion Price. The Conversion Price
shall be subject to adjustment from time to time as follows:
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(a) In case the Company shall (1) pay a dividend in shares of Common
Stock to holders of Common Stock, (2) make a distribution in shares of Common
Stock to holders of Common Stock, (3) subdivide its outstanding shares of Common
Stock into a greater number of shares of Common Stock or (4) combine its
outstanding shares of Common Stock into a smaller number of shares of Common
Stock, the Conversion Price in effect immediately prior to such action shall be
adjusted so that the holder of any Security thereafter surrendered for
conversion shall be entitled to receive the number of shares of Common Stock
which he would have owned immediately following such action had such Securities
been converted immediately prior thereto. Any adjustment made pursuant to this
subsection (a) shall become effective immediately after the record date in the
case of a dividend or distribution and shall become effective immediately after
the effective date in the case of a subdivision or combination.
(b) In case the Company shall issue rights or warrants to substantially
all holders of Common Stock entitling them (for a period commencing no earlier
than the record date for the determination of holders of Common Stock entitled
to receive such rights or warrants and expiring not more than 45 days after such
record date) to subscribe for or purchase shares of Common Stock (or securities
convertible into Common Stock) at a price per share less than the Current Market
Price (as determined pursuant to subsection (f) below) of the Common Stock on
such record date, the Conversion Price shall be adjusted so that the same shall
equal the price determined by multiplying the Conversion Price in effect
immediately prior to such record date by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding on such record date, plus
the number of shares of Common Stock which the aggregate offering price of the
offered shares of Common Stock (or the aggregate conversion price of the
convertible securities so offered) would purchase at such Current Market Price,
and of which the denominator shall be the number of shares of Common Stock
outstanding on such record date plus the number of additional shares of Common
Stock offered (or into which the convertible securities so offered are
convertible). Such adjustments shall become effective immediately after such
record date.
(c) In case the Company shall distribute to all holders of Common Stock
shares of any class of Capital Stock of the Company other than Common Stock,
evidences of indebtedness or other assets (other than cash dividends out of
current or retained earnings), or shall distribute to substantially all holders
of Common Stock rights or warrants to subscribe for securities (other than those
Securities referred to in subsection (b) above), then in each such case the
Conversion Price shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior to
the date of such distribution by a fraction of which the numerator shall be the
Current Market Price (determined as provided in subsection (f) below) of the
Common Stock on the record date mentioned below less the then fair market value
(as determined by the Board of Directors, whose determination shall be
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conclusive evidence of such fair market value and described in a Board
Resolution) of the portion of the assets so distributed or of such subscription
rights or warrants applicable to one share of Common Stock, and of which the
denominator shall be such Current Market Price of the Common Stock. Such
adjustment shall become effective immediately after the record date for the
determination of the holders of Common Stock entitled to receive such
distribution. Notwithstanding the foregoing, in case the Company shall issue
rights or warrants to subscribe for additional shares of the Company's capital
stock (other than those referred to in subsection (b) above) ("Rights") to
substantially all holders of Common Stock, the Company may, in lieu of making
any adjustment pursuant to this Section 5.06, make proper provision so that each
holder of a Security who converts such Security (or any portion thereof) after
the record date for such distribution and prior to the expiration or redemption
of the Rights shall be entitled to receive upon such conversion, in addition to
the shares of Common Stock issuable upon such conversion (the "Conversion
Shares"), a number of Rights to be determined as follows: (i) if such conversion
occurs on or prior to the date for the distribution to the holders of Rights of
separate certificates evidencing such Rights (the "Distribution Date"), the same
number of Rights to which a holder of a number of shares of Common Stock equal
to the number of Conversion Shares is entitled at the time of such conversion in
accordance with the terms and provisions of and applicable to the Rights; and
(ii) if such conversion occurs after the Distribution Date, the same number of
Rights to which a holder of the number of shares of Common Stock into which the
principal amount of the Security so converted was convertible immediately prior
to the Distribution Date would have been entitled on the Distribution Date in
accordance with the terms and provisions of and applicable to the Rights.
(d) In case the Company shall, by dividend or otherwise, at any time
distribute to all holders of its Common Stock cash (including any distributions
of cash out of current or retained earnings of the Company but excluding any
cash that is distributed as part of a distribution requiring a Conversion Price
adjustment pursuant to paragraph (c) of this Section) in an aggregate amount
that, together with the sum of (x) the aggregate amount of any other
distributions to all holders of its Common Stock made in cash plus (y) all
Excess Payments, in each case made within the 12 months preceding the date fixed
for determining the stockholders entitled to such distribution (the
"Distribution Record Date") and in respect of which no Conversion Price
adjustment pursuant to paragraphs (c) or (e) of this Section or this paragraph
(d) has been made, exceeds 15% of the product of the Current Market Price per
share (determined as provided in paragraph (f) of this Section) of the Common
Stock on the Distribution Record Date multiplied by the number of shares of
Common Stock outstanding on the Distribution Record Date (excluding shares held
in the treasury of the Company), the Conversion Price shall be reduced so that
the same shall equal the price determined by multiplying such Conversion Price
in effect immediately prior to the effectiveness of the Conversion Price
reduction contemplated by this paragraph (d) by a fraction of which the
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numerator shall be the Current Market Price per share (determined as provided in
paragraph (f) of this Section) of the Common Stock on the Distribution Record
Date less the amount of such cash and other consideration (including any Excess
Payments) so distributed applicable to one share of Common Stock (equal to the
aggregate amount of such cash and other consideration (including any Excess
Payments) divided by the number of shares of Common Stock outstanding on the
Distribution Record Date) and the denominator shall be such Current Market Price
per share (determined as provided in paragraph (f) of this Section) of the
Common Stock on the Distribution Record Date, such reduction to become effective
immediately prior to the opening of business on the day following the
Distribution Record Date.
(e) In case a tender offer or other negotiated transaction made by the
Company or any Subsidiary of the Company for all or any portion of the Common
Stock shall be consummated, if an Excess Payment is made in respect of such
tender offer or other negotiated transaction and the amount of such Excess
Payment, together with the sum of (x) the aggregate amount of all Excess
Payments plus (y) the aggregate amount of all distributions to all holders of
the Common Stock made in cash (including any distributions of cash out of
current or retained earnings of the Company), in each case made within the 12
months preceding the date of payment of such current negotiated transaction
consideration or expiration of such current tender offer, as the case may be
(the "Purchase Date"), and as to which no adjustment pursuant to paragraph (c)
or paragraph (d) of this Section or this paragraph (e) has been made, exceeds
15% of the product of the Current Market Price per share (determined as provided
in paragraph (f) of this Section) of the Common Stock on the Purchase Date
multiplied by the number of shares of Common Stock outstanding (including any
tendered shares but excluding any shares held in the treasury of the Company or
any Subsidiary of the Company) on the Purchase Date, the Conversion Price shall
be reduced so that the same shall equal the price determined by multiplying such
Conversion Price in effect immediately prior to the effectiveness of the
Conversion Price reduction contemplated by this paragraph (e) by a fraction of
which the numerator shall be the Current Market Price per share (determined as
provided in paragraph (f) of this Section) of the Common Stock on the Purchase
Date less the amount of such Excess Payments and such cash distributions, if
any, applicable to one share of Common Stock (equal to the aggregate amount of
such Excess Payments and such cash distributions divided by the number of shares
of Common Stock outstanding on the Purchase Date) and the denominator shall be
such Current Market Price per share (determined as provided in paragraph (f) of
this Section) of the Common Stock on the Purchase Date, such reduction to become
effective immediately prior to the opening of business on the day following the
Purchase Date.
(f) 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
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determining such Daily Market Prices prior to the time of determination or (ii)
the period commencing on the date next succeeding the first public announcement
of the issuance of such rights or such warrants or such other distribution or
such negotiated transaction through such last full trading day on the exchange
or market referred to in determining such Daily Market Prices prior to the time
of determination.
(g) "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 a tender offer or other
negotiated transaction over (B) the Daily Market Price on the Trading Day
immediately following the completion of such tender offer or other negotiated
transaction multiplied by the number of acquired shares.
(h) In any case in which this Section 5.06 shall require that an
adjustment be made immediately following a record date for an event, the Company
may elect to defer, until such event, issuing to the holder of any Security
converted after such record date the shares of Common Stock and other Capital
Stock of the Company issuable upon such conversion over and above the shares of
Common Stock and other Capital Stock of the Company issuable upon such
conversion only on the basis of the Conversion Price prior to adjustment; and,
in lieu of the shares the issuance of which is so deferred, the Company shall
issue or cause its transfer agents to issue due bills or other appropriate
evidence of the right to receive such shares.
SECTION 5.07. No Adjustment. No adjustment in the Conversion Price
shall be required until cumulative adjustments amount to 1% or more of the
Conversion Price as last adjusted; provided, however, that any adjustments which
by reason of this Section 5.07 are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Article V shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be. No adjustment need be made for
rights to purchase Common Stock pursuant to a Company plan for reinvestment of
dividends or interest. No adjustment need be made for a change in the par value
or no par value of the Common Stock.
SECTION 5.08. Other Adjustments. (a) In the event that, as a result of
an adjustment made pursuant to Section 5.06 above, the holder of any Security
thereafter surrendered for conversion shall become entitled to receive any
shares of Capital Stock of the Company other than shares of its Common Stock,
thereafter the Conversion Price of such other shares so receivable upon
conversion of any Securities shall be subject to adjustment from time to time in
a manner and on terms as nearly equivalent as practicable to the provisions with
respect to Common Stock contained in this Article V.
(b) In the event that shares of Common Stock are not delivered after
the expiration of any of the rights or warrants referred to in Section 5.06(b)
and Section 5.06(c)
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hereof, the Conversion Price shall be readjusted to the Conversion Price which
would otherwise be in effect had the adjustment made upon the issuance of such
rights or warrants been made on the basis of delivery of only the number of
shares of Common Stock actually delivered.
SECTION 5.09. Adjustments for Tax Purposes. The Company may, at its
option, make such reductions in the Conversion Price, in addition to those
required by Section 5.06 above, as it determines to be advisable in order that
any stock dividend, subdivision of shares, distribution of rights to purchase
stock or securities or distribution of securities convertible into or
exchangeable for stock made by the Company to its stockholders will not be
taxable to the recipients thereof.
SECTION 5.10. Adjustments by the Company. 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, in which case the Company shall give at
least 15 days' notice of such reduction in accordance with Section 5.11, 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.
SECTION 5.11. Notice of Adjustment. Whenever the Conversion Price is
adjusted, the Company shall promptly mail to Noteholders at the addresses
appearing on the Registrar's books a notice of the adjustment and file with the
Trustee an Officers' Certificate briefly stating the facts requiring the
adjustment and the manner of computing it. The certificate shall be conclusive
evidence of the correctness of such adjustment.
SECTION 5.12. Notice of Certain Transactions. In the event that:
(1) the Company takes any action which would require an adjustment in
the Conversion Price;
(2) the Company takes any action that would require a supplemental
indenture pursuant to Section 5.13; or
(3) there is a dissolution or liquidation of the Company;
a holder of a Security may wish to convert such Security into shares of Common
Stock prior to the record date for or the effective date of the transaction so
that he may receive the rights, warrants, securities or assets which a holder of
shares of Common Stock on that date may receive. Therefore, the Company shall
mail to Noteholders at the addresses appearing on the Registrar's books and the
Trustee a notice stating the proposed record or effective date, as the case may
be. The Company shall mail the notice at least 15 days before such date;
however,
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failure to mail such notice or any defect therein shall not affect the validity
of any transaction referred to in clause (1), (2) or (3) of this Section 5.12.
SECTION 5.13. Effect of Reclassifications, Consolidations, Mergers or
Sales on Conversion Privilege. If any of the following shall occur, namely: (i)
any reclassification or change of outstanding shares of Common Stock issuable
upon conversion of Securities (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of a
subdivision or combination), (ii) any consolidation or merger to which the
Company is a party other than a merger in which the Company is the continuing
corporation and which does not result in any reclassification of, or change
(other than a change in name, or par value, or from par value to no par value,
or from no par value to par value or as a result of a subdivision or
combination) in, outstanding shares of Common Stock or (iii) any sale or
conveyance of all or substantially all of the property or business of the
Company as an entirety, then the Company, or such successor or purchasing
corporation, as the case may be, shall, as a condition precedent to such
reclassification, change, consolidation, merger, sale or conveyance, execute and
deliver to the Trustee a supplemental indenture in form satisfactory to the
Trustee providing that the holder of each Security then outstanding shall have
the right to convert such Security into the kind and amount of shares of stock
and other securities and property (including cash) receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by a holder
of the number of shares of Common Stock deliverable upon conversion of such
Security immediately prior to such reclassification, change, consolidation,
merger, sale or conveyance. Such supplemental indenture shall provide for
adjustments of the Conversion Price which shall be as nearly equivalent as may
be practicable to the adjustments of the Conversion Price provided for in this
Article V. The foregoing, however, shall not in any way affect the right a
holder of a Security may otherwise have, pursuant to clause (ii) of the last
sentence of subsection (c) of Section 5.06, to receive Rights upon conversion of
a Security. If, in the case of any such consolidation, merger, sale or
conveyance, the stock or other securities and property (including cash)
receivable thereupon by a holder of Common Stock includes shares of stock or
other securities and property of a corporation other than the successor or
purchasing corporation, as the case may be, in such consolidation, merger, sale
or conveyance, then such supplemental indenture shall also be executed by such
other corporation and shall contain such additional provisions to protect the
interests of the holders of the Securities as the Board of Directors of the
Company shall reasonably consider necessary by reason of the foregoing. The
provision of this Section 5.13 shall similarly apply to successive
consolidations, mergers, sales or conveyances.
In the event the Company shall execute a supplemental indenture
pursuant to this Section 5.13, the Company shall promptly file with the Trustee
an Officers' Certificate briefly stating the reasons therefor, the kind or
amount of shares of stock or securities or property (including cash) receivable
by holders of the Securities upon the conversion of their Securities
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after any such reclassification, change, consolidation, merger, sale or
conveyance and any adjustment to be made with respect thereto.
SECTION 5.14. Trustee's Disclaimer. The Trustee has no duty to
determine when an adjustment under this Article V should be made, how it should
be made or what such adjustment should be, but may accept as conclusive evidence
of the correctness of any such adjustment, and shall be protected in relying
upon the Officers' Certificate with respect thereto which the Company is
obligated to file with the Trustee pursuant to Section 5.11. The Trustee makes
no representation as to the validity or value of any securities or assets issued
upon conversion of Securities, and the Trustee shall not be responsible for the
Company's failure to comply with any provisions of this Article V.
The Trustee shall not be under any responsibility to determine the
correctness of any provisions contained in any supplemental indenture executed
pursuant to Section 5.13, but may accept as conclusive evidence of the
correctness thereof, and shall be protected in relying upon, the Officers'
Certificate with respect thereto which the Company is obligated to file with the
Trustee pursuant to Section 5.13.
ARTICLE VI
Successors
SECTION 6.01. Merger, Consolidation or Sale of Assets. 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:
(a) the Company is the surviving corporation or the Person formed by or
surviving any such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia;
(b) the corporation formed by or surviving any such consolidation or
merger (if other than the Company) or the corporation 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
Securities and the Indenture;
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(c) any 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
corporation;
(d) immediately after such transaction no Default or Event of Default
exists; and
(e) the Company or such corporation 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.
SECTION 6.02. Successor Corporation Substituted. Upon any consolidation
or merger, or any sale, assignment, transfer, lease, conveyance or other
disposition of all or substantially all of the assets of the Company in
accordance with Section 6.01 hereof, the successor corporation formed by such
consolidation or into or with which the Company is merged or the corporation to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor person has been named as the Company herein; provided, however, that
the predecessor Company in the case of a sale, assignment, transfer, lease,
conveyance or other disposition shall not be released from the obligation to pay
the principal of and interest on the Securities.
ARTICLE VII
Defaults and Remedies
SECTION 7.01. Events of Default. An "Event of Default" occurs if:
(a) the Company defaults in the payment of interest on any Security
when the same becomes due and payable, and the Default continues for a
period of 30 days after the date due and payable;
(b) the Company defaults in the payment of the principal of any
Security when the same becomes due and payable at maturity, upon redemption
or otherwise;
(c) the Company fails to observe or perform any covenant or agreement
contained in Section 4.07 hereof;
(d) the Company fails to observe or perform any other covenant or
agreement contained in this Indenture or the Securities required by it to be
performed and the
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Default continues for a period of 60 days after the receipt of written
notice from the Trustee to the Company or from the holders of 25% in
aggregate principal amount of the then outstanding Securities to the Company
and the Trustee stating that such notice is a "Notice of Default";
(e) there is a 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 Material
Subsidiary of the Company (or the payment of which is guaranteed by the
Company or any Material Subsidiary of the Company), whether such
Indebtedness or guarantee now exists or is created after the Issuance Date,
which default (i) is caused by a failure to pay when due principal of or
interest on such Indebtedness within the grace period provided for in such
Indebtedness (which failure continues beyond any applicable grace period) (a
"Payment Default") or (ii) 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 is a Payment Default or the maturity of which has been so
accelerated, aggregates $10 million or more;
(f) a final, non-appealable judgment or final non-appealable judgments
(other than any judgment as to which a reputable insurance company has
accepted full liability) for the payment of money are entered by a court or
courts of competent jurisdiction against the Company or any Material
Subsidiary of the Company and remain undischarged for a period (during which
execution shall not be effectively stayed) of 60 days, provided that the
aggregate of all such judgments exceeds $5 million;
(g) the Company or any Material Subsidiary pursuant to or within the
meaning of any Bankruptcy Law: (i) commences a voluntary case, (ii) consents
to the entry of an order for relief against it in an involuntary case in
which it is the debtor, (iii) consents to the appointment of a Custodian of
it or for all or substantially all of its property, (iv) makes a general
assignment for the benefit of its creditors, or (v) makes the admission in
writing that it generally is unable to pay its debts as the same become due;
or
(h) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that: (i) is for relief against the Company or any
Material Subsidiary of the Company in an involuntary case, (ii) appoints a
Custodian of the Company or any Material Subsidiary of the Company or for
all or substantially all of its property, and the order or decree remains
unstayed and in effect for 60 days or (iii) orders the liquidation of the
Company or any Material Subsidiary of the Company, and the order or decree
remains unstayed and in effect for 60 days.
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The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
SECTION 7.02. Acceleration. If an Event of Default (other than an Event
of Default specified in clauses (g) and (h) of Section 7.01 hereof) occurs and
is continuing, the Trustee by notice to the Company, or the Noteholders of at
least 25% in principal amount of the then-outstanding Securities by notice to
the Company and the Trustee, may declare all the Securities to be due and
payable. Upon such declaration, the principal of, premium, if any, and accrued
and unpaid interest on the Securities shall be due and payable immediately. If
an Event of Default specified in clause (g) or (h) of Section 7.01 hereof
occurs, the principal of, premium, if any, and accrued and unpaid interest on
the Securities shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any
Noteholder. The Noteholders of a majority in aggregate principal amount of the
then-outstanding Securities by notice to the Trustee may rescind an acceleration
and its consequences if the rescission would not conflict with any judgment or
decree, if all amounts payable to the Trustee pursuant to Section 8.07 hereof
have been paid and if all existing Events of Default have been cured or waived
except nonpayment of principal or interest that has become due solely because of
the acceleration.
SECTION 7.03. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal or interest on the Securities or to enforce the performance of any
provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Noteholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
SECTION 7.04. Waiver of Past Defaults. The Noteholders of a majority in
aggregate principal amount of the then-outstanding Securities by notice to the
Trustee may waive an existing Default or Event of Default and its consequences
except a continuing Default or Event of Default in the payment of the Designated
Event Payment or the principal of, or interest on, any Security. When a Default
or Event of Default is waived, it is cured and ceases; but no such waiver shall
extend to any subsequent or other Default or impair any right consequent
thereon.
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SECTION 7.05. Control by Majority. The Noteholders of a majority in
principal amount of the then-outstanding Securities may direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on it. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture, is
unduly prejudicial to the rights of other Noteholders, or would involve the
Trustee in personal liability.
SECTION 7.06. Limitation on Suits. A Noteholder may pursue a remedy
with respect to this Indenture or the Securities only if:
(a) the Noteholder gives to the Trustee notice of a continuing Event of
Default;
(b) the Noteholders of at least 25% in principal amount of the
then-outstanding Securities make a request to the Trustee to pursue the
remedy;
(c) such Noteholder or Noteholders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
(e) during such 60-day period the Noteholders of a majority in
principal amount of the then-outstanding Securities do not give the Trustee
a direction inconsistent with the request.
A Noteholder may not use this Indenture to prejudice the rights of
another Noteholder or to obtain a preference or priority over another
Noteholder.
SECTION 7.07. Rights of Noteholders to Receive Payment. Notwithstanding
any other provision of this Indenture, the right of any Noteholder of a Security
to receive payment of principal and interest on the Security, on or after the
respective due dates expressed in the Security, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of the Noteholder made pursuant to this
Section.
SECTION 7.08. Collection Suit by Trustee. If an Event of Default
specified in Section 7.01(a) or (b) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount of principal and interest remaining unpaid on the
Securities and interest on overdue principal and interest and such further
amount as shall be sufficient to cover the costs and, to the extent lawful,
expenses of
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collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
SECTION 7.09. Trustee May File Proofs of Claim. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Noteholders allowed
in any judicial proceedings relative to the Company, its creditors or its
property. Nothing contained herein shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Noteholder any plan
of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Noteholder thereof, or to authorize the Trustee
to vote in respect of the claim of any Noteholder in any such proceeding.
SECTION 7.10. Priorities. If the Trustee collects any money pursuant to
this Article, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 8.07 hereof;
Second: to the Noteholders, for amounts due and unpaid on the
Securities for principal and interest, ratably, according to the amounts due
and payable on the Securities for principal and interest, respectively; and
Third: to the Company.
Except as otherwise provided in Section 2.12 hereof, the Trustee may
fix a record date and payment date for any payment to Noteholders made pursuant
to this Section.
SECTION 7.11. Undertaking for Costs. In any suit for the enforcement of
any right or remedy under this Indenture or in any suit against the Trustee for
any action taken or omitted by it as a Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by a holder pursuant to Section 7.07 hereof, or a suit by
Noteholders of more than 10% in principal amount of the then-outstanding
Securities.
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ARTICLE VIII
Trustee
SECTION 8.01. Duties of Trustee. (a) If an Event of Default has
occurred and is continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and use the same degree of care and skill
in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(b) Except during the continuance of an Event of Default: (i) the
Trustee need perform only those duties that are specifically set forth in this
Indenture and no others and (ii) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and, if required by the terms hereof, conforming to the
requirements of this Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether or not they conform to the
requirements of this Indenture. During the continuance of an event of Default,
the Trustee may consult with its legal counsel and rely upon advice from such
counsel with respect to legal matters.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that: (i) this paragraph does not limit the effect of
paragraph (b) of this Section 8.01; (ii) the Trustee shall not be liable for any
error of judgment made in good faith by a Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts and (iii) the
Trustee shall not be liable with respect to any action it takes or omits to take
in good faith in accordance with a direction received by it pursuant to Section
7.05 hereof.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section 8.01.
(e) The Trustee may refuse to perform any duty or exercise any right or
power unless it receives indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 8.02. Rights of Trustee. (a) The Trustee may rely on any
document believed by it to be genuine and to have been signed or presented by
the proper person. The Trustee need not investigate any fact or matter stated in
the document.
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(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel, or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible for
the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers.
(e) The Trustee shall not be charged with knowledge of any Event of
Default under subsection (c), (d), (e), (f), (g) or (h) of Section 7.01 unless
either (1) a Trust Officer assigned to its corporate trust department shall have
actual knowledge thereof, or (2) the Trustee shall have received notice thereof
in accordance with Section 11.02 hereof from the Company or any holder.
SECTION 8.03. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or an Affiliate with the same rights it
would have if it were not Trustee. Any Agent may do the same with like rights.
However, the Trustee is subject to Sections 8.10 and 8.11 hereof.
SECTION 8.04. Trustee's Disclaimer. The Trustee makes no representation
as to the validity or adequacy of this Indenture or the Securities, it shall not
be accountable for the Company's use of the proceeds from the Securities, and it
shall not be responsible for any statement of the Company in the Indenture or
any statement in the Securities (other than its authentication) or for
compliance by the Company with the Registration Agreement.
SECTION 8.05. Notice of Defaults. If a Default or Event of Default
occurs and is continuing and if it is known to the Trustee, the Trustee shall
mail to Noteholders a notice of the Default or Event of Default within 90 days
after it occurs. Except in the case of a Default or Event of Default in payment
on any Security, the Trustee may withhold the notice if and so long as a
committee of its Trust Officers in good faith determines that withholding the
notice is in the interests of Noteholders.
SECTION 8.06. Reports by Trustee to Noteholders. Within 60 days after
the reporting date stated in Section 11.10, the Trustee shall mail to
Noteholders a brief report dated as of such reporting date that complies with
TIA Section 313(a) if and to the extent required by such
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Section 313(a). The Trustee also shall comply with TIA Section 313(b)(2). The
Trustee shall also transmit by mail all reports as required by TIA Section
313(c).
A copy of each report at the time of its mailing to Noteholders shall
be filed with the SEC and each stock exchange on which the Securities are
listed. The Company shall notify the Trustee when the Securities are listed on
any stock exchange.
SECTION 8.07. Compensation and Indemnity. The Company shall pay to the
Trustee from time to time reasonable compensation for its services hereunder.
The Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable disbursements, expenses and advances incurred or made
by it. Such disbursements and expenses may include the reasonable disbursements,
compensation and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any loss or liability
incurred by it except as set forth in the next paragraph. Promptly after receipt
by the Trustee under this Section of notice of the commencement of any action,
the Trustee will, if a claim in respect thereof is to be made against the
Company under this Section, notify the Company in writing of the commencement
thereof; but the failure so to notify the Company (i) will not relieve it from
liability unless and to the extent it did not otherwise learn of such action and
such failure results in the forfeiture by the Company of substantial rights and
defenses and (ii) will not, in any event, relieve the Company from any
obligations to the Trustee other than the indemnification obligation provided
above. The Company shall be entitled to appoint counsel of the Company's choice
at the Company's expense to represent the Trustee in any action for which
indemnification is sought (in which case the Company shall not thereafter be
responsible for the fees and expenses of any separate counsel retained by the
Trustee or parties except as set forth below); provided, however, that such
counsel shall be reasonably satisfactory to the Trustee. Notwithstanding the
Company's election to appoint counsel to represent the Trustee in an action, the
Trustee shall have the right to employ separate counsel (including local
counsel), and the Company shall bear the reasonable fees, costs and expenses of
such separate counsel (and local counsel) if (i) the use of counsel chosen by
the Company to represent the Trustee would present such counsel with a conflict
of interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the Trustee and the Company and the Trustee shall have
reasonably concluded that there may be legal defenses available to it which are
different from or additional to those available to the Company, (iii) the
Company shall not have employed counsel satisfactory to the Trustee to represent
the Trustee within a reasonable time after notice of the institution of such
action or (iv) the Company shall authorize the Trustee to employ separate
counsel at the expense of the Company; provided further, that the Company shall
not be responsible for the fees and expenses of more than one separate counsel
(together with
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appropriate local counsel). The Company will not, without the prior written
consent of the Trustee, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification may be sought hereunder (whether
or not the Trustee is an actual or potential party to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of the Trustee from all liability arising out of such claim, action, suit or
proceeding.
The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through the Trustee's negligence or
bad faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee, except money or property held in trust to pay
principal and interest on particular Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 7.01(g) or (h) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
SECTION 8.08. Replacement of Trustee. A resignation or removal of the
Trustee and appointment of a successor Trustee shall become effective only upon
the successor Trustee's acceptance of appointment as provided in this Section.
The Trustee may resign by so notifying the Company. The Noteholders of
a majority in principal amount of the then-outstanding Securities may remove the
Trustee by so notifying the Trustee and the Company. The Company may remove the
Trustee if:
(a) the Trustee fails to comply with Section 8.10 hereof, unless the
Trustee's duty to resign is stayed as provided in TIA Section 310(b);
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the
Noteholders of a majority in principal amount of the then-
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outstanding Securities may appoint a successor Trustee to replace the successor
Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Noteholders of at least 10% in principal amount of the then-outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee fails to comply with Section 8.10 hereof, unless the
Trustee's duty to resign is stayed as provided in TIA Section 310(b), any
Noteholder who has been a bona fide holder of a Security for at least six months
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Noteholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 8.07 hereof. Notwithstanding the resignation or
replacement of the Trustee pursuant to this Section 8.08, the Company's
obligations under Section 8.07 hereof shall continue for the benefit of the
retiring trustee with respect to expenses and liabilities incurred by it prior
to such resignation or replacement.
SECTION 8.09. Successor Trustee by Merger, Etc. If the Trustee
consolidates, merges or converts into, or transfers all or substantially all of
its corporate trust business to, another corporation, the successor corporation
without any further act shall be the successor Trustee.
SECTION 8.10. Eligibility; Disqualification. This Indenture shall
always have a Trustee who satisfies the requirements of TIA Section 310(a)(1)
and (5). The Trustee shall always have a combined capital and surplus as stated
in Section 11.10 hereof. The Trustee is subject to TIA Section 310(b).
SECTION 8.11. Preferential Collection of Claims Against Company. The
Trustee is subject to TIA Section 311(a), excluding any creditor relationship
listed in TIA Section 311(b). A Trustee who has resigned or been removed shall
be subject to TIA Section 311(a) to the extent indicated therein.
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ARTICLE IX
Discharge of Indenture
SECTION 9.01. Termination of Company's Obligations. This Indenture
shall cease to be of further effect (except that the Company's obligations under
Sections 8.07 and 9.02 hereof shall survive) when all outstanding Securities
theretofore authenticated and issued have been delivered to the Trustee for
cancellation and the Company has paid all sums payable hereunder.
Thereupon, the Trustee upon request of the Company, shall acknowledge
in writing the discharge of the Company's obligations under this Indenture,
except for those surviving obligations specified above.
SECTION 9.02. Repayment to Company. The Trustee and the Paying Agent
shall promptly pay to the Company upon request any excess money or securities
held by them at any time.
The Trustee and the Paying Agent shall pay to the Company upon written
request any money held by them for the payment of principal or interest that
remains unclaimed for two years after the date upon which such payment shall
have become due; provided, however, that the Company shall have first caused
notice of such payment to the Company to be mailed to each Noteholder entitled
thereto no less than 30 days prior to such payment. After payment to the
Company, the Trustee and the Paying Agent shall have no further liability with
respect to such money and Noteholders entitled to the money must look to the
Company for payment as general creditors unless any applicable abandoned
property law designates another person.
ARTICLE X
Amendments, Supplements and Waivers
SECTION 10.01. Without Consent of Noteholders. The Company and the
Trustee may amend or supplement this Indenture or the Securities without the
consent of any Noteholder:
(a) to cure any ambiguity, defect or inconsistency;
(b) to comply with Sections 5.13 and 6.01 hereof;
(c) to provide for uncertificated Securities in addition to
certificated Securities;
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(d) to make any change that does not adversely affect the legal rights
hereunder of any Noteholder;
(e) to qualify this Indenture under the TIA or to comply with the
requirements of the SEC in order to maintain the qualification of the
Indenture under the TIA; or
(f) to make any change that provides any additional rights or benefits
to the holders of Securities.
SECTION 10.02. With Consent of Noteholders. Subject to Section 7.07
hereof, the Company and the Trustee may amend or supplement this Indenture or
the Securities with the written consent (including consents obtained in
connection with any tender or exchange offer for Securities) of the Noteholders
of at least a majority in principal amount of the then-outstanding Securities.
Subject to Sections 7.04 and 7.07 hereof, the Noteholders of a majority in
principal amount of the Securities then outstanding may also by their written
consent (including consents obtained in connection with any tender offer or
exchange offer for Securities) waive any existing Default as provided in Section
7.04 or waive compliance in a particular instance by the Company with any
provision of this Indenture or the Securities. However, without the consent of
each Noteholder affected, an amendment, supplement or waiver under this Section
may not (with respect to any Securities held by a nonconsenting Noteholder):
(a) reduce the amount of Securities whose Noteholders must consent to
an amendment, supplement or waiver;
(b) reduce the rate of or change the time for payment of interest on
any Security;
(c) reduce the principal of or change the fixed maturity of any
Security or alter the redemption provisions with respect thereto;
(d) make any Security payable in money other than that stated in the
Security;
(e) make any change in Section 7.04, 7.07 or 10.02 hereof (this
sentence);
(f) waive a default in the payment of the Designated Event Payment or
principal of, or interest on, any Security (other than as provided in
Section 7.04);
(g) waive a redemption payment payable on any Security; or
(h) make any change that adversely affects the right of Noteholders to
convert Securities into Common Stock of the Company.
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To secure a consent of the Noteholders under this Section 10.02, it
shall not be necessary for the Noteholders to approve the particular form of any
proposed amendment, supplement or waiver, but it shall be sufficient if such
consent approves the substance thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to Noteholders a notice briefly describing the
amendment or waiver.
SECTION 10.03. Compliance with Trust Indenture Act. Every amendment to
this Indenture or the Securities shall be set forth in a supplemental indenture
that complies with the TIA as then in effect.
SECTION 10.04. Revocation and Effect of Consents. Until an amendment,
supplement or waiver becomes effective, a consent to it by a Noteholder of a
Security is a continuing consent by the Noteholder and every subsequent
Noteholder of a Security or portion of a Security that evidences the same debt
as the consenting Noteholder's Security, even if notation of the consent is not
made on any Security. However, any such Noteholder or subsequent Noteholder may
revoke the consent as to such Noteholder's Security or portion of a Security if
the Trustee receives the notice of revocation before the date on which the
Trustee receives an Officers' Certificate certifying that the Noteholders of the
requisite principal amount of Securities have consented to the amendment,
supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Noteholders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the
provisions of the immediately preceding paragraph, those persons who were
Noteholders at such record date (or their duly designated proxies), and only
those persons, shall be entitled to consent to such amendment, supplement or
waiver or to revoke any consent previously given, whether or not such persons
continue to be Noteholders after such record date. No consent shall be valid or
effective for more than 90 days after such record date unless consents from
Noteholders of the principal amount of Securities required hereunder for such
amendment or waiver to be effective shall have also been given and not revoked
within such 90-day period.
After an amendment, supplement or waiver becomes effective it shall
bind every Noteholder, unless it is of the type described in any of clauses (a)
through (h) of Section 10.02 hereof. In such case, the amendment or waiver shall
bind each Noteholder who has consented to it and every subsequent Noteholder
that evidences the same debt as the consenting Noteholder's Security.
SECTION 10.05. Notation on or Exchange of Securities. The Trustee may
place an appropriate notation about an amendment or waiver on any Security
thereafter authenticated.
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The Company in exchange for all Securities may issue and the Trustee shall
authenticate new Securities that reflect the amendment or waiver.
SECTION 10.06. Trustee Protected. The Trustee shall sign all
supplemental indentures, except that the Trustee may, but need not, sign any
supplemental indenture that adversely affects its rights. As a condition to
executing, or accepting the additional trusts created by, any supplemental
indenture permitted by this Article or the modifications thereby of the trust
created by this Indenture, the Trustee shall be entitled to receive (in addition
to those documents required by Section 11.04), and (subject to Section 315 of
the TIA) shall be fully protected in relying upon, an Opinion of Counsel stating
that the execution of such supplemental indenture is authorized or permitted by
this Indenture.
ARTICLE XI
Miscellaneous
SECTION 11.01. Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies, or conflicts with another provision which is
automatically deemed to be incorporated in this Indenture by the TIA, the
incorporated provision shall control.
SECTION 11.02. Notices. Any notice or communication by the Company or
the Trustee to the other is duly given if in writing and delivered in person or
mailed by first-class mail to the other's address stated in Section 11.10
hereof. The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication to a Noteholder shall be mailed by
first-class mail to his address shown on the register kept by the Registrar.
Failure to mail a notice or communication to a Noteholder or any defect in it
shall not affect its sufficiency with respect to other Noteholders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Noteholders, it shall
mail a copy to the Trustee and each Agent at the same time.
All other notices or communications shall be in writing.
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In case by reason of the suspension of regular mail service, or by
reason of any other cause, it shall be impossible to mail any notice as required
by the Indenture, then such method of notification as shall be made with the
approval of the Trustee shall constitute a sufficient mailing of such notice.
SECTION 11.03. Communication by Noteholders with Other Noteholders.
Noteholders may communicate pursuant to TIA Section 312(b) with other
Noteholders with respect to their rights under this Indenture or the Securities.
The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).
SECTION 11.04. Certificate and Opinion as to Conditions Precedent. Upon
any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION 11.05. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture (other than pursuant to Section 4.03) shall
include:
(a) a statement that the person signing such certificate or rendering
such opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such person, such person has
made such examination or investigation as is necessary to enable such person
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with.
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SECTION 11.06. Rules by Trustee and Agents. The Trustee may make
reasonable rules for action by, or a meeting of, Noteholders. The Registrar or
Paying Agent may make reasonable rules and set reasonable requirements for its
functions.
SECTION 11.07. Legal Holidays. A "Legal Holiday" is 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 this 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.
SECTION 11.08. No Recourse Against Others. A director, Officer,
employee or stockholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Securities or the Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. Each Noteholder by accepting a Security waives and releases all such
liability. The waiver and release are part of the consideration for the issue of
the Securities.
SECTION 11.09. Counterparts. This Indenture may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
SECTION 11.10. Variable Provisions. "Officer" means the Chairman of the
Board, the Chief Executive Officer, the President, any Vice-President, the Chief
Financial Officer, the Treasurer, the Secretary, any Assistant Treasurer, any
Assistant Secretary or the Controller of the Company.
The Company initially appoints the Trustee as Paying Agent, Registrar
and Conversion Agent, and the Trustee hereby accepts such appointments.
The first certificate pursuant to Section 4.03 hereof shall be for the
fiscal year ending on December 31, 1998.
The reporting date for Section 8.06 hereof is April 15 of each year.
The first reporting date is April 15, 1999.
The Trustee shall always have a combined capital and surplus of at
least $50,000,000 as set forth in its most recent published annual report of
condition.
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The Company's address for purposes of the Indenture is:
Sabratek Corporation
5601 West Howard Street
Niles, Illinois 60714
The Trustee's address is:
LaSalle National Bank
135 South LaSalle Street
Chicago, Illinois 60603
The Company or the Trustee may change its address for purposes of this
Indenture by written notice to the other.
SECTION 11.11. GOVERNING LAW. THE INTERNAL LAWS OF THE STATE OF NEW
YORK SHALL GOVERN THIS INDENTURE AND THE SECURITIES, WITHOUT REGARD TO THE
CONFLICT OF LAWS PROVISIONS THEREOF.
SECTION 11.12. No Adverse Interpretation of Other Agreements. This
Indenture may not be used to interpret another indenture, loan or debt agreement
of the Company or an Affiliate. Any such indenture, loan or debt agreement may
not be used to interpret this Indenture.
SECTION 11.13. Successors. All agreements of the Company in this
Indenture and the Securities shall bind its successor. All agreements of the
Trustee in this Indenture shall bind its successor.
SECTION 11.14. Severability. In case any provision in this Indenture or
in the Securities shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 11.15. Table of Contents, Headings, Etc. The Table of Contents
and headings of the Articles and Sections of this Indenture have been inserted
for convenience of reference only, are not to be considered a part hereof, and
shall in no way modify or restrict any of the terms or provisions hereof.
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<PAGE> 54
IN WITNESS WHEREOF, the parties hereto have caused this Indenture
to be duly executed, all as of the date first written above.
Sabratek Corporation, as Company,
by /s/ Stephen L. Holden
--------------------------------
Name: Stephen L. Holden
Title: Chief Financial Officer,
Senior Vice President
and Treasurer
LaSalle National Bank, as Trustee,
by /s/ Wayne M. Evans
--------------------------------
Name: Wayne M. Evans
Title: Vice President
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STATE OF ILLINOIS )
) ss.:
COUNTY OF COOK )
Personally appeared before me, the undersigned authority in
and for the said county and state, on this 14th day of April, 1998, within my
jurisdiction, the within named Stephen L. Holden, who acknowledged that he is a
Chief Financial Officer, Senior Vice President and Treasurer of Sabratek
Corporation and that for and on behalf of the said corporation, and as its act
and deed he executed the above and foregoing instrument, after first having
been duly authorized by said corporation so to do.
/s/ Marilynne Irgang
-----------------------------
NOTARY PUBLIC
[Notarial Seal]
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<PAGE> 56
EXHIBIT A
FORM OF CONVERTIBLE NOTE
[FORM OF FACE OF NOTE]
[GLOBAL SECURITIES LEGEND]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[RESTRICTED SECURITIES LEGEND]
THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS NOTE AND THE COMMON STOCK
ISSUABLE UPON THE CONVERSION THEREOF MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED WITHIN THE UNITED
A-1
<PAGE> 57
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (AS DEFINED IN
REGULATION S UNDER THE SECURITIES ACT) IN THE ABSENCE OF SUCH REGISTRATION
EXCEPT IN A TRANSACTION EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. EACH PURCHASER OF THIS NOTE THAT IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE AND THE COMMON STOCK ISSUABLE
UPON THE CONVERSION THEREOF MAY BE RELYING ON THE EXEMPTION FROM THE PROVI SIONS
OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE COMPANY
THAT (A) THIS NOTE AND THE COMMON STOCK ISSUABLE UPON THE CONVERSION THEREOF MAY
BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) INSIDE THE UNITED
STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE UNITED
STATES IN A TRANSACTION COMPLYING WITH THE PROVISIONS OF RULE 903 OR 904 UNDER
THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), OR (IV) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF
CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER
IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THIS NOTE OF THE RESALE
RESTRICTIONS REFERRED TO IN (A) ABOVE.
A-2
<PAGE> 58
No. _________ Cusip No.78572E AA 1
SABRATEK CORPORATION
6% CONVERTIBLE NOTE
DUE 2005
SABRATEK CORPORATION
Sabratek Corporation, a Delaware corporation (the "Company"),
promises to pay to CEDE & CO. or registered assigns, the principal sum indicated
on Schedule A hereof on April 15, 2005.
Interest Payment Dates: April 15 and October 15, commencing October 15, 1998.
Record Dates: April 1 and October 1.
Reference is hereby made to the further provisions of this
Convertible Note set forth on the reverse hereof which further provisions shall
for all purposes have the same effect as if set forth at this place.
IN WITNESS WHEREOF, Sabratek Corporation has caused this
Convertible Note to be signed manually or by facsimile by its duly authorized
Officers and a facsimile of its corporate seal to be affixed hereto or imprinted
hereon.
Dated:__________________
SABRATEK CORPORATION,
by____________________________
by____________________________
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
This is one of the 6% Convertible Notes Due 2005
described in the within-mentioned Indenture.
LaSalle National Bank, as Trustee,
by_______________________________
Authorized Officer
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<PAGE> 59
SABRATEK CORPORATION
6% Convertible Note Due 2005
1. Interest. SABRATEK CORPORATION, a Delaware corporation (the
"Company"), is the issuer of the 6% Convertible Notes Due 2005 (the "Convertible
Notes"), of which this Convertible Note is a part. The Company promises to pay
interest on the Convertible Notes in cash semiannually on each April 15 and
October 15, commencing on October 15, 1998, to holders of record on the
immediately preceding April 1 and October 1.
Interest on the Convertible 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. Interest will be computed on the basis of a 360-day year of
twelve 30-day months. To the extent lawful, the Company shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest (without regard to any applicable grace period)
at the rate borne by the Convertible Notes, compounded annually.
2. Method of Payment. The Company will pay interest on the
Convertible Notes (except defaulted interest) to the persons who are registered
holders of the Convertible Notes at the close of business on the record date for
the next interest payment date even though Convertible Notes are canceled after
the record date and on or before the interest payment date. The Noteholder
hereof must surrender Convertible Notes to a Paying Agent to collect principal
payments. The Company will pay principal and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts. However, the Company may pay principal and interest by check
payable in such money. It may mail an interest check to a holders' registered
address.
3. Paying Agent, Registrar and Conversion Agent. The Trustee
will act as Paying Agent, Registrar and Conversion Agent. The Company may change
any Paying Agent, Registrar, or Conversion Agent without prior notice.
4. Indenture. The Company issued the Convertible Notes under
an indenture, dated as of April 14, 1998 (the "Indenture"), between the Company
and LaSalle National Bank, as Trustee. The terms of the Convertible Notes
include those stated in the Indenture and those made part of the Indenture by
the Trust Indenture Act of 1939 (15 U.S. Code ss.ss. 77aaa-77bbbb) as in effect
on the date of the Indenture. The Convertible Notes are subject to, and
qualified by, all such terms, certain of which are summarized hereon, and
Noteholders are referred to the Indenture and such Act for a statement of such
terms. The Convertible Notes are general
A-4
<PAGE> 60
unsecured obligations of the Company limited to an aggregate principal
amount of $97,750,000. The Indenture does not limit the ability of the Company
or any of its Subsidiaries to incur indebtedness or to grant security interests
or liens in respect of their assets.
5. Optional Redemption. The Convertible Notes are not
redeemable at the Company's option prior to April 19, 2001. Thereafter, the
Convertible Notes will be subject to redemption at the option of the Company, in
whole or in part (in any integral multiple of $1,000), at the following
redemption prices (expressed as percentages of the principal amount), if
redeemed during the 12-month period beginning April 15 of the years indicated
(April 19 in the case of the year 2001):
<TABLE>
<CAPTION>
Redemption
Year Price
- --- ----------
<S> <C>
2001............................................................... 103.43%
2002............................................................... 102.57%
2003............................................................... 101.71%
2004............................................................... 100.86%
2005............................................................... 100.00%
</TABLE>
, 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). On or after the redemption date, interest will
cease to accrue on the Convertible Notes, or portion thereof, called for
redemption.
6. Notice of Redemption. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the redemption date to each
holder of the Convertible Notes to be redeemed at his address of record. The
Convertible Notes in denominations larger than $1,000 may be redeemed in part
but only in integral multiples of $1,000. In the event of a redemption of less
than all of the Convertible Notes, the Convertible Notes will be chosen for
redemption by the Trustee in accordance with the Indenture. Unless the Company
defaults in making such redemption payment, or a Paying Agent is prohibited from
making such payment pursuant to the Indenture, by law or otherwise, interest
ceases to accrue on the Convertible Notes or portions of them called for
redemption on and after the redemption date.
If this Convertible Note is redeemed subsequent to a record
date with respect to any interest payment date specified above and on or prior
to such interest payment date, then anyaccrued interest will be paid to the
person in whose name this Convertible Note is registered at the close of
business on such record date.
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<PAGE> 61
7. Mandatory Redemption. The Company will not be required to
make mandatory redemption payments with respect to the Convertible Notes. There
are no sinking fund payments with respect to the Convertible Notes.
8. Repurchase at Option of Holder. If there is a Designated
Event, the Company shall be required to offer to purchase on the Designated
Event Payment Date all outstanding Convertible Notes at a purchase price equal
to 100% of the principal amount thereof on the date of purchase, plus accrued
and unpaid interest to the Designated Event Payment Date. Holders of Convertible
Notes that are subject to an offer to purchase will receive a Designated Event
Offer from the Company prior to any related Designated Event Payment Date and
may elect to have such Convertible Notes or portions thereof in authorized
denominations purchased by completing the form entitled "Option of Noteholder To
Elect Purchase" appearing below. Noteholders have the right to withdraw their
election by delivering a written notice of withdrawal to the Company or the
Paying Agent in accordance with the terms of the Indenture.
9. Conversion. The holder of any Convertible Note has the
right, exercisable at any time after 90 days following the Issuance Date and
prior to the close of business (New York City time) on the Business Day
immediately preceding the date of the Convertible Note's maturity, to convert
the principal amount thereof (or any portion thereof that is an integral
multiple of $1,000) into shares of Common Stock at the initial Conversion Price
of $40.46 per share, subject to adjustment under certain circumstances, except
that if a Convertible Note is called for redemption, the conversion right will
terminate at the close of business (New York City time) on the Business Day
immediately preceding the date fixed for redemption.
To convert a Convertible Note, a holder must (1) complete and
sign a notice of election to convert substantially in the form set forth below,
(2) surrender the Convertible Note to a Conversion Agent, (3) furnish
appropriate endorsements or transfer documents if required by the Registrar or
Conversion Agent and (4) pay any transfer or similar tax, if required. Upon
conversion, no adjustment or payment will be made for interest or dividends, but
if any Noteholder surrenders a Convertible Note for conversion after the close
of business on the record date for the payment of an installment of interest and
prior to the opening of business on the next interest payment date, then,
notwithstanding such conversion, the interest payable on such interest payment
date will be paid to the registered holder of such Convertible Note on such
record date. In such event, unless such Security has been called for redemption
on or prior to such interest payment date, such Convertible Note, when
surrendered for conversion, must be accompanied by payment in funds acceptable
to the Company of an amount equal to the interest payable on such interest
payment date on the portion so converted. The number of shares of Common Stock
issuable upon conversion of a Convertible Note is determined by dividing the
A-6
<PAGE> 62
principal amount of the Convertible Note converted by the Conversion Price in
effect on the Conversion Date. No fractional shares will be issued upon
conversion but a cash adjustment will be made for any fractional interest.
A Convertible Note in respect of which a holder has delivered
an "Option of Noteholder to Elect Purchase" form appearing below exercising the
option of such holder to require the Company to purchase such Convertible Note
may be converted only if the notice of exercise is withdrawn as provided above
and in accordance with the terms of the Indenture. The above description of
conversion of the Convertible Notes is qualified by reference to, and is subject
in its entirety to, the more complete description thereof contained in the
Indenture.
10. Registration Agreement. The holder of this Convertible
Note is entitled to the benefits of a Registration Agreement, dated April 14,
1998, between the Company and the Initial Purchaser (the "Registration
Agreement"). Pursuant to the Registration Agreement the Company has agreed
for the benefit of the holders of the Convertible Notes, that (i) it will, at
its cost, within 60 days after the closing of the sale of the Convertible Notes
(the "Closing"), file a shelf registration statement (the "Shelf Registration
Statement") with the Securities and Exchange Commission (the "Commission") with
respect to resales of the Convertible Notes and the Common Stock issuable upon
conversion thereof, (ii) the Company will use its best efforts to ensure that
within 120 days after the Closing, such Shelf Registration Statement shall be
declared effective by the Commission and (iii) the Company will use its best
efforts to keep such Shelf Registration Statement continuously effective under
the Securities Act until the earliest of (a) the second anniversary of the date
of the Closing, (b) the date on which the Convertible Notes or the Common Stock
issuable upon conversion thereof may be sold 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 Convertible Notes or the
Common Stock issuable upon conversion thereof have been sold pursuant to such
Shelf Registration Statement (the "Shelf Registration Period"). If the Company
fails to comply with clause (i) above then, at such time, the per annum
interest rate on the Convertible Notes will increase by 25 basis points. Such
increase will remain in effect until the date on which such Shelf Registration
Statement is filed, on which date the interest rate on the Convertible Notes
will revert to the interest rate originally borne by the Convertible Notes plus
any increase in such interest rate pursuant to the following sentence. If the
Shelf Registration Statement is not declared effective as provided in clause
(ii) above (other than as a result solely of actions of any holders of
securities covered by such Shelf Registration Statement), then, at such time
and on each date that would have been the successive 30th day following such
time, the per annum interest rate on the Convertible Notes (which interest rate
will be the original interest rate on the Convertible Notes plus any increase
or
A-7
<PAGE> 63
increases in such interest rate pursuant to the preceding sentence and this
sentence) will increase by an additional 25 basis points; provided that the
interest rate will not increase by more than 50 basis points pursuant to this
sentence and will not increase by more than 75 basis points pursuant to this
sentence and the preceding sentence. Such increase or increases will remain in
effect until the date on which such Shelf Registration Statement is declared
effective, on which date the interest rate on the Convertible Notes will revert
to the interest rate originally borne by the Convertible Notes. Pursuant to
clause (iii) above, however, if the Company fails to keep the Shelf Registration
Statement continuously effective for the period specified above (other than as a
result solely of actions of any holders of securities covered by such Shelf
Registration Statement), then at such time as the Shelf Registration Statement
is no longer effective and on each date thereafter that is the successive 30th
day subsequent to such time and until the earlier of (i) the date that the Shelf
Registration Statement is again deemed effective or (ii) the termination of the
Shelf Registration Period, the per annum interest rate on the Convertible 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. 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 such
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. For purposes of the foregoing, restricted Common
Stock shall not include any shares of Common Stock which (i) may be sold
pursuant to paragraph (k) of Rule 144 (or any successor provision) promulgated
by the Commission under the Securities Act or (ii) have been sold pursuant to
the Shelf Registration Statement.
Pursuant to the Registration Agreement, the Company may
suspend the use of the prospectus which is a part of the Shelf Registration
Statement for a period not to exceed 30 days in any three-month period or three
periods not to exceed an aggregate of 90 days in any twelve-month period under
certain circumstances. The holders of Convertible Notes will not be entitled to
additional interest as set forth in the preceding paragraph solely because of
such suspension.
11. Denominations, Transfer, Exchange and Replacement. The
Convertible Notes are in registered form, without coupons, in denominations of
$1,000 and integral multiples of $1,000. The transfer of Convertible Notes may
be registered, and Convertible Notes may be
A-8
<PAGE> 64
exchanged, as provided in the Indenture. The Registrar may require a Noteholder,
among other things, to furnish appropriate endorsements and transfer documents
and to pay any taxes and fees required by law or permitted by the Indenture. The
Registrar need not exchange or register the transfer of any Convertible Note or
portion of a Convertible Note selected for redemption (except the unredeemed
portion of any Convertible Note being redeemed in part). Also, it need not
exchange or register the transfer of any Convertible Note for a period of 15
days before a selection of Convertible Notes to be redeemed. Replacement
Convertible Notes for lost, stolen or mutilated Convertible Notes may be issued
in accordance with the terms of the Indenture.
12. Persons Deemed Owners. The registered Noteholder of a
Convertible Note may be treated as its owner for all purposes.
13. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent shall
pay the money back to the Company at its request. After that, Noteholders of
Convertible Notes entitled to the money must look to the Company for payment,
unless an abandoned property law designates another person, and all liability of
the Trustee and such Paying Agent with respect to such money shall cease.
14. Defaults and Remedies. The Convertible Notes shall have
the Events of Default as set forth in Section 7.01 of the Indenture. Subject to
certain limitations in the Indenture, if an Event of Default occurs and is
continuing, the Trustee by notice to the Company or the Noteholders of at least
25% in aggregate principal amount of the then-outstanding Convertible Notes by
notice to the Company and the Trustee may declare all the Convertible Notes to
be due and payable immediately, except that in the case of an Event of Default
arising from certain events of bankruptcy or insolvency, all unpaid principal
and interest accrued on the Convertible Notes shall become due and payable
immediately without further action or notice.
The Noteholders of a majority in principal amount of the
Convertible Notes then outstanding by written notice to the Trustee may rescind
an acceleration and its consequences if the rescission would not conflict with
any judgment or decree and if all existing Events of Default have been cured or
waived except nonpayment of principal or interest that has become due solely
because of the acceleration. Noteholders may not enforce the Indenture or the
Convertible Notes except as provided in the Indenture. Subject to certain
limitations, Noteholders of a majority in principal amount of the
then-outstanding Convertible Notes issued under the Indenture may direct the
Trustee in its exercise of any trust or power. The Company must furnish
compliance certificates to the Trustee annually. The above description of Events
of Default and remedies is qualified by reference to, and subject in its
entirety to, the more complete description thereof contained in the Indenture.
A-9
<PAGE> 65
15. Amendments, Supplements and Waivers. Subject to certain
exceptions, the Indenture or the Convertible Notes may be amended or
supplemented with the consent of the Noteholders of at least a majority in
principal amount of the then-outstanding Convertible Notes (including consents
obtained in connection with a tender offer or exchange offer for Convertible
Notes), and any existing default may be waived with the consent of the
Noteholders of a majority in principal amount of the then-outstanding
Convertible Notes, including consents obtained in connection with a tender offer
or exchange offer for Convertible Notes. Without the consent of any Noteholder,
the Indenture or the Convertible Notes may be amended, among other things, to
cure any ambiguity, defect or inconsistency, to provide for assumption of the
Company's obligations to Noteholders, to make any change that does not adversely
affect the rights of any Noteholder, to qualify the Indenture under the TIA, or
to comply with the requirements of the SEC in order to maintain the
qualification of the Indenture under the TIA.
16. Trustee Dealings with the Company. The Trustee, in its
individual or any other capacity, may become the owner or pledgee of the
Convertible Notes and may otherwise deal with the Company or an Affiliate with
the same rights it would have, as if it were not Trustee, subject to certain
limitations provided for in the Indenture and in the TIA. Any Agent may do the
same with like rights.
17. No Recourse Against others. A director, Officer, employee
or stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Convertible Notes or the Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. Each Noteholder, by accepting a Convertible Note, waives and releases
all such liability. The waiver and release are part of the consideration for the
issue of the Convertible Notes.
18. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK
SHALL GOVERN THE INDENTURE AND THE CONVERTIBLE NOTES WITHOUT REGARD TO CONFLICT
OF LAW PROVISIONS THEREOF.
19. Authentication. The Convertible Notes shall not be valid
until authenticated by the manual signature of an authorized officer of the
Trustee or an authenticating agent.
20. Abbreviations. Customary abbreviations may be used in the
name of a Noteholder or an assignee, such as: TEN COM (for tenants in common),
TEN ENT (for tenants by the entireties), JT TEN (for joint tenants with right of
survivorship and not as tenants in common), CUST (for Custodian), and U/G/M/A
(for Uniform Gifts to Minors Act).
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<PAGE> 66
21. Definitions. Capitalized terms not defined in this
Convertible Note have the meaning given to them in the Indenture.
The Company will furnish to any Noteholder of the Convertible
Notes upon written request and without charge a copy of the Indenture and the
Registration Agreement.
Request may be made to:
Sabratek Corporation
5601 West Howard Street
Niles, Illinois 60714
(847) 647-2760
A-11
<PAGE> 67
ASSIGNMENT FORM
To assign this Convertible Note, fill in the form below:
(I) or (we) assign and transfer this Convertible Note to
_____________________________________________________________________________
(Insert assignee's social security or tax I.D. no.)
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________ agent to
transfer this Convertible Note on the books of the Company. The agent may
substitute another to act for him.
Your Signature: ____________________________________________________________
(Sign exactly as your name appears on the other side of this
Convertible Note)
Date: ___________________
Medallion Signature Guarantee: _____________________________
In connection with any transfer of any of the Convertible
Notes evidenced by this certificate occurring prior to the date that is two
years after the later of the date of original issuance of such Convertible Notes
and the last date, if any, on which such
A-12
<PAGE> 68
Convertible Notes were owned by the Company or any Affiliate of the Company, the
undersigned confirms that such Convertible Notes are being transferred:
CHECK ONE BOX BELOW
(1) / / to the Company; or
(2) / / pursuant to and in compliance with Rule 144A under the
Securities Act of 1933; or
(3) / / pursuant to and in compliance with Regulation S under the
Securities Act of 1933; or
(4) / / pursuant to an exemption from registration under the
Securities Act of 1933 provided by Rule 144 thereunder.
Unless one of the boxes is checked, the Registrar will refuse to
register any of the Convertible Notes evidenced by this certificate in
the name of any person other than the registered holder thereof;
provided, however, that if box (3) or (4) is checked, the Trustee may
require, prior to registering any such transfer of the Convertible
Notes such legal opinions, certifications and other information as the
Company has reasonably requested in writing, by delivery to the Trustee
of a standing letter of instruction, to confirm that such transfer is
being made pursuant to an exemption from,
A-13
<PAGE> 69
or in a transaction not subject to, the registration requirements of the
Securities Act of 1933.
--------------------------
Signature
Medallion Signature Guarantee:
- ------------------------ --------------------------
Signature
- --------------------------------------------------------------------------------
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Convertible Note for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated:
-------------------- ---------------------------
NOTICE: To be executed by
an executive officer
- -----------------------------
A-14
<PAGE> 70
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE A
The initial principal amount at maturity of this Global
Security shall be $85,000,000. The following increases or decreases in the
principal amount of this Global Security have been made:
<TABLE>
<CAPTION>
Amount of increase in
Principal Amount of this
Global Security including Amount of decrease in Principal Amount of this Signature of authorized
upon exercise of over- Principal Amount of this Global Security following officer of Trustee or
Date Made allotment option Global Security such decrease or increase Securities Custodian
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
A-15
<PAGE> 71
OPTION OF NOTEHOLDER TO ELECT PURCHASE
If you want to elect to have this Convertible Note or a
portion thereof repurchased by the Company pursuant to Section 3.08 or 4.07 of
the Indenture, check the box: / /
If the purchase is in part, indicate the portion ($1,000 or
any integral multiple thereof) to be purchased: ____________
Your Signature:_______________________________________________
(Sign exactly as your name appears on the other
side of this Convertible Note)
Date: ____________
Medallion Signature Guarantee: _______________________
A-16
<PAGE> 72
ELECTION TO CONVERT
To Sabratek Corporation:
The undersigned owner of this Convertible Note hereby
irrevocably exercises the option to convert this Convertible Note, or the
portion below designated, into Common Stock of SABRATEK CORPORATION in
accordance with the terms of the Indenture referred to in this Convertible Note,
and directs that the shares issuable and deliverable upon conversion, together
with any check in payment for fractional shares, be issued in the name of and
delivered to the undersigned, unless a different name has been indicated in the
assignment below. If shares are to be issued in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto.
The undersigned agrees to be bound by the terms of the
Registration Agreement relating to the Common Stock issuable upon conversion of
the Convertible Notes.
Date:_________________
In whole ____ or Portion of Convertible Note to be
converted ($1,000 or any integral
multiple thereof):
$_________________
Your Signature: _______________________________________
(Sign exactly as your name appears on the other
side of this Convertible Note.)
Please Print or Typewrite Name and
Address, Including Zip Code, and
Social Security or other Identifying
Number
A-17
<PAGE> 73
Medallion Signature Guarantee:*
---------------------------
- -----------------
* Signature must be guaranteed by a commercial bank, trust company or
member firm of the New York Stock Exchange.
A-18
<PAGE> 74
EXHIBIT B
FORM OF REGISTRATION AGREEMENT
B-1
<PAGE> 1
EXHIBIT 5.1
[ROSS & HARDIES LETTERHEAD]
JUNE 12, 1998
Sabratek Corporation
5601 West Howard Street
Niles, Illinois 60714
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
You have requested our opinion with respect to the registration by Sabratek
Corporation (the "Company") pursuant to a Registration Statement on Form S-3
(the "Registration Statement") under the Securities Act of 1933, as amended (the
"Act"), of $85,000,000 principal amount of 6% Convertible Notes due 2005 (the
"Notes") and the shares of Common Stock issuable upon conversion of the Notes
(the "Shares", together with the Notes, the "Securities").
In so acting, we have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed relevant and necessary to
form a basis for the opinions hereinafter expressed. In conducting such
examination, we have assumed (i) that all signatures are genuine, (ii) that all
documents and instruments submitted to us as copies conform with the originals,
and (iii) the due execution and delivery of all documents where due execution
and delivery are a prerequisite to the effectiveness thereof. As to any facts
material to this opinion, we have relied upon statements and representations of
officers and other representatives of the Company and certificates of public
officials and have not independently verified such facts.
Based upon the foregoing, it is our opinion that the Notes have been duly
authorized and issued and that the Shares issuable upon the proper conversion of
the Notes have been duly authorized will be validly issued, fully paid and
non-assessable when issued upon conversion of the Notes.
We express no opinion as to the laws of any jurisdiction other than the
State of Illinois and the United States of America. Insofar as the foregoing
opinion relates to matters that would be controlled by the substantive laws of
any jurisdiction other than the United States of America or the State of
Illinois, we have assumed that the substantive laws of such jurisdiction conform
in all respects to the internal laws of the State of Illinois.
We hereby consent to the reference to our firm in the Registration
Statement relating to the registration of the Securities
Very truly yours,
ROSS & HARDIES
By: /s/ DAVID S. GUIN
------------------------------------
A Partner
<PAGE> 1
EXHIBIT 10.36
CREDIT AGREEMENT
BY AND AMONG
SABRATEK CORPORATION
AND
LASALLE BANK NI
DATED: MARCH 26, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
1.0 GENERAL DEFINITIONS..................................................................................1
1.1 "Affiliate ..............................................................................1
1.2 "Ancillary Agreements ...................................................................1
1.3 "Business Day ...........................................................................1
1.4 "Change .................................................................................2
1.5 "Charges ................................................................................2
1.6 "Code ...................................................................................2
1.7 "Collateral .............................................................................2
1.8 "Default ................................................................................2
1.9 "Default Rate ...........................................................................2
1.10 "Environmental Laws .....................................................................2
1.11 "ERISA ..................................................................................2
1.12 "Event of Default .......................................................................2
1.13 "GAAP ...................................................................................3
1.14 "Hazardous Materials ....................................................................3
1.15 "Indebtedness ...........................................................................3
1.16 "L/C Fee ................................................................................3
1.17 "Letters of Credit ......................................................................3
1.18 "Liabilities ............................................................................3
1.19 "Loan Account ...........................................................................4
1.20 "Maximum Amount .........................................................................4
1.21 "Loans ..................................................................................4
1.22 "Net Income .............................................................................4
1.23 "Notes ..................................................................................4
1.24 "Operating Income .......................................................................4
1.25 "Quick Assets ...........................................................................4
1.26 "Over-Advance ...........................................................................4
1.27 "Participant ............................................................................4
1.28 "Person .................................................................................4
1.29 "Prime Rate .............................................................................5
1.30 "Release ................................................................................5
1.31 "Reportable Event .......................................................................5
1.32 "Revolving Loan .........................................................................5
1.33 "Revolving Note .........................................................................5
1.34 "Stock ..................................................................................5
1.35 "Subsidiary .............................................................................5
1.36 "Equipment Term Loan"....................................................................6
1.37 "Equipment Term Note"....................................................................6
1.38 "Total Facility".........................................................................6
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
1.39 "Accounting Terms".......................................................................6
1.40 "Other Terms"............................................................................6
2.0 LOANS: GENERAL TERMS.................................................................................6
2.1 Total Facility...........................................................................6
2.1.1 Revolving Loan...............................................................6
2.1.2 Letter of Credit Facility....................................................7
2.1.3 Equipment Purchase Facility..................................................7
2.2 Advances to Constitute One Loan; Effect of Revolving Loan Termination....................9
2.2.1 One Loan.....................................................................9
2.2.2 Effect on Equipment Term Loans...............................................9
2.3 Interest Rate............................................................................9
2.3.1 Revolving Loan...............................................................9
2.3.2 Equipment Term Loan..........................................................9
2.3.3 Computation of Interest.....................................................10
2.3.4 Default Rates...............................................................10
2.4 Over-Advances...........................................................................11
2.5 Prepayment and Termination of Term Loans................................................11
2.5.1 Equipment Term Loan.........................................................11
2.6 Provisions of Agreement To Remain in Force..............................................11
2.7 Payment of Ongoing Fees.................................................................12
2.7.1 Unused Line Fee.............................................................12
2.7.2 Letter of Credit Fees.......................................................12
2.8 Change in Circumstances.................................................................12
2.8.1 Yield Protection............................................................12
2.8.2 Changes in Capital Adequacy Regulations.....................................13
2.8.3 Lender Statements: Survival of Indemnity....................................14
3.0 PAYMENTS............................................................................................14
3.1 Borrower's Loan Account.................................................................14
3.2 Payment Terms...........................................................................14
3.3 Cash Collateral Account.................................................................15
3.4 Application of Payments and Collections.................................................15
3.5 Statements..............................................................................16
4.0 WARRANTIES AND REPRESENTATIONS......................................................................16
4.1 General Warranties and Representations..................................................16
4.2 Environmental Warranties and Representations............................................19
4.3 Automatic Warranty and Reaffirmation of Warranties and Representations..................19
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C> <C>
4.4 Survival of Warranties and Representations..............................................20
5.0 COVENANTS AND CONTINUING AGREEMENTS.................................................................20
5.1 Affirmative Covenants...................................................................20
5.2 Negative Covenants......................................................................23
5.3 Payment of Charges......................................................................25
5.4 Contesting Charges......................................................................25
5.5 Insurance; Payment of Premiums..........................................................25
5.6 Survival of Obligations Upon Termination of Agreement...................................26
6.0 EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON EVENTS OF DEFAULT.........................................26
6.1 Events of Default.......................................................................26
6.2 Acceleration of the Liabilities.........................................................29
6.3 Remedies................................................................................29
6.4 Notice..................................................................................30
7.0 CONDITIONS PRECEDENT TO INITIAL FUNDING AND ADDITIONAL
ADVANCES............................................................................................30
7.1 Conditions to All Advances..............................................................30
7.2 Conditions to Initial Advances under the Loans..........................................31
7.2.1 Financial Condition..............................................................31
7.2.2 Fees.............................................................................31
7.2.3 Ancillary Agreements.............................................................31
7.2.4 Financial Statements.............................................................31
7.2.5 Field Audit......................................................................31
7.2.6 Closing Certificate..............................................................32
7.2.7 Corporate Matters................................................................32
7.2.8 Opinion of Counsel...............................................................32
7.2.9 Additional Documents.............................................................32
8. MISCELLANEOUS.......................................................................................32
8.1 Modification of Agreement; Sale of Interest.............................................32
8.2 Attorneys' Fees and Expenses; Lender's Out-of-Pocket Expenses; Audit
Fees....................................................................................33
8.3 No Waiver by Lender.....................................................................34
8.4 Severability............................................................................34
8.5 Parties; Entire Agreement...............................................................34
8.6 Conflict of Terms.......................................................................34
8.7 Waivers by Borrower.....................................................................35
8.8 Governing Law...........................................................................35
</TABLE>
(iii)
<PAGE> 5
<TABLE>
<S> <C> <C>
8.9 FORUM; SERVICE OF PROCESS...............................................................35
8.10 Notice..................................................................................36
8.11 Delegation of Duties and Grant of Authority.............................................37
8.12 Transaction Expenses....................................................................37
8.13 Section Titles..........................................................................37
8.14 Release by Borrower.....................................................................37
8.15 Participations..........................................................................38
</TABLE>
(iv)
<PAGE> 6
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTIONS
<S> <C>
A Form of Revolving Note
(Ref., Sec. 2.1.1.2)
B Form of Equipment Term Note
(Ref., Sec. 2.1.3.3)
LIST OF SCHEDULES
SCHEDULE DESCRIPTION
I Litigation
(Ref., Sec. 4.1.9)
</TABLE>
(v)
<PAGE> 7
CREDIT AGREEMENT
THIS CREDIT AGREEMENT ("this Agreement") is made on the 26th day of
March, 1997 by and among LaSalle Bank NI ("Lender"), and Sabratek Corporation, a
Delaware corporation ("Borrower").
W I T N E S S E T H:
WHEREAS, Borrower desires to borrow funds and obtain other
financial accommodation from Lender, and Lender is willing to make certain loans
and provide other financial accommodation to Borrower upon the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the terms and conditions
contained herein, and of any loans or extension of credit heretofore, now or
hereafter made to or for the benefit of Borrower by Lender, the parties hereto
hereby agree as follows:
1 GENERAL DEFINITIONS
When used herein, the following terms shall have the following
meanings:
1.1 "AFFILIATE" shall mean (i) any Person which directly or
indirectly owns more than 50% of the common stock or
other equity interest of any Borrower or which is
entitled to receive 50% or more of any Borrower's
income; or (ii) any legal entity which any Borrower or
any Affiliate of any Borrower as defined under part (i)
hereof, or any of any Borrower's directors or officers,
directly or indirectly owns more than 50% of the common
stock or other equity interest; or (iii) any
Subsidiary.
1.2 "ANCILLARY AGREEMENTS" shall mean all other agreements,
instruments and documents, including, notes,
guaranties, mortgages, deeds of trusts, chattel
mortgages, pledges, powers of attorney, consents,
assignments, contracts, notices, security agreements,
leases, financing statements, subordination agreements,
trust account agreements and all other written matter
whether heretofore, now, or hereafter executed by or on
behalf of any Borrower or any other Person and/or
delivered to Lender or any Participant with respect to
this Agreement.
1.3 "BUSINESS DAY" shall mean any day other than a
Saturday, Sunday or other day on which commercial banks
in Chicago, Illinois are authorized or required to
close under the laws of the State of Illinois or the
laws of the United States.
(1)
<PAGE> 8
1.4 "CHANGE" shall have the meaning set forth in
Section 2.8.2 of this Agreement.
1.5 "CHARGES" shall mean all national, federal, state,
county, city, municipal, and/or other governmental
(including, the Pension Benefit Guaranty Corporation)
taxes, levies, assessments, charges, liens, claims or
encumbrances upon and/or relating to (i) the
Collateral, (ii) the Liabilities, (iii) any Borrower's
employees, payroll, income and/or gross receipts, (iv)
any Borrower's ownership and/or use of any of its
assets, or (v) any other aspect of any Borrower's
business.
1.6 "CODE" shall mean the Uniform Commercial Code of the
State of Illinois, as the same may be amended from time
to time.
1.7 "COLLATERAL" shall mean any and all property and
interests in property pledged, assigned, transferred or
delivered to Lender by Borrower, or in which Borrower
grants Lender a security interest, whether now or
hereafter, to secure the Liabilities.
1.8 "DEFAULT" shall mean any event or condition which, upon
occurrence or with the passage of time, or upon the
giving of notice, or both, would constitute an Event of
Default.
1.9 "DEFAULT RATE" shall have the meaning set forth in
Section 2.3.6 of this Agreement.
1.10 "ENVIRONMENTAL LAWS" shall mean the Resource
Conservation and Recovery Act of 1976, as amended, the
Hazardous Materials Transportation Act, the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended and reauthorized by
the Superfund Amendments and Reauthorization Act of
1986, any so-called "Superfund" or "Superlien" laws,
the Toxic Substances Control Act, as amended, the Clean
Air Act, the Federal Water Pollution Control Act or any
other federal, state or local statute, law, ordinance,
code, rule, regulation, order or decree regulating,
relating to, or imposing liability or standards of
conduct concerning, any hazardous, toxic or dangerous
waste, substance or material as in effect from time to
time.
1.11 "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
1.12 "EVENT OF DEFAULT" shall mean the occurrence or
existence of any one or more of the events described in
Section l0.l of this Agreement.
(2)
<PAGE> 9
1.13 "GAAP" shall mean generally accepted accounting
principles as in effect in the United States from time
to time.
1.14 "HAZARDOUS MATERIALS" shall mean any hazardous
substance or pollutant or contaminant defined as such
in (or for the purposes of) any Environmental Law and
shall include, but shall not be limited to, petroleum,
including crude oil or any fraction thereof, natural
gas, any radioactive material and asbestos in any form
or condition.
1.15 "INDEBTEDNESS" shall mean all of a Person's
liabilities, obligations and indebtedness to any Person
of any and every kind and nature, whether primary,
secondary, direct, indirect, absolute, contingent,
fixed, or otherwise, heretofore, now or hereafter
owing, due, or payable, however evidenced, created,
incurred, acquired or owing and however arising,
whether under written or oral agreement, by operation
of law, or otherwise. Without in any way limiting the
generality of the foregoing, Indebtedness specifically
includes (i) the Liabilities, (ii) all other
indebtedness for borrowed money, the deferred purchase
price of goods or services, all guaranties,
endorsements (other than for collection or deposit in
the ordinary course of business) and all obligations
under any letter of credit or acceptance facility,
(iii) all obligations or liabilities of any Person that
are secured by any lien, claim, encumbrance, or
security interest upon property owned by Borrower, even
though Borrower has not assumed or become liable for
the payment thereof, (iv) all obligations or
liabilities created or arising under any lease of real
or personal property, or conditional sale or other
title retention agreement with respect to property used
and/or acquired by Borrower, even though the rights and
remedies of the lessor, seller and/or lender thereunder
are limited to repossession of such property, (v) all
unfunded pension fund obligations and liabilities and
(vi) deferred taxes.
1.16 "L/C FEE" shall have the meaning set forth in
Section 2.7.2 of this Agreement.
1.17 "LETTERS OF CREDIT" shall have the meaning set forth in
Section 2.1.2 of this Agreement.
1.18 "LIABILITIES" shall mean all of Borrower's liabilities,
obligations and indebtedness to Lender of any and every
kind and nature, whether primary, secondary, direct,
indirect, absolute, contingent, fixed, or otherwise,
(including, interest, charges, expenses, attorneys'
fees, liquidated damages, and other sums chargeable to
Borrower by Lender, future advances made to or for the
benefit of Borrower and obligations of performance),
whether arising under this Agreement, under any of the
Ancillary Agreements or acquired by Lender
from any other source, whether
(3)
<PAGE> 10
heretofore, now or hereafter owing, arising, due, or
payable from Borrower to Lender, however evidenced,
created, incurred, acquired or owing and however
arising, whether under written or oral agreement,
operation of law, or otherwise.
1.19 "LOAN ACCOUNT" shall have the meaning set forth in
Section 3.1 of this Agreement.
1.20 "MAXIMUM AMOUNT" shall have the meaning set forth in
Section 2.1.1 of this Agreement.
1.21 "LOANS" shall mean the Revolving Loan and the Term
Loans, collectively.
1.22 "NET INCOME" shall mean, with respect to any fiscal
period of Borrower, the excess of total revenues over
total expenses of Borrower on a consolidated basis for
such period, after provision for income taxes and after
elimination of intercompany items, determined in
accordance with GAAP applied on a consistent basis.
There shall be excluded from Net Income any
extraordinary item, and any gain resulting from either
the extinguishment of any Indebtedness or the sale,
exchange or other disposition of assets not made in the
ordinary course of business.
1.23 "NOTES" shall mean the Revolving Loan Note and the
Equipment Term Note, collectively.
1.24 "OPERATING INCOME" shall mean, with respect to any
fiscal period of Borrower, operating income as defined
in accordance with GAAP, plus interest income, less
interest expense.
1.25 "QUICK ASSETS" shall mean, as of any particular date,
all of Borrower's cash and cash equivalents, accounts
receivable, and short term and long term investments in
marketable securities, defined in conformity with GAAP.
1.26 "OVER-ADVANCE" shall have the meaning set forth in
Section 2.4 of this Agreement.
1.27 "PARTICIPANT" shall mean any Person, now or at any time
or times hereafter, participating with Lender in the
Loans made by Lender to Borrower pursuant to this
Agreement and the Ancillary Agreements.
1.28 "PERSON" shall mean any individual, sole
proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation,
institution,
(4)
<PAGE> 11
entity, party, business organization of
any other kind, or governmental agency, unit or
representative of any kind (whether national, federal,
state, county, city, municipal or otherwise, including,
any instrumentality, division, agency, body or
department thereof).
1.29 "PRIME RATE" shall mean the interest rate per annum
from time to time announced and made effective by
Lender at its office in Chicago, Illinois, as the Prime
Rate, or, as the case may be, the base, reference or
other similar rate then designated by Lender for
commercial loan reference purposes, it being understood
that such rate is a reference rate, not necessarily the
lowest interest rate charged by Lender to its
customers, and as established from time to time serves
as the basis upon which effective rates of interest are
calculated for those loans making reference thereto.
1.30 "RELEASE" shall have the same meaning as set forth in
the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 as amended and reauthorized.
1.31 "REPORTABLE EVENT" shall mean any of the events set
forth in Section 4043 of ERISA, or the regulations
thereunder.
1.32 "REVOLVING LOAN" shall have the meaning set forth in
Section 2.1.1 of this Agreement.
1.33 "REVOLVING NOTE" shall have the meaning set forth in
Section 2.1.1.2 of this Agreement.
1.34 "STOCK" shall mean all shares, options, interests,
participations or other equivalents (however
designated) of or in a corporation, whether voting or
non-voting, including, common stock, warrants,
preferred stock, convertible debentures and all
agreements, instruments and documents convertible, in
whole or in part, into any one or all of the foregoing.
1.35 "SUBSIDIARY" shall mean any corporation of which more
than 50% of the outstanding shares of Stock which have
voting power sufficient to elect a majority of the
board of directors of such corporation (irrespective of
whether or not at the time Stock of any other class or
classes shall have or might have voting power by reason
of the happening of any contingency) is at the time
directly or indirectly owned by any Borrower, by any
Borrower and one or more Affiliates or other
Subsidiaries, or by one or more Affiliates or other
Subsidiaries.
(5)
<PAGE> 12
1.36 "EQUIPMENT TERM LOAN" shall have the meaning set forth
in Section 2.1.3 of this Agreement.
1.37 "EQUIPMENT TERM NOTE" shall have the meaning set forth
in Section 2.1.3.3 of this Agreement.
1.38 "TOTAL FACILITY" shall have the meaning set forth in
Section 2.1 of this Agreement.
1.39 "ACCOUNTING TERMS". Any accounting terms used in this
Agreement which are not specifically defined shall have
the meanings customarily given them in accordance with
GAAP.
1.40 "OTHER TERMS". All other terms contained in this
Agreement which are not otherwise deemed in Section 1
or in any other section of this Agreement shall, unless
the context indicates otherwise, have the meanings
provided for by the Code to the extent the same are
used or defined therein. Wherever the term "including"
appears in this Agreement, such term shall be construed
to mean "including, without limitation," it being the
express intention of the parties hereto that any rule
of limitation applicable to any listing of items in a
contract is hereby rejected.
2.0 LOANS: GENERAL TERMS
2.1 TOTAL FACILITY. Lender shall make available for
Borrower's use from time to time during the term of
this Agreement, upon Borrower's request therefor,
certain loans and other financial accommodation not to
exceed the aggregate principal amount of Nine Million
Five Hundred Thousand Dollars ($9,500,000) ("Total
Facility"). The Total Facility shall be subject to all
of the terms and conditions of this Agreement and
Ancillary Agreements and shall consist of:
2.1.1 REVOLVING LOAN. A revolving line of credit
(the "Revolving Loan") in an aggregate
principal amount not to exceed, at any time
outstanding, Eight Million Dollars
($8,000,000) (the "Maximum Amount") minus
the aggregate undrawn face amount of
Letters of Credit outstanding at such time.
2.1.1.1 The Revolving Loan shall be
repaid in full not later than,
and no further advances under
the Revolving Loan will be
made after, April 30, 1999
(the "Termination Date"). The
Revolving Loan shall be
evidenced by a Revolving
Loan Note
(6)
<PAGE> 13
in the form attached
hereto as EXHIBIT A (the
"Revolving Note"). To the
extent payment is not already
due, Borrower may repay the
Revolving Loan in whole or in
part (without penalty or
premium) upon one business
day's prior notice to Lender
with sums repaid available to
be reborrowed consistent with
and subject to the terms and
conditions described herein
governing new advances under
the Revolving Loan. Borrower
shall pay interest on the
outstanding principal balance
of the Revolving Loan monthly
in arrears on the first day of
each month.
2.1.1.2 All requests for advances
under the Revolving Loan
and/or the Revolving Note
shall be in writing and signed
by an authorized
representative of Borrower.
Lender shall respond to such
requests within one Business
Day. Any request for advances
made after 2:00 p.m. on any
Business Day shall be treated
as being received by Lender on
the following Business Day.
2.1.2 LETTER OF CREDIT FACILITY. Lender will
issue standby letters of credit and
commercial letters of credit (collectively
the "Letters of Credit") at the request of
Borrower in an aggregate undrawn face
amount not to exceed at any time $8,000,000
minus the aggregate principal amount of the
Revolving Loan outstanding at such time.
2.1.2.1 Borrower shall immediately
reimburse Lender for any draws
under any Letter of Credit,
and any advances made by
Lender to Borrower to satisfy
such reimbursement obligation
shall constitute an additional
Revolving Loan hereunder and
shall be governed by the terms
and conditions of this
Agreement, including Section
2.1.1 hereof.
2.1.2.2 At no time shall the sum of
(a) the aggregate principal
amount of the Revolving Loan
at any time outstanding to
Borrower and (b) the aggregate
undrawn face amount of the
Letters of Credit outstanding
at such time exceed the
Maximum Amount.
2.1.3 EQUIPMENT PURCHASE FACILITY. An equipment
purchase facility (the "Equipment Purchase
Facility") consisting of term loans for
purchases of new equipment (each a
"Equipment Term Loan"), available to
Borrower upon request made from time to
time until April 30, 1999 (subject to
extension at the sole discretion of
Lender), so long as no
(7)
<PAGE> 14
Event of Default has occurred, in the aggregate
principal amount not to exceed at any one time
outstanding One Million Five Hundred Thousand
Dollars ($1,500,000).
2.1.3.1 Any Equipment Term Loan which does not
use the Equipment Purchase Facility in
full shall be in an amount of not less
than One Hundred Thousand Dollars
($100,000). No Equipment Term Loan shall
be made for an amount in excess of eighty
percent (80%) of the purchase price of
such new equipment net of shipping,
freight, insurance, taxes, installation
and other incidental costs of such new
equipment.
2.1.3.2 Each Equipment Term Loan under the
Equipment Purchase Facility shall be
repayable as follows:
2.1.3.2.1 Prior to the first to occur
of (a) the total amount
available under the
Equipment Purchase Facility
being funded to Borrower; or
(b) April 30, 1998 or, with
regard to Equipment Term
Loans funded after such
date, April 30, 1999,
Borrower shall pay interest
only on the outstanding
principal balance of all
Equipment Term Loans,
monthly in arrears on the
first day of each calendar
month.
2.1.3.2.2 Upon the first to occur of
(a) the total amount
available under the
Equipment Purchase Facility
being funded to
Borrower; or (b) April 30,
1998 or, with regard to
Equipment Term Loans funded
after such date, April 30,
1999, Borrower shall pay
monthly installments, on the
first day of each calendar
month (commencing on the
first day of the calendar
month immediately following
such event), in sixty (60)
equal monthly installments,
the final payment to include
all of the remaining
outstanding principal
balance of all Equipment
Term Loans under the
Equipment Purchase Facility.
Accrued interest shall be
due and payable with each
installment of principal.
2.1.3.3 The Equipment Purchase Facility and the
Equipment Term Loans thereunder shall be
evidenced by a Equipment Term
(8)
<PAGE> 15
Note (the "Equipment Term
Note") in the form attached
hereto as Exhibit B.
2.1.3.4 All requests under the
Equipment Purchase Facility
shall be in writing and signed
by an authorized
representative of Borrower,
shall describe with reasonable
specificity the equipment to
be purchased and shall be
accompanied by purchase orders
or invoices for the equipment
which is the subject of the
request and such other
supporting documentation as
Lender may request.
2.2 ADVANCES TO CONSTITUTE ONE LOAN; EFFECT OF REVOLVING
LOAN TERMINATION.
2.2.1 ONE LOAN. All loans and advances by Lender
to Borrower under this Agreement and the
Ancillary Agreements (whether made as a
Revolving Loan, as a Term Loan, or
otherwise), shall constitute one loan, and
all Indebtedness of Borrower to Lender
under this Agreement and the Ancillary
Agreements shall constitute one general
obligation secured by the Collateral.
2.2.2 EFFECT ON EQUIPMENT TERM LOANS. Any
provision of this Agreement or any of the
Notes to the contrary notwithstanding, if
Lender demands repayment of the Revolving
Loan upon acceleration due to the
occurrence of an Event of Default, or any
other termination thereof, all Equipment
Term Loans shall become immediately due and
payable.
2.3 INTEREST RATE. Borrower shall pay Lender interest on
the outstanding principal balance of the Liabilities at
the following rates:
2.3.1 REVOLVING LOAN. The principal amount
outstanding under the Revolving Loan will
bear interest at a varying rate equal to
the Prime Rate.
2.3.2 EQUIPMENT TERM LOANS. During the period the
Equipment Term Loans are governed by
Section 2.1.3.2.1, the principal amount
outstanding under the Equipment Purchase
Facility will bear interest at a varying
interest rate equal to the Prime Rate. Upon
the occurrence of the events set forth in
Section 2.1.3.2.2, the principal amount
outstanding under the Equipment Term Loan
will bear interest at one of the
alternative rates set forth below as
selected by Borrower on or before the date
or dates of the occurrence of such events:
(9)
<PAGE> 16
2.3.2.1 A varying rate equal to the Prime
Rate; or
2.3.2.2 A fixed rate equal to 250 basis points
per annum plus the then current
five year Treasury Bill yield, as
stated in the Wall Street Journal
(Midwest Edition) on the day of
funding.
2.3.3 COMPUTATION OF INTEREST. All interest shall
be computed on the basis of a year of 360
days and actual days elapsed, and shall be
payable as provided in Section 3.2 of this
Agreement. Any change in any interest rate
applicable to any of the Liabilities based on
the Prime Rate shall be effective as of the
effective date stated in the announcement by
the Lender of such change in the Prime Rate.
In addition, for purposes of calculating
interest payable on the Revolving Loan,
payments of principal thereon shall be applied
to the outstanding principal balance of the
Revolving Loan upon receipt of such payments
by Lender in immediately available funds.
2.3.4 DEFAULT RATES. Upon the occurrence and
during the continuance of an Event of
Default, Borrower shall pay Lender interest on
the outstanding Liabilities, including
principal, interest, fees and reimbursable
expenses, at a rate (the "Default Rate"),
equal to the interest rate provided in the
applicable Note, plus three percent (3%). In
no event whatsoever shall the rate of interest
paid by Borrower under this Agreement or any
of the Ancillary Agreements exceed the maximum
amount permissible under any law which a court
of competent jurisdiction shall, in a final
determination and following exhaustion of all
appeals, deem applicable hereto. In the event
that such a court determines that Lender has
received interest hereunder in excess of the
maximum rate permitted by any such law, (i)
Lender shall apply the excess amount of
interest paid by Borrower to any unpaid
principal owed by Borrower to Lender or, if
the amount of such excess exceeds the unpaid
balance of such principal, Lender shall
promptly refund such excess interest to
Borrower, and (ii) the provisions hereof shall
be deemed amended to provide for such
permissible rate. All sums paid, or agreed to
be paid, by Borrower which are, or hereafter
may be construed to be, compensation for the
use, forbearance or detention of money shall,
to the extent permitted by applicable law, be
amortized, prorated, spread and allocated
throughout the full term of all such
Indebtedness until the Indebtedness is paid in
full.
(10)
<PAGE> 17
2.4 OVER-ADVANCES. If, at any time and for any
reason, the aggregate amount of loans and
advances outstanding at any time made
pursuant to Section 2.1 hereof exceeds any
percentage or dollar limitation, either
with respect to the Total Facility or
individual facilities or sublimits therein
(an "Over-Advance"), then Borrower, upon
Lender's election and demand, immediately
shall pay to Lender, in cash, the amount of
such Over-Advance.
2.5 PREPAYMENT AND TERMINATION OF TERM LOANS.
2.5.1 EQUIPMENT TERM LOAN. Borrower may
terminate the Equipment Term Loan in
whole, but not in part, upon three
(3) Business Days' prior written
notice to Lender at any time prior to
the maturity thereof, by paying to
Lender upon such termination (a) the
then outstanding principal amount,
accrued interest, and any other
applicable charges thereon, including
attorneys' fees and (b) if Borrower
has selected the interest rate
alternative set forth in Section
2.3.2.2 hereof, Borrower shall pay to
Lender as liquidated damages for
Lender's loss of the benefit of its
bargain and not as a penalty, an
amount equal to the product of (i)
the outstanding principal amount of
the Equipment Term Note at the time
of such termination and (ii) the
percentage set forth opposite the
applicable date in the following
table:
<TABLE>
<CAPTION>
If Terminated Prior to Percentage
---------------------- ----------
<S> <C>
April 30, 1999 5%
April 30, 2000 4%
April 30, 2001 3%
April 30, 2002 2%
April 30, 2003 1%
</TABLE>
2.6 PROVISIONS OF AGREEMENT TO REMAIN IN
FORCE. Notwithstanding any
termination of the Total Facility,
until all of the Liabilities shall
have been fully paid and satisfied,
Borrower shall continue to pay
interest to Lender as provided in
Section 2.3 of this Agreement, Lender
shall be entitled to retain its
security interest, if any, in the
Collateral, Borrower shall continue
to remit collection of Accounts and
proceeds of Collateral as provided in
this Agreement, and Lender shall
retain all of its rights and remedies
under this Agreement.
(11)
<PAGE> 18
2.7 PAYMENT OF ONGOING FEES.
2.7.1 UNUSED LINE FEE. For the period from the
date of this Agreement to, but not
including, the Termination Date, Borrower
shall pay to Lender an unused line fee at
the rate of one-eighth of one percent
(.0125%) per annum (computed on the basis
of a year of 360 days and actual days
elapsed) on the average daily unused
portion of the Maximum Amount during each
month, minus the aggregate average
daily undrawn face amount of Letters of
Credit outstanding during such month. Such
fee is to be payable quarterly in arrears
on the first day of the immediately
following calendar quarter, commencing on
April 1, 1997 with the final payment to be
made on the Termination Date, unless the
Revolving Loan is terminated in whole on an
earlier date, in which event the commitment
fee for the period to, but not including,
the date of such termination in whole shall
be paid on the date of such termination.
2.7.2 LETTER OF CREDIT FEES. In addition to the
fee provided for in Section 2.7.1 above,
Borrower shall pay to Lender, concurrently
with the issuance of any Letter of Credit,
a letter of credit fee (each, an "L/C Fee")
at a rate equal to (a) in the case of any
standby Letter of Credit, one percent (1%)
of the undrawn face amount thereof, or (b)
in the case of any commercial Letter of
Credit, the standard rate based upon the
then current commercial letter of credit
fee schedule of Lender. Any L/C Fee shall
include any set up and handling fees
charged by Lender. The L/C Fee for any
Letter of Credit to be issued concurrently
with the initial funding hereunder shall be
deducted from Borrower's loan proceeds at
the time of closing. The payment of any L/C
Fee shall be non-refundable to Borrower,
notwithstanding any prepayment and
termination by Borrower as provided for in
Section 2.5 of this Agreement.
2.8 CHANGE IN CIRCUMSTANCES
2.8.1 YIELD PROTECTION. If any law or any
governmental or quasi-governmental rule,
regulation, policy, guideline or directive
(whether or not having the force of law),
adopted after the date of this Agreement
and having general applicability to all
banks within the jurisdiction in which
Lender operates, or any interpretation or
application thereof by any governmental
authority charged with the interpretation
or application thereof, or the compliance
of Lender therewith,
(12)
<PAGE> 19
2.8.1.1 subjects Lender to any tax,
duty, charge or withholding on
or from payments due from the
Borrower (excluding federal
taxation of the overall net
income of Lender), or changes
the basis of taxation of
payments to Lender in respect
of its Loans, or other amounts
due it hereunder, or
2.8.1.2 imposes or increases or deems
applicable any reserve,
assessment, insurance charge,
special deposit or similar
requirement against assets of,
deposits with or for the
account of, or credit extended
by, Lender with respect to its
Loans or
2.8.1.3 imposes any other condition
the result of which is to
increase the cost to Lender of
making, funding or maintaining
the Loans or reduces any
amount received by Lender in
connection with the Loans or
requires Lender to make any
payment calculated by
reference to the amount of
Loans or interest received by
it by an amount deemed
material by Lender in its sole
discretion;
and the result of any of the foregoing is
to increase the cost to Lender of making,
renewing or maintaining the Loans or to
reduce any amount received under this
Agreement, then, within 15 days after
receipt by Borrower of written demand by
Lender pursuant to Section 2.8.3, the
Borrower shall pay Lender that portion of
such increased expense incurred or
reduction in an amount received which
Lender determines is attributable to
making, funding and maintaining the Loans
and its commitments under this Agreement.
2.8.2 CHANGES IN CAPITAL ADEQUACY REGULATIONS. If
Lender determines (i) the amount of capital
required or expected to be maintained by
Lender, or any corporation controlling such
Lender is increased as a result of a
"Change" (as defined below), and (ii) such
increase in required capital will result in
an increase in the cost to Lender of
maintaining its Loans, the Letter of Credit
or its obligation to make Loans hereunder,
then, within 15 days after receipt by
Borrower of written demand by such Lender
pursuant to Section 2.8.3, Borrower shall
pay Lender the amount necessary to
compensate Lender for any shortfall in the
rate of return on the portion of such
increased capital which Lender determines
is attributable to this Agreement, its
Loans, or its obligation to make Loans
hereunder. "Change" means (i) any change
after the date of this Agreement in the
"Risk-Based Capital Guidelines" (as deemed
below),
(13)
<PAGE> 20
or (ii) adoption of or change in any other
law, governmental or quasigovernmental
rule, regulation, policy, guideline,
interpretation or directive (whether or not
having the force of law) after the date of
this Agreement and having general
applicability to all banks and financial
institutions within the jurisdiction in
which such Lender operates which affects
the amount of capital required or expected
to be maintained by Lender or any
corporation controlling Lender. "Risk-Based
Capital Guidelines" means (i) the
risk-based capital guidelines in effect in
the United States on the date of this
Agreement, including transition rules, and
(ii) the corresponding capital regulations
promulgated by regulatory authorities
outside the United States implementing the
July 1988 Report of the House Committee on
Banking Regulation and Supervisory
Practices entitled "International
Convergence of Capital Measurements and
Capital Standards," including transition
rules, and any amendments to such
regulations.
2.8.3 LENDER STATEMENTS: SURVIVAL OF INDEMNITY.
Lender shall use its best efforts to
notify Borrower in writing of any Change,
law, policy, rule, guideline or directive
giving rise to such demand for
compensation not later than ninety (90)
days following the date upon which Lender
knows of such Change, law, policy, rule,
guideline or directive. Any demand for
compensation pursuant to this Agreement
shall be in writing and shall state the
amount due, if any, and shall set forth in
reasonable detail the calculations upon
which Lender determined such amount. Such
written demand shall be rebuttably
presumed correct for all purposes. The
obligations of the Borrower under this
Section 2.8, shall survive payment of the
Liabilities and termination of this
Agreement.
3.0 PAYMENTS
3.1 BORROWER'S LOAN ACCOUNT. Lender shall maintain a loan
account ("Loan Account") on its books in which shall be
recorded (i) all loans and advances made by Lender to
Borrower pursuant to this Agreement, (ii) all payments
made by Borrower on all such loans and advances and
(iii) all other appropriate debits and credits as
provided in this Agreement, including, all fees,
charges, expenses and interest. All entries in
Borrower's Loan Account and other accounts shall be
made in accordance with Lender's customary accounting
practices as in effect from time to time.
3.2 PAYMENT TERMS. All of the Liabilities shall be payable
to Lender at the address set forth in Section 8.10 of
this Agreement. Except (a) as otherwise provided in
(14)
<PAGE> 21
this Agreement or in the Ancillary Agreement or (b) in
the case of acceleration of the Liabilities, principal
on the Term Loans and interest on the Liabilities shall
be payable monthly on the first day of each month.
Unless otherwise provided in this Agreement or the
Ancillary Agreements, all other payments shall be
payable within five (5) days of Lender's demand. At
Lender's sole discretion, such payment may be made by a
debit to Borrower's demand deposit account with Lender,
and fees, costs, expenses and similar charges shall
also be payable monthly by such debits.
3.3 CASH COLLATERAL ACCOUNT. Borrower shall use Lender as
its exclusive depository and disbursement bank for all
of its accounts. Borrower shall establish general
accounts with Lender in Borrower's names. Borrower and
any of its Affiliates, shareholders, directors,
officers, employees, agents or those Persons acting for
or in concert with Borrower shall, acting as Trustee
for Lender, receive any monies, checks, notes, drafts
or any other payment relating to and/or proceeds of
Collateral which come into their possession or under
their control and immediately upon receipt thereof,
shall remit the same or cause the same to be remitted
to Lender for deposit into Borrower's general accounts
with Lender. Borrower hereby agrees that, upon the
occurrence of any Event of Default, Lender shall have
the right, without the necessity or prior or
contemporaneous notice, to set-off against any portion
and/or all of the Liabilities all payments made to and
all funds deposited in Borrower's accounts of any kind,
or funds otherwise received by Lender. Borrower agrees
to pay fees, costs and expenses which Lender charges or
incurs in connection with opening, servicing, operating
and maintaining Borrower's accounts with Lender in
accordance with Lender's standard fee schedule, and
such amounts will constitute part of the Liabilities
and shall be secured by any Collateral.
3.4 APPLICATION OF PAYMENTS AND COLLECTIONS. Borrower
irrevocably waive the right to direct the application
of payments and collections received by Lender from or
on behalf of Borrower, and Borrower agrees that Lender
shall have the continuing, exclusive right to apply and
reapply any and all such payments and collections
against the Liabilities in such manner as Lender may
deem appropriate, notwithstanding any term or provision
hereof or any entry by Lender upon any of its books and
records. Unless Lender in its discretion determines
otherwise, amounts credited to the Loan Account shall
be applied to the principal balance of the Revolving
Loan, and when the outstanding principal balance of the
Revolving Loan is equal to zero (0), any amount
remaining unapplied shall be credited to Borrower's
demand deposit account with Lender. To the extent that
Borrower make a payment or payments to Lender or Lender
receives any
(15)
<PAGE> 22
payment or proceeds of the Collateral for Borrower's
benefit, which payment(s) or proceeds or any part
thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required
to be repaid to a trustee, receiver, custodian or any
other party under any bankruptcy act, state or federal
law, common law or equitable cause, then, to the
extent of such payment or proceeds received, the
Liabilities or part thereof intended to be satisfied
shall be revived and shall continue in full force and
effect, as if such payments or proceeds have not been
received by Lender.
3.5 STATEMENTS. Until such time as Lender shall have
rendered to Borrower written statements of account as
provided herein, the balance in Borrower's Loan
Account, as set forth on Lender's most recent
statement, shall be rebuttably presumptive evidence of
the amounts due and owing to Lender by Borrower. Not
less than ten (10) Business Days nor more than twenty
(20) Business Days after the final day of each calendar
month, Lender shall render to Borrower a statement
setting forth the balance of Borrower Loan Account,
including principal, interest, expenses and fees. Each
such statement shall be subject to subsequent
adjustment by Lender and Lender's right to reapply
payments in accordance with Section 3.4 of this
Agreement but shall, absent manifest errors or
omissions, be presumed correct and conclusively binding
upon Borrower and shall constitute an account stated
unless, within sixty (60) days after receipt of any
statement from Lender, Borrower shall deliver to Lender
written objection thereto specifying the error or
errors, if any, contained in such statement. Any such
objection by Borrower shall toll the sixty (60) day
period referred to in the preceding sentence during the
period reasonably required to resolve such objection.
4.0 WARRANTIES AND REPRESENTATIONS
4.1 GENERAL WARRANTIES AND REPRESENTATIONS. Borrower
warrants and represents to Lender that:
4.1.1 Borrower is a corporation duly organized
and validly existing and in good standing
under the laws of the state of its
incorporation, as represented at the
beginning of this Agreement, and is
qualified or licensed to do business in all
other countries, states and provinces where
the failure to be so qualified and/or
licensed would have a material adverse
effect on Borrower;
4.1.2 Borrower has not used, during the five (5)
year period preceding the date of this
Agreement, and does not intend to use any
other corporate or fictitious name;
(16)
<PAGE> 23
4.1.3 Borrower has the right and power and is
duly authorized and empowered to enter
into, execute, deliver and perform this
Agreement and the Ancillary Agreements;
4.1.4 The execution, delivery and performance by
Borrower of this Agreement and the
Ancillary Agreements shall not, by their
execution or performance, the lapse of
time, the giving of notice or otherwise,
constitute a violation of any applicable
law, rule or regulation or a breach of any
provision contained in any Borrower's
Certificate of Incorporation or By-Laws or
contained in any agreement, instrument,
indenture or other document to which any
Borrower is now a party or by which it is
bound;
4.1.5 Borrower's uses of the proceeds of any
advances and readvances made by Lender to
Borrower pursuant to this Agreement are,
and will continue to be, legal and proper
corporate uses (duly authorized by its
Board of Directors, if necessary pursuant
to applicable corporate law, rule or
regulation) and such uses are consistent
with all applicable laws and statutes, as
in effect as of the date hereof;
4.1.6 To the best of Borrower's knowledge,
Borrower has, and is current and in good
standing with respect to, all governmental
approvals, permits, certificates,
inspections, consents and franchises
necessary to conduct or to continue to
conduct its present or intended business as
heretofore conducted by it or in a manner
similar to that of the previous owner of
the business or of other Persons engaged in
the same or similar businesses and to own
or lease and operate its properties as now
owned or leased and operated by it or by
the previous owner of those properties;
4.1.7 To the best of Borrower's knowledge, none
of said approvals, permits, certificates,
consents or franchises contain any term,
provision, condition or limitation more
burdensome than such as are generally
applicable to Persons engaged in the same
or similar business as Borrower;
4.1.8 Borrower has capital sufficient to carry on
its business and transactions and all
businesses and transactions in which it is
about to engage and is solvent and able to
pay its debts as they mature, and Borrower
owns property the fair saleable value of
which is greater than the amount required
to pay Borrower's debts;
4.1.9 Except as set forth on SCHEDULE I, Borrower
has no litigation pending and no
Indebtedness (except trade payables arising
in the ordinary course of
(17)
<PAGE> 24
its business) and has not guarantied the
obligations of any other Person;
4.1.10 Borrower is not a party to any contract or
agreement or subject to any charge,
corporate restriction, judgment, decree or
order materially and adversely affecting
its business, property, assets, operations
or condition, financial or otherwise, and
Borrower is not a party to any labor
dispute; there are no strikes or walkouts
relating to any labor contracts and no such
contract is scheduled to expire prior to
the maturity of any portion of the Total
Facility;
4.1.11 Borrower has good, indefeasible and
merchantable title to and ownership of its
property free and clear of all liens,
claims, security interests and other
encumbrances other than any security
interests which may be granted to Lender
from time to time hereunder;
4.1.12 To the best of Borrower's knowledge,
Borrower is not in violation of any
applicable statute, rule, regulation or
ordinance, including those pertaining to
environmental pollution or disposal or OSHA
standards, of any governmental entity,
including, the United States of America,
any state, city, town, municipality, county
or any other jurisdiction, or any agency
thereof, in any respect materially and
adversely affecting the Borrower's
business, property, assets, operations or
condition, financial or otherwise;
4.1.13 Borrower is not in default under any
indenture, loan agreement, mortgage, lease,
trust deed, deed of trust or other similar
agreement relating to the borrowing of
monies to which it is a party or by which
it is bound;
4.1.14 The financial statements and loan
applications which Borrower has supplied
Lender prior to execution of this
Agreement, fairly present the assets,
liabilities and financial condition and
results of operations of Borrower and such
other Persons described therein as of the
dates thereof; there are no omissions or
other facts or circumstances which are
material to a complete and correct
understanding of the information set forth
therein; and there has been no material and
adverse change in the assets, liabilities
or financial or other condition of Borrower
since the dates of such documents; there
exist no equity or long term investments in
or outstanding advances to any Person
(except contractual deposits and expense
advances in each case made in the ordinary
course of business) not reflected in such
documents; there are no actions or
proceedings which are pending or, to the
best of Borrower's knowledge, threatened
against Borrower or any other Person which
might result in any material adverse
(18)
<PAGE> 25
change in Borrower's financial condition or
materially and adversely affect Borrower's
existing or anticipated operations, or its
existing or future assets;
4.1.15 Borrower has received no notice to the
effect that they are not in full compliance
with any of the requirements of ERISA and
the regulations promulgated thereunder and,
to the best of their knowledge there exists
no Reportable Event;
4.1.16 Borrower has filed all federal, state and
local tax returns (including, but not
limited to, income and payroll tax returns)
and other reports, or has been included in
consolidated returns or reports filed by an
Affiliate, which Borrower is required by
law, rule or regulation to file and all
Charges that are due and payable have been
paid; and
4.1.17 Borrower's execution and delivery of this
Agreement or any of the Ancillary
Agreements does not directly or indirectly
violate or result in a violation of Section
7 of the Securities Exchange Act of 1934,
as amended, or any regulations issued
pursuant thereto, including Regulation U,
G, T or X of the Board of Governors of the
Federal Reserve System (12 CFR 221, 207,
220 and 224, respectively) and Borrower
does not own or intend to purchase or carry
any "margin security," as defined in said
Regulations.
4.2 ENVIRONMENTAL WARRANTIES AND REPRESENTATIONS. Borrower
warrants and represents that (i) the operations of
Borrower have complied and currently comply with all
Environmental Laws; (ii) none of the operations of
Borrower is subject to or, to the best knowledge of
Borrower will be subject to any threatened or pending
judicial or administrative proceeding alleging the
violation of any Environmental Laws; (iii) none of the
operations of Borrower is the subject of a federal or
state investigation evaluating whether any remedial
action is needed to respond to a Release of any
Hazardous Material into the environment; (iv) Borrower
has not filed any notice under any federal or state law
indicating past or present treatment, storage or
disposal of a Hazardous Material or reporting a spill
or release of a Hazardous Material into the
environment; and (v) Borrower has no known liability in
connection with any Releases of any Hazardous Material
into the environment.
4.3 AUTOMATIC WARRANTY AND REAFFIRMATION OF WARRANTIES AND
REPRESENTATIONS. Each request for any loan or advance
made by Borrower pursuant to this Agreement or the
Ancillary Agreements shall constitute (i) an automatic
warranty
(19)
<PAGE> 26
and representation by Borrower to Lender that there
does not then exist a Default or an Event of Default
and (ii) a reaffirmation as of the date of said request
of all of the representations and warranties of
Borrower contained in this Agreement or the Ancillary
Agreements.
4.4 SURVIVAL OF WARRANTIES AND REPRESENTATIONS. Borrower
covenants, warrants and represents to Lender that all
representations and warranties of Borrower contained in
this Agreement and the Ancillary Agreements shall be
true at the time of Borrower's execution of this
Agreement and the Ancillary Agreements, and shall
survive the execution, delivery and acceptance thereof
by the parties thereto and the closing of the
transactions described therein or related thereto.
Borrower and Lender expressly agree that any
misrepresentation or breach of any representation or
warranty whatsoever contained in this Agreement or the
Ancillary Agreements shall be deemed material.
5.0 COVENANTS AND CONTINUING AGREEMENTS
5.1 AFFIRMATIVE COVENANTS. Borrower covenants that it
shall:
5.1.1 Comply with the following financial
covenants at all relevant times during the
term of this Agreement:
5.1.1.1 Maintain at all times a ratio
of Quick Assets to the Maximum
Amount of the Revolving Loan
facility of not less than 1.7
to 1.0;
5.1.1.2 Maintain Operating Income of
not less than $1.00, measured
on a year-to-date basis at the
end of each fiscal quarter of
Borrower; and
5.1.1.3 Maintain Net Income of not
less than $1.00, measured at
the end of each fiscal year of
Borrower;
In the event Borrower shall fail at any time to
maintain the ratio of Quick Assets to the Maximum
Amount as set forth in Section 5.1.1.1 above, Borrower
shall giant to Lender a continuing, first priority
security interest in all assets of Borrower to secure
the Liabilities, but such failure shall not constitute
a Default or an Event of Default. In connection with
this provision Borrower shall deliver to Lender at the
time of closing fully executed Uniform Commercial Code
financing statements, and hereby authorizes Lender to
file said financing statements with the relevant
official offices upon the failure of Borrower to
(20)
<PAGE> 27
maintain the financial ratio set forth in Section
5.1.1.1 above.
5.1.2 Furnish Lender with the following information:
5.1.2.1 As soon as available, but not later than
forty-five (45) days after the end of
each fiscal quarter, a copy of Borrower's
quarterly 10-Q Report filed with the
Securities and Exchange Commission, and
accompanied by a certificate of the chief
financial officer of Borrower stating (i)
that such financial statements have been
prepared on a consistent basis and
reflect all adjustments (other than
year-end and audit adjustments) necessary
to fairly present the financial condition
of the Borrower for the periods
indicated, (ii) whether he has knowledge
of any Default or Event of Default
hereunder and, if so, stating in
reasonable detail the facts with respect
thereto, and (iii) calculating Borrower's
compliance with the financial covenants
set forth in Section 5.1.1 hereof.
5.1.2.2 As soon as available, but not later than
ninety (90) days after the end of each
fiscal year of Borrower, a copy of the
annual audited financial statements
reviewed by independent certified public
accountants selected by Borrower and
reasonably acceptable to Lender, which
annual financial statements shall include
the balance sheet of Borrower on a
consolidated basis as at the end of such
fiscal year, the related statements of
income, retained earnings and cash flows,
and notes of Borrower for the fiscal year
then ended, and appropriate notes to
same, all in reasonable detail and
consistent with the form and detail
reasonably requested by Lender, and all
prepared in accordance with GAAP,
together with a certificate of the chief
financial officer of Borrower stating
that such financial statements have been
prepared in accordance with GAAP,
consistently applied, and whether or not
he has knowledge of any failure of
Borrower to comply with the financial
covenants set forth in Section 5.1.1
hereof; and, if so, stating in reasonable
detail the facts with respect thereto;
5.1.2.3 As soon as available, but not later than
five (5) days after filing, copies of all
financial information, proxy materials
and other information and reports, if
any, filed by Borrower with the
Securities and Exchange Commission.
(21)
<PAGE> 28
5.1.2.4 As soon as available, but not later than
five (5) days after Borrower's receipt
thereof, a copy of any "management
letter" received from Borrower's
certified public accountant.
5.1.2.5 Such other data and information
(financial and other) as Lender, from
time to time, may reasonably request,
bearing upon or related to Borrower's
financial condition and/or results of
operations;
5.1.3 Maintain product liability insurance in the
amount of $7,000,000 per occurrence, as presently
maintained by Borrower;
5.1.4 At its sole cost and expense, keep and maintain
Borrower's property insured for its full
insurable value against loss or damage by fire,
theft, explosion, sprinklers and all other
hazards and risks ordinarily insured against by
other owners or users of such properties in
similar businesses, and notify Lender promptly of
any event or occurrence causing a material loss
or decline in value of its property and the
estimated (or actual, if available) amount of
such loss or decline;
5.1.5 Notify Lender in writing, promptly upon, but in
no event later than five (5) Business Days after
an officer of Borrower obtains knowledge
thereof, of the occurrence of any event which
constitutes a Default or an Event of Default,
together with a detailed statement by a
responsible officer of Borrower of the steps
being taken by Borrower to cure the effect of
such event;
5.1.6 Notify Lender in writing, promptly upon any
Borrower's learning of any litigation affecting
any Borrower, whether or not the claim is
considered by Borrower to be covered by
insurance, and of the institution of any suit or
administrative proceeding which may materially
and adversely affect the property operations,
financial condition or business of Borrower;
5.1.7 Use Lender as its exclusive depository and
disbursement bank for all of its deposit,
investment, trust and other accounts and cash
management services;
5.1.8 Notify Lender in writing within thirty (30) days
of any of the following:
5.1.8.1 the receipt by Borrower of any notice
from a governmental entity alleging the
occurrence of a Reportable Event with
(22)
<PAGE> 29
respect to any pension plan governed by
ERISA (such notice shall contain the
statement of the chief financial officer
of Borrower setting forth details as to
such Reportable Event and the action which
Borrower proposes to take with respect
thereto and a copy, as soon as available,
of the notice of such Reportable Event to
the Pension Benefit Guaranty Corporation);
5.1.8.2 the commencement of proceedings to
terminate any such plan;
5.1.8.3 the appointment of a trustee by an
appropriate United States District Court
to administer any such plan, or
5.1.8.4 the institution of any proceedings by the
Pension Benefit Guaranty Corporation to
terminate any such plan or to appoint a
trustee to administer any such plan; and
5.1.9 Comply in all material respects with all applicable
laws, rules, regulations, and orders unless contested
in good faith and by appropriate proceedings otherwise
permitted by law or this Agreement, and with respect to
which appropriate reserves are maintained.
5.2 NEGATIVE COVENANTS. Borrower covenants that it shall not:
5.2.1 Merge or consolidate with or acquire any Person or
acquire substantially all the assets of any Person
unless Borrower is the surviving entity in such
transaction, and no Default or Event of Default has
occurred and is continuing or would occur after giving
effect to such transaction;
5.2.2 Other than in the ordinary course of its business, make
any investment in the securities of any Person without
fifteen (15) days prior written notice to Lender;
5.2.3 Declare or pay (or cause to be declared or paid)
dividends upon the Stock, or make (or cause to be made)
any distribution of any Borrower's property or assets
or make (or cause to be made) any loans, advances
and/or extensions of credit to any Person, including,
any Affiliate, officer or employee of any Borrower;
5.2.4 Make (or cause to be made) any loans or other advances
of money (other than salary) to officers, directors,
shareholders or Affiliates of any Borrower; provided
that any Borrower may make reasonable advances of
(23)
<PAGE> 30
money to its employees in payment of reasonable
expenses incurred by such employees in the ordinary
course of business;
5.2.5 Redeem, retire, purchase or otherwise acquire, directly
or indirectly, the Stock of Borrower, or make (or cause
to be made) any material change in Borrower's capital
structure or in any of its business objectives,
purposes and operations which might reasonably be
expected to adversely affect the repayment of the
Liabilities;
5.2.6 Enter into, or be a party to, any transaction with any
Affiliate or shareholder of Borrower, except in the
ordinary course of and pursuant to the reasonable
requirements of Borrower's business and upon fair and
reasonable terms which are fully disclosed to Lender
and are no less favorable to Borrower than would obtain
in a comparable arm's length transaction with a Person
not an Affiliate or shareholder of Borrower;
5.2.7 Enter into any transaction which materially and
adversely affects Borrower's ability to repay
Indebtedness for borrowed money;
5.2.8 Guaranty or otherwise, in any way, become liable with
respect to the obligations or liabilities of any Person
except by endorsement of instruments or items of
payment for deposit to the general account of Borrower
or for delivery to Lender on account of the
Liabilities;
5.2.9 Except as otherwise expressly permitted herein or in
the Ancillary Agreements, pledge, mortgage, grant a
security interest in or, encumber, assign, sell, lease
or otherwise dispose of or transfer, whether by sale,
merger, consolidation, liquidation, dissolution, or
other transactions not in Borrower's ordinary course of
business, any of Borrower's assets; provided, however,
Borrower may lease personal property or undertake
purchase money indebtedness to purchase personal
property so long as any lien granted is limited to the
specific personal property so acquired, the aggregate
of said leases and indebtedness does not exceed
$100,000 at any time outstanding, and the transaction
does not otherwise violate any other provision hereof;
5.2.10 Incur any Indebtedness for borrowed money (other than
the Liabilities) from any Person;
5.2.11 Change its name, business structure or identity, or add
any new fictitious name;
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5.2.12 Engage in any line of business materially different
from that previously engaged in by Borrower;
5.2.13 Change or relocate its chief executive office or
principal place of business; and
5.3 PAYMENT OF CHARGES. Subject to the provisions of Section 5.4 of
this Agreement, Borrower shall pay promptly when due all of the
Charges. In the event Borrower, at any time or times hereafter,
shall fail to pay the Charges or to promptly obtain the
satisfaction of such Charges under circumstances where said Section
5.4 does not relieve Borrower from doing so, Borrower shall so
advise Lender thereof in writing and Lender may, without waiving or
releasing any obligation or liability of Borrower hereunder or any
Default or Event of Default, in its sole and absolute discretion,
at any time or times thereafter, make such payment or any part
thereof, (but shall not be obligated so to do) or obtain such
satisfaction and take any other action with respect thereto which
Lender deems advisable. All sums so paid by Lender and any
expenses, including reasonable attorneys' fees, court costs,
expenses and other charges relating thereto, shall be payable, upon
demand, by Borrower to Lender and shall be additional Liabilities
hereunder secured by the Collateral.
5.4 CONTESTING CHARGES. Notwithstanding anything to the contrary
herein, Borrower may dispute any Charges without prior payment
thereof, even if such non-payment may cause a lien to attach to any
Borrower's assets, provided that Borrower shall give Lender notice
of such dispute and shall be diligently contesting the same in good
faith, with due diligence and by an appropriate proceeding and
there is no danger of a loss or forfeiture of any of Borrower's
assets, and provided further that, if the same are in excess of
Twenty-Five Thousand Dollars ($25,000) in the aggregate at any time
or times hereafter, Borrower shall give Lender such additional
collateral and assurances as Lender, in its sole discretion, deems
necessary under the circumstances.
5.5 INSURANCE: PAYMENT OF PREMIUMS. All policies of insurance required
hereunder shall be in form and with insurers recognized as adequate
by prudent business persons and all such policies shall be in such
amounts as may be satisfactory to Lender. Borrower shall deliver to
Lender the original (or certified copy) of each policy of insurance
and evidence of payment of all premiums therefor. [Such policies of
insurance shall contain an endorsement, in form and substance
acceptable to Lender, naming Lender as additional insured or loss
payee. Such endorsement shall provide that the insurance companies
will give Lender at least thirty (30) days' prior notice before any
such policy shall be altered or canceled
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and that no act or default of Borrower or any other Person shall
affect the right of Lender to recover under such policy in case of
loss or damage.] If Borrower shall fail to obtain or maintain any
of the policies required by this Agreement or to pay any premium
relating thereto, then Lender, without waiving or releasing any
obligation or default by Borrower hereunder, may (but shall be
under no obligation to do so) obtain and maintain such policies of
insurance and pay such premium and take any other action with
respect thereto which Lender deems advisable. All sums so disbursed
by Lender, including reasonable attorneys' fees, court costs,
expenses and other charges relating thereto, shall be payable, on
demand, by Borrower to Lender and shall be additional Liabilities
hereunder secured by the Collateral.
5.6 SURVIVAL OF OBLIGATIONS UPON TERMINATION OF AGREEMENT. Except as
otherwise expressly provided for in this Agreement and in the
Ancillary Agreements, no termination or cancellation (regardless of
cause or procedure) of this Agreement or the Ancillary Agreements
shall in any way affect or impair the powers, obligations, duties,
rights, and liabilities of Borrower or Lender in any way or respect
relating to any transaction or event occurring prior to such
termination or cancellation, any Collateral, or any of the
undertakings, agreements, covenants, warranties and representations
of Borrower or Lender contained in this Agreement or the Ancillary
Agreements. All such undertakings, agreements, covenants,
warranties and representations shall survive such termination or
cancellation.
6.0 EVENTS OF DEFAULT: RIGHTS AND REMEDIES ON EVENTS OF DEFAULT
6.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an Event of Default:
6.1.1 Borrower fails to pay the Liabilities within five (5)
days of the date such Liabilities are due and payable
or declared due and payable; or Borrower is in default
in the payment of any Indebtedness for borrowed money
exceeding $100,000 in the aggregate, after any
applicable grace period; or
6.1.2 Borrower fails or neglect to perform, keep or observe
any other term, provision, condition or covenant
contained in this Agreement (other than Section
5.1.1.1) or in the Ancillary Agreements, which is
required to be performed, kept or observed by Borrower
and the same is not cured to Lender's satisfaction
within ten (10) days after Lender gives Borrower
written notice identifying such default; or
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6.1.3 A default shall occur by any Borrower under any
agreement, document or instrument, other than this
Agreement or any of the Ancillary Agreements, now or
hereafter existing, to which Borrower is a party, but
only if that default has a material effect upon the
operation of Borrower's business;
6.1.4 An event of default shall occur and be continuing after
any applicable cure period under any mortgage,
assignment of rents and leases, assignment of
beneficial interest in land trust or any other security
document entered into between Lender and any Person
which secures the Liabilities;
6.1.5 Any statement, warranty, representation, report,
financial statement, or certificate made or delivered
by any Borrower, or any of its officers, employees or
agents, to Lender shall not have been true and correct
in any material respect when made; or
6.1.6 There shall occur any material uninsured damage to, or
loss, theft, or destruction of, any Collateral in which
Borrower shall have granted to Lender a security
interest hereunder; or
6.1.7 Any of Borrower's assets are attached, seized, levied
upon or subjected to a writ or distress warrant, or
come within the possession of any receiver, trustee,
custodian or assignee for the benefit of creditors and
the same is not cured within thirty (30) days
thereafter; an application is made by any Person other
than Borrower for the appointment of a receiver,
trustee, or custodian for any of Borrower's assets and
the same is not dismissed within thirty (30) days after
the application therefor; or
6.1.8 An application is made by any Borrower for the
appointment of a receiver, trustee or custodian for any
of Borrower's assets; a petition under any section or
chapter of the Bankruptcy Code or any similar law or
regulation is filed by any Borrower; any Borrower makes
an assignment for the benefit of its creditors or any
case or proceeding is filed by any Borrower for its
dissolution, liquidation, or termination; any Borrower
ceases to conduct its business as now conducted or is
enjoined, restrained or in any way prevented by court
order from conducting all or any material part of its
business affairs; or
6.1.9 A petition under any section or chapter of the
Bankruptcy Code or any similar law or regulation is
filed against any Borrower and is not
(27)
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dismissed within thirty (30) days after filing; or any
case or proceeding is filed against any Borrower for
its dissolution, liquidation or termination and such
case and proceeding is not dismissed within thirty (30)
days; or
6.1.10 A notice of lien, levy or assessment is filed of record
with respect to all or any substantial portion of any
Borrower's assets by the United States, or any
department, agency or instrumentality thereof, or by
any state, county, municipal or other governmental
agency, including, the Pension Benefit Guaranty
Corporation, or any taxes or debts owing to any of the
foregoing becomes a lien or encumbrance upon or any of
Borrower's assets and such lien or encumbrance is not
released within thirty (30) days after its creation; or
6.1.11 Judgment in an amount exceeding $100,000 is rendered
against any Borrower, and becomes final and
nonappealable, for any amount and Borrower fails to pay
such judgment within sixty (60) days of the due date
thereof; or
6.1.12 Any Borrower becomes insolvent or fails generally to
pay its debts as they become due; or
6.1.13 Any of the following events shall occur or exist with
respect to Borrower or an Affiliate of any Borrower
under ERISA:
6.1.13.1 the happening of a Reportable Event with
respect to any pension plan governed by ERISA;
6.1.13.2 the termination of any pension plan, or the
withdrawal from a multi-employer pension plan
governed by ERISA;
6.1.13.3 the appointment of a trustee by an appropriate
United States District Court to administer any
pension plan;
6.1.13.4 the institution of any proceedings by the
Pension Benefit Guaranty Corporation to
terminate any pension plan (other than a
multi-employer plan) or to appoint a trustee
to administer any such plan, or
6.1.13.5 a Prohibited Transaction, as defined in ERISA,
shall occur; and in each such case, Lender
determines that such event or condition could
subject Borrower to a tax, penalty or other
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<PAGE> 35
liability which would materially,
adversely affect the financial
condition of Borrower taken as a
whole; or
6.1.14 There is a substantial change in the
existing or prospective business,
properties, operations or condition,
financial or otherwise, of Borrower which
Lender in good faith determines to be
materially adverse.
6.2 ACCELERATION OF THE LIABILITIES. Upon and after the
occurrence and during the continuance of an Event of
Default, all of the Liabilities may, at the option of
Lender and without demand, notice, or legal process of
any kind, be declared, and immediately shall become,
due and payable.
6.3 REMEDIES. Upon and after the occurrence and during the
continuance of an Event of Default, if Borrower shall
have granted to Lender a security interest in all
assets of Borrower hereunder, Lender shall have the
following rights and remedies:
6.3.1 All of the rights and remedies of a secured
party under the Code or other applicable
law, all of which rights and remedies shall
be cumulative, and none exclusive, to the
extent permitted by law, in addition to any
other rights and remedies contained in this
Agreement and in all of the Ancillary
Agreements;
6.3.2 The right to (i) peacefully enter upon the
premises of Borrower or any other place or
places where any Collateral is located and
kept, without any obligation to pay rent to
Borrower (if Borrower own the place or
places where any Collateral is kept),
through self-help and without judicial
process or first obtaining a final judgment
or giving Borrower notice and opportunity
for a hearing on the validity of Lender's
claim, and remove any Collateral from such
premises and places to the premises of
Lender or any agent of Lender, for such
time as Lender may require to collect or
liquidate any Collateral, and/or (ii)
require Borrower to assemble and deliver
any Collateral to Lender at a place to be
designated by Lender;
6.3.3 The right to sell or to otherwise dispose
of all or any Collateral in its then
condition, or after any further
manufacturing or processing thereof (if
applicable), at public or private sale or
sales, with such notice as provided in
Section 8.10 of this Agreement, in lots or
in bulk, for cash or on credit, all as
Lender, in its sole and absolute
discretion, may deem advisable. At any such
sale or sales of the Collateral, the
Collateral need
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<PAGE> 36
not be in view of those present and
attending the sale, nor at the same
location at which the sale is being
conducted. Lender shall have the right to
conduct such sales on any Borrower's
premises or elsewhere and shall have the
right to use any Borrower's premises
without charge for such sales for such
time or times as Lender may see fit.
Lender is hereby granted a license or
other right to use, without charge, any
Borrower's labels, patents, copyrights,
rights of use of any name, trade secrets,
trade names, trademarks and advertising
maker, or any property of a similar
nature, as it pertains to the Collateral,
in advertising for sale and selling any
Collateral and any Borrower's rights under
all licenses and all franchise agreements
shall inure to Lender's benefit. Lender
may purchase all or any part of the
Collateral at public or, if permitted by
law, private sale and, in lieu of actual
payment of such purchase price, may set
off the amount of such price against the
Liabilities. The proceeds realized from
the sale of any Collateral shall be
applied first to the reasonable costs,
expenses and attorneys' and paralegal fees
and expenses incurred by Lender for
collection and for acquisition,
completion, protection, removal, storage,
sale and delivery of the Collateral;
second to interest due upon any of the
Liabilities; and third to the principal of
the Liabilities. If any deficiency shall
arise, Borrower shall remain liable to
Lender therefor.
6.4 NOTICE. Any notice required to be given by Lender of a
sale, lease, other disposition of the Collateral or any
other intended action by Lender, which is deposited in
the United States mail, postage prepaid and duly
addressed to Borrower, at the address set forth in
Section 8.10 of this Agreement, ten (10) days prior to
such proposed action, shall constitute commercially
reasonable and fair notice thereof to Borrower.
7.0 CONDITIONS PRECEDENT TO INITIAL FUNDING AND ADDITIONAL ADVANCES
7.1 CONDITIONS TO ALL ADVANCES. In addition to those
conditions set forth in Section 7.2 regarding the
initial advances and funding of the Loans, and
notwithstanding other provisions in this Agreement
concerning the making and the funding of the Loans,
Lender's obligations under this Agreement, including
Lender's obligations (if any) to make or consider any
and all requests for advances under the Revolving Loan
shall constitute a representation to Lender that each
of the following conditions have been met or satisfied
as of the date of the request:
7.1.1 All of the warranties and representations
of Borrower contained herein
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shall be true and correct;
7.1.2 No material adverse change in the financial
condition of Borrower has occurred since
the date of this Agreement;
7.1.3 No Default or Event of Default currently
exists and the granting of the request by
the Lender will not give rise to a Default
or an Event of Default;
7.1.4 No litigation is pending or threatened
against any Borrower which, if adversely
determined, would have a material adverse
effect on the financial operations of
Borrower taken as a whole; and
7.1.5 Borrower has provided Lender with all
certificates, financial statements and
other information and documentation which
Lender has requested pursuant to the terms
of this Agreement.
7.2 CONDITIONS TO INITIAL ADVANCES UNDER THE LOANS. In
addition to those conditions set forth in other
portions of this Agreement, Lender's obligation to
perform any of its obligations under this Agreement or
the Ancillary Agreements, including its obligation to
advance any funds to Borrower, is conditioned upon the
following:
7.2.1 FINANCIAL CONDITION. No material adverse
change in the business, property, assets,
operations or condition, financial or
other, of Borrower shall have occurred
since September 30, 1996.
7.2.2 FEES. Borrower shall have paid the closing
fee, recording fees, attorneys' fees and
all other costs, fees and expenses which it
owes Lender in connection with the
negotiation, execution and origination of
the transactions contemplated herein, which
sum shall not exceed $5,000 in the
aggregate, plus attorneys fees.
7.2.3 ANCILLARY AGREEMENTS. Borrower and other
necessary parties shall have executed all
Ancillary Agreements, including the Notes
and, with respect to any Letters of Credit,
Lender's customary letter of credit
application form, properly completed, which
Lender shall reasonably require.
7.2.4 FINANCIAL STATEMENTS. Borrower shall have
delivered to Lender a copy of Borrower's
fourth quarter financial statements.
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7.2.5 FIELD AUDIT. Lender shall have completed a
field audit of Borrower and the results of
such field audit shall be satisfactory to
Lender.
7.2.6 CLOSING CERTIFICATE. The president of
Borrower shall have provided Lender with a
certificate stating, in form acceptable to
Lender, that:
7.2.6.1 As of the date of the
transactions contemplated by
this Agreement, no Default or
Event of Default has occurred;
7.2.6.2 No litigation, investigation,
or proceeding, except as
disclosed in this Agreement,
is pending or threatened;
7.2.6.3 The representations and
warranties contained in this
Agreement are true and
correct;
7.2.6.4 The Borrower is in compliance
with all of the terms and
provisions of this Agreement;
and
7.2.6.5 Each of the conditions
described in this Section 7
have been complied with and/or
satisfied.
7.2.7 CORPORATE MATTERS. Borrower shall have
provided Lender with their respective
certified Articles or Certificates of
Incorporation, By-Laws, Certificates of
Good Standing and resolutions acceptable in
form and in substance to Lender.
7.2.8 OPINION OF COUNSEL. Borrower's counsel
shall have provided Lender with an opinion
letter concerning the validity and
enforceability of all provisions of this
Agreement and the Ancillary Agreements
which is acceptable in form and in
substance to Lender.
7.2.9 ADDITIONAL DOCUMENTS. Borrower shall have
provided Lender with such other
certificates and documents as Lender shall
require.
8.0 MISCELLANEOUS
8.1 MODIFICATION OF AGREEMENT: SALE OF INTEREST. This
Agreement and the Ancillary Agreements may not be
modified, altered or amended, except by an agreement in
writing signed by Borrower and Lender. Borrower may not
sell, assign or transfer this Agreement, or the
Ancillary Agreements or any portion hereof or thereof,
including, Borrower's right, title, interest, remedies,
powers, and/or
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<PAGE> 39
duties hereunder or thereunder. Borrower hereby consent
to Lender's participation, sale, assignment, transfer
or other disposition, at any time or times hereafter,
of this Agreement, or the Ancillary Agreements, or of
any portion hereof or thereof, including, Lender's
right, title, interest, remedies, powers, and/or duties
hereunder or thereunder.
8.2 ATTORNEYS' FEES AND EXPENSES; LENDER'S OUT-OF-POCKET
EXPENSES; AUDIT FEES. If, at any time or times, whether
prior or subsequent to the date hereof, and regardless
of the existence of a Default or an Event of Default,
Lender employs counsel for advice or other
representation or incurs legal and/or other costs and
expenses in connection with:
8.2.1 The preparation, negotiation and execution
of this Agreement, all Ancillary
Agreements, any amendment or modification
of this Agreement or the Ancillary
Agreements or any sale or attempted sale
of any interest herein to a Participant;
or
8.2.2 Any litigation, contest, dispute, suit,
proceeding or action (whether instituted by
Lender, any Borrower or any other Person)
in any way relating to any Collateral, this
Agreement, the Ancillary Agreements or any
Borrower's affairs; or
8.2.3 Any attempt to enforce any rights of Lender
or any Participant against any Borrower or
any other Person which may be obligated to
Lender by virtue of this Agreement or the
Ancillary Agreements; or
8.2.4 Any attempt to inspect, verify, protect,
collect, see, liquidate or otherwise
dispose of any Collateral; or
8.2.5 Any audit of any Collateral;
then, in any of the foregoing events, the fees arising
from such services and all reasonably incurred
expenses, costs and charges in any way or respect
arising in connection with or relating to any of the
events or actions described in this Section 8.2 shall
be payable, on demand, by Borrower to Lender and shall
be additional Liabilities hereunder; provided,
however, that the fees, costs and expenses in
connection with the preparation, negotiation and
execution of this Agreement and the initial field
audit shall not exceed $5,000 plus attorneys fees, and
with respect to subsequent field audits will not
exceed $1,500 per audit. Without limiting the
generality of the foregoing, such expenses, costs,
charges and fees may include legal fees, costs and
expenses; paralegals' fees, costs and
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expenses; accountants' and expert witness' fees, costs
and expenses; court costs, fees and expenses;
photocopying and duplicating expenses; court reporter
fees, costs and expenses; long distance telephone
charges; air express charges; telegram charges;
secretarial overtime charges; and expenses for travel,
lodging and food paid or incurred in connection with
the performance of such legal services.
8.3 NO WAIVER BY LENDER. Lender's failure, at any time or
times hereafter, to require strict performance by
Borrower of any provision of this Agreement shall not
constitute a waiver, or affect or diminish any right of
Lender thereafter to demand strict compliance and
performance therewith. Any suspension or waiver by
Lender of a Default or Event of Default by Borrower
under this Agreement or the Ancillary Agreements shall
not suspend, constitute a waiver of or affect any other
Default or Event of Default by Borrower under this
Agreement or Ancillary Agreements, whether the same is
prior or subsequent thereto and whether of the same or
of a different type. None of the undertakings,
agreements, warranties and covenants of Borrower
contained in this Agreement or the Ancillary Agreements
and no Default or Event of Default by the Borrower
under this Agreement or the Ancillary Agreements shall
be deemed to have been suspended or waived by Lender,
unless such suspension or waiver is by an instrument in
writing signed by an officer of Lender and directed to
Borrower specifying such suspension or waiver.
8.4 SEVERABILITY. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any
provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such
provision or the remaining provisions of this
Agreement.
8.5 PARTIES; ENTIRE AGREEMENT. This Agreement and the
Ancillary Agreements shall be binding upon and inure to
the benefit of the successors and assigns of Borrower
and Lender. Borrower's successors and assigns shall
include, without limitation, a trustee, receiver or
debtor-in-possession of or for Borrower. Nothing
contained in this Section 8.5 shall be deemed to modify
Section 12.2 of this Agreement. This Agreement is the
complete statement of the agreement by and between
Borrower and the Lender and supersedes all prior
negotiations, understandings and representations
between them with respect to the subject matter of this
Agreement.
8.6 CONFLICT OF TERMS. The provisions of the Ancillary
Agreements are incorporated in this Agreement by this
reference thereto. Except as otherwise provided in this
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Agreement and except as otherwise provided in the
Ancillary Agreements by specific reference to the
applicable provision of this Agreement, if any
provision contained in this Agreement is in conflict
with, or inconsistent with, any provision in the
Ancillary Agreements, the provision contained in this
Agreement shall govern and control.
8.7 WAIVERS BY BORROWER. Except as otherwise provided for
in this Agreement, Borrower waives (i) presentment,
demand and protest, notice of protest, notice of
presentment, default, non-payment, maturity, release,
compromise, settlement, extension or renewal of any or
all commercial paper, contract rights, documents,
instruments, chattel paper and guaranties at any time
held by Lender on which Borrower may in any way be
liable and hereby ratify and confirm whatever Lender
may do in this regard; (ii) all rights to notice and a
hearing prior to Lender's taking possession or control
of, or to Lender's replevy, attachment or levy upon,
any Collateral or any bond or security which might be
required by any court prior to allowing Lender to
exercise any of Lender's remedies; and (iii) the
benefit of all valuation, appraisement, extension and
exemption laws. Borrower acknowledges that they have
been advised by counsel of its choice with respect to
this Agreement and the transactions evidenced by this
Agreement.
8.8 GOVERNING LAW. This Agreement shall be interpreted, and
the rights and liabilities of the parties hereto
determined, in accordance with the internal laws (as
opposed to conflicts of law provision) of the State of
Illinois.
8.9 FORUM: SERVICE OF PROCESS. AS PART OF THE CONSIDERATION
FOR NEW VALUE THIS DAY RECEIVED, BORROWER HEREBY
CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN COOK COUNTY, ILLINOIS AND
WAIVE PERSONAL SERVICE OF ANY AND ALL PROCESS UPON
BORROWER, AND CONSENT THAT ALL SUCH SERVICE OF PROCESS
BE MADE BY MESSENGER OR REGISTERED MAIL DIRECTED TO
BORROWER AT THE ADDRESS STATED IN SECTION 8.10 OF THIS
AGREEMENT AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED UPON THE EARLIER OF DATE OF DELIVERY IF SENT
BY MESSENGER OR THREE (3) DAYS AFTER THE SAME SHALL
HAVE BEEN POSTED TO BORROWER'S ADDRESS AS SET FORTH
BELOW. BORROWER WAIVES TRIAL BY JURY AND WAIVE ANY
OBJECTION WHICH BORROWER MAY HAVE BASED ON IMPROPER
VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY
PROCEEDING INSTITUTED HEREUNDER OR RELATED IN ANY WAY
TO THIS AGREEMENT OR THE ANCILLARY AGREEMENTS AND
CONSENT TO
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THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY THE COURT. NOTHING CONTAINED IN
THIS SECTION 8.9 SHALL AFFECT THE RIGHT OF LENDER TO
SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR AFFECT THE RIGHT OF LENDER TO BRING ANY ACTION
OR PROCEEDING AGAINST BORROWER OR ITS PROPERTY IN THE
COURTS OF ANY OTHER JURISDICTION.
8.10 NOTICE. Except as otherwise provided herein, any notice
required hereunder shall be in writing and shall be
deemed to have been validly served, given or delivered
(i) three (3) business days after deposit in the United
States mails, with proper postage prepaid, certified or
registered mail, (ii) upon receipt when personally
delivered or delivered by reputable overnight courier,
or (iii) when sent by confirmed facsimile transmission,
in each case addressed to the party to be notified as
follows:
If to Lender, at:
LaSalle Bank NI
3201 North Ashland Avenue
Chicago, Illinois 60657
Attention: Beth S. Yura
Telefax: (773) 244-7432
with a copy (which copy shall not constitute notice)
to:
Foley & Lardner
One IBM Plaza, Suite 3300
Chicago, Illinois 60611-3608
Attention: Nehad S. Othman, Esq.
Telefax: (312) 755-1925
If to Borrower, at
Sabratek Corporation
5601 West Howard
Niles, Illinois 60714
Attention: Scott Skooglund,
Vice President
Telefax: (847) 647-2382
(36)
<PAGE> 43
with a copy (which copy shall not constitute notice)
to:
Ross & Hardies
150 North Michigan Avenue
Chicago, Illinois 60601
Attention: Scott Hodes, Esq.
Telefax: (312) 750-8600
or to such other address as each party may designate
for itself by like notice.
8.11 DELEGATION OF DUTIES AND GRANT OF AUTHORITY. Lender may
perform any of its duties under this Agreement or
under the Ancillary Agreements by or through agents or
attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such
duties. In such capacity, such agent or
attorney-in-fact shall have the right to undertake,
exercise and enforce, on behalf of Lender, all duties,
rights, demands and acts of discretion of Lender
provided for in, or in any way related to, this
Agreement or the Ancillary Agreements and to receive
all payments, notices and requests from Borrower on
behalf of and for the account of Lender that are
provided for in, or in any way related to, this
Agreement or the Ancillary Agreements to "Lender"
shall be deemed to mean a reference to such agent or
attorney in fact, as agent for Lender, as well as a
reference to Lender.
8.12 TRANSACTION EXPENSES. In addition to the payment of the
attorneys' fees referred to in Section 8.2 of this
Agreement, Borrower agrees to pay all of Lender's
expenses, not to exceed $5,000 plus attorneys fees,
incurred in connection with the preparation,
negotiation, execution and implementation of this
Agreement and the Ancillary Agreements, including audit
fees and document search fees. Lender shall deduct
these expenses from Borrower's loan proceeds at the
time of closing. Payment of such expenses shall not be
credited to any of the Liabilities.
8.13 SECTION TITLES. The section titles and Table of
Contents contained in this Agreement are and shall be
without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between
the parties hereto.
8.14 RELEASE BY BORROWER. In connection with any repayment
of all of the Liabilities to Lender, Borrower agrees to
give to Lender a release of all claims Borrower may
have against Lender, the form, substance and content of
which release shall be satisfactory to Lender in its
sole discretion.
(37)
<PAGE> 44
8.15 PARTICIPATIONS. Lender shall be permitted to sell a
participation in the Total Facilities hereunder on
terms satisfactory to such parties. Borrower shall
cooperate with any credit investigations and reviews
undertaken by such Participant.
IN WITNESS WHEREOF, this Agreement has been duly
executed as of the day and year specified at the beginning hereof.
SABRATEK CORPORATION
By: /s/ Scott Skooglund
-----------------------
Its: V.P. Finance
---------------------
LASALLE BANK NI
By: [SIG]
----------------------
Its: Vice President
---------------------
(38)
<PAGE> 45
EXHIBIT A
REVOLVING NOTE
$8,000,000.00 March 26, 1997
Chicago, Illinois
FOR VALUE RECEIVED, Sabratek Corporation, a Delaware corporation
("Borrower"), unconditionally promises to pay to the order of LaSalle Bank NI
("Lender"), at its offices at 3201 North Ashland Avenue, Chicago, Illinois, or
at such other place or places as Lender may from time to time designate in
writing, an amount not to exceed the principal sum of EIGHT MILLION DOLLARS
($8,000,000.00), together with interest payable on the principal balance from
time to time remaining unpaid. Notwithstanding anything to the contrary
contained herein, all unpaid principal, interest and other costs, charges or
amounts owing hereunder shall be due and shall be paid on April 30, 1999.
Principal and interest payments shall be due and payable as set
forth in that certain Credit Agreement dated March 26, 1997 by and among
Borrower and Lender (the "Loan Agreement"), at Lender's offices or wherever
Lender shall direct in writing. All terms of the Loan Agreement are hereby
incorporated herein. The Loan Agreement, among other things, contains provisions
for default, acceleration of amounts owing in certain circumstances, and
requests for advances under this instrument. Capitalized terms used herein and
not otherwise defined shall have the meanings given them in the Loan Agreement.
Interest shall be computed on the basis of a 360-day year for the
actual number of days elapsed, and shall be at a varying rate per annum equal to
the Prime Rate. Upon and during the continuance of an Event of Default, interest
shall be at a varying rate per annum equal to three percent (3%) plus the Prime
Rate. The "Prime Rate" shall mean the interest rate per annum from time to time
announced and made effective by Lender at its office in Chicago, Illinois, as
the Prime Rate, or, as the case may be, the base, reference or other similar
rate then designated by Lender for commercial loan reference purposes, it being
understood that such rate is a reference rate, not necessarily the lowest
interest rate charged by Lender or others to their respective customers, and as
established from time to time serves as the basis upon which effective rates of
interest are calculated for those loans making reference thereto.
Borrower warrants and represents to Lender that Borrower has used
and will continue to use the loans and advances represented by this Note solely
for proper business purposes, and consistent with all applicable laws and
statues. Borrower further warrants and represents to Lender and covenants with
Lender that Borrower is not in the business of extending credit for the purpose
of purchasing or carrying margin stock (within the meaning of Regulation U
issued by the Board of Governors of the Federal Reserve System), and no part of
the loan represented by this Note has been or will be used to purchase or carry
any margin stock or to extend credit to others for the purpose of purchasing or
carrying any margin stock.
Upon and after the occurrence and during the continuance of an
Event of Default under
A-1
<PAGE> 46
the Loan Agreement (a) at the option of Lender, the entire unpaid amount of all
the Liabilities shall become immediately due and payable without demand, notice
or legal process of any kind; and (b) Lender may, at its option, without demand,
notice or legal process of any kind, exercise any and all rights and remedies
granted to it by the Loan Agreement or by any Ancillary Agreement or any other
rights and remedies available to it under the Code or other law of the State of
Illinois.
Upon and after the occurrence of and during the continuance of an
Event of Default, Borrower waives the benefit of any law that would otherwise
restrict or limit Lender in the exercise of its right, which is hereby
acknowledged, to set off at any time hereafter any indebtedness owing from
Lender to Borrower. Borrower does hereby assign and transfer to Lender any and
all cash, negotiable instruments, documents of title, chattel paper, securities,
certificates of deposit, deposit accounts, other cash equivalents and other
assets of Borrower in the possession or control of Lender for any purpose,
including application to the satisfaction of any or all of the Liabilities.
Borrower waives presentment, demand and protest, notice of protest
and notice of presentment. Any failure of Lender to exercise any right available
hereunder or otherwise shall not be construed as a waiver of the right to
exercise the same or as a waiver of any other right at any other time.
Borrower agrees to pay all out-of-pocket expenses, including, but
not limited to, reasonable attorneys' fees, court costs, storage costs, rental
charges, transportation charges and similar expenses paid or incurred in
enforcing any of Lender's rights hereunder or in connection with any of the
collateral securing this Note, promptly on demand of Lender or other person
incurring the same.
Lender may at any time transfer this Note and Lender's rights in
any collateral securing this Note, and Lender thereafter shall be relieved from
all liability with respect to such collateral for any damage occurring after
such transfer.
This Note shall be governed and construed in accordance with the
internal laws of the State of Illinois and shall be binding upon Borrower and
their respective legal representatives, successors and assigns. If this Note
contains any blanks when executed by Borrower, Lender is hereby authorized,
without notice to Borrower, to complete any such blanks according to the terms
upon which the loan is granted. Wherever possible, each provision of this Note
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Note shall be prohibited by or
invalid under such law, such provision shall be severable, and be ineffective to
the extent of such prohibition or invalidity, without invalidating the remaining
provisions of this Note.
TO INDUCE LENDER TO ACCEPT THIS NOTE, BORROWER IRREVOCABLY AGREES
THAT, SUBJECT TO LENDER'S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS
IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS NOTE,
SHALL BE LITIGATED IN COURTS HAVING SITES WITHIN THE COUNTY OF COOK, STATE OF
ILLINOIS. BORROWER HEREBY
A-2
<PAGE> 47
CONSENTS AND SUBMIT TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT
LOCATED WITHIN SAID COUNTY AND STATE, AND CONSENT TO LENDER CHANGING VENUE TO
THIS FORUM IN THE EVENT LITIGATION CONCERNING THIS INSTRUMENT IS PENDING IN
ANOTHER FORUM. BORROWER HEREBY WAIVES (I) ANY RIGHT TO A TRIAL BY JURY
CONCERNING ANY MATTER RELATING TO THIS NOTE, THE LOAN AGREEMENT, THE ANCILLARY
DOCUMENTS AND ANY SECURITY DOCUMENT, AND (II) ANY RIGHTS BORROWER MAY HAVE TO
TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST BORROWER BY
LENDER IN ACCORDANCE WITH THIS PARAGRAPH.
SABRATEK CORPORATION
By:___________________
Its:__________________
A-3
<PAGE> 48
EXHIBIT B
EQUIPMENT TERM NOTE
$1,500,000 March 26, 1997
Chicago, Illinois
Sabratek Corporation, a Delaware corporation ("Borrower"), FOR
VALUE RECEIVED, unconditionally promises to pay to the order of LaSalle Bank NI
("Lender"), at 3201 North Ashland Avenue, Chicago, Illinois 60657, or at such
other place as the holder of this Equipment Term Note may designate in writing,
the principal sum owed by Borrower to Lender pursuant to the Equipment Term Loan
evidenced by this Note. Such Equipment Term Loan is part of the Equipment
Purchase Facility referenced in Section 2.1.3 of that certain Credit Agreement
dated March 26, 1997 (as the same may at any time be amended or modified and in
effect, the "Loan Agreement"), between Borrower and Lender. The Equipment Term
Loan evidenced by this Note shall be repaid in full not later than [April 30,
2004].
Borrower promises to pay interest on the outstanding principal
amount hereunder until paid, pursuant to the terms of the Loan Agreement and at
the rates per annum and on the dates specified in the Loan Agreement. The
principal amount due hereunder shall be repaid as set forth in the Loan
Agreement. Payments of principal and interest hereunder are to be made in lawful
money of the United States of America and in immediately available funds.
Capitalized terms used in this Note that are not specifically
defined herein but are defined in the Loan Agreement shall have the meanings in
this Note given to them in the Loan Agreement. Lender is authorized to
record, on a schedule annexed hereto, or on other appropriate records of
Lender, the date, type and amount of each Equipment Term Loan under the
Equipment Purchase Facility, any continuation thereof, any conversion of all or
a portion thereof to a different type of Equipment Term Loan, and the date and
amount of each payment or prepayment of principal thereof, and any such
recordation shall constitute prima facie evidence of the accuracy of the
information so recorded; provided that the failure of lender to make such
recordation (or any error in such recordation) shall not affect the obligations
of Borrower hereunder or under the Loan Agreement in respect of such Equipment
Term Loans.
This Note is the note described in Section 2.1.3.3 of the Loan
Agreement, and is subject to the terms and provisions of the Loan Agreement.
Reference is hereby made to the Loan Agreement for a statement of the terms and
conditions under which the Equipment Term Loan was made and is to be repaid,
including prepayment rights and obligations of Borrower, nature, extent and
rights in any collateral security, and a statement of the terms and conditions
under which the due date of this Note may be accelerated.
Borrower hereby waives presentment, demand, protest and notice of
presentment, demand, nonpayment and protest. Any failure of Lender to exercise
any right available hereunder or otherwise shall not be construed as a waiver of
the right to exercise the same or as a waiver of any other right at any other
time.
B-1
<PAGE> 49
Payments received by Lender from Borrower on this Note shall be
applied to the Liabilities as provided in the Loan Agreement.
Lender may at any time transfer this Note and Lender's rights in
any collateral securing this Note, and Lender thereafter shall be relieved from
all liability with respect to such collateral for any damage occurring after
such transfer.
This Note shall be interpreted and the rights and liabilities of
the parties shall be determined in accordance with the laws of the State of
Illinois. Whenever possible each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Note. Whenever in this Note reference is made to Lender, such reference
shall be deemed to include, as applicable, a reference to Lender's successors
and assigns. The provisions of this Note shall be binding upon Borrower and its
successors and assigns, and shall inure to the benefit of Lender and its
successors and assigns.
In addition to and not in limitation of the foregoing and the
provisions of the Loan Agreement, the undersigned further agrees, subject only
to the limitations imposed by applicable law, to pay all expenses incurred by
the holder of this Note in endeavoring to collect any amounts payable hereunder
which are not paid when due, whether by acceleration or otherwise.
TO INDUCE LENDER TO ACCEPT THIS NOTE, BORROWER IRREVOCABLY AGREES
THAT, SUBJECT TO LENDER'S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR
PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED
TO THIS NOTE, SHALL BE LITIGATED IN COURTS HAVING SITES WITHIN THE COUNTY OF
COOK, STATE OF ILLINOIS. BORROWER HEREBY CONSENTS AND SUBMIT TO THE
JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCALLY WITHIN SAID COUNTY
AND STATE, AND CONSENT TO LENDER CHANGING VENUE TO THIS FORUM IN THE
EVENT LITIGATION CONCERNING THIS INSTRUMENT IS PENDING IN ANOTHER FORUM.
BORROWER HEREBY WAIVES (I) ANY RIGHT TO A TRIAL BY JURY CONCERNING ANY MATTER
RELATING TO THIS NOTE, THE LOAN AGREEMENT, THE ANCILLARY DOCUMENTS AND ANY
SECURITY DOCUMENT, AND (II) ANY RIGHTS BORROWER MAY HAVE TO TRANSFER OR CHANGE
THE VENUE OF ANY LITIGATION BROUGHT AGAINST BORROWER BY LENDER IN ACCORDANCE
WITH THIS PARAGRAPH.
SABRATEK CORPORATION
By:___________________
Its:__________________
B-2
<PAGE> 50
Schedule I
to Credit Agreement Dated as of March 26, 1997
1. Litigation:
(a) On February 5, 1997, SIMS Deltec filed a complaint in
the U.S. District Court for the District of Minnesota
(Sims Deltec, Inc. vs. Sabratek Corporation) alleging
that Borrower's manufacture, use and/or sale of the
MediVIEW software in conjunction with its infusion
pumps infringes a patent previously issued to SIMS
Deltec. The Borrower is being represented by Fitch,
Even, Tabin & Flannery of Chicago.
(b) The Borrower is a party to a lawsuit filed by a former
employee (Garrison v. Sabratek Corporation) seeking
payment of certain compensation. The Borrower is being
represented by Jenner & Block.
2. Indebtedness:
(a) In connection with a training program, the Borrower is
indebted to the State of Illinois in the approximate
amount of $4,000.
(b) The Borrower is a party to a number of conditional sale
agreements providing for the lease of certain fixed
assets, computer hardware, office and production
equipment. The lessors are: Acclaim Leasing (Advanta),
Comdisco and Funding Services, Inc. (assigned to GE
Capital). Attached hereto as Attachment A is a list of
each such lease.
(c) The Borrower formerly financed receivables with
Sterling Business Credit, a division of Standard
Factors Corp. Although Borrower's financing with
Sterling has been terminated, and Sterling has
delivered copies of U.C.C.-3 termination statements
terminating Sterling's interest in Borrower's assets,
Sterling's Forms U.C.C.-3 have apparently not been
filed and Sterling's security interests continue to
appear of record.
<PAGE> 51
ATTACHMENT A
<TABLE>
<CAPTION>
ORIGINATION MATURITY
LEASE COMPANY LEASE NO. DATE # MONTHS DATE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fixed Assets
1 Comdisco 18-SL31268-00 Sep-94 36 Sep-97
2 Comdisco 18-SL31268-01 Mar-95 36 Feb-98
3 Comdisco 18-SL31268-02 Apr-95 36 Mar-98
Computer Hardware:
4 Funding Services, Inc. 24078017 Feb-93 36 Jan-96
5 Funding Services, Inc. 7123440 Apr-93 36 Mar-96
6 Funding Services, Inc. HI LS 8400 May-93 36 Mar-96
7 Funding Services, Inc. 7141461 Dec-93 36 Nov-96
8 Funding Services, Inc. 342410-077 Jun-94 36 May-97
9 Funding Services, Inc. 10411 Oct-94 36 Sep-97
10 Funding Services, Inc. 11994 Dec-94 36 Nov-97
11 Funding Services, Inc. 7162111 Dec-94 36 Nov-97
12 Funding Services, Inc. 7163597 Jan-95 36 Dec-97
13 Acclaim Leasing, Inc. 10187967001 Feb-95 36 Jan-98
14 Acclaim Leasing, Inc. 10187967002 Mar-95 36 Feb-98
Office Furniture:
15 Funding Services, Inc. 7123275 Apr-93 52 Jul-97
Production Equipment:
16 Funding Services, Inc. 0007671-000 Jul-94 36 Jun-97
17 Funding Services, Inc. 7126927 May-93 36 Apr-96
</TABLE>
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' 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
/s/ KPMG Peat Marwick LLP
Chicago, Illinois
June 11, 1998
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
-----------------------
LASALLE NATIONAL BANK
(Exact name of trustee as specified in its charter)
36-0884183
(I.R.S. Employer
Identification No.)
135 South LaSalle Street, Chicago, Illinois 60603
(Address of principal executive offices) (Zip Code)
-----------------------
M. ROBERT K. QUINN
Senior Vice President and General Counsel
Telephone: (312) 904-2010
135 South LaSalle Street
Chicago, Illinois 60603
(Name, address and telephone number of agent for service)
-----------------------
Sabratek Corporation
(Exact name of obligor as specified in its charter)
Delaware
(State or other jurisdiction
incorporation or organization)
36-3700639
(I.R.S. Employer
Identification No.)
5601 West Howard Street
Niles, Illinois
60714
-----------------------
(Address of Principal Executive Offices)
(Zip Code)
$85,000,000 6% Convertible Note Due 2005
(Title of the indenture securities)
<PAGE> 2
ITEM 1. GENERAL INFORMATION
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
1. Comptroller of the Currency, Washington D.C.
2. Federal Deposit Insurance Corporation,
Washington, D.C.
3. The Board of Governors of the Federal Reserve
Systems, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS.
If the obligor or any underwriter for the obligor is an affiliate of the
trustee, describe each such affiliation.
Neither the obligor nor any underwriter for the obligor is an
affiliate of the trustee.
ITEM 3. VOTING SECURITIES OF THE TRUSTEE.
Furnish the following information as to each class of voting securities of the
trustee:
Not applicable
ITEM 4. TRUSTEESHIPS UNDER OTHER INDENTURES.
If the trustee is a trustee under another indenture under which any other
securities, or certificates of interest or participation in any other
securities, of the obligor are outstanding, furnish the following information:
(a) Title of the securities outstanding under each other
indenture.
Not applicable
(b) A brief statement of the facts relied upon as a basis for the
claim that no conflicting interest within the meaning of Section
310(b)(1) of the Act arises as a result of the trusteeship under
such other indenture, including a statement as to how the
indenture securities will rank as compared with the securities
issued under such other indenture.
We have performed our annual conflict of interest check and found
no conflicts with the Issuer in our individual capacity. The new securities,
when issued, would rank pari passu with the securities under the existing
indentures.
<PAGE> 3
ITEM 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR OR
UNDERWRITERS.
If the trustee or any of the directors or executive officers of the trustee is
a director, officer, partner, employee, appointee, or representative of the
obligor or of any underwriter for the obligor, identify each such person having
any such connection and state the nature of each such connection.
Not applicable
ITEM 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS OFFICIALS.
Furnish the following information as to the voting securities of the trustee
owned beneficially by the obligor and each director, partner and executive
officer of the obligor.
Not applicable
ITEM 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR
OFFICIALS.
Furnish the following information as to the voting securities of the trustee
owned beneficially by each underwriter for the obligor and each director,
partner, and executive officer of each such underwriter.
Not applicable
ITEM 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
Furnish the following information as to securities of the obligor owned
beneficially or held as collateral security for obligations in default by the
trustee:
Not applicable
ITEM 9. SECURITIES OF THE UNDERWRITER OWNED OR HELD BY THE TRUSTEE.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of an underwriter for the obligor,
furnish the following information as to each class of securities of such
underwriter any of which are so owned or held by the trustee.
Not applicable
Not applicable
ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN
AFFILIATE
Not applicable
Not applicable
<PAGE> 4
ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN
AFFILIATE
Not applicable
ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN
AFFILIATES OR SECURITY HOLDER
Not applicable
ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN
AFFILIATES OR SECURITY HOLDER
Not applicable
Not applicable
Not applicable
ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN
AE OF THE VOTING SECURITIES OF THE OBLIGOR.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of a person who, to the knowledge of the
trustee, owns 50 percent or more of the voting securities of the obligor,
furnish the following information as to each class of securities of such person
any of which are so owned or held by the trustee.
Not applicable
ITEM 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
If the obligor is indebted to the trustee, furnish the following information.
Not applicable
ITEM 13. DEFAULTS BY THE OBLIGOR.
a) State whether there is or has been a default with respect to the securities
under this indenture. Explain the nature of any such default.
Not applicable
b) If the trustee is a trustee under another indenture under which any other
securities, or certificates of interest or participation in any other
securities, of the obligor are outstanding, or is trustee for more than one
outstanding series of securities under the indenture, state whether there has
been a default under any such indenture or series, identify the indenture or
series affected, and explain the nature of any such default.
Not applicable
<PAGE> 5
ITEM 14. AFFILIATIONS WITH THE UNDERWRITERS.
If any underwriter is an affiliate of the trustee, describe each such
affiliation.
Not applicable
ITEM 15. FOREIGN TRUSTEE.
Identify the order or rule pursuant to which the foreign trustee is authorized
to act as sole trustee under indentures qualified or to be qualified.
Not applicable
ITEM 16. LIST OF EXHIBITS.
List below all exhibits filed as part of this statement of eligibility and
qualification.
1. A copy of the Articles of Association of
LaSalle National Bank now in effect.
2. A copy of the certificate of authority to
commence business.
3. A copy of the authorization to exercise
corporate trust powers.
4. A copy of the existing By-Laws of LaSalle
National Bank.
5. Not applicable.
6. The consent of the trustee required by Section
321(b) of the Trust Indenture Act of 1939.
7. A copy of the latest report of condition of the
trustee published pursuant to law or the requirements of its
supervising or examining authority.
8. Not applicable.
9. Not applicable.
<PAGE> 6
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939,the trustee,
LaSalle National Bank, a corporation organized and existing under the laws of
the United States of America, has duly caused this statement of eligibility and
qualification to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Chicago, State of Illinois, on the 8th day of
June 1998.
LASALLE NATIONAL
BANK
By: /s/ Sarah H. Webb
----------------------------
Sarah H. Webb
First Vice President
<PAGE> 7
EXHIBIT 1
ARTICLES OF ASSOCIATION
<PAGE> 8
ARTICLES
OF
ASSOCIATION
LASALLE NATIONAL BANK (LOGO)
LASALLE NATIONAL BANK
CHICAGO, ILLINOIS
<PAGE> 9
(LOGO)
LaSalle National Bank
ARTICLES OF ASSOCIATION
FIRST. The title of this association, which shall carry on the business of
banking under the laws of the United States shall be "LaSalle National Bank."
SECOND. The place where the main banking house or office of this
association shall be located, its operations of discount and deposit carried
on, and its general business conducted, shall be Chicago, County of Cook, State
of Illinois.
THIRD. The Board of Directors of this association shall consist of such
number of its shareholders, not less than five nor more than twenty-five, as
from time to time shall be determined by a majority of the votes to which all
of its shareholders are at the time entitled. A majority of the Board of
Directors shall be necessary to constitute a quorum for the transaction of
business. The Board of Directors, by vote of a majority of the full board, may,
between annual meetings of shareholders increase the membership of the Board
where the number of directors last elected by shareholders was 15 or less, by
not more than two members, and where the number of directors last elected by
shareholders was 16 or more, by not more than four members and by a like vote
appoint qualified persons to fill the vacancies created thereby; provided that
the number of Directors shall at no time exceed twenty-five.
FOURTH. The regular annual meeting of the shareholders of this association
shall be held at its main banking house, or other convenient place duly
authorized by the board of directors on such day of each year as is specified
therefor in the bylaws.
FIFTH. The amount of capital stock which this association is authorized to
issue shall be Twenty Million Dollars ($20,000,000.00) divided into 2,000,000
shares of common capital stock of the par value of $10.00 each; but said
capital stock may be increased or decreased from time to time, in accordance
with the provisions of the laws of the United States.
If the capital stock is increased by the sale of additional shares
thereof, other than to key officers and employees of the association upon the
exercise of options granted pursuant to the terms of a stock option plan then
in effect, as to which sales all pre-emptive rights are waived, each
shareholder shall be entitled to subscribe for such additional shares in
proportion to the number of shares of said capital stock owned by him at the
time the increase is authorized by the shareholders, unless another time
subsequent to the date of the shareholders' meeting is specified in a
resolution adopted by the shareholders at the time the increase is authorized.
The board of directors shall have the power to prescribe a reasonable period of
time within which the pre-emptive rights to subscribe to the new shares of
capital stock may be exercised.
The association, at any time and from time to time, may authorize and
issue debt obligations, whether or not subordinated, without the approval of
the shareholders.
SIXTH. The board of directors shall appoint one of its members president
of this association, who shall be chairman of the board, but the board of
directors may appoint a director in lieu of the president
<PAGE> 10
to be chairman of the board, who shall perform such duties as may be designated
by the board of directors. The board of directors shall have the power to
appoint one or more vice presidents, a cashier and such other officers as may
be required to transact the business of this association; to fix the salaries
to be paid to all officers of this association; and to dismiss such officers,
or any of them.
The board of directors shall have the power to define the duties of
officers and employees of this association, to require bonds from them, and to
fix the penalty thereof; to regulate the manner in which directors shall be
elected or appointed, and to appoint judges of the election; to make all bylaws
that it may be lawful for them to make for the general regulation of the
business of this association and the management of its affairs; and generally
to do and perform all acts that it may be lawful for a board of directors to do
and perform.
SEVENTH. This association shall have succession from the date of its
organization certificate until such time as it be dissolved by act of its
shareholders in accordance with the provisions of the banking laws of the
United States, or until its franchise becomes forfeited by reason of violation
of law, or until terminated by either a general or a special act of Congress,
or until its affairs be placed in the hands of a receiver and finally wound up
by him.
EIGHTH. The board of directors of this association, or any three or more
shareholders owning, in the aggregate, not less than ten per centum of the
stock of this association, may call a special meeting of shareholders at any
time: Provided, however, that, unless otherwise provided by law, not less than
ten days prior to the date fixed for any such meeting, a notice of the time,
place, and purpose of the meeting shall be given by first-class mail, postage
prepaid, to all shareholders of record of this association at their respective
addresses as shown upon the books of the association. These articles of
association may be amended at any regular or special meeting of the
shareholders by the affirmative vote of the shareholders owning at least a
majority of the stock of this association, subject to the provisions of the
banking laws of the United States. The notice of any shareholders' meeting, at
which an amendment to the articles of association of this association is to be
considered, shall be given as herein-above set forth.
NINTH. Any person, his heirs, executors, or administrators, may be
indemnified or reimbursed by the association for reasonable expenses actually
incurred in connection with any action, suit, or proceeding, civil or criminal,
to which he or they shall be made a party by reason of his being or having been
a director, officer, or employee of the association or of any firm,
corporation, or organization which he served in any such capacity at the
request of the association: Provided, however, that no person shall be so
indemnified or reimbursed in relation to any matter in such action, suit, or
proceeding as to which he shall finally be adjudged to have been guilty of or
liable for negligence or wilful misconduct in the performance of his duties to
the association: And, provided further, that no person shall be so indemnified
or reimbursed in relation to any matter in such action, suit, or proceeding
which has been made the subject of a compromise settlement except with the
approval of a court of competent jurisdiction, or the holders of record of a
majority of the outstanding shares of the association, or the board of
directors, acting by vote of directors not parties to the same or substantially
the same action, suit, or proceeding, constituting a majority of the whole
number of the directors. The foregoing right of indemnification or
reimbursement shall not be exclusive of other rights to which such person, his
heirs, executors, or administrators, may be entitled as a matter of law.
********
<PAGE> 11
May 17, 1982
Form No. 181, Rev 5/17/82 GW
<PAGE> 12
EXHIBIT 2
CERTIFICATE OF AUTHORITY
TO COMMENCE BUSINESS
<PAGE> 13
STATE OF ILLINOIS
AUDITOR'S OFFICE
NO. 333 (LOGO)
NATIONAL BANK TRUST CERTIFICATE
Springfield, FEBRUARY 15th 1928
I, OSCAR NELSON, Auditor of Public Accounts of the State of Illinois, do
hereby certify that the NATIONAL BUILDERS BANK OF CHICAGO located at CHICAGO,
County of COOK and State of Illinois, a corporation organized under and by
authority of the statutes of the United States governing National Banks and
authority granted by the Federal Reserve Act for the purpose of accepting and
executing trusts, has this day deposited in this office, securities in the sum
of TWO HUNDRED THOUSAND Dollars, $200,000.00 of the character designated by
Section 6 of the Act of the Legislature of the State of Illinois entitled "An
Act to provide for and regulate the administration of trusts by trust
companies,"
The said deposit is made for the benefit of the creditors of said NATIONAL
BUILDERS BANK OF CHICAGO under and by virtue of the provisions of the Act above
referred to and the said securities are now held by me in this office in my
official capacity as such Auditor of Public Accounts, for the uses and purposes
aforesaid.
I further certify that by virtue of the Acts aforesaid, the NATIONAL
BUILDERS BANK OF CHICAGO is hereby authorized to accept and execute trusts and
receive deposits of trust funds under the provisions and limitations of "An Act
to provide for and regulate the administration of trusts in Illinois.
(SEAL)
IN TESTIMONY WHEREOF, I hereunto subscribe my name and affix the seal of my
office, the day and year first above written.
/s/ Oscar Nelson
---------------------------
AUDITOR OF PUBLIC ACCOUNTS.
STATE OF ILLINOIS.
<PAGE> 14
NO. 13146.
TREASURY DEPARTMENT (LOGO)
OFFICE OF COMPTROLLER OF THE CURRENCY
Washington, D.C., NOVEMBER 29, 1927.
WHEREAS, by satisfactory evidence presented to the undersigned, it has
been made to appear that "NATIONAL BUILDERS BANK OF CHICAGO" in the CITY of
CHICAGO in the County of COOK and State of ILLINOIS has complied with all the
provisions of the Statutes of the United States, required to be complied with
before an association shall be authorized to commence the business of Banking;
NOW THEREFORE I, J.W. MCINTOSH, Comptroller of the Currency, do hereby
certify that "NATIONAL BUILDERS BANK OF CHICAGO" in the CITY of CHICAGO in the
County of COOK and State of ILLINOIS is authorized to commence the business of
Banking as provided in Section Fifty one hundred and sixty nine of the Revised
Statutes of the United States.
(SEAL)
IN TESTIMONY WHEREOF witness my hand and Seal of (SEAL) office this
TWENTY-NINTH day of NOVEMBER, 1927.
/s/ J.W. McIntosh
---------------------------
Comptroller of the Currency
<PAGE> 15
CERTIFICATE OF CHANGE OF CORPORATE TITLE
(LOGO)
NO. 13146.
TREASURY DEPARTMENT
OFFICE OF THE COMPTROLLER OF THE CURRENCY
WASHINGTON, D.C., MAY 1, 1940.
WHEREAS, by satisfactory evidence presented to me, it appears that under
authority of sections 2, 3, and 4, of the Act of Congress approved May 1, 1886,
entitled "An Act to enable national banking associations to increase their
capital stock and to change their names or location," shareholders owning
two-thirds of the stock of the national banking association heretofore known
as-- "NATIONAL BUILDERS BANK OF CHICAGO," located in CHICAGO, County of COOK,
State of ILLINOIS, have voted to change the name of said association to--
"LASALLE NATIONAL BANK," and have complied with all the provisions of the said
Act relative to national banking associations changing their name.
NOW, THEREFORE, IT IS HEREBY CERTIFIED, that the name of the said
association has been changed to-- "LASALLE NATIONAL BANK," and that such change
of name is hereby approved under authority conferred by said Act.
(SEAL)
IN TESTIMONY WHEREOF, witness my hand and seal of office this FIRST day of MAY,
1940.
/s/
-------------------------------------
ACTING Comptroller of the Currency.
<PAGE> 16
EXHIBIT 3
AUTHORIZATION TO EXERCISE
CORPORATE TRUST POWERS
<PAGE> 17
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM [LETTERHEAD]
WASHINGTON
May 9, 1940
LaSalle National Bank,
Chicago, Illinois.
Gentlemen:
The Board of Governors of the Federal Reserve System has been officially
advised by the Comptroller of the Currency that on May 1, 1940, National
Builders Bank of Chicago, Chicago, Illinois, changed its title to LaSalle
National Bank, and accordingly there is enclosed herewith a certificate showing
that LaSalle National Bank has authority to exercise the fiduciary powers
enumerated therein.
Kindly acknowledge receipt of this certificate.
Very truly yours,
S. R. Carpenter
--------------------
S. R. Carpenter,
Assistant Secretary.
Enclosure
<PAGE> 18
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
I, S. R. Carpenter, Assistant Secretary of the Board of Governors of the
Federal Reserve System (formerly known as the Federal Reserve Board), do hereby
certify that it appears from the records of the Board of Governors of the
Federal Reserve System that:
(1) Pursuant to the authority vested in the Federal Reserve Board by an
Act of Congress approved December 23, 1913, known as the Federal Reserve Act,
as amended, the Federal Reserve Board on December 8, 1927, granted to National
Builders Bank of Chicago, Chicago, Illinois, the right to act, when not in
contravention of State or local law, as trustee, executor, administrator,
registrar of stocks and bonds, guardian of estates, assignee, receiver,
committee of estates of lunatics, or in any other fiduciary capacity in which
State banks, trust companies or other corporations which come into competition
with national banks are permitted to act under the laws of the State of
Illinois;
(2) Under the provisions of an Act of Congress approved May 1, 1886,
National Builders Bank of Chicago, Chicago, Illinois, on May 1, 1940, changed
its title to LaSalle National Bank; and
(3) By virtue of the foregoing, LaSalle National Bank, Chicago, Illinois,
has authority to act, when not in contravention of State or local law, as
trustee, executor, administrator, registrar of stocks and bonds, guardian of
estates, assignee, receiver, committee of estates of lunatics, or in any other
fiduciary capacity in which State banks, trust companies or other corporations
which come into competition with national banks are permitted to act under the
laws of the State of Illinois, subject to regulations prescribed by the Board
of Governors of the Federal Reserve System.
IN WITNESS WHEREOF, I have hereunto subscribed my name and caused the seal
of the Board of Governors of the Federal Reserve System to be affixed at the
City of Washington in the District of Columbia.
/s/ S. R. Carpenter
----------------------
Assistant Secretary.
Dated May 9, 1940
<PAGE> 19
EXHIBIT 4
BY-LAWS OF LASALLE NATIONAL BANK
<PAGE> 20
BYLAWS
OF
LASALLE NATIONAL BANK
CHICAGO, ILLINOIS
LASALLE NATIONAL BANK (LOGO)
Organized Under the National Banking Laws
of the United States
<PAGE> 21
BYLAWS
of the
LASALLE NATIONAL BANK
(a National Banking Association which association
is herein referred to as the "bank")
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1.1. ANNUAL MEETING. The regular annual meeting of the
shareholders for the election of directors and the transaction of whatever
other business may properly come before the meeting, shareholders for the
election of directors and the transaction of whatever other business may
properly come before the meeting, shareholders for the election of directors
and the transaction of whatever other business may properly come before the
meeting, shareholders for the election of directors and the transaction of
whatever other business may properly come before the meeting, shareholders for
the election of directors and the transaction of whatever other business may
properly come before the meeting, on to be held on some subsequent day as soon
thereafter as practicable, according to the provisions of law; and notice
thereof shall be given in the manner herein provided for the annual meeting.
SECTION 1.2. SPECIAL MEETINGS. Except as otherwise specifically provided
by statute, special meetings of the shareholders may be called for any purpose
at anytime by the board of directors or by any three or more shareholders
owning, in the aggregate, not less than ten percent of the stock of the bank.
Every such special meeting, unless otherwise provided by law, shall be called
by mailing, postage pre-paid, not less than ten days prior to the date fixed
for such meeting, to each shareholder at his address appearing on the books of
the bank, a notice stating the purpose of the meeting.
SECTION 1.3. NOMINATIONS FOR DIRECTOR. Nominations for election to the
board of directors may be made by the board of directors or by any shareholder
of any outstanding class of capital stock of the bank entitled to vote for the
election of directors. Nominations, other than those made by or on behalf of
the existing management of the bank, shall be made in writing and shall be
delivered or mailed to the president of the bank and to the Comptroller of the
Currency, Washington, D.C., not less than 14 days nor more than 50 days prior
to any meeting of shareholders called for the election of directors, provided,
however, that if less than 21 days' notice of the meeting is given to the
shareholders, such nomination shall be mailed or delivered to the president of
the bank and to the Comptroller of the Currency not later than the close of
business on the seventh day following the day on which the notice of meeting
was mailed. Such notification shall contain the following information to the
extent known to the notifying shareholder: (a) the name and address of each
proposed nominee; (b) the principal occupation of each proposed nominee; (c)
the total number of shares of capital stock of each proposed nominee; (d) the
name and address of the notifying shareholder; and (e) the number of shares of
capital stock of the bank owned by the notifying shareholder. Nominations not
made in accordance herewith, may, in his discretion, be disregarded by the
chairman of the meeting, and upon his instructions, the vote tellers may
disregard all votes cast for each such nominee.
SECTION 1.4. JUDGES OF ELECTION. Every election of directors shall be
managed by three judges, who shall be appointed by the board of directors prior
lo the time of said election. The judges of election shall hold and conduct the
election at which they are appointed to serve; and after the
<PAGE> 22
election, they shall file with the cashier a certificate under their hands,
certifying the result thereof and the names of the directors elected. The
judges of election. at the request of the chairman of the meeting, shall act as
tellers of any other vote by ballot taken at such meeting, and shall certify
the result thereof.
SECTION 1.5. PROXIES. Shareholders may vote at any meeting of the
shareholders by proxies duly authorized in writing, but no officer or employee
of this bank shall act as proxy. Proxies shall be valid only for one meeting,
to be specified therein, and any adjournments of such meeting. Proxies shall be
dated and shall be filed with the records of the meeting.
SECTION 1.6. QUORUM. A majority of the outstanding capital stock,
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders, unless otherwise provided by law; but less than a quorum may
adjourn any meeting, from time to time, and the meeting may be held, as
adjourned, without further notice. A majority of the votes cast shall decide
every question or matter submitted to the shareholders at any meeting, unless
otherwise provided by law or by the articles of association.
ARTICLE II
DIRECTORS
SECTION 2.1. BOARD OF DIRECTORS. The board of directors (hereinafter
referred to as the "board"), shall have power to manage and administer the
business affairs of the bank. Except as expressly limited by law, all corporate
powers of the bank shall be vested in and may be exercised by said board.
SECTION 2.2. NUMBER. The board shall consist of not less than five or more
than twenty-five shareholders, the exact number within such minimum and maximum
limits to be fixed and determined from time to time by resolution of a majority
of the full board or by resolution of the shareholders at any meeting thereof;
provided, however, that a majority of the full board may not increase the
number of directors by more than two if the number of directors last elected by
shareholders was fifteen or less and by not more than four where the number of
directors last elected by shareholders was sixteen or more, provided that in no
event shall the number of directors exceed twenty-five.
SECTION 2.3. ORGANIZATION MEETING. The cashier, upon receiving the
certificate of the judges, of the result of any election, shall notify the
directors-elect of their election and of the time at which they are required to
meet at the main office of the bank for the purpose of organizing the new board
and electing and appointing officers of the bank for the succeeding year. Such
meeting shall be appointed to be held on the day of election or as soon
thereafter as practicable, and, in any event, within thirty days thereof. If,
at the time fixed for such meeting, there shall not be a quorum present the
directors present may adjourn the meeting, from time to time, until a quorum
is obtained.
SECTlON 2.4 REGULAR MEETINGS. The regular meetings of the board shall be
held, without notice, on the third Wednesday of each month at the main office.
When any regular meeting of the board falls upon a holiday, the meeting shall
be held on the next banking business day unless the board shall designate some
other day.
SECTION 2.5 SPECIAL MEETINGS. Special meetings of the board may be called
by the chairman of the board, the president, or at the request of three or more
directors. Each member of the board shall be given notice stating the
1
<PAGE> 23
time and place, by telegram, letter or in person, of each such special meeting.
SECTION 2.6. QUORUM. A majority of the directors shall constitute a quorum
at any meeting, except when otherwise provided by law; but a less number may
adjourn any meeting from time to time, and the meeting may be held, as
adjourned, without further notice.
SECTION 2.7. VACANCIES. When any vacancy occurs among the directors, the
remaining members of the board, in accordance with the laws of the United
States, may appoint a director to fill such vacancy at any regular meeting of
the board, or at a special meeting called for that purpose.
SECTION 2.8. RETIREMENT POLICY. A retirement policy adopted by the board
of directors shall be applicable to directors who are not active officers of
the bank.
ARTICLE III
COMMITTEES OF THE BOARD
SECTION 3.1. EXECUTIVE COMMITTEE. There shall be an executive committee of
the board. The members of the executive committee shall be chosen by the board
from time to time, shall hold office during its pleasure, and shall consist of
the chairman of the board, the chairman of the executive committee selected by
the board, who may but need not be the same person designated to be president,
and the president, ex officio, and not less than seven additional members of
the board who shall not be active officers of the bank. It shall be the duty of
this committee to exercise such powers and perform such duties in respect to
the making of loans and discounts as shall from time to time be specified by
resolution of the board. During such periods as the board shall not be in
session, the executive committee shall have and may exercise all the powers of
the board except such as are by law or by these bylaws required to be exercised
only by the board. The executive committee may make rules for holding and
conducting its meetings and keep in the minute book of the bank a report of all
action taken which shall be submitted for approval at each regular meeting of
the board and the action of the board shall be recorded in the minutes of that
meeting. A quorum of the executive committee shall consist of not less than
five of its members, at least three of whom shall not be active officers of the
bank. The chairman of the board, or in his absence in the order named if
present, the chairman of the executive committee or the president, may
designate any director who is not an active officer of the bank, or a
designated member, to serve as a member of the executive committee at any
specified meeting. Vacancies in the executive committee at any time existing
may be filled by appointment by the board. The board may at anytime revise or
change the membership and chairmanship of the executive committee and make new
or additional appointments thereto. The chairman of the executive committee
shall be ex officio a member of all committees except the examining committee
and the trust audit committee, and shall have such other duties as may from
time to time be assigned him by the board.
SECTION 3.2. OFFICERS' COMPENSATION COMMITTEE. There shall be an officers'
compensation committee of the board. The members of the officers' compensation
committee shall consist of the members ex officio provided for in other
sections of these bylaws and not less than three additional non-officer members
of the board who shall be appointed by the board each year at its first meeting
after the directors have been elected and qualified. It shall be the duty of
this committee to study the compensation of all officers of the bank and from
time to time report their recommendations to the board; and such other duties,
if any, as may from time to time be assigned to it by the board. A majority of
the committee, including at least two non-officer members, shall be necessary
for the committee to keep records of its action.
2
<PAGE> 24
SECTION 3.3. EXAMINING COMMITTEE. There shall be an examining committee of
the board. The members of the examining committee shall consist of the members
ex officio provided for in other sections of these bylaws, but exclusive of any
active officer of the bank and not less than three additional non-officer
members of the board who shall be appointed by the board each year at its first
meeting after the directors have been elected and qualified. It shall be the
duty of this committee to make an examination at least twice each year into the
affairs of the bank or to cause the examinations to be made by accountants (who
may be the bank's own accountants) responsible only to the board in such
examinations, and to report the result of such examinations in writing to the
board at the next regular meeting thereafter, or it may, at its sole
discretion, submit the reports of the national bank examiner or of the Chicago
Clearing House Association examination, with or without additional comments by
the committee itself, for, and in lieu of its personal examinations. Such
reports shall state whether the bank is in sound condition, whether adequate
internal audit controls and procedures are being maintained and shall recommend
to the board such changes in the manner of doing business or conducting the
affairs of the bank as shall be deemed advisable.
SECTION 3.4. OTHER COMMITTEES. The board may appoint, from time to time,
from its own members, other committees of one or more persons, for such
purposes and with such powers as the board may determine.
ARTICLE IV
OFFICERS AND EMPLOYEES
SECTION 4.1. CHAIRMAN OF THE BOARD. The board shall appoint one of its
members to be chairman of the board. The chairman of the board shall supervise
the carrying out of the policies adopted or approved by the board. He shall
have general executive powers, as well as the specific powers conferred by
these bylaws. He shall be ex officio a member of all committees, except the
examining committee and the trust audit committee. He shall have general
supervision and direction of the business, affairs and personnel of the bank.
He shall also have and may exercise such further powers and duties as from time
to time may be conferred upon, or assigned to him by the board.
SECTION 4. 2. VICE CHAIRMAN OF THE BOARD. The board may appoint one of its
members to be vice chairman of the board. He shall perform such duties as may
from time to time be assigned to him by the board.
SECTION 4.3. PRESIDENT. The board shall appoint one of its members to be
president of the bank. He shall be the chief executive officer and the chief
administrative officer of the bank and in the absence of the chairman of the
board, he shall preside at any meeting of the board at which he is present. The
president shall have general executive powers, and shall have and may exercise
any and all other powers and duties pertaining by law, regulation, or practice
to the office of president, or imposed by these bylaws. He shall be ex officio
a member of all committees, except the examining committee and trust audit
committee. He shall have general supervision of the business, affairs and
personnel of the bank and in the absence of the chairman of the board, shall
exercise the powers and perform the duties of the chairman of the board. He
shall also have and may exercise such further powers and duties as from time to
time may be conferred upon or assigned to him by the board.
SECTION 4.4. SENIOR OFFICERS. The board may appoint one or more executive
vice presidents and one or more senior vice presidents. Each such senior
officer shall have such powers and duties as may be assigned to him by the
board, the chairman of the board, or the president.
3
<PAGE> 25
SECTION 4.5. VICE PRESIDENT. The board may appoint one or more vice
presidents. Each vice president shall have such powers and duties as may be
assigned to him by the board, the chairman of the board, or the president.
SECTION 4.6. CASHIER. The board shall appoint a cashier who shall have
such powers and duties as may be assigned to him by the board, the chairman of
the board, or the president. The cashier shall be custodian of the corporate
seal, records, documents and papers of the bank. He shall provide for keeping
of proper records of all transactions of the bank.
SECTION 4.7. SECRETARY. The board shall appoint a secretary who shall be
secretary of the bank. He shall also perform such duties as may be assigned to
him from time to time by the board. The board may appoint a secretary of the
board who shall keep accurate minutes of all meetings. He shall attend to the
giving of all notices; he shall also perform such other duties as may be
assigned to him from time to time by the board.
SECTION 4.8. OTHER OFFICERS. The board may appoint one or more assistant
vice presidents, one or more trust officers, one or more assistant secretaries,
one or more assistant cashiers, and such other officers and attorneys-in-fact
as from time to time may appear to the board to be required or desirable to
transact the business of the bank. Such officers, respectively, shall exercise
such powers and perform such duties as pertain to their several offices or as
may be conferred upon or assigned to them by the board the chairman of the
board or the president.
SECTION 4.9. CLERKS AND AGENTS. The chairman of the board, the president,
or any other active officer of the bank authorized by the chairman of the
board, or the president, may appoint and dismiss all or any paying tellers
receiving tellers note tellers, vault custodians, bookkeepers and other clerks,
agents and employees as they may deem advisable for the prompt and orderly
transaction of the business of the bank, define their duties, fix the salaries
to be paid them and the conditions of their employment.
SECTION 4.10. RESPONSIBILITY FOR MONEYS, ETC. Each of the active officers
and clerks of this bank shall be responsible for all moneys, funds valuables
and property of every kind and description that may from time to time be
entrusted to his care or placed in his hands by the board or others, or that
otherwise may come into his possession as an active officer or clerk of this
bank.
SECTION 4.11. SURETY BONDS. All the active officers and clerks of this
bank may be covered by one of the blanket form bonds customarily written by the
surety companies, drawn for such an amount, and executed by such surety
company, as the board may from time to time require, and duly approve; or at
the discretion of the board, all such active officers and clerks shall, each
for himself, give such bond, with such security, and in such denominations as
the board may from time to time require and direct. All bonds approved by the
board shall assure the faithful and honest discharge of the respective duties
of such active officer or clerk and shall provide that such active officer or
clerk shall faithfully apply and account for all moneys, funds, valuables and
property of every kind and description that may from time to time come into his
hands or be entrusted to his care, and pay over and deliver the same to the
order of the board or to such other person or persons as may be authorized to
demand and receive the same.
SECTION 4.12. TERM OF OFFICE - OFFICER DIRECTOR. The chairman of the
board, the vice chairman of the board and the president, together with any
other active officers who may be duly elected members of the board, shall hold
their respective offices for the current year for which the board (of which
they shall be members) was elected and until their successors are appointed,
unless they shall resign, be disqualified, or be removed; and any vacancy
4
<PAGE> 26
occurring in the office of the chairman of the board, the vice chairman of the
board, the president, or in the board, shall, if required by these bylaws, be
filled by the remaining members.
SECTION 4.13. TERM OF OFFICE - OFFICER. The executive vice presidents, the
senior vice presidents, the vice presidents, the assistant vice presidents, the
cashier, the secretary, the trust officers and all other officers and
attorneys-in-fact who are not duly elected members of the board, shall be
appointed to hold their offices, respectively, during the pleasure of the
board.
ARTICLE V
TRUST DEPARTMENT
SECTION 5.1. TRUST DEPARTMENT. There shall be a department of the bank
known as the trust department which shall perform the fiduciary
responsibilities of the bank.
SECTION 5.2. TRUST OFFICER. There shall be a senior vice president and
trust officer, or vice president and trust officer of this bank, who shall be
designated as the managing officer of the trust department and whose duties
shall be to manage, supervise and direct all the activities of the trust
department. He shall do, or cause to be done, all things necessary or proper in
carrying on the business of the trust department in accordance with provisions
of law and regulations. He shall act pursuant to opinion of counsel where such
opinion is deemed necessary. Opinions of counsel shall be retained on file in
connection with all important matters pertaining to fiduciary activities. The
trust officer shall be responsible for all assets and documents held by the
bank in connection with fiduciary matters.
The board may appoint such other officers of the trust department as it may
deem necessary, with such duties as may be assigned to them by the board, the
chairman of the board, or the president.
SECTION 5.3. TRUST INVESTMENT COMMITTEE. There shall be appointed by the
board a trust investment committee of this bank composed of not less than four
members, including members ex officio provided for in other sections of these
bylaws, who shall be capable and experienced officers or directors of the bank.
All investments of funds held in a fiduciary capacity shall be made, retained
or disposed of only with the approval of the trust investment committee; and
the committee shall keep minutes of all its meetings, showing the disposition
of all matters considered and passed upon by it. The committee shall, promptly
after the acceptance of an account for which the bank has investment
responsibilities, review the assets thereof, to determine the advisability of
retaining or disposing of such assets. The committee shall conduct a similar
review at least once during each calendar year thereafter and within fifteen
months of the last such review. A report of all such reviews, together with the
action taken as a result thereof, shall be noted in the minutes of the
committee. Three members of the trust investment committee shall constitute a
quorum, and any action approved by a majority of those present shall constitute
the action of the committee.
SECTION 5.4. TRUST AUDIT COMMITTEE. The board shall appoint a committee of
not less than three directors, including members ex officio provided for in
other sections of these bylaws, exclusive of any active officers of the bank,
which shall at least once during each calendar year and within fifteen months
of the last such audit make suitable audits of the trust department, or cause
suitable audits to be made, by auditors responsible only to the board, and at
such time shall ascertain whether the department has been administered in
accordance with law, Regulation 9, and sound fiduciary principles.
Notwithstanding the provisions of this Section, the board at any time may
assign to the Examining Committee, in addition to the duties of the
5
<PAGE> 27
Examining Committee set forth in Section 3.3 of these bylaws, all of the duties
of the Trust Audit Committee and during such time as the Examining Committee is
performing the duties of both committees, the Trust Audit Committee shall cease
to function as a committee of this board. The board at any time may reassign
the duties provided for in this Section to the Trust Audit Committee.
SECTION 5.5. TRUST DEPARTMENT FILES. There shall be maintained in the
trust department, files containing all fiduciary records necessary to assure
that its fiduciary responsibilities have been properly undertaken and
discharged.
SECTION 5.6. TRUST INVESTMENTS. Funds held in a fiduciary capacity shall
be invested in accordance with the instrument establishing the fiduciary
relationship and local law. Where such instrument does not specify the
character and class of investments to be made and does not vest in the bank a
discretion in the matter, fund shield pursuant to such instrument shall be
invested in investments in which corporate fiduciaries may invest under local
law.
ARTICLE VI
STOCK AND STOCK CERTIFICATES
SECTION 6.1. TRANSFERS. Shares of capital stock shall be transferable on
the books of the bank and a transfer book shall be kept in which all transfers
of stock shall be recorded. Every person becoming a shareholder be such
transfer shall in proportion to his shares, succeed to all rights and
liabilities of the prior holder of such shares.
SECTION 6.2. STOCK CERTIFICATES. Certificates of capital stock shall bear
the signature of any one of, the chairman of the board, or the president (which
may be engraved, printed or impressed) and shall be signed manually or by
facsimile process by the secretary, assistant secretary, cashier, assistant
cashier, or any other officer appointed by the board for that purpose, to be
known as an authorized officer and the seal of the bank shall be engraven
thereon. Each certificate shall recite on its face that the stock represented
thereby is transferable, properly endorsed, only on the books of the bank.
ARTICLE VII
CORPORATE SEAL
SECTION 7.1. CORPORATE SEAL. The chairman of the board, the president, the
cashier, the secretary or any assistant cashier or assistant secretary, or
other officer thereunto designated by the board, shall have authority to affix
the corporate seal to any document requiring such seal, and to attest the same.
Such seal shall be substantially in the form set forth herein.
ARTICLE VIII
INDEMNIFYING OFFICERS AND DIRECTORS
SECTION 8.1. INDEMNIFYING OFFICERS AND DIRECTORS. Any person, his heirs,
executors or administrators, may be indemnified or reimbursed by the bank for
reasonable expenses actually incurred in connection with any action, suit or
proceeding, civil or criminal, to which he or they shall be made a party by
reason of his being or having been a director, officer or employee of
6
<PAGE> 28
the bank or of any firm, corporation or organization which he served in any
such capacity at the request of the bank; provided, however, that no person
shall be so indemnified or reimbursed in relation to any matter in such action,
suit or proceeding as to which he shall finally be adjudged to have been guilty
of or liable for negligence or willful misconduct in the performance of his
duties to the bank; and, provided further, that no person shall be so
indemnified or reimbursed in relation to any matter in such action, suit or
proceeding which has been made the subject of a compromise settlement except
with the approval of a court of competent jurisdiction, or the holders of
record of a majority of the outstanding shares of the bank, or the board,
acting by vote of directors not parties to the same or substantially the same
action suit or proceeding, constituting a majority of the whole number of the
directors. The foregoing right of indemnification or reimbursement shall not be
exclusive of other rights to which such person, his heirs, executors or
administrators, may be entitled as a matter of law.
ARTICLE IX
MISCELLANEOUS PROVISIONS
SECTION 9.1. FISCAL YEAR. The fiscal year of the bank shall be the
calendar year.
SECTION 9.2. EXECUTION OF INSTRUMENTS. All agreements, indentures
mortgages, deeds, conveyances transfers certificates declarations, receipts,
discharges, releases, satisfactions, settlements, petitions, schedules,
accounts, affidavits, bonds, undertakings, proxies and other instruments or
documents may be signed, executed, acknowledged, verified, delivered or
accepted for the bank by the chairman of the board, or the vice chairman of the
board, or the president, or any executive vice president, or any senior vice
president, or any vice president, or the secretary or the cashier, or, if in
connection with the exercise of fiduciary powers of the bank by any of said
officers or by any officer in the trust department. Any such instruments may
also be signed, executed, acknowledged, verified, delivered or accepted for the
bank in such other manner and by such other officers as the board may from time
to time direct. The provisions of this Section 9.2 are supplementary to any
other provisions of these bylaws.
SECTION 9.3. RECORDS. The articles of association, the bylaws, and the
proceedings of all meetings of the shareholders and of the board shall be
recorded in appropriate minute books provided for the purpose; where these
bylaws so provide, the proceedings of standing committees of the board shall be
recorded in appropriate minute books provided for the purpose.
ARTICLE X
EMERGENCIES
SECTION 10.1. CONTINUATION OF BUSINESS. In the event of a state of
emergency of sufficient severity to interfere with the conduct and management
of the affairs of this bank, the officers and employees will continue to
conduct the affairs of the bank under such guidance from the directors as may
be available except as to matters which by statute require specific approval of
the board of directors and subject to conformance with any governmental
directives during the emergency.
SECTION 10.2. DESIGNATION OF PLACE OF BUSINESS. The offices of the bank at
which its business shall be conducted shall be the main office thereof located
at 135 South LaSalle Street, Chicago, Illinois, and any other legally
7
<PAGE> 29
authorized location which may be leased or acquired by this bank to carry on
its business. During an emergency resulting in any authorized place of business
of this bank being unable to function, the business ordinarily conducted at
such location shall be relocated elsewhere in suitable quarters, in addition to
or in lieu of the locations heretofore mentioned, as may be designated by the
board of directors or by the executive committee or by such persons as are
then, in accordance with resolutions adopted from time to time by the board of
directors dealing with the exercise of authority in the time of such emergency,
conducting the affairs of this bank. Any temporarily relocated place of
business of this bank shall be returned to its legally authorized location as
soon as practicable and such temporary place of business shall then be
discontinued.
ARTICLE XI
BYLAWS
SECTION 11.1 INSPECTION. A copy of the bylaws with all amendments thereto,
shall at all times be kept in a convenient place at the main office of the bank
and shall be open for inspection to all shareholders, during banking hours.
SECTION 11.2 AMENDMENTS. The bylaws may be amended, altered or repealed,
at any regular meeting of the board, by a vote of a majority of the whole
number of the directors.
***
I........................................... hereby certify that I am
the................................ Cashier/Secretary of LaSalle National Bank,
Chicago, Illinois and that the foregoing is a true and correct copy of the
bylaws of this bank as amended and that the same are in full force and effect
............. day of...................19........
...............................
Cashier/Secretary.
December 15, 1982
(SEAL)
8
<PAGE> 30
EXHIBIT 5
NOT APPLICABLE
<PAGE> 31
EXHIBIT 6
LaSalle National Bank hereby consents in accordance with the provisions of
Section 321(b) of the Trust Indenture Act of 1939, that reports of examinations
by Federal, State, Territorial and District authorities may be furnished by
such authorities to the Securities and Exchange Commission upon its request
therefor.
LASALLE NATIONAL BANK
By: /s/ Sarah H. Webb
--------------------------
Sarah H. Webb
First Vice President
1
<PAGE> 32
EXHIBIT 7
Latest Report of Condition of
Trustee published pursuant to
law or the requirement of its
surviving or examining authority.
2
<PAGE> 33
LaSalle National Bank Call Date: 06/30/95 ST-BK: 17-1520 FFIEC0 31
120 South LaSalle Street Page RC- 1
Chicago IL 60603 Vendor ID: D CERT: 15407 11
Transit Number: 71000505
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND STATE-CHARTERED
SAVINGS BANKS FOR JUNE 30, 1995
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
SCHEDULE RC - BALANCE SHEET
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
---------------------------
<S> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A): RCFD
a.Noninterest-bearing balances and currency and coin (1) 0081. . 445,352 1.a
b. Interest-bearing balances (2) 0071. . 403 1.b
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A) 1754. . 1,520,524 2.a
b. Available-for-sale securities (from Schedule RC-B, column D) 1773. . 2,025,407 2.b
3. Federal funds sold and securities purchased under agreements to resell
in domestic offices of the bank and of its Edge and Agreement subsidiaries and
in IBFs:
a. Federal funds sold 0276. . 45,225 3.a
b. Securities purchased under agreements to resell 0277. . 0 3.b
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income RCFD
(from Schedule RC-C) 2122 . .6,158,147 . . . . . . 4.a
b. LESS: Allowance for loan and lease losses 3123 . . 111,842 . . . . . . 4.b
c. LESS: Allocated transfer risk reserve 3128 . . 0 . . . . . . 4.c
d. Loans and leases, net of unearned income,
allowance, and reserve (item 4.a minus 4.b and 4.c) 2125. . 6,046,305 4.d
5. Trading assets (from Schedule RC-D) 3545. . 36,811 5.
6. Premises and fixed assets (including capitalized leases) 2145. . 36,841 6.
7. Other real estate owned (from Schedule RC-M) 2150. . 11,001 7.
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M) 2130. . 0 8.
9. Customers, liability to this bank on acceptances outstanding 2155. . 17,974 9.
10. Intangible assets (from Schedule RC-M) 2143. . 24,271 10.
11. Other assets (from Schedule RC-F) 2160. . 167,553 11.
12. Total assets (sum of items 1 through 11) 2170. .10,377,667 12.
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
</TABLE>
3
<PAGE> 34
LaSalle National Bank Call Date: 06/30/95 ST-BK: 17-1520 FFIEC 031
120 South LaSalle Street Page RC- 2
Chicago IL 60603 Vendor ID: D CERT: 15407 12
Transit Number: 71000505
SCHEDULE RC - CONTINUED
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
---------------------------
LIABILITIES
13. Deposits:
<S> <C> <C> <C> <C> <C> <C> <C>
a. In domestic offices (sum of totals of RCON
columns A and C from Schedule RC-E, part I) 2200. . 5,535,365 13.a
RCON
(1) Noninterest-bearing (1) 6631. . 1,258,072 . . . . . . 13.a.1
(2) Interest-bearing 6636. . 4,277,293 . . . . . . 13.a.2
RCFN
b. In foreign offices, Edge and Agreement subsidiaries and IBFs (from ----
Schedule RC-E, part II) 2200 1,712,512 13.b
RCFN
(1) Noninterest-bearing 6631. . 0 . . . . . . 13.b.1
(2) Interest-bearing 6636. . 1,712,512 . . . . . . 13.b.2
14. Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge
and Agreement subsidiaries, and in IBFs:
RCFD
----
a. Federal funds purchased 0278. . 1,050,330 14.a
b. Securities sold under agreements to repurchase 0279. . 62,790 14.b
RCON
----
15. a. Demand notes issued to the U.S. Treasury 2840. . 399,988 15.a
RCFD
----
b. Trading liabilities (from Schedule RC-D) 3548. . 24,415 15.b
16. Other borrowed money:
a. With original maturity of one year or less 2332. . 471,372 16.a
b. With original maturity of more than one year 2333. . 178,073 16.b
17. Mortgage indebtedness and obligations under capitalized leases 2910. . 0 17.
18. Bank's liability on acceptances executed and outstanding 2920. . 17,974 18.
19. Subordinated notes and debentures 3200. . 193,750 19.
20. Other liabilities (from Schedule RC-G) 2930. . 111,441 20.
21. Total liabilities (sum of items 13 through 20) 2948. . 9,758,010 21.
22. Limited-life preferred stock and related surplus 3282. . 0 22.
EQUITY CAPITAL
RCFD
----
23. Perpetual preferred stock and related surplus 3838. . 0 23.
24. Common stock 3230. . 18,417 24.
25. Surplus (exclude all surplus related to preferred stock) 3839. . 126,213 25.
26. a. Undivided profits and capital reserves 3632. . 479,685 26.a
b. Net unrealized holding gains (losses) on available-for-sale securities 8434. . (4,658) 26.b
27. Cumulative foreign currency translation adjustments 3284. . 0 27.
28. Total equity capital (sum of items 23 through 27) 3210. . 619,657 28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of
items 21, 22, and 28) 3300. . 10,377,667 29.
</TABLE>
4
<PAGE> 35
MEMORANDUM
TO BE REPORTED ONLY WITH THE MARCH REPORT OF CONDITION.
1. Indicate in the box at the right the number of the statement below
that best describes the most comprehensive level of auditing work performed for
the bank by independent external auditors as of any date during 1994
RCFD Number
6724. . N/A M.1
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which submits
a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the consolidated holding company (but
not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with
generally accepted auditing standards by a certified public accounting firm
(may be required by state chartering authority)
4 = Directors' examination of the bank performed by other external
auditors (may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
(1) Includes total demand deposits and noninterest-bearing time and
savings deposits.
5
<PAGE> 36
EXHIBIT 8
NOT APPLICABLE
6
<PAGE> 37
EXHIBIT 9
NOT APPLICABLE
7
<PAGE> 38
<TABLE>
<CAPTION>
LaSalle National Bank Call Date: 3/31/98 ST-BK: 17-1520 FFIEC 031
135 South LaSalle Street Page RC-1
Chicago, IL 60603 Vendor ID: D CERT: 15407 11
Transit Number: 71000505
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND
STATE-CHARTERED SAVINGS BANKS FOR MARCH 31, 1998
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
SCHEDULE RC - BALANCE SHEET
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
1.Cash and balances due from depository institutions (from Schedule RC-A): RCFD
----
a. Noninterest-bearing balances and currency and coin (1) 0081 873,752 1.a
b. Interest-bearing balances (2) 0071 564 1.b
2.Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A) 1754 969,505 2.a
b. Available-for-sale securities (from Schedule RC-B, column D) 1773 4,539,683 2.b
3.Federal funds sold and securities purchased under agreements to resell 1350 72,318 3.
4.Loans and lease financing receivables:
a. Loans and leases, net of unearned income RCFD
(from Schedule RC-C) ----
2122 12,381,405 4.a
b. LESS: Allowance for loan and lease losses 3123 231,482 4.b
c. LESS: Allocated transfer risk reserve 3128 0 4.c
d. Loans and leases, net of unearned income,
allowance, and reserve (item 4.a minus 4.b and 4.c) 2125 12,149,923 4.d
5.Trading assets (from Schedule RC-D) 3545 142,506 5.
6.Premises and fixed assets (including capitalized leases) 2145 83,138 6.
7.Other real estate owned (from Schedule RC-M) 2150 528 7.
8.Investments in unconsolidated subsidiaries and associated companies (from
Schedule RC-M) 2130 0 8.
9.Customers' liability to this bank on acceptances outstanding 2155 9,777 9.
10.Intangible assets (from Schedule RC-M) 2143 19,658 10.
11.Other assets (from Schedule RC-F) 2160 286,763 11.
12.Total assets (sum of items 1 through 11) 2170 19,148,115 12. 19,148,115
- ------------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
</TABLE>
<PAGE> 39
<TABLE>
<CAPTION>
LaSalle National Bank Call Date: 3/31/98 ST-BK: 17-1520 FFIEC 031
135 South LaSalle Street Page RC- 2
Chicago, IL 60603 Vendor ID: D CERT: 15407 12
Transit Number: 71000505
SCHEDULE RC - CONTINUED
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES
13.Deposits:
a. In domestic offices (sum of totals of RCON
----
columns A and C from Schedule RC-E, part I) 2200 10,112,345 13.a
RCON
----
(1) Noninterest-bearing (1) 6631 2,069,551 13.a.1
(2) Interest-bearing 6636 8,042,794 13.a.2 10,112,345
RCFN
----
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from
Schedule RC-E, part II) 2200 2,231,400 13.b
RCFN
----
(1) Noninterest-bearing 6631 0 13.b.1
(2) Interest-bearing 6636 2,231,400 13.b.2
RCFD
----
14.Federal funds purchased and securities sold under agreements to repurchase 2800 2,139,075 14.
RCON
----
15.a. Demand notes issued to the U.S. Treasury 2840 417,791 15.a
RCFD
----
b. Trading liabilities (from Schedule RC-D) 3548 35,004 15.b
16.Other borrowed money (includes mortgage indebtedness and obligations under
capitalized leases):
a. With a remaining maturity of one year or less 2332 2,093,462 16.a
b. With a remaining maturity of more than one year through three years A547 27,542 16.b
c. With a remaining maturity of more than three years A548 41,482 16.c
17.Not applicable.
18.Bank's liability on acceptances executed and outstanding 2920 9,777 18.
19.Subordinated notes and debentures (2) 3200 416,000 19.
20.Other liabilities (from Schedule RC-G) 2930 363,678 20.
21.Total liabilities (sum of items 13 through 20) 2948 17,887,556 21. 17,887,556
22.Not applicable.
EQUITY CAPITAL
RCFD
----
23.Perpetual preferred stock and related surplus 3838 0 23.
24.Common stock 3230 26,911 24.
25.Surplus (exclude all surplus related to preferred stock) 3839 346,971 25.
26.a. Undivided profits and capital reserves 3632 845,390 26.a
b. Net unrealized holding gains (losses) on available-for-sale securities 8434 41,287 26.b
27.Cumulative foreign currency translation adjustments 3284 0 27.
28.Total equity capital (sum of items 23 through 27) 3210 1,260,559 28. 1,260,559
29.Total liabilities and equity capital (sum of items 21 and 28) 3300 19,148,115 29.
MEMORANDUM
TO BE REPORTED ONLY WITH THE MARCH REPORT OF CONDITION.
1.Indicate in the box at the right the number of the statement below that best describes
the most comprehensive level of auditing work performed for the bank by independent RCFD Number
---- ------
external auditors as of any date during 1997 6724 2 M.1
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by
submits a report on the consolidated holding company (but external auditors
not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in accordance 8 = No external audit work
with generally accepted auditing standards by a certified
public accounting firm (may be required by state charter-
ing authority)
- ------------------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
(2) Includes limited-life preferred stock and related surplus.
</TABLE>
