<PAGE> 1
As filed with the Securities and Exchange Commission on May 12, 1998
Registration No. 333-46057
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
--------------
AMENDMENT NO. 1
TO
FORM S-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
KTI, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-2665282
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7000 Boulevard East
Guttenberg, New Jersey 07093
(201) 854-7777
(Address, including zip code, and telephone including area code, of registrant's
principal executive offices)
Robert E. Wetzel, Esq.
c/o KTI, Inc.
7000 Boulevard East
Guttenberg, New Jersey 07093
(201) 854-7777
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Brian Hoffmann, Esq.
McDermott, Will & Emery
50 Rockefeller Plaza
New York, New York 10020
(212) 547-5400
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement.
If any of the securities being registered on this Form are being offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933 check the following box. |X|
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Section 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of 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 Act
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>
===============================================================================================================================
Title of each class Amount to be Proposed Proposed maximum Amount of
of securities to be registered maximum offering aggregate offering registration fee
registered price per share price
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
8 3/4% Series B Convertible Exchangeable 856,000 $25(1) $21,400,000 $6,313
Preferred Stock, no par value
- -------------------------------------------------------------------------------------------------------------------------------
Common Stock, no par value, issuable 1,861,105 (2) (2) (2)
upon conversion of the 8 3/4% Series B
Convertible Exchangeable Preferred Stock
- -------------------------------------------------------------------------------------------------------------------------------
8 3/4% Convertible Subordinated Notes, $21,398,000 (3) (3) (3)
due August 15, 2004, issuable in exchange
for the 8 3/4% Series B Convertible
Exchangeable Preferred Stock
===============================================================================================================================
</TABLE>
(1) Represents the per-share sales price ($25.00) of the 8 3/4% Series B
Convertible Exchangeable Preferred Stock sold by the Registrant in an
institutional private placement in August, 1997, each share having a
stated value of $25.00.
(2) Common Stock issued upon conversion of the 8 3/4% Series B Convertible
Exchangeable Preferred Stock will be issued for no additional
consideration and no additional registration fee is required with respect
to the registration thereof.
<PAGE> 2
(3) 8 3/4% Convertible Subordinated Notes issued in exchange for the 8 3/4%
Series B Convertible Exchangeable Preferred Stock will be issued for no
additional consideration and no additional registration fee is required
---------------
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 section 8(a), may
determine.
<PAGE> 3
KTI, Inc.
856,000 Shares of 8 3/4% Series B Convertible Exchangeable Preferred Stock
1,861,105 Shares of Common Stock
$21,398,000 8 3/4% Convertible Subordinated Notes due August 15, 2004
---------------
This prospectus relates to the resale of an aggregate of 856,000 shares of
8 3/4% Series B Convertible Exchangeable Preferred Stock, no par value, (the
"Series B Preferred Stock"), of KTI, Inc., a New Jersey corporation (the
"Company"), all of which 856,000 shares have been previously issued by the
Company to the selling shareholders named herein (the "Selling Shareholders"),
1,861,105 shares of common stock, no par value (the "Common Stock"), of the
Company issuable upon conversion of the Series B Preferred Stock plus any
accrued and unpaid dividends, and $21,398,000 aggregate principal amount of 8
3/4% Convertible Subordinated Notes due August 15, 2004 (the "Exchange Notes")
issuable in exchange for the Series B Preferred Stock. The shares of Series B
Preferred Stock and Common Stock offered hereby (the "Shares") and the Exchange
Notes offered hereby may be offered for sale from time to time by the Selling
Shareholders or their respective pledgees, donees, transferees or other
successors in interest in the open market, on the NASDAQ National Market (in the
case of Common Stock), in the over-the-counter market, in privately negotiated
transactions, or a combination of such methods, at market prices prevailing at
the time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Shares and Exchange Notes are intended to be sold through
one or more broker-dealers or directly to purchasers. Such broker-dealers may
receive compensation in the form of commissions, discounts or concessions from
the Selling Shareholders or purchasers of the Shares and Exchange Notes for whom
such broker-dealers may act as agent, or to whom the Selling Shareholders may
sell as principal, or both (which compensation as to a particular broker-dealer
may be in excess of customary concessions). The Selling Shareholders and any
broker-dealers who act in connection with the sale of Shares and Exchange Notes
hereunder may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), and any commissions
received by them and proceeds of any resale of the Shares and Exchange Notes may
be deemed to be underwriting discounts and commissions under the Act. See
"Selling Security Holders" and "Plan of Distribution."
Annual cumulative dividends of $2.1875 per share of Series B Preferred
Stock accruing from August 15, 1997 will be payable quarterly on each of
February 1, May 1, August 1 and November 1. Except in limited circumstances, the
Series B Preferred Stock is not entitled to voting rights. The Series B
Preferred Stock will be redeemed on August 15, 2004 at an amount equal to the
liquidation preference plus accrued and unpaid dividends. It is also subject to
earlier redemption at the option of the Company after August 15, 2000 or, in
certain circumstances, after August 15, 1999, at prices ranging from $26.47 to
$25 per share. The Series B Preferred Stock, at the option of the holder, may be
converted into Common Stock, at a conversion price of $11.75 per share, subject
to adjustment, and, at the option of the Company, may be exchanged for the
Exchange Notes. See "Description of Securities--Series B Preferred Stock."
The Exchange Notes will bear interest at the rate of 8 3/4% per annum,
payable quarterly in arrears on February 1, May 1, August 1 and November 1 of
each year, commencing on the first such date following the date on which the
Exchange Notes are issued. The Exchange Notes will be general unsecured
obligations of the Company, subordinated in right of payment to all senior debt.
The Company may repurchase the Exchange Notes after August 15, 2000 or, in
certain circumstances, after August 15, 1999, at prices ranging from 105.9% to
100%. The Exchange Notes, at the option of the holder, may be converted into
Common Stock at a conversion price of $11.75 per share subject to adjustment.
See "Description of Securities-- Exchange Notes."
All of the shares of Series B Preferred Stock offered hereby are presently
issued and outstanding. The 1,861,105 shares of Common Stock offered hereby are
issuable upon conversion of the Series B Preferred. The $21,398,000 Exchange
Notes offered hereby are issuable in exchange for the Series B Preferred Stock.
The Common Stock is listed on the NASDAQ National Market System under the
symbol "KTIE." On May 8, 1998, the last reported sale price of the Common Stock,
as reported on the NASDAQ National Market System, was $21.25 per share.
AN INVESTMENT IN THE SECURITIES OFFERED PURSUANT TO THIS
PROSPECTUS IS SPECULATIVE AND INVOLVES A HIGH DEGREE
OF RISK. SEE "RISK FACTORS" AT PAGES 7 TO 12.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE 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 May 12, 1998.
<PAGE> 4
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection with
the offering made hereby, and if given or made, such information or
representations must not be relied upon as having been authorized by the
Company, any Selling Stockholder or by any other person. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that the information herein is correct as of any time
subsequent to the date hereof. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy the shares to any person or by anyone
in any jurisdiction in which such offer or solicitation may not lawfully be
made.
<PAGE> 5
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-2 (referred to herein, together
with all other amendments and exhibits, as the "Registration Statement") under
the Securities Act for the registration of the Series B Preferred Stock, Common
Stock and the Exchange Notes offered hereby. This Prospectus, which constitutes
a part of the Registration Statement, does not contain all of the information
set forth in the Registration Statement, certain items of which are omitted from
this Prospectus in accordance with the rules and regulations of the Commission.
For further information with respect to the Company and the shares of Series B
Preferred Stock and Common Stock offered hereby, reference is made to the
Registration Statement, exhibits, schedules thereto, and the financial statement
and notes thereto filed or incorporated by reference as a part thereof.
Statements made in this Prospectus concerning the contents of any document
referred to herein are not necessarily complete. With respect to each such
document filed with the Commission as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference. Copies of the Registration Statement and the exhibits thereto
are on file at the offices of the Commission and may be obtained upon payment of
the prescribed fee or may be examined without charge at the public reference
facilities of the Commission described below.
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
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 its office at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's regional offices located at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and 7 World Trade Center, Suite 1300, New York, New York 10048.
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 Commission maintains a web site that contains registration
statements, reports, proxy and information statements and other information
regarding registrants, such as the Company, that file electronically with the
Commission at http://www.sec.gov.
The Common Stock is traded on the NASDAQ National Market System. Reports,
proxy statements and other information concerning the Company may be inspected
at the National Association of Securities Dealers, Inc. at 1735 K Street, N.W.
Washington, D.C. 20006.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents have been filed with the Commission and are
incorporated herein by reference and made a part of this Prospectus:
Current Report on Form 8-K, dated November 14, 1997, as amended on
Form 8-K/A;
Annual Report on Form 10-K for the year ended December 31, 1997; and
Current Report on Form dated May 6, 1998.
2
<PAGE> 6
No other report has been filed by the Company since the end of its fiscal
year ended December 31, 1997.
Any statement contained 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 a statement contained herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of such person, a
copy of any or all of the documents incorporated by reference herein (other than
exhibits to such documents, unless such exhibits are specifically incorporated
by reference into the information that this Prospectus incorporates). Requests
should be directed to:
KTI, Inc.
7000 Boulevard East
Guttenberg, New Jersey 07093
Attention: Robert E. Wetzel
Telephone Number: (201) 854-7777
This Prospectus is accompanied by a copy of the Company's Form 10-K filed
with the Commission for the fiscal year of the Company ended December 31, 1997.
This Prospectus shall be accompanied by a copy of the Company's Form 10-K,
together with any amendments thereto, filed with the Commission for each
subsequent fiscal year of the Company during the duration of this Offering and
by a copy of the Company's
3
<PAGE> 7
Proxy Statement used for the solicitation of stockholders for each subsequent
annual meeting of stockholders held during the duration of this Offering.
The Company shall deliver without charge to each person to whom this
Prospectus is delivered, a copy of the Company's latest Form 10-Q filed with the
Commission with respect to the most recent fiscal quarter which ends after the
end of the latest fiscal year of the Company for which the Company has delivered
the Form 10-K as described above. The Company shall also provide without charge
a copy of each Form 8-K, if any, filed with the Commission since the end of the
latest fiscal year of the Company for which the audited financial statements
were included in the latest Form 10-K filed with the Commission.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
All statements contained herein or incorporated by reference herein that
are not historical facts, including but not limited to statements regarding the
Company's current business strategy, prospective joint ventures, and plans for
future development and operations, are based upon current expectations. These
statements are forward-looking in nature and involve a number of risks and
uncertainties. Actual results may differ materially. Among the factors in
addition to the foregoing that could cause actual results to differ materially
are the following: (i) the availability of sufficient capital to finance the
Company's business plan on terms satisfactory to the Company; (ii) competitive
factors such as availability of less expensive waste disposal outlets or
expanded recycling programs that may significantly reduce the amount of waste
products available to the Company's facilities; (iii) any further restructuring
of the Company's power purchase agreement with Central Maine Power Company or
any restructuring of the Company's power purchase agreements with Bangor-Hydro
Electric Power Company and Florida Power Company (iv) changes in labor,
equipment and capital costs; (v) the ability of the Company to consummate any
contemplated joint ventures and/or restructuring on terms satisfactory to the
Company; (vi) changes in regulations affecting the waste disposal and recycling
industries; (vii) the ability of the Company to comply with the restrictions
imposed upon it in connection with its outstanding indebtedness; (viii) future
acquisitions or strategic partnerships; (ix) general business and economic
conditions; and (x) other factors described from time to time in the Company's
reports filed with the Commission and in the "Risk Factors" section of this
Prospectus. The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which statements are made pursuant to the
Private Securities Litigation Reform Act of 1995 and, as such, speak only as of
the date made.
4
<PAGE> 8
SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with the more detailed information and financial statements,
including the notes thereto, appearing elsewhere or incorporated by reference
herein. All share numbers have been adjusted to give effect to a 5% stock
dividend paid on March 28, 1997.
The Company
KTI, Inc. (individually and collectively with its subsidiaries, the
"Company") was incorporated in New Jersey in 1985. The Company is a holding
company, and substantially all of its operating assets are owned by corporate
and partnership subsidiaries. The principal executive offices of the Company are
located at 7000 Boulevard East, Guttenberg, New Jersey 07093. Its telephone
number is (201) 854-7777.
The Company's objectives are focused on the development of an integrated
waste handling business, providing wood, paper, corrugated, metals, plastic and
glass processing and recycling, municipal solid waste processing and disposal
capabilities, specialty waste disposal services, facility operations and
recycling of ash combustion residue. The Company's integrated waste handling
business emphasizes the use of low cost processing to add potential value to the
various waste products delivered and in certain cases the generation of electric
power. The Company believes that by adding these processing steps to its system,
it is competitive with traditional landfill alternatives while producing
superior environmental results and meeting social and political mandates. The
Company also markets recyclable metals, plastic, paper and corrugated processed
at its facilities and by third parties.
As part of its integrated waste handling business, the Company owns eleven
processing facilities and seven marketing offices in the United States.
5
<PAGE> 9
The Offering
This prospectus relates to the resale of up to an aggregate of 856,000
shares of Series B Preferred Stock, all of which are issued and outstanding,
1,861,105 shares of Common Stock, which are issuable upon the conversion of the
Series B Preferred Stock, and $21,398,000 aggregate principal amount of Exchange
Notes.
Series B Preferred Stock
Series B Preferred Stock: Annual cumulative dividends of $2.1875 per share
accruing from August 15, 1997 will be payable
quarterly on each February 1, May 1, August 1 and
November 1.
Ranking: The Series B Preferred Stock ranks senior to all
Common Stock and on parity with holders of all
other preferred stock.
Liquidation Preference: $25 per share, plus accrued and unpaid dividends.
Voting Rights: The Series B Preferred Stock is not entitled to
voting rights. Holders of the Series B Preferred
may elect one member to the Company's Board of
Directors in the event that dividends on the
Series B Preferred Stock are in arrears for more
than four consecutive quarters, and two members to
the Company's Board of Directors in the event that
the Company fails to redeem the Series B Preferred
on any mandatory redemption date.
6
<PAGE> 10
Protective Provisions: Consent of the holders of a majority of Series B
Preferred Stock is required for any corporate
action which (i) alters or changes the rights,
preferences or privileges of the Series B
Preferred Stock materially and adversely; (ii)
creates any new class or series of shares having a
preference over or being on a parity with Series B
Preferred Stock, unless the pro forma ratios of
latest twelve months of a) net income available
for preferred dividends to preferred dividends
would be not less that 1:1 and b) earnings before
interest, taxes, depreciation and amortization
less capital expenditures, securities amortization
and redemption, cash taxes and changes in working
capital to preferred dividends would be not less
that 1.2:1; and (iii) adversely affects or is
adversely affected by certain other events.
Mandatory Redemption: The Company must redeem the Series B Preferred
Stock on August 15, 2004 at an amount equal to the
then liquidation preference plus accrued and
unpaid dividends thereon. Such redemption may be
made at the option of the Company either (i) in
cash at 100% or (ii) in Common Stock at 95% of the
average closing price of Common Stock during the
20 trading days prior to such redemption.
Optional Redemption: The Company has the right to call for cash
redemption of Series B Preferred Stock, in whole
or in part, (i) during the twelve month period
beginning on August 15 of the years indicated
below as follows:
<TABLE>
<CAPTION>
<S> <C>
2000........................$26.10 per share
2001........................$25.73 per share
2002........................$25.37 per share
2003 and thereafter.........$25.00 per share
</TABLE>
or (ii) after August 15, 1999, the Company may, at
its option, redeem the Series B Preferred Stock at
$26.47 per share, plus accumulated and unpaid
dividends thereon, if the Common Stock bid price
has averaged not less than 1.5 times the
Conversion Price during the preceding 20
consecutive trading days.
Conversion Price: $11.75 per share, subject to adjustment as
provided below in "Antidilution Provisions".
Conversion: The Series B Preferred Stock may be converted, at
the option of the holder, in whole or in part, at
any time, into shares of Common Stock at the
conversion price, subject to adjustment as
provided under "Antidilution Provisions".
Exchange: Upon not less than 30 days and not more than 60
days' written notice to the holders of Series B
Preferred, the Company may exchange at any time,
in whole but not in part, on any dividend payment
date, the Series B Preferred for Exchange Notes of
the Company having similar terms and conditions.
In the event of such exchange, the interest rate
of the Exchange Notes will be equivalent to the
dividend rate of the Series B Preferred Stock,
without adjustment for the dividends received
deduction.
7
<PAGE> 11
Antidilution Provisions: The conversion price shall be subject to
adjustments (i) for Common Stock splits and
recapitalizations, and (ii) to prevent dilution,
on a weighted average basis, in the event the
Company issues additional Common Stock, or rights
to purchase Common Stock, at a purchase price less
than the then applicable market price.
Change of Control: In the event of a change of control, holders of
the Series B Preferred Stock may require the
Company to redeem the Series B Preferred Stock at
$25 per share plus accrued and unpaid dividends
thereon. Such redemption may be made at the option
of the Company either (i) in cash at 100% or (ii)
subject to certain conditions, in Common Stock
at 95% of the average trading price of Common
Stock during the 20 trading days prior to such
redemption.
Exchange Notes
Exchange Notes: The Exchange Notes will bear interest at the rate
of 8 3/4% per annum, payable quarterly in arrears
on February 1, May 1, August 1 and November 1 of
each year, commencing on the first such date
following the date on which the Exchange Notes are
issued.
Subordination: The Exchange Notes will be general unsecured
obligations of the Company, subordinated in right
of payment to all senior debt.
Maturity: The Exchange Notes will be due August 15, 2004.
Optional Redemption: The Company has the right to repurchase the
Exchange Notes, in whole or in part, (i) during
the twelve month period beginning on August 15 of
the years indicated below as follows:
<TABLE>
<CAPTION>
<S> <C>
2000........................104.4%
2001........................102.9%
2002........................101.5%
2003 and thereafter.........100%
</TABLE>
or (ii) after August 15, 1999, the Company may, at
its option, repurchase the Exchange Notes at
105.9%, plus accumulated and unpaid dividends
thereon, if the Common Stock bid price has
averaged not less than 1.5 times the conversion
price during 20 consecutive trading days.
Conversion Price: $11.75 per share, subject to adjustment.
Conversion: The Exchange Notes may be converted, at the option
of the holder, in whole or in part, at any time,
into shares of Common Stock at the conversion
price, subject to adjustment.
8
<PAGE> 12
RISK FACTORS
Investors should consider very carefully each of the following risk
factors and all other information contained in this prospectus.
Holding Company Status of the Company; Restrictions on Utilization of Assets
The Company is a legal entity separate and distinct from its subsidiaries,
which operate substantially all of the Company's businesses. Accordingly, the
right of the Company to utilize any assets or earnings or cash flow of any one
subsidiary to finance the growth of any other of its subsidiaries is necessarily
subject to the prior claims of creditors of the subsidiaries. In addition, the
payment of management fees and the distribution of the cash flow of the Company
generated by certain subsidiaries of the Company are subject to substantial
restrictions as a result of agreements with their respective lenders. Certain
financing agreements and the long-term waste handling agreements of Maine
Energy, the owner and operator of a waste-to-energy facility in which the
Company has a 74.15% ownership interest, require that all available cash flow be
applied to the redemption of indebtedness in full before any distribution to
partners. In addition, certain financing agreements to which Penobscot Energy
Recovery Company, Limited Partnership, a Maine limited partnership ("PERC"), in
which the Company has a 71.29% ownership interest, Timber Energy Resources,
Inc., a Texas corporation ("TERI") wholly-owned by the Company, K-C
International, Ltd., an Oregon corporation ("K-C") wholly-owned by the Company,
and other subsidiaries of the Company are parties also restrict the ability of
such entities to make distributions to the Company.
Currently, the Company's ability to utilize internally generated cash flow
as a means of financing expansion is limited to distributions from its operating
subsidiaries. As a result, the liquidity of the Company is adversely affected,
which could result in the need to raise additional cash through the sale of
securities of the Company, some of which may include sales of Common Stock at
less than the then prevailing market prices which may dilute existing
shareholders and make less likely the payment of cash dividends on Common Stock.
Reliance on Electric Utilities and Power Purchase Agreements
The Company's waste-to-energy business, which accounted for approximately
73% of the Company's revenue during 1997, is dependent upon electric utilities
that purchase energy produced at the Company's waste-to-energy plant. Pursuant
to power purchase agreements between Maine Energy and Central Maine with a term
through 2012, between PERC and Bangor Hydro Electric Company with a term through
2018, and between the TERI plant in Telogia, Florida (the "Telogia Facility")
and Florida Power Corporation with a term through 2002, these utilities have
agreed to purchase electricity generated by the Company's waste-to-energy
facilities at contractually agreed rates. Sales of electricity to these
utilities accounted for approximately 63%, 59% and 96% of revenues of Maine
Energy, PERC and the Telogia Facility, respectively, in 1997. In the event of
the deregulation of electric utilities, certain electric companies may no longer
be financially viable. To the extent that any of the electric utilities with
whom the Company contracts is adversely impacted by deregulation, such utilities
may not be able to perform their obligations under such purchase power
agreements. The State of Maine has recently enacted deregulation legislation
which will require the local utilities to transfer their respective contracts
with Maine Energy and PERC to newly formed regulated transmission and
distribution companies. The costs of such contracts will be passed through to
the rate-payers beginning in the year 2000 through these transmission and
distribution companies.
9
<PAGE> 13
Governmental Regulation and Environmental Risks
Federal, state, and local environmental laws govern discharges of
pollutants and the generation, transportation, storage, treatment and disposal
of solid waste. These laws (i) establish standards governing most aspects of the
operation of the waste-to-energy facilities, wood waste processing facilities,
its ash recycling facility, and the Telogia Facility and (ii) generally require
multiple governmental permits in order to continue the operation of these
facilities. The Company believes it has all permits necessary to operate its
facilities in the manner that each of them is currently operating. However,
there can be no assurance that all required permits will be renewed following
their expiration. In some cases the renewal process may entail public hearings.
The standards established pursuant to environmental statutes and
regulations, the interpretation of statutes and regulations and the policies
governing their enforcement may change, requiring new pollution control
technology or stricter standards for the control of discharge of air or water
pollutants or for solid waste or ash handling and disposal. For example, the
United States Supreme Court, in a 1994 decision interpreting the Resource
Conservation and Recovery Act, held that ash from the combustion of
non-hazardous household and commercial waste, if tested and found to have
hazardous characteristics, will be treated as a hazardous waste. In addition,
new statutory and regulatory provisions may be implemented which could have
retroactive application. Both Maine Energy and PERC have been testing their ash
since initial start-up and the ash has generally tested as non-hazardous. If any
hazardous waste is detected, it would be disposed of appropriately. There can be
no assurance, however, that disposing of hazardous waste, if ever detected,
would not entail substantial costs.
The waste-to-energy facilities in which the Company has an interest are
also subject to the provisions of various federal and state laws and regulations
including the Public Utility Regulatory Policies Act of 1978 ("PURPA"), as
amended. PURPA requires that electric utilities purchase electricity generated
by qualifying power producers at a price equal to the purchasing utility's full
"avoided cost". Avoided costs are defined by PURPA as the incremental costs to
the electric utility of electric energy or capability, or both. The Company's
facilities could be materially and adversely affected if the various benefits of
PURPA were repealed or substantially reduced. Changes in laws, regulations or
policies or new interpretations of existing laws, regulations or policies, could
have a material impact on the profitability, level of capital expenditures or
continued operation of the waste-to-energy facilities, wood processing and ash
recycling operations in which the Company has an interest.
Competition
The Company experiences significant competition in each of its waste
handling markets. Maine Energy and PERC compete with landfills and several
waste-to-energy facilities and municipal incinerators in Maine and the New
England region. However, the volume of MSW produced in the New England region
has historically increased and the Company believes that it is likely to
continue to increase while the availability of landfills for waste disposal is
likely to continue to decline. There can be no assurance, however, that these
trends will continue. Even though the implementation of recycling programs to
reduce MSW has increased, the Company believes that there are limits on the
percentage of MSW that ultimately can be recycled and that alternatives for
disposal of MSW will continue to be needed. There can be no assurance, however,
that new recycling technologies will not be developed.
10
<PAGE> 14
The wood waste processing facility operated by KTI Bio Fuels, Inc., a
subsidiary of the Company ("KTI Bio Fuels"), in Lewiston, Maine competes with
landfills and operators of portable wood chipping equipment.
The Telogia Facility competes for biomass fuel supply with paper companies
which employ on-site power generation. As the Company increasingly utilizes
tipping fee based waste fuels, this facility's dependence on the current fuel
supply is expected to decrease. The Telogia Facility is permitted to combust
100% of such tipping fee based fuels. Competition for tipping fee based material
will principally come from landfills whose cost structure is higher than that of
the Telogia Facility. Local landfill costs for biomass waste products range from
$15 to $25 per ton, while the cost of processing the material ranges from $5 to
$8 per ton at the Telogia Facility. There can be no assurance, however, that
such cost structure will not change in a manner adverse to the Company.
Competition for the Company's ash recycling subsidiary is primarily from
ash landfills. The Company believes its ash recycling facilities will be able to
compete favorably based on historical prices charged by these landfill
operators, although there can be no assurance that they will do so.
Manner Resins, Inc., acquired by the Company in November, 1996,
("Manner"), competes with several other recycled plastic brokers and direct
marketing from plastic recycling plants for the post-industrial plastic scrap
and with materials recovery facilities for post-consumer plastics.
The Company's other recycling subsidiaries which are primarily involved in
the waste paper brokerage business face extensive competition. Such businesses
operate with thin profit margins. In order to be profitable, the waste paper
broker must arrange to simultaneously buy and sell waste paper, while providing
a great enough spread to cover transportation costs and insurance. Generally,
paper mills purchase paper under long-term contracts which provide for purchase
prices that are adjusted in accordance with a relevant paper price index. A
significant portion of the sales made by K-C are to foreign customers, and such
sales are contingent upon the availability of letters of credit for such
customers.
KTI Recycling, which operates recycling plants in Boston, Chicago and
Newark, formerly owned by Prins Recycling Corp. and its subsidiaries, faces
significant price competition in all of its market. The Newark recycling market
is burdened with industry-wide overcapacity and continual price pressure.
Combined with high labor costs, the Newark market currently operates with very
low profitability. In the Chicago market, the Company's recycling plant has
relatively low utilization and price competition is extensive.
Dependence upon Sources of Supply of Fuel
The waste-to-energy facilities operated by Maine Energy, PERC and the
Telogia Facility are dependent upon spot market waste material in order to run
at high capacity. In 1997, approximately 71% of the total MSW processed by Maine
Energy was received from sources other than parties with whom Maine Energy has
long-term waste disposal agreements. Competition within the waste handling and
disposal industry for spot market MSW may impede a steady, reliable supply of
MSW. The Telogia Facility is in the process of changing its fuel mix from
purchased residual material to tipping fee-driven bio-mass waste which has
reduced net fuel costs. As its fuel mix continues to change over time, the
Telogia Facility expects to have tipping revenue in excess of its cost of
purchased bio-mass material for its boiler fuel. There can be no assurance,
however, that it will have tipping revenue in excess of its cost of purchased
bio-mass material. The Telogia Facility may be subject to competition from other
waste disposal companies as it continues to penetrate the bio-mass waste market.
11
<PAGE> 15
Timber Energy Resources, Inc.'s Reliance on One Chip Mill Customer
TERI's chip mill (the "Timber Chip Mill") relies on one customer, Stone
Container Corporation ("Stone Container"), for all of its business. The Timber
Chip Mill was constructed as a result of establishing a 15 year "process-or-pay"
contract with Stone Container, whereby the Timber Chip Mill receives a tolling
fee upon receipt of raw wood. The contract expires on December 1, 2004 and
includes an option to extend it for an additional five years. Loss of this
contract would require the Company to obtain an additional source of supply or
possibly shut down the facility. Additionally, Stone Container has the right to
purchase the Timber Chip Mill at a specified price which decreases each year.
Management believes it is unlikely that Stone Container will exercise its right
to purchase.
Flow Control
The availability of reliable and continuous sources of MSW or other
combustible waste is critical to the operations of the waste-to-energy
facilities in which the Company has an interest. MSW availability has been
assured, to some extent, by the enactment by municipalities in the service
territories of Maine Energy and PERC of ordinances requiring that waste
generated within their respective jurisdictions be brought exclusively to the
Maine Energy or PERC facilities. Such ordinances are referred to as "flow
control". A 1994 decision of the United States Supreme Court overturned a flow
control ordinance of a New York municipality on the basis that it was an
improper regulation of interstate commerce. In New Jersey, flow control laws
also have been overturned and the State of New Jersey is in the process of
appealing such decisions. Accordingly, the present questionable validity of all
flow control ordinances introduces some degree of uncertainty in the waste
handling business.
Need for Additional Financing; Liquidity
The Company's strategy to foster expansion of its business includes, in
part, the development of new businesses or the acquisition of the ownership of,
or operational responsibility for, additional businesses in the waste handling
industry. This strategy may require the Company to raise additional cash through
offerings of either equity or non-recourse and recourse debt, or both. The
success of the Company's planned expansion will depend upon a number of factors
not entirely within the Company's control, including, among others, the terms
and availability of additional financing, the regulatory climate in which the
Company operates, and other general economic and business conditions. There can
be no assurance that additional funding, through bank borrowings, debt or equity
financings or otherwise, will be available to the Company on acceptable terms.
Availability of Acquisition Targets; Integration of Future Acquisitions.
The Company's ongoing acquisition program is a key element of the growth
strategy for expanding its integrated waste management operations. Consequently,
the future growth of the Company depends in a large part upon the successful
continuation of this acquisition program. The Company may encounter substantial
competition in its efforts to acquire waste-to-energy facilities, ash recycling
facilities, pre and post consumer recycling facilities or any other facilities
relating to integrated waste management business. There can be no assurance that
the Company will succeed in locating or acquiring appropriate acquisition
candidates at price levels and on terms and conditions that the Company
considers appropriate. In addition, if in the future the Company is successful
in acquiring targeted companies, it will need to integrate those acquired
companies into the Company's operations. There can be no assurance that the
Company will successfully integrate future acquisitions into its operations.
12
<PAGE> 16
Dependence on Key Personnel
The Company believes that its success depends, to a significant extent, on
the efforts and abilities of its senior management. In particular, the loss of
any one of Ross Pirasteh, Chairman of the Board of Directors, Martin J. Sergi,
the Company's Vice Chairman, President and Chief Financial Officer, David E.
Hill, the Company's Chief Operating Officer or William Kaiser, the Company's
Executive Vice President and Treasurer, could have a material adverse effect on
the Company. In addition, the Company believes that its success will depend in
large part upon its ability to attract, retain and motivate skilled employees
and other senior management personnel. Although the Company expects to continue
to attract sufficient numbers of such persons for the foreseeable future, there
can be no assurance that the Company will be able to do so. In addition, because
the Company may acquire one or more businesses in the future, the Company's
success will depend, in part, upon its ability to retain and integrate its own
operations personnel with personnel from acquired entities who are necessary to
the continued success or successful integration of the acquired business.
Seasonality
The Company's wood waste and MSW revenues for KTI BioFuels, Maine Energy
and PERC tend to be lower in the winter months. This is primarily attributable
in the case of KTI BioFuels to the volume of waste relating to construction and
demolition activities which increases in the spring and summer months; and in
the case of Maine Energy and PERC to the summer population in Maine which is
roughly 30% higher than any other season of the year. Generally, the supply of
recycled paper is highest in the winter months and decreases during the summer
months. The Company's recycled plastic volume is highest during the fourth
quarter.
No Cash Dividends on Common Stock
The Company has not paid any cash dividends on its Common Stock to date
and the Company does not anticipate paying any cash dividends on its Common
Stock in the foreseeable future. The Company is required to pay annual dividends
of $1,872,500 in the aggregate on the Series B Preferred Stock. Additionally,
the Company's bank credit facility and the Series B Preferred Stock contain
restrictions on the payment of cash dividends on the Common Stock.
Potential Anti-Takeover Effects of State Law; Preferred Stock
Certain provisions of New Jersey law and the Company's Restated
Certificate of Incorporation could delay or impede the removal of incumbent
directors and could make it more difficult for a third party to acquire, or
discourage 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 the Company's securities.
Shares of preferred stock may be issued by the Board of Directors of the
Company without Common Stock shareholder approval on such terms and conditions,
and having such rights, privileges and preferences, as the Board of Directors
may determine. The issuance of preferred stock could make the possible takeover
of the Company or the removal of management of the Company more difficult,
discourage hostile bids for control of the Company in which shareholders may
receive premiums for their shares of Common Stock, or otherwise dilute the
rights of holders of the Common Stock and depress the market price of the
Company's securities.
In addition, the Restated Certificate of Incorporation of the Company
provides for "supermajority" and "fair price" anti-takeover measures which could
affect the price shareholders could receive for shares of Common Stock. The
supermajority provision requires that in the event of a merger or consolidation
of the Company with
13
<PAGE> 17
another corporation or the sale, lease, exchange or other disposition of all or
substantially all the assets of the Company, an affirmative vote of at least 80%
of all outstanding shares of voting stock shall be required to approve such
transaction unless it is approved by at least the greater of three fourths of
the directors or two directors who are not affiliated with said transaction.
The fair price provision as set forth in the Restated Certificate of
Incorporation requires a potential acquiring entity to obtain the approval of at
least 80% of all outstanding shares of voting stock of the Company, obtain the
approval of at least three fourths of the directors on the Board who are not
affiliated with the transaction, or satisfy several conditions that include,
among other things, holders of capital stock of the Company receiving fair
market value for their shares, the payment of all outstanding dividends on
capital stock of the Company, the receipt of a proxy or information statement by
all holders of Common Stock describing the proposed transaction and complying
with the requirements of the Exchange Act and the approval of not less than the
majority of the directors not affiliated with said transaction. See "Description
of Common Stock."
Limitation on Use of Tax Loss Carryforwards
As of December 31, 1997, the Company had net operating loss carryforwards
("NOLs") for federal income tax purposes of approximately $46,100,000 that
expire in the years 2002 through 2010. As a result of an "ownership change"
which occurred during 1994, the Company's ability to utilize its pre-ownership
change NOLs is limited under Section 382 of the Internal Revenue Code of 1986,
as amended (the "Code"), to an amount equal to approximately $1,200,000 of
taxable income per year. If the value of the Company's capital stock immediately
before the 1994 ownership change were determined to be lower than that
calculated by management of the Company, the annual allowable NOL deduction of
$1,200,000 per year for the Company, other than TERI, would be reduced
proportionately. The net operating loss carryforward of TERI is limited to
approximately $988,000 per year. This limitation may be increased if the Company
or TERI recognizes a gain on the disposition of an asset which had a fair market
value greater than its tax basis on the date of the ownership change.
USE OF PROCEEDS
The Company will not receive proceeds from the sale of any of the Shares
offered by the Selling Shareholders pursuant to this prospectus.
14
<PAGE> 18
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth the Company's consolidated ratios of
earnings to combined fixed charges and preferred stock dividends for the
periods shown. The information appearing below should be read in conjunction
with information appearing in the Company's consolidated financial statements,
the notes thereto and Management's Discussion and Analysis of Financial
Condition and Results of Operations included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, which is incorporated herein by
reference.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Combined Fixed 1.73 4.23 (1) (1) 1.55
Charges and Preferred Stock
Dividends (unaudited)
</TABLE>
Earnings used to compute this ratio are earnings from continuing operations
before income taxes and before fixed charges (excluding, for purposes of such
computation, interest capitalized during the period and dividends on the
Company's Series B Preferred Stock). Fixed charges consist of interest, whether
expensed or capitalized, amortization of debt discount and expense, the portion
of rental expense representative of an interest factor and dividends on the
Company's Series B Preferred Stock.
(1) Fixed charges and preferred stock dividends for the years ended December
31, 1995 and 1994 exceeded earnings, as adjusted by $1,328 and $1,428,
respectively.
SELLING SHAREHOLDERS
The following sets forth certain information with respect to the Selling
Shareholders which has been provided to the Company by each such Selling
Shareholder. The Company has no knowledge of the intentions of any of the
Selling Shareholders to actually sell any of the shares listed under the column
"Shares Available for Sale." Each of the Selling Shareholders has the
contractual right to sell shares. No Selling Shareholder has a material
relationship with the Company other than as a result of ownership of the Shares
and the Exchange Notes. All amounts indicated are as of May 6, 1998.
Series B Preferred Stock
<TABLE>
<CAPTION>
Percentage of
Shares Offered Class Owned
Ownership Prior to Pursuant to this After
Selling Shareholder Offering Prospectus(1) Offering(2)
-------- -------------- -----------
<S> <C> <C> <C>
Armstrong Fund Equity Account 1,800 1,800 *
Bell South 4,500 4,500 *
Berwyn Income Fund, Inc. 50,000 50,000 *
</TABLE>
15
<PAGE> 19
<TABLE>
<S> <C> <C> <C>
Cardinal Special Situations 800 800 *
Fund, L.P.
Cardinal Value Equity Partners 10,600 10,600 *
Catholic Mutual Relief Society 7,000 7,000 *
of America
Catholic Mutual Relief Society 4,000 4,000 *
Retirement Plan and Trust
Century National Insurance Company 10,000 10,000 *
Commonwealth Life Insurance 20,000 20,000 *
Company (Teamsters-Camden
Non-Enhanced)
Credit Research & Trading LLC 26,000 26,000 *
Deutsche Bank A.G. 23,200 23,200 *
Fidelity Financial Trust: 178,800 178,800 *
Fidelity Convertible Security Fund
Foundation Account No. 1 8,000 8,000 *
HBK Finance L.P. 14,200 14,200 *
Highbridge International LDC 65,000 65,000 *
JMG Convertible Investments, L.P. 65,000 65,000 *
JSS Investments, L.L.C. 10,000 10,000 *
KF Company Limited 600 600 *
LACERA 5,900 5,900 *
Metropolitan Life Insurance Co.
Separate Account #184 10,000 10,000 *
Navesink Equity Derivative Fund, 15,000 15,000 *
LDC
Paloma Securities LLC 12,000 12,000 *
Remy Capital Partners II L.P. 4,600 4,600 *
RH Capital Associates #1, L.P. 46,000 46,000 *
Silverton International Fund Limited 8,000 8,000 *
SoundShore Partners L.P. 131,500 131,500 *
State Street Research Alpha 40,000 40,000 *
Fund
State Street Research High Income
Fund 10,000 10,000 *
TQA Arbitrage Fund, L.P. 14,000 14,000 *
Triton Capital Investments, Inc. 42,500 42,500 *
Zazove Convertible Fund, L.P. 17,000 17,000 *
--------
Total 856,000
</TABLE>
Common Stock
<TABLE>
<CAPTION>
Percentage of
Shares Offered Class Owned
Ownership Prior to Pursuant to this After
Selling Shareholder Offering Prospectus(1) Offering(2)
-------- -------------- -----------
<S> <C> <C> <C>
Armstrong Fund Equity Account 3,913(1) 3,913 *
</TABLE>
16
<PAGE> 20
<TABLE>
<S> <C> <C> <C>
Bell South 9,783(2) 9,783 *
Berwyn Income Fund, Inc. 108,710(3) 108,710 *
Cardinal Special Situations 1,739(4) 1,739 *
Fund, L.P.
Cardinal Value Equity Partners 23,046(5) 23,046 *
Catholic Mutual Relief Society 15,219(6) 15,219 *
of America
Catholic Mutual Relief Society 8,696(7) 8,696 *
Retirement Plan and Trust
Century National Insurance Company 21,742(8) 21,742 *
Commonwealth Life Insurance 43,484(9) 43,484 *
Company (Teamsters-Camden
Non-Enhanced)
Credit Research & Trading LLC 56,529(10) 56,529 *
Deutsche Bank A.G. 50,411(11) 50,411 *
Fidelity Financial Trust: 388,747(12) 388,747 *
Fidelity Convertible Security Fund
Foundation Account No. 1 17,393(13) 17,393 *
HBK Finance L.P. 30,873(14) 30,873 *
Highbridge International LDC 141,323(15) 141,323 *
JMG Convertible Investments, L.P. 141,323(16) 141,323 *
JSS Investments, L.L.C. 21,742(17) 21,742 *
KF Company Limited 1,304(18) 1,304 *
LACERA 12,827(19) 12,827 *
Metropolitan Life Insurance Co.
Separate Account #184 21,742(20) 21,742 *
Navesink Equity Derivative Fund, 32,613(21) 32,613 *
LDC
Paloma Securities LLC 26,090(22) 26,090 *
Remy Capital Partners II L.P. 10,001(23) 10,001 *
RH Capital Associates #1, L.P. 100,013(24) 100,013 *
Silverton International Fund Limited 17,393(25) 17,393 *
SoundShore Partners L.P. 285,907(26) 285,907 *
State Street Research Alpha 86,968(27) 86,968 *
Fund
State Street Research High Income
Fund 21,742(28) 21,742 *
TQA Arbitrage Fund, L.P. 30,438(29) 30,438 *
Triton Capital Investments, Inc. 92,403(30) 92,403 *
Zazove Convertible Fund, L.P. 32,961(31) 32,961 *
--------
Total 1,861,104
</TABLE>
(1) Represents shares of Common Stock issuable upon conversion of 1,800 shares
of Series B Preferred Stock plus accumulated and unpaid dividends.
17
<PAGE> 21
(2) Represents shares of Common Stock issuable upon conversion of 4,500
shares of Series B Preferred Stock plus accumulated and unpaid dividends.
(3) Represents shares of Common Stock issuable upon conversion of 50,000
shares of Series B Preferred Stock plus accumulated and unpaid dividends.
(4) Represents shares of Common Stock issuable upon conversion of 800 shares
of Series B Preferred Stock plus accumulated and unpaid dividends.
(5) Represents shares of Common Stock issuable upon conversion of 10,600
shares of Series B Preferred Stock plus accumulated and unpaid dividends.
(6) Represents shares of Common Stock issuable upon conversion of 7,000
shares of Series B Preferred Stock plus accumulated and unpaid dividends.
(7) Represents shares of Common Stock issuable upon conversion of 4,000 shares
of Series B Preferred Stock plus accumulated and unpaid dividends.
(8) Represents shares of Common Stock issuable upon conversion of 10,000
shares of Series B Preferred Stock plus accumulated and unpaid dividends.
(9) Represents shares of Common Stock issuable upon conversion of 20,000
shares of Series B Preferred Stock plus accumulated and unpaid dividends.
(10) Represents shares of Common Stock issuable upon conversion of 26,000
shares of Series B Preferred Stock plus accumulated and unpaid dividends.
(11) Represents shares of Common Stock issuable upon conversion of 23,200
shares of Series B Preferred Stock plus accumulated and unpaid dividends.
(12) Represents shares of Common Stock issuable upon conversion of 178,800
shares of Series B Preferred Stock plus accumulated and unpaid dividends.
(13) Represents shares of Common Stock issuable upon conversion of 8,000 shares
of Series B Preferred Stock plus accumulated and unpaid dividends.
(14) Represents shares of Common Stock issuable upon conversion of 14,200
shares of Series B Preferred Stock plus accumulated and unpaid dividends.
(15) Represents shares of Common Stock issuable upon conversion of 65,000
shares of Series B Preferred Stock plus accumulated and unpaid dividends.
(16) Represents shares of Common Stock issuable upon conversion of 65,000
shares of Series B Preferred Stock plus accumulated and unpaid dividends.
(17) Represents shares of Common Stock issuable upon conversion of 10,000
shares of Series B Preferred Stock plus accumulated and unpaid dividends.
18
<PAGE> 22
(18) Represents shares of Common Stock issuable upon conversion of 600 shares
of Series B Preferred Stock plus accumulated and unpaid dividends.
(19) Represents shares of Common Stock issuable upon conversion of 5,900
shares of Series B Preferred Stock plus accumulated and unpaid dividends.
(20) Represents shares of Common Stock issuable upon conversion of 10,000
shares of Series B Preferred Stock plus accumulated and unpaid dividends.
(21) Represents shares of Common Stock issuable upon conversion of 15,000
shares of Series B Preferred Stock plus accumulated and unpaid dividends.
(22) Represents shares of Common Stock issuable upon conversion of 12,000
shares of Series B Preferred Stock plus accumulated and unpaid dividends.
(23) Represents shares of Common Stock issuable upon conversion of 4,600 shares
of Series B Preferred Stock plus accumulated and unpaid dividends.
(24) Represents shares of Common Stock issuable upon conversion of 46,000
shares of Series B Preferred Stock plus accumulated and unpaid dividends.
(25) Represents shares of Common Stock issuable upon conversion of 8,000 shares
of Series B Preferred Stock plus accumulated and unpaid dividends.
(26) Represents shares of Common Stock issuable upon conversion of 131,500
shares of Series B Preferred Stock plus accumulated and unpaid dividends.
(27) Represents shares of Common Stock issuable upon conversion of 40,000
shares of Series B Preferred Stock plus accumulated and unpaid dividends.
(28) Represents shares of Common Stock issuable upon conversion of 10,000
shares of Series B Preferred Stock plus accumulated and unpaid dividends.
(29) Represents shares of Common Stock issuable upon conversion of 14,000
shares of Series B Preferred Stock plus accumulated and unpaid dividends.
(30) Represents shares of Common Stock issuable upon conversion of 42,500
shares of Series B Preferred Stock plus accumulated and unpaid dividends.
(31) Represents shares of Common Stock issuable upon conversion of 17,000
shares of Series B Preferred Stock plus accumulated and unpaid dividends.
19
<PAGE> 23
<TABLE>
<CAPTION>
Percentage of
Class Owned
Exchange Note
s Ownership Prior to Notes Offered Pursuant After
Selling Shareholder Offering to this Prospectus(1) Offering(2)
-------- -------------------- -----------
<S> <C> <C>
Armstrong Fund Equity Account $ 45,000(1) $ 45,000 *
Bell South 112,000(2) 112,000 *
Berwyn Income Fund, Inc. 1,250,000(3) 1,250,000 *
Cardinal Special Situations 20,000(4) 20,000 *
Fund, L.P.
Cardinal Value Equity Partners 265,000(5) 265,000 *
Catholic Mutual Relief Society 175,000(6) 175,000 *
of America
Catholic Mutual Relief Society 100,000(7) 100,000 *
Retirement Plan and Trust
Century National Insurance Company 250,000(8) 250,000 *
Commonwealth Life Insurance 500,000(9) 500,000 *
Company (Teamsters-Camden
Non-Enhanced)
Credit Research & Trading LLC 650,000(10) 650,000 *
Deutsche Bank A.G. 580,000(11) 580,000 *
Fidelity Financial Trust: 4,470,000(11) 4,470,000 *
Fidelity Convertible Security Fund
Foundation Account No. 1 200,000(12) 200,000 *
HBK Finance L.P. 355,000(13) 355,000 *
Highbridge International LDC 1,625,000(15) 1,625,000 *
JMG Convertible Investments, L.P. 1,625,000(16) 1,625,000 *
JSS Investments, L.L.C. 250,000(17) 250,000 *
KF Company Limited 15,000(18) 15,000 *
LACERA 147,000(19) 147,000 *
Metropolitan Life Insurance Co. 250,000(20) 250,000 *
SeparateAccount #184
Navesink Equity Derivative Fund, 375,000(21) 375,000 *
LDC
Paloma Securities LLC 300,000(22) 300,000 *
Remy Capital Partners II L.P. 115,000(23) 115,000 *
RH Capital Associates #1, L.P. 1,150,000(24) 1,150,000 *
Silverton International Fund Limited 200,000(25) 200,000 *
SoundShore Partners L.P. 3,287,000(26) 3,287,000 *
State Street Research Alpha Fund 1,000,000(27) 1,000,000 *
State Street Research High Income
Fund 250,000(28) 250,000 *
TQA Arbitrage Fund, L.P. 350,000(29) 350,000 *
Triton Capital Investments, Inc. 1,062,000(30) 1,062,000 *
Zazove Convertible Fund, L.P. 425,000(31) 425,000 *
-----------
Total $21,397,000
</TABLE>
20
<PAGE> 24
(1) Represents aggregate principal amount of Exchange Notes issuable in
exchange for 1,800 shares of Series B Preferred Stock.
(2) Represents aggregate principal amount of Exchange Notes issuable in
exchange for 4,500 shares of Series B Preferred Stock.
(3) Represents aggregate principal amount of Exchange Notes issuable in
exchange for 50,000 shares of Series B Preferred Stock.
(4) Represents aggregate principal amount of Exchange Notes issuable in
exchange for 800 shares of Series B Preferred Stock.
(5) Represents aggregate principal amount of Exchange Notes issuable in
exchange for 10,600 shares of Series B Preferred Stock.
(6) Represents aggregate principal amount of Exchange Notes issuable in
exchange for 7,000 shares of Series B Preferred Stock.
(7) Represents aggregate principal amount of Exchange Notes issuable in
exchange for 4,000 shares of Series B Preferred Stock.
(8) Represents aggregate principal amount of Exchange Notes issuable in
exchange for 10,000 shares of Series B Preferred Stock.
(9) Represents aggregate principal amount of Exchange Notes issuable in
exchange for 20,000 shares of Series B Preferred Stock.
(10) Represents aggregate principal amount of Exchange Notes issuable in
exchange for 26,000 shares of Series B Preferred Stock.
(11) Represents aggregate principal amount of Exchange Notes issuable in
exchange for 23,200 shares of Common Stock.
(12) Represents aggregate principal amount of Exchange Notes issuable in
exchange for 178,800 shares of Series B Preferred Stock.
(13) Represents aggregate principal amount of Exchange Notes issuable in
exchange for 8,000 shares of Series B Preferred Stock.
(14) Represents aggregate principal amount of Exchange Notes issuable in
exchange for 14,200 shares of Series B Preferred Stock.
(15) Represents aggregate principal amount of Exchange Notes issuable in
exchange for 65,000 shares of Series B Preferred Stock.
(16) Represents aggregate principal amount of Exchange Notes issuable in
exchange for 65,000 shares of Series B Preferred Stock.
21
<PAGE> 25
(17) Represents aggregate principal amount of Exchange Notes issuable in
exchange for 10,000 shares of Series B Preferred Stock.
(18) Represents aggregate principal amount of Exchange Notes issuable in
exchange for 600 shares of Series B Preferred Stock.
(19) Represents aggregate principal amount of Exchange Notes issuable in
exchange for 5,900 shares of Series B Preferred Stock.
(20) Represents aggregate principal amount of Exchange Notes issuable in
exchange for 10,000 shares of Series B Preferred Stock.
(21) Represents aggregate principal amount of Exchange Notes issuable in
exchange for 15,000 shares of Series B Preferred Stock.
(22) Represents aggregate principal amount of Exchange Notes issuable in
exchange for 12,000 shares of Series B Preferred Stock.
(23) Represents aggregate principal amount of Exchange Notes issuable in
exchange for 4,600 shares of Series B Preferred Stock.
(24) Represents aggregate principal amount of Exchange Notes issuable in
exchange for 46,000 shares of Series B Preferred Stock.
(25) Represents aggregate principal amount of Exchange Notes issuable in
exchange for 8,000 shares of Series B Preferred Stock.
(26) Represents aggregate principal amount of Exchange Notes issuable in
exchange for 131,500 shares of Series B Preferred Stock.
(27) Represents aggregate principal amount of Exchange Notes issuable in
exchange for 40,000 shares of Series B Preferred Stock.
(28) Represents aggregate principal amount of Exchange Notes issuable in
exchange for 10,000 shares of Series B Preferred Stock.
(29) Represents aggregate principal amount of Exchange Notes issuable in
exchange for 14,000 shares of Series B Preferred Stock.
(30) Represents aggregate principal amount of Exchange Notes issuable in
exchange for 42,500 shares of Series B Preferred Stock.
(31) Represents aggregate principal amount of Exchange Notes issuable in
exchange for 17,000 shares of Series B Preferred Stock.
22
<PAGE> 26
PLAN OF DISTRIBUTION
The Shares and Exchange Notes may be offered for sale from time to time by
the Selling Shareholders or their respective pledgees, donees, transferees or
other successors in interest in the open market, on the NASDAQ National Market
(in the case of Common Stock), in the over-the-counter market, in privately
negotiated transactions, through the writing of options (whether such options
are listed on an options exchange or otherwise), settlement of short sales of
the Shares and Exchange Notes, or a combination of such methods, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, at varying prices determined at the time of sale, or at
negotiated or fixed prices, in each case, as determined by the Selling
Shareholders or by agreement between the Selling Shareholders and underwriters,
brokers, dealers or agents, or purchasers. The sale or distribution of the
Shares and Exchange Notes may be effected directly to purchasers by the Selling
Shareholders or through one or more brokers, dealers or agents, from time to
time, in one or more transactions. If the Selling Shareholders effect such
transactions by selling shares to or through underwriters, brokers, dealers or
agents, such underwriters, brokers, dealers or agents may receive compensation
in the form of commissions, discounts or concessions from the Selling
Shareholders and/or purchasers of the Shares and Exchange Notes for whom they
may act as agent, or to whom they may sell as principal, or both (which
compensation as to a particular underwriter, broker, dealer or agent may be in
excess of those customary in the type of transaction involved). The Selling
Shareholders and any brokers, dealers or agents who act in connection with the
sale of Shares and Exchange Notes hereunder may be deemed to be "underwriters"
within the meaning of the Act, and any commissions, discounts or concessions
received by any such brokers, dealers or agents and proceeds of any resale of
the Shares and Exchange Notes may be deemed to be underwriting discounts and
commissions under the Act.
Under the securities laws of certain states, the Shares and Exchange Notes
may be sold in such states only through registered or licensed brokers or
dealers. In addition, in certain states the Shares and Exchange Notes may be not
be sold unless the Shares and Exchange Notes have been registered or qualified
for sale in any such state or an exemption from registration or qualification is
available and complied with.
The Company will pay all of the expenses incident to the registration,
offering and sale of the Shares to the public hereunder other than commissions,
fees and discounts of underwriters, brokers, dealers or agents. The Company will
not receive any of the proceeds of the sale of any of the Shares and Exchange
Notes by the Selling Shareholders.
DESCRIPTION OF SECURITIES
Authorized Stock
The Company's Restated Certificate of Incorporation, as amended,
authorizes the issuance of 13,333,333 shares of Common Stock and 10,000,000
shares of "blank check" preferred stock, no par value, and, pursuant to a
Certificate of Amendment to the Company's Restated Certificate of Incorporation
filed on May 16, 1997, 20,000,000 shares of Common Stock. As of March 19,
1998, there were 9,477,953 shares of Common Stock issued and outstanding and
held of record by 201 shareholders of record, and 856,000 shares of the
Company's Series B Preferred Stock issued and outstanding and held of record by
2 shareholders.
Common Stock
Shareholders are entitled to one vote for each share of the Common Stock
held of record on all matters to be voted by shareholders. Shareholders are not
entitled to cumulate their votes in the election of directors.
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Subject to the prior rights of holders of additional preferred stock of the
Company which may be issued, the holders of Common Stock are entitled to
dividends, when and if declared by the Board of Directors, out of funds legally
available therefor. The Credit Facility and the Series B Preferred Stock
however, contain restrictions on the payment of cash dividends. See "Risk
Factors -- No Cash Dividends." In the event of the liquidation, dissolution or
winding up of the Company, the holders of Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities and the liquidation
preferences of any outstanding shares of preferred stock. Holders of Common
Stock have no preemptive rights and have no right to convert Common Stock into
any other securities. All outstanding shares of Common Stock are fully paid and
nonassessable.
Series B Preferred Stock
Ranking
The Series B Preferred Stock will, with respect to dividend distributions
and distributions upon the liquidation, winding-up and dissolution of the
Company, rank (i) senior to all classes of Common Stock of the Company and to
each other class of capital stock or series of preferred stock established after
July, 1997 by the Board of Directors the terms of which do not expressly provide
that it ranks senior to or on a parity with the Series B Preferred Stock as to
dividend distributions and distributions upon the liquidation, winding-up and
dissolution of the Company (collectively referred to with the Common Stock of
the Company as "Junior Securities"); (ii) subject to certain conditions, on a
parity with any class of capital stock or series of preferred stock issued by
the Company established after the date of the issuance of the Series B Preferred
Stock by the Board of Directors, the terms of which expressly provide that such
class or series will rank on a parity with the Series B Preferred Stock as to
dividend distributions and distributions upon the liquidation, winding-up and
dissolution of the Company (collectively referred to as "Parity Securities");
and (iii) subject to certain conditions, junior to each class of capital stock
or series of preferred stock issued by the Company established after the date of
the issuance of the Series B Preferred Stock by the Board of Directors the terms
of which expressly provide that such class or series will rank senior to the
Series B Preferred Stock as to dividend distributions and distributions upon
liquidation, winding-up and dissolution of the Company (collectively referred to
as "Senior Securities"). The Series B Preferred Stock will be subject to the
issuance of series of Junior Securities, Parity Securities and Senior
Securities, provided that the Company may not issue any new class of Parity
Securities or Senior Securities without the approval of the holders of at least
a majority of the shares of Series B Preferred Stock then outstanding, voting or
consenting, as the case may be, together as one class unless the pro forma
ratios for the latest twelve months of (i) net income available for preferred
dividends to preferred dividends is not less than 1:1 and (ii) earnings before
interest, taxes, depreciation and amortization, exclusive of non-recurring
items, less capital expenditures, securities amortization and redemption, cash
taxes and changes in working capital to preferred dividends is not less than
1.2:1.
In addition, the Series B Preferred Stock will rank junior in right of
payment to all indebtedness and other debt obligations of the Company.
Dividends
Holders of the Series B Preferred Stock will be entitled to receive, when,
as and if declared by the Board of Directors, from any source of funds legally
available therefor, dividends on the Series B Preferred Stock at a rate per
annum equal to 8 3/4% of $25.00 per share plus accumulated and unpaid dividends
thereon, payable quarterly. All dividends will be cumulative whether or not
earned or declared on a daily basis from the date of issuance of the Series B
Preferred Stock and will be payable quarterly in arrears on February 1, May 1,
August 1 and November 1 of each year, commencing on November 1, 1997. Upon the
occurrence of an Event of Default
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under certain of the Company's existing indebtedness, the Company is restricted
from paying, and future agreements of the Company may restrict the payment of,
cash dividends on the Series B Preferred Stock.
Dividends will be payable to holders of record of the Series B Preferred
Stock on the stock register of the Company on the record date for such purpose
fixed by the Board of Directors of the Company, which shall not be less than 10
nor more than 60 days preceding the dividend payment date. Dividends will be
computed on the basis of a 360-day year of twelve 30-day months and the actual
number of days elapsed in any period of less than one month.
No dividends may be declared or paid or funds set apart for the payment of
dividends on any Parity Securities for any period unless full cumulative
dividends shall have been or contemporaneously are declared and paid in cash or
declared and a sum in cash set apart for such payment on the Series B Preferred
Stock. If full dividends in cash are not so paid, the Series B Preferred Stock
will share dividends pro rata with the Parity Securities. No dividends may be
paid or set apart for such payment on Junior Securities (except dividends on
Junior Securities in additional shares of Junior Securities) and no Junior
Securities or Parity Securities may be repurchased, redeemed or otherwise
retired, nor may funds be set apart for payment with respect thereto, if full
cumulative dividends for all past dividend periods have not been paid in cash on
the Series B Preferred Stock.
Mandatory Redemption
On August 15, 2004, the Company shall redeem from any source of funds
legally available therefor, all of the then outstanding shares of Series B
Preferred Stock at a redemption price equal to $25.00 per share plus accumulated
and unpaid dividends thereon. Such redemption may be made at the option of the
Company either in (i) cash at 100% or (ii) Common Stock valued at 95% of the
average closing price of the Common Stock during the 20 trading days prior to
such redemption.
Optional Redemption
The Series B Preferred Stock will be redeemable for cash on or after
August 15, 2000, at the option of the Company, from any source of funds legally
available therefor, from time to time, in whole or in part, at the redemption
prices set forth herein, together with all accumulated and unpaid dividends to
the redemption date ("Redemption Price"). The Redemption Prices are as follows,
plus all accumulated and unpaid dividends to the redemption date, for shares of
Series B Preferred Stock redeemed during the twelve month period beginning on
August 15, of the years indicated:
Year Price
- -------------------------- ---------------------------
2000 $ 26.10 per share
2001 $ 25.73 per share
2002 $ 25.37 per share
2003 and thereafter $ 25.00 per share
Notwithstanding the foregoing, on or after August 15, 1999, the Company
may, at its option, redeem the Series B Preferred Stock at $26.47 per share plus
accumulated and unpaid dividends thereon if the Common Stock bid price has
averaged not less than 1.5 times the conversion price during the preceding 20
consecutive trading days.
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No optional redemption may be authorized or made unless, prior to giving
the applicable redemption notice, all accumulated and unpaid dividends for
dividend periods ended prior to the date of such redemption notice shall have
been paid in cash. In the event of partial redemptions of Series B Preferred
Stock, the shares to be redeemed will be determined pro rate or by lot, as
determined by the Company; provided that the Company may redeem all shares held
by holders of fewer than 100 shares of Series B Preferred Stock (or by holders
that would hold fewer than 100 shares of Series B Preferred Stock following such
redemption) prior to its redemption of other shares of Series B Preferred Stock.
Conversion Rights
Each share of Series B Preferred Stock will be convertible at any time at
the option of the holder thereof into Common Stock of the Company, at a
conversion price equal to $11.75 per share, except that the right to convert
shares of Series B Preferred Stock called for redemption will terminate at the
close of business on the business day preceding the redemption date and will be
lost if not exercised prior to that time, unless the Company defaults in making
the payment due upon redemption.
The conversion price will be subject to adjustment in certain events,
including: (i) the payment of dividends (and other distributions) payable in
Common Stock on any class of capital stock of the Company; (ii) the issuance to
all holders of Common Stock of rights, warrants or options entitling them to
subscribe for or purchase Common Stock at less than the current market price (as
defined in the Certificate of Incorporation); (iii) subdivisions, combinations
and reclassifications of Common Stock; (iv) distributions to all holders of
Common Stock of evidences of indebtedness of the Company, shares of any class of
capital stock, cash or other assets (including securities, but excluding those
dividends, issuance of rights, warrants, and options and distributions referred
to above and dividends and distributions paid in cash out of the retained
earnings of the Company, unless the sum of all such cash dividends and
distributions made and the amount of cash and the fair market value of other
consideration paid in respect of any repurchase of Common Stock by the Company
or any of its subsidiaries, in each case within the preceding 12 months in
respect of which no adjustment has been made, exceeds 20% of the product of the
then current market price of the Common Stock times the aggregate number of
shares of Common Stock outstanding on the record date for such dividend or
distribution).
No adjustment of the conversion price will be required to be made until
cumulative adjustments amount to 1% or more of the conversion price as last
adjusted. In addition to the foregoing adjustments, the Company will be
permitted to make such reductions in the conversion price as it considers to be
advisable in order that any event treated for federal income tax purposes as a
dividend of stock or stock rights will not be taxable to the holders of the
Common Stock.
In the case of certain consolidations or mergers to which the Company is a
party or the transfer of substantially all of the assets of the Company, each
share of Series B Preferred Stock then outstanding will become convertible only
to the kind and amount of securities, cash and other property receivable upon
the consolidation, merger or transfer by a holder of the number of shares of
Common Stock into which such share of Series B Preferred Stock might have been
converted immediately prior to such consolidation, merger or transfer (assuming
such holder of Common Stock failed to exercise any rights of election and
received per share the kind and amount receivable per share by a plurality of
non-electing shares).
No fractional shares of Common Stock will be issued upon conversion; in
lieu thereof, the Company will pay a cash adjustment based upon the closing
price of the Common Stock on the business day prior to the conversion date.
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The holder of record of a share of Series B Preferred Stock at the close
of business on a record date with respect to the payment of dividends on the
Series B Preferred Stock will be entitled to receive such dividends with respect
to such share of the Series B Preferred Stock on the corresponding dividend
payment date, notwithstanding the conversion of such share after such record
date and prior to such dividend payment date. A share of Series B Preferred
Stock surrendered for conversion during the period from the close of business on
any record date for the payment of dividends to the opening of business of the
corresponding dividend payment date must be accompanied by a payment in cash in
an amount equal to the dividends payable on such dividend payment date, unless
such share of Series B Preferred Stock has been called for redemption on a
redemption date occurring during the period from the close of business on any
record date for the payment of dividends to the close of business on the
business day immediately following the corresponding dividend payment date. The
dividend payment with respect to a share of Series B Preferred Stock called for
redemption on a date during the period from the close of business on any record
date for the payment of dividends to the close of business on the business day
immediately following the corresponding dividend payment date will be payable on
such dividend payment date to the record holder of such share on such record
date, notwithstanding the conversion of such share after such record date and
prior to such dividend payment date. No payment or adjustment will be made upon
conversion of shares of Series B Preferred Stock for accumulated and unpaid
dividends or for dividends with respect to the Common Stock issued upon such
conversion.
Change of Control
Upon the occurrence of a Change of Control (as defined below), at the
option of the holders of a majority of the Series B Preferred Stock the Company
will be required to make an offer (a "Change of Control Offer") to repurchase
all or any part of each holder's Series B Preferred Stock at an offer price
equal to $25.00 per share plus accumulated and unpaid dividends thereon to the
date of repurchase. Such redemption may be made at the option of the Company
either in (i) cash at 100% or (ii) Common Stock valued at 95% of the average
closing price of the Common Stock during the 20 trading days prior to such
redemption, if the Board of Directors of the Company determines that making such
payment in shares of Common Stock will not adversely affect the voting rights,
preferences, privileges or relative, participating, option or other specified
rights of the holders of the Preferred Stock or the Common Stock. Within 30 days
following a Change of Control, the Company will mail a notice to each holder of
Series B Preferred Stock describing the transaction that constitutes the Change
of Control and offering to repurchase the Series B Preferred Stock pursuant to
the procedures required by the Certificate of Incorporation and described in
such notice; provided that, prior to complying with the provisions of this
covenant, but in any event within 90 days following a Change of Control, the
Company will either repay all outstanding indebtedness or obtain the requisite
consents, if any, under all agreements governing outstanding indebtedness to
permit the repurchase of the Series B Preferred Stock required by this covenant.
A "Change of Control" will be deemed to have occurred upon the occurrence
of any of the following: (a) the sale, lease, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one or a series
of related transactions, of all or substantially all of the assets of the
Company and its subsidiaries, taken as a whole, (b) the adoption of a plan
relating to the liquidation or dissolution of the Company, (c) the consummation
of any transaction (including, without limitation, any merger or consolidation)
the result of which is that any "person" or "group" (as such terms are, used in
Section 13(d)(3) of the Exchange Act), other than a group including any one of
Nicholas Menonna Jr., Martin Sergi or Ross Pirasteh, becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act), directly or indirectly through one or more intermediaries, of more than
50% of the voting power of the outstanding voting stock of the Company, unless
the closing price per share of Common Stock for any five trading days within the
period of ten consecutive trading days ending immediately after the announcement
of such Change of Control equals or exceeds 105% of the conversion price of the
Series B Preferred Stock or the Exchange Notes, as the case may be, in effect on
each such trading day, or (d) the first day on which more than a majority of the
Board of Directors are not Continuing Directors (as defined below); provided,
however, that a transaction in which the
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Company becomes a subsidiary of another entity shall not constitute a Change of
Control if (i) the shareholders of the Company immediately prior to such
transaction "beneficially own" (as such term is defined in Rule 13d-3 and Rule
13d-5 under the Exchange Act), directly or indirectly through one or more
intermediaries, at least a majority of the voting power of the outstanding
voting stock of the Company immediately prior to such transaction, no "person"
or "group" (as such terms are defined above), other than such other entity (but
including holders of equity interests of such other entity), "beneficially owns"
(as such term is defined above), directly or indirectly through one or more
intermediaries, more than 50% of the voting power of the outstanding voting
stock of the Company.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (a) was a member of the Board of
Directors on the date of original issuance of the Series B Preferred Stock or
(b) was nominated for election to the Board of Directors with the approval of,
or whose election to the Board of Directors was ratified by, at least two-thirds
of the Continuing Directors who were members of the Board of Directors at the
time of such nomination or election.
Except as described above with respect to a Change of Control, the
Certificate of Incorporation does not contain provisions that permit the holders
of the Series B Preferred Stock to require that the Company repurchase or redeem
the Series B Preferred Stock in the event of a takeover, recapitalization or
similar transaction. In addition, the Company could enter into certain
transactions, including acquisitions, refinancing or other recapitalizations,
that could affect the Company's capital structure or the value of the Series B
Preferred Stock or the Common Stock, but that would not constitute a Change of
Control.
The occurrence of a Change of Control may result in default under certain
indebtedness of the Company. In addition, certain indebtedness of the Company
could restrict the Company's ability to repurchase the Series B Preferred Stock
for cash upon a Change of Control. In the event a Change of Control occurs at a
time when the Company is prohibited from repurchasing the Series B Preferred
Stock for cash, the Company could seek the consent of its lenders to the
repurchase of the Series B Preferred Stock or could attempt to refinance the
borrowings that contain such prohibition. If the Company does not obtain such
consent or repay such borrowings, the Company will remain prohibited from
repurchasing the Series B Preferred Stock for cash. The Company's failure to
make a Change of Control Offer or to repurchase the Series B Preferred Stock
tendered in a Change of Control Offer would constitute a Voting Rights
Triggering Event (as defined below). Finally, the Company's ability to
repurchase Series B Preferred Stock following a Change of Control may be limited
by the Company's then existing financial resources.
The Company will not be required to make a Change of Control Offer
following a Change of Control if a third party makes the Change of Control Offer
in the manner, at the times and otherwise in compliance with the requirements
set forth in the Certificate of Incorporation applicable to a Change of Control
Offer made by the Company and purchases all of the Series B Preferred Stock
validly tendered and not withdrawn under such Change of Control Offer.
Exchange
The Company at its option, upon 60 days' written notice to the holders of
Series B Preferred Stock, may exchange all, but not less than all, of the then
outstanding shares of Series B Preferred Stock into its 8 3/4% Exchange Notes on
any dividend payment date, provided that on the date of such exchange: (a) there
are no accumulated and unpaid dividends on the Series B Preferred Stock
(including the dividends payable on such date) or other contractual impediment
to such exchange; (b) there shall be legally available funds sufficient
therefor; (c) a registration statement relating to the Exchange Notes shall have
been declared effective under the
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Securities Act of 1933, as amended (the "Securities Act"), prior to such
exchange and shall continue to be in effect on the date of such exchange or the
Company shall have obtained a written opinion of counsel that an exemption from
the registration requirements of the Securities Act is available for such
exchange and that upon receipt of such Exchange Notes pursuant to such exchange
made in accordance with such exemption, the holders (assuming such holder is not
an affiliate of the Company) thereof will not be subject to any restrictions
imposed by the Securities Act upon the resale thereof, other than any such
restriction to which the holder thereof already is subject on the Exchange Date
(as defined below), and such exemption is relied upon by the Company for such
exchange; (d) the indenture in respect of the Exchange Notes (the "Exchange Note
Indenture") and the trustee thereunder shall have been qualified under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"); (e) immediately
after giving effect to such exchange, no Default or Event of Default (each as
defined in the Exchange Note Indenture) would exist under the Exchange Note
Indenture; and (f) the Company shall have delivered to the Trustee under the
Exchange Note Indenture a written opinion of counsel, dated the date of
exchange, regarding the satisfaction of the conditions set forth in clauses (a),
(b), (c) and (d). The Company shall send a written notice of exchange by mail to
each holder of record of shares of Series B Preferred Stock, which notice shall
state, among other things, (i) that the Company is exercising its option to
exchange the Series B Preferred Stock for Exchange Notes pursuant to the
Certificate of Incorporation and (ii) the date of exchange (the "Exchange Date")
which date shall not be less than 30 days nor more than 60 days following the
date on which such notice is mailed. On the Exchange Date, the Company shall
issue Exchange Notes in exchange for the Series B Preferred Stock as provided
below.
The holders of outstanding shares of Series B Preferred Stock will be
entitled to receive $1,000 principal amount of Exchange Notes for each 40 shares
of Series B Preferred Stock (the liquidation preference of which equals $1,000).
The Exchange Notes will be issued in registered form, without coupons. Exchange
Notes issued in exchange for Series B Preferred Stock will be issued in
principal amounts of $1,000 and integral multiples thereof. The Company will pay
cash in lieu of issuing an Exchange Note in a principal amount less than $1,000.
On and after the Exchange Date, dividends will cease to accrue on the
outstanding shares of Series B Preferred Stock, and all rights of the holders of
Series B Preferred (except the right to receive the Exchange Notes, an amount in
cash equal to the accumulated and unpaid dividend and Liquidated Damages, if
any, to the Exchange Date and, if the Company so elects, cash in lieu of any
Exchange Note which in an amount that is not an integral multiple of $1,000)
will terminate. The person entitled to receive the Exchange Notes issuable upon
such exchange will be treated for all purposes as registered holder of such
Exchange Notes.
Liquidation Preference
Upon any voluntary liquidation, dissolution or winding-up of the Company,
holders of Series B Preferred Stock will be entitled to be paid, out of the
assets of the Company available for distribution, $25.00 per share plus
accumulated and unpaid dividends thereon to the date fixed for liquidation,
dissolution or winding-up (including an amount equal to a prorated dividend for
the period from the last dividend payment date to the date fixed for
liquidation, dissolution or winding-up, the "Liquidation Preference"), before
any distribution is made on any Junior Securities, including, without
limitation, Common Stock of the Company. If, upon any voluntary or involuntary
liquidation dissolution or winding-up of the Company, the amount payable with
respect to the Series B Preferred Stock and all other Parity Securities is not
paid in full, the holders of the Series B Preferred Stock and the Parity
Securities will share equally and ratably in any distribution of assets of the
Company in proportion to the full liquidation preference to which each is
entitled. After payment of the full amount of the Liquidation Preferences to
which they are entitled, the holders of shares of Series B Preferred Stock will
not be entitled to any further participation in any distribution of assets of
the Company. However, neither the sale, conveyance, exchange or transfer (for
cash, shares of stock, securities or other consideration) of all or
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substantially all of the property or assets of the Company nor the consolidation
or merger of the Company with or into one or more entities should be deemed to
be a liquidation, dissolution or winding-up of the Company.
The Certificate of Incorporation for the Series B Preferred Stock does not
contain any provision requiring funds to be set aside to protect the Liquidation
Preference of the Series B Preferred Stock, although such Liquidation Preference
will be substantially in excess of the par value of such shares of Series B
Preferred Stock. In addition, the Company is not aware of any provision of New
Jersey law or any controlling decision of the courts of the State of New Jersey
(the state of incorporation of the Company) that requires a restriction upon the
surplus of the Company solely because the Liquidation Preference of the
preferred stock will exceed its par value. Consequently, there will be no
restriction upon the surplus of the Company solely because the Liquidation
Preference of the Series B Preferred Stock will exceed the par value thereof and
there will be no remedies available to holders of the Series B Preferred Stock
before or after the payment of any dividend, other than in connection with the
liquidation of the Company, solely by reason of the fact that such dividend
would reduce the surplus of the Company to an amount less than the difference
between the liquidation preference of the Series B Preferred Stock and its par
value.
Voting Rights
Holders of the Series B Preferred Stock are not entitled or permitted to
vote on any matter required or permitted to be voted upon by the shareholders of
the Company, except as otherwise required by New Jersey law or the Certificate
of Incorporation.
Pursuant to the Certificate of Incorporation, so long as any shares of the
Series B Preferred Stock are outstanding, the affirmative vote of the holders of
at least a majority of the outstanding shares of Series B Preferred Stock voting
separately as one class, is required before:
(a) the Company can authorize or issue any new class of Parity
Securities or Senior Securities, or increase the authorized number
of shares of any such class or series, or reclassify any authorized
stock of the Company into any such class or series, or authorize any
obligation or security convertible into or evidencing the right to
purchase any such Parity Securities or Senior Securities unless the
pro forma ratios for the latest twelve months of (i) net income
available for preferred dividends to preferred dividends is not less
than 1: I and (ii) earning before interest, taxes, depreciation and
amortization, less capital expenditures, securities amortization and
redemption, cash taxes and changes in working capital to preferred
dividends is not less than 1.2:1;
(b) the Company can amend the Certificate of Incorporation so as to
affect adversely the voting rights, preferences, privileges or
relative participating, optional or other specified rights of the
holders of Series B Preferred Stock or to authorize the issuance of
any additional shares of Series B Preferred Stock; provided that any
such amendment that adversely changes the dividend payable on, or
the liquidation preference of, the Series B Preferred Stock shall
require the affirmative vote or consent of all holders of Series B
Preferred Stock; and
(c) the Company can amend or modify the Exchange Note Indenture from the
form as existing on the date of issue of the Series B Preferred
Stock (except as expressly provided therein), until the exchange of
Series B Preferred Stock for Exchange Notes.
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Upon the failure by the Company to (a) declare and pay in full dividends
accumulated and owing on any dividend payment date for more than four
consecutive dividend payment dates; (b) satisfy any mandatory redemption
obligation with respect to the Series B Preferred Stock or make a Change of
Control Offer in the time period set forth therein (each of the events,described
in clauses (a) and (b) being referred to herein as a "Voting Rights Triggering
Event"), then the number of directors constituting the Board of Directors shall
thereupon automatically be increased by one, in the case of clause (a) above and
two, in the case of clause (b) above, and the holders of a majority of the
outstanding shares of Series B Preferred Stock, voting separately as one class
(or as a class together with the holders of shares of Parity Securities, if such
holders are entitled to elect additional directors pursuant to any provisions of
the Certificate of Incorporation that are similar to those of the holders of the
Series B Preferred Stock), shall be entitled to elect such members to the Board
of Directors at a special meeting therefor called upon the occurrence of such
Voting Rights Triggering Event and at every subsequent meeting at which the
terms of office of the directors so elected expire. In no event shall the
holders of the Series B Preferred Stock and the holders of Parity Securities
voting together as a class be entitled to elect a total of more than two
additional directors to the Board of Directors of the Company
The right of the holders of the Series B Preferred Stock to elect
directors shall continue until such time as all accumulated dividends that are
in arrears on the Series B Preferred Stock are paid in full or such other Voting
Rights Triggering Event has been completely cured, at which time (a) the special
right of such holders so to vote for the election of directors and (b) the term
of office of the directors elected by such holders shall terminate, and the
directors elected by the holders of Common Stock shall constitute the entire
Board of Directors and the authorized number of directors of the Company shall
thereupon return to the number of authorized directors otherwise in effect, but
subject always to the same provisions for the renewal and divestment of such
special voting rights in the case of any future Voting Rights Triggering Event.
At any time after voting power to elect directors shall have become vested
and be continuing in the holders of the Series B Preferred Stock or if vacancies
shall exist in the offices of directors elected by such holders, a proper
officer of the Company may, and upon the written request of any holder of record
of the Series B Preferred addressed to the Secretary of the Company at the
Company's principal executive office shall, call special meeting of such holders
for the purpose of electing the directors that such holders are entitled to
elect. If such meeting shall not be called by the proper officer of the Company
within 20 days after personal service of such written request upon the Secretary
of the Company, or within 20 days after mailing the same within the United
States by certified mail, addressed to the Secretary of the Company at its
principal executive offices, then any holder of the Series B Preferred Stock may
designate in writing one of their number to call such meeting at the expense of
the Company, and such meeting may be called by the person so designated upon the
notice required for special meetings of shareholders of the Company and shall be
held at the place for holding the annual meetings of shareholders. Any holder so
designated shall have, and the Company shall provide, access to the lists of
holders to be called pursuant to the provisions hereof.
At any meeting held for the purpose of electing directors at which the
holders of the Series B Preferred Stock shall have the right to elect directors,
the presence in person or by proxy of the holders of at least a majority of the
outstanding Series B Preferred Stock shall be required to constitute a quorum of
such Series B Preferred Stock.
Any vacancy occurring in the office of a director elected by the holders
of the Series B Preferred Stock (or such holders and holders of Parity
Securities) may be filled by the Board of Directors with a person nominated by
the remaining director, if any, elected by such holders (or such holders and
holders of such Parity Securities) unless and until such vacancy shall be filled
by such holders (or such holders and holders of such Parity Securities) by
calling a special meeting of such holders as provided above.
31
<PAGE> 35
In any case in which the holders of Series B Preferred Stock shall be
entitled to vote pursuant to the Certificate of Incorporation or pursuant to New
Jersey law, each such holder shall be entitled to one vote for each share of
Series B Preferred Stock held.
Merger, Consolidation and Sale of Assets
Without the vote or consent of the holders of a majority of the then
outstanding shares of Series B Preferred Stock, the Company may not consolidate
or merge with or into, or sell, assign, transfer, lease convey or otherwise
dispose of 80% or more of its assets to, any person unless (a) the entity formed
by 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 (in any such case, the "resulting entity") is a corporation organized
and existing under the laws of the United States or any State thereof or the
District of Columbia; (b) if the Company is not the resulting entity, the Series
B Preferred Stock is converted into or exchanged for and becomes shares of such
resulting entity, having in respect of such resulting entity the same (or more
favorable) powers, preferences and relative participating, optional or other
special rights thereof that the Series B Preferred Stock had immediately prior
to such transaction; and (c) immediately after giving effect to such
transaction, no Voting Rights Triggering Event has occurred and is continuing.
The resulting entity of such transaction shall thereafter be deemed to be the
"Company" for all purposes of the Certificate of Incorporation.
Exchange Notes
The Exchange Notes, if issued, will be issued pursuant to the Exchange
Note Indenture between the Company and a trustee to be chosen by the Company
prior to the issuance of the Exchange Notes. The terms of the Exchange Notes
include those stated in the Exchange Note Indenture and those made part of the
Exchange Note Indenture by reference to the Trust Indenture Act. The Exchange
Notes are subject to all such terms, and prospective investors are referred to
the Exchange Note Indenture and the Trust Indenture Act for a statement thereof.
The following summary of certain provisions of the Exchange Note Indenture does
not purport to be complete.
General
The Exchange Note Indenture authorizes the issuance of an aggregate
principal amount of Exchange Notes equal to the aggregate liquidation preference
of the then outstanding shares of Series B Preferred Stock at the time such
shares are exchanged for Exchange Notes as described under "--Series B Preferred
Stock-Exchange". The Exchange Notes will mature on August 15, 2004. The Exchange
Notes will bear interest at the rate of 8 3/4% per annum, payable quarterly in
arrears on February 1, May 1, August 1 and November 1 of each year, commencing
on the first such date following the date on which the Exchange Notes are issued
(the "Exchange Date"), to the holders of record at the close of business on the
April 1 and October 1 next preceding such interest payment date. Interest will
initially accrue from the Exchange Date. Interest will be computed on the basis
of a 360-day year of twelve 30-day months. The Exchange Notes will be issued in
fully registered form only in denominations of $1,000 and integral multiples
thereof, other than as described under "--Series B Preferred Stock--Exchange".
The Exchange Notes will be general unsecured obligations of the Company,
subordinated in right of payment to all Senior Debt (as defined below). See "--
Subordination."
Principal, premium and interest will be payable, and the Exchange Notes
may be presented for redemption, repurchase, exchange or transfer, at the office
of the paying agent and registrar and at any other office or agency maintained
by the Company for such purpose. The Trustee will initially act as registrar and
paying agent. The
32
<PAGE> 36
Company may change the registrar or paying agent without prior notice to holders
and the Company or any subsidiary of the Company may act in such capacity.
Optional Redemption
The Exchange Notes will be redeemable for cash on or after August 15,
2000, at the option of the Company, in whole or from time to time in part, at
the redemption prices set forth herein, together with all accrued and unpaid
interest thereon to the redemption date. The redemption prices (expressed as
percentages of principal amount) are as follows for Exchange Note redeemed
during the twelve-month period beginning on August 15, of the years
indicated:
<TABLE>
<CAPTION>
Year Percentage
-------------------------- ----------------------
<S> <C>
2000 104.4%
2001 102.9%
2002 101.5%
2003 and thereafter 100%
</TABLE>
Notwithstanding the foregoing, on or after August 15, 1999, the Company
may, at its option, redeem the Exchange Notes at 105.9% of the principal amount
plus accrued and unpaid interest thereon if the Common Stock bid price has
averaged not less than 1.5 times the Conversion Price during 20 consecutive
trading days.
Selection and Notice
If less than all of the Exchange Notes are to be redeemed at any time,
selection of Exchange 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 Exchange Notes are listed, or, if the Exchange 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 Exchange Notes of $1,000 or
less shall be redeemed in part. Exchange Notes will be redeemed in multiples of
$1,000. At least 30 but not more than 60 days before the redemption date, a
public notice of the redemption shall be made and notice of redemption shall be
mailed by first class mail to each holder of Exchange Notes to be redeemed at
its registered address. If any Exchange Note is to be redeemed in part only, the
notice of redemption that relates to such Exchange Note shall state the portion
of the principal amount thereof to be redeemed. A new Exchange 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 Exchange Note. Interest will
cease to accrue on Exchange Notes or portions thereof called for redemption on
the redemption date.
Mandatory Redemption
Except as set forth under "--Change of Control," the Company is not
required to make mandatory redemption or sinking fund payments with respect to
the Exchange Notes.
Subordination
The payment of principal of and premium and interest on the Exchange Notes
will be subordinated in right of payment to the prior payment in full of all
Senior Debt, whether outstanding on the Exchange Date or thereafter incurred.
33
<PAGE> 37
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors of any marshaling of the Company's
assets and liabilities, the holders of Senior Debt will be entitled to receive
payment in full of all monetary obligations due in respect of such Senior Debt
(including interest after the commencement of any such proceeding at the rate
specified in the applicable Senior Debt) before the holders of Exchange Notes
will be entitled to receive any payment with respect to the Exchange Notes, and
until all monetary obligations with respect to Senior Debt are paid in full, any
distribution to which the holders of Exchange Notes would be entitled shall be
made to the holders of such Senior Debt (except that holders of Exchange Notes
may receive securities, including capital stock, that are subordinated at least
to the same extent as the Exchange Notes to Senior Debt and any securities
issued in exchange for Senior Debt).
The Company also may not make any payment upon or in respect of the
Exchange Notes (except in such capital stock or subordinated securities) if (a)
a default on the payment of the principal of or premium or interest on any
Senior Debt occurs and is continuing beyond any applicable period of grace or
(b) any other default occurs and is continuing with respect to any Designated
Senior Debt (as defined below) that permits holders of such Designated Senior
Debt to accelerate its maturity and the Trustee receives a notice of such
default (a "Payment Blockage Notice") from the Company or the representative of
holders of such Designated Senior Debt. Payments on the Exchange Notes may and
shall be resumed (i) in the case of a payment default, upon the date on which
such nonpayment default is cured or waived or 179 days after the date on which
the applicable Payment Blockage Notice is received, unless the maturity of any
Designated Senior Debt has been accelerated and remains unpaid. No new period of
payment blockage may be commenced unless and until 360 days have elapsed since
the effectiveness of the immediately prior Payment Blockage Notice. No
non-payment default that existed or was continuing on the date of delivery of
any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Brokage Notice.
"Senior Debt" means (a) all obligations of the Company under the Existing
Indebtedness (as defined in the Exchange Note Indenture), as it may be amended,
modified, restated, supplemented, deferred, extended, renewed, replaced,
refunded or refinanced from time to time, and (b) any other Indebtedness of the
Company, whether outstanding on the date of issuance of the Exchange Notes or
thereafter incurred, unless the instrument under which such indebtedness is
incurred expressly provides that it is subordinated in right of payment to any
Senior Debt; provided, however, that Senior Debt will not include (i) any
liability for federal, state, local or other taxes owed or owing by the Company,
(ii) any Indebtedness of the company to any of its subsidiaries or (iii) any
trade payables.
"Indebtedness" means any indebtedness, whether or not contingent, in
respect of borrowed money or evidenced by bonds, notes, debentures or similar
instrument or letters of credit (or reimbursement agreements in respect thereof)
or banker's acceptances or representing capital lease obligations or the balance
deferred and unpaid of the purchase price of any property or representing any
hedging obligations, except any such balance that constitutes an accrued expense
or trade payable, if and to the extent any of the foregoing indebtedness (other
than letters of credit and hedging obligations) would appear as a liability upon
a balance sheet prepared in accordance with generally accepted accounting
principles.
"Designated Senior Debt" means (i) any Indebtedness outstanding under the
Existing Indebtedness and (ii) any other Senior Debt permitted under the
Indenture the principal amount of which is $5.0 million or more and that has
been designated by the Company as "Designated Senior Debt."
34
<PAGE> 38
As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, holders of Exchange Notes may recover less
ratably than creditors of the Company who are holders of Senior Debt. In
addition, neither the Certificate of Incorporation nor the Exchange Note
Indenture will limit the amount of Senior Debt that the Company may incur in the
future.
Change of Control
Upon the occurrence of a Change of Control, at the option of the holders of
a majority in principal amount of the Exchange Notes, the Company will be
required to make an offer (an "Exchange Note Change of Control Offer") to
repurchase all or any part of each holder's Exchange Notes at an offer price
equal to 100% of the aggregate principal amour thereof, plus accrued and unpaid
interest thereon to the date of repurchase. Such repurchase may be made at the
option of the Company either in (i) cash at 100% or (ii) Common Stock value at
95% of average closing price of the Common Stock during the 20 trading days
prior to such redemption, if the Board of Directors of the Company determines
that making such payment in shares of Common Stock will not adversely affect the
voting rights, preferences, privileges or relative, participating, option or
other specified rights of the holders of the Exchange Notes or the Common
Stock. Within 30 days following a Change of Control, the Company will mail a
notice to each holder of Exchange Note describing the transaction that
constitutes the Change of Control and offering to repurchase the Exchange Notes
pursuant to the procedures required by the Exchange Note Indenture and described
in such notice; provided that, prior to complying with the provisions of this
covenant, but in any event within 90 days following a Change of Control, the
Company will either repay all outstanding Senior Debt or obtain the requisite
consents, if any, under all agreements governing outstanding Senior Debt to
permit the repurchase of the Exchange Notes required by this covenant. The
Company will comply with the requirements of 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 Exchange
Notes as a result of a Change of Control.
Except as described above with respect to a Change of Control, the
Exchange Note Indenture does not contain provisions that permit the holders of
the Exchange Notes to require that the Company repurchase or redeem the Exchange
Notes in the event of a takeover, recapitalization or similar transaction. In
addition, the Company could enter into certain transactions, including
acquisitions, refinancings or other recapitalizations, that could affect the
Company's capital structure or the value of the Exchange Notes or the Common
Stock but that would not constitute a Change of Control.
The occurrence of a Change of Control may result in a default under
certain of the Existing Indebtedness or other Senior Debt. In addition, certain
of the Existing Indebtedness or other Senior Debt could restrict the Company's
ability to repurchase Exchange Notes for cash upon a Change of Control. In the
event a Change of Control occurs at a time when the Company is prohibited from
repurchasing Exchange Notes for cash, the Company could seek the consent of its
lenders to the repurchase of Exchange Notes or could attempt to refinance the
borrowings that contain such prohibition. If the Company does not obtain such
consent or repay such borrowings, the Company will remain prohibited from
repurchasing Exchange Notes for cash. The Company's failure to make an Exchange
Note Change of Control Offer or to repurchase Exchange Notes tendered in an
Exchange Note Change of Control Offer would constitute an event of default under
the Exchange Note Indenture, which could, in turn, constitute a default under
the Company's existing indebtedness or other Senior Debt. In such circumstances,
the subordination provisions in the Exchange Note Indenture would likely
restrict payments to the holders of Exchange Notes. See "--Subordination."
Finally, the Company's ability to repurchase Exchange Notes following a Change
of Control may be limited by the Company's then existing financial resources.
The Company will not be required to make an Exchange Note Change of
Control Offer following a Change of Control if a third party makes the Exchange
Note Change of Control Offer in the manner, at the times and otherwise in
compliance with the requirements set forth in the Exchange Note Indenture
applicable to an
35
<PAGE> 39
Exchange Note Change of Control Offer made by the Company and purchases all
Exchange Notes validly tendered and not withdrawn under such Exchange Note
Change of Control Offer.
Conversion Rights
Each Exchange Note will be convertible at any time at the option of the
holder thereof into Common Stock of the Company at a conversion rate equal to
the principal amount of such Exchange Note divided by the conversion price then
applicable, except that the right to convert Exchange Notes called for
redemption will terminate at the close of business on the business day preceding
the redemption date and will be lost if not exercised prior to that time, unless
the Company defaults in making the payment due upon redemption, or if not
exercised prior to the maturity of the Exchange Notes.
The conversion price initially will be the conversion price with respect
to the Series B Preferred Stock on the Exchange Date and will be subject to
adjustment as set forth under "--Series B Preferred Stock--Conversion Rights".
In the case of certain consolidations or mergers to which the Company is a
party or the transfer of substantially all of the assets of the Company, the
Exchange Notes then outstanding would become convertible only into the kind and
amount of securities, cash and other property receivable upon the consolidation,
merger or transfer by a holder of the number of shares of Common Stock into
which such Exchange Notes might have been converted immediately prior to such
consolidation, merger or transfer (assuming such holder of Common Stock failed
to exercise any rights of election and received per share the kind and amount
receivable per share by a plurality of non-electing shares).
No fractional shares of Common Stock will be issued upon conversion; in
lieu thereof, the Company will pay a cash adjustment based upon the closing
price of the Common Stock on the business day prior to the conversion date.
The holder of record of an Exchange Note at the close of business on a
record date with respect to the payment of interest on the Exchange Notes will
be entitled to receive such interest with respect to such Exchange Notes on the
corresponding interest payment date notwithstanding the conversion of such
Exchange Notes after such record date and prior to such interest payment date.
Exchange Notes surrendered for conversion during the period from the close of
business on any record date for the payment of interest to the opening of
business on the corresponding interest payment date must be accompanied by a
payment in cash in an amount equal to the interest payable on such interest
payment date, unless such Exchange Notes have been called for redemption on a
redemption date occurring during the period from the, close of business on any
record date for the payment of interest to the close of business on the business
day immediately following the corresponding interest payment date. The interest
payment with respect to an Exchange Note called for redemption on a date during
the period from the close of business on any record date for the payment of
interest to the close of business on the business day immediately following the
corresponding interest payment date will be payable on such interest payment
date to the record holder of such Exchange Note on such record date, not
withstanding the conversion of such Exchange Note after such record date and
prior to such interest payment date. No payment or adjustment will be made upon
conversion of Exchange Notes for accrued and unpaid interest or for dividends
with respect to the Common Stock issued upon such conversion.
36
<PAGE> 40
Other Provisions of the Company's Restated Certificate of Incorporation
The Company's Restated Certificate of Incorporation contains certain
provisions known as "supermajority" and "fair price" provisions which are
anti-takeover measures and could affect the price shareholders could receive for
shares of Common Stock.
Supermajority Provision. The "supermajority" provision is intended to
encourage a corporation seeking to enter into a merger or consolidation with the
Company or a sale of all or substantially all of the assets of the Company to
negotiate these transactions with the "Disinterested Directors" (as defined) to
ensure that such transactions have the substantial support of such directors
before submission to the shareholders.
The supermajority provision requires for approval of a merger or
consolidation between the Company and another corporation, or a sale of
substantially all of the assets of the Company, the affirmative vote of at least
80% of the combined voting power of the then outstanding voting stock voting
together as a single class (an "80% Shareholder Vote") in addition to any other
shareholder vote required. The 80% Shareholder Vote would not apply if the
proposed transaction is approved by the greater of (i) at least three-fourths of
the Disinterested Directors or (ii) two Disinterested Directors. A Disinterested
Director is any person who is a member of the Board of Directors, while such
person is a member of the Board, who is not an Affiliate, Associate (as those
terms are defined in Rule 12b-2 under the Exchange Act) or representative of the
other party to the transaction with the Company and who was either a member of
the Board at the time the supermajority provision was approved by the Board, or
who was recommended for election to the Board, or elected to fill a vacancy on
the Board, by a majority of Disinterested Directors.
Fair Price Provision. The "fair price" provision is intended to (i)
override New Jersey's corporation law which provides that a majority in interest
of shareholders voting thereon is required for a merger by a corporation, unless
such corporation's certificate of incorporation specifies a higher percentage
and (ii) prevent a two-tier front-end loaded pricing method for corporate
takeovers. In this type of takeover attempt, the bidder tenders for that
percentage of shares which will give it sufficient votes to approve a merger
providing for the elimination of minority shareholders, as the method of buying
the remaining shares. The consideration given for a corporation's shares in this
type of merger can be, and frequently is, in a different form than that given in
the tender offer. For example, the bidder may pay cash to purchase a controlling
position and thereafter approve a merger in which the remaining shareholders
receive securities of the bidder (or one of its subsidiaries). Moreover, the
value of the securities exchanged in the second step may be substantially less
than the amount of cash or the value of the other consideration given in the
first step. Accordingly, the shareholders are induced to tender initially.
The fair price provision requires an 80% Shareholder Vote for certain
transactions with an Interested Shareholder (as defined) unless specified price
criteria and procedural requirements are met and a majority of the entire Board
of Directors approves the Business Combination (as defined) or the approval of
not less than three-fourths of the Continuing Directors (as defined) is given.
If the latter occurred, then the proposed Business Combination would be subject
to the normal approval requirements under New Jersey law.
An "Interested Shareholder" is defined as any person, other than the
Company or any subsidiary or any employee benefit plan of the Company or of any
subsidiary or fiduciary of such a plan, or any person who was a director of the
Company on the date the provision was adopted by the Board of Directors (such
persons being Messrs. Nicholas Menonna, Jr., Martin J. Sergi and Marshall S.
Sterman) who (i) is the beneficial owner of voting stock representing 10% or
more of the votes entitled to be cast by the holders of all then outstanding
shares of voting stock, (ii) is an Affiliate (as defined) or Associate of the
Company and within the prior two
37
<PAGE> 41
years was the beneficial owner of voting stock representing 10% or more of the
votes entitled to be cast by the holders of all then outstanding shares of
voting stock, or (iii) is the assignee of or has otherwise succeeded to the
beneficial ownership of any voting stock beneficially owned by an Interested
Shareholder within such two-year period, if such assignment or succession
occurred pursuant to a transaction or any series of transactions not involving a
public offering within the meaning of the Securities Act. The term "beneficial
owner" includes any person directly or indirectly owning or having the right to
vote or acquire shares.
The terms "Affiliate" and "Associate" have the respective meanings
ascribed to such terms in Rule 12b-2 under the Exchange Act, as in effect on
December 31, 1993.
A "Business Combination" includes the following transactions: (1) a merger
or consolidation of the Company or any of its subsidiaries with an Interested
Shareholder or any other corporation which is or after such transaction becomes
an Affiliate or Associate of an Interested Shareholder; (2) the sale or other
disposition to, with or by any Interested Shareholder or any Affiliate or
Associate of an Interested Shareholder involving any assets or securities of the
Company, any subsidiary or any Interested Shareholder or any Affiliate or
Associate of an Interested Shareholder valued at $20,000,000 or more; (3) the
adoption of any plan or proposal for the liquidation or dissolution of the
Company proposed by or on behalf of an Interested Shareholder or any Affiliate
or Associate of an Interested Shareholder; (4) any reclassification of
securities or recapitalization of the Company, merger or consolidation of the
Company with any subsidiary or other transaction which has the effect, directly
or indirectly, of increasing the proportionate share of any class or series of
the Company's stock, or securities convertible into stock of any class or series
of the Company's stock or into equity securities of any subsidiary, that is
beneficially owned by an Interested Shareholder or any Affiliate or Associate of
an Interested Shareholder; or (5) any agreement, contract or other arrangement
providing for any one or more of the actions referred to above.
A "Continuing Director" is any member of the Board, while a member of the
Board, who is not an Affiliate or Associate or a representative of the
Interested Shareholder and either was a director at the time the fair price
provision was adopted by the Board or was recommended for election to the Board,
or elected to fill a vacancy on the Board, by a majority of the Continuing
Directors.
An 80% Shareholder Vote would not be required if the proposed Business
Combination is approved by not less than three-fourths of the Continuing
Directors or certain minimum price criteria and procedural requirements are
satisfied and not less than a majority of the entire Board of Directors approves
the transaction.
LEGAL MATTERS
The law firm of McDermott, Will & Emery, 50 Rockefeller Plaza, New York,
New York 10020 acted as counsel for the Company in connection with the validity
of the Shares and the Exchange Notes offered hereby.
EXPERTS
The consolidated financial statements and schedule of KTI, Inc. and the
financial statements of Perobscot Energy Recovery Company, Limited Partnership
appearing in KTI, Inc.'s Annual Report (Form 10-K) for the year ended December
31, 1997, and the consolidated statements of Prins Recycling Corp.
(debtor-in-possession) appearing in KTI, Inc.'s Current Report (Form 8-K, dated
November 14, 1997, as amended by Form 8-K/A) have been audited by Ernst & Young
LLP, independent auditors, as set forth in their reports thereon included
therein and incorporated herein by
38
<PAGE> 42
reference. Such financial statements and schedule are incorporated herein by
reference in reliance upon such reports given upon the authority of such firm as
experts in accounting and auditing.
INDEMNIFICATION
The registrant's Restated Certificate of Incorporation provides that it
shall indemnify its officers, directors, employees and agents to the full extent
permitted by law. Statutory authority for such indemnification is contained in
Title 14A, New Jersey Business Corporation Act, Revised Statutes of New Jersey,
N.J.S.A. 14A:3-5.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to officers, directors and controlling persons of
the Company pursuant to the foregoing provisions, or otherwise, the company has
been advised that in the opinion of the Securities and Exchange Commission it is
against public policy as expressed in the Security Act of 1933 and is,
therefore, unenforceable.
39
<PAGE> 43
No dealer, salesman or any other
person has been authorized to give any
information or to make any representation
other than those contained in this
Prospectus and, if given or made, such
information or representation must not be
relied upon as having been authorized by
the Company, by any Selling Shareholder or
by any other person. This Prospectus does
not constitute an offer to sell or a
solicitation of an offer to buy the
securities offered hereby to any person or
by anyone in any jurisdiction in which
such offer or solicitation may not
lawfully be made. Neither the delivery of
this Prospectus nor any sale made
hereunder shall, under any circumstances,
create any implication that there has been
no change in the affairs of the Company
since the date hereof, or that the
information herein contained is correct as
of any time subsequent to its date.
---------------
TABLE OF CONTENTS
Page
----
Available Information...................
Incorporation of Certain Information
by Reference..........................
Special Note Regarding Forward Looking
Statements............................
Summary.................................
The Offering............................
Risk Factors............................
Use of Proceeds.........................
Business................................
Selling Shareholders....................
Plan of Distribution....................
Description of Securities...............
Legal Matters...........................
Experts.................................
Indemnification.........................
856,000
Shares of Series B Convertible
Exchangeable Preferred Stock
1,861,104
Shares of Common Stock
$21,397,000
Subordinated Convertible Notes
KTI, INC.
-----------
PROSPECTUS
-----------
May 12, 1998
67
<PAGE> 44
PART II
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses in connection with the
offering described in this Registration Statement. The Company has agreed to pay
all of the costs and expenses of this Offering.
<TABLE>
<S> <C>
SEC Registration fee $ 6,313.00
*Blue Sky fees and expenses 0
*Legal fees and expenses 30,000.00
*Accounting fees and expenses 10,000.00
*Miscellaneous 2,000.00
--------
*TOTAL $48,313.00
==========
</TABLE>
*Estimated
Item 15. Indemnification of Directors and Officers.
The registrant's Restated Certificate of Incorporation provides that it
shall indemnify its officers, directors, employees and agents to the full extent
permitted by law.
Statutory authority for such indemnification is contained in Title 14A,
New Jersey Business Corporation Act, Revised Statutes of New Jersey, N.J.S.A.
14A:3-5, the material provisions of which may be summarized as follows:
Non-derivative Proceedings (proceedings other than those brought by or in
the right of the corporation). A corporation may indemnify an actual or
prospective party to a proceeding or investigation if he became such because he
is or was a director, officer, employee or agent of the corporation, or of a
constituent corporation absorbed by such corporation in a consolidation or
merger, or is or was serving at the request of the indemnifying or constituent
corporation as a director, officer, trustee, employee or agent of another
enterprise. To be eligible for such indemnity, the party must have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation and also, in a criminal proceeding, he must have
had no reasonable cause to believe that his conduct was unlawful. Such indemnity
may be against judgments, fines, settlements, and penalties and reasonable
expenses (including counsel fees) incurred in connection with such proceeding.
Derivative Proceedings (proceedings by or in the right of the
corporation). A corporation may indemnify such actual or prospective party to a
proceeding or investigation against his reasonable expenses (including counsel
fees) if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation, but not against
judgments, fines, settlements or penalties in connection with such proceedings
or investigation. However, if such party has been adjudged to be liable to the
corporation, he may be indemnified for expenses only if a court determines that,
despite such adjudication of liability, in the circumstances of the case
indemnity of such party is fair and reasonable.
Determination Regarding Indemnification. Indemnification of a party
(unless ordered by a court) is dependent upon a determination that such
indemnification is proper because the party has met the above standards
applicable to him, such determination to be made by (a) the Board of Directors
or a committee thereof acting by a majority vote of a quorum consisting of
directors who were not parties to or otherwise involved in the proceedings or
(b) under certain circumstances, by independent legal counsel in a written
opinion or by the
II-1
<PAGE> 45
shareholders of the corporation. Upon the making of such determination in the
appropriate manner, a corporation may advance expenses in connection with a
proceeding upon receipt of an undertaking by the party to repay them if it is
ultimately determined that he is not entitled to indemnification.
Other Material Provisions. In all cases, if the party has been successful
in a proceeding on the merits or otherwise, or in defense of any matter therein,
he is entitled to indemnification for his reasonable expenses (including counsel
fees). The indemnification provided by statute is not exclusive of other rights
of indemnification and inures to the benefit of the party's legal
representative. A corporation may purchase and maintain insurance against
expenses incurred by, and liabilities asserted against, directors, officers,
employees or agents whether or not the corporation would be empowered to provide
such indemnity.
Item 16. Exhibits.
The following exhibits, which are furnished with this Registration
Statement or incorporated herein by reference, are filed as part of this
Registration Statement.
EXHIBIT INDEX
2.1 Agreement of Reorganization and Merger among KTI, Inc., a New Jersey
corporation, K-C Industries, Inc., an Oregon corporation and KES,
Inc., a Delaware corporation, dated September 22, 1997 (1)
4.1 Specimen Form of Common Stock Certificate (2)
4.3 Certificate of Amendment to Registrant's Restated Certificate of
Certificate of Incorporation, filed August 8, 1997 (3)
*4.4 Certificate of Correction to Certificate of Amendment to
Registrant's Restated Certificate of Certificate of Incorporation,
filed October 31, 1997
**4.5 Indenture
**4.6 Form of Exchange Note
**5 Opinion of McDermott, Will & Emery re: legality
10.1 Loan Agreement dated as of June 1, 1985 between City of Biddeford,
Maine and Maine Energy Recovery Company, as amended (4)
10.2 Subordinated Note of Maine Energy Recovery Company dated as of
December 1, 1990 in the original principal amount of $14,252,338.39
payable to CNA Realty Corp. (4)
10.3 Subordinated Note of Maine Energy Recovery Company dated as of
December 1, 1990 in the original principal amount of $9,495,327.45
payable to Energy National, Inc. (4)
10.4 Subordinated Note of Maine Energy Recovery Company dated as of
December 1, 1990 in the original principal amount of $4,737,517.54
payable to Project Capital 1985 (4)
10.5 Loan Agreement dated as of April 1, 1986 between Town of Orrington,
Maine and Penobscot Energy Recovery Company, as amended (4)
10.6 Credit Agreement dated as of May 15, 1986 by and among Penobscot
Energy Recovery Company, PERC Management Company and Energy
National, Inc. and The Banking Institutions Signatory Hereto and
Bankers Trust Company, as Agent, as amended (4)
10.7 Second Amended and Restated Agreement and Certificate of Limited
Partnership of Penobscot Energy Recovery Company dated May 15, 1986,
as amended (2)
10.8 Agreement between Penobscot Energy Recovery Company and Bangor
Hydro-Electric Company dated June 21, 1984, as amended (2)
10.9 Form of Penobscot Energy Recovery Company Waste Disposal Agreement
(City of Bangor) dated April 1, 1991 and Schedule of Substantially
Identical Waste Disposal Agreements (2)
10.10 Operation and Maintenance Agreement Between Esoco Orrington, Inc.
and Penobscot Energy Recovery Company dated June 30, 1989 (2)
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<PAGE> 46
10.11 Residue Disposal Agreement between Penobscot Energy Recovery Company
and Sawyer Environmental Recovery Facilities, Inc. dated September
19, 1985, as amended (2)
10.12 Amended and Restated Bypass Agreement between Sawyer Environmental
Recovery Facilities, Inc. and Penobscot Energy Recovery Company
dated April 4, 1994 (2)
10.13 Second Amended and Restated Agreement and Certificate of Limited
Partnership of Maine Energy Recovery Company dated June 30, 1986, as
amended (2)
10.14 Power Purchase Agreement Between Maine Energy Recovery Company and
Central Maine Power Company dated January 12, 1984, as amended (2)
10.15 Operation and Maintenance Agreement Between Maine Energy Recovery
Company and KTI Operations, Inc. dated December 1, 1990 (2)
10.16 Host Municipalities' Waste Handling Agreement among Biddeford-Saco
Solid Waste Committee, City of Biddeford, City of Saco and Maine
Energy Recovery Company dated June 7, 1991 (2)
10.17 Form of Maine Energy Recovery Company Waste Handling Agreement (Town
of North Berwick) dated June 7, 1991 and Schedule of Substantially
Identical Waste Disposal Agreements (2)
10.18 Material Disposal and Transportation Agreement among Consolidated
Waste Service, Inc., Waste Management of New Hampshire and Maine
Energy Recovery Company dated October 21, 1991 (2)
10.19 Front-End Process Residue Agreement between Arthur Schofield, Inc.
and Maine Energy Recovery Company dated May 27, 1994 (2)
10.20 Second Amended and Restated Agreement and Certificate of Limited
Partnership of FTI Limited Partnership dated December 11, 1986, as
amended (2)
10.21 Land Lease dated November 25, 1985 between City of Lewiston and Fuel
Technologies, Inc. as amended (2)
10.22 KTI, Inc. 1994 Long-Term Incentive Award Plan (2)
10.23 Employment Agreement between KTI, Inc. and Martin J. Sergi dated May
1, 1994 (2)
10.24 Registration Rights Agreement between Davstar Managed Investments
Corp. and KTI Environmental Group, Inc. dated March 17, 1993 (2)
10.25 Registration Rights Agreement among KTI Environmental Group, Inc.,
Martin J. Sergi and Midlantic National Bank dated May 10, 1994 (2)
10.26 Registration Rights Agreement among KTI Environmental Group, Inc.,
Nicholas Menonna, Jr. and Midlantic National Bank dated May 10, 1994
(2)
10.27 KTI, Inc. Directors Stock Option Plan (5)
10.28 Form of Registration Rights between KTI, Inc. and Mona Kalimian,
Mark D. Kalimian, and Linda Berley dated July 27, 1995 and Schedule
of Substantially Identical Registration Rights Agreements (4)
10.29 Letter Agreement dated as of November 10, 1995 among Central Maine
Power, Maine Energy Recovery Company and Citizens Lehman Power (6)
10.30 Global Agreement dated December 28, 1995 between Environmental
Capital Holdings, Inc. and KTI, Inc. (6)
10.31 Agreement of Limited Partnership of American Ash Recycling of
Tennessee, Ltd. dated December 28, 1995 (6)
10.32 Agreement of Limited Partnership of American Ash Recycling of New
England, Ltd. dated December 28, 1995 (6)
10.33 First Amendment to Agreement of Limited Partnership of American Ash
Recycling of Tennessee, Ltd., dated March 16, 1996 (7)
10.34 Agreement dated as of July 19, 1996 by and among KTI, Inc.,
DataFocus Incorporated and CIBER, Inc. (8)
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<PAGE> 47
10.35 Agreement dated July 19, 1996 by and among KTI, Inc., Thomas Bosanko
and Patrick B. Higbie (8)
10.36 Operating Agreement of Specialties Environmental Management Company,
LLC dated as of October 18, 1996 (9)
10.37 Amendment to Employment Agreements between KTI, Inc. and Nicholas
Menonna, Jr. and Martin J. Sergi (10)
10.38 Note Purchase Agreement dated as of October 23, 1996 between KTI,
Inc. and WEXFORD KTI LLC (11)
10.39 Registration Rights Agreement dated as of October 23, 1996 between
KTI, Inc. and WEXFORD KTI LLC (11)
10.40 Escrow Agreement dated as of October 23, 1996 between KTI, Inc. and
WEXFORD KTI LLC and Key Trust of Ohio, N.A. (11)
10.41 Securities Purchase Agreement by and among KTI Plastic Recycling,
Inc., Continental Casualty Company, CNA Realty Corp., CLE, Inc. and
Timber Energy Investment, Inc. dated as of November 22, 1996 (12)
10.42 Securities Purchase Agreement by and among KTI Plastic Recycling,
Inc. and Diane Goodman and Seth Lehner dated as of November 25, 1996
(13)
10.43 Loan and Security Agreement between KTI, Inc., KTI Environmental
Group, Inc., Kuhr Technologies, Inc., KTI Limited Partners, Inc.,
KTI Operations, Inc. and PERC, Inc., Borrowers, and Key Bank of New
York, Lender, dated October 29, 1996 (14)
10.44 Pledge Agreement between each Borrower and Key Bank of New York
dated October 29, 1996 (14)
10.45 Key Trust Company PRISM(R) Prototype Retirement Plan and Trust
adopted as of December 11, 1996 (14)
10.46 Option and Consulting Agreement by and among KTI, Inc. and L.T.
Lawrence & Co., Inc. dated as of June 1, 1996 (14)
10.47 First Amendment to Option and Consulting Agreement by and among KTI,
Inc. and L.T. Lawrence & Co., Inc. dated as of December 18, 1996
(14)
10.48 Warrant to purchase 200,000 shares of KTI, Inc. common stock at
$7.50 per share issued to L.T. Lawrence & Co., Inc. dated as of
December 18, 1996 (14)
10.49 Warrant to purchase 6,000 shares of KTI, Inc. common stock at $8.50
per share issued to Thomas E. Schulze dated as of January 2, 1997
(14)
10.50 Warrant to purchase 3,000 shares of KTI, Inc. common stock at $8.50
per share issued to John E. Turner dated as of January 2, 1997 (14)
10.51 Warrant to purchase 6,000 shares of KTI, Inc. common stock at $8.50
per share issued to Robert E. Wetzel dated as of January 2, 1997
(14)
10.52 Warrant to purchase 15,000 shares of KTI, Inc. common stock at $6.00
per share issued to The Baldwin & Clarke Companies dated as of
January 2, 1997 (14)
10.53 Warrant to purchase 15,000 shares of KTI, Inc. common stock at $7.00
per share issued to The Baldwin & Clarke Companies dated as of
January 2, 1997 (14)
10.54 Third Amendment to Second Amended and Restated Certificate and
Agreement of Limited Partnership of FTI Limited Partnership dated as
of January 23, 1997 (14)
10.55 Warrant to purchase 2,000 shares of KTI, Inc. common stock at $8.50
per share issued to Maine Woodchips Associates dated as of January
23, 1997 (14)
10.56 Registration Rights Agreement by and between KTI, Inc. and Maine
Woodchips Associates dated as of January 23, 1997 (14)
10.57 Securities Purchase Agreement by and among KTI Plastic Recycling,
Inc., Continental Casualty Company, CNA Realty Corp., CLE, Inc. and
Timber Energy Investment, Inc., dated as of November 22, 1996 (15)
10.58 Term sheet (Purchase of assets of Prins Recycling Corp. and
subsidiaries) (16)
II-4
<PAGE> 48
10.59 Agreement, dated as of April 21, 1997 between KTI Recycling, Inc.
and its subsidiaries and PNC Bank (16)
10.60 Operations and Maintenance Agreement, dated as of April 21, 1997, by
and between Prins Recycling Corp. and its subsidiaries and KTI
Operations, Inc. (16)
10.61 Order of the Bankruptcy Court for the District of New Jersey dated
June 19, 1997 (16)
10.62 Asset Purchase Agreement, dated as of June 24, 1997, between Prins
Recycling Corp. and its subsidiaries and KTI Recycling, Inc. and its
subsidiaries (16)
10.63 Securities Purchase Agreement by and among I. Zaitlin & Sons, Inc.,
a Maine corporation, Data Destruction Services, Inc., a Maine
corporation, Samuel M. Zaitlin, Steven G. Suher and George G. Deely
and KTI Recycling, Inc., a Delaware corporation (17)
10.64 First amendment, dated as of August 14, 1997, to the Loan and
Security Agreement between KTI, Inc., KTI Environmental Group, Inc.,
Kuhr Technologies, Inc., KTI Limited Partners, Inc., KTI Operations,
Inc. and PERC, Inc. (18)
10.65 Securities Purchase Agreement, dated as of August 12, 1997, by and
among KTI, Inc., and Wenoha Corporation, John G. Mills, L. Don
Norton, Glen Wade Stewart, Bruce D. Wentworth and Donald E.
Wentworth (18)
10.66 Placement Agreement dated August 7, 1997 between KTI, Inc. and
Credit Research & Trading LLC (19)
10.67 Warrant Agreement dated August 7, 1997 between KTI, Inc. and Credit
Research & Trading LLC (19)
10.68 Registration Rights Agreement dated August 15, 1997 between KTI,
Inc. and the purchases named therein (19)
10.69 Purchase and Option Agreement by and between PERC Management Company
Limited Partnership and The Prudential Insurance Company of America
dated September 30, 1997 (20)
10.70 Second Amendment to the Second Amended and Restated Agreement and
Certificate of Limited Partnership of Penobscot Energy Recovery
Company, Limited Partnership dated as of September 29, 1997 (20)
10.71 Assignment and Assumption Agreement between The Prudential Insurance
Company of America and PERC Management Company Limited (20)
Partnership dated as of September 29, 1997 re Penobscot Energy
Recovery Company, Limited Partnership (20)
10.72 Amendment No. 1 to Reimbursement Agreement and Release of Assignment
dated as of September 29, 1997 to the Reimbursement Agreement dated
as of May 28, 1991 of Penobscot Energy Recovery Company, Limited
Partnership in favor of Morgan Guaranty Trust Company of New York re
Penobscot Energy Recovery Company, Limited Partnership (20)
10.73 Assignment and Assumption Agreement between The Prudential Insurance
Company of America and PERC Management Company Limited Partnership
dated as of September 29, 1997 re Orrington Waste Ltd., Limited
Partnership (20)
10.74 Amendment no. 1 to Reimbursement Agreement and Release of Assignment
dated as of September 29, 1997 to the Reimbursement Agreement dated
as of May 28, 1991 of Penobscot Energy Recovery Company, Limited
Partnership in favor of Morgan Guaranty Trust Company of New York re
Orrington Waste Ltd. (20)
10.75 Securities Purchase Agreement dated as of January 1, 1998, by and
among Vel-A-Tran Recycling, Inc., a Massachusetts corporation,
Raymond Vellucci and KTI Recycling of New England, Inc., a Delaware
corporation (21)
10.76 Securities Purchase Agreement dated as of January 27, 1998 among
Total Waste Management Corporation, Donald A. Littlefield, William
Kaylor and KTI Specialty Waste Services, Inc., a Maine corporation
(22)
**12 Statement of computation of earnings to fixed charges and preferred
stock dividends
**23.1 Consent of Ernst & Young LLP
II-5
<PAGE> 49
*23.2 Consent of McDermott, Will & Emery (contained in Exhibit 5)
*24 Power of Attorney (on signature page)
**25 Form T-1 Statement of Eligibility of First Union National Bank to
act as Trustee under the Indenture
- ----------------------------------
(1) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated
September 16, 1997
(2) Filed as an Exhibit to Registrant's Registration Statement on Form S-4
(No. 33-85234) dated January 6, 1995.
(3) Filed as an Exhibit to the Company's Current Report on Form 8-K dated
August 15, 1997.
(4) Filed with the Registration Statement on Form S-1 dated December 6, 1995.
(5) Filed as an Exhibit to Registrant's Proxy Statement dated June 5, 1995.
(6) Filed with the Amendment No. 1 to the Registration Statement on Form S-1
dated February 2, 1996.
(7) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated April
15, 1996.
(8) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated July
19, 1996.
(9) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated
October 18, 1996.
(10) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated
October 23, 1996.
(11) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated
October 24, 1996.
(12) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated
November 22, 1996.
(13) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated
November 25, 1996.
(14) Filed as an Exhibit to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1996.
(15) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated
November 26, 1996.
(16) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated June
19, 1997
(17) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated July
29, 1997.
(18) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated
August 12, 1997.
(19) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated
August 15, 1997.
(20) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated
September 30, 1997.
(21) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated
January 15, 1998.
(22) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated
February 4, 1998.
* Previously filed.
** Filed herewith.
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement;
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar 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 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; and
II-6
<PAGE> 50
(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 (a)(1)(i) and (a)(1)(ii) do not apply
if the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or 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.
(b) The undersigned registrant hereby undertakes 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 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
(d) 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 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-7
<PAGE> 51
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-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Guttenberg in the State of New Jersey, on May 7,
1998.
KTI, INC.
By: /s/ Martin J. Sergi
---------------------------
Martin J. Sergi
President
By: /s/ Ross Pirasteh
---------------------------
Ross Pirasteh
Chairman of the Board of Directors
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Dated
- --------- ----- -----
/s/ Ross Pirasteh Chairman of the Board of May 7, 1998
- ------------------------------ Directors, Chairman of the
Ross Pirasteh Executive Committee and
Director
II-8
<PAGE> 52
Signature Title Dated
- --------- ----- -----
/s/ Martin J. Sergi Vice Chairman, President, May 7, 1998
- ------------------------------
Martin J. Sergi and Director (Principal
Financial Officer and
Principal Accounting
Officer)
/s/ Dibo Attar* Director May 7, 1998
- ------------------------------
Dibo Attar
/s/ Paul Kleinaitis* Director May 7, 1998
- ------------------------------
Paul Kleinaitis
/s/ Jack Polak* Director May 7, 1998
- ------------------------------
Jack Polak
/s/ Jeffrey R. Power* Director May 7, 1998
- ------------------------------
Jeffrey R. Power
/s/ Wilbur Ross* Director May 7, 1998
- ------------------------------
Wilbur Ross
*/s/ Martin J. Sergi
- ------------------------------
Martin J. Sergi
Attorney-in-Fact
II-9
<PAGE> 53
EXHIBIT INDEX
2.1 Agreement of Reorganization and Merger among KTI, Inc., a New Jersey
corporation, K-C Industries, Inc., an Oregon corporation and KES,
Inc., a Delaware corporation, dated September 22, 1997 (1)
4.1 Specimen Form of Common Stock Certificate (2)
4.3 Certificate of Amendment to Registrant's Restated Certificate of
Certificate of Incorporation, filed August 8, 1997 (3)
*4.4 Certificate of Correction to Certificate of Amendment to
Registrant's Restated Certificate of Certificate of Incorporation,
filed October 31, 1997
**4.5 Indenture
**4.6 Form of Exchange Note
**5 Opinion of McDermott, Will & Emery re: legality
10.1 Loan Agreement dated as of June 1, 1985 between City of Biddeford,
Maine and Maine Energy Recovery Company, as amended (4)
10.2 Subordinated Note of Maine Energy Recovery Company dated as of
December 1, 1990 in the original principal amount of $14,252,338.39
payable to CNA Realty Corp. (4)
10.3 Subordinated Note of Maine Energy Recovery Company dated as of
December 1, 1990 in the original principal amount of $9,495,327.45
payable to Energy National, Inc. (4)
10.4 Subordinated Note of Maine Energy Recovery Company dated as of
December 1, 1990 in the original principal amount of $4,737,517.54
payable to Project Capital 1985 (4)
10.5 Loan Agreement dated as of April 1, 1986 between Town of Orrington,
Maine and Penobscot Energy Recovery Company, as amended (4)
10.6 Credit Agreement dated as of May 15, 1986 by and among Penobscot
Energy Recovery Company, PERC Management Company and Energy
National, Inc. and The Banking Institutions Signatory Hereto and
Bankers Trust Company, as Agent, as amended (4)
10.7 Second Amended and Restated Agreement and Certificate of Limited
Partnership of Penobscot Energy Recovery Company dated May 15, 1986,
as amended (2)
10.8 Agreement between Penobscot Energy Recovery Company and Bangor
Hydro-Electric Company dated June 21, 1984, as amended (2)
10.9 Form of Penobscot Energy Recovery Company Waste Disposal Agreement
(City of Bangor) dated April 1, 1991 and Schedule of Substantially
Identical Waste Disposal Agreements (2)
10.10 Operation and Maintenance Agreement Between Esoco Orrington, Inc.
and Penobscot Energy Recovery Company dated June 30, 1989 (2)
<PAGE> 54
10.11 Residue Disposal Agreement between Penobscot Energy Recovery Company
and Sawyer Environmental Recovery Facilities, Inc. dated September
19, 1985, as amended (2)
10.12 Amended and Restated Bypass Agreement between Sawyer Environmental
Recovery Facilities, Inc. and Penobscot Energy Recovery Company
dated April 4, 1994 (2)
10.13 Second Amended and Restated Agreement and Certificate of Limited
Partnership of Maine Energy Recovery Company dated June 30, 1986, as
amended (2)
10.14 Power Purchase Agreement Between Maine Energy Recovery Company and
Central Maine Power Company dated January 12, 1984, as amended (2)
10.15 Operation and Maintenance Agreement Between Maine Energy Recovery
Company and KTI Operations, Inc. dated December 1, 1990 (2)
10.16 Host Municipalities' Waste Handling Agreement among Biddeford-Saco
Solid Waste Committee, City of Biddeford, City of Saco and Maine
Energy Recovery Company dated June 7, 1991 (2)
10.17 Form of Maine Energy Recovery Company Waste Handling Agreement (Town
of North Berwick) dated June 7, 1991 and Schedule of Substantially
Identical Waste Disposal Agreements (2)
10.18 Material Disposal and Transportation Agreement among Consolidated
Waste Service, Inc., Waste Management of New Hampshire and Maine
Energy Recovery Company dated October 21, 1991 (2)
10.19 Front-End Process Residue Agreement between Arthur Schofield, Inc.
and Maine Energy Recovery Company dated May 27, 1994 (2)
10.20 Second Amended and Restated Agreement and Certificate of Limited
Partnership of FTI Limited Partnership dated December 11, 1986, as
amended (2)
10.21 Land Lease dated November 25, 1985 between City of Lewiston and Fuel
Technologies, Inc. as amended (2)
10.22 KTI, Inc. 1994 Long-Term Incentive Award Plan (2)
10.23 Employment Agreement between KTI, Inc. and Martin J. Sergi dated May
1, 1994 (2)
10.24 Registration Rights Agreement between Davstar Managed Investments
Corp. and KTI Environmental Group, Inc. dated March 17, 1993 (2)
10.25 Registration Rights Agreement among KTI Environmental Group, Inc.,
Martin J. Sergi and Midlantic National Bank dated May 10, 1994 (2)
10.26 Registration Rights Agreement among KTI Environmental Group, Inc.,
Nicholas Menonna, Jr. and Midlantic National Bank dated May 10, 1994
(2)
10.27 KTI, Inc. Directors Stock Option Plan (5)
10.28 Form of Registration Rights between KTI, Inc. and Mona Kalimian,
Mark D. Kalimian, and Linda Berley dated July 27, 1995 and Schedule
of Substantially Identical Registration Rights Agreements (4)
10.29 Letter Agreement dated as of November 10, 1995 among Central Maine
Power, Maine Energy Recovery Company and Citizens Lehman Power (6)
10.30 Global Agreement dated December 28, 1995 between Environmental
Capital Holdings, Inc. and KTI, Inc. (6)
10.31 Agreement of Limited Partnership of American Ash Recycling of
Tennessee, Ltd. dated December 28, 1995 (6)
10.32 Agreement of Limited Partnership of American Ash Recycling of New
England, Ltd. dated December 28, 1995 (6)
10.33 First Amendment to Agreement of Limited Partnership of American Ash
Recycling of Tennessee, Ltd., dated March 16, 1996 (7)
10.34 Agreement dated as of July 19, 1996 by and among KTI, Inc.,
DataFocus Incorporated and CIBER, Inc. (8)
<PAGE> 55
10.35 Agreement dated July 19, 1996 by and among KTI, Inc., Thomas Bosanko
and Patrick B. Higbie (8)
10.36 Operating Agreement of Specialties Environmental Management Company,
LLC dated as of October 18, 1996 (9)
10.37 Amendment to Employment Agreements between KTI, Inc. and Nicholas
Menonna, Jr. and Martin J. Sergi (10)
10.38 Note Purchase Agreement dated as of October 23, 1996 between KTI,
Inc. and WEXFORD KTI LLC (11)
10.39 Registration Rights Agreement dated as of October 23, 1996 between
KTI, Inc. and WEXFORD KTI LLC (11)
10.40 Escrow Agreement dated as of October 23, 1996 between KTI, Inc. and
WEXFORD KTI LLC and Key Trust of Ohio, N.A. (11)
10.41 Securities Purchase Agreement by and among KTI Plastic Recycling,
Inc., Continental Casualty Company, CNA Realty Corp., CLE, Inc. and
Timber Energy Investment, Inc. dated as of November 22, 1996 (12)
10.42 Securities Purchase Agreement by and among KTI Plastic Recycling,
Inc. and Diane Goodman and Seth Lehner dated as of November 25, 1996
(13)
10.43 Loan and Security Agreement between KTI, Inc., KTI Environmental
Group, Inc., Kuhr Technologies, Inc., KTI Limited Partners, Inc.,
KTI Operations, Inc. and PERC, Inc., Borrowers, and Key Bank of New
York, Lender, dated October 29, 1996 (14)
10.44 Pledge Agreement between each Borrower and Key Bank of New York
dated October 29, 1996 (14)
10.45 Key Trust Company PRISM(R) Prototype Retirement Plan and Trust
adopted as of December 11, 1996 (14)
10.46 Option and Consulting Agreement by and among KTI, Inc. and L.T.
Lawrence & Co., Inc. dated as of June 1, 1996 (14)
10.47 First Amendment to Option and Consulting Agreement by and among KTI,
Inc. and L.T. Lawrence & Co., Inc. dated as of December 18, 1996
(14)
10.48 Warrant to purchase 200,000 shares of KTI, Inc. common stock at
$7.50 per share issued to L.T. Lawrence & Co., Inc. dated as of
December 18, 1996 (14)
10.49 Warrant to purchase 6,000 shares of KTI, Inc. common stock at $8.50
per share issued to Thomas E. Schulze dated as of January 2, 1997
(14)
10.50 Warrant to purchase 3,000 shares of KTI, Inc. common stock at $8.50
per share issued to John E. Turner dated as of January 2, 1997 (14)
10.51 Warrant to purchase 6,000 shares of KTI, Inc. common stock at $8.50
per share issued to Robert E. Wetzel dated as of January 2, 1997
(14)
10.52 Warrant to purchase 15,000 shares of KTI, Inc. common stock at $6.00
per share issued to The Baldwin & Clarke Companies dated as of
January 2, 1997 (14)
10.53 Warrant to purchase 15,000 shares of KTI, Inc. common stock at $7.00
per share issued to The Baldwin & Clarke Companies dated as of
January 2, 1997 (14)
10.54 Third Amendment to Second Amended and Restated Certificate and
Agreement of Limited Partnership of FTI Limited Partnership dated as
of January 23, 1997 (14)
10.55 Warrant to purchase 2,000 shares of KTI, Inc. common stock at $8.50
per share issued to Maine Woodchips Associates dated as of January
23, 1997 (14)
10.56 Registration Rights Agreement by and between KTI, Inc. and Maine
Woodchips Associates dated as of January 23, 1997 (14)
10.57 Securities Purchase Agreement by and among KTI Plastic Recycling,
Inc., Continental Casualty Company, CNA Realty Corp., CLE, Inc. and
Timber Energy Investment, Inc., dated as of November 22, 1996 (15)
10.58 Term sheet (Purchase of assets of Prins Recycling Corp. and
subsidiaries) (16)
<PAGE> 56
10.59 Agreement, dated as of April 21, 1997 between KTI Recycling, Inc.
and its subsidiaries and PNC Bank (16)
10.60 Operations and Maintenance Agreement, dated as of April 21, 1997, by
and between Prins Recycling Corp. and its subsidiaries and KTI
Operations, Inc. (16)
10.61 Order of the Bankruptcy Court for the District of New Jersey dated
June 19, 1997 (16)
10.62 Asset Purchase Agreement, dated as of June 24, 1997, between Prins
Recycling Corp. and its subsidiaries and KTI Recycling, Inc. and its
subsidiaries (16)
10.63 Securities Purchase Agreement by and among I. Zaitlin & Sons, Inc.,
a Maine corporation, Data Destruction Services, Inc., a Maine
corporation, Samuel M. Zaitlin, Steven G. Suher and George G. Deely
and KTI Recycling, Inc., a Delaware corporation (17)
10.64 First amendment, dated as of August 14, 1997, to the Loan and
Security Agreement between KTI, Inc., KTI Environmental Group, Inc.,
Kuhr Technologies, Inc., KTI Limited Partners, Inc., KTI Operations,
Inc. and PERC, Inc. (18)
10.65 Securities Purchase Agreement, dated as of August 12, 1997, by and
among KTI, Inc., and Wenoha Corporation, John G. Mills, L. Don
Norton, Glen Wade Stewart, Bruce D. Wentworth and Donald E.
Wentworth (18)
10.66 Placement Agreement dated August 7, 1997 between KTI, Inc. and
Credit Research & Trading LLC (19)
10.67 Warrant Agreement dated August 7, 1997 between KTI, Inc. and Credit
Research & Trading LLC (19)
10.68 Registration Rights Agreement dated August 15, 1997 between KTI,
Inc. and the purchases named therein (19)
10.69 Purchase and Option Agreement by and between PERC Management Company
Limited Partnership and The Prudential Insurance Company of America
dated September 30, 1997 (20)
10.70 Second Amendment to the Second Amended and Restated Agreement and
Certificate of Limited Partnership of Penobscot Energy Recovery
Company, Limited Partnership dated as of September 29, 1997 (20)
10.71 Assignment and Assumption Agreement between The Prudential Insurance
Company of America and PERC Management Company Limited (20)
Partnership dated as of September 29, 1997 re Penobscot Energy
Recovery Company, Limited Partnership (20)
10.72 Amendment No. 1 to Reimbursement Agreement and Release of Assignment
dated as of September 29, 1997 to the Reimbursement Agreement dated
as of May 28, 1991 of Penobscot Energy Recovery Company, Limited
Partnership in favor of Morgan Guaranty Trust Company of New York re
Penobscot Energy Recovery Company, Limited Partnership (20)
10.73 Assignment and Assumption Agreement between The Prudential Insurance
Company of America and PERC Management Company Limited Partnership
dated as of September 29, 1997 re Orrington Waste Ltd., Limited
Partnership (20)
10.74 Amendment no. 1 to Reimbursement Agreement and Release of Assignment
dated as of September 29, 1997 to the Reimbursement Agreement dated
as of May 28, 1991 of Penobscot Energy Recovery Company, Limited
Partnership in favor of Morgan Guaranty Trust Company of New York re
Orrington Waste Ltd. (20)
10.75 Securities Purchase Agreement dated as of January 1, 1998, by and
among Vel-A-Tran Recycling, Inc., a Massachusetts corporation,
Raymond Vellucci and KTI Recycling of New England, Inc., a Delaware
corporation (21)
10.76 Securities Purchase Agreement dated as of January 27, 1998 among
Total Waste Management Corporation, Donald A. Littlefield, William
Kaylor and KTI Specialty Waste Services, Inc., a Maine corporation
(22)
**12 Statement of computation of earnings to fixed charges and preferred
stock dividends
**23.1 Consent of Ernst & Young LLP
<PAGE> 57
*23.2 Consent of McDermott, Will & Emery (contained in Exhibit 5)
*24 Power of Attorney (on signature page)
**25 Form T-1 Statement of Eligibility of First Union National Bank
to act as Trustee under the Indenture
- ----------------------------------
(1) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated
September 16, 1997
(2) Filed as an Exhibit to Registrant's Registration Statement on Form S-4
(No. 33-85234) dated January 6, 1995.
(3) Filed as an Exhibit to the Company's Current Report on Form 8-K dated
August 15, 1997.
(4) Filed with the Registration Statement on Form S-1 dated December 6, 1995.
(5) Filed as an Exhibit to Registrant's Proxy Statement dated June 5, 1995.
(6) Filed with the Amendment No. 1 to the Registration Statement on Form S-1
dated February 2, 1996.
(7) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated April
15, 1996.
(8) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated July
19, 1996.
(9) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated
October 18, 1996.
(10) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated
October 23, 1996.
(11) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated
October 24, 1996.
(12) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated
November 22, 1996.
(13) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated
November 25, 1996.
(14) Filed as an Exhibit to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1996.
(15) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated
November 26, 1996.
(16) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated June
19, 1997
(17) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated July
29, 1997.
(18) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated
August 12, 1997.
(19) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated
August 15, 1997.
(20) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated
September 30, 1997.
(21) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated
January 15, 1998.
(22) Filed as an Exhibit to Registrant's Current Report on Form 8-K dated
February 4, 1998.
* Previously filed.
** Filed herewith.
<PAGE> 1
Exhibit 4.5
================================================================================
KTI, INC.
Issuer
8 3/4% CONVERTIBLE SUBORDINATED NOTES DUE 2004
INDENTURE
Dated as of May 12, 1998
FIRST UNION NATIONAL BANK
Trustee
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE*
Trust Indenture Indenture Section
Act Section
310(a)(1).................................................. 7.10
(a)(2).................................................. 7.10
(a)(3).................................................. N.A.
(a)(4).................................................. N.A.
(a)(5).................................................. 7.10
(b)..................................................... 7.10
(c)..................................................... N.A.
311(a)..................................................... 7.11
(b)..................................................... 7.11
(c)..................................................... N.A.
312(a)..................................................... 2.5
(b)..................................................... 11.3
(c)..................................................... 11.3
313(a)..................................................... 7.6
(b)(1).................................................. 10.3
(b)(2).................................................. 7.7
(c)..................................................... 7.6;11.2
(d)..................................................... 7.6
314(a)..................................................... 4.3;11.2
(b)..................................................... 10.2
(c)(1).................................................. 11.4
(c)(2).................................................. 11.4
(c)(3).................................................. N.A.
(d)..................................................... 10.3, 10.4, 10.5
(e)..................................................... 11.5
(f)..................................................... N.A.
315(a)..................................................... 7.1
(b)..................................................... 7.5,11.2
(c)..................................................... 7.1
(d)..................................................... 7.1
(e)..................................................... 6.11
316(a)(last sentence)...................................... 2.9
(a)(1)(A)............................................... 6.5
(a)(1)(B)............................................... 6.4
(a)(2).................................................. N.A.
(b)..................................................... 6.7
(c)..................................................... 2.12
317(a)(1).................................................. 6.8
(a)(2).................................................. 6.9
(b)..................................................... 2.4
318(a)..................................................... 11.1
(b)..................................................... N.A.
(c)..................................................... 11.1
N.A. means not applicable.
<PAGE> 3
*This Cross-Reference Table is not part of the Indenture.
ii
<PAGE> 4
TABLE OF CONTENTS
Page
----
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE..............................-1-
SECTION 1.1. DEFINITIONS...............................................-1-
SECTION 1.2. OTHER DEFINITIONS.........................................-6-
SECTION 1.3. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.........-6-
SECTION 1.4. RULES OF CONSTRUCTION.....................................-6-
ARTICLE 2
THE NOTES...............................-7-
SECTION 2.1. FORM AND DATING...........................................-7-
SECTION 2.2. EXECUTION AND AUTHENTICATION..............................-8-
SECTION 2.3. REGISTRAR AND PAYING AGENT................................-8-
SECTION 2.4. PAYING AGENT TO HOLD MONEY IN TRUST.......................-9-
SECTION 2.5. HOLDER LISTS..............................................-9-
SECTION 2.6. TRANSFER AND EXCHANGE.....................................-9-
SECTION 2.7. REPLACEMENT NOTES........................................-11-
SECTION 2.8. OUTSTANDING NOTES........................................-12-
SECTION 2.9. TREASURY NOTES...........................................-12-
SECTION 2.10. TEMPORARY NOTES.........................................-12-
SECTION 2.11. CANCELLATION............................................-13-
SECTION 2.12. DEFAULTED INTEREST......................................-13-
ARTICLE 3
REDEMPTION AND PREPAYMENT......................-13-
SECTION 3.1. NOTICES TO TRUSTEE.......................................-13-
SECTION 3.2. SELECTION OF NOTES TO BE REDEEMED........................-13-
SECTION 3.3. NOTICE OF REDEMPTION.....................................-14-
SECTION 3.4. EFFECT OF NOTICE OF REDEMPTION...........................-14-
SECTION 3.5. DEPOSIT OF REDEMPTION PRICE..............................-15-
SECTION 3.6. NOTES REDEEMED IN PART...................................-15-
SECTION 3.7. OPTIONAL REDEMPTION......................................-15-
SECTION 3.8. NO MANDATORY REDEMPTION..................................-16-
ARTICLE 4
COVENANTS..............................-16-
SECTION 4.1. PAYMENT OF NOTES.........................................-16-
SECTION 4.2. MAINTENANCE OF OFFICE OR AGENCY..........................-16-
SECTION 4.3. REPORTS..................................................-17-
SECTION 4.4. COMPLIANCE CERTIFICATE...................................-17-
SECTION 4.5. TAXES....................................................-18-
SECTION 4.6. STAY, EXTENSION AND USURY LAWS...........................-18-
SECTION 4.7. CORPORATE EXISTENCE......................................-18-
iii
<PAGE> 5
SECTION 4.8. OFFER TO REPURCHASE UPON CHANGE OF CONTROL...............-18-
ARTICLE 5
SUCCESSORS..............................-20-
SECTION 5.1. MERGER, CONSOLIDATION, OR SALE OF ASSETS.................-20-
SECTION 5.2. SUCCESSOR CORPORATION SUBSTITUTED........................-20-
ARTICLE 6
DEFAULTS AND REMEDIES........................-20-
SECTION 6.1. EVENTS OF DEFAULT........................................-20-
SECTION 6.2. ACCELERATION.............................................-21-
SECTION 6.3. OTHER REMEDIES...........................................-22-
SECTION 6.4. WAIVER OF PAST DEFAULTS..................................-22-
SECTION 6.5. CONTROL BY MAJORITY......................................-22-
SECTION 6.6. LIMITATION ON SUITS......................................-22-
SECTION 6.7. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT............-23-
SECTION 6.8. COLLECTION SUIT BY TRUSTEE...............................-23-
SECTION 6.9. TRUSTEE MAY FILE PROOFS OF CLAIM.........................-23-
SECTION 6.10. PRIORITIES..............................................-24-
SECTION 6.11. UNDERTAKING FOR COSTS...................................-24-
ARTICLE 7
TRUSTEE...............................-24-
SECTION 7.1. DUTIES OF TRUSTEE........................................-24-
SECTION 7.2. RIGHTS OF TRUSTEE........................................-25-
SECTION 7.3. INDIVIDUAL RIGHTS OF TRUSTEE.............................-26-
SECTION 7.4. TRUSTEE'S DISCLAIMER.....................................-26-
SECTION 7.5. NOTICE OF DEFAULTS.......................................-26-
SECTION 7.6. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES...............-26-
SECTION 7.7. COMPENSATION AND INDEMNITY...............................-27-
SECTION 7.8. REPLACEMENT OF TRUSTEE...................................-28-
SECTION 7.9. SUCCESSOR TRUSTEE BY MERGER, ETC.........................-29-
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION...........................-29-
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.......-29-
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE...............-29-
SECTION 8.1. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT
DEFEASANCE...........................................-29-
SECTION 8.2. LEGAL DEFEASANCE AND DISCHARGE...........................-29-
SECTION 8.3. COVENANT DEFEASANCE......................................-30-
SECTION 8.4. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE...............-30-
SECTION 8.5. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE
HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS........-31-
SECTION 8.6. REPAYMENT TO COMPANY.....................................-32-
SECTION 8.7. REINSTATEMENT............................................-32-
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER...................-32-
iv
<PAGE> 6
SECTION 9.1. WITHOUT CONSENT OF HOLDERS OF NOTES......................-32-
SECTION 9.2. WITH CONSENT OF HOLDERS OF NOTES.........................-33-
SECTION 9.3. COMPLIANCE WITH TRUST INDENTURE ACT......................-34-
SECTION 9.4. REVOCATION AND EFFECT OF CONSENTS........................-34-
SECTION 9.5. NOTATION ON OR EXCHANGE OF NOTES.........................-34-
SECTION 9.6. TRUSTEE TO SIGN AMENDMENTS, ETC..........................-35-
.......................................................................-35-
ARTICLE 10
SUBORDINATION............................-35-
SECTION 10.1. AGREEMENT TO SUBORDINATE................................-35-
SECTION 10.2. LIQUIDATION; DISSOLUTION; BANKRUPTCY....................-35-
SECTION 10.3. DEFAULT ON SENIOR DEBT..................................-35-
SECTION 10.4. ACCELERATION OF NOTES...................................-36-
SECTION 10.5. WHEN DISTRIBUTION MUST BE PAID OVER.....................-36-
SECTION 10.6. NOTICE BY COMPANY.......................................-37-
SECTION 10.7. SUBROGATION.............................................-37-
SECTION 10.8. RELATIVE RIGHTS.........................................-37-
SECTION 10.9. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY............-37-
SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE...............-38-
SECTION 10.11. RIGHTS OF TRUSTEE AND PAYING AGENT.....................-38-
SECTION 10.12. AUTHORIZATION TO EFFECT SUBORDINATION..................-38-
SECTION 10.13. AMENDMENTS.............................................-38-
ARTICLE 11
CONVERSION OF NOTES.........................-39-
SECTION 11.1. RIGHT TO CONVERT........................................-39-
SECTION 11.2. EXERCISE OF CONVERSION PRIVILEGE; ISSUANCE OF
COMMON STOCK ON CONVERSION; NO ADJUSTMENT FOR
INTEREST OR DIVIDENDS................................-39-
SECTION 11.3. CASH PAYMENTS IN LIEU OF FRACTIONAL SHARES..............-40-
SECTION 11.4. CONVERSION PRICE........................................-41-
SECTION 11.5. ADJUSTMENT OF CONVERSION PRICE..........................-41-
SECTION 11.6. EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE.................................................-44-
SECTION 11.7. TAXES ON SHARES ISSUED..................................-45-
SECTION 11.8. RESERVATION OF SHARES; SHARES TO BE FULLY PAID; LISTING
OF COMMON STOCK......................................-45-
SECTION 11.9. COMMON STOCK ISSUABLE UPON CONVERSION...................-45-
SECTION 11.10. RESPONSIBILITY OF TRUSTEE..............................-45-
SECTION 11.11. NOTICE TO HOLDERS PRIOR TO CERTAIN ACTIONS.............-46-
ARTICLE 12
MISCELLANEOUS............................-46-
SECTION 12.1. TRUST INDENTURE ACT CONTROLS............................-46-
SECTION 12.2. NOTICES.................................................-46-
SECTION 12.3. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER
HOLDERS OF NOTES.....................................-48-
SECTION 12.4. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT......-48-
v
<PAGE> 7
SECTION 12.5. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION...........-48-
SECTION 12.6. RULES BY TRUSTEE AND AGENTS.............................-49-
SECTION 12.7. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES
AND SHAREHOLDERS.....................................-49-
SECTION 12.8. GOVERNING LAW...........................................-49-
SECTION 12.9. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS...........-49-
SECTION 12.10. SUCCESSORS.............................................-49-
SECTION 12.11. SEVERABILITY...........................................-49-
SECTION 12.12. COUNTERPART ORIGINALS..................................-49-
SECTION 12.13. TABLE OF CONTENTS, HEADINGS, ETC.......................-49-
EXHIBITS
Exhibit A Form of Note................................................A 1
vi
<PAGE> 8
This Indenture, dated as of May 12, 1998 is between KTI, Inc., a New
Jersey corporation (the "Company"), and First Union National Bank, as trustee
(the "Trustee").
The Company and the Trustee agree as follows for the benefit of each other
and for the equal and ratable benefit of the Holders of the 8 3/4% Convertible
Subordinated Notes due August 15, 2004 (the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.1. DEFINITIONS.
"Affiliate" of any specified Person means an "affiliate" of such Person,
as such term is defined for purposes of Rule 144 under the Securities Act.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or exchange of
beneficial interests in a Global Note, the rules and procedures of the
Depository that apply to such transfer and exchange.
"Bankruptcy Law" means Title 11, United States Code, or any similar
federal or state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company, or any
authorized committee of the Board of Directors.
"Business Day" means any day other than a Legal Holiday.
"Capital Stock" means (a) in the case of a corporation, corporate stock,
(b) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (c) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited) and (d) any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing
Person.
"Change of Control" means the occurrence of any of the following: (a) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one transaction or a series of related
transactions, of all or substantially all of the assets of the Company and its
Subsidiaries, taken as a whole, (b) the adoption of a plan relating to the
liquidation or dissolution of the Company, (c) the consummation of any
transaction (including, without limitation, any merger or consolidation) the
result of which is that any "person" or "group" (as such terms are used in
Section 13(d)(3) of the Exchange Act), other than a group including any one of
Nicholas Mennona Jr., Martin Sergi or Ross Pirasteh, becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act), directly or indirectly through one or more intermediaries, of more than
50% of the voting power of the outstanding voting stock of the Company, unless
the Closing Price per share of Common Stock for any five Trading Days within the
<PAGE> 9
period of ten consecutive Trading Days ending immediately after the announcement
of such Change of Control equals or exceeds 105% of the Conversion Price in
effect on each such Trading Day, or (d) the first day on which more than a
majority of the Board of Directors are not Continuing Directors; provided,
however, that a transaction in which the Company becomes a subsidiary of another
entity shall not constitute a Change of Control if (i) the shareholders of the
Company immediately prior to such transaction "beneficially own" (as such term
is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or
indirectly through one or more intermediaries, at least a majority of the voting
power of the outstanding voting stock of the Company immediately following the
consummation of such transaction and (ii) immediately following the consummation
of such transaction, no "person" or "group" (as such terms are defined above),
other than such other entity (but including holders of equity interests of such
other entity), "beneficially owns" (as such term is defined above), directly or
indirectly through one or more intermediaries, more than 50% of the voting power
of the outstanding voting stock of the Company.
"Closing Price" means, for each Trading Day, the last reported sale price
regular way on the principal exchange, including the NASDAQ National Market, on
which the applicable security is listed or quoted or, if the applicable security
is not so listed or quoted, the average of the closing bid and asked prices in
the over-the-counter market as furnished by any New York Stock Exchange member
firm selected from time to time by the Company for that purpose. In the event
that the Closing Price cannot be determined as aforesaid, the Board of Directors
of the Company shall determine the Closing Price on the basis of such quotations
as it in good faith considers appropriate.
"Common Stock" means the common stock, no par value, of the Company, and
any other capital stock of the Company into which such common stock may be
converted or reclassified or that may be issued in respect of, in exchange for,
or in substitution for such common stock by reason of any stock splits, stock
dividends, distributions, mergers, consolidations or other like events.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (a) was a member of the Board of
Directors on the date of original issuance of the Preferred Stock or (b) was
nominated for election to the Board of Directors with the approval of, or whose
election to the Board of Directors was ratified by, at least two- thirds of the
Continuing Directors who were members of the Board of Directors at the time of
such nomination or election.
"Conversion Price" means the conversion price of the Notes as set forth in
Section 11.4 hereof.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 12.2 hereof or such other address as to which the
Trustee may give notice to the Company.
"Credit Facility" means that certain line of credit pursuant to a Loan and
Security Agreement, dated as of October 29, 1996, as amended from time to time
by and between the Company, its Subsidiaries and KeyBank, National Association,
including any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, in each case as amended, restated,
modified, supplemented, extended, renewed, replaced, refinanced or restructured
from time to time, whether by the same or any other agent or agents, lender or
group of lenders, whether represented by one or more agreements and whether one
or more Subsidiaries are added or removed as borrowers or guarantors thereunder
or as parties thereto.
-2-
<PAGE> 10
"Default" means any event that with the passage of time or the giving of
notice or both would be an Event of Default.
"Definitive Notes" means Notes that are in the form of Exhibit A attached
hereto (but without including the text referred to in footnotes 1 and 2
thereto).
"Depository" means, with respect to the Notes issuable or issued in whole
or in part in global form, the Person specified in Section 2.3 hereof as the
Depository with respect to the Notes until a successor shall have been appointed
and become such pursuant to the applicable provision of this Indenture, and,
thereafter, "Depository" shall mean or include such successor.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means the amount that a willing buyer would pay a
willing seller in an arm's-length transaction.
"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 have been approved by a significant segment of the accounting
profession, which are in effect on the date of this Indenture.
"Global Note" means a permanent global debenture that contains the
paragraph referred to in footnote 1 and the additional schedule referred to in
footnote 2 to the form of the Note attached hereto as Exhibit A, and that is
deposited with the Note Custodian and registered in the name of the Depository.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means any indebtedness, whether or not contingent, in
respect of borrowed money or evidenced by bonds, notes, debentures or similar
instruments or letters of credit (or reimbursement agreements in respect
thereof) or banker's acceptances or representing capital lease obligations or
the balance deferred and unpaid of the purchase price of any property or
representing any hedging obligations, except any such balance that constitutes
an accrued expense or trade payable, if and to the extent any of the foregoing
indebtedness (other than letters of credit and hedging obligations) would appear
as a liability upon a balance sheet prepared in accordance with GAAP.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Indirect Participant" means a Person who holds an interest through a
Participant.
"Institutional Accredited Investor" means an "accredited investor" as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
-3-
<PAGE> 11
"Junior Securities" means all classes of Common Stock of the Company and
each other class of capital stock or series of preferred stock established after
July 1, 1997 by the Board of Directors the terms of which do not expressly
provide that it ranks senior to or on a parity with the Preferred Stock as to
dividend distributions and distributions upon the liquidation, winding-up and
dissolution of the Company.
"Legal Holiday" means a Saturday, a Sunday or any day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. 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 additional interest
shall be payable on such day for the intervening period.
"Lien" means any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind, whether or not filed, recorded or otherwise perfected
under applicable law (including any conditional sale or other title retention
agreement, any lease intended as security, any option or other agreement to sell
or give any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction other than a financing statement covering leased
goods under lease not intended as security).
"Note Custodian" means the Trustee, as custodian with respect to the Notes
in global form, or any successor entity thereto.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Preferred Stock by the Company.
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 12.5 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee.
"Participant" means with respect to the Depository, a Person who has an
account with the Depository.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government or agency or political subdivision thereof (including
any subdivision or ongoing business of any such entity or substantially all of
the assets of any such entity, subdivision or business).
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"Preferred Stock" means the 8 3/4% Series B Convertible Exchangeable
Preferred Stock, which may be exchanged by the Company for the Notes.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of August 7,1997, by and between the Company and Credit Research &
Trading LLC, as such agreement may be amended, modified or supplemented from
time to time.
"Responsible Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restated Certificate of Incorporation" means the amendment to the
restated certificate of incorporation duly filed with the Secretary of State of
the State of New Jersey on August 8, 1997 with respect to the Preferred Stock.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means (a) all obligations of the Company under the Credit
Facility, as it may be amended, modified, restated, supplemented, deferred,
extended, renewed, replaced, refunded or refinanced from time to time, and (b)
any other Indebtedness of the Company, whether outstanding on the date of
issuance of the Notes or thereafter incurred, unless the instrument under which
such Indebtedness is incurred expressly provides that it is subordinated in
right of payment to any Senior Debt; provided, however, that Senior Debt will
not include (i) any liability for federal, state, local or other taxes owed or
owing by the Company, (ii) any Indebtedness of the Company to any of its
Subsidiaries or (iii) any trade payables.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.
"Subsidiary" means, with respect to any Person, (a) 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 such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (b) any partnership (i) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (ii)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"Trading Day" means any day on which the NASDAQ National Market or other
applicable stock exchange or market on which the Common Stock is listed or
quoted is open for business.
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"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 serving hereunder.
SECTION 1.2. OTHER DEFINITIONS.
Defined in
Term Section
---- -------
"Change of Control Offer" .................... 4.8
"Change of Control Payment"................... 4.8
"Change of Control Payment Date".............. 4.8
"Conversion Date"............................. 11.2
"Conversion Price"............................ 11.4
"Covenant Defeasance"......................... 8.3
"DTC"......................................... 2.3
"Event of Default"............................ 6.1
"Legal Defeasance"............................ 8.2
"Paying Agent"................................ 2.3
"Payment Default"............................. 6.1
"Payment Blockage Notice"..................... 10.3
"Registrar"................................... 2.3
"Representative".............................. 10.5
SECTION 1.3. 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. Any terms
incorporated 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 1.4. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural include
the singular;
(5) provisions apply to successive events and transactions; and
(6) the words "include", "includes", and "including" shall be deemed to
be followed by the phrase "without limitation"; and
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(7) references to sections of or rules under the Securities Act shall be
deemed to include substitute, replacement of successor sections or
rules adopted by the SEC from time to time.
ARTICLE 2
THE NOTES
SECTION 2.1. FORM AND DATING.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto. The Notes may have notations,
legends or endorsements required by law, stock exchange rule or usage. Each Note
shall be dated the date of its authentication. The Notes shall be issued in
denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and are
hereby expressly made, a part of this Indenture and 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 Notes. Notes issued in exchange for the Preferred Stock
may be issued initially in the form of one or more Global Notes, which shall be
deposited on behalf of the Holders of the Notes represented thereby with a
custodian of the Depository, and registered in the name of the Depository or a
nominee of the Depository, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The aggregate principal amount of the Global
Notes may from time to time be increased or decreased by adjustments made on the
records of the Trustee and the Depository or its nominee as hereinafter
provided.
Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate amount of outstanding Notes from time to time endorsed thereon and
that the aggregate amount of outstanding Notes represented thereby may from time
to time be reduced or increased, as appropriate, to reflect exchanges,
redemptions and transfers of interests. Any endorsement of a Global Note to
reflect the amount of any increase or decrease in the amount of outstanding
Notes represented thereby shall be made by the Trustee or the Note Custodian, at
the direction of the Trustee, in accordance with instructions given by the
Holder thereof as required by Section 2.6 hereof.
Except as set forth in Section 2.6 hereof, the Global Notes may be
transferred, in whole and not in part, only to another nominee of the Depository
or to a successor of the Depository or its nominee.
(b) Book-Entry Provisions. The Company shall execute and the Trustee
shall, in accordance with Section 2.2, authenticate and deliver the Global
Notes, if any, that (i) shall be registered in the name of the Depository or the
nominee of the Depository and (ii) shall be delivered by the Trustee to the
Depository or pursuant to the Depository's instructions or held by the Trustee
as custodian for the Depository.
Participants shall have no rights either under this Indenture with
respect to any Global Note held on their behalf by the Depository or by the Note
Custodian as custodian for the Depository or under such Global Note, and the
Depository may be treated by the Company, the Trustee and any
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Agent of the Company or the Trustee as the absolute owner of such Global Note
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 Depository or impair, as between the Depository and its
Participants, the operation of customary practices of such Depository governing
the exercise of the rights of an owner of a beneficial interest in any Global
Note.
(c) Definitive Notes. Notes issued in certificated form shall be
substantially in the form of Exhibit A attached hereto (but without including
the text referred to in footnotes 1 and 2 thereto).
SECTION 2.2. EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Notes for the Company by manual or facsimile
signature. The Company's seal shall be reproduced on the Notes and may be in
facsimile form.
If an Officer whose signature is on a Note no longer holds that office at
the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature shall be conclusive evidence that the Note has been
authenticated under this Indenture. The form of Trustee's certificate of
authentication to be borne by the Notes shall be substantially as set forth in
Exhibit A hereto.
The Trustee shall, upon a written order of the Company signed by two
Officers, authenticate Notes for original issue up to $21,400,000 aggregate
principal amount of the Notes. Such written order shall specify the exact
aggregate principal amount of Notes to be authenticated. The aggregate principal
amount of Notes outstanding at any time may not exceed such amount except as
provided in Section 2.7 hereof. The Company shall also deliver to the Trustee an
Officers' Certificate and an Opinion of Counsel that all of the conditions to
the exchange of the Preferred Stock into the Notes have been satisfied.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Notes. An authenticating agent may authenticate Notes 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 of the Company.
SECTION 2.3. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency in the State of New York
where Notes may be presented for registration of transfer or for exchange
("Registrar") and an office or agency where Notes may be presented for payment
("Paying Agent"). The Registrar shall keep a register of the Notes and of their
transfer and exchange. The Company may appoint one or more co-registrars and one
or more additional paying agents. The term "Registrar" includes any co-registrar
and the term "Paying Agent" includes any additional paying agent. The Company
may change any Paying Agent or Registrar without notice to any Holder. The
Company shall notify the Trustee in writing of the name and address of any Agent
not a party to this Indenture. If the Company fails to appoint or maintain
another entity as Registrar or Paying Agent, the Trustee shall act as such. The
Company shall enter
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into an appropriate agency agreement with any Agent not a party to this
Indenture, and such agreement shall incorporate the TIA's provisions of this
Indenture that relate to such Agent. The Company or any Significant Subsidiary
may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to act
as Depository with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Note Custodian with respect to the Global Notes.
SECTION 2.4. 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
Holders or the Trustee all money held by the Paying Agent for the payment of
principal of or premium or interest on the Notes, 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. Upon payment over to the Trustee, the Paying Agent
(if other than the Company or a Subsidiary) shall have no further liability for
the money. If the Company or a Significant Subsidiary acts as Paying Agent, it
shall segregate and hold in a separate trust fund for the benefit of the Holders
all money held by it as Paying Agent. Upon any bankruptcy or reorganization
proceedings relating to the Company, the Trustee shall serve as Paying Agent for
the Notes.
SECTION 2.5. HOLDER 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
all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee
is not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days 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 the Holders of
Notes and the Company shall otherwise comply with TIA Section 312(a).
SECTION 2.6. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes. The transfer and exchange
of Global Notes or beneficial interests therein shall be effected through the
Depository, in accordance with this Indenture and the procedures of the
Depository therefor. Beneficial interests in a Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in the
same Global Note.
(b) Transfer and Exchange of Definitive Notes. When Definitive Notes
are presented by a Holder to the Registrar with a request to register the
transfer of the Definitive Notes or to exchange such Definitive Notes for an
equal principal amount of Definitive Notes of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested only
if the Definitive Notes are presented or surrendered for registration of
transfer or exchange, are endorsed and contain a signature guarantee or
accompanied by a written instrument of transfer in form
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satisfactory to the Registrar duly executed by such Holder or by his attorney
and contains a signature guarantee.
(c) Transfer of a Beneficial Interest in a Global Note for a
Definitive Note. Any Person having a beneficial interest in a Global Note may
upon request, subject to the Applicable Procedures, exchange such beneficial
interest for a Definitive Note, upon receipt by the Trustee of written
instructions or such other form of instructions as is customary for the
Depository, from the Depository or its nominee on behalf of any Person having a
beneficial interest in a Global Note.
(d) Restrictions on Transfer and Exchange of Global Notes.
Notwithstanding any other provision of this Indenture, a Global Note may not be
transferred as a whole except by the Depository to a nominee of the Depository
or by a nominee of the Depository to the Depository or another nominee of the
Depository or by the Depository or any such nominee to a successor Depository or
a nominee of such successor Depository.
(e) Authentication of Definitive Notes in Absence of Depository. If
at any time:
(i) the Depository for the Notes notifies the Company that the
Depository is unwilling or unable to continue as Depository for the Global
Notes and a successor Depository for the Global Notes is not appointed by
the Company within 90 days after delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the Trustee
in writing that it elects to cause the issuance of Definitive Notes under
this Indenture, then the Company shall execute, and the Trustee shall,
upon receipt of an authentication order in accordance with Section 2.2
hereof, authenticate and deliver, Definitive Notes in an aggregate
principal amount equal to the principal amount of the Global Notes in
exchange for such Global Notes.
(f) Cancellation and/or Adjustment of Global Notes. At such time as
all beneficial interests in Global Notes have been exchanged for Definitive
Notes, redeemed, repurchased or cancelled, all Global Notes shall be returned to
or retained and cancelled by the Trustee in accordance with Section 2.11 hereof.
At any time prior to such cancellation, if any beneficial interest in a Global
Note is exchanged for Definitive Notes, redeemed, repurchased or cancelled, the
principal amount of Notes represented by such Global Note shall be reduced
accordingly and an endorsement shall be made on such Global Note, by the Trustee
or the Note Custodian, at the direction of the Trustee, to reflect such
reduction.
(g) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges,
subject to this Section 2.6 the Company shall execute and the Trustee
shall authenticate Definitive Notes and Global Notes at the Registrar's
request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, 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 taxes
or similar governmental charge payable upon exchange or transfer pursuant
to Sections 3.7, 4.8 and 9.5 hereof).
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(iii) The Registrar shall not be required to register the
transfer of or exchange any Note selected for redemption in whole or in
part, except the unredeemed portion of any Note being redeemed in part.
(iv) All Definitive Notes and Global Notes issued upon any
registration of transfer or exchange of Definitive Notes or Global Notes
shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture as the Definitive
Notes or Global Notes surrendered upon such registration of transfer or
exchange.
(v) The Company shall not be required:
(A) to issue, to register the transfer of or to exchange
Notes during a period beginning at the opening of business 15 days before
the day of any selection of Notes for redemption under Section 3.2 hereof
and ending at the close of business on the day of selection;
(B) to register the transfer of or to exchange any Note
so selected for redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part;
(C) to register the transfer of or to exchange a Note
between a record date and the next succeeding interest payment date; or
(D) to register the transfer of a Note other than in
amounts of $1,000 or multiple integrals thereof.
(vi) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the Company may deem and
treat the Person in whose name any Note is registered as the absolute
owner of such Note for the purpose of receiving payment of principal of
and interest on such Notes, and neither the Trustee, any Agent nor the
Company shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Definitive Notes and
Global Notes in accordance with the provisions of Section 2.2 hereof.
SECTION 2.7. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee or the Company or the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Note, the Company shall issue and the Trustee, upon the written order of
the Company signed by two Officers of the Company, shall authenticate a
replacement Note if the Trustee's requirements are met. If required by the
Trustee or the Company, an indemnity bond must be supplied by the Holder that is
sufficient in the judgment of the Trustee and the Company to protect the
Company, the Trustee, any Agent and any authenticating agent from any loss that
any of them may suffer if a Note is replaced. The Company may charge for its
expenses in replacing a Note.
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Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
SECTION 2.8. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.9 hereof, a Note
does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Note.
If a Note is lost, destroyed or stolen and is then replaced pursuant to
Section 2.7 hereof, it ceases to be outstanding unless the Trustee receives
proof satisfactory to it that the replaced Note is held by a bona fide
purchaser.
If the entire principal of and premium and interest on any Note is
considered paid under Section 4.1 hereof, it ceases to be outstanding and
interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary of the Company
or an Affiliate) holds, on a redemption date or maturity date, money sufficient
to pay Notes payable on that date, then on and after that date such Notes shall
be deemed to be no longer outstanding and shall cease to accrue interest.
SECTION 2.9. TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, a Subsidiary of the Company or an Affiliate, shall be considered as
though 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 Notes that a Trustee knows are so owned shall be so disregarded.
Notwithstanding the foregoing, Notes that the Company, a Subsidiary of the
Company or an Affiliate offers to purchase or acquires pursuant to an offer,
exchange offer, tender offer or otherwise shall not be deemed to be owned by the
Company, a Subsidiary of the Company or an Affiliate until legal title to such
Notes passes to the Company, such Subsidiary or such Affiliate as the case may
be.
SECTION 2.10. TEMPORARY NOTES.
Until Definitive Notes are ready for delivery, the Company may prepare and
the Trustee shall authenticate temporary Notes upon a written order of the
Company signed by two Officers of the Company. Temporary Notes shall be
substantially in the form of Definitive Notes but may have variations that the
Company considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Company shall prepare
and the Trustee shall authenticate Definitive Notes in exchange for temporary
Notes. Until such exchange, Holders of temporary Notes shall be entitled to all
of the benefits of this Indenture.
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SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for cancellation.
The Registrar and Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all cancelled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it has
paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, it shall
pay the defaulted interest in any lawful manner plus, to the extent lawful,
interest payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, in each case at the rate provided in the Notes
and in Section 4.1 hereof. The Company shall notify the Trustee in writing of
the amount of defaulted interest proposed to be paid on each Note and the date
of the proposed payment. The Company shall fix or cause to be fixed each such
special record date and payment date, provided that no such special record date
shall be less than 10 days prior to the related payment date for such defaulted
interest. At least 15 days before the special record date, the Company (or, upon
the written request of the Company, the Trustee in the name and at the expense
of the Company) shall mail or cause to be mailed to Holders a notice that states
the special record date, the related payment date and the amount of such
interest to be paid.
ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.1. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional redemption
provisions of Section 3.7 hereof, it shall furnish to the Trustee, at least 30
days but not more than 60 days before a redemption date, an Officers'
Certificate setting forth (i) the clause of this Indenture pursuant to which the
redemption shall occur, (ii) the redemption date, (iii) the principal amount of
Notes to be redeemed and (iv) the redemption price.
SECTION 3.2. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed at any time, the Trustee
shall select the Notes to be redeemed among the Holders of the Notes 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 in accordance with any other method the Trustee
considers fair and appropriate; provided that no Notes of $1,000 or less shall
be redeemed in part. In the event of partial redemption by lot, the particular
Notes to be redeemed shall be selected, unless otherwise provided herein, by the
Trustee from the outstanding Notes not previously called for redemption within
10 business days after receipt of the Officers' Certificate pursuant to Section
3.1 hereof.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof
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to be redeemed. Notes and portions of Notes selected shall be in amounts of
$1,000 or whole multiples of $1,000. Provisions of this Indenture that apply to
Notes called for redemption also apply to portions of Notes called for
redemption.
SECTION 3.3. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a redemption date, a
public notice of the redemption shall be made and the Company shall mail or
cause to be mailed, by first class mail, a notice of redemption to each Holder
whose Notes are to be redeemed at its registered address with copies to the
Trustee.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the redemption date
upon surrender of such Note, a new Note or Notes in a principal amount equal to
the unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and after
the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that in
all cases, the text of such notice of redemption shall be prepared or approved
by the Company and the Trustee shall have no responsibility whatsoever with
regard to such notice being accurate or correct.
SECTION 3.4. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.3 hereof,
Notes called for redemption become irrevocably due and payable on the redemption
date at the redemption price. A notice of redemption may not be conditional.
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SECTION 3.5. DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to the redemption date, the Company shall deposit
with the Paying Agent money sufficient to pay the redemption price of and
accrued interest on all Notes to be redeemed on that date. The Paying Agent
shall promptly return to the Company any money deposited with the Paying Agent
by the Company in excess of the amounts necessary to pay the redemption price of
and accrued interest on all Notes to be redeemed.
If the Company complies with the provisions of the preceding paragraph, on
and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption. If a Note is redeemed on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest shall be paid to the Person in whose name
such Note was registered at the close of business on such record date. If any
Note called for redemption shall not be so paid upon surrender for redemption
because of the failure of the Company to comply with the preceding paragraph,
interest shall be paid on the unpaid principal, from the redemption date until
such principal is paid, and to the extent lawful on any interest not paid on
such unpaid principal, in each case at the rate provided in the Notes and in
Section 4.1 hereof.
SECTION 3.6. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company shall issue
and, upon the Company's written request, the Trustee shall authenticate for the
Holder at the expense of the Company a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
SECTION 3.7. OPTIONAL REDEMPTION.
(a) The Company shall have the option to redeem the Notes pursuant
to this Section 3.7 on or after August 15, 2000. The Company shall have the
option to redeem the Notes, in whole or from time to time in part, at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest thereon, to the applicable redemption date, if
redeemed during the twelve-month period beginning on August 15 of the years
indicated below:
<TABLE>
<CAPTION>
Year PERCENTAGE
---- ----------
<C> <C>
2000 ....................................... 104.4%
2001 ....................................... 102.9%
2002 ....................................... 101.5%
2003 and thereafter......................... 100.0%
</TABLE>
Notwithstanding the foregoing, on or after August 15, 1999, the
Company may, at its option, redeem the Notes at 105.9% of the principal amount
plus accrued and unpaid interest thereon if the Common Stock bid price has
averaged not less than 1.5 times the Conversion Price during 20 consecutive
Trading Days.
(b) Any redemption pursuant to this Section 3.7 shall be made
pursuant to the provisions of Section 3.1 through 3.6 hereof.
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<PAGE> 23
SECTION 3.8. NO MANDATORY REDEMPTION.
Except as provided in Section 4.8, the Company shall not be required to
make mandatory redemption or sinking fund payments with respect to the Notes.
ARTICLE 4
COVENANTS
SECTION 4.1. PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of and premium and
interest on the Notes on the dates and in the manner provided in the Notes.
Principal, premium and interest shall be considered paid on the date due if the
Paying Agent, if other than the Company or a Subsidiary thereof, holds as of
5:00 p.m. New York City time on the Business Day immediately prior to the due
date money deposited by the Company in immediately available funds and
designated for and sufficient to pay all principal, premium and interest then
due.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
the interest rate on the Notes to the extent lawful; it 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 same rate to the extent lawful.
SECTION 4.2. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain an office or agency in the State of New York
(which may be an office of the Trustee or an affiliate of the Trustee, Registrar
or co-registrar) where Notes may be surrendered for registration of transfer or
for exchange and where notices and demands to or upon the Company in respect of
the Notes and this Indenture may be served. The Company shall give prompt
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency for such purposes. The Company
shall give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.3.
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<PAGE> 24
SECTION 4.3. REPORTS.
Whether or not the Company is required to do so by the rules and
regulations of the SEC, the Company will file with the SEC (unless the SEC will
not accept such a filing) and, within 15 days of filing, or attempting to file,
the same with the SEC, furnish to the holders of the Notes and the Trustee (a)
all quarterly and annual financial and other information with respect to the
Company that would be required to be contained in a filing with the SEC on Forms
10-Q and 10-K if the Company were required to file such forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants, and (b) all current reports
that would be required to be filed with the SEC on Form 8-K if the Company were
required to file such reports. The Company shall at all times comply with TIA
Section 314(a).
SECTION 4.4. COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within 90 days after
the end of each fiscal year, an Officers' Certificate stating that a review of
the activities of the Company and its Significant 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 this Indenture, and further
stating, as to each such Officer signing such certificate, that to the best of
his or her knowledge the Company has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions of this
Indenture (or, if a Default or Event of Default shall have occurred, describing
all such Defaults or Events of Default of which he or she may have knowledge and
what action the Company is taking or proposes to take with respect thereto) and
that to the best of his or her knowledge no event has occurred and remains in
existence by reason of which payments on account of the principal of or
interest, if any, on the Notes is prohibited or if such event has occurred, a
description of the event and what action the Company is taking or proposes to
take with respect thereto.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.3 above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, as soon as possible upon any Officer becoming aware of
any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
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<PAGE> 25
SECTION 4.5. TAXES.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Notes.
SECTION 4.6. STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that it
shall 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, that may affect the covenants or
the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it shall not, by resort to any such law, hinder, delay
or impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law has
been enacted.
SECTION 4.7. CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall 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 of its
Significant Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company or any
such Significant Subsidiary, 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 of its Significant Subsidiaries, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Significant
Subsidiaries, taken as a whole.
SECTION 4.8. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Within 10 days of the occurrence of a Change of Control, the
Company shall give notice to the Holders and the Trustee that a Change of
Control has occurred (the "Change of Control Notice"). Subject to subparagraph
(c) below, upon the occurrence of a Change of Control, at the option of the
Holders of a majority in principal amount of Notes exercised by the giving of
notice to the Company within 20 days of receipt of the Change of Control Notice,
the Company shall make an offer (a "Change of Control Offer") to repurchase all
or any part (equal to $1,000 or an integral multiple thereof) of each Holder's
Notes at an offer price in cash equal to 100% of the aggregate principal amount
thereof, plus accrued and unpaid interest, if any, thereon to the date of
repurchase (the "Change of Control Payment"). The Company shall deliver to the
Trustee copies of all notices received from the Holders in response to the
Change of Control Notice. The Change of Control Payment shall be made at the
option of the Company either in (a) cash or (b) fully registered shares of
Common Stock valued at 95% of the average closing price of the Common Stock
during the 20 Trading Days prior to such Change of Control Payment if the Board
of Directors of the Company determines that the payment of the Change of Control
Payment in fully registered shares of Common Stock will not adversely affect the
voting rights, preferences, privileges or relative, participating, optional or
other specified rights of the holders of the Notes. Within 10 days following
the receipt by the Company from the Holders of a sufficient number of the
notices
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<PAGE> 26
described in the second sentence of this Section 4.8(a), the Company shall mail
a notice to each Holder and the Trustee stating: (i) that the Change of Control
Offer is being made pursuant to this Section 4.8 and that all Notes validly
tendered and not withdrawn will be accepted for payment; (ii) the purchase price
and the purchase date, which shall be no earlier than 30 days but no later than
60 days from the date such notice is mailed (the "Change of Control Payment
Date"); (iii) that any Note not tendered will continue to accrue interest; (iv)
that, unless the Company defaults in the payment of the Change of Control
Payment, all Notes accepted for payment pursuant to the Change of Control Offer
shall cease to accrue interest after the Change of Control Payment Date; (v)
that Holders electing to have any Notes purchased pursuant to a Change of
Control Offer will be required to surrender the Notes, properly endorsed for
transfer together with the form entitled "Option of Holder to Elect Purchase" on
the reverse of the Notes completed and such customary documents as the Company
may reasonably request, to the Paying Agent at the address specified in the
notice prior to the close of business on the third Business Day preceding the
Change of Control Payment Date; (vi) that Holders 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 Change of Control 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 the Notes
purchased; and (vii) 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. The Company shall comply with
the requirements of Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent Rule 14e-1 or such laws and
regulations are applicable in connection with the repurchase of Notes as a
result of a Change of Control. In the event of any conflict between this
Indenture and Rule 14e-1 or such laws and regulations, the requirements of
Rule 14e-1, any successor provision thereto, and such laws and regulations
thereunder shall control.
(b) On or before the Business Day immediately prior to the Change of
Control Payment Date, the Company shall, to the extent lawful, (i) accept for
payment all Notes or portions thereof properly tendered pursuant to the Change
of Control Offer, (ii) deposit with the Paying Agent an amount, whether in cash
or Common Stock, equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (iii) deliver or cause to be delivered to
the Trustee the Notes so accepted together with an Officers' Certificate stating
the aggregate principal amount of Notes or portions thereof being purchased by
the Company. The Paying Agent shall promptly mail to each holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee shall
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided, that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Company shall
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
(c) Notwithstanding the foregoing, prior to complying with the
provisions of this Section 4.8, but in any event within 90 days following a
Change of Control, the Company shall either repay all outstanding Senior Debt or
obtain the requisite consents, if any, under all agreements governing
outstanding Senior Debt to permit the repurchase of the Notes required by this
Section 4.8.
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<PAGE> 27
ARTICLE 5
SUCCESSORS
SECTION 5.1. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company shall not consolidate or merge with or into (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 in one or more related transactions, to another corporation, Person or
entity unless (a) the Company is the surviving corporation or the entity 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 entity or Person formed by or surviving any such consolidation
or merger (if other than the Company) or the entity or Person to which such
sale, assignment, transfer, lease, conveyance or other disposition shall have
been made assumes all the obligations of the Company under the Notes and this
Indenture pursuant to a supplemental indenture in a form reasonably satisfactory
to the Trustee, (c) immediately after such transaction no Default or Event of
Default exists, and (d) the Company or such other Person shall have delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel stating that such
consolidation, merger, sale, assignment, transfer, lease, conveyance or disposal
complies with this Indenture and that all conditions precedent in this Indenture
have been satisfied.
SECTION 5.2. 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 5.1 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of, the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein. When a successor
corporation assumes all of the obligations of the Company hereunder and under
the Notes and agrees to be bound hereby and thereby, the predecessor Company
shall be relieved from such obligations.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.1. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) the Company defaults in the payment when due of interest on the
Notes and such default continues for a period of 30 days;
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(b) the Company defaults in the payment when due of principal of or
premium on the Notes when the same becomes due and payable at maturity, upon
redemption (including in connection with an offer to purchase) or otherwise;
(c) the Company fails to comply with any of the provisions of
Section 4.8 hereof;
(d) the Company fails to observe or perform any other covenant,
representation, warranty or other agreement in this Indenture or the Notes for
60 days after notice to the Company by the Trustee or the Holders of at least
25% in principal amount of the Notes then outstanding of such failure;
(e) the Company pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it
in an involuntary case,
(iii) consents to the appointment of a custodian of it or for
all or substantially all of its property, or
(iv) makes a general assignment for the benefit of its
creditors.
(f) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(i) is for relief against the Company in an involuntary case;
(ii) appoints a custodian of the Company for all or
substantially all of the property of the Company, or
(iii) orders the liquidation of the Company; and the order or
decree remains unstayed and in effect for 60 consecutive days.
SECTION 6.2. ACCELERATION.
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 by a notice in writing
to the Company (and to the Trustee if such written notice is given by the
Holders). Upon any such declaration, the Notes shall become due and payable
immediately. Notwithstanding the foregoing, if an Event of Default specified in
clause (e) or (f) of Section 6.1 hereof occurs, all outstanding Notes shall be
due and payable immediately without further action or notice. The Holders of a
majority in aggregate principal amount of the then outstanding Notes by written
notice to the Trustee may on behalf of all of the Holders rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default (except nonpayment of
principal, premium or interest that has become due solely because of the
acceleration) have been cured or waived.
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<PAGE> 29
SECTION 6.3. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal of, premium and
interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or omission
by the Trustee or any Holder of a Note 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 6.4. WAIVER OF PAST DEFAULTS.
Holders of a majority in aggregate principal amount of the then
outstanding Notes by written notice to the Trustee may on behalf of the Holders
of all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium or interest on the Notes (including in
connection with an offer to purchase) (provided, however, that the Holders of a
majority in aggregate principal amount of the then outstanding Notes with
written notice to the Trustee may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration) in
accordance with Section 6.2 hereof. Upon any such waiver, such Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other Default or impair any right of the Trustee or
the Holders consequent thereon.
SECTION 6.5. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding Notes
may direct the time, method and place of conducting any proceeding for
exercising 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, that the Trustee determines may be unduly
prejudicial to the rights of other Holders of Notes or that may involve the
Trustee in personal liability.
SECTION 6.6. LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this Indenture or
the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee against
any loss, liability or expense;
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<PAGE> 30
(d) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of another
Holder of a Note or to obtain a preference or priority over another Holder of a
Note.
SECTION 6.7. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal of, premium and interest on the
Note, on or after the respective due dates expressed in the Note (including in
connection with an offer to purchase), 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 such Holder.
SECTION 6.8. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.1(a) or (b) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal of, premium and interest remaining unpaid on the Notes and interest on
overdue principal and, to the extent lawful, interest, and such further amount
as shall be sufficient to cover the costs and expenses of collection, including
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel.
SECTION 6.9. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to 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 (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.7 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.7 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
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SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article 6, it shall pay
out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.7 hereof, including payment of all reasonable compensation, expense
and liabilities incurred, and all advances made, by the Trustee and the
Trustee's costs and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes for
principal, premium and interest ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for principal,
premium and interest respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
SECTION 6.11. 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 of a
Note pursuant to Section 6.7 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
SECTION 7.1. 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 its exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by
the express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; 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
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<PAGE> 32
certificates or opinions furnished to the Trustee and 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.
(c) The Trustee may not be relieved from liabilities 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;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible 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 6.5 hereof or with an
Officers' Certificate or Opinion of Counsel received by it pursuant to
Section 7.2(b).
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b) and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of its rights and powers under this Indenture at
the request of any Holders, unless such Holder shall have offered to the Trustee
security and 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 7.2. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon 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.
(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. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and 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 that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
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(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
SECTION 7.3. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Notes and may otherwise deal with the Company or any Affiliate of
the Company with the same rights it would have if it were not Trustee. However,
in the event that the Trustee acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the SEC for permission to
continue as trustee or resign. Any Agent may do the same with like rights and
duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.4. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
SECTION 7.5. 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 Holders of Notes 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 of principal of, premium, if any, or
interest on any Note, the Trustee may withhold the notice if and so long as a
committee of its Responsible Officers in good faith determines that withholding
the notice is in the interests of the Holders of the Notes.
The Trustee shall not be deemed to have knowledge of any Default or Event
of Default except (i) provided that the Trustee is the Paying Agent, a Default
or Event of Default arising under Section 6.1(a) or (b), or (ii) any Default or
Event of Default of which the Trustee shall have received written notice in
accordance with the terms of this Indenture, and such notice shall not be deemed
to include receipt of information obtained in any information, documents and
reports furnished, filed or delivered to the Trustee under Section 4.3.
SECTION 7.6. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, and for so long as Notes remain outstanding, the Trustee
shall mail to the Holders of the Notes a brief report dated as of such reporting
date that complies with TIA Section 313(a) (but if no event described in TIA
Section 313(a) has occurred within the twelve months preceding the reporting
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date, no report need be transmitted). The Trustee also shall comply with TIA
Section 313(b)(2) to the extent applicable. 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 the Holders of Notes
shall be mailed to the Company and filed with the SEC and each stock exchange on
which the Notes are listed in accordance with TIA Section 313(d). The Company
shall promptly notify the Trustee, in writing when the Notes are listed on any
stock exchange.
SECTION 7.7. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and 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 promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
The Company shall indemnify the Trustee and its directors, officers,
agents and employees against any and all losses, liabilities or expenses
incurred by it or such director, officer, agent or employee arising out of or in
connection with the acceptance or administration of its duties under this
Indenture, including the costs and expenses of enforcing this Indenture against
the Company (including this Section 7.7) and defending itself or such director,
officer, agent or employee against any claim (whether asserted by the Company or
any Holder or any other person) or liability in connection with the exercise or
performance of any of its or their powers or duties hereunder, except to the
extent any such loss, liability or expense may be attributable to its or their
negligence, bad faith or willful misconduct. The Trustee shall notify the
Company promptly of any claim for which it or such director, officer, agent or
employee may seek indemnity. Failure by the Trustee to so notify the Company
shall not relieve the Company of its obligations hereunder. The Company shall
defend the claim and the Trustee shall cooperate in the defense. The Trustee and
such officer, director, agent or employee may have separate counsel and the
Company shall pay the reasonable fees and expenses of such counsel. The Company
need not pay for any settlement made without its consent, which consent shall
not be unreasonably withheld.
The obligations of the Company under this Section 7.7 shall survive the
satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the Trustee
shall have a Lien prior to the Notes on all money or property held or collected
by the Trustee, except that held in trust to pay principal and interest on
particular Notes. Such Lien shall survive the satisfaction and discharge of this
Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(e) or (f) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
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SECTION 7.8. 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 in writing at any time and be discharged from the
trust hereby created by so notifying the Company. The Holders of a majority in
principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and the Company in writing. The Company may remove the
Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(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;
(d) the Trustee becomes incapable of acting; or
(e) prior to the issuance of any Notes hereunder, the Board of
Directors determines to remove the Trustee; provided, that the Company shall
have paid all amounts owed to the Trustee pursuant to Section 7.7.
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 Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of at least 10% in principal amount of the then outstanding Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder of a Note who has been
a Holder of a Note for at least six months, fails to comply with Section 7.10
hereof, such Holder of a Note 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
Holders of the Notes. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, provided all sums owing to the
Trustee hereunder have been paid and subject to the Lien provided for in Section
7.7 hereof. Notwithstanding replacement of the Trustee pursuant to this Section
7.8, the Company's obligations under Section 7.7 hereof shall continue for the
benefit of the retiring Trustee.
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SECTION 7.9. 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 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has (or is part of a bank holding company that has) a
combined capital and surplus of at least $100 million as set forth in its most
recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section
310(b).
SECTION 7.11. 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.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.1. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, exercise its
rights under either Section 8.2 or 8.3 hereof with respect to all outstanding
Notes upon compliance with the conditions set forth below in this Article 8.
SECTION 8.2. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.1 hereof of the option
applicable to this Section 8.2, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.4 hereof, be deemed to have discharged
its obligations with respect to all outstanding Notes on the date the conditions
set forth below are satisfied (hereinafter, "Legal Defeasance"). For this
purpose, Legal Defeasance means that the Company shall be deemed to have paid
and discharged the entire Indebtedness represented by the outstanding Notes
(which shall thereafter be deemed to be "outstanding" only for the purposes of
Section 8.5 hereof and the other Sections of this Indenture referred to in (a)
and (b) below) and to have satisfied all its other obligations under such Notes
and this Indenture (and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging the same), except for
the following provisions which shall survive until otherwise terminated or
discharged hereunder: (a) the rights of Holders of outstanding Notes to receive
solely from the trust fund described in Section 8.4 hereof, and as more fully
set forth in such Section, payments in respect of the principal of, premium and
interest on such Notes when such
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payments are due, (b) the Company's obligations with respect to such Notes under
Sections 2.3, 2.4, 2.7, 2.10 and 4.2 hereof, (c) the rights, powers, trusts,
duties and immunities of the Trustee hereunder and the Company's obligations in
connection therewith and (d) this Article 8. Subject to compliance with this
Article 8, the Company may exercise its option under this Section 8.2
notwithstanding the prior exercise of its option under Section 8.3 hereof.
SECTION 8.3. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.1 hereof of the option
applicable to this Section 8.3, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.4 hereof, be released from its
obligations under the covenants contained in Article 4 (other than those in
Sections 4.1, 4.2, 4.6 and 4.7) and Section 5.1 hereof with respect to the
outstanding Notes on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter
be deemed not "outstanding" for the purposes of any direction, waiver, consent
or declaration or act of Holders (and the consequences of any thereof) in
connection with the covenant, but shall continue to be deemed "outstanding" for
all other purposes hereunder (it being understood that such Notes shall not be
deemed outstanding for accounting purposes). For this purpose, Covenant
Defeasance means that, with respect to the outstanding Notes, the Company may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in the covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to the covenant or by
reason of any reference in the covenant to any other provision herein or in any
other document and such omission to comply shall not constitute a Default or an
Event of Default under Section 6.1 hereof, but, except as specified above, the
remainder of this Indenture and such Notes shall be unaffected thereby. In
addition, upon the Company's exercise under Section 8.1 hereof of the option
applicable to this Section 8.3, subject to the satisfaction of the conditions
set forth in Section 8.4 hereof, Sections 6.1(c) through 6.1(f) hereof shall not
constitute an Event of Default.
SECTION 8.4. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, cash in United States dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of and premium and interest on the outstanding
Notes on the stated maturity thereof or on the applicable redemption date, as
the case may be, and the Company must specify whether the Notes are being
defeased to maturity or to a particular redemption date;
(b) in the case of an election under Section 8.2 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred;
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(c) in the case of an election under Section 8.3 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the incurrence of Indebtedness, all or a portion of the proceeds
of which will be used to defease the Notes pursuant to this Article 8
concurrently with such incurrence);
(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any material agreement
or instrument (other than this Indenture) to which the Company is a party or by
which the Company is bound;
(f) the Company shall have delivered to the Trustee an Opinion of
Counsel (which may be based on such solvency certificates or solvency opinions
as counsel deems necessary or appropriate) to the effect that the trust funds
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding creditors of the Company
or others; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
SECTION 8.5. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.6 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.5, the
"Trustee") pursuant to Section 8.4 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law. The Company shall not be required to execute a separate trust agreement
to implement the trust described in this paragraph.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.4 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
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Anything in this Article 8 to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the request of the
Company any money or non-callable Government Securities held by it as provided
in Section 8.4 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.4(a) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.6. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium, if any, or
interest on any Note and remaining unclaimed for two years after such principal,
premium, if any, or interest has become due and payable shall be paid to the
Company on its request or (if then held by the Company) shall be discharged from
such trust; and the Holder of such Note shall thereafter, as a secured creditor,
look only to the Company for payment thereof, and all liability of the Trustee
or such Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of the Company cause to be published once, in The New York
Times and The Wall Street Journal (national edition), notice that such money
remains unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the date of such notification or publication, any
unclaimed balance of such money then remaining will be repaid to the Company.
SECTION 8.7. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.2 or
8.3 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.2 or 8.3 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.2 or 8.3 hereof,
as the case may be; provided, however, that, if the Company makes any payment of
principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.1. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.2 of this Indenture, the Company and the Trustee
may amend or supplement this Indenture or the Notes without the consent of any
Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency, provided that
such action shall not adversely affect the interests of the Holders in any
material respect;
(b) to provide for uncertificated Notes in addition to or in place
of certificated Notes;
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(c) to provide for the assumption of the Company's obligations to
the Holders of the Notes in the case of a merger or consolidation pursuant to
Article 5 hereof;
(d) 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 hereunder of any Holder of the Notes;
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA; or
(f) at any time prior to the issuance of any Notes hereunder, to
make any changes determined appropriate by the Board of Directors.
Upon the request of the Company accompanied by a resolution of its Board
of Directors authorizing the execution of any such amended or supplemental
indenture, and upon receipt by the Trustee of the documents described in Section
7.2 hereof, the Trustee shall join with the Company in the execution of any
amended or supplemental indenture authorized or permitted by the terms of this
Indenture and make any further appropriate agreements and stipulations that may
be therein contained, but the Trustee shall not be obligated to enter into such
amended or supplemental Indenture that affects its own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.2. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.2, the Company and the Trustee
may amend or supplement this Indenture and the Notes may be amended or
supplemented with the consent of the Holders of a majority in principal amount
of the Notes then outstanding (including, without limitation, consents obtained
in connection with a purchase of, or tender offer or exchange offer for, the
Notes), and, subject to Sections 6.4 and 6.7 hereof, any existing Default or
Event of Default or compliance with any provision of this 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 the Notes).
Upon the request of the Company accompanied by a resolution of its Board
of Directors authorizing the execution of any such amended or supplemental
indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.2 hereof, the Trustee shall
join with the Company in the execution of such amended or supplemental indenture
unless such amended or supplemental indenture affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise, in which case the
Trustee may in its discretion, but shall not be obligated to, enter into such
amended or supplemental indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.2 to approve the particular form of any proposed amendment 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 the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or
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supplemental Indenture or waiver. Subject to Sections 6.4 and 6.7 hereof, the
Holders of a majority in aggregate principal amount of the Notes then
outstanding may waive compliance in a particular instance by the Company with
any provision of this Indenture or the Notes. However, without the consent of
each Holder affected, an amendment or waiver may not (with respect to any Notes
held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note
or alter any of the provisions with respect to the redemption of the Notes
(except as provided in Section 4.8 hereof);
(c) reduce the rate of or change the time for payment of interest on
any Note;
(d) make any Note payable in money other than that stated in the
Notes;
(e) make any changes to Sections 6.4 or 6.7; or
(f) make any change in the foregoing amendment and waiver
provisions.
SECTION 9.3. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes shall be set
forth in an amended or supplemental Indenture that complies with the TIA as then
in effect.
SECTION 9.4. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent to
it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
SECTION 9.5. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
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SECTION 9.6. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental indenture authorized
pursuant to this Article 9 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Company
may not sign an amendment or supplemental indenture until the Board of Directors
approves it. In executing any amended or supplemental indenture, the Trustee
shall be entitled to receive and (subject to Section 7.1) shall be fully
protected in relying upon, an Officers' Certificate and an Opinion of Counsel
stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
ARTICLE 10
SUBORDINATION
SECTION 10.1. AGREEMENT TO SUBORDINATE.
The Company agrees, and each Holder by accepting a Note agrees, that the
Indebtedness evidenced by the Note is subordinated in right of payment, to the
extent and in the manner provided in this Article 10, to the prior payment in
full of all Senior Debt (whether outstanding on the date hereof or hereafter
created, incurred, assumed or guaranteed), and that the subordination is for the
benefit of the holders of Senior Debt.
SECTION 10.2. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, in
an assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities:
(a) holders of Senior Debt shall be entitled to receive payment in
full of all Obligations due in respect of such Senior Debt (including interest
after the commencement of any such proceeding at the rate specified in the
applicable Senior Debt) before Holders shall be entitled to receive any payment
with respect to the Notes; and
(b) until all Obligations with respect to Senior Debt are paid in
full, any distribution to which Holders would be entitled but for this Article
10 shall be made to holders of Senior Debt (except that Holders may receive
securities, including capital stock, that are subordinated at least to the same
extent as the Notes to Senior Debt and any securities issued in exchange for
Senior Debt).
SECTION 10.3. DEFAULT ON SENIOR DEBT.
(a) The Company may not make any payment or distribution to the
Trustee or any Holder in respect of Obligations with respect to the Notes and
may not acquire from the Trustee or any Holder any Notes for cash or property
(other than securities, including capital stock, that are subordinated at least
to the same extent as the Notes to Senior Debt and any securities issued in
exchange for Senior Debt) until all principal and other Obligations with respect
to the Senior Debt have been paid in full if:
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(i) a default in the payment of any principal or other
Obligations with respect to any Senior Debt occurs and is continuing
beyond any applicable grace period in the agreement, indenture or other
document governing such Senior Debt; or
(ii) a default, other than a payment default, on Senior Debt
occurs and is continuing that then permits holders of the Senior Debt to
accelerate its maturity and the Trustee receives a notice of the default
(a "Payment Blockage Notice") from the Company or a Person who may give it
pursuant to Section 10.12 hereof. If the Trustee receives any such Payment
Blockage Notice, no subsequent Payment Blockage Notice shall be effective
for purposes of this Section unless and until at least 360 days shall have
elapsed since the date of receipt by the Trustee of the immediately prior
Payment Blockage Notice. No nonpayment default that existed or was
continuing on the date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice (it being understood that any subsequent action, or any breach of
any covenant during the period commencing after the date of receipt by the
Trustee of such Payment Blockage Notice, that, in either case, would give
rise to such a default pursuant to any provision under which a default
previously existed or was continuing shall constitute a new default for
this purpose).
(b) The Company may and shall resume payments on and distributions
in respect of the Notes and may acquire them upon the earlier of: (i) in the
case of a default referred to in Section 10.3(a)(i) hereof, the date upon which
the default is cured or waived, or (ii) in the case of a default referred to in
Section 10.3(a)(ii) hereof, the earlier of (1) the date on which such default is
cured or waived or (2) 179 days after the applicable Payment Blockage Notice is
received by the Company if the maturity of such Senior Debt has not been
accelerated (or, if such Senior Debt has been accelerated, such Senior Debt has
not been paid in full) and if this Article 10 otherwise permits the payment,
distribution or acquisition at the time of such payment or acquisition.
SECTION 10.4. ACCELERATION OF NOTES.
If payment of the Notes is accelerated because of an Event of Default, the
Company shall promptly notify holders of Senior Debt of the acceleration.
SECTION 10.5. WHEN DISTRIBUTION MUST BE PAID OVER.
(a) In the event that the Trustee or any Holder receives any payment
of any Obligations with respect to the Notes at a time when the Trustee or such
Holder, as applicable, has actual knowledge that such payment is prohibited by
Section 10.3 hereof, such payment shall be held by the Trustee or such Holder in
trust for the benefit of, and shall be paid forthwith over and delivered, upon
written request, to, the holders of Senior Debt as their interests may appear or
their representative (the "Representative") under the indenture or other
agreement (if any) pursuant to which Senior Debt may have been issued, as their
respective interests may appear, for application to the payment of all
Obligations with respect to Senior Debt remaining unpaid to the extent necessary
to pay such Obligations in full in accordance with their terms, after giving
effect to any concurrent payment or distribution to or for the holders of Senior
Debt.
(b) With respect to the holders of Senior Debt, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article 10, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the
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holders of Senior Debt, and shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of Holders or the Company
or any other Person money or assets to which any holders of Senior Debt shall be
entitled by virtue of this Article 10, except if such payment is made as a
result of the willful misconduct or gross negligence of the Trustee.
SECTION 10.6. NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying Agent in
writing of any facts known to the Company that would cause a payment of any
Obligations with respect to the Notes to violate this Article 10, but failure to
give such notice shall not affect the subordination of the Notes to the Senior
Debt as provided in this Article 10. The Trustee or any Paying Agent shall not
be deemed to have knowledge of any facts or circumstances causing any payment of
any Obligations with respect to the Notes to violate this Article 10 unless it
shall have received written notice thereof in accordance with the terms of this
Indenture, and such notice shall not be deemed to include receipt of information
obtained in any information, documents and reports furnished, filed or delivered
to the Trustee under Section 4.3.
SECTION 10.7. SUBROGATION.
After all Senior Debt is paid in full and until the Notes are paid in
full, Holders shall be subrogated (equally and ratably with all other
Indebtedness pari passu with the Notes) to the rights of holders of Senior Debt
to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to the Holders have been applied to the payment
of Senior Debt. A distribution made under this Article 10 to holders of Senior
Debt that otherwise would have been made to Holders is not, as between the
Company and Holders, a payment by the Company on the Notes.
SECTION 10.8. RELATIVE RIGHTS.
(a) This Article 10 defines the relative rights of Holders and
holders of Senior Debt. Nothing in this Indenture shall: (i) impair, as between
the Company and Holders, the obligation of the Company, which is absolute and
unconditional, to pay principal of and interest on the Notes in accordance with
their terms; (ii) affect the relative rights of Holders and creditors of the
Company other than their rights in relation to holders of Senior Debt; or (iii)
prevent the Trustee or any Holder from exercising its available remedies upon a
Default or Event of Default, subject to the rights of holders and owners of
Senior Debt to receive distributions and payments otherwise payable to Holders.
(b) If the Company fails because of this Article 10 to pay principal
of, premium, if any, or interest on a Note on the due date, the failure is still
a Default or Event of Default.
SECTION 10.9. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior Debt to enforce the subordination of the
Indebtedness evidenced by the Notes shall be impaired by any act or failure to
act by the Company or any Holder or by the failure of the Company or any Holder
to comply with this Indenture.
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SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Company referred to in
this Article 10, the Trustee and the Holders shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to the Trustee or to the Holders for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Debt and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article 10.
SECTION 10.11. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 10 or any other provision
of this Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article 10. Only the Company or a
Representative may give the notice. Nothing in this Article 10 shall impair the
claims of, or payments to, the Trustee under or pursuant to Section 7.7 hereof.
The Trustee in its individual or any other capacity may hold Senior Debt
with the same rights it would have if it were not Trustee. Any Agent may do the
same with like rights.
SECTION 10.12. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of a Note by the Holder's acceptance thereof authorizes and
directs the Trustee on the Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as the Holder's attorney-in-fact for
any and all such purposes. If the Trustee does not file a proper proof of claim
or proof of debt in the form required in any proceeding referred to in Section
6.9 hereof at least 30 days before the expiration of the time to file such
claim, the Holders are hereby authorized to file an appropriate claim.
SECTION 10.13. AMENDMENTS.
The provisions of this Article 10 shall not be amended or modified at any
time after the issuance of any Notes hereunder without the written consent of
the holders of all Senior Debt (in accordance with the provisions thereof).
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ARTICLE 11
CONVERSION OF NOTES
SECTION 11.1. RIGHT TO CONVERT.
Subject to and upon compliance with the provisions of this Indenture, the
Holder of any Note shall have the right, at the option of such Holder, at any
time (except that, with respect to any Note or portion of a Note that shall be
called for redemption or delivered for repurchase, such right shall terminate
immediately prior to close of business on the date fixed for redemption of such
Note or portion of such Note unless the Company shall default in payment due
upon redemption thereof) to convert the principal amount of any such Note, or
any portion thereof, into that number of fully paid and nonassessable shares of
Common Stock (as such shares shall then be constituted) obtained by dividing the
aggregate principal amount of the Notes or portion thereof surrendered for
conversion by the Conversion Price in effect at such time, by surrender of the
Note so to be converted in whole or in part in the manner provided in Section
11.2 hereof. Immediately following such conversion, the rights of the Holders of
converted Notes shall cease and the Persons entitled to receive the Common Stock
upon the conversion of Notes shall be treated for all purposes as having become
the owners of such Common Stock.
SECTION 11.2. EXERCISE OF CONVERSION PRIVILEGE; ISSUANCE OF COMMON STOCK ON
CONVERSION; NO ADJUSTMENT FOR INTEREST OR DIVIDENDS.
In order to exercise the conversion privilege with respect to any Note in
definitive form, a Holder must (a) surrender such Note to be converted, duly
endorsed and in a form satisfactory to the Company, at an office or agency
maintained by the Company pursuant to Section 4.2 hereof, accompanied by the
funds, if any, required by the last paragraph of this Section 11.2, (b) notify
the Company at such office that he elects to convert such Note or a portion
thereof, specifying the principal amount he wishes to convert, (c) state in
writing the name or names (with address) in which he wishes the certificate or
certificates for shares of Common Stock to be issued and (d) pay any transfer
taxes, if required pursuant to Section 11.7 hereof. The date on which the Holder
satisfies all those requirements is the "Conversion Date." Each such Note
surrendered for conversion shall, unless the shares issuable on conversion are
to be issued in the name of the Holder of such Note as it appears on the Note
register, be accompanied by instruments of transfer in form satisfactory to the
Company duly executed by the Holder or his duly authorized attorney.
In order to exercise the conversion privilege with respect to any interest
in a Global Note, the beneficial Holder must complete the appropriate
instruction form for conversion pursuant to the Depositary's book-entry
conversion program and follow the other procedures set forth in such program.
As promptly as practicable after the Conversion Date, subject to
compliance with any restrictions on transfer if shares issuable on conversion
are to be issued in a name other than that of the Holder (as if such transfer
were a transfer of the Note or Notes (or portion thereof) so converted), the
Company shall issue and shall deliver to such Holder at the office or agency
maintained by the Company for such purpose pursuant to Section 4.2 hereof, a
certificate or certificates for the number of full shares issuable upon the
conversion of such Note or portion thereof in accordance with the provisions of
this Article 11 and a payment in cash in respect of any fractional interest in
respect of a share of Common Stock arising upon such conversion, as provided in
Section 11.3 hereof. In case
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any Note shall be surrendered for partial conversion, and subject to Section 2.3
hereof, the Company shall execute and the Trustee shall authenticate and make
available for delivery to the Holder of the Note so surrendered, without charge
to him, a new Note or Notes in authorized denominations in an aggregate
principal amount equal to the unconverted portion of the surrendered Note.
Each conversion shall be deemed to have been effected as to any Note (or
portion thereof) on the Conversion Date, and the Person in whose name any
certificate or certificates for shares of Common Stock shall be issuable upon
such conversion shall be deemed to have become on such date the Holder of record
of the shares represented thereby; provided that any such surrender on any date
when the stock transfer books of the Company shall be closed shall constitute
the Person in whose name the certificates are to be issued as the record holder
thereof for all purposes on the next succeeding day on which such stock transfer
books are open, but such conversion shall be at the Conversion Price in effect
on the date upon which such Note shall have been surrendered.
The Holder of record of a Note at the close of business on a record date
with respect to the payment of interest on the Notes will be entitled to receive
such interest with respect to such Notes on the corresponding interest payment
date, notwithstanding the conversion of such Notes after such record date and
prior to such interest payment date. Notes surrendered for conversion during the
period from the close of business on any record date for the payment of interest
to the opening of business of the corresponding interest payment date must be
accompanied by a payment in cash in an amount equal to the interest payable on
such interest payment date, unless such Notes have been called for redemption on
a redemption date occurring during the period from the close of business on any
record date for the payment of interest to the close of business on the business
day immediately following the corresponding interest payment date. The interest
payment with respect to any Note called for redemption on a date during the
period from the close of business on any record date for the payment of interest
to the close of business on the business day immediately following the
corresponding interest payment date will be payable on such interest payment
date to the record Holder of such Note on such record date, notwithstanding the
conversion of such Note after such record date and prior to such interest
payment date. Except as provided in this Section 11.2, no payment or adjustment
will be made upon conversion of Notes for accrued and unpaid interest or for
dividends with respect to the Common Stock issued upon such conversion of Notes
as provided in this Article 11.
Upon the conversion of any interest in a Global Note, the Trustee, or the
Note Custodian at the direction of the Trustee, shall make a notation on such
Global Note as to the reduction in the principal amount represented thereby.
SECTION 11.3. CASH PAYMENTS IN LIEU OF FRACTIONAL SHARES.
The Company shall not issue a fractional share of Common Stock upon
conversion of the Notes. Instead the Company shall pay a cash adjustment for the
current market value of the fractional share. The current market value of a
fraction of a share shall be determined as follows: Multiply the current market
price of a full share by the fraction. Round the result to the nearest cent. The
current market price of a share of Common Stock is the Closing Price of the
Common Stock on the last Trading Day prior to the Conversion Date.
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SECTION 11.4. CONVERSION PRICE.
The "Conversion Price" shall be that amount as determined pursuant to the
Company's Restated Certificate of Incorporation with respect to the 8 3/4%
Series B Convertible Exchangeable Preferred Stock, filed with the Secretary of
State of the State of New Jersey on August 8, 1997, as amended through the date
of the exchange of the Preferred Stock for the Notes, on the date of exchange
of the Preferred Stock for the Notes, subject to adjustment as provided in
this Article 11. Notice of the initial Conversion Price shall be set forth in
the Officers' Certificate delivered to the Trustee pursuant to Section 2.2
hereof and the Company shall notify the Trustee of any adjustments in the
Conversion Price as soon as practicable after determination.
SECTION 11.5. ADJUSTMENT OF CONVERSION PRICE.
The Conversion Price shall be adjusted from time to time by the Company as
follows:
(a) In case the Company shall pay or make a dividend or other
distribution on any class of capital stock of the Company in Common Stock, the
Conversion Price in effect at the opening of business on the day following the
date fixed for the determination of shareholders entitled to receive such
dividend or other distribution shall be reduced by multiplying such Conversion
Price by a fraction the numerator of which shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for such
determination and the denominator of which shall be the sum of such number of
shares and the total number shares constituting such dividend or other
distribution, such reduction to become effective immediately after the opening
of business on the day following the date fixed for such determination of the
holders entitled to such dividends and distributions. For the purposes of this
Section 11.5(a), the number of shares of Common Stock at any time outstanding
shall not include shares held in the treasury of the Company. The Company shall
not pay any dividend or make any distribution on shares of Common Stock held in
the treasury of the Company.
(b) In case the Company shall issue rights, options or warrants to
all holders of its Common Stock entitling them to subscribe for, purchase or
acquire shares of Common Stock at a price per share less than the current market
price per share of the Common Stock on the date fixed for the determination of
shareholders entitled to receive such rights, options or warrants, the
Conversion Price in effect at the opening of business on the day following the
date fixed for such determination shall be reduced by multiplying such
Conversion Price by a fraction the numerator of which shall be the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination plus the number of shares of Common Stock which the
aggregate of the offering price of the total number of shares of Common Stock so
offered for subscription, purchase or acquisition would purchase at such current
market price and the denominator of which shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock so offered for
subscription, purchase or acquisition, such reduction to become effective
immediately after the opening of business on the day following the date fixed
for such determination of the holders entitled to such right, options or
warrants. However, upon the expiration of any right, option or warrant to
purchase Common Stock, the issuance of which resulted in an adjustment in the
Conversion Price pursuant to this Section 11.5(b), if any such right, option or
warrant shall expire and shall not have been exercised, the Conversion Price
shall be recomputed immediately upon such expiration and effective immediately
upon such expiration shall be increased to the price it would have been (but
reflecting any other adjustments to the Conversion Price made pursuant to the
provisions of Section 11.5 hereof
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after the issuance of such rights, options or warrants) had the adjustment of
the Conversion Price made upon the issuance of such rights, options or warrants
been made on the basis of offering for subscription or purchase only that number
of shares of Common Stock actually purchased upon the exercise of such rights,
options or warrants. No further adjustment shall be made upon exercise of any
right, option or warrant if any adjustment shall have been made upon the
issuance of such security. For the purposes of this Section 11.5(b), the number
of shares of Common Stock at any time outstanding shall not include shares held
in the treasury of the Company. The Company shall not issue any rights, options
or warrants in respect of shares of Common Stock held in the treasury of the
Company.
(c) In case the outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the Conversion Price
in effect at the opening of business on the day following the day upon which
such subdivision becomes effective shall be reduced, and, conversely, in case
the outstanding shares of Common Stock shall each be combined into a smaller
number of shares of Common Stock, the Conversion Price in effect at the opening
of business on the day following the day upon which such combination becomes
effective shall be increased, to equal the product of the Conversion Price in
effect on such date and a fraction the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such subdivision or
combination, as the case may be, and the denominator of which shall be the
number of shares of Common Stock outstanding immediately after such subdivision
or combination, as the case may be. Such reduction or increase, as the case may
be, shall become effective immediately after the opening of business on the day
following the day upon which such subdivision or combination becomes effective.
(d) In case the Company shall, by dividend or otherwise, distribute
to all holders of its Common Stock (i) evidences of its indebtedness or (ii)
shares of any class of capital stock, cash or other assets (including
securities, but excluding (1) any rights, options or warrants referred to in
Section 11.5(b) hereof, (2) any dividend or distribution referred to in Section
11.5(a) hereof, and (3) cash dividends paid from the Company's retained earnings
unless the sum of (A) all such cash dividends and distributions made within the
preceding 12 months in respect of which no adjustment has been made and (B) any
cash and the fair market value of other consideration paid in respect of any
repurchases of Common Stock by the Company or any of its subsidiaries within the
preceding 12 months in respect of which no adjustment has been made, exceeds 20%
of the Company's market capitalization (being the product of the then current
market price per share of the Common Stock times the aggregate number of shares
of Common Stock then outstanding) on the record date for such distribution),
then in each case, the Conversion Price in effect at the opening of business on
the day following the date fixed for the determination of holders of Common
Stock entitled to receive such distribution shall be adjusted by multiplying
such Conversion Price by a fraction of which the numerator shall be the current
market price per share of the Common Stock on such date of determination (or, if
earlier, on the date on which the Common Stock goes "ex-dividend" in respect of
such distribution) less the then fair market value as determined by the Board of
Directors (whose determination shall be conclusive and shall be described in a
statement filed with any conversion agent) of the portion of the capital stock,
cash or other assets or evidences of indebtedness so distributed (and for which
an adjustment to the Conversion Price has not previously been made pursuant to
the terms of this Section 11.5) applicable to one share of Common Stock, and the
denominator shall be such current market price per share of the Common Stock,
such adjustment to become effective immediately after the opening of business on
the day following such date of determination of the holders entitled to such
distribution. The following transactions shall be excluded from the foregoing
clauses (A) and (B): (x) repurchases of Common Stock issued under the
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Company's stock incentive programs and (y) dividends or distributions
payable-in-kind in additional shares of or warrants, rights, calls or options
exercisable for or convertible into additional shares of Junior Securities.
(e) The reclassification or change of Common Stock into securities
including securities other than Common Stock (other than any reclassification
upon a consolidation or merger to which Section 11.6 shall apply) shall be
deemed to involve (i) a distribution of such securities other than Common Stock
to all holders of Common Stock (and the effective date of such reclassification
shall be deemed to be "the date fixed for the determination of holders of Common
Stock entitled to receive such distribution" within the meaning of Section
11.5(d) hereof), and (ii) a subdivision or combination, as the case may be, of
the number of shares of Common Stock outstanding immediately prior to such
reclassification into the number of shares of Common Stock outstanding
immediately thereafter (and the effective date of such reclassification shall be
deemed to be "the day upon which such subdivision becomes effective" or "the day
upon which such combination becomes effective," as the case may be, and "the day
upon which such subdivision or combination becomes effective" within the meaning
of Section 11.5(c) hereof).
(f) The Company from time to time may reduce the Conversion Price if
it considers such reductions to be advisable in order that any event treated for
federal income tax purposes as a dividend of stock rights will not be taxable to
the holders of Common Stock by any amount, but in no event may the Conversion
Price be less than the par value of a share of Common Stock. Whenever the
Conversion Price is reduced, the Company shall mail to Holders of record of
Notes a notice of the reduction. The Company shall mail the notice at least 15
days before the date the reduced Conversion Price takes effect. The notice shall
state the reduced Conversion Price and the period it will be in effect. A
reduction of the Conversion Price does not change or adjust the Conversion Price
otherwise in effect for purposes of Sections 11.5(a), (b), (c), (d) and (e)
hereof.
(g) No adjustment in the Conversion Price need be made until all
cumulative adjustments amount to at least 1% in the Conversion Price, as last
adjusted; provided that any adjustments that by reason of this Section 11.5(g)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Article 11 shall be made
by the Company and shall be made to the nearest cent.
(h) For the purpose of any computation under Section 11.5, the
current market price per share of Common Stock on any day shall be deemed to be
the average of the Closing Prices of the Common Stock for the 20 consecutive
Trading Days selected by the Board of Directors commencing no more than 30
Trading Days before and ending no later than the day before the day in question;
provided that, in the case of Section 11.5(d) hereof, if the period between the
date of the public announcement of the dividend or distribution and the date for
the determination of holders of Common Stock entitled to receive such dividend
or distribution (or, if earlier, the date on which the Common Stock goes
"ex-dividend" in respect of such dividend or distribution) shall be less than 20
Trading Days, the period shall be such lesser number of Trading Days but, in any
event, not less than five Trading Days.
(i) No adjustment in the Conversion Price shall reduce the
Conversion Price below the then par value of the Common Stock. No adjustment in
the Conversion Price need be made under Section 11.5(a), (b) or (d) hereof if
the Company issues or distributes to each Holder of Notes the shares of Common
Stock, evidences of indebtedness, assets, rights, options or warrants referred
to in
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those paragraphs which each Holder would have been entitled to receive had Notes
been converted into Common Stock prior to the happening of such event or the
record date with respect thereto.
(j) Whenever the Conversion Price is adjusted as herein provided,
the Company shall promptly file with the Trustee and any conversion agent other
than the Trustee an Officers' Certificate setting forth the Conversion Price
after such adjustment and setting forth a brief statement of the fact requiring
such adjustment. Promptly after delivery of such certificate, the Company shall
prepare a notice of such adjustment of the Conversion Price setting forth the
adjusted Conversion Price and the date on which each adjustment became effective
and shall mail such notice of such adjustment of the Conversion Price to each
Holder of Notes at his last address appearing on the Note register provided for
in Section 2.5 hereof, within 20 days after execution thereof. Failure to
deliver such notice shall not effect the legality or validity of any such
adjustment.
(k) In any case in which this Section 11.5 shall require that an
adjustment as a result of any event become effective from and after a record
date, the Company may elect to defer until after the occurrence of such event
(i) the issuance to the Holder of and Notes converted after such record date and
before the occurrence of such event of the additional shares of Common Stock
issuable upon such conversion over and above the shares issuable on the basis of
the Conversion Price in effect immediately prior to adjustment and (ii) a cash
payment for any remaining fractional shares of Common Stock as provided in
Section 11.3 hereof; provided, however, that if such event shall not have
occurred and authorization of such event shall be rescinded by the Company, the
Conversion Price shall be recomputed immediately upon such recision to the price
that would have been in effect had such event not been authorized, provided that
such recision is permitted by and effective under applicable laws.
SECTION 11.6. EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.
In the case of any consolidation of the Company or the merger of the
Company with or into any other entity or the sale or transfer of all or
substantially all the assets of the Company pursuant to which the Company's
Common Stock is converted into other securities, cash or assets, the Company or
the successor or purchasing corporation, as the case may be, shall execute with
the Trustee a supplemental indenture providing that the Notes shall be
convertible into the kind and amount of securities, cash or other assets
receivable upon such consolidation, merger, sale or transfer by a holder of the
number of shares of Common Stock into which such Notes might have been converted
immediately prior to such consolidation, merger, transfer or sale (assuming such
holder of Common Stock failed to exercise any rights of election and received
per share the kind and amount receivable per share by a plurality of
non-electing shares). Such supplemental indenture shall provide for adjustments
that shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article 11.
The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each Holder of Notes within 20 days after execution
thereof. Failure to deliver such notice shall not affect the legality or
validity of such supplemental indenture.
The above provisions of this Section 11.6 shall similarly apply to
successive reclassifications, changes, consolidations, mergers, combinations,
sales and conveyances.
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SECTION 11.7. TAXES ON SHARES ISSUED.
If a Holder converts Notes, the Company shall pay any documentary, stamp
or similar issue or transfer tax due on the issue of shares of Common Stock upon
the conversion. However, the Holder shall pay any such tax that is due because
the shares are issued in a name other than the Holder's name.
SECTION 11.8. RESERVATION OF SHARES; SHARES TO BE FULLY PAID; LISTING OF COMMON
STOCK.
The Company has reserved and shall continue to reserve out of its
authorized but unissued Common Stock or its Common Stock held in treasury enough
shares of Common Stock to permit the conversion of the Notes in full. All shares
of Common Stock that may be issued upon conversion of Notes shall be fully paid
and nonassessable. The Company shall endeavor to comply with all securities laws
regulating the offer and delivery of shares of Common Stock upon conversion of
Notes and shall endeavor to list such shares on each national securities
exchange on which the Common Stock is listed.
SECTION 11.9. COMMON STOCK ISSUABLE UPON CONVERSION.
For purposes of this Article 11, "Common Stock" includes any stock of any
class of the Company which has no preference in respect of dividends or of
amounts payable in the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the Company and which is not subject to redemption
by the Company. However, subject to the provisions of Section 11.5(b) hereof,
shares issuable on conversion of Notes shall include only shares of the class
designated as Common Stock of the Company on the date of issuance of the
Preferred Stock pursuant to the Offering or shares of any class or classes
resulting from any reclassification thereof and which have no preferences in
respect of dividends or amounts payable in the event of any voluntary or
involuntary liquidation, dissolution or winding-up of the Company and which are
not subject to redemption by the Company; provided that, if at any time there
shall be more than one such resulting class, the shares of each such class then
so issuable shall be substantially in the proportion which the total number of
shares of such class resulting from all such reclassifications bears to the
total number of shares of all such classes resulting from all such
reclassifications.
SECTION 11.10. RESPONSIBILITY OF TRUSTEE.
The Trustee and any other conversion agent shall not at any time be under
any duty or responsibility to any Holder of Notes to make a determination
whether any facts exist that may require any adjustment of the Conversion Price,
or with respect to the nature or extent or calculation of any such adjustment
when made, or with respect to the method employed, or herein or in any
supplemental indenture provided to be employed, in making the same. The Trustee
and any other conversion agent shall not be accountable with respect to the
validity or value (or the kind or amount) of any shares of Common Stock, or of
any securities or property, that may at any time be issued or delivered upon the
conversion of any Note; and the Trustee and any other conversion agent make no
representations with respect thereto. Subject to the provisions of Section 7.1
hereof, neither the Trustee nor any conversion agent shall be responsible for
any failure of the Company to issue, transfer or deliver any shares of Common
Stock or stock certificates or other securities or property or cash upon the
surrender of any Note for the purpose of conversion or to comply with any of the
duties, responsibilities or covenants of the Company contained in this Article
11. Without limiting
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the generality of the foregoing, neither the Trustee nor any conversion agent
shall be under any responsibility to determine whether a supplemental indenture
under Section 11.6 hereof is required to be entered into or the correctness of
any provisions contained in any supplemental indenture entered into pursuant to
Section 11.6 relating either to the amount of shares receivable by Holders upon
the conversion of their Notes after any event referred to in Section 11.6 hereof
or to any adjustment to be made with respect thereto, but, subject to the
provisions of Section 7.1 hereof, may accept as conclusive evidence of the
correctness of any such provisions, and shall be protected in relying upon, the
Officers' Certificate (which the Company shall be obligated to file with the
Trustee prior to the execution of any such supplemental indenture) with respect
thereto.
SECTION 11.11. NOTICE TO HOLDERS PRIOR TO CERTAIN ACTIONS.
In case (a) the Company makes any distribution or dividend that would
require an adjustment in the Conversion Price pursuant to Section 11.5 hereof,
(b) the Company takes any action that would require a supplemental indenture
pursuant to Section 11.6 hereof or (c) of the voluntary or involuntary
dissolution, liquidation or winding-up of the Company, the Company shall cause
to be filed with the Trustee and to be mailed to each Holder of Notes as
promptly as possible but in any event at least 15 days prior to the applicable
date hereinafter specified, a notice stating (i) the date on which a record date
is to be taken for the purpose of such dividend, distribution, rights, options
or warrants, or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend, distribution,
rights, options or warrants are to be determined or (ii) the date on which such
reclassification, change, consolidation, merger, sale, conveyance, transfer,
dissolution, liquidation or winding-up is expected to become effective or occur
and the date as of which it is expected that holders of record of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reclassification, change, consolidation, merger,
sale, conveyance, transfer, dissolution, liquidation or winding-up. Neither the
failure to give such notice nor any defect therein shall affect the legality or
validity of the proceedings referenced in clauses (a) through (c) of this
Section 11.11.
ARTICLE 12
MISCELLANEOUS
SECTION 12.1. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by Subsection (c) of Section 318 of the TIA, the imposed duties
shall control. The provisions of Sections 310 to 317, inclusive, of the TIA that
impose duties on any Person (including provisions automatically deemed included
in an indenture unless the indenture provides that such provisions are excluded)
are a part of and govern this Indenture, except as, and to the extent, expressly
excluded from this Indenture, as permitted by the TIA.
SECTION 12.2. NOTICES.
Any notice or communication shall be in writing and delivered in person or
mailed by first class mail (registered or certified, return receipt requested),
or overnight air courier guaranteeing next day delivery, addressed as follows:
-46-
<PAGE> 54
If to the Company:
KTI, Inc.
7000 Boulevard East
Guttenberg, NJ 07093
Telecopier No.: (201) 854-1771
Attention: General Counsel
With a copy to:
McDermott, Will & Emery
50 Rockefeller Plaza
New York, NY 10020
Telecopier No.: (212) 547-5444
Attention: Brian Hoffmann, Esq.
If to the Trustee:
First Union National Bank
200 S. Biscayne Boulevard
14th Floor (FL 6065)
Miami, FL 33131
Telecopier No.: (305) 789-4678
Attention: Ms. Lisa Derryberry
With a copy to:
Holland & Knight LLP
701 Brickell Avenue
Miami, FL 33131
Telecopier: (305) 789-7799
Attention: Robert J. Friedman, Esq.
The Company or the Trustee, by notice to the others may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; and the next Business Day after timely delivery to the
courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA Section 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder or any defect in it shall
not affect its sufficiency with respect to other Holders.
-47-
<PAGE> 55
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 or otherwise gives a notice or communication to
Holders, it shall similarly mail or give a copy to the Trustee and each Agent at
the same time.
SECTION 12.3. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA Section 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company, the
Trustee, the Registrar and anyone else shall have the protection of TIA Section
312(c).
SECTION 12.4. 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 in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 12.5 hereof) stating that, in the opinion of the signers, all conditions
precedent and covenants, if any, provided for in this Indenture relating to the
proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 12.5 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
SECTION 12.5. 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 a certificate provided
pursuant to TIA Section 314(a)(4)) shall comply with the provisions of TIA
Section 314(e) and shall include:
(a) a statement that the Person making such certificate or 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, he or she has
made such examination or investigation as is necessary to enable him or her to
express an informed opinion as to whether or not such covenant or condition has
been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
-48-
<PAGE> 56
SECTION 12.6. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 12.7. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
SHAREHOLDERS.
No past, present or future director, officer, employee, incorporator or
shareholder of the Company, as such, shall have any liability for any
obligations of the Company under the Notes, this Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Notes.
SECTION 12.8. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE AND THE NOTES.
SECTION 12.9. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Significant Subsidiaries or of any other
Person. Any such indenture, loan or debt agreement may not be used to interpret
this Indenture.
SECTION 12.10. SUCCESSORS.
All agreements of the Company in this Indenture and the Notes shall bind
their successors. All agreements of the Trustee in this Indenture shall bind its
successors.
SECTION 12.11. SEVERABILITY.
In case any provision in this Indenture or in the Notes 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 12.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
SECTION 12.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table 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 of this Indenture and shall in no way
modify or restrict any of the terms or provisions hereof.
-49-
<PAGE> 57
SIGNATURES
Dated as of May 12, 1998 KTI, INC.
By:
------------------------------------
Name:
Title:
Dated as of May 12, 1998 FIRST UNION NATIONAL BANK, as Trustee
By:
------------------------------------
Name:
Title:
-50-
<PAGE> 1
EXHIBIT 4.6
(Face of Note)
8 3/4% Convertible Subordinated Notes due 2004
No. $_______________
CUSIP NO. 482689 AA 4
KTI, INC.
promises to pay to _____________ or registered assigns, the principal sum of
___________ Dollars on August 15, 2004.
Interest Payment Dates: February 1, May 1, August 1 and November 1
Record Dates: January 15, April 15, July 15 and October 15
Dated: _______, ____
KTI, INC.
By:
----------------------------
Name:
Title:
(SEAL)
This is one of the [Global]
Notes referred to in the
within-mentioned Indenture:
Authentication Date: [__________________]
FIRST UNION NATIONAL BANK
as Trustee
By:
-----------------------------
A-1
<PAGE> 2
(Back of Note)
8 3/4% Convertible Subordinated Notes due 2004
[Unless and until it is exchanged in whole or in part for Notes in
definitive form, this Note may not be transferred except as a whole by the
Depository to a nominee of the Depository or by a nominee of the Depository to
the Depository or another nominee of the Depository or by the Depository or any
such nominee to a successor Depository or a nominee of such successor
Depository. Unless this certificate is presented by an authorized representative
of The Depository Trust Company (55 Water Street, New York, New York) ("DTC"),
to the issuer or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or such other
name as may be requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or such other entity as may be 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 in as much as the registered owner
hereof, Cede & Co., has an interest herein.]1
1. INTEREST. KTI, Inc., a New Jersey corporation (the "Company"), promises
to pay interest on the principal amount of this Note at 8 3/4% per annum from
________________, 199_ until maturity. The Company will pay interest quarterly
in arrears on February 1, May 1, August 1 and November 1 of each year, or if any
such day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). 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 the
date of original issuance. The Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
principal and premium, if any, from time to time on demand at a rate that is the
rate then in effect; it 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 periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except
defaulted interest) to the Persons who are registered Holders of Notes at the
close of business on the January 15, April 15, July 15 or October 15 next
preceding the Interest Payment Date, even if such Notes are cancelled after such
record date and on or before such Interest Payment Date, except as provided in
Section 2.12 of the Indenture with respect to defaulted interest. The Notes will
be payable as to principal, premium and interest at the office or agency of the
Company maintained for such purpose within or without the City and State of New
York, or, at the option of the Company, payment of interest may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
and provided that payment by wire transfer of immediately available funds will
be required with respect to principal of and interest and premium on, all Global
Notes and all other Notes the Holders of which shall have provided wire transfer
instructions to the Company or the Paying Agent. Such payment shall be in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, First Union National Bank, the
Trustee under the Indenture, will act as Paying Agent and Registrar. The Company
may change any Paying Agent or Registrar without notice to any Holder. The
Company or any of its Subsidiaries may act in any such capacity.
- ----------
1. This paragraph should be included only if the Debenture is issued in
global form.
A-2
<PAGE> 3
4. INDENTURE. The Company issued the Notes under an Indenture dated as of
May __, 1998 ("Indenture") between the Company and the Trustee. The terms of the
Notes include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code
Sections 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are
referred to the Indenture and such Act for a statement of such terms. The Notes
are general subordinated unsecured obligations of the Company limited to
$21,400,000 aggregate principal amount.
5. OPTIONAL REDEMPTION. The Company shall have the option to redeem the
Notes on or after August 15, 2000. The Company shall have the option to redeem
the Notes, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on August
15 of the years indicated below:
<TABLE>
<CAPTION>
Year PERCENTAGE
---- ----------
<C> <C>
2000 .................................... 104.4%
2001 .................................... 102.9%
2002 .................................... 101.5%
2003 and thereafter...................... 100.0%
</TABLE>
Notwithstanding the foregoing, on or after August 15, 1999, the
Company may, at its option, redeem the Notes at 105.9% of the principal amount
plus accrued and unpaid interest thereon if the Common Stock bid price has
averaged not less than 1.5 times the Conversion Price during 20 consecutive
Trading Days.
6. NO MANDATORY REDEMPTION.
The Company shall not be required to make mandatory redemption or sinking
fund payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER. If there is a Change of Control, at the
option of the Holders of a majority in principal amount of Notes, the Company
shall be required to make an offer (a "Change of Control Offer") to repurchase
all or any part (equal to $1,000 or an integral multiple thereof) of each
Holder's Notes at a purchase price equal to 100% of the aggregate principal
amount thereof plus accrued and unpaid interest thereon to the date of purchase
(the "Change of Control Payment"). Within 30 days following any Change of
Control, the Company shall mail a notice to each Holder describing the
transaction that constitutes the Change of Control and setting forth the
procedures governing the Change of Control Offer as required by the Indenture.
8. 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 whose
Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be
A-3
<PAGE> 4
registered and Notes may be exchanged as provided in the Indenture. The
Registrar and the Trustee 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 need not exchange or register the transfer of any Note or portion of
a Note selected for redemption, except for the unredeemed portion of any Note
being redeemed in part. Also, it need not exchange or register the transfer of
any Notes for a period of 15 days before a selection of Notes to be redeemed or
during the period between a record date and the corresponding Interest Payment
Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated
as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of a majority in principal amount of the then outstanding 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. Without the consent of any Holder of a Note, the
Indenture or the Notes may be amended or supplemented 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 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 the requirements of the
Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act.
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30
days in the payment when due of interest on the Notes; (ii) default in payment
when due of the principal of or premium, if any, on the Notes; (iii) failure by
the Company to comply with Section 4.8 of the Indenture; (iv) failure by the
Company for 60 days after notice to comply with any of its other agreements in
the Indenture or the Notes; and (v) certain events of bankruptcy or insolvency
with respect to the Company. 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.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding Notes will become
due and payable without further action or notice. Holders 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. The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee 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 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.
13. DEFEASANCE. The Notes are subject to defeasance upon the terms and
conditions specified in the Indenture.
A-4
<PAGE> 5
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates, as if it were not the Trustee.
15. CONVERSION RIGHTS. Subject to and upon compliance with the provisions
of the Indenture, the Holder of any Note shall have the right, at the option of
such Holder, at any time (except that, with respect to any Note or portion of a
Note that shall be called for redemption or delivered for repurchase, such right
shall terminate immediately prior to close of business on the date fixed for
redemption of such Note or portion of such Note unless the Company shall default
in payment due upon redemption thereof) to convert the principal amount of any
such Note, or any portion of such principal amount that is $1,000 or any
integral multiple thereof, into that number of fully paid and nonassessable
shares of Common Stock (as such shares shall then be constituted) obtained by
dividing the aggregate principal amount of the Notes or a portion thereof
surrendered for conversion by the Conversion Price in effect at such time
rounded to the nearest cent, by surrender of the Note so to be converted in
whole or in part. The Conversion Price shall be that amount as determined
pursuant to the Company's Restated Certificate of Incorporation with respect to
the 8 3/4% Series B Convertible Exchangeable Preferred Stock (the "Preferred
Stock"), filed with the Secretary of State of the State of New Jersey on August
8, 1997, as amended through the date of exchange of the Preferred Stock for
the Note, on the date of exchange of the Preferred Stock for the Notes,
subject to adjustment as provided in the Indenture. Immediately following such
conversion, the rights of the Holders of converted Notes shall cease and the
persons entitled to receive the Common Stock upon the conversion of Notes
shall be treated for all purposes as having become the owners of such Common
Stock.
16. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or shareholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
17. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
18. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
A-5
<PAGE> 6
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
KTI, Inc.
7000 Boulevard East
Guttenberg, NJ 07093
Attention: General Counsel
A-6
<PAGE> 7
Unless this certificate is presented by an authorized representative of
The Depository Trust Company 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 such other name as requested by the authorized
representative of The Depository Trust Company and any payment is made to Cede &
Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an
interest herein.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned sells, assigns and transfers unto
________________________________________________________________________________
Insert Social Security or Other Identifying Number of Assignee
________________________________________________________________________________
(Name and Address of Assignee)
________________________________________________________________________________
the within Note and does hereby irrevocably constitute and appoint _____________
_______________________ as attorneys to register the transfer of the said Note
on the books kept for registration thereof with full power of substitution in
the premises.
Dated:
_______________________________________ ____________________________________
Signature guaranteed: NOTICE: Signature must be guaranteed
by an institution which is a
participant in the Securities
_______________________________________ Transfer Agent Medallion Program
(STAMP) or similar program.
NOTICE: The signature to this
assignmentmust correspond with the name
of the registered Holder as it appears
upon the face of the within Note in
every particular, without alteration or
enlargement or any change whatever and
the Social Security or other identifying
number of such assignee must be supplied.
A-7
<PAGE> 8
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant
to Section 4.8 of the Indenture, check the box below:
[ ] Section 4.8
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.8 of the Indenture, state the amount you elect to
have purchased: $___________ (in a minimum denomination amount of $1,000 or
integral multiple thereof).
Date: ___________________ Your Signature: ____________________________________
NOTICE: The signature to this assignment
must correspond with the name of the
registered Holder as it appears upon the
face of the within Note in every particular,
without alteration or enlargement or any
change whatever and the Social Security or
other identifying number of such assignee
must be supplied.
Tax Identification No.:____________________
Signature Guaranteed:
______________________________________
NOTICE: Signature must be guaranteed
by an institution which is a
participant in the Securities Transfer
Agent Medallion Program (STAMP) or
similar program.
A-8
<PAGE> 9
SCHEDULE OF EXCHANGES OF NOTES(1)
THE FOLLOWING EXCHANGES OF A PART OF THIS GLOBAL NOTE FOR OTHER NOTES HAVE BEEN
MADE:
<TABLE>
<CAPTION>
Date of Exchange Amount of Amount of Principal Amount Signature of
decrease in increase in of this Global authorized officer
Principal Amount Principal Amount Note following of Trustee or
of this Global of this Global such decrease (or Note Custodian
Note Note increase)
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
</TABLE>
A-9
<PAGE> 1
Exhibit 5
McDermott, Will & Emery
50 Rockefeller Plaza
New York, New York 10020
May 12, 1998
KTI, Inc.
7000 Boulevard East
Guttenberg, New Jersey 07093
Re: Resale of up to an aggregate of (i) 856,000 shares of Series B
Convertible Exchangeable Preferred Stock, no par value (the "Series
B Preferred Stock"), of KTI, Inc., a New Jersey corporation (the
"Company"), (ii) 1,861,104 shares of common stock, no par value (the
"Common Stock"), of the Company issuable upon conversion of the
Series B Preferred Stock (the "Conversion Shares"), and (iii)
$21,397,000 aggregate principal amount of 8 3/4% Convertible
Subordinated Notes of the Company (the "Exchange Notes").
Ladies and Gentlemen:
We have acted as your special counsel in connection with the
preparation and filing of a Registration Statement on Form S-2 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), of the above-captioned securities, which, in the case of the
Conversion Shares, may be issued upon the conversion of Series B Preferred
Stock, and, in the case of the Exchange Notes, may be issued in exchange for
the Series B Preferred Stock, and, in each case, then offered for sale from
time to time by selling shareholders.
In arriving at the opinions expressed below we have examined the
Registration Statement, the Series B Preferred Stock, the form of indenture
relating to the Exchange Notes (the "Indenture"), and such other documents as we
have deemed necessary to enable us to express the opinions hereinafter set
forth. We have also reviewed such questions of law as we considered necessary or
appropriate for the purposes of such opinions. In addition, we have examined and
relied, to the extent we deemed proper, on certificates of officers of the
Company as to factual matters, on the originals or copies certified or otherwise
identified to our satisfaction of all such corporate records of the Company and
such other instruments and certificates of public officials and other persons as
we have deemed appropriate. In our
<PAGE> 2
KTI, Inc.
May 12, 1998
Page 2
examination, we have assumed the authenticity of all documents submitted to us
as originals, the conformity to the original documents of all documents
submitted to as copies, and the genuineness of all signatures on documents
reviewed by us and the legal capacity of natural persons.
Members of our firm are admitted to the bar of the State of New
York. We express no opinion as to the laws of any jurisdiction other than the
laws of the State of New York and, to the extent specifically referred to
herein, the New Jersey Business Corporation Act (the "NJBCA"), and the Federal
laws of the United States of America. While we are not licensed to practice law
in the State of New Jersey, we have reviewed applicable provisions of the NJBCA
as we have deemed appropriate in connection with the opinions expressed herein.
Except as described, we have neither examined nor do we express any opinion with
respect to New Jersey Law.
Based upon and subject to the foregoing, we are of the opinion that:
1. The shares of the Series B Preferred Stock are, and the
Conversion Shares, when issued in accordance with the terms of the Series B
Preferred Stock, will be, legally issued, fully paid and non-assessable.
2. The Exchange Notes when issued in exchange for, and in
accordance with the terms of the Series B Preferred Stock and the Indenture,
will be legal, valid and binding obligations of the Company.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the Prospectus forming a part of the Registration Statement. In
giving this consent, we do not thereby admit that we are within the category of
persons whose consent is required under Section 7 of the Securities Act and the
rules and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ McDermott, Will & Emery
<PAGE> 1
Exhibit 12
KTI, Inc.
Calculation of Ratio Earnings to Combined Fixed Charges and Preferred Stock
Dividends
(All amounts in thousands except for ratio of earnings to combined fixed charges
and preferred stock dividends)
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
EARNINGS
Consolidated pre-tax income from
continuing operations 5,506 16,628 (1,328) (1,428) 683
Less:
Share of pre-tax loss of
less-than-50%-owned affiliates (21)
Fixed charges 6,547 5,109 10,117 10,090 1,193
Less:
Interest capitalized during
the period (20) (110)
Dividends on Series B Preferred
Stock (708)
------ ------ ------ ------ ------
EARNINGS AS ADJUSTED 11,325 21,627 8,789 8,662 1,855
====== ====== ====== ====== ======
FIXED CHARGES AND PREFERRED
STOCK DIVIDENDS
Interest cost(1) 5,106 4,574 9,379 9,715 1,057
Net amortization of the debt
discount and issuance expense 331 476 618 246 60
Interest portion of rental
expense(2) 408 59 120 129 76
Dividends on Series B
Preferred Stock 708
------ ------ ------ ------ ------
TOTAL COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS 6,553 5,109 10,117 10,090 1,193
====== ====== ====== ====== ======
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock
Dividends 1.73 4.23 (3) (3) 1.55
</TABLE>
(1) Includes interest expense and interest capitalized in accordance with FASB
Statement No. 34.
(2) Represents an appropriate portion of rental expense.
(3) Fixed charges and preferred stock dividends for the years ended December
31, 1995 and 1994 exceeding earnings, as adjusted by $1,328 and $1,428,
respectively.
<PAGE> 1
Exhibit 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (Form S-2 No. 333-46057) and
related Prospectus of KTI, Inc. for the registration of 856,000 shares of its
Series B Convertible Exchangeable Preferred Stock, 1,861,105 shares of its
common stock and an aggregate principal amount of $21,398,000 of its 8.75%
Convertible Subordinated Notes due August 15, 2004, and to the incorporation by
reference therein of our reports dated March 6, 1998 (except for Note 18 as to
which the date is March 23, 1998) and February 7, 1997 with respect to the
consolidated financial statements and schedule of KTI, Inc. and the financial
statements of Penobscot Energy Recovery Company, Limited Partnership (a Maine
limited partnership), respectively, included in the Annual Report (Form 10-K)
of KTI, Inc. for the year ended December 31, 1997, and of our report dated
January 16, 1998 with respect to the consolidated financial statements of
Prins Recycling Corp. (debtor-in-possession) included in the Current Report
(Form 8-K, dated November 14, 1997, as amended by Form 8-K/A) of KTI, Inc., as
filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Ernst & Young LLP
Hackensack, New Jersey
May 11, 1998
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
PURSUANT TO SECTION 305(b)(2) X
FIRST UNION NATIONAL BANK
(Name of Trustee)
22-1147033
(I.R.S. Employer Identification No.)
301 South College Street, 1 First Union Center,
Charlotte, North Carolina
(Address of Principal Executive Offices)
28288
(Zip Code)
KTI, INC.
(Exact name of registrant as specified in its charter)
New Jersey
(State of Incorporation)
22-2665282
(I.R.S Employer Identification No.)
7000 Boulevard East
Guttenberg, New Jersey
07093
(201) 854-7777
(Address of Principal Executive Offices)
8 3/4% Convertible Subordinated Notes
(Title of Indenture Securities)
<PAGE> 2
1. General information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervisory
authority to which it is subject:
Comptroller of the Currency
United States Department of the Treasury
Washington, D.C. 20219
Federal Reserve Bank
Richmond, Virginia 23219
Federal Deposit Insurance Corporation
Washington, D.C. 20429
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
3. Voting securities of the trustee.
Furnish the following information as to each class of voting securities
of the trustee:
Not applicable - see answer to item 13.
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:
Not applicable - see answer to item 13.
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
2
<PAGE> 3
for the obligor, identify each such person having any such connection and state
the nature of each such connection.
Not applicable - see answer to item 13.
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 - see answer to item 13.
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 - see answer to item 13.
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 - see answer to item 13.
9. Securities of underwriters 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 - see answer to item 13.
10. Ownership or holdings by the trustee of voting securities of certain
affiliates or security holders of the obligor.
If the trustee owns beneficially or holds as collateral security for
obligations in default voting securities of a person who, to the knowledge of
the trustee (1) owns 10 percent or more of the voting stock of the obligor or
(2) is an affiliate, other than a subsidiary, of the obligor, furnish the
following information as to the voting securities of such person:
3
<PAGE> 4
Not applicable - see answer to item 13.
11. Ownership or holdings by the trustee of any securities of a person
owning 50 percent or more 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 - see answer to item 13.
12. Indebtedness of the obligor to the trustee.
Except as noted in the instructions, if the obligor is indebted to the
trustee, furnish the following information:
Not applicable - see answer to item 13.
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.
None.
(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.
None.
14. Affiliations with the underwriters.
If any underwriter is an affiliate of the trustee, describe each such
affiliation.
Not applicable - see answer to item 13.
15. Foreign trustee.
Identify the order or rule pursuant to which the trustee is authorized
to act as sole trustee under indentures qualified or to be qualified under the
Act.
4
<PAGE> 5
Not applicable - trustee is a national banking association organized
under the laws of the United States.
16. List of Exhibits.
List below all exhibits filed as part of this statement of eligibility.
1. Copy of Articles of Association of the trustee as now in
effect.*
X 2. Copy of the Certificate of the Comptroller of the Currency
dated March 4, 1998, evidencing the authority of the trustee
to transact business.
X 3. Copy of the authorization of the trustee to exercise
fiduciary powers
4. Copy of existing by-laws of the trustee.*
5. Copy of each indenture referred to in Item 4, if the obligor
is in default, not applicable.
X 6. Consent of the trustee required by Section 321(b) of the
Act.
X 7. Copy of report of condition of the trustee at the close of
business on March 31, 1998, published pursuant to the
requirements of its supervising authority.
8. Copy of any order pursuant to which the foreign trustee is
authorized to act as sole trustee under indentures qualified
or to be qualified under the Act, not applicable.
9. Consent to service of process required of foreign trustees
pursuant to Rule 10a-4 under the Act, not applicable.
- --------------------
*Previously filed with the Securities and Exchange Commission on March
16, 1998 as an exhibit to Form T-1 in connection with Registration Statement No.
333-47985 and incorporated herein by reference.
5
<PAGE> 6
NOTE
The trustee disclaims responsibIlity for the accuracy or completeness
of information contained in this Statement of Eligibility and Qualification not
known to the trustee and not obtainable by it through reasonable investigation
and as to which information it has obtained from the obligor and has had to rely
or will obtain from the principal underwriters and will have to rely.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, First Union National Bank, a national banking association organized and
existing under the laws of the United States of America, has duly caused this
Statement of Eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Miami and State of Florida, on the
1st day of May, 1998.
FIRST UNION NATIONAL BANK
By:/s/ Lisa Derryberry
--------------------------
Lisa Derryberry
Vice President
6
<PAGE> 7
[COMPTROLLER OF THE CURRENCY ADMINISTRATOR OF NATIONAL BANKS LETTERHEAD]
CERTIFICATE
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify that:
1. The Comptroller of the Currency, pursuant to Revised Statutes 324, et
seq., as amended, 12 U.S.C. 1, et seq., as amended, has possession, custody and
control of all records pertaining to the chartering of all National Banking
Associations.
2. "First Union National Bank," Charlotte, North Carolina, (Charter No.
22693) is a National Banking Association formed under the laws of the United
States and is authorized thereunder to transact the business of banking on the
date of this Certificate.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal of
office to be affixed to these presents at the
Treasury Department in the City of
Washington and District of Columbia, this 4th
[Seal day of March, 1998.
of the
Comptroller
of the
Currency] /s/ Eugene A. Ludwig
----------------------------------
Comptroller of the Currency
<PAGE> 8
[COMPTROLLER OF THE CURRENCY ADMINISTRATOR OF NATIONAL BANKS LETTERHEAD]
Certificate of Fiduciary Powers
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify that:
1. The Comptroller of the Currency, pursuant to Revised Statutes 324, et
seq., as amended, 12 U.S.C. 1, et seq., as amended, has possession, custody and
control of all records pertaining to the chartering of all National Banking
Associations.
2. "First Union National Bank," Charlotte, North Carolina, (Charter No.
22693), was granted, under the hand and seal of the Comptroller, the right to
act in all fiduciary capacities authorized under the provisions of the Act of
Congress approved September 28, 1962, 76 Stat. 668, 12 U.S.C. 92a, and that the
authority so granted remains in full force and effect on the date of this
Certificate.
IN TESTIMONY WHEREOF, I have hereunto subscribed
my name and caused my seal of office to be affixed
to these presents at the Treasury Department in
the City of Washington and District of Columbia,
[Seal this 4th day of March, 1998.
of the
Comptroller
of the /s/ Eugene A. Ludwig
Currency] -------------------------------------
Comptroller of the Currency
<PAGE> 9
EXHIBIT 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, and in connection with the proposed issue of KTI, Inc.
8 3/4% Convertible Subordinated Notes, we hereby consent that reports of
examinations by Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
FIRST UNION NATIONAL BANK
By:/s/ Lisa Derryberry
-----------------------
Lisa Derryberry
Vice President
Miami, Florida
May 1, 1998
<PAGE> 10
Legal Title of Bank: First Union National Bank
Address: Two First Union Center
City, State Zip: Charlotte, NC 28288-0201
FDIC Certificate No.: 04885
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
__________
<TABLE>
<CAPTION>
----------
C400 (-
------------ --------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C> <C>
ASSETS //////////////////
1. Cash and balances due from depository institutions (from Schedule RC-A): //////////////////
a. Noninterest-bearing balances and currency and coin(1) ................................... 0081 7,346,667 1.a.
b. Interest-bearing balances(2) ............................................................ 0071 12,682 1.b.
2. Securities: //////////////////
a. Held-to-maturity securities (from Schedule RC-B, column A) .............................. 1754 1,937,159 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D) ............................ 1773 31,508,601 2.b.
3. Federal funds sold and securities purchased under agreements to resell ..................... 1350 4,501,133 3.
4. Loans and lease financing receivables: -------------------------- //////////////////
a. Loans and leases, net of unearned income (from Schedule RC-C) RCFD 2122 98,032,231 ////////////////// 4.a.
b. LESS: Allowance for loan and lease losses ................... RCFD 3123 1,213,122 ////////////////// 4.b.
c. LESS: Allocated transfer risk reserve ....................... RCFD 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 96,830,110 4.d.
5. Trading assets (from Schedule RC-D) ........................................................ 3545 3,818,431 5.
6. Premises and fixed assets (including capitalized leases) ................................... 2145 2,660,908 6.
7. Other real estate owned (from Schedule RC-M) ............................................... 2150 112,869 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) ... 2130 269,234 8.
9. Customers' liability to this bank on acceptances outstanding ............................... 2155 575,447 9.
10. Intangible assets (from Schedule RC-M) ..................................................... 2143 2,896,253 10.
11. Other assets (from Schedule RC-F) .......................................................... 2160 7,274,331 11.
12. Total assets (sum of items 1 through 11) ................................................... 2170 159,743,634 12.
----------------------
</TABLE>
____________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE> 11
Legal Title of Bank: First Union National Bank
Address: Two First Union Center
City, State Zip: Charlotte, NC 28288-0201
FDIC Certificate No.: 04885
Schedule RC--Continued
<TABLE>
<CAPTION>
---------------------------
Dollar Amounts in Thousands ////// Bil Mil Thou
- ----------------------------------------------------------------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C>
LIABILITIES //////////////////
13. Deposits: //////////////////
RCON
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I) ..... 2200 101,638,235 13.a.
----------------------------
(1) Noninterest-bearing(1) ................................ RECON 6631 19,061,893 ////////////////// 13.a.(1)
(2) Interest-bearing ...................................... RECON 6636 82,376,326 ////////////////// 13.a.(2)
----------------------------
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, //////////////////
RCFN
part II) .............................................................................. 2200 5,487,257 13.b.
----------------------------
(1) Noninterest-bearing ................................... RCFN 6631 29,619 ////////////////// 13.b.(1)
(2) Interest-bearing ...................................... RCFN 6636 5,457,638 ////////////////// 13.b.(2)
----------------------------
RCFD
14. Federal funds purchased and securities sold under agreements to repurchase ............... 2800 24,525,121 14.
RCON
15. a. Demand notes issued to the U.S. Treasury .............................................. 2840 426,758 15.a.
RCFD
b. Trading liabilities (from Schedule RC-D) .............................................. 3548 4,547,787 15.b.
16. Other borrowed money (includes mortgage indebtedness and obligations under //////////////////
capitalized leases): //////////////////
RCFD
a. With remaining maturity of one year or less ........................................... 2332 3,391,194 16.a.
RCFD
b. With remaining maturity of more than one year through three years ..................... A647 635,109 16.b.
RCFD
c. With a remaining maturity of more than three years .................................... A5410 416,618 16.c.
17. Not applicable //////////////////
RCFD
18. Bank's liability on acceptances executed and outstanding ................................. 2920 675,222 18.
RCFD
19. Subordinated notes and debentures (2) .................................................... 3200 2,797,773 19.
RCFD
20. Other liabilities (from Schedule RC-G) ................................................... 2930 3,662,892 20.
RCFD
21. Total liabilities (sum of items 13 through 20) ........................................... 2948 147,903,952 21.
22. Not applicable //////////////////
EQUITY CAPITAL //////////////////
RCFD
23. Perpetual preferred stock and related surplus ............................................ 3838 160,540 23.
RCFD
24. Common stock ............................................................................. 3230 82,795 24.
RCFD
25. Surplus (exclude all surplus related to preferred stock).................................. 3839 8,532,323 25.
RCFD
26. a. Undivided profits and capital reserves ................................................ 3632 2,823,904 26.a.
RCFD
b. Net unrealized holding gains (losses) on available-for-sale securities ................ 8434 240,120 26.b.
RCFD
27. Cumulative foreign currency translation adjustments ...................................... 3284 0 27.
RCFD
28. Total equity capital (sum of items 23 through 27) ........................................ 3210 11,839,682 28.
RCFD
29. Total liabilities and equity capital (sum of items 21 and 28) ............................ 3300 159,743,634 29.
---------------------------
</TABLE>
<TABLE>
<S> <C> <C>
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 Number
best describes the most comprehensive level of auditing work performed -----------------
for the bank by independent external auditors as of any date during 1997 ...................... RCFD 6724 2 M.1.
-----------------
</TABLE>
<TABLE>
<S> <C>
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 external
submits a report on the consolidated holding company auditors
(but 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
chartering authority)
</TABLE>
- ------------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
(2) Includes limited-life preferred stock and related surplus.
