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Copies of all communications, including communications sent to agent for service, should be sent to:

Approximate date of commencement of proposed sale to the public: From time to time in the discretion of the selling shareholders after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: þ


(1)	Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457 under the Securities Act of 1933, as amended. In accordance with Rule 457(c), the estimates for the proposed maximum offering prices were based on the average of the bid and asked prices as reported by the National Quotation Bureau on the Pink Sheets for December 23, 2004.

(2)	Also registered hereunder are an indeterminate number of additional shares as may be issued under anti-dilution provisions contained in the warrant agreement relating to certain of the shares registered hereby.

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 this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting any offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

This prospectus relates to resales of 3,673,235 shares of common stock, $0.01 par value per share (“Common Stock”), held by the shareholders identified under the “Selling Shareholders” section of this prospectus. These shareholders may offer and sell from time to time all of the Common Stock being registered. Selling shareholders are offering for resale:


	•	805,230 shares of Common Stock issuable upon exercise of warrants sold as part of 90,000 units (the “Units”) consisting of $1,000 principal amount of our 11.5% senior secured notes due 2011 (the “11.5% Notes”) and a warrant to purchase 8.947 shares of Common Stock (collectively, the “Warrants”); and

	•	2,868,005 shares of Common Stock issued in April 2003 in connection with the cancellation of the Company’s 10.25% Notes due 2001 (the “Old Senior Notes”).

We are also registering additional shares of Common Stock that may be issued under anti-dilution provisions of the warrant agreement pursuant to which the Warrants were issued.

We will not receive any proceeds from the sale of Common Stock by the selling shareholders. Holders of our Common Stock are entitled to one vote for each share of Common Stock held.

The Common Stock is not listed on any national securities exchange. Currently, the Common Stock is quoted through the National Quotation Bureau “pink sheet” service under the symbol “VKSC.”

Neither the Securities and Exchange Commission nor any state securities commission has approved or

We have filed with the Securities and Exchange Commission (the “SEC”) a registration statement (“Registration Statement”) on Form S-1 under the Securities Act of 1933, as amended (the “Securities Act”), with respect to the Common Stock. This prospectus, which is a part of the Registration Statement, omits certain information included in the Registration Statement and in its exhibits. For further information relating to us and our Common Stock, we refer you to the Registration Statement and its exhibits, from which this prospectus incorporates important business and financial information about the Company that is not included in or delivered herewith. You may read and copy the Registration Statement, including its exhibits, at the SEC’s Public Reading Room located at 450 Fifth Street, N.W., Washington D.C. 20549. You may obtain information on the operation of the Public Reading Room by calling the SEC at 1-800-SEC-0300. The SEC also maintains a Web site (www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants like us who file electronically with the SEC. You can obtain a copy of any of our filings, without charge, by contacting us at the following address:

We are not currently subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Following effectiveness of the registration statement of which this prospectus is a part, we will file annual, quarterly and current reports and other information with the SEC in accordance with the Exchange Act. You may read and copy any document we file with the SEC at the SEC’s address set forth above.

You should rely only on the information contained in this prospectus. We have not authorized any person to provide you with any information or represent anything not contained in this prospectus, and, if given or made, any such other information or representation should not be relied upon as having been authorized by us. We are not making an offer to sell our Common Stock in any jurisdiction where an offer or sale is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front cover of this prospectus.

PROSPECTUS SUMMARY

This summary highlights certain information that we believe is especially important concerning our business and this offering. It does not contain all of the information that may be important to you and to your investment decision. You should carefully read the entire prospectus and should consider, among other things, the matters set forth in the section entitled “Risk Factors” before deciding to participate in the offering. In this prospectus, unless indicated otherwise, “Viskase” or the “Company” refers to Viskase Companies, Inc., the issuer of the Common Stock, and “we,” “us,” and “our” refer to Viskase and its subsidiaries.

Our Company

We are a leading worldwide producer of non-edible cellulosic, fibrous and plastic casings used to prepare and package processed meat products. We provide value-added support services relating to these products to our customers, which include some of the world’s largest global consumer products companies. In 1925, one of our predecessors invented the basic process for producing casings from regenerated cellulose for commercial production, and we and/or our predecessors have been in the processed meat flexible packaging business for over 79 years. We believe we are one of the two largest worldwide producers of non-edible cellulosic casings for small-diameter processed meats, such as hot dogs. In addition, we believe we are one of the leading producers of non-edible fibrous casings for large-diameter sausages, salami, hams and other processed meat products. We also produce plastic casings for a wide range of processed meat and poultry applications. Our high-quality product offering and superior customer service have resulted in strong and longstanding relationships with our blue-chip customer base that includes Kraft, Smithfield Foods and ConAgra. The average length of our relationships with our top 15 customers is greater than ten years. We operate seven manufacturing facilities and eight distribution centers in North America, Europe and Latin America, and, as a result, we are able to sell our products in most countries throughout the world.

The Company is a Delaware corporation. Our principal executive offices are located at 625 Willowbrook Centre Parkway, Willowbrook, Illinois 60527, and our telephone number is (630) 789-4900. Our website is www.viskase.com. Our website and the information included therein are not part of this prospectus.

The Industry

The flexible packaging market in the United States is comprised of paper, plastic film or foil products and laminations of these materials. According to industry sources, domestic demand for flexible packaging was 6.0 billion pounds in 2003, and has grown from 5.5 billion pounds in 1998, reflecting a compound annual growth rate of 1.9%. Industry analysts expect the flexible packaging market as a whole to continue to expand at a steady rate due to technological advances and manufacturers’ needs for higher performance packaging. According to industry sources, domestic demand for flexible packaging is expected to reach 6.8 billion pounds by 2008, which would reflect a compound annual growth rate of 2.4% from 2003. Furthermore, domestic demand for flexible packaging for meat, poultry and seafood, the subsection of the flexible packaging market in which we operate, has been growing. Industry sources report that domestic demand for flexible packaging used for meat, poultry and seafood increased to 540 million pounds in 2003 from 515 million pounds in 1998, reflecting a compound annual growth rate of 1.0%. Domestic demand for flexible packaging for meat, poultry and seafood is expected to reach 594 million pounds by 2008, which would reflect a compound annual growth rate of 1.9% from 2003. We believe that we will continue to benefit from these stable United States industry fundamentals in both the general and the meat, poultry and seafood flexible packaging markets. We also believe that growth in demand for flexible meat, poultry and seafood packaging will occur in international markets. We expect modest growth in developed countries and, due to increasing wealth and availability of quality nutrition, more expansive growth in developing countries.

preparation is stuffed into a casing and then cooked, smoked or dried. The casing utilized determines the size, consistency of shape, and overall appearance and quality of the final product. Small-diameter cellulosic, fibrous and plastic casings also permit high-speed stuffing and processing of products on commercially available, automated equipment, which provides a meat processor with consistent product quality, high production output rates and lower manufacturing costs.

SUMMARY OF THE OFFERING


Issuer		Viskase Companies, Inc.

Common Stock Being Offered by the Selling Shareholders		3,673,235 shares of Common Stock, consisting of 805,230 shares of Common Stock issuable upon exercise of the Warrants and 2,868,005 shares of Common Stock issued in connection with the cancellation of the Old Senior Notes.

Use of Proceeds		All of the Common Stock offered hereby will be sold by the selling shareholders. We will not receive any proceeds from the sale of these shares. See “Use of Proceeds.”

Registration Rights		We entered into separate registration rights agreements in respect of the Common Stock registered hereby.

Voting Rights		Holders of Common Stock are entitled to one vote for each share of Common Stock held.

Dividend Policy		Holders of Common Stock have the right to receive dividends when and as dividends are declared by the Board of Directors of the Company. We have not paid dividends on our Common Stock and do not anticipate paying any cash dividends on our Common Stock in the foreseeable future. In addition, the terms of our revolving credit facility and the indenture governing our 11.5% Notes restrict our ability to pay dividends on our Common Stock.

Liquidation Rights		Upon any liquidation, dissolution or winding up of the affairs of the Company, whether voluntary or involuntary, any assets remaining after satisfaction of the rights of creditors and the rights of any holders of preferred stock will be distributed to the holders of Common Stock. See “Description of Capital Stock.”

Absence of Public Market		The Common Stock is quoted through the National Quotation Bureau “pink sheet” service under the symbol “VKSC” and traded in small amounts on a limited and sporadic basis. The Common Stock is not listed on any securities exchange and we do not intend to apply for the Common Stock to be listed on any securities exchange or to arrange for quotation of the Common Stock on any automated dealer quotation system in the foreseeable future.

For more information about the Common Stock, see “Description of the Capital Stock.”

Risk Factors

You should carefully consider all of the information set forth in this prospectus and, in particular, you should refer to the section captioned “Risk Factors” for an explanation of certain risks related to investing in the Common Stock.

SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA

The following table sets forth our summary historical, unaudited interim and unaudited pro forma consolidated financial data for the periods ended and the dates indicated. We have derived the summary historical consolidated financial data for the years ended December 31, 2001, 2002 and 2003 from our audited consolidated financial statements and related notes for such years included elsewhere in this prospectus. We have derived the summary historical consolidated financial data as of September 30, 2004 from our unaudited interim consolidated financial statements included elsewhere in this prospectus. We have derived the summary historical consolidated financial data for the period April 3, 2003 through December 31, 2003 from our audited consolidated financial statements and related notes for the year ended December 31, 2003. We have derived the summary historical consolidated financial data for the periods January 1 through April 2, 2003 and April 3, 2003 through September 30, 2003 from our unaudited interim consolidated financial statements and related notes for the periods January 1 through April 2, 2003 and April 3, 2003 through September 30, 2003 included elsewhere in this prospectus. In the opinion of our management, our unaudited interim consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of our financial position, the results of our operations and cash flows. The results of operations for the nine-month period ended September 30, 2004 are not necessarily indicative of the operating results to be expected for a full fiscal year.

Moreover, as a result of our emergence from Chapter 11 bankruptcy and the application of fresh-start accounting, our unaudited historical and pro forma consolidated financial data for the periods subsequent to April 2, 2003, following the effective date of our plan of reorganization in the bankruptcy proceedings, are referred to as the “Reorganized Company” and are not comparable to those for the periods prior to April 3, 2003, which are referred to as the “Predecessor Company.”

The pro forma data for the nine-month period ended September 30, 2004 gives effect to the original offering of the 11.5% Notes, the repayment of certain capital lease obligations and the purchase of $55.5 million of our 8% Senior Subordinated Notes due December 1, 2008 (“8% Senior Notes”), which are now unsecured and subordinated to our obligations under certain of our indebtedness, at a purchase price of 90% of the aggregate principal amount thereof, together with accrued and unpaid interest to the purchase date therefor, as if they occurred on October 1, 2003, while the pro forma balance sheet data give effect to these transactions as if they occurred as of September 30, 2004. The summary historical and unaudited interim consolidated financial data set forth below are not necessarily indicative of the results of future operations and should be read in conjunction with the discussion under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical consolidated financial statements and related notes included elsewhere in this prospectus.



	Predecessor Company									Reorganized Company

							January 1			April 3			April 3			Nine Months
	Year Ended December 31,						Through			Through			Through			Ended
							April 2,			December 31,			September 30,			September 30,
	2001			2002			2003			2003			2003			2004


	(Dollars in thousands)
Income Statement Data:
Net sales	$	189,315		$	183,577		$	45,402		$	152,408		$	101,094		$	154,366
Gross margin		33,057			36,736			7,371			32,419			22,446			32,676
Selling, general and administrative expenses		40,027			38,526			8,890			24,664			16,645			22,779
Operating (loss) income		(13,736	)		2,342			(2,019	)		(40,813	)		4,100			8,421
Net (loss) income		(25,526	)		(19,330	)		151,873			(46,627	)		(465	)		(15,103	)
Other Financial Data:
Depreciation and amortization		23,125			22,959			5,338			10,067			6,722			8,819
Capital expenditures		5,882			3,824			527			3,764			1,349	(1)		3,898	(1)


Pro Forma Data:
Total interest expense(2)(3)	$	13,503
Cash interest expense(4)		10,977
Domestic collateral(5)		83,302
Net debt(6)		67,470
Domestic collateral/ Net debt(7)		1.2	x



	As of September 30, 2004

	Actual			Pro Forma(8)

Balance Sheet Data:
Cash and cash equivalents(9)	$	33,249		$	33,249
Property, plant and equipment, net		86,260			86,260
Total assets		203,545			203,545
Total debt		100,719			100,719
Total stockholders’ (deficit) equity		(55,826	)		(55,826	)

(1) Capital expenditures total does not include $9,500 for reacquisition of leased assets.

(2) Pro forma total interest expense includes $183 of amortization of deferred financing costs.

(3) The effect of the 11.5% Notes issuance, repayment of the GECC lease and repurchase of the 8% Senior Notes on pro forma interest expense was $7,812, $(5,304) and $(2,148), respectively.

(4) Pro forma cash interest expense is calculated as total interest expense less non-cash interest on 8% Senior Notes of $2,200, effective interest of $143 on the 11.5% Notes and non-cash charges of $183 related to the amortization of deferred financing costs.

(5) Domestic collateral is defined as the sum of domestic receivables, domestic inventories and domestic property, plant and equipment, net as of September 30, 2004. Domestic collateral does not include the value of the stock of foreign subsidiaries.

(6) Net debt is defined as total debt less cash and cash equivalents as of September 30, 2004.

(7) Calculated as the pro forma domestic collateral divided by the pro forma net debt at September 30, 2004.

(8) Pro forma numbers assume $55.5 million of our 8% Senior Notes were repurchased by the Company concurrently with completion of the June 29, 2004 offering of the 11.5% Notes, at a price equal to 90% of the aggregate principal amount as of December 31, 2003.

(9) Includes $2.7 million of restricted cash primarily securing letters of credit.

You should carefully consider the risk factors set forth below as well as the other information contained in this prospectus before investing in our Common Stock. The risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business operations. Any of the following risks could materially adversely affect our business, financial condition or results of operations. In such case, you may lose all or part of your original investment.

On June 29, 2004, we issued the Warrants for the purchase of Common Stock representing approximately 7.34% of our outstanding Common Stock on a fully diluted basis as of such date (assuming exercise of all such Warrants) as part of an issuance of the Units, each of which consisted of $1,000 principal amount of our 11.5% Notes and one warrant for 8.947 shares of Common Stock exercisable for $0.01 per share. There may be a dilutive effect on the value of our Common Stock as additional shares of Common Stock are issued upon the exercise of the Warrants.

There is no established public market for the Common Stock. Our Common Stock is not listed on any exchange and we do not intend to apply for any listing. Our Common Stock has been traded in an “over-the-counter” market on the “pink sheets” under the symbol “VKSC.” Trading on such market is highly illiquid and volatile. There can be no certainty as to:


	•	whether any public market will develop for the Common Stock;

	•	the liquidity of any such market that may develop;

	•	your ability to sell your Common Stock; or

	•	the price at which you would be able to sell your Common Stock.

Historically, we have not paid dividends on the Common Stock, and we do not anticipate paying any cash dividends on the Common Stock in the foreseeable future. Furthermore, the terms of the indenture relating to the 11.5% Notes and our revolving line of credit facility each restrict our ability to pay dividends on our Common Stock.

We have substantial indebtedness. As of September 30, 2004, we had approximately $100.7 million ($106.1 million aggregate principal) of total debt, not including the availability of additional indebtedness, of up to $20.0 million, that we may borrow under our revolving credit facility. Of the total debt, $89.0 million ($90 million aggregate principal) relates to the 11.5% Notes we issued on June 29, 2004. We also have $11.2 million ($15.7 million aggregate principal) of our 8% Senior Notes outstanding.

Our high level of indebtedness has important implications, including the following:


	•	it may make it more difficult for us to satisfy our obligations under the 11.5% Notes, the 8% Senior Notes (collectively, the “outstanding notes”) and our other indebtedness, including our revolving credit facility and our other contractual and commercial commitments;


	•	if we fail to satisfy our obligations under the outstanding notes or our other indebtedness, including our revolving credit facility, or fail to comply with the restrictive covenants contained in the indenture relating to the 11.5% Notes or our revolving credit facility, it may result in an event of default, all of our indebtedness could become immediately due and payable, and the collateral agent for the 11.5% Notes and our revolving credit facility could foreclose on our assets securing such indebtedness following the occurrence and during the continuance of an event of default;

	•	it may require us to dedicate a substantial portion of our cash flow from our business operations to pay our indebtedness, thereby reducing the availability of cash flow to fund working capital, capital expenditures, development projects, general operational requirements and other purposes;

	•	it may reduce our ability to obtain additional financing for working capital, capital expenditures and other activities;

	•	it may place us at a competitive disadvantage compared to those of our competitors that may have proportionately less debt and greater financial resources; and

	•	it may limit our flexibility in reacting to changes in the industry and make us more vulnerable to adverse changes in our business or economic conditions in general.

We expect to obtain the money to pay our expenses and to pay the amounts due under the outstanding notes and our other debt primarily from our operations. Our ability to meet our expenses and make these payments thus depends on our future performance, which will be affected by financial, business, economic and other factors, many of which we cannot control. Our business may not generate sufficient cash flow from operations in the future and our currently anticipated growth in revenue and cash flow may not be realized, either or both of which could result in our being unable to repay indebtedness, including the outstanding notes, or to fund other liquidity needs. If we do not have enough money, we may be required to refinance all or part of our then existing debt (including the then outstanding notes), sell assets or borrow more money, which we may not be able to accomplish on terms acceptable to us, or at all. In addition, the terms of existing or future debt agreements, including the indenture relating to the 11.5% Notes and our revolving credit facility, may restrict us from adopting any of these alternatives. The failure to generate sufficient cash flow or to achieve any of these alternatives could materially adversely affect the value of the Common Stock.

We may be able to incur substantial additional indebtedness in the future. Although the indenture relating to the 11.5% Notes and our revolving credit facility contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial. For example, we have the ability to borrow up to $20.0 million under our revolving credit facility, which is secured by liens on all of our personal and real property assets, with certain exceptions. Under certain circumstances, we are permitted to incur in excess of $20.0 million under our revolving credit facility. See “Capitalization,” “Selected Consolidated Historical Financial Data” and “Description of Certain Indebtedness.”

Our earnings, excluding gains on the early extinguishment of debt, were insufficient to cover our fixed charges for the nine-month period ended September 30, 2004. If our cash flow and capital resources are insufficient to pay interest and principal under our revolving credit facility, the outstanding notes, and our other debt, we may be forced to reduce or delay capital expenditures, sell assets, seek to obtain additional equity capital or attempt to restructure our debt. If any of those alternative measures do not permit us to meet our scheduled debt service obligations, we could face substantial liquidity problems and the

Unless we were to obtain an appropriate waiver, an event of default would give our lender under our revolving credit facility or the holders of the 11.5% Notes, as applicable, the right to demand immediate repayment, a demand we might not be able to meet. We urge you to consider the information under “Capitalization,” “Prospectus Summary — Summary Consolidated Historical and Pro Forma Financial Data,” “Selected Consolidated Historical Financial Data” and “Description of Certain Indebtedness” for more information.

Our sales to customers located outside the United States are conducted primarily through subsidiaries organized under the laws of jurisdictions outside of the United States. For the nine-month period ended September 30, 2004, our foreign restricted subsidiaries contributed approximately 41% of our consolidated revenues. As of September 30, 2004, 45% of our consolidated assets, based on book value, were held by foreign subsidiaries. Dividend and interest payments to us from our foreign subsidiaries may be subject to foreign withholding taxes, which would reduce the amount of funds we receive from such foreign subsidiaries. Dividends and other distributions from our foreign subsidiaries may also be subject to fluctuations in currency exchange rates and restrictions on repatriation, which could further reduce the amount of funds we receive from such foreign subsidiaries.

The indenture relating to the 11.5% Notes and the credit agreement governing our revolving credit facility impose significant operating and financial restrictions on us. These restrictions restrict our ability to take advantage of potential business opportunities as they arise and may adversely affect the conduct of our current business. More specifically, they restrict our ability to, among other things:


	•	pay dividends, redeem subordinated debt or make other restricted payments;

	•	make certain investments or acquisitions;

	•	merge, consolidate or transfer substantially all of our assets; and

	•	transfer, sell or acquire assets, including capital stock of our subsidiaries.

The 11.5% Notes and credit agreement governing our revolving credit facility also require us to meet a number of financial ratios and tests. Compliance with these financial ratios and tests may adversely affect our ability to adequately finance our operations or capital needs in the future or to pursue attractive business opportunities that may arise in the future. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Our Board of Directors has the authority to issue up to 50,000,000 shares of our preferred stock, $0.01 par value per share (“Preferred Stock”), and to determine the price, rights, preferences and privileges of those shares without any further vote or action by our stockholders. You will be subject to, and may be adversely affected by, the rights of the holders of any Preferred Stock that may be issued in the future. The issuance of Preferred Stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire a majority of our outstanding voting stock.

To our knowledge, Carl C. Icahn is the beneficial owner of approximately 29.1% of our outstanding Common Stock. Two employees of companies affiliated with Mr. Icahn are members of our Board of Directors, which is comprised of five directors. When we emerged from bankruptcy, a third individual was designated as a member of our Board of Directors by a company affiliated with Mr. Icahn. As the beneficial owner of 29.1% of our Common Stock, Mr. Icahn has significant influence regarding the election of our Board of Directors and stockholder voting on decisions relating to fundamental corporate actions. It is possible that the interests of Mr. Icahn could conflict in certain circumstances with your interest as a stockholder.

We have recently emerged from bankruptcy and have a history of losses. We may not grow or achieve and maintain profitability in the near future, or at all. On November 13, 2002, we filed a prepackaged plan of reorganization under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Illinois, Eastern Division. On April 3, 2003, we consummated our prepackaged plan of reorganization, as modified by the bankruptcy court, and emerged from bankruptcy. If we cannot achieve and maintain profitability, the value of an investment in the Common Stock may decline. Should we file for bankruptcy again in the future, the Common Stock could lose some or all of its value.

In connection with our plan of reorganization, we were required to prepare projected financial information to demonstrate to the United States Bankruptcy Court the feasibility of our plan of reorganization and ability to continue operations upon our emergence from bankruptcy. Also in connection with our emergence from bankruptcy, we have applied the “fresh-start” accounting method. This method requires us to revalue all our assets and liabilities based on our estimate of our enterprise value and the fair value of each of our assets and liabilities. These projections and enterprise valuation were prepared solely for the purpose of the bankruptcy and should not be relied upon for any other purpose. The determination of these values was subject to significant estimates, and the fair values recorded based on these estimates may not be fully realized in periods subsequent to our emergence from bankruptcy. The recorded amounts of our assets and liabilities and the results of our operations reflected in the financial statements for periods subsequent to our emergence from bankruptcy are not comparable to the financial statements for the period prior to the emergence from bankruptcy. You may not be able to make meaningful comparisons of certain information reflecting our results of operations and financial condition to the previous periods.

We face competition in the United States and internationally from competitors that may have substantially greater financial resources than us. The cellulosic casings industry includes several competitors that are larger and better capitalized than us. Currently, our primary competitors include Teepak LLC, Viscofan, S.A. and Kalle Nalo GmbH, although new competitors could enter the market or competing products could be introduced. Since 1995, there have been steady declines in the prices of cellulosic casing products; nevertheless, we believe prices have stabilized recently. Also, although we believe that the current output in our industry is in balance with global demand, the continuous-flow

nature of the casings manufacturing process requires competitors in our industry to compete based on volume. Recently, some of our competitors have announced plans to expand extrusion capacity at their existing facilities, which we anticipate will increase global capacity by approximately 5%. Upon completion of these projects, the industry may return to a condition of overcapacity, likely leading the industry to compete more aggressively based on volume. We attempt to differentiate our products on the basis of product quality and performance, product development, service, sales and distribution, but competitors in our industry may use price as a competitive factor in an attempt to obtain greater volumes. If prices decline further, we may not be able to achieve profitability whereas certain of our competitors who are better capitalized may be positioned to absorb such price declines. Any of these factors could result in a material reduction of our revenue, gross profit margins and operating results.

Our principal raw materials, paper and pulp, constitute an important aspect and cost factor of our operations. We generally purchase our paper and pulp from a single source or a small number of suppliers. Any inability of our suppliers to timely deliver raw materials or any unanticipated adverse change in our suppliers could be disruptive and costly to us. Our inability to obtain raw materials from our suppliers would require us to seek alternative sources. These alternative sources may not be adequate for all of our raw material needs, nor may adequate raw material substitutes exist in a form that our processes could be modified to use. These risks could materially and adversely impact our sales volume, revenues, costs of goods sold and, ultimately, profit margins.

We and other participants in our industry have considered alternatives to cellulosic casings for many years. As resin technology improves, alternative casings may be developed that threaten the long-term sustainability and profitability of our cellulosic casings, our core product, and our fibrous casings. Our failure to anticipate, develop or efficiently and timely integrate new technologies that provide viable alternatives to cellulosic casings, including plastics and film alternatives, may cause us to lose customers and market share to competitors integrating such technologies, which, in turn, would negatively impact our revenues and operating results.

We could be adversely affected if consumers in the food markets were to lose confidence in the safety and quality of meat products, particularly with respect to processed meat products for which casings are used, such as hot dogs and sausages. Outbreaks of, or even adverse publicity about the possibility of, diseases such as “mad cow disease” and “foot and mouth disease,” food-borne pathogens such as E. coli and listeria, and any other food safety problems or concerns relating to meat products, may discourage consumers from buying meat products. These risks could also result in additional governmental regulations, and/or cause production and delivery disruptions or product recalls. Each of these risks could adversely affect the demand for our products, and consequently, our revenues and liquidity.

Various medical studies detailing the health-related attributes of particular foods, including meat products, affect the purchase patterns, dietary trends and consumption preferences of consumers. These patterns, trends and preferences are routinely changing. For example, general dietary concerns about meat products, such as the cholesterol, calorie, sodium and fat content of such products, could result in reduced demand for such products, which would, in turn, cause a reduction in the demand for our products and a decrease in our sales volume and revenue.

Our business is capital intensive. We operate seven manufacturing facilities and eight distribution centers as part of our business. We are required to make substantial capital expenditures and substantial repair and maintenance expenditures to maintain, repair, upgrade and expand existing equipment and facilities to keep pace with competitive developments. In addition, we are required to invest in technological advances to maintain compliance with safety standards and environmental laws or regulations. For example, we have already expended $2.9 million, and expect to expend another $7.4 million over the next 12 months, on maximum achievable control technology (“MACT”) to meet certain air emissions standards related to carbon disulfide under the Clean Air Act Amendments of 1990. Historically, we have spent approximately $5.0 million each year on capital expenditures. We currently estimate that we will need to spend approximately $9.9 million for capital expenditures in 2004, $8.0 million in 2005 and approximately $6.5 million annually thereafter. At some point in the future, we may be required to obtain additional financing to fund capital expenditures. If we need to obtain additional funds, we may not be able to do so on terms favorable to us, or at all, which would ultimately negatively affect our production and operating results.

The reliability of our production facilities is critical to the success of our business. In recent years, we have streamlined our productive capacity to be better aligned with our sales. At current operating levels, we have little or no excess production capacity for certain products. Additionally, our collective bargaining agreement covering union employees at our Loudon, Tennessee facility expires on September 30, 2005. When the current agreement expires, we do not know whether we will be able to negotiate a replacement agreement on similar or more favorable terms as the current agreement or at all or whether we will be able to do so without production interruptions or labor stoppages. If the operations of any of our manufacturing facilities were interrupted or significantly delayed for any reason, we may be unable to shift production to another facility without incurring a significant drop in production. Such a drop in production would negatively affect our sales and our relationships with our customers.

We maintain a pension plan for our domestic employees, through which monthly benefits are paid to our retired employees. We are subject to substantial minimum contribution requirements with respect to our pension plan. Although the amount fluctuates, our aggregate minimum funding contribution requirement from September 30, 2004 through 2008 is approximately $36.1 million. This amount could increase or decrease due to market factors, including expected returns on plan assets and the discount rate used to measure accounting liabilities, among other factors.

Our unfunded pension plan liabilities with respect to our North American employees were projected to be $47.1 million as of September 30, 2004. The funds in our defined benefit plan are subject to market risks, including fluctuating discount rates, interest rates and asset returns. As of April 1, 2004 for all employees not covered by a collective bargaining agreement, we eliminated the unreduced early retirement benefit within our defined benefit plan and, in addition, we replaced the current defined benefit plan for all employees who were not defined benefit plan participants as of March 31, 2003 with a new defined contribution plan. Plan documents governing our pension plan reserve our right to terminate, amend or change the pension plan.

We have historically provided postretirement medical and life insurance benefits to eligible North American retirees. The retirees contribute between 50% and 80% of the “premium costs” depending on their credited years of service with us. We fund the postretirement employee benefits (“PREB”) on a “pay-as-you-go” basis. The actuarially computed unfunded PREB liability with respect to our North American employees was approximately $55.8 million as of September 30, 2004. Plan documents governing our postretirement medical and life insurance benefits reserve our right to terminate, amend or change the plans under which such benefits are offered.

The Company will terminate postretirement medical benefits as of December 31, 2004 for all active employees and retirees in the U.S. who are not covered by a collective bargaining agreement. It is estimated that said termination will result in a projected $35 million reduction in the Company’s unfunded postretirement liability.

We currently have manufacturing or sales and distribution centers in six foreign countries, including Brazil, Canada, France, Germany, Italy and Poland. Our international sales and operations may be subject to various political and economic risks including, but not limited to:


	•	possible unfavorable exchange rate fluctuations or hyperinflation;

	•	changes in a country’s or region’s political or economic conditions;

	•	governmental regulations, including import and export controls; and

	•	tariffs.

Our sales to customers located outside the United States generally are subject to taxes on the repatriation of funds. In addition, international operations in certain parts of the world may be subject to international balance of payments difficulties that may raise the possibility of delay or loss in the collection of accounts receivable from sales to customers in those countries. Net sales to customers located outside the United States represented approximately 59% and 59% of total net sales in 2003 and the nine-month period ended September 30, 2004, respectively.

Should any of these risks occur, it could impair our ability to export our products or conduct sales to customers located outside of the United States and result in a loss of sales and profits from our international operations.

In recent years, the trend among our customers has been towards consolidation within the meat processing industry. These consolidations have enhanced the purchasing power of our customers who, not being contractually obligated to purchase our products, tend to exert increased pressure with respect to pricing terms, product quality and new products. As our customer base continues to consolidate, the already high level of competition for the business of fewer customers is expected to intensify. If we do not continue to enhance the value of our product offering in a way that provides greater benefit to our customers, our sales volume and revenues could decrease.

In connection with our business strategies and goals of growth of our operations and market share, we may seek to acquire, merge with, enter into partnerships with or enter into other similar transactions with,

Our operations are subject to extensive and increasingly stringent environmental, health and safety laws and regulations pertaining to the discharge of material into the environment, the handling and disposition of wastes and land reclamation and remediation of hazardous substance releases. We are also subject to differing environmental regulations and standards due to the fact we operate in many different countries. These laws and regulations are complex and subject to change at any time. Failure to comply with environmental laws and regulations can have serious consequences for us, including criminal as well as civil and administrative penalties and negative publicity. Liability under these laws and regulations involves inherent uncertainties. In addition, continued government and public emphasis on environmental issues can be expected to result in increased future investments for environmental controls at ongoing operations, which will be charged against income from future operations. Present and future environmental laws and regulations applicable to our operations may require substantial capital expenditures and may have a material adverse effect on our business, financial condition and results of operations.

We have incurred, and will continue to incur, significant capital and operating expenditures to comply with various environmental laws and regulations. For example, we have already expended $2.9 million, and expect to expend another $7.4 million over the next 12 months, on “maximum achievable control technology” to meet certain air emissions standards related to carbon disulfide under the Clean Air Act Amendments of 1990. Although we expect to implement the technology necessary to meet these emissions standards at our two U.S. extrusion facilities, our failure to do so could result in substantial penalties, including civil fines of approximately $50,000 per facility per day or a shutdown of our U.S. extrusion operations. Additional environmental requirements imposed in the future could require currently unanticipated investigations, assessments or expenditures, and may require us to incur significant additional costs. As the nature of these potential future charges is unknown, management is not able to estimate the magnitude of any future costs, and we have not accrued any reserve for any potential future costs.

Some of our facilities have been in operation for many years. During that time, we and previous owners of these facilities may have generated and disposed of wastes that are or may be considered hazardous or may have polluted the soil or groundwater at our facilities, including adjacent properties. Some environmental regulations impose liability on certain categories of persons who are deemed to be responsible for the release of “hazardous substances” or other pollutants into the environment, without regard to fault or to the legality of such person’s conduct. Under certain circumstances, a party may be required to bear more than its proportional share of cleanup costs at a contaminated site for which it has liability if payments sufficient to remediate the site cannot be obtained from other responsible parties.

For example, our Canadian subsidiary, Viskase Canada Inc. (“Viskase Canada”), among others, has been identified, and is currently being investigated by the Ontario Ministry of the Environment (the “MOE”), as a potentially responsible party for polychlorinated biphenyl (“PCB”) contamination at its facility in Lindsay, Ontario, Canada. While Viskase Canada did not engage in the activities that deposited the PCB contamination at the Lindsay facility, it is possible that it could ultimately be held responsible for costs associated with the clean-up of the site.

These costs could be substantial. Moreover, the MOE could seek to hold the Company liable for a portion of these costs, although we believe that risk is low. See “Business — Legal Matters.”

We are currently involved in both litigation and ongoing governmental proceedings arising out of environmental contamination at a facility owned by Viskase Canada in Lindsay, Ontario, Canada. Viskase Canada acquired the facility from Union Carbide Corporation and its affiliates, including Union Carbide Canada Limited (together, “Union Carbide”), as part of the purchase of Union Carbide’s cellulosic casings and plastic barrier films businesses by several of our former subsidiaries. Shortly after the acquisition, Viskase Canada commenced a lawsuit in Canada against Union Carbide seeking damages resulting from the discovery of ammonium sulphate contamination at the Lindsay facility and Union Carbide’s breach of contractual representations and warranties relating to the environmental condition of the facility. In the meantime, the MOE notified Viskase Canada that it had evidence suggesting that the Lindsay facility was also a source of PCB contamination. The Dow Chemical Company (the corporate successor to Union Carbide) and its relevant affiliates (collectively, “Dow”) have replaced or soon will replace Union Carbide as the defendant in the ongoing litigation, which is still pending and is expected to proceed to trial sometime during 2005. Dow has consented to an amendment to the lawsuit that adds a claim against Union Carbide relating to the PCB contamination, which amendment Viskase Canada intends to file with the court as soon as the claim can be adequately quantified.

Viskase Canada was recently advised by the MOE that it expects to issue certain orders against the Company, Viskase Canada, Dow and others in the next few months requiring remediation under applicable Canadian provincial environmental laws and regulations. Canadian provincial environmental law provides for joint and several liability among responsible parties for remediation of contaminated sites. It further extends responsibility for environmental contamination, under certain circumstances, not only to parties who actively release substances into the environment, but also to those who at any time had “management or control” of the contaminated property. Consequently, the MOE has further indicated that it will seek to require such parties (including the Company and Viskase Canada) to post a bond preliminarily set in an aggregate amount of $20.0 million (Canadian) in connection with anticipated remediation of the site. The bond, if required, would impose joint and several obligations on the parties. We have vigorously opposed any such obligation on the grounds that neither Viskase Canada nor the Company engaged in any of the operations or conduct producing the contamination found at the Lindsay facility, and on the grounds that the Company, as a high-level parent company, has had no significant connection to the property or control of operations there. Nevertheless, Viskase Canada, and possibly the Company, may be deemed a responsible party with respect to remediation of PCB contamination at the Lindsay facility, or limited portions or aspects thereof. While no definitive clean-up cost estimates have been arrived at concerning the PCB contamination, remediation costs could be substantial. We have reserved $0.75 million (U.S.) for remediation of the Lindsay facility, and our present estimate of the cost of remediating the PCB contamination at the Lindsay facility is $2.0 million (Canadian).

In 1993, the Illinois Department of Revenue submitted a proof of claim against Envirodyne Industries, Inc. (our former corporate name) and its subsidiaries in the United States Bankruptcy Court, for liability with respect to our allegedly incorrect utilization of certain loss carry-forwards of certain of our subsidiaries. We believe the potential tax liability, interest and penalties totaled approximately $2.5 million as of September 30, 2004. Our liability could be materially greater than or less than our current estimates and could materially affect our financial condition. See “Business — Legal Matters” for more information.

In August 2001, the Department of Revenue of the Province of Quebec, Canada, issued an assessment against Viskase Canada in the amount of $2.7 million (Canadian), plus additional interest and possible penalties to accrue after August 31, 2001. This assessment is based upon Viskase Canada’s failure to collect and remit sales tax during the period July 1, 1997 to May 31, 2001. During this period, Viskase Canada did not collect and remit sales tax in Quebec in reliance on the written advice of its outside accounting firm. We have provided for a reserve of $0.3 million for interest and penalties, if any, but have

We rely on a combination of trademarks, patents, trade secret rights and other rights to protect our intellectual property. Our trademark or patent applications may not be approved and our trademarks or patents may be challenged by third parties. We cannot be certain that the steps we have taken will prevent the misappropriation of our intellectual property, particularly in foreign countries where the laws may not protect our rights as fully as the laws of the United States. From time to time, it has been necessary for us to enforce our intellectual property rights against infringements by third parties, and we expect to continue to do so in the ordinary course of our business. We also may be subjected to claims by others that we have violated their intellectual property rights. Even if we prevail, third party-initiated or Company-initiated claims may be time consuming and expensive to resolve, and may result in a diversion of our time and resources. The occurrence of any of these factors could diminish the value of our trademark, patent and intellectual property portfolio, increase competition within our industry and negatively impact our sales volume and revenues.

All of the Common Stock referred to in this offering will be offered by the selling shareholders. We will not receive any proceeds from the resales of the Common Stock by those selling shareholders. We will receive proceeds in the amount of $0.01 per share when the selling shareholders exercise the 90,000 Warrants entitling them to purchase 805,230 shares of Common Stock that they may sell from time to time. If all warrants are exercised, we will receive $8,052.30, which will be used for general corporate purposes.

We have not paid dividends on our Common Stock, and we do not anticipate paying dividends on our Common Stock in the foreseeable future. In addition, the terms of our revolving credit facility and the indenture governing the 11.5% Notes restrict our ability to pay dividends on the Common Stock.

The following table sets forth our cash and cash equivalents, debt and total capitalization as of September 30, 2004. This table should be read in conjunction with “Use of Proceeds,” “Selected Consolidated Historical Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the notes thereto included elsewhere in this prospectus.


(1)	Includes $2.7 million of restricted cash primarily securing letters of credit.

(2)	We currently have a $20 million revolving credit facility in place with Wells Fargo Foothill.

(3)	Represents aggregate principal amount of 11.5% Notes as of September 30, 2004. The carrying value of the 11.5% Notes as of September 30, 2004 was $89.0 million.

(4)	Represents aggregate principal amount of the 8% Senior Notes as of September 30, 2004. The carrying value of the 8% Senior Notes as of September 30, 2004 was $11.2 million.

The following table contains our selected consolidated financial data for the years ended December 31, 1999, 2000, 2001 and 2002, the periods from January 1, 2003 to April 2, 2003 and from April 3, 2003 to December 31, 2003 and the nine months ended September 30, 2004, which have been derived from audited consolidated financial statements for 1999, 2000, 2001, 2002 and 2003 and unaudited interim consolidated financial statements for the periods from January 1, 2003 to April 2, 2003, April 3, 2003 to September 30, 2003 and for the nine months ended September 30, 2004. The selected consolidated balance sheet data as of September 30, 2004 have been derived from our unaudited interim consolidated financial statements and, in our opinion, reflects all adjustments, consisting of normal accruals, necessary for a fair presentation of the data. Our unaudited interim consolidated results of operations for the nine months ended September 30, 2004 may not be indicative of the results that may be expected for 2004. You should read the information set forth below in conjunction with our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.

As a result of our emergence from Chapter 11 bankruptcy and the application of fresh-start accounting, our consolidated financial statements for the periods subsequent to April 2, 2003, following the effective date of our plan of reorganization in the bankruptcy proceedings, are referred to as the “Reorganized Company” and are not comparable to those for the periods prior to April 3, 2003, which are referred to as the “Predecessor Company.” A black line has been drawn in the data presented below to distinguish, for accounting purposes, the periods associated with the Reorganized Company and the Predecessor Company. Aside from the effects of fresh-start accounting and new accounting pronouncements adopted as of the effective date of the plan of reorganization, the Reorganized Company follows the same accounting policies as the Predecessor Company.


(1)	Ratio of earnings to fixed charges includes gain (loss) from continuing operations before taxes and reorganization expense and gain on debt extinguishment, plus fixed charges, less capitalized interest net of amortization of capitalized interest, divided by fixed charges. Fixed charges include interest costs expensed and capitalized, including amortization of the discount associated with the 8% Senior Notes and estimated interest within rental expense. Where “NM” is indicated, the ratio is not meaningful since earnings (as defined herein) were negative.

(2)	Capital expenditures total does not include $9,500 for reacquisition of leased assets.

We are a worldwide leader in the manufacture and sale of cellulosic, fibrous and plastic casings for the processed meat industry. We currently operate seven manufacturing facilities and eight distribution centers throughout North America, Europe and South America, and we derive approximately 60% of our total net sales from customers located outside the United States. We believe we are one of the two largest manufacturers of non-edible cellulosic casings for small-diameter processed meats and one of the three largest manufacturers of non-edible fibrous casings. Our management believes that the factors most critical to the success of our business are:


	•	maintaining and building upon our reputation for providing a high level of customer and technical services;

	•	maintaining and building upon our long-standing customer relationships, many of which have continued for decades;

	•	developing additional sources of revenue through new products and services; and

	•	continuing to streamline our cost structure.

Our net sales are primarily driven by consumer demand for meat products, but are also driven by demand for casings by processed meat manufacturers and by the prices of our casings relative to the market. More specifically, demand for our casings is dependent on overall consumption of processed meats and the types of meat products purchased by consumers. Demand for meat products is driven by general economic conditions, population growth, changing consumer preferences and dietary trends, and expansion into developing world markets. Average selling prices are dependent on overall supply and demand for processed meat casings and on our product mix.

Our industry is capital-intensive and is characterized by high fixed costs. The industry’s operating results have historically been sensitive to the global balance of capacity and demand. We believe that the industry’s current output is in balance with global demand and that the downward trend in casing prices during recent years has stabilized. Recently, some of our competitors announced plans to expand extrusion capacity at their existing facilities. The projected increase in global capacity from these expansion projects is approximately 5%.

Our contribution margin varies with changes in selling price, input material costs, labor costs and manufacturing efficiencies. Subject to the limits of our capacity discussed below, our total contribution margin increases as demand for our casings increases. Our financial results benefit from increased volume because we do not have to increase our fixed cost structure in proportion to increases in demand. For certain products, we operate at near-capacity in our existing facilities. We continue to seek ways to increase our throughput at these facilities; however, should demand for those products increase substantially, we would not be able to meet such increased demand in the short-term. We regularly evaluate our capacity limitations and compare those limitations to projected market demand.

We operate in a competitive environment. During the mid-1990’s, we experienced significant pricing pressure and volume loss as a consequence of the entrance of a foreign competitor into the U.S. market. The market for cellulosic casings experienced declines in selling price over the last ten years, which we believe only recently has stabilized. While the overall market volume has expanded during this period, the industry continued to experience pressure on pricing. Our financial performance moves in direct relation to our average selling price.

We have continued to reduce our fixed cost structure in response to market and economic conditions. Since 1998, we have reduced annual fixed costs by approximately $35 million by:


	•	closing our Chicago, Illinois plant and selling the facility;

	•	reconfiguring our Loudon, Tennessee and Beauvais, France plants;

	•	closing our Thâon-les-Vosges, France extrusion operations;

	•	discontinuing our Nucel® operations;

	•	ceasing operations at our Lindsay, Ontario, Canada facility; and

	•	reducing the number of employees at our headquarters and most of our facilities by approximately 30%.

Despite these restructuring efforts, the significance of our debt load caused us to be unable to continue meeting our debt service obligations in 2002. As a result, we filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code on November 13, 2002. The bankruptcy court confirmed our plan of reorganization and we emerged from bankruptcy on April 3, 2003. We adopted fresh-start accounting in accordance with SOP 90-7, and reflected the effects of the adoption in the consolidated financial statements in 2003.

As a result of our adoption of fresh-start accounting, the results of operations for periods ended after April 2, 2003 are prepared on a different basis of accounting. Therefore, the results of operations prior to April 3, 2003 are not comparable to the periods after April 2, 2003.

Net Sales. Our net sales for the third quarter of 2004 were $53.0 million, which represents an increase of $1.5 million or 2.9% from the prior year period. Sales benefited from strong volume in the fibrous casing market in the U.S. Additionally, U.S. sales pricing in the small diameter cellulosic casings market was slightly favorable. Offsetting these benefits was pressure on selling prices in the worldwide market. Increased European sales dollars primarily reflect the strengthened Euro against the U.S. dollar, which benefited net sales by $1.4 million; increased volume of $0.7 million and decreased price and or mix of $1.2 million.

Cost of Sales. The cost of sales increased 5.7% from the prior year; and increased as a percent of sales from 77.3% in third quarter 2003 to 79.4% in third quarter 2004. The increase in cost of sales as a percent of sales can be attributed to higher plant costs in our European facilities and 0.4% of additional depreciation related to the repurchase of the GECC leased equipment.

Selling, General and Administrative Expenses. We were able to reduce selling, general and administrative expenses from 16.2% of sales in third quarter 2003 to 13.9% of sales in third quarter 2004. This can be attributed to reductions in overall spending and internal cost savings measures implemented during the third and fourth quarters of 2003 and the first quarter of 2004, which reduced employee costs.

Operating Income. The operating income for the third quarter of 2004 was $3.3 million, representing an improvement of $1.7 million from the prior year period. The improvement in the operating income resulted primarily from reduced selling, general and administrative expenses, the absence of restructuring expenses during 2004 offset by higher cost of goods due to higher European plant costs.

Interest Expense. Interest expense, net of interest income, for the third quarter of 2004 and 2003 both totaled $3.3 million. The principal components of the third quarter 2004 interest expense were approximately $0.5 million on the 8% Senior Notes and $2.7 million on the 11.5% Notes. The principal components of the third quarter 2003 interest expense were approximately $1.0 million on the GECC lease and $2.3 million on the 8% Senior Notes.

Other Income. Other income of approximately $1.9 million and $0.3 million for the third quarter of 2004 and the prior year quarter, respectively, consists principally of foreign exchange losses and gains.

Income Tax Benefit. In the third quarter of 2004, a tax benefit of $0.2 million was recognized on the income before income taxes of $1.8 million resulting from the tax benefit related to operations of foreign subsidiaries.

The net income for the quarter ended September 30, 2004 was $2.0 million compared to net (loss) of $1.3 million for the comparable period of 2003.


(1)	- % Change is computed as the percentage difference between the column entitled “Nine Months Ended September 30, 2004 and the sum of the columns entitled “Predecessor Company January 1 through April 2, 2003” plus “April 3 through September 30, 2003.”

Net Sales. Our net sales for the first nine months of 2004 were $154.4 million, which represents an increase of $7.9 million or 5.4% from the predecessor period January 1 through April 2, 2003 and reorganized period April 3, 2003 through September 30, 2003. Sales benefited from strong volumes in the small diameter cellulosic casings market in the U.S. domestic and export markets. Additionally, sales benefited from stronger volumes in the fibrous casing market in the U.S., which more than offset the pressure selling prices had on our U.S. sales. Increased European sales dollars primarily reflect the strengthened Euro against the U.S. dollar, which benefited net sales by $6.7 million; increased volume of $2.7 million and decreased price and or mix of $2.2 million.

Cost of Sales. The cost of sales increased 4.3% over the prior year due to the increased sales level for the same period, and increased as a percent of sales from 78.8% in first nine months of 2003 to 79.6% in first nine months 2004. The increase in cost of sales as a percent of sales can be attributed to higher plant costs in Europe and 0.3% of additional depreciation related to the repurchase of the GECC leased equipment.

Selling, General and Administrative Expenses. We were able to reduce selling, general and administrative expenses from 17.4% of sales in first nine months of 2003 to 14.8% in first nine months of 2004. This can be attributed to reductions in overall spending and internal reorganizations that occurred in July 2003 and March 2004, which reduced employee costs. Additionally, in the first quarter of 2004 there was an unusual income charge of $0.4 million consisting of a reversal of a legal liability recorded in fresh-start accounting that has been settled.

Operating Income. The operating income for the first nine months of 2004 was $8.4 million, representing an improvement of $6.3 million from the prior year period. The improvement in the operating income resulted primarily from lower employee costs, reduced selling, general and administrative expenses and a $3.0 million decrease in depreciation during the first nine months of 2004 versus the same period of 2003. Operating income in 2004 includes a restructuring charge of $0.8 million, offset by a reversal of $.1 million for the 2003 restructuring, in keeping with the Company’s strategy to streamline its cost structure. Also included in the 2004 operating income is an unusual income charge of $0.4 million consisting of a reversal of a legal liability recorded in fresh-start accounting that has been settled.

Interest Expense. Interest expense, net of interest income, for the first nine months of 2004 totaled $9.4 million, which represented an increase of $2.1 million from the $7.3 million for the comparable period of the prior year predecessor and reorganized periods. The principal components of the first nine months of 2004 interest expense were approximately $1.1 million on the GECC lease; $5.2 million on the 8% Senior Notes and $2.7 million on the Notes. The principal components of the first nine months of 2003 interest expense were approximately $3.1 million on the GECC lease and $4.3 million on the 8% Senior Notes issued upon the emergence from bankruptcy in April 2003.

Other Expense (Income). Other expense of approximately $1.4 million for the first nine months of 2004 and other income of $3.8 million for the prior year predecessor and reorganized periods, respectively, consists principally of foreign exchange losses and gains, the loss on disposal of an asset in 2004, and the gain associated with the disposal of property held for sale in 2003.

Debt Extinguishment. The loss on debt extinguishment for the first nine months of 2004 of $13.1 million consists of the losses from the early retirement of $55.5 million of the 8% Senior Notes and of the early termination of the General Electric Capital Corporation (“GECC”) capital lease. The 8% Senior Notes were purchased at a discount to the principal amount, however, the purchase price exceeded the carrying value of the 8% Senior Notes as established in fresh-start accounting. The gain on debt extinguishment for the period from January 1 through April 2, 2003 of $153.9 million consisted of the elimination of the old senior debt of $163.1 million, a gain on the elimination of the accrued interest on the debt of $25.1 million, a loss on the establishment at fair market value of the 8% Senior Notes of $33.2 million and a loss on the fair market value of the new equity at $1.0 million.

Reorganization Expense. The 2003 reorganization expenses of $0.8 million consist principally of fees for legal, financial advisory and professional services incurred due to the Chapter 11 proceeding.

Income Tax Benefit. In the first nine months of 2004, a tax benefit of $.2 million was recognized on the (loss) before income taxes of $(17.3) million, resulting from the tax benefit related to operations of foreign subsidiaries.

Primarily as a result of factors discussed above, net (loss) for the nine months ended September 30, 2004 was $(15.1) million compared to net income of $151.8 million for the predecessor and reorganized periods of 2003.

The following discussion compares the results of operations for the fiscal year ended December 31, 2001 to the results of operations for the fiscal year ended December 31, 2002, and compares the results of operations for the fiscal year ended December 31, 2002 to the results of operations for the fiscal year ended December 31, 2003. We have provided the table below in order to facilitate an understanding of this discussion. The table shows our results of operations for the 2001, 2002 and 2003 fiscal years. Results of operations for 2003 include the combined income statement activity of the Predecessor Company and the Reorganized Company, and are not intended to be a presentation in accordance with accounting principles generally accepted in the United States. The table (dollars in thousands) is as follows:

Net Sales. Our 2003 net sales were $197.8 million, which represented an increase of 14.2 million from 2002. The increase in sales reflected slightly higher volumes and the strengthening of the Euro against the U.S. dollar, which positively benefited net sales by approximately $13.8 million. This benefit was partially offset by the continuing effect of reduced selling prices in the worldwide casings industry.

Cost of Sales. Our cost of sales increased proportionately with net sales in 2003 (from 80.0% of net sales in 2002 to 79.9% of net sales in 2003), with the benefit of various cost reduction programs and lower depreciation due to fresh-start accounting being offset, for the most part, by increases in the costs of labor and materials.

Selling, General and Administration Expense. We were able to reduce our selling, general and administrative expenses in 2003 by $5.0 million compared to 2002, and from 21.0% to 17.0% of net sales in the same period. This reduction reflected decreases in depreciation of certain assets that reached the end of their depreciable lives, employee expenses and other costs associated with our headquarters facility.

Operating Income (Loss). Our operating loss during 2003 was $42.8 million. This operating loss included net restructuring expense of $1.0 million and an asset write-down of $46.8 million. The asset write-down occurred during our annual impairment review in the fourth quarter of the year and resulted in a complete write-off of the goodwill created under fresh-start accounting after consummation of our

Debt Extinguishment. We recognized a gain on the early extinguishment of debt in the amount of $153.9 million in the period January 1 through April 2, 2003. We did not recognize income tax expense on that gain. Internal Revenue Code Section 108 prescribes that we will not recognize any taxable income for calendar year 2003 but that we must reduce tax attributes up to the extent of the cancellation of debt income (COD). In 2003, the tax benefit recognized of $0.3 million resulted from the benefit related to sales to customers outside the U.S.

Interest Expense. Interest expense during 2003 totaled $11.6 million, which represented a decrease of $10.7 million from 2002. The decrease was due to the emergence from bankruptcy and the establishment of 8% Senior Notes with a fair market value of $33.3 million, which replaced $163.1 million of 10.25% Senior Notes. The principal components of the 2003 interest expense were approximately $4.2 million on the GECC lease and $6.6 million on the 8% Senior Notes issued upon emergence from bankruptcy in April 2003. The principal components of the 2002 interest expense were approximately $15.2 million on the 10.25% Senior Notes that were cancelled upon emergence bankruptcy in April 2003 and $6.0 million on the GECC lease. Cash interest paid was $4.4 million in 2003, which compared to $3.2 million in 2002. This increase was primarily associated with the timing of payments under the GECC capital lease.

Other Income (Expense). Other income (expense) of approximately $5.3 million and $1.5 million in 2003 and 2002, respectively, consisted principally of foreign exchange gains.

Reorganization Expense. The reorganization expenses in 2003 of $0.8 million consisted principally of fees for legal, financial advisory and professional services incurred due to the Chapter 11 proceeding, which compared to $3.4 million in 2002.

Income Tax Benefit. Net domestic cash income taxes paid (refunded) in 2003 and 2002 were $0.0 and $(2.1) million, respectively. In 2002, we received a refund of a 2001 alternative minimum tax payment, resulting from passage of the 2002 Job Creation Act which retroactively changed the law under which we made the 2001 payment. Net foreign cash income taxes paid during the same periods were $3.0 million and $0.9 million respectively. The increase in 2003 compared to 2002 was due to improved profits reported for tax purposes in our foreign subsidiaries.

Net Sales. Our 2002 net sales were $183.6 million, which represented a decrease of $5.7 million from 2001. The decline in sales reflected the continuing effect of reduced selling prices in the casings industry and slightly lower sales volumes, offset by the strengthening Euro against the U.S. dollar that positively benefited net sales by approximately $3.2 million.

Cost of Sales. Cost of sales decreased from 82.5% of net sales in 2001 to 80.0% of net sales in 2002 primarily as a result of a reduction in raw materials costs, but also as a result of our continuing cost-reduction initiatives.

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased by $1.5 million, but remained at 21.0% as a percentage of sales as a result of the 2002 restructuring, which reduced headcount throughout our organization.

Operating Income (Loss). Our operating income during 2002 was $2.3 million. Operating income included net restructuring income of $6.1 million recognized in the second quarter of 2002. This restructuring income was the result of a reversal of $9.3 million of excess reserves that were originally recorded in 2000 due to the negotiation of reduced Nucel® technology third party license fees, offset by a

Interest Expense. Interest expense during 2002 totaled $22.2 million, which represented a decrease of $3.3 million from 2001. The decrease was due primarily to the lower amount of interest expense related to the GECC lease payment for 2002 compared to 2001. Cash interest paid decreased from $11.7 million in 2001 to $3.2 million in 2002, primarily as a result of ceasing interest payments on the 10.25% Senior Notes due 2001.

Other Income (Expense). Other income (expense) for 2002 increased by $4.9 million compared to 2001, and consisted primarily of foreign exchange gains.

Reorganization Expense. The reorganization expenses of $3.4 million consisted principally of professional fees for services incurred due to our Chapter 11 proceeding.

Income Tax Benefit. In 2002, the tax benefit of $1.3 million resulted from the benefit of a U.S. income tax refund resulting from the Job Creation Act enacted in March 2002, offset by the tax provision related to operations of foreign subsidiaries. Net domestic cash income taxes paid (refunded) in 2002 and 2001 were $(2.1) million and $2.2 million, respectively. The 2001 payment was due to alternative minimum tax rules which were superseded in 2002 with passage of the Job Creation Act and under which we received a 2002 refund. Net foreign cash income taxes paid during the same periods were $0.9 million and $2.5 million respectively. The decrease in 2002 compared to 2001 was due to lower profits reported for tax purposes in our foreign subsidiaries.

In general, our financial results are affected by changes in foreign exchange rates. Subject to market conditions, we price most of our products in our foreign operations in local currencies, with the exception of the Brazilian export market and the U.S. export markets, which are priced in U.S. dollars. As a result, a decline in the U.S. dollar relative to the local currencies of profitable foreign subsidiaries can have a favorable effect on our profitability, and an increase in the value of the U.S. dollar relative to the local currencies of profitable foreign subsidiaries can have a negative effect on our profitability. Exchange rate fluctuations improved the comprehensive loss by $3.7 million in both 2003 and 2002. Exchange rate fluctuations decreased comprehensive income by $0.3 million for the nine months ended September 30, 2004 and increased comprehensive income by $0.3 million for the comparable predecessor and reorganized periods of 2003.

During 2001, we recognized a net gain of $3.2 million, which was a residual amount left over from the sale of our plastic barrier and non-barrier shrink films business in 2000. The business sold included production facilities in the United States, United Kingdom, and Brazil. In conjunction with the sale of the films business, we shut down our oriented polypropylene films business located in Newton Aycliffe, England and our films operation in Canada. The costs of shutting down these operations are included in the business discontinuance.

Cash and cash equivalents increased by $7.4 million during the first nine months of 2004. Cash flows provided by operating activities were $14.3 million, provided by investing activities were $11.2 million, and used in financing activities were $17.9 million. Cash flows provided by operating activities were principally attributable to depreciation, amortization, the loss on debt extinguishment and the non-cash accrued interest on the debt offset by the net loss and increase in working capital usage. Cash flows provided by

Cash and cash equivalents increased by $13.3 million during the period from April 3 through December 31, 2003. Cash flows provided by operating activities were $16.6 million, used for reorganization items were $0.4 million, provided by investing activities were $0.7 million, and used in financing activities were $4.5 million. Cash flows provided by operating activities were principally attributable to the effect of depreciation and amortization, and a decrease in working capital usage. Cash flows used for reorganization items consist principally of fees for legal, financial advisory and professional services incurred due to our Chapter 11 proceeding. Cash flows provided by investing activities were principally attributable to a decrease in restrictions on cash and the proceeds on disposition of assets, offset by capital expenditures for property, plant and equipment. Cash flows used in financing activities principally consisted of the payment of the scheduled GECC capital lease obligation.

On June 29, 2004, the Company issued $90 million of 11.5% Notes and 90,000 Warrants to purchase an aggregate of 805,230 shares of common stock of the Company. The proceeds of the 11.5% Notes and the 90,000 Warrants totaled $90 million. The 11.5% Notes have a maturity date of, and the Warrants expire on, June 15, 2011. The $90 million of proceeds were used for the (i) repurchase $55.5 million principal amount of the 8% Senior Notes at a price of 90% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon; (ii) early termination of the GECC capital lease and repurchase of the operating assets subject thereto for a purchase price of $33.0 million; and (iii) payment of fees and expenses associated with the refinancing and repurchase of existing debt. In addition, the Company entered into a $20.0 million revolving credit facility. The revolving credit facility is a five-year facility with a June 29, 2009 maturity date.

The 11.5% Notes require that the Company maintain a minimum annual level of EBITDA calculated at the end of each fiscal quarter as follows:

unless the sum of (i) unrestricted cash of the Company and its restricted subsidiaries as of such day and (ii) the aggregate amount of advances that the Company is actually able to borrow under the revolving credit facility on such day (after giving effect to any borrowings thereunder on such day) is at least $15 million. The minimum annual level of EBITDA covenant is not currently in effect as the Company’s unrestricted cash and the amount of available credit under the revolving credit facility exceeds $15 million.

The 11.5% Notes limit our ability to (i) incur additional indebtedness; (ii) pay dividends, redeem subordinated debt, or make other restricted payments, (iii) make certain investments or acquisitions; (iv) issue stock of subsidiaries; (v) grant or permit to exist certain liens; (vi) enter into certain transactions with affiliates; (vii) merge, consolidate, or transfer substantially all of our assets; (viii) incur dividend or other payment restrictions affecting certain subsidiaries; (ix) transfer or sell assets, including capital stock of subsidiaries; and, (x) change the nature of our business.

The revolving credit facility contains various covenants that restrict the Company’s ability to, among other things, incur indebtedness, enter into mergers or consolidation transactions, dispose of assets (other than in the ordinary course of business), acquire assets, make certain restricted payments, prepay any of the 8% Senior Notes at a purchase price in excess of 90% of the aggregate principal amount thereof (together with accrued and unpaid interest to the date of such prepayment), create liens on our assets, make investments, create guarantee obligations and enter into sale and leaseback transactions and transactions with affiliates, in each case subject to permitted exceptions. The revolving credit facility also

requires that we comply with various financial covenants, including meeting a minimum four-quarter EBITDA (calculated each calendar quarter) of $19,400 through September 30, 2006 and $21,000 thereafter and an annual limitation on capital expenditures of $9,700 in 2004, $5,500 in 2005 and $6,000 in 2006 and thereafter (with any unused amount being carried over to the immediately following fiscal year), as well as certain other covenants, if our usage of the revolving credit facility exceeds 30%. The minimum level of EBITDA and annual limitations on capital expenditures are not currently in effect because the Company has no borrowings outstanding, and as such, its usage is below the 30% threshold applicable to the covenant. The revolving credit facility also requires payment of a prepayment premium in the event that it is terminated prior to maturity. The prepayment premium, as a percentage of the $20.0 million facility amount, is 3% through June 29, 2005, 2% through June 29, 2006, and 1% through June 29, 2007.

In April 2004, the Company renegotiated and amended its lease arrangement with GECC. Under terms of the amended lease, six payments of approximately $6.1 million were due semi-annually on February 28 and August 28 beginning in February 2005. The Company and GECC mutually agreed to a $9.5 million fair market sales value for the leased equipment, which amount was used to value the equipment in fresh-start accounting. The Company had the option to terminate the lease early upon payment of $33.0 million through February 28, 2005, thereafter the amount of the early termination payment would decrease upon payment of each semi-annual capital lease payment. The equipment would have transferred to the Company free and clear of all liens on the earlier of (i) the payment of the early termination amount, plus any accrued interest due and payable at 6% per annum or (ii) the payment of the final installment due August 28, 2007. On June 29, 2004, the Company exercised its $33.0 million early termination payment option, terminated the lease and acquired title to the leased equipment. The leased equipment was transferred to the Company free and clear of all liens.

Capital expenditures (excluding the repurchase of the leased equipment under the GECC capital lease) for the nine months ended September 30, 2004 and 2003 totaled $3.9 million and $1.9 million, respectively. In June 2004, the Company repurchased the leased assets under the GECC capital lease for $9.5 million. Significant 2004 capital expenditures, other than the repurchase of the leased equipment, are related to the installation of environmental equipment to conform to MACT standards for casing manufacturers. Significant 2003 capital expenditures included costs associated with the Viskase Food Science Quality Institute (“FSQI”) plastic casing line. Capital expenditures for 2004, excluding the repurchase of the leased equipment from GECC, are expected to be approximately $9.9 million.

Capital expenditures for the year ended December 31, 2003 and 2002 totaled $4.3 and $3.8 million, respectively. Significant 2003 expenditures included costs for Osceola and Loudon environmental control technology systems. Significant 2002 capital expenditures included costs associated with FSQI and numerous smaller projects throughout our manufacturing facilities worldwide. Significant 2001 capital expenditures for continuing operations included costs associated with the Visflex^TM and Vismax^TM plastic casing product line and with the corporate office relocation.

During the first nine months of 2004, we spent approximately $2.0 million on research and development programs, including product and process development, and on new technology development. Our 2004 research and development and product introduction expenses are expected to be approximately $3.0 million. Among the projects included in the current research and development efforts are the development of SmokeMaster^TM casing, the anti-listeria NOJAX® AL^TM casing, and the application of certain patents and technology being licensed by Viskase to the manufacture of cellulosic casings.

We paid $5.0 million and $1.0 million for our pension and postretirement contributions in the third quarter of 2004. We anticipate we will pay $0.2 million additional pension contributions and approximately $0.9 million of postretirement contributions during the remainder of the year.

Letters of credit in the amount of $1.9 million were outstanding under letter of credit facilities with commercial banks, and were cash collateralized at September 30, 2004.

We finance our working capital needs through a combination of internally generated cash from operations, cash on hand and our revolving credit facility.

On June 29, 2004, we terminated our existing revolving credit facility with Arnos Corp., an affiliate of Carl C. Icahn, and entered into a credit facility for up to $20.0 million with Wells Fargo Foothill. This revolving credit facility will be used for working capital and other general corporate purposes.

Borrowings under the loan and security agreement governing this revolving credit facility (the “Credit Agreement”) are subject to a borrowing base formula based on percentages of eligible domestic receivables and eligible domestic inventory. Under the Credit Agreement, we are able to choose between two per annum interest rate options: (x) the lender’s prime rate and (y) (1) LIBOR plus (2) a margin of 2.25% (which margin will be subject to performance based increases up to 2.50% and decreases down to 2.00%); provided that LIBOR shall be at least equal to 1.00%. Letter of credit fees will be charged a per annum rate equal to the then applicable margin described in clause (y)(2) of the immediately preceding sentence less 50 basis points. The Credit Agreement also provides for an unused line fee of 0.375% per annum and a monthly servicing fee. The Credit Agreement has a term of five years from the date of the closing thereof.

Indebtedness under the Credit Agreement is secured by liens on substantially all of our and our domestic subsidiaries’ assets, which liens (i) on inventory, account receivables, lockboxes, deposit accounts into which payments therefor are deposited and proceeds thereof, are contractually senior to the liens securing the Notes and the related guarantees pursuant to an intercreditor agreement, (ii) on real property, fixtures and improvements thereon, equipment and proceeds thereof, are contractually subordinate to the liens securing the Notes and such guarantees pursuant to such intercreditor agreement, (iii) on all other assets, are contractually pari passu with the liens securing the Notes and such guarantees pursuant to such intercreditor agreement.

The Credit Agreement also contains various covenants that restrict our and our subsidiaries’ ability to, among other things, incur indebtedness, enter into mergers or consolidation transactions, dispose of assets (other than in the ordinary course of business), acquire assets (with permitted exceptions), make certain restricted payments, prepay any of the 8% Senior Notes at a purchase price in excess of 90% of the aggregate principal amount thereof, together with accrued and unpaid interest to the date of such prepayment, create liens on our assets, make investments, create guarantee obligations and enter into sale and leaseback transactions and transactions with affiliates. The Credit Agreement also requires that we comply with various financial covenants, including meeting a minimum EBITDA requirement and limitations on capital expenditures as well as, in the event our usage of the Credit Agreement exceeds 30%, certain other financial covenants. The Credit Agreement provides for certain events of default, including default upon the nonpayment of principal, interest, fees or other amounts, a cross default with respect to other obligations of ours and our subsidiaries, failure to comply with certain covenants, conditions or provisions under the Credit Agreement, the existence of certain unstayed or undischarged judgments, the invalidity or unenforceability of the relevant security documents, the making of materially false or misleading representations or warranties, commencement of reorganization, bankruptcy, insolvency or similar proceedings and the occurrence of certain ERISA events. Upon the occurrence of an event of default under the Credit Agreement, the lender will be entitled to declare all obligations thereunder to be immediately due and payable. The Credit Agreement requires us to pay a prepayment premium in the event that it is prepaid prior to maturity.

The 8% Senior Notes are unsecured, bear interest at a rate of 8% per year, and will accrue interest from December 1, 2001, payable semi-annually (except annually with respect to year four and quarterly with respect to year five), with interest payable in the form of 8% Senior Notes (paid-in-kind) for the first three years. The first interest payment date on the 8% Senior Notes was June 30, 2003 (paid-in-kind).

The 8% Senior Notes were valued at market under fresh-start accounting. The 8% Senior Notes were recorded on the books at April 3, 2003 at their discounted value of $33.2 million. The discount to face value is being amortized using the effective-interest rate methodology through maturity with an effective interest rate of 10.46%.

On June 29, 2004, we purchased $55.5 million aggregate principal amount of the outstanding 8% Senior Notes. In connection therewith and in accordance with the indenture for the 8% Senior Notes, the holders thereof agreed to, among other things, release the liens on the collateral that had been securing the 8% Senior Notes and may eliminate substantially all of the restrictive covenants contained in such indentures governing the 8% Senior Notes. From time to time, we may offer to purchase at a substantial discount any or all of the remaining 8% Senior Notes through privately negotiated transactions, purchases in the public marketplace or otherwise. The following table summarizes the carrying value of the 8% Senior Notes at December 31 (in millions):

As a result of the purchase of 8% Senior Notes and the termination of the GECC lease on June 29, 2004, we have recorded a net loss of approximately $13.1 million during the second quarter of 2004, which reduced our operating income and net income (loss), and we expect interest expense to be $11.3 million on a pro forma annual basis for 2004.

Our long-term pension and postretirement benefit liabilities totaled $101.7 million at December 31, 2003. Expected cash contributions for pension and postretirement benefit liabilities are expected to be (in millions):

The fair value of our debt obligations (excluding capital lease obligations) is estimated based upon the quoted market prices for the same or similar issues or on the current rates offered to us for the debt of the same remaining maturities. At September 30, 2004, the carrying amount and estimated fair value of our debt obligations (excluding capital lease obligations) were $100.7 million and $103.8 million, respectively.

As of September 30, 2004, aggregate maturities of debt for each of the next five years are (in millions):

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying financial statements. In preparing these financial statements, management bases its estimates on historical experience and other assumptions that they believe are reasonable. We do not believe there is a great likelihood that materially different amounts would be reported under different conditions or using different assumptions related to the accounting policies described below. However, application of these accounting policies involves the exercise of judgment and the use of assumptions as to uncertainties and, as a result, actual results could differ from these estimates. If actual amounts are ultimately different from previous estimates, the revisions are included in our results for the period in which the actual amounts become known. Historically, the aggregate differences, if any, between our estimates and actual amounts in any year have not had a significant impact on our consolidated financial statements. The Company is not aware of any trend, event or uncertainty that would materially affect the methodology or assumptions used within its critical accounting policies. The Company has not made any material changes to accounting estimates in the past three years, and at this time the Company does not intend to make any changes in the underlying assumptions to its accounting estimates.

Substantially all of the Company’s revenues are recognized at the time the products are shipped to the customer, under F.O.B. Shipping Point terms or under F.O.B. Port terms. Revenues are net of any discounts, rebates and allowances. The Company records all labor, raw materials, in-bound freight, plant receiving and purchasing, warehousing, handling and distribution costs as a component of cost of goods sold.

Accounts receivable have been reduced by an allowance for amounts that may become uncollectible in the future. This estimated allowance is primarily based upon our evaluation of the financial condition of each customer, each customer’s ability to pay and historical write-offs.

Inventories are valued at the lower of cost or market. The inventories have been reduced by an allowance for slow moving and obsolete inventories. The estimated allowance is based upon management’s estimate of specifically identified items, the age of the inventory and historical write-offs of obsolete and excess inventories.

Deferred tax assets and liabilities are measured using enacted tax laws and tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities due to a change in tax rates is recognized in income in the period that includes the enactment date. In addition, the amounts of any future tax benefits

Our North American operations have a defined benefit retirement plan that covers substantially all salaried and full-time hourly employees who were hired prior to April 1, 2003 and a fixed defined contribution plan and a discretionary profit sharing plan that covers substantially all salaried and full-time hourly employees who were hired on or after April 1, 2003. Our operations in Germany have a defined benefit retirement plan that covers substantially all salaried and full-time hourly employees. Pension cost is computed using the projected unit credit method. The discount rate used approximates the average yield for high quality corporate bonds as of the valuation date. Our funding policy is consistent with funding requirements of the applicable federal and foreign laws and regulations.

Our North American operations have postretirement health care and life insurance benefits. We accrue for the accumulated postretirement benefit obligation that represents the actuarial present value of the anticipated benefits. Measurement is based on assumptions regarding such items as the expected cost of providing future benefits and any cost sharing provisions. The Company will terminate postretirement medical benefits as of December 31, 2004 for all active employees and retirees in the U.S. who are not covered by a collective bargaining agreement. It is estimated that said termination will result in a $35 million reduction in the Company’s unfunded postretirement liability.

As previously discussed, the accompanying consolidated financial statements reflect the use of fresh-start accounting as required by SOP 90-7. Under fresh-start accounting, our assets and liabilities were adjusted to fair values and a reorganization value for the entity was determined based upon the estimated fair value of the enterprise before considering values allocated to debt. The portion of the reorganization value that could not be attributed to specific tangible or identified intangible assets of the Reorganized Company totaled $44.4 million. In accordance with Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets,” this amount is reported as “Goodwill” in the consolidated financial statements. Fresh-start accounting results in the creation of a new reporting entity with no accumulated deficit as of April 3, 2003. Our reorganization value was based on the consideration of many factors and various valuation methods, including discounted cash flow analysis using projected financial information, selected publicly traded company market multiples of certain companies operating businesses viewed to be similar to us, and other applicable ratios and valuation techniques believed by us to be representative of our business and industry.

The valuation was based upon a number of estimates and assumptions, which are inherently subject to significant uncertainties and contingencies beyond our control.

Upon the adoption of fresh-start accounting, as of April 3, 2003, we recorded goodwill of $44.4 million, which equals the reorganization value in excess of amounts allocable to identifiable net assets recorded in accordance with SOP 90-7. In the fourth quarter of 2003, we performed our first annual goodwill impairment analysis under SFAS No. 142. Due to the fact the fair value of our single reporting unit, as estimated by our market capitalization, was significantly less than the net book value at December 31, 2003, we wrote off the entire $44.4 million goodwill balance in the fourth quarter of 2003.

Goodwill and intangible assets that have an indefinite useful life are not amortized and are tested at least annually for impairment. Due to the prepackaged nature of our bankruptcy plan, goodwill was tested for impairment by comparing the fair value with its recorded amount. As a result of adopting SFAS No. 142, we used a discounted cash flow methodology for determining fair value. This methodology identified an impairment of goodwill and intangible assets in the amount of $49.4 million, which was written off in the fourth quarter of 2003. As part of fresh-start accounting, the Company recognized

We carry property, plant and equipment at cost less accumulated depreciation. Property and equipment additions include acquisition of property and equipment and costs incurred for computer software purchased for internal use including related external direct costs of materials and services and payroll costs for employees directly associated with the project. Depreciation is computed on the straight-line method over the estimated useful lives of the assets ranging from 2 to 32 years. Upon retirement or other disposition, cost and related accumulated depreciation are removed from the accounts, and any gain or loss is included in results of operations.

We continue to evaluate the recoverability of long-lived assets including property, plant and equipment, patents and other intangible assets. Impairments are recognized when the expected undiscounted future operating cash flows derived from long-lived assets are less than their carrying value. If impairment is identified, valuation techniques deemed appropriate under the particular circumstances will be used to determine the asset’s fair value. The loss will be measured based on the excess of carrying value over the determined fair value. The review for impairment is performed at least once a year or when circumstances warrant.

We do not have off-balance sheet arrangements (sometimes referred to as “special purpose entities”), financing or other relations with unconsolidated entities or other persons. In the ordinary course of business, we lease certain casing manufacturing and finishing equipment, and certain real property, consisting of manufacturing and distribution facilities and office facilities. Substantially all such leases as of September 30, 2004 were operating leases, with the majority of those leases requiring the Company to pay maintenance, insurance and real estate taxes.

The Company emerged from bankruptcy on April 3, 2003. For the period April 3 through December 31, 2003, the Company recorded a net loss of $46,627 and positive cash flow from operating activities before reorganization expense of $16,645. In connection with its emergence from bankruptcy, the Company restructured its debt and equity. In addition, the amounts due under capital leases were renegotiated with the lessor. As of December 31, 2003, the Company had positive working capital of approximately $52,201 and unrestricted cash of $23,160, with additional amounts available under its revolving credit facility. While the Company could decide to raise additional amounts through the issuance of new debt or equity, management believes that the existing resources available to it will be adequate to satisfy current and planned operations for at least the next twelve months.

The following table reflects our future contractual cash obligations and commercial commitments as of December 31, 2003, determined on a pro forma basis (in millions):

The following table reflects our future contractual cash obligations and commercial commitments as of September 30, 2004, determined on a pro forma basis (in millions):

Cash interest obligations changed between December 31, 2003 and September 30, 2004 as a result of the issuance of the 11.5% Notes, which pay interest in cash, in comparison with the 8% Senior Notes, with respect to which a substantial portion of the interest is payable in kind. The decrease in postretirement benefits between December 31, 2003 and September 30, 2004 relates to the Company’s decision to discontinue certain postretirement benefits effective December 31, 2004.

In January 2003, the Financial Accounting Standards Board (FASB) issued EITF No. 00-21, “Revenue Arrangements with Multiple Deliverables.” EITF 00-21 provides guidance on how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting and how arrangement consideration should be measured and allocated to the separate units of accounting in the arrangement. EITF 00-21 is effective for arrangements entered into in fiscal periods beginning after June 15, 2003. The adoption of EITF 00-21 did not have a material impact on our results of operations or financial position.

In January 2003, the FASB issued FASB Interpretation No. (FIN) 46, “Consolidation of Variable Interest Entities — an Interpretation of ARB No. 51.” FIN 46 clarified the application of Accounting Research Bulletin Number 51, “Consolidated Financial Statements,” to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other

In December 2003, a revised version of FIN 46 (Revised FIN 46) was issued by the FASB. The revisions clarify some requirements, ease some implementation problems, add new scope exceptions and add applicability judgments. Revised FIN 46 is required to be adopted by most public companies no later than March 31, 2004. We believe that the adoption of revised FIN 46 will not have a material impact on our results of operations or financial position.

In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instrument and Hedging Activities.” SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003. The adoption of SFAS No. 149 did not have a material impact on our results of operations or financial position.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. In November 2003, the FASB issued FASB Staff Position Number 150-3, which deferred indefinitely the effective date of SFAS No. 150 as it relates to certain mandatory redeemable non-controlling interests. SFAS No. 150 was effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 did not have a material impact on our results of operations or financial position.

In December 2003, the FASB issued SFAS No. 132, “Employers’ Disclosures about Pensions and Other Postretirement Benefits — an Amendment of FASB Statements No. 87, 88, and 106.” The statement was developed in response to concerns expressed by users of financial statements regarding more information about pension plan assets, obligations, benefit payments, contributions and net benefit cost. Disclosures about postretirement benefits other than pensions are required. All new provisions for domestic plans are effective for fiscal years ending after December 15, 2003. Foreign and nonpublic entities disclosures are required effective for fiscal years ending after June 15, 2004. We are considering the standard and its effect on our financial statements.

On December 17, 2003, the staff of the SEC issued Staff Accounting Bulletin (SAB) 104, “Revenue Recognition,” which amends SAB 101, “Revenue Recognition in Financial Statements.” SAB 104’s primary purpose is to rescind accounting guidance contained in SAB 101 related to multiple element revenue arrangements, superseded as a result of the issuance of EITF 00-21. Additionally, SAB 104 rescinds the SEC’s “Revenue Recognition in Financial Statements Frequently Asked Questions and Answers” (the FAQ) issued with SAB 101 (that had been codified in SEC Topic 13, “Revenue Recognition”). Selected portions of the FAQ have been incorporated into SAB 104. While the wording of SAB 104 has changed to reflect the issuance of EITF 00-21, the revenue recognition principles of SAB 101 remain largely unchanged by the issuance of SAB 104. The adoption of SAB 104 did not have a material impact on our results of operations or financial position.

In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” The statement is applicable for fiscal years beginning after May 15, 2002 and requires, among other things, that any gain or loss on extinguishment of debt that does not meet criteria in Opinion 30, as amended, no longer be classified as an

We are exposed to certain market risks related to foreign currency exchange rates. In order to manage the risk associated with this exposure to such fluctuations, we occasionally use derivative financial instruments. We do not enter into derivatives for trading purposes.

We have prepared sensitivity analyses to determine the impact of a hypothetical 10% devaluation of the U.S. dollar relative to our European receivables, payables, sales and purchases denominated in U.S. dollars. Based on our sensitivity analyses at September 30, 2004, a 10% devaluation of the U.S. dollar would affect our consolidated financial position by $16,000.

We purchase gas futures contracts to lock in set rates on gas purchases. We use this strategy to minimize our exposure to volatility in the price of natural gas. These products are not linked to specific assets and liabilities that appear on the balance sheet or to a forecasted transaction and, therefore, do not qualify for hedge accounting. As such, gains on the change in fair value of the futures contracts are not recorded in other income, whereas losses are recognized. There were no natural gas futures contracts outstanding at September 30, 2004.

We are a leading worldwide producer of non-edible cellulosic, fibrous and plastic casings used to prepare and package processed meat products. We provide value-added support services relating to these products to our customers, which include some of the world’s largest global consumer products companies. We are a Delaware corporation organized in 1970 and were known as Envirodyne Industries, Inc. until we changed our name in 1998. In 1925, one of our predecessors invented the basic process for producing casings from regenerated cellulose for commercial production, and we and/or our predecessors have been in the processed meat flexible packaging business for over 79 years. We believe we are one of the two largest worldwide producers of non-edible cellulosic casings for small-diameter processed meats, such as hot dogs. In addition, we believe we are one of the leading producers of non-edible fibrous casings for large-diameter sausages, salami, hams and other processed meat products. We also produce plastic casings for a wide range of processed meat and poultry applications. Our high-quality product offering and superior customer service have resulted in strong and longstanding relationships with our blue-chip customer base, which includes Kraft, Smithfield Foods and ConAgra. The average length of our relationships with our top 15 customers is greater than ten years. We operate seven manufacturing facilities and eight distribution centers in North America, Europe and South America and, as a result, we are able to sell our products in most countries throughout the world.

Since 1998, we have sold certain of our operations in order to reduce indebtedness and increase our operational focus. As a result of these efforts, we sold our wholly-owned subsidiary, Sandusky Plastics, Inc. in June 1998, our wholly-owned subsidiary, Clear Shield National, Inc. in July 1998, and our plastic barrier and non-barrier shrink film business in August 2000. These divestitures have left the cellulosic, fibrous and plastic casings business as our primary operating activity.

Upon emergence from bankruptcy in April 2003, our wholly-owned subsidiary, Viskase Corporation, merged with and into us. In addition, since emerging from bankruptcy, we have implemented a number of restructuring measures to reduce the fixed cost structure of our remaining business and to address competitive price pressures and increases in various production costs in our business. In September 2003, we dissolved two of our subsidiaries, Envirosonics, Inc. and Viskase Puerto Rico Corporation, and in October 2003, we dissolved another subsidiary, Viskase Australia Limited. In January 2004, we merged two of our subsidiaries, Viskase Holding Corporation and Viskase Sales Corporation, with and into us, and merged another subsidiary, Envirodyne Subsidiary, Inc., with and into one of our domestic subsidiaries.

On November 13, 2002, we filed a prepackaged Chapter 11 bankruptcy plan in the United States Bankruptcy Court for the Northern District of Illinois, Eastern Division (the “Bankruptcy Court”). The Chapter 11 filing was for Viskase Companies, Inc. alone and did not include any of our domestic or foreign subsidiaries. On December 20, 2002, the Bankruptcy Court confirmed our prepackaged plan of reorganization, as modified (the “Plan”), and we consummated the Plan and emerged from bankruptcy on April 3, 2003. Throughout the bankruptcy proceeding, our domestic and foreign operating subsidiaries continued to provide an uninterrupted supply of products and services to customers worldwide. Trade creditors and vendors were unaffected and were paid in the ordinary course of business, and the employees of our operating subsidiaries were paid all wages, salaries and benefits on a timely basis.

Under the terms of the Plan, our 10.25% Senior Notes due 2001 (the “10.25% Senior Notes”) were converted into 8% Senior Notes and shares of our Common Stock on the basis of $367.96271 principal amount of 8% Senior Notes (i.e., $60 million) and 63.4122 shares of Common Stock for each $1,000 principal amount of the 10.25% Senior Notes. The previously outstanding shares of our common stock were canceled pursuant to the Plan and the holders thereof received warrants (the “2010 Warrants”) with a term of seven years (expiring April 2, 2010) to purchase 306,291 shares of Common Stock equal to 2.7% of our Common Stock outstanding immediately after the consummation of the Plan on a fully-

Upon emerging from bankruptcy our Board of Directors was reconstituted into five members.

The flexible packaging market in the U.S. is comprised of paper, plastic film or foil products, and laminations of these materials. According to industry sources, domestic demand for flexible packaging was 6.0 billion pounds in 2003, and has grown from 5.5 billion pounds in 1998, reflecting a compound annual growth rate of 1.9%. Industry analysts expect the flexible packaging market as a whole to continue to expand at a steady rate due to technological advances and manufacturers’ needs for higher performance packaging. According to industry sources, domestic demand for flexible packaging is expected to reach 6.8 billion pounds by 2008, which would reflect a compound annual growth rate of 2.4% from 2003. Furthermore, domestic demand for flexible packaging for meat, poultry and seafood, the subsection of the flexible packaging market in which we operate, has been growing. Industry sources report that domestic demand for flexible packaging used for meat, poultry and seafood increased to 540 million pounds in 2003 from 515 million pounds in 1998, reflecting a compound annual growth rate of 1.0%. Domestic demand for flexible packaging for meat, poultry and seafood is expected to reach 594 million pounds by 2008, which would reflect a compound annual growth rate of 1.9% from 2003. We believe that we will continue to benefit from these stable U.S. industry fundamentals in both the general and the meat, poultry and seafood flexible packaging markets. We also believe that growth in demand for flexible meat, poultry and seafood packaging will occur in international markets. We expect modest growth in developed countries and, due to increasing wealth and availability of quality nutrition, more expansive growth in developing countries.

We participate in the small-diameter cellulosic, fibrous and plastic casings segments of the general flexible packaging market. Casings are used in the production of processed meat and poultry products, such as hot dogs, sausages, salami, ham and bologna. In the manufacturing of these products, a meat preparation is stuffed into a casing and then cooked, smoked or dried. The casing utilized dictates the size, consistency of shape, and overall appearance and quality of the final meat product. Small-diameter cellulosic, fibrous and plastic casings also permit high-speed stuffing and processing of products on commercially available automated equipment, which provides a meat processor with consistent product quality, high production output rates and lower manufacturing costs.

Natural (Gut) Casings. Natural casings, made from animal intestines, are the most commonly used edible casings, although their share of the worldwide market is believed to be decreasing due to their inconsistent quality and lack of compatibility with automated production equipment.

Edible Collagen Casings. Edible collagen (derived from animal proteins) is used for fresh sausages, snack sticks and some small-diameter cooked sausages because its consistency in performance is generally improved over natural casings.

Cellulosic Casings. Cellulosic casings are the highest volume non-edible casings and are used in the production of small-diameter processed meat products (less than 35 millimeters), such as hot dogs, frankfurters and other small-diameter cooked sausages. Cellulosic casings are typically peeled off of the meat product and discarded prior to final packaging. Cellulosic casings’ advantages in strength, uniformity and machinability on high speed, automatic stuffing equipment allow for higher productivity and lower manufacturing costs compared to processing with edible natural or collagen casings.

Fibrous Casings. Fibrous casings are paper-reinforced cellulosic casings used in large-diameter products (greater than 35 millimeters) because the fibrous material enhances casing strength and provides uniformity in product diameter. Applications include a wide variety of cooked, smoked and dried processed meats, including large sausages, salami, hams and deli meats.

Non-Edible Collagen Casings. Non-edible collagen is used for large-diameter sausages such as chorizo and certain types of specialty dried salamis.

Plastic Casings. Plastic casings are traditionally used in steam or water cooking applications, such as boiled ham, poultry rolls and other processed sausages where the plastic casing lends itself to higher cooking yields and can serve as a final package. Plastic casings are growing in market demand because they can provide a lower-cost alternative to fibrous casings when cook yields and re-packaging costs are taken into consideration.

We compete in the cellulosic, fibrous and plastic casing segments of the non-edible casings market.

NOJAX® casings — Small-diameter cellulosic casings designed for the production of hot dogs, wieners, frankfurters, viennas, cocktail sausages, coarse ground dinner sausages, dry mini-salamis and other small-diameter processed meats.

Fibrous casings — Paper-reinforced cellulosic casings utilized in the manufacturing of a wide variety of cooked, smoked and dried processed meats, including large sausages, bologna, salami, ham, pepperoni and deli meats.

Visflex^TM, Vismax^TM and Vislon® casings — Plastic (polyamide) casings, each designed with distinct performance characteristics targeted at a wide range of sausage, deli meat and other processed meat and poultry applications.

We also manufacture other specialty cellulosic products, notably a family of large cellulosic casings with limited applications for mortadella and specialty sausages, as well as some non-food products targeted at dialysis membrane and specialized battery separator market applications. Furthermore, on a limited and geographic basis, we sometimes take on distributor product lines of certain allied products that serve as complimentary supply items to casings. Examples of such products include an elastic netting line that we distribute in North America and shrinkable barrier bags that we distribute in Italy.

We have four manufacturing and/or finishing facilities located outside the continental United States, in Beauvais, France; Thâon-les-Vosges, France; Guarulhos, Brazil, and Caronno, Italy.

Net sales from customers located outside the United States represented approximately 59% of our total net sales during 2003. Our operations in France are responsible for distributing products, directly or through distributors, in Europe, Africa, the Middle East and parts of Asia. While overall consumption of processed meat products in North America and Western Europe has apparently stabilized, we believe there is a potential for market growth in Eastern Europe, Latin America, South America and Southeast Asia.

The following table shows our net sales, operating (loss) income, identifiable assets and U.S. export sales by geographic region during the last three fiscal years (in millions):

The production of regenerated cellulosic casings generally involves four principal steps: (i) production of a viscose slurry from wood pulp; (ii) regeneration of cellulosic fibers; (iii) extrusion of a continuous tube during the regeneration process; and (iv) “shirring” of the final product. Shirring is a finishing process that involves pleating and compressing the casing in tubular form for subsequent use in high-speed stuffing machines. The production of regenerated cellulosic casings involves a complex and continuous series of chemical and manufacturing processes, and we believe that our facilities and expertise in the manufacture of extruded cellulose are important factors in maintaining our product quality and operating efficiencies.

Our product line includes NOJAX® cellulosic casings, which are used for small-diameter processed meat products such as hot dogs; fibrous casings, which are paper-reinforced cellulosic casings used in the production of large-diameter sausages, salami, hams and other processed meat products; and Visflex^TM and Vismax^TM plastic casings, which are used for a wide range of processed meat, poultry and cheese applications.

We have a broad base of customers, with no single customer accounting for more than 7.0% of our net sales. We are able to sell our products in most countries throughout the world. We have 40 people

As of September 30, 2004, we had backlog orders of approximately $34.8 million. As of December 31, 2003 and 2002, we had backlog orders of approximately $36.6 million and $28.0 million, respectively. Orders on backlog typically are filled within 90 days.

We are one of the world’s leading producers of cellulosic casings. While our industry generally competes based on volume and price, we seek to maintain our competitive advantage and differentiate ourselves from our competitors by manufacturing products that have higher quality and superior performance characteristics when compared to our competitors’ products; by responding quickly to customer product requirements; by providing technical support services to our customers for production and formulation requirements; and by producing niche products to satisfy individual customer needs.

Our principal competitors in the cellulosic casing market are Teepak LLC, located in the United States with manufacturing facilities in the United States, Belgium, Mexico and the Czech Republic; Viscofan, S.A., located in Spain with manufacturing facilities in Germany, Brazil, the Czech Republic and the United States; Kalle Nalo GmbH, located in Germany; Case Tech, a wholly-owned subsidiary of Bayer AG, located in Germany; Oy Visko AB, located in Finland; and two Japanese manufacturers, Futamura Chemical, marketed by Meatlonn, and Toho. Our primary competitors include several corporations that are larger and better capitalized than we are and, thus, are less vulnerable to price reductions in the market. During the previous ten years, we have experienced reduced profits due to overcapacity in our industry and intense competition based on volume.

We believe our continuing emphasis on research and development is central to our ability to maintain industry leadership. In particular, we have focused on the development of new products that increase our customers’ operating efficiencies, reduce their operating costs and expand their markets. Our research and development projects also include the development of new processes and products to improve our own manufacturing efficiencies. Our research scientists, engineers and technicians are engaged in continuous product and equipment development, and also provide direct technical and educational support to our customers.

We believe we have achieved and maintained our position as a leading producer of cellulosic casings for packaging meats through significant expenditures on research and development. We expect to continue our research and development efforts. The commercialization of certain of our product and process applications, and related capital expenditures to achieve commercialization, may require substantial financial commitments in future periods. Research and development costs from continuing operations are expensed as incurred and totaled $3.6 million, $4.1 million and $4.8 million during 2003, 2002 and 2001, respectively.

Historically, our domestic sales and profits have been seasonal in nature, increasing in the spring and summer months. Sales outside of the U.S. remain relatively stable throughout the year.

The raw materials we use include cellulose (derived from wood pulp), specialty fibrous paper and various other chemicals. We generally purchase our raw materials from a single source or a small number of suppliers with whom we maintain good relations. Certain primary and alternative sources of supply are located outside the U.S. We believe that adequate alternative sources of supply currently exist for all of our raw materials or that raw material substitutes are available, which we could utilize by modifying our manufacturing processes.

The following table lists each of our facilities, including location, use, approximate square footage and status:

We believe we maintain productive and amicable relationships with our approximately 1,360 employees worldwide. Approximately 480 of our 1,360 employees are union members. One of our domestic facilities, located in Loudon, Tennessee, is unionized. Our collective bargaining agreement covering union employees at the Loudon facility expires on September 30, 2005. Additionally, all of our European and Brazilian facilities have national agreements with annual renewals. Employees at our European facilities are involved in labor negotiations at both the local and national levels.

We hold patents on many of our major technologies, including those used in our manufacturing processes and those embodied in products sold to our customers. We believe our ongoing market leadership is derived, in part, from our technology. We vigorously protect and defend our patents against infringement on an international basis. As part of our research and development program, we have developed and expect to continue to develop new proprietary technology and have licensed proprietary technology from third parties. We believe these activities will enable us to maintain our competitive position. However, we do not believe that any single patent or group of patents is material to us. We also own numerous trademarks and registered trade names that are used actively in marketing our products. We periodically license our process and product patents to competitors on a royalty basis.

In manufacturing our products, we employ certain hazardous chemicals and generate toxic and hazardous wastes. The use of these chemicals and the disposal of such wastes are subject to stringent regulation by several governmental entities, including the United States Environmental Protection Agency (the “EPA”) and similar state, local and foreign environmental control entities. We are subject to various environmental, health and safety laws, rules and regulations including those of the United States Occupational Safety and Health Administration and the EPA. These laws, rules and regulations are subject to amendment and to future changes in public policy or interpretation, which may affect our operations.

Certain of our facilities are or may become potentially responsible parties with respect to on-site and off-site waste disposal facilities and remediation of environmental contamination. See “— Legal Matters” with respect to potential environmental liabilities at the Lindsay, Ontario facility of our Canadian subsidiary, Viskase Canada.

Under the Clean Air Act Amendments of 1990, various industries, including casings manufacturers, will be required to meet MACT air emissions standards for certain chemicals. MACT standards applicable to all U.S. cellulosic casing manufacturers were promulgated June 11, 2002. We submitted extensive comments to the EPA during the public comment period. Compliance with these new rules is required by June 13, 2005, although the Company has obtained a one-year extension for both of its facilities. To date, we have over $2.9 million in capital expenditures, and we expect to spend over $7.4 million over the next 12 months, to become compliant with MACT rules at our two U.S. extrusion facilities. Although we expect to implement the technology necessary to meet these emissions standards at our two extrusion facilities, our failure to do so, or our failure to receive a compliance extension that we anticipate requesting from regulatory agencies, could result in substantial penalties, including civil fines of up to $50,000 per facility per day or a shutdown of our U.S. extrusion operations.

Under the Resource Conservation and Recovery Act, regulations have been proposed that, in the future, may impose design and/or operating requirements on the use of surface impoundments for wastewater. Two of our plants use surface impoundments. We do not foresee these regulations being imposed for several years.

In 1988, our subsidiary, Viskase Canada, commenced a lawsuit against Union Carbide claiming that Union Carbide had breached several representations and warranties and deliberately and/or negligently failed to disclose the existence of ammonium sulphate contamination on the premises of a facility in Lindsay, Ontario, Canada that Viskase Canada purchased from Union Carbide in 1986.

In November 2000, the MOE notified Viskase Canada that it had evidence to suggest that the Lindsay facility was a source of PCB contamination in surrounding areas. Viskase Canada has been working with the MOE in investigating the alleged PCB contamination and developing and implementing, if appropriate, a remedial plan for the Lindsay facility and the affected area. Viskase Canada and others have been advised by the MOE that the MOE has prepared certain Director’s Orders requiring remediation under applicable environmental laws and regulations against Viskase Canada, Dow and others,

In 1993, the Illinois Department of Revenue (“IDR”) submitted a proof of claim against Envirodyne Industries, Inc. (our former corporate name) and its subsidiaries in the United States Bankruptcy Court for the Northern District of Illinois, for liability with respect to IDR’s denial of our allegedly incorrect utilization of certain loss carry-forwards of certain of our subsidiaries. In September 2001, the bankruptcy court denied IDR’s claim and determined that we were not responsible for 1998 and 1999 tax liabilities, interest and penalties. IDR appealed the bankruptcy court’s decision to the United States District Court, Northern District of Illinois, and in February 2002 the district court affirmed the bankruptcy court’s order. IDR appealed the district court’s order to the United States Court of Appeals for the Seventh Circuit. On January 6, 2004, the appeals court reversed the judgment of the district court and remanded the case for further proceedings. The matter is now before the bankruptcy court for further determination. As of September 30, 2004, the tax liabilities, interest and penalties totaled approximately $2.5 million. See “Risk Factors.”

In August 2001, the Department of Revenue of the Province of Quebec, Canada issued an assessment against Viskase Canada in the amount of approximately $2.7 million (Canadian), plus additional interest and possible penalties to accrue from August 31, 2001. This assessment is based upon Viskase Canada’s failure to collect and remit sales tax during the period July 1, 1997 to May 31, 2001. During this period, Viskase Canada did not collect and remit sales tax in Quebec in reliance on the written advice of its outside accounting firm. Viskase Canada filed a Notice of Objection in November 2001 with a supplementary submission in October 2002. The Notice of Objection found in favor of the Department of Revenue. The Company has appealed the decision. We have provided for a reserve of $0.3 million for interest and penalties, if any, but have not provided for a reserve for the underlying sales tax. Although the ultimate liability for the Quebec sales tax lies with the customers of Viskase Canada during the relevant period, Viskase Canada could be required to pay the amount of the underlying sales tax prior to collecting such tax from its customers, and there is no guarantee that customers will fully reimburse Viskase Canada for such tax. Viskase Canada is negotiating with the Quebec Department of Ministry to avoid having to collect the sales tax from customers.

On December 23, 2003, our former vice president, secretary and general counsel, Kimberly K. Duttlinger, filed suit against us in the Circuit Court of the Eighteenth Judicial Circuit, DuPage County, Illinois, alleging that she terminated her employment for “good reason,” as defined in her employment agreement with us, and is therefore entitled to termination compensation of approximately $368,000. Ms. Duttlinger is alleging that, under her employment agreement, if she terminated her employment for “good reason,” she is entitled to receive two years’ of salary and certain bonus and other amounts. We strongly deny the allegations set forth in this complaint and intend to vigorously defend this claim. We filed a motion to dismiss the complaint in April 2004, which was dismissed without prejudice. We are currently engaged in pre-trial discovery.

In addition to the matters we have described above, we, and our subsidiaries, are involved in various other legal proceedings arising in the ordinary course of our business, none of which is expected to have a material adverse effect upon our results of operations, cash flows or financial condition.

The following table sets forth certain information regarding the members of our board of directors and our executive officers and other senior officers.

Robert L Weisman, 56, has been President and Chief Executive Officer since October 2004. From December 2002 to June 2004, he served as the Vice President, Innovation and Business Development for Sara Lee Corporation. Mr. Weisman also served as the Chief Executive Officer, Sara Lee Bakery from May 2001 to December 2002 and the Group President of Sara Lee’s Specialty Meat Companies from June 1996 through May 2001.

Gordon S. Donovan, 51, has been our Vice President and Chief Financial Officer since January 1997. Mr. Donovan has also served as our Treasurer and Assistant Secretary since November 1989, and as a Vice President since May 1995. Mr. Donovan has been employed by us since 1987.

Stephen E. Foli, 60, has been our Vice President, Worldwide Operations since August 2003. He also served as our Vice President, Logistics from January 1998 to August 2003 and our Vice President, West Region Sales from August 1995 to January 1998. Mr. Foli has been employed by us since 1967.

Maurice J. Ryan, 52, has served as our Vice President, Sales, North America since September 2000. He also served as our Vice President, U.S. and Canada Sales beginning in 2000, our Vice President, West Region from 1997 to 2000, Vice President, Strategic Accounts from 1995 to 1997 and our Vice President, Sales from 1993 to 1995. Mr. Ryan has been employed by us since 1977.

John O. Cunningham, 55, has served as our Vice President, Administration/ Human Resources, Compensation and Benefits since October, 2002. He also served as our Director, Human Resources/ Compensation and Benefits from September 1995 to September 2002. Mr. Cunningham has been employed by us since 1990.

Jean-Luc Tillon, 45, has served as our President, Viskase S.A.S. since January 1999. He previously served as our Director of Finance, Europe from January 1999 to June 2003 and as our Director of Sales and Marketing, Europe from July 2003 to March 2004. Mr. Tillon has been employed by us since 1986 and currently also serves as a director of Viskase Spa, Viskase GmbH and Viskase Polska.

Jeffrey B. Sherry, 42, has served as our Vice President, Marketing since May 2003. Mr. Sherry also served as our Director, Sales, Western Region from June 2002 to May 2003 and as our Director,

Paul J. Fitzsimmons, 48, has served as our Vice President, Sales, Asia Pacific/ Latin America since June 2003. Mr. Fitzsimmons also served as our Director, Sales, Asia Pacific/ Latin America from May 2000 to June 2003 and as our Director, Customer Service from January 1999 to May 2000. Mr. Fitzsimmons has been employed by us since March 1990.

Vincent J. Intrieri, 48, has served as Chairman of the Board of Directors and as a director since April 2003. Since March 2003, he has been Managing Director of Icahn Associates Corp., an entity controlled by Carl C. Icahn, who may be deemed to be a beneficial owner of approximately 29.07% of our Common Stock. Mr. Intrieri served as a portfolio manager of High River Limited Partnership from 1998 to March 2003. From 1995 to 1998, he served as a portfolio manager for distressed investments with Elliot Associates L.P., a New York investment fund. Mr. Intrieri currently serves on the boards of XO Communications, Inc. and Trans Texas Gas Corporation, each of which are affiliated with Mr. Icahn.

Eugene I. Davis, 49, has been a director since April 2003. Since 1999, Mr. Davis has been chairman and chief executive officer of Pirinate Consulting Group, L.L.C., a consulting firm that specializes in, among other things, crisis and turn-around management, mergers and acquisitions and strategic planning services. From January 2001 to December 2003, he was chairman, chief executive officer and president of RBX Industries, Inc., a manufacturer and distributor of rubber and plastic based foam products, and prior to that served as RBX Industries’ chief restructuring officer, and from 1998 to 1999, he served as chief operating officer of Total-Tel USA Communications, Inc. Mr. Davis has been the chief executive officer, chief operating officer or president of other companies including Murdock Communications Corporation and SmarTalk Teleservices, Inc. RBX Industries and SmarTalk Teleservices were debtors under the federal bankruptcy code for which Mr. Davis was retained to provide turnaround management services. Mr. Davis is currently a member of the CFN Liquidating Trust Committee for the former Contifinancial Corporation and its affiliates, and is a director of Metals USA, Inc., Metrocall Holdings, Inc., Flag Telecom Group Limited, Elder-Beerman Stores, Inc., Tipperary Corporation, Knology, Inc., TelCove, Inc., Exide Technologies and a number of private companies. In addition, he is a member of the Board of Advisors of PPM America Special Investment Funds.

Thomas S. Hyland, 61, has been a director since April 2003. Mr. Hyland has been associated as a consultant for the past six years with the Service Corps of Retired Executives, a nonprofit association that provides counseling and educational programs for small businesses.

James L. Nelson, 55, has served as a director since April 2003. From March 1998 until July 2004, Mr. Nelson has been Chairman and Chief Executive Officer of Orbit Aviation, Inc., a company engaged in the acquisition and completion of Boeing 737 Business Jets for private and corporate clients. From 1986 until the present, Mr. Nelson has been Chairman and Chief Executive Officer of Eaglescliff Corporation, a specialty investment banking, consulting and wealth management company. From August 1995 until July 1999, he was Chief Executive Officer and Co-Chairman of Orbitex Management, Inc. Mr. Nelson currently serves on the board of American Real Estate Partners LP, which is affiliated with Mr. Icahn.

Jon F. Weber, 46, has been a Director since May 2003 and was President and Chief Executive Officer from May 2003 until October 2004. Since April 2003, he has been Head of Portfolio Company Operations and Chief Financial Officer at Icahn Associates Corp., an entity controlled by Carl C. Icahn, who may be deemed to be a beneficial owner of approximately 29.07% of our Common Stock. Since March 2003, he has served as Chief Executive Officer and a director of Philip Services Corporation, a metal recycling and, industrial services company affiliated with Mr. Icahn. He served as Chief Financial Officer of venture-backed companies QuantumShift Inc. and Alchemedia Ltd. from October 2001 to July 2002 and November 2000 to October 2001, respectively. From May 1998 to November 2000, Mr. Weber served as Managing Director — Investment Banking for JP Morgan Chase and its predecessor, Chase Manhattan Bank, in São Paulo, Brazil. Previously, Mr. Weber was an investment banker at Morgan Stanley and Salomon Brothers. Mr. Weber began his career as a corporate lawyer following his graduation from

The following table sets forth information regarding compensation for the fiscal years 2003, 2002 and 2001 awarded to, earned by or paid to the individuals serving as our Chief Executive Officer in fiscal year 2003 and the other four most highly compensated executive officers at December 31, 2003. Mr. Gustafson resigned as our President and Chief Executive Officer effective as of May 30, 2003 and was replaced by Mr. Weber effective as of May 31, 2003. Effective October 4, 2004, Jon F. Weber resigned as President and Chief Executive Officer and Robert L. Weisman was appointed President and Chief Executive Officer. Mr. Weber will continue his duties as a member of the Company’s board of directors.


	(1)	On April 3, 2003, Mr. Donovan was granted 45,605 restricted shares of our Common Stock and Messrs. Foli, Ryan and Cunningham each were granted 10,000 restricted shares of our Common Stock. The per share value as of the grant date was $0.01. These restricted shares are entitled to receive dividends should we authorize dividends on our Common Stock. These restricted shares vest according to the schedule described in “— Restricted Stock Plan.” As of December 31, 2003, the value of the vested restricted shares held by Mr. Donovan was $2,280 and the value of the vested restricted shares held by Messrs. Foli, Ryan and Cunningham was $500 each.

	(2)	Mr. Weisman was appointed President and Chief Executive Officer effective as of October 4, 2004.

	(3)	Mr. Weber was appointed President and Chief Executive Officer effective as of May 31, 2003. Effective October 4, 2004, Jon F. Weber resigned as President and Chief Executive Officer. Mr. Weber will continue his duties as a member of the Company’s board of directors.

	(4)	Mr. Gustafson resigned as Chairman, President and Chief Executive Officer and director of the Company effective as of May 30, 2003.

	(5)	Includes a $1,605,000 severance equal to three times his annual salary, a $267,500 payment equal to the bonus that would have been otherwise payable for achievement of a 50% bonus level for fiscal


		year 2003, and a $185,192 payout for accrued vacation, which were paid to Mr. Gustafson upon his resignation in accordance with his employment agreement. Also includes $6,688 contributed to the Viskase SAVE Plan (401(k)), $7,512 contributed to the Viskase Parallel Non-Qualified Savings Plan (the “Non-Qualified Plan”), $32,136 paid for deferred salary and Company contributions made under our Non-Qualified Plan and $275 paid for group life insurance.

	(6)	Includes $30,000 for automobile allowance and $20,084 for reimbursement of legal services.

	(7)	Includes $8,175 contributed to the Viskase SAVE Plan, $7,215 contributed to the Non-Qualified Plan and $660 paid for group life insurance.

	(8)	Includes $7,815 contributed to the Viskase SAVE Plan, $15,780 contributed to the Non-Qualified Plan and $1,150 paid for group life insurance.

	(9)	Represents tax gross-up payments for automobile allowances.


(10)	Includes $5,791 contributed to the Viskase SAVE Plan, $2,221 contributed to the Non-Qualified Plan and $512 paid for group life insurance.

(11)	Includes $5,582 contributed to the Viskase SAVE Plan, $420 contributed to the Non-Qualified Plan and $494 paid for group life insurance.

(12)	Includes $5,362 contributed to the Viskase SAVE Plan, $1,999 contributed to the Non-Qualified Plan and $494 paid for group life insurance.

(13)	Includes $4,778 contributed to the Viskase SAVE Plan, $1,500 contributed to the Viskase Corporation Non-Qualified Executive Benefit Trust, our non-qualified supplemental pension plan (the “Executive Benefit Trust”) and $422 paid for group life insurance.

(14)	Includes $4,605 contributed to the Viskase SAVE Plan, $1,500 contributed to the Executive Benefit Trust and $407 paid for group life insurance.

(15)	Includes $4,424 contributed to the Viskase SAVE Plan, $1,500 contributed to the Executive Benefit Trust and $408 paid for group life insurance.

(16)	Includes $4,246 contributed to the Viskase SAVE Plan and $375 paid for group life insurance.

(17)	Includes $4,084 contributed to the Viskase SAVE Plan and $362 paid for group life insurance.

(18)	Includes $3,916 contributed to the Viskase SAVE Plan and $362 paid for group life insurance.

(19)	Includes $4,242 contributed to the Viskase SAVE Plan and $375 paid for group life insurance.

(20)	Includes $3,836 contributed to the Viskase SAVE Plan and $338 paid for group life insurance.

(21)	Includes $3,600 contributed to the Viskase SAVE Plan and $331 paid for group life insurance.

There were initially 660,000 shares of Common Stock reserved for grant to our management and employees under the Viskase Companies, Inc. Restricted Stock Plan. On April 3, 2003, the Company granted 330,070 shares of restricted Common Stock (“Restricted Stock”) under the Restricted Stock Plan. Shares granted under the Restricted Stock Plan vested 12.5% on the grant date and vest 17.5%, 20%, 20% and 30% on the first, second, third and fourth anniversaries, respectively, of the grant date, subject to acceleration upon the occurrence of certain events. The Restricted Stock expense for the nine-month period ending December 31, 2003 for the Reorganized Company was $20,000.

The following table sets forth estimated annual benefits payable upon retirement under the Retirement Program for Employees of Viskase Corporation (the “Retirement Program”) to employees of the U.S. operations of the Company in specified remuneration and years of service classifications.


(1)	Annual benefits payable under the Retirement Program are calculated based on the participant’s average base salary for the consecutive thirty-six (36) month period immediately prior to retirement.

(2)	The annual benefits payable are based on straight-life annuity basis at normal retirement age. The benefits reported in this table are not subject to any reduction for benefits paid by other sources, including Social Security. As of December 31, 2003, Messrs. Donovan, Foli, Ryan and Cunningham are credited with 16, 37, 27 and 14 years of service, respectively.

Each director who is not an officer of the Company received an annual retainer of $10,000 in 2003 and a fee of $1,000 for each meeting of the Board of Directors attended. Chairmen of committees of the Board of Directors receive an additional annual retainer of $1,500. Directors receive a fee of $1,000 ($500 in the case of committee meetings occurring immediately before or after meetings of the full Board of Directors) for each meeting of a committee of the Board of Directors attended. Directors who are officers of the Company do not receive compensation in their capacity as directors.

We have no standing compensation committee. All compensation decisions are made by our full Board of Directors.

On October 4, 2004, we entered into an employment agreement with Robert L. Weisman. Pursuant to this agreement, Mr. Weisman agreed to serve as our President and Chief Executive Officer. The initial term of the agreement is three years, commencing on October 4, 2004 and ending on October 4, 2007. However, Mr. Weisman’s employment is at will, and it may be terminated by us for various reasons set forth in the agreement and by Mr. Weisman for any reason.

Under the agreement, Mr. Weisman receives an annual base salary of at least $250,000. This salary may be increased annually based on reviews by the Board of Directors. Mr. Weisman is also eligible to participate in our: (i) Management Incentive Plan, a bonus program calculated as a percentage of his base salary depending on our performance and our appraisal of his personal performance; (ii) Non-Qualified Parallel Plan; and (iii) other employee and fringe benefit and/or profit sharing plans that we provide to other senior executive employees, including medical and health plans.

Under the Agreement, Mr. Weisman will receive stock options with respect to 500,000 shares of Common Stock, at an exercise price of $2.40 per share. Generally, options with respect to one-third of the shares will vest at every anniversary of the agreement. However, no stock options will vest after the employment is terminated, other than the stock options that would have vested upon the anniversary of the agreement immediately after the termination if the termination had not been taken place; provided, however, that Mr. Weisman has completed at least six months of employment with us before termination. If we experience a change of control such that Mr. Weisman ceases to serve as our principal executive officer, the stock options with respect to all 500,000 shares will vest. The stock options will expire on the fifth anniversary of their issuance.

If Mr. Weisman’s employment is terminated by us for reasons other than disability or “Cause,” as defined in the agreement, we will: (1) continue to pay Mr. Weisman for six months at a per annum rate equivalent to his base salary; (2) provide Mr. Weisman and his spouse medical and health insurance coverage for six months or until Mr. Weisman receives such coverage from another employer, whichever is earlier; and (3) pay Mr. Weisman a pro rata portion of the bonus for which he is eligible.

Pursuant to the agreement, Mr. Weisman is generally prohibited during the term of the agreement, and for a period of twelve months thereafter, from competing with us, soliciting any of our customers or inducing or attempting to persuade any of our employees to terminate his or her employment with us to enter into competitive employment.

On November 29, 2001, we entered into an employment agreement with Gordon S. Donovan. Pursuant to the employment agreement, Mr. Donovan agreed to serve as our Vice President, Chief Financial Officer and Treasurer. The initial term of the employment agreement is approximately three years ending December 31, 2004; provided, however, that on January 1, 2003 and each subsequent anniversary thereof, the term of the employment agreement is automatically extended for a period of one year unless either we or Mr. Donovan give written notice to the other party at least 30 days prior to the anniversary date that the term shall not be so extended.

Under the employment agreement, Mr. Donovan receives an annual base salary of at least $193,020. Mr. Donovan’s base salary will be increased by the President of the Company each year in a manner consistent with increases in base salary for our other senior officers. In addition, the employment agreement provides that Mr. Donovan is eligible to participate in our: (i) Management Incentive Plan, a bonus program calculated as a percentage of his base salary depending on our performance and our appraisal of his personal performance; (ii) Non-Qualified Parallel Plan; (iii) Executive Auto Allowance Program; and (iv) certain equity incentive compensation plans. Mr. Donovan is also entitled to participate in any employee benefit plans in effect for, and to receive other fringe benefits provided to, other executive officers.

If Mr. Donovan’s employment is terminated by us for “cause,” as defined in the employment agreement, or by Mr. Donovan other than for “good reason” or “disability,” each as defined in the employment agreement, Mr. Donovan will be paid all “accrued compensation,” as defined in the employment agreement, through the date of termination of employment. If Mr. Donovan’s employment is terminated by us for any reason other than for cause, death or disability, or by Mr. Donovan for good reason: (i) Mr. Donovan will be paid all accrued compensation plus 200% of his base salary and the prorated amount of annual bonus that would have been payable to him with respect to the fiscal year in which his employment is terminated, provided that the performance targets have been actually achieved as of the date of termination (unless such termination of employment follows a “change in control,” as defined in the employment agreement, in which case Mr. Donovan will receive a bonus equal to 40% of his base salary regardless of our performance); (ii) Mr. Donovan will continue to receive life insurance, medical, dental and hospitalization benefits for a period of twenty-four (24) months following termination of employment; and (iii) all outstanding stock options and restricted shares will become immediately exercisable, vested and nonforfeitable.

Pursuant to the employment agreement, Mr. Donovan is generally prohibited during the term of the employment agreement, and for a period of two years thereafter, from competing with us, soliciting any of

We have provided notice to Mr. Donovan that the employment agreement will not be renewed at the end of the current term of the agreement, which ends December 31, 2005, although it is not our intention that the non-renewal of the employment agreement be deemed a termination of his employment.

The following table sets forth the beneficial ownership of our Common Stock as of September 30, 2004 of (i) each person or group of persons known to us to beneficially own more than 5% of the outstanding shares of Common Stock, (ii) each director of the Company, (iii) each executive officer of the Company listed in the Summary Compensation Table above and (iv) all executive officers and directors of the Company as a group. In June 2003, we terminated our registration under Section 12(g) of the Exchange Act and, therefore, we have not been subject to the reporting requirements of the Exchange Act since that time. All information below is taken from or based upon ownership filings previously made by such persons with the SEC or upon information provided to us by such persons, but because such persons have not been subject to the beneficial ownership reporting requirements of the Exchange Act, complete and accurate information with respect to current beneficial ownership provided may be unavailable. To our knowledge, each of the holders of Common Stock listed below has sole voting and investment power as to the shares of Common Stock owned, unless otherwise noted.

(1)

The ownership indicated is according to a Schedule 13D filed with the SEC on April 14, 2003, rounded down to reflect the actual number of shares issued by the disbursement agent. Mr. Icahn is the sole shareholder, director and executive officer of Barberry Corp. (“Barberry”), which is the general partner of each of High River Limited Partnership (“High River”) and Meadow Walk Limited Partnership (“Meadow Walk”). As such, Mr. Icahn is in a position, directly or indirectly, to determine the investment and voting decisions with respect to the Common Stock owned by Barberry, High River and Meadow Walk. The ownership indicated (rounded down to reflect the actual number of shares issued by the disbursing agent) includes 1,236,537 owned directly by Barberry, 1,331,656 owned directly by High River and 299,812 owned directly by Meadow Walk. The address for Mr. Icahn is c/o Icahn Associates Corp., 767 Fifth Avenue, 47th Floor, New York, New York 10153


	and the address for each of Barberry, High River and Meadow Walk is 100 South Bedford Road, Mount Kisco, New York 10549.

(2)	The ownership indicated is according to a Schedule 13G filed with the SEC on January 27, 2004. The ownership indicated includes shares of Common Stock over which Merrill Lynch & Co., Inc. (“ML&Co.”) and Debt Strategies Fund, Inc. share voting and dispositive power, which shares are owned directly by asset management subsidiaries of ML&Co., including Fund Asset Management, L.P. ML&Co. and Debt Strategies Fund, Inc. disclaim beneficial ownership of the shares held by their subsidiaries. The address of ML&Co. is World Financial Center, North Tower, 250 Vesey Street, New York, New York 10381 and the address of Debt Strategies Fund, Inc. is 800 Scudders Mill Road, Plainsboro, New Jersey 08536.

(3)	The ownership indicated is according to a Schedule 13G filed with the SEC on June 11, 2003. The address for Northeast Investors Trust is 50 Congress Street, Boston, Massachusetts 02109-4096.

(4)	The address for each of our officers and directors is c/o Viskase Companies, Inc., 625 Willowbrook Centre Parkway, Willowbrook, Illinois 60527.

(5)	Mr. Donovan was granted 45,605 shares of Restricted Stock pursuant to the Restricted Stock Plan, 13,682 shares of which are vested. Mr. Donovan also directly owns warrants to purchase 160 shares of Common Stock and beneficially owns through our 401(k) Plan, our Non-Qualified Plan, his IRA and his spouse’s IRA, warrants to purchase 324, 59, 20 and 20 shares of Common Stock, respectively. Mr. Donovan disclaims beneficial ownership of the warrants to purchase 20 shares of Common Stock held in his spouse’s IRA.

(6)	Messrs. Foli, Ryan and Cunningham were each granted 10,000 shares of Restricted Stock pursuant to the Restricted Stock Plan, 3,000 shares of which are vested.

The following table sets forth certain information regarding our common stock that may be issued under our equity compensation plan as of December 31, 2003.

(1)

Under terms of prepackged plan or reorganization, 660,000 shares of Common Stock were reserved for grant to management and employees under the Viskase Companies, Inc. Restricted Stock Plan. On April 3, 2003, the Company granted 330,070 shares of restricted common stock (“Restricted Stock”) under the Restricted Stock Plan. Shares granted under the Restricted Stock Plan vested 12.5% on grant date; 17.5% on the first anniversary of grant date; 20% on the second anniversary of grant date; 20% on the third anniversary; and, 30% on the fourth anniversary of the grant date, subject to acceleration upon the occurrence of certain events.

Selling shareholders may use this prospectus to offer and sell the Common Stock. See “Plan of Distribution.” The Registration Statement of which this prospectus forms a part has been filed pursuant to Rule 415 under the Securities Act to afford the holders of the Common Stock the opportunity to sell their Common Stock in a public transaction rather than pursuant to an exemption from the registration and prospectus delivery requirements of the Securities Act. In order to avail itself of that opportunity, a holder must notify the Company in writing of its intention to sell Common Stock and request that the Company file a supplement to this prospectus or an amendment to the Registration Statement, if required, identifying such holder as a selling shareholder and disclosing such other information concerning the selling shareholder and the Common Stock to be sold as may then be required by the Securities Act and the rules of the SEC. No offer or sale pursuant to this prospectus may be made by any holder until such a request has been made and until any such supplement has been filed or any such amendment has become effective.

The selling shareholders and their transferees of any sort, including pledgees or secured parties of such selling shareholders in case of default, may from time to time sell all or any of their shares of Common Stock on or through the facilities of any stock exchange, market or trading facility on which the shares are traded or quoted. These sales may be at fixed or negotiated prices. The principal factors to be considered by a selling shareholder in determining the price include the following:


	•	the information included in this prospectus and otherwise available to the selling shareholder;

	•	the history of and prospects for our business and our past and present operations;

	•	the history and prospects for the industry in which we compete;

	•	our past and present earnings and current financial position;

	•	the market for securities of companies in businesses similar to ours; and

	•	the general condition of the securities market.

The following chart summarizes the extremely limited trading information relating to the bid and ask quotations for our Common Stock in the “pink sheet” quotation system. The information below reflect inter-dealer prices, without retail mark-up, mark-down or commission. Accordingly, the prices shown in the chart may not necessarily represent actual transactions.

There were 161 holders of record of the Common Stock as of December 21, 2004, the most recent practicable date before the filing of this document.

The selling shareholders may use a variety of methods when selling the Common Stock, including ordinary brokerage transactions and transactions where the broker-dealer solicits purchasers, block trades in which the broker-dealer may attempt to sell as an agent or resell as a principal, including for its own account, an exchange distribution in accordance with the rules of any such exchange, privately negotiated transactions or any other method permitted by law. The selling shareholders may also sell shares under Rule 144 under the Securities Act, if available, or in other private resales, rather than under this prospectus.

If the selling shareholder effects the sale or transfer of its Common Stock through a broker-dealer, such broker-dealer may receive compensation in the form of discounts, concessions or commissions from the selling shareholder or the purchasers of Common Stock for whom such broker-dealer may act as agent or to whom they sell as principal or both (which compensation is not expected to exceed what is customary in the types of transactions involved). The selling shareholder and any broker-dealer that acts in connection with the sale or transfer of the Common Stock may be deemed to be “underwriters” within the meaning of Securities Act. In such event, any commissions received by such broker-dealer or agent and any profits on the resale of the shares of Common Stock purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.

Upon our being notified in writing by a selling shareholder that any material arrangement has been entered into with any broker-dealer for the sale of Common Stock, a supplement to this prospectus will be filed to the extent applicable that sets forth the amount of Common Stock to be sold and the terms of the sale, any plan of distribution, the names of any underwriters, brokers, dealers or agents, any discounts, commissions, concessions or other items constituting compensation from the selling shareholders or any other information as may be required under the Securities Act.

We are required to pay all fees and expenses incident to the registration of the Common Stock. We have agreed to indemnify the selling shareholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.

During the period from April 2003 to December 2003, Mr. Weber, our former President and Chief Executive Officer, received a salary of $170,000 and other benefits (including 401(k) contributions and medical and life insurance) of approximately $10,000 from a wholly-owned subsidiary of Icahn Associates Corp. as compensation for Mr. Weber’s services to us and to other companies affiliated with Icahn Associates Corp.

During the nine months ended September 30, 2004, we purchased $66,000 in telecommunication services in the ordinary course of business from XO Communications, Inc., an affiliate of Carl C. Icahn, who may be deemed to be a beneficial owner of approximately 29.1% of our Common Stock. The Company believes that the purchase of the telecommunications services were on terms at least as favorable as those that the Company would expect to negotiate with an unaffiliated party.

Arnos Corp., an affiliate of Mr. Icahn, was the lender under our former revolving credit facility. We paid Arnos Corp. origination fees, interest and unused commitment fees of $175,000 during the period from April 3, 2003 through December 31, 2003 and $144,000 during the period ended from January 1, 2004 through September 30, 2004. The Company believes that the terms of the former revolving credit facility were at least as favorable as those that the Company would have expected to negotiate with unaffiliated party.

Gregory R. Page, the President and Chief Operating Officer of Cargill, Inc., resigned as one of our directors as of the date we emerged from bankruptcy in April 2003. During 2003, we had sales in the ordinary course of business of $613,162 to Cargill, Inc. and its affiliates, $199,598 of which occurred prior to Mr. Page’s resignation in April 2003.

On June 29, 2004, we repurchased 805,270 shares of our Common Stock (representing approximately 7.34% of our issued and outstanding Common Stock on a fully-diluted basis as of June 17, 2004 held by Jefferies & Company, Inc., the initial purchaser of the 11.5% Notes, or its affiliates for total consideration of $298,000.

The following summary of certain provisions of the instruments evidencing our material indebtedness does not purport to be complete, but it does discuss the provisions that are, in our view, material for investors in the Common Stock, and is subject to all of the provisions of the corresponding agreements, including the definitions of certain terms therein that are not otherwise defined in this prospectus.

On June 29, 2004, the Company and all of its domestic subsidiaries entered into a senior secured revolving credit facility for up to $20.0 million (which includes a letter of credit subfacility of up to $10.0 million) as borrowers thereunder. This revolving credit facility will be used for working capital and other general corporate purposes.

Borrowings under the loan and security agreement governing the revolving credit facility (the “Credit Agreement”) will be subject to a borrowing base formula based on percentages of eligible domestic receivables and eligible domestic inventory. Under the Credit Agreement, we are able to choose between two per annum interest rate options: (x) the lender’s prime rate and (y) (1) LIBOR plus (2) a margin of 2.25% (which margin will be subject to performance based increases up to 2.50% and decreases down to 2.00%); provided that LIBOR shall be at least equal to 1.00%. Letter of credit fees are charged a per annum rate equal to the then applicable margin described in clause (y)(2) of the immediately preceding sentence less 50 basis points. The Credit Agreement also provides for an unused line fee of 0.375% per annum and a monthly servicing fee. The Credit Agreement has a term of five years.

Indebtedness under the Credit Agreement is secured by liens on substantially all of our and our domestic subsidiaries’ assets, which liens (i) on inventory, account receivables, lockboxes, deposit accounts into which payments therefor are deposited and proceeds thereof, are contractually senior to the liens securing the 11.5% Notes and the related guarantees pursuant to an intercreditor agreement, (ii) on real property, fixtures and improvements thereon, equipment and proceeds thereof, are contractually subordinate to the liens securing the 11.5% Notes and such guarantees pursuant to such intercreditor agreement, (iii) on all other assets, are contractually pari passu with the liens securing the 11.5% Notes and such guarantees pursuant to such intercreditor agreement.

The Credit Agreement contains various covenants that restrict our ability to, among other things, incur indebtedness, enter into mergers or consolidation transactions, dispose of assets (other than in the ordinary course of business), acquire assets (with permitted exceptions), make certain restricted payments, prepay any of the 8% Senior Notes at a purchase price in excess of 90% of the aggregate principal amount thereof, together with accrued and unpaid interest to the date of such prepayment, create liens on our assets, make investments, create guarantee obligations and enter into sale and leaseback transactions and transactions with affiliates. The Credit Agreement also requires that we comply with various financial covenants, including meeting a minimum EBITDA requirement and limitations on capital expenditures as well as, in the event our usage of the Credit Agreement exceeds 30%, certain other financial covenants. For a description of the revolving credit facility’s covenants, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The Credit Agreement provides for certain events of default, including default upon the nonpayment of principal, interest, fees or other amounts, a cross default with respect to other obligations of ours, failure to comply with certain covenants, conditions or provisions under the Credit Agreement, the existence of certain unstayed or undischarged judgments, the invalidity or unenforceability of the relevant security documents, the making of materially false or misleading representations or warranties, commencement of reorganization, bankruptcy, insolvency or similar proceedings and the occurrence of certain ERISA events. Upon the occurrence of an event of default under the Credit Agreement, the lender will be entitled to declare all obligations thereunder to be immediately due and payable. The Credit Agreement requires us to pay a prepayment premium in the event that it is prepaid prior to maturity.

The 11.5% Notes accrue interest from June 29, 2004 at the rate of 11.5% per year, payable semi-annually. The 11.5% Notes mature on June 15, 2011. We have currently issued an aggregate principal amount of $90,000,000 of 11.5% Notes.

The 11.5% Notes are senior secured obligations of the Company that rank equally in right of payment with all other senior obligations of the Company and senior in right of payments to all indebtedness that is by its terms subordinated to the 11.5% Notes. The 11.5% Notes are secured by security interests in substantially all of the assets of the Company, subjected to certain permitted liens identified in the indenture relating to the 11.5% Notes, and are unconditionally guaranteed, jointly and severally on a senior secured basis by all of the Company’s subsidiaries identified in the indenture relating to the 11.5% Notes.

The 8% Senior Notes accrue interest from December 1, 2001 at the rate of 8% per year, payable semi-annually (except annually with respect to year four and quarterly with respect to year five), with interest payable in the form of 8% Senior Notes (paid-in-kind) for the first three years. The first interest payment date on the 8% Senior Notes was June 30, 2003 (paid-in-kind). Interest for years four and five will be payable in cash to the extent of available cash flow, as defined, and the balance in the form of 8% Senior Notes (paid-in-kind). Thereafter, interest will be payable in cash. The 8% Senior Notes mature on December 1, 2008 with a principal value of approximately $18.7 million, assuming interest in the first five years is paid in the form of 8% Senior Notes (paid-in-kind). The aggregate principal amount and carrying value of the 8% Senior Notes as of September 30, 2004 were $15.7 million and $11.2 million, respectively.

On June 29, 2004, we purchased $55.5 million aggregate principal amount of the outstanding 8% Senior Notes. In connection therewith, the holders thereof agreed to, among other things, release the liens on the collateral securing the 8% Senior Notes and to eliminate substantially all of the restrictive covenants contained in the indenture governing the 8% Senior Notes. From time to time, we may offer to purchase at a substantial discount the remaining 8% Senior Notes through privately negotiated transactions, purchases in the public marketplace or otherwise.

Our authorized capital stock consists of 100,000,000 shares, with (i) 50,000,000 shares of Common Stock, par value $0.01 and (ii) 50,000,000 shares of preferred stock, par value $0.01 (“Preferred Stock”). As of September 30, 2004, there are 10,670,053 shares of Common Stock issued and 9,864,783 shares of Common Stock outstanding. Holders of the Warrants are entitled, in the aggregate, to purchase 805,230 shares of Common Stock, representing about 7.34% of our Common Stock on a fully diluted basis, as of September 30, 2004.

Holders of Common Stock are entitled to one vote per share on all matters submitted to a vote of the shareholders, including the election of directors.

Holders of Common Stock are entitled to receive a pro rata share of dividends when and as declared by the Board of Directors out of funds legally available for the payment of dividends and to participate pro rata in liquidating distributions. However, the rights of the holders of Common Stock are subject to the holders of all classes or series of stock outstanding at the time of a dividend distribution that have prior rights to the Common Stock.

The Board of Directors is authorized to issue Preferred Stock, in one or more series, that may have such prior rights to the Common Stock without any further action by shareholders. The Board of Directors also has the authority, without further action by shareholders, to establish rights of holders of Preferred Stock with respect to voting, dividends, redemption, liquidation, conversion, retirement or sinking funds, restrictions upon actions relating to Common Stock, ranking, as well as other preferences, powers or rights. Currently, the Company does not have any shares of Preferred Stock designated for issuance or outstanding.

One of the effects of the undesignated Preferred Stock may be to enable the Board of Directors to render more difficult or to discourage an attempt to obtain control of the Company by means of a tender offer, proxy contest, merger or otherwise, and thereby to protect the continuity of the Company’s management. The issuance of shares of the Preferred Stock pursuant to the Board of Directors’ authority described above may adversely affect the rights of the holders of Common Stock. For example, Preferred Stock issued by the Company may rank prior to the Common Stock as to dividend rights, liquidation preference or both, may have full or limited voting rights and may be convertible into shares of Common Stock. Accordingly, the issuance of shares of Preferred Stock may discourage bids for the Common Stock or may otherwise adversely affect the market price of the Common Stock.

Our certificate of incorporation provides that we may not issue shares of stock without the approval of our Board of Directors upon the affirmative vote of no less than 80% of the authorized number of directors, including authorized but vacant directorships.

On June 29, 2004, the Company issued and sold the Warrants (with respect to which 805,230 shares of Common Stock are issuable) as part of the Units, which consisted of $1,000 principal amount of our 11.5% Notes and one Warrant to purchase 8.947 shares of Common Stock at an exercise price of $0.01 per share throughout the entire exercise period. The exercise period for the Warrants ends on June 15, 2011. No fractional shares will be issued upon exercise of the Warrants, and the Company will pay an amount in cash equal to the current market value of any such fractional share less a corresponding fraction of the exercise price. The number of shares purchasable upon exercise of the Warrants and the exercise price may be adjusted upon certain events such as, among other events, (i) payment of dividends or other distributions by the Company; (ii) subdivisions, combinations and other reclassifications of Common Stock; (iii) issues to all holders of Common Stock of rights, options or warrants entitling them to Common Stock at an exercise price less than the fair market value of the Common Stock; (iv) issuance of shares of Common Stock at a price less than the fair market value of the Common Stock; and issuance of shares of other securities that are convertible into or exchangeable or exercisable for shares of Common Stock at a price less than the fair market value of the Common Stock. However, no adjustment will be required unless the adjustment would require an increase or decrease of at least one percent in the exercise

The Warrants have not been and will not be registered under the Securities Act. Therefore, any transfer of the Warrants must be make in compliance with the registration requirements of the Securities Act or pursuant to an exemption therefrom.

The Company originally sold the Units to Jefferies & Company, Inc., the initial purchaser, under the terms of a purchase agreement dated June 29, 2004. The initial purchaser subsequently resold the Units to qualified institutional buyers in reliance on Rule 144A and Regulation S under the Securities Act. In connection with the issuance and sale of the Units, the Company entered into a registration rights agreement with the initial purchaser of the Warrants in which the Company agreed to use its reasonable best efforts to:


	•	file a registration statement, within 180 days after the date of original issuance of the Warrants, with the SEC with respect to resales of the Common Stock that may be acquired upon exercise of the Warrants;

	•	cause the registration statement to be declared effective under the Securities Act within 270 days after the date of the original issuance of the Warrants; and

	•	keep the registration statement continuously effective, supplemented, amended and current until the second anniversary of the effective date of the registration statement.

The Company received approximately $86.1 million in net proceeds from the sale of the Units, after deducting the fees and expenses of the offering of the Units. Approximately $52.2 million of the net proceeds were used to repurchase $55.5 million of 8% Senior Notes (which bear interest at the rate of 8% per year and mature on December 1, 2008) at a price of 90% of the principal amount thereof, plus accrued and unpaid interest thereon, and approximately $33.0 million of the net proceeds were used for the early termination of the GECC capital lease and repurchase of the operating assets subject thereto. The remainder of the net proceeds are available for general corporate purposes.

On April 3, 2003, the Company consummated its prepackaged Chapter 11 bankruptcy plan, as modified (the “Plan”), which had previously been confirmed by order of the United States Bankruptcy Court for the Northern District of Illinois, Eastern Division. Under the Plan, holders of the Company’s Old Senior Notes received just over 90% of the Company’s equity on a fully diluted basis. The holders of the Company’s outstanding Old Senior Notes received a pro rata share of 8% Senior Notes and 10,340,000 shares of Common Stock. In connection therewith, we entered into a registration rights agreement with certain shareholders, including High River Limited Partnership, which is controlled by Mr. Icahn. See “Security Ownership of Certain Beneficial Owners and Management.” Pursuant to the terms of such registration rights agreement, if the Company proposes to effect a registration of equity securities, each of the parties to such registration rights agreement is allowed to request that the Company include in the registration statement such party’s registrable securities. Pursuant to the Plan, the previously outstanding shares of Common Stock were canceled and the holders thereof received the 2010 Warrants exercisable in the aggregate for 306,291 shares at an exercise price of $10.00 per share.

Section 1145 of the Bankruptcy Code exempts the original issuance of securities under a plan of reorganization (as well as subsequent distributions by the distribution agent) from registration under the Securities Act and state securities laws. Under Section 1145, the issuance of securities pursuant to a plan of reorganization is exempt from registration if three principal requirements are satisfied: (1) the securities must be issued under a plan of reorganization by a debtor, its successor or an affiliate participating in a joint plan with the debtor; (2) the recipients of the securities must hold a claim against the debtor or such affiliate, an interest in the debtor or such affiliate, or a claim for an administrative expense against the debtor or such affiliate; and (3) the securities must be issued entirely in exchange for the recipient’s claim against or interest in the debtor or such affiliate or “principally” in such exchange and “partly” for cash or property. We believe that the issuances of the shares of our Common Stock and the 2010 Warrants pursuant to the Plan satisfy the requirement of Section 1145 of the Bankruptcy Code and, therefore, were exempt from registration under the Securities Act and state securities laws. Similarly, the Common Stock for which the 2010 Warrants may be exercised are exempt from registration pursuant to Section 1145 of the Bankruptcy Code.

Assuming exercise in full of all of the Warrants and the 2010 Warrants, we will have 10,976,304 shares of Common Stock outstanding. All 10,976,304 shares of Common Stock will be freely transferable without restriction or further registration under the Securities Act by persons other than “underwriters,” as that term is defined under Section 1145(b) of the Bankruptcy Code, and “affiliates,” as that term is defined in Rule 144 under the Securities Act.

Subject to volume restrictions under the Securities Act on sales by affiliates, the securities issued under the plan of reorganization may be freely transferred by most recipients following distribution under the plan of reorganization, and all resales and subsequent transactions in such securities are exempt from registration under federal and state securities laws, unless the holder is an “underwriter” with respect to such securities. Section 1145(b) of the Bankruptcy Code defines four types of “underwriters:”


	•	persons who purchase a claim against, an interest in, or a claim for an administrative expense against the debtor with a view to distributing any securities received in exchange for such a claim or interest;

	•	persons who offer to sell securities offered under a plan for the holders of such securities;

	•	persons who offer to buy such securities for the holders of such securities, if the offer to buy is (A) with a view to the distribution of such securities or (B) made under a distribution agreement; and

	•	a person who is an “issuer” with respect to the securities, as the term “issuer” is defined in Section 2(11) of the Securities Act.

Under Section 2(11) of the Securities Act, an “issuer” includes any person directly or indirectly controlling or controlled by the issuer, or any person under direct or indirect common control with the issuer.

To the extent that persons deemed to be “underwriters” received securities in the plan of reorganization, resales by such persons would not be exempted by Section 1145 of the Bankruptcy Code from registration under the Securities Act or other applicable law. Persons deemed to be underwriters, however, may be able to sell these securities without registration subject to the provisions of Rule 144 under the Securities Act, which permits the public sale of securities received under a plan of reorganization by persons who would be deemed to be “underwriters” under Section 1145 of the

Whether or not any particular person would be deemed an “underwriter” with respect to our common stock or our warrants to purchase our common stock would depend upon various facts and circumstances applicable to that person. Accordingly, we express no view as to whether any particular person that received distributions under the plan of reorganization would be an “underwriter” with respect to these securities.

Given the complex and subjective nature of the question of whether a particular holder may be an underwriter, we make no representation concerning the right of any person to trade in the securities issued in the plan of reorganization. We recommend that recipients of a large amount of securities consult their own counsel concerning whether they may freely trade these securities under the Securities Act.

In general with respect to the Company, under Rule 144, a person (or persons whose shares are required to be aggregated), including an affiliate, who has beneficially owned shares for at least one year is entitled to sell, within any three-month period, a number of shares of Common Stock that does not exceed 1% of the number of shares of Common Stock then outstanding, which will equal approximately 106,700 shares after the completion of the offering, assuming exercise in full of all the Warrants.

Sales under Rule 144 also are subject to manner of sale provisions and notice requirements and to the availability of current public information about us.

In connection with the Plan, we entered into a registration rights agreement with certain holders who, as a result of their ownership of Common Stock upon consummation of the Plan, might be characterized as “underwriters” for purposes of Section 1145(b) of the Bankruptcy Code. To our knowledge, these holders own a total of 5,589,719 shares of Common Stock, which includes the 2,868,005 shares of Common Stock held by High River Limited Partnership and its affiliates that are being registered hereby. In connection with the sale of the Warrants, we entered into a registration rights agreement. We have filed this registration statement to satisfy certain of our obligations under that registration rights agreement.

As of September 30, 2004, there were outstanding 2010 Warrants exercisable for a total of 304,127 shares of Common Stock at an exercise price of $10.00 per share and Warrants exercisable for 805,230 shares of Common Stock at an exercise price of $0.01 per share.

Pursuant to the terms of the restructuring agreement by and among the Company and High River Limited Partnership, Debt Strategies Fund, Inc. and Northeast Investors Trust, as the same was amended pursuant to the registration rights agreement with such shareholders, such shareholders are prohibited from transferring (other than among themselves or to certain of their affiliates) any Common Stock they may own until April 4, 2006. Beginning April 4, 2005, however, such shareholders may transfer shares of Common Stock that they own if such shareholder (1) provides the Company at least 20 business days before any transfer such information that would be required in a Schedule 13D filed by the proposed transferee with respect to the transfer and (2) the Company fails to notify such shareholder within the 20 business day period that it or its designee will purchase the Common Stock on the same terms as the proposed transferee. Any such transfer to the proposed transferee must occur within 90 days of the expiration of the 20 business day period and be on terms no more favorable to the proposed transferee than the terms described to the Company.

The validity of the Common Stock offered by this prospectus was passed upon for the Company by Jenner & Block LLP, Chicago, Illinois.

The financial statements as of December 31, 2002 and for each of the two years in the period ended December 31, 2002 included in this prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP (“PwC”), independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

The financial statements as of December 31, 2003 and for the year ended December 31, 2003 included in this prospectus have been so included in reliance on the report of Grant Thornton LLP (“Grant Thornton”), independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

On September 15, 2003, the Company dismissed PwC and engaged Grant Thornton as our independent registered public accounting firm. The decision to change such firms was recommended by our audit committee and unanimously ratified by our board of directors. The reports of PwC on our financial statements as of December 31, 2002 and for each of the two years in the period ended December 31, 2002 contained no adverse opinion or disclaimer of opinion and, except as noted in the next sentence, were not qualified or modified as to uncertainty, audit scope or accounting principle. PwC’s report on such financial statements included an explanatory paragraph that described substantial doubt about our ability to continue as a going concern. During the two years in the period ended December 31, 2002 and through September 15, 2003, there were no disagreements with PwC on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of PwC, would have caused PwC to make reference thereto in its report on our financial statements for such years; nor were there any “reportable events” as defined in Item 304(a)(1)(v) of Regulation S-K. In addition, we did not consult with Grant Thornton with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements.

This prospectus includes “forward-looking statements.” Forward-looking statements are those that do not relate solely to historical fact. These statements relate to future events or our future financial performance and implicate known and unknown risks, uncertainties and other factors that may cause the actual results, performances or levels of activity of our business or our industry to be materially different from that expressed or implied by any such forward-looking statements. They include, but are not limited to, any statement that may predict, forecast, indicate or imply future results, performance, achievements or events. In some cases, you can identify forward-looking statements by use of words such as “believe,” “anticipate,” “expect,” “estimate,” “intend,” “project,” “plan,” “will,” “would,” “could,” “predict,” “propose,” “potential,” “may” or words or phrases of similar meaning. Statements concerning our financial position, business strategy and measures to implement that strategy, including changes to operations, competitive strengths, goals, plans, references to future success and other similar matters are forward-looking statements. Forward-looking statements may relate to, among other things:


	•	our ability to meet liquidity requirements and to fund necessary capital expenditures;

	•	the strength of demand for our products, prices for our products and changes in overall demand;

	•	assessment of market and industry conditions and changes in the relative market shares of industry participants;

	•	consumption patterns and consumer preferences;


	•	the effects of competition;

	•	our ability to realize operating improvements and anticipated cost savings, including with respect to the planned termination of certain postretirement medical and pension benefits;

	•	pending or future legal proceedings and regulatory matters, including but not limited to proceedings, claims or problems related to environmental issues, or the impact of any adverse outcome of any currently pending or future litigation on the adequacy of our reserves;

	•	general economic conditions and their effect on our business;

	•	changes in the cost or availability of raw materials;

	•	the cost of and compliance with environmental laws and other governmental regulations;

	•	our results of operations for future periods;

	•	our anticipated capital expenditures;

	•	our ability to pay, and our intentions with respect to the payment of, dividends on shares of our capital stock;

	•	our ability to protect our intellectual property; and

	•	our strategy for the future.

These forward-looking statements are not guarantees of future performance. Forward-looking statements are based on management’s expectations that involve risks and uncertainties, including, but not limited to, economic, competitive, governmental and technological factors outside of our control, that may cause actual results to differ materially from trends, plans or expectations set forth in the forward-looking statements. These risks and uncertainties may include those discussed in “Risk Factors.” Other risks besides those listed in “Risk Factors” can adversely affect us, and new risk factors can emerge from time to time. It is not possible for us to predict all of these risks, nor can we assess the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in the forward-looking statements. Given these risks and uncertainties, we urge you to read this prospectus completely and with the understanding that actual future results may be materially different from what we plan or expect. We will not update these forward-looking statements even if our situation changes in the future.

We have audited the accompanying consolidated balance sheet of Viskase Companies, Inc. (a Delaware corporation) and Subsidiaries as of December 31, 2003, and the related consolidated statements of income, stockholders’ deficit and cash flows for the periods from January 1, 2003 through April 2, 2003 and April 3, 2003 through December 31, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of Viskase Companies, Inc. and Subsidiaries as of and for the year ended December 31, 2002 and for each of the two years in the period then ended, were audited by other auditors, whose report thereon, dated March 14, 2003, included an explanatory paragraph that described the Company’s filing of its voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code, which raised substantial doubt about the Company’s ability to continue as a going concern and that the financial statements were prepared assuming the Company and its subsidiaries will continue as a going concern.

We conducted our audit in accordance with the standards of the Public Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

As discussed in Note 2 to the consolidated financial statements, the Company’s plan of reorganization under Chapter 11 of the United States Bankruptcy Code became effective on April 2, 2003. As a result of the adoption of “fresh-start” reporting in accordance with Statement of Position 90-7, “Financial Reporting by Entities in Reorganization Under the Bankruptcy Code,” the consolidated financial statements as of and for the year ended December 31, 2003 and for the period from April 3, 2003 to December 31, 2003 are presented on a different basis than the periods before the emergence from bankruptcy, and are therefore not comparable.

In our opinion, the 2003 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Viskase Companies, Inc. and Subsidiaries as of December 31, 2003, and the results of their operations and their cash flows for the periods from January 1, 2003 through April 2, 2003 and April 3, 2003 through December 31, 2003, in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, of shareholders’ deficit and of cash flows present fairly, in all material respects, the financial position of Viskase Companies, Inc. and its subsidiaries (the “Company”) at December 31, 2002, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. In addition, the accompanying financial statement schedule for each of the two years in the period ended December 31, 2002 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

The accompanying consolidated financial statements have been prepared assuming that Viskase Companies, Inc. and its subsidiaries will continue as a going concern. As more fully described in Note 2 to the consolidated financial statements, on November 13, 2002, Viskase Companies, Inc. filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code, which raises substantial doubt about the Company’s ability to continue as a going concern. Management’s intentions with respect to this matter are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The accompanying notes are an integral part of the consolidated financial statements.

The Company is a producer of non-edible cellulosic and plastic casings used to prepare and package processed meat products, and to provide value-added support services relating to these products, for some of the largest global consumer products companies. The Company operates seven manufacturing facilities and eight distribution centers in North America, Europe and Latin America and, as a result, are able to sell our products in most countries throughout the world.

The consolidated financial statements include the accounts of the Viskase Companies, Inc. and its wholly-owned subsidiaries (the “Company”). Intercompany accounts and transactions have been eliminated in consolidation.

Reclassifications have been made to the prior years’ financial statements to conform to the 2003 presentation.

The preparation of financial statements includes the use of estimates and assumptions that affect a number of amounts included in the Company’s financial statements, including, among other things, pensions and other post-retirement benefits and related disclosures, inventories valued under the last-in-first-out method, reserves for excess and obsolete inventory, restructuring charges and income taxes. Management bases its estimates on historical experience and other assumptions that they believe are reasonable. If actual amounts are ultimately different from previous estimates, the revisions are included in the Company’s results for the period in which the actual amounts become known. Historically, the aggregate differences, if any, between the Company’s estimates and actual amounts in any year have not had a significant effect on the Company’s consolidated financial statements.

For purposes of the statement of cash flows, the Company considers cash equivalents to consist of all highly liquid debt investments purchased with an initial maturity of approximately three months or less. Due to the short-term nature of these instruments, the carrying values approximate the fair market value. Cash equivalents and restricted cash include $44,172 and $52,193 of short-term investments at December 31, 2003 and December 31, 2002, respectively. The 2003 restricted cash is principally cash held as collateral for outstanding letters of credit with a commercial bank.

Domestic inventories are valued primarily at the lower of last-in, first-out (“LIFO”) cost or market. Remaining inventories, primarily foreign, are valued at the lower of first-in, first-out (“FIFO”) cost or market.

The Company carries property, plant and equipment at cost less accumulated depreciation. Property and equipment additions include acquisition of property and equipment and costs incurred for computer software purchased for internal use including related external direct costs of materials and services and

payroll costs for employees directly associated with the project. Upon retirement or other disposition, cost and related accumulated depreciation are removed from the accounts, and any gain or loss is included in results of operations. Depreciation is computed on the straight-line method over the estimated useful lives of the assets ranging from (1) building and improvements — 10 to 32 years, (2) machinery and equipment — 4 to 12 years, (3) furniture and fixtures — 3 to 12 years and (4) auto and trucks — 2 to 5 years.

Deferred financing costs are amortized on a straight-line basis over the expected term of the related debt agreement. Amortization of deferred financing costs is classified as interest expense.

Patents are amortized on the straight-line method over an estimated average useful life of 10 years.

Goodwill and intangible assets that have an indefinite useful life are not amortized and are tested at least annually for impairment. Due to the prepackaged nature of the Bankruptcy Plan, goodwill was tested for impairment by comparing the fair value with its recorded amount. As a result of adopting Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets,” the Company used a discounted cash flow methodology for determining fair value. This methodology identified an impairment and goodwill in the amount of $44,430 was written off in the fourth quarter of the current year. As part of Fresh-Start Accounting, the Company recognized intangible assets that are being amortized. Non-compete agreements in the amount of $1,236 are being amortized over two years. The intangible backlog in the amount of $2,375 was amortized in its entirety during 2003.

The Company continues to evaluate the recoverability of long-lived assets including property, plant and equipment, patents and other intangible assets. Impairments are recognized when the expected undiscounted future operating cash flows derived from long-lived assets are less than their carrying value. If impairment is identified, valuation techniques deemed appropriate under the particular circumstances will be used to determine the asset’s fair value. The loss will be measured based on the excess of carrying value over the determined fair value. The review for impairment is performed at least once a year or when circumstances warrant.

The Company’s cash management system provides for the daily replenishment of its bank accounts for check-clearing requirements. The outstanding check balances of $79 and $420 at December 31, 2003 and 2002, respectively, are not deducted from cash but are reflected in Accounts Payable in the consolidated balance sheets.

The North American operations of the Company and the Company’s operations in Germany have defined benefit retirement plans covering substantially all salaried and full time hourly employees. Pension cost is computed using the projected unit credit method. The discount rate used approximates the average yield for high-quality corporate bonds as of the valuation date. The Company’s funding policy is consistent with funding requirements of the applicable Federal and foreign laws and regulations.

The North American operations of the Company have postretirement health care and life insurance benefits. The Company accrues for the accumulated postretirement benefit obligation that represents the actuarial present value of the anticipated benefits. Measurement is based on assumptions regarding such items as the expected cost of providing future benefits and any cost sharing provisions.

Net loss per share of common stock is based upon the weighted-average number of shares of common stock outstanding during the year.

Comprehensive income includes all other non-shareholder changes in equity. As of December 31, 2003, changes in other comprehensive income resulted from changes in foreign currency translation adjustments.

Substantially all of the Company’s revenues are recognized at the time products are shipped to customer under F.O.B. Shipping Point terms or under F.O.B. Port Terms. Revenues are net of any discounts, rebates and allowances. The Company records all labor, raw materials, in-bound freight, plant receiving and purchasing, warehousing, handling and distribution costs as a component of cost of goods sold.

In January 2003, the Financial Accounting Standards Board (“FASB”) issued Emerging Issues Task Force (“EITF”) No. 00-21, “Revenue Arrangements With Multiple Deliverables.” EITF No. 00-21 provides guidance on how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting and how arrangement consideration should be measured and allocated to the separate units of accounting in the arrangement. EITF No. 00-21 is effective for arrangements entered into in fiscal periods beginning after June 15, 2003. The adoption of EITF No. 00-21 did not have a material impact on the Company’s results of operations or financial position.

In January 2003, the FASB issued FASB Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities — an Interpretation of Art No. 51.” FIN 46 clarified the application of Accounting Research Bulletin Number 51, “Consolidated Financial Statements,” to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. Qualifying special-purpose entities as defined by FASB Statement No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” are excluded from the scope of FIN 46. FIN 46 applied immediately to all variable interest entities created after January 31, 2003, and was originally effective for fiscal periods beginning after July 1, 2003, for

existing variable interest entities. In October 2003, the FASB postponed the effective date of FIN 46 to December 31, 2003. The Company does not have any variable interest entities and, therefore, believes that the adoption of the provisions of FIN 46 will not have a material impact on the Company’s results of operations or financial position.

In December 2003, a revised version of FIN 46 (“Revised FIN 46”) was issued by the FASB. The revisions clarify some requirements, ease some implementation problems, add new scope exceptions, and add applicability judgments. Revised FIN 46 is required to be adopted by most public companies no later than March 31, 2004. The Company believes that the adoption of Revised FIN 46 will not have a material impact on the Company’s results of operations or financial position.

In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instrument and Hedging Activities.” SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003. The adoption of SFAS No. 149 did not have a material impact on the Company’s results of operations or financial position.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments With Characteristics of Both Liabilities and Equity.” SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. In November 2003, the FASB issues FASB Staff Position Number 150-3, which deferred indefinitely the effective date of SFAS No. 150 as it relates to certain mandatory redeemable non-controlling interests. SFAS No. 150 was effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 did not have a material impact on the Company’s results of operations or financial position.

In December 2003, the FASB issued SFAS No. 132, “Employers’ Disclosures About Pensions and Other Postretirement Benefits — an Amendment of FASB Statements No. 87, 88, and 106.” The statement was developed in response to concerns expressed by users of financial statements regarding more information about pension plan assets, obligations, benefit payments, contributions and net benefit cost. Disclosures about post-retirement benefits other than pensions are required. All new provisions for domestic plans are effective for fiscal years ending after December 15, 2003. Foreign and non-public entities disclosures are required effective for fiscal years ending after June 15, 2004. The Company is considering the standard and its effect on the Company’s financial statements.

On December 17, 2003, the Staff of Securities and Exchange Commission (“SEC” or the “Staff”) issued Staff Accounting Bulletin (“SAB”) 104, “Revenue Recognition,” which amends SAB 101, “Revenue Recognition in Financial Statements.” SAB 104’s primary purpose is to rescind accounting guidance contained in SAB 101 related to multiple element revenue arrangements, superseded as a result of the issuance of EITF No. 00-21. Additionally, SAB 104 rescinds the SEC’s “Revenue Recognition in Financial Statements Frequently Asked Questions and Answers” (the “FAQ”) issued with SAB 101 (that had been codified in SEC Topic 13, “Revenue Recognition”). Selected portions of the FAQ have been incorporated into SAB 104. While the wording of SAB 104 has changed to reflect the issuance of EITF No. 00-21, the revenue recognition principles of SAB 101 remain largely unchanged by the issuance of SAB 104. The adoption of SAB 104 did not have a material impact on the Company’s results of operations or financial position.

extraordinary item. The Company adopted SFAS No. 145 in 2003 and accordingly reclassified extraordinary gains as a separate caption in accordance with this statement.

As a result of the Company’s emergence from Chapter 11 bankruptcy on April 3, 2003 and the application of Fresh-Start Accounting (see Note 3 Fresh-Start Accounting), consolidated financial statements for the Company for the periods subsequent to the effective date of the Company’s plan of reorganization in the bankruptcy proceedings are referred to as the “Reorganized Company” and are not comparable to those for the periods prior to this date, which are referred to as the “Predecessor Company.” The March 31, 2003 unaudited consolidated financial statements were used for the predecessor period ended April 2, 2003; subsequent to March 31, 2003 through the end of the period ending April 2, 2003, net income reflects a $153,946 gain representing the gain on debt extinguishment (see Note 3). A black line has been drawn in the audited consolidated financial statements to distinguish, for accounting purposes, the periods associated with the Reorganized Company and the Predecessor Company. Aside from the effects of fresh-start accounting and new accounting pronouncements adopted as of the effective date of the plan of reorganization, the Reorganized Company follows the same accounting policies as the Predecessor Company.

On April 3, 2003, the Company consummated its prepackaged Chapter 11 bankruptcy plan, as modified (the “Plan”), which had previously been confirmed by order of the Bankruptcy Court. Under the Plan, holders of the Company’s 10.25% Notes due 2001 (“Old Senior Notes”) received just over 90% of the Company’s equity on a fully diluted basis. Suppliers and other trade creditors were not affected by the consummation of the Plan.

Under the terms of the Plan, the Company’s wholly-owned operating subsidiary, Viskase Corporation, was merged into the Company with the Company being the surviving corporation.

The holders of the Company’s outstanding $163,060 of Old Senior Notes received a pro rata share of $60,000 face value of 8% Senior Subordinated Notes due December 1, 2008 (“8% Senior Notes”), and 10,340,000 shares of new common stock (“New Common Stock”) issued by the Company on a basis of $367.96271 principal amount of 8% Senior Notes and 63.4122 shares of New Common Stock for each one thousand dollar ($1,000) principal amount of Old Senior Notes.

The 8% Senior Notes bear interest at a stated rate of 8% per year, and accrue interest from December 1, 2001, payable semi-annually (except annually with respect to year four and quarterly with respect to year five), with interest payable in the form of 8% Senior Notes (paid-in-kind) for the first three years. The first interest payment date on the 8% Senior Notes was June 30, 2003 (paid-in-kind). Interest for years four and five will be payable in cash to the extent of available cash flow, as defined, and the balance in the form of 8% Senior Notes (paid-in-kind). Thereafter, interest will be payable in cash. The 8% Senior Notes mature on December 1, 2008, with an accreted value of approximately $88,894, assuming interest in the first five years is paid in the form of 8% Senior Notes (paid-in-kind). The 8% Senior Notes are secured by substantially all of the Company’s personal Property other than assets subject to the Company’s capital lease obligations.

Shares of common stock (“Old Common Stock”), including the stock issued to employees to celebrate the Company’s 75th anniversary, and options of the Company outstanding prior to the Company’s emergence from bankruptcy were canceled pursuant to the Plan. In addition, the Company’s stockholder rights plan was terminated pursuant to the Plan. Holders of the Old Common Stock received a

pro rata share of 306,291 warrants (“2010 Warrants”) to purchase shares of New Common Stock. The 2010 Warrants have a seven year term expiring on April 2, 2010, and an exercise price of $10.00 per share.

Under the restructuring, 660,000 shares of Restricted Stock were authorized for Company management and employees under a new Restricted Stock Plan. Any such shares that are issued are subject to a vesting schedule with acceleration upon the occurrence of certain events.

The Company also entered into a three-year $20,000 working capital facility to provide the Company with additional financial flexibility. The working capital facility is senior to the 8% Senior Notes. The credit facility is a three-year facility. Interest under the credit facility is prime plus 200 basis points. The credit facility contains one financial covenant that requires a minimum level of earnings before depreciation, interest, amortization and taxes calculated on a rolling four-quarter basis.

Following the approval of the Plan, the Company adopted Statement of Position (“SOP”) 90-7, “Fresh-Start” accounting, resulting in recording all assets and liabilities at fair value. As a result, the effects of the adjustments on reported amounts of individual assets and liabilities resulting from the adoption of fresh-start accounting and the effects of the forgiveness of debt are reflected in the Company’s historical statement of operations. Upon emergence from bankruptcy, the amounts and classifications reported in the consolidated historical financial statements materially changed.

The conversion of $163,060 of Old Senior Notes to 8% Senior Notes and New Common Stock results in a $103,060 reduction of debt, which represents cancellation of debt income (“COD”) which is governed by Internal Revenue Code Section 108. Under Section 108, the Company will not recognize any taxable income for calendar year 2003 but must reduce tax attributes up to the extent of the COD income. This tax attribute reduction will be used to eliminate the Company’s Net Operating Loss carryforward and reduce the tax basis of assets that the Company had previously written off for book purposes.

On November 13, 2002, Viskase Companies, Inc., a stand-alone-entity (“VCI”), filed a prepackaged Chapter 11 bankruptcy in the Bankruptcy Court. The Chapter 11 filing was for VCI only and did not include any domestic or foreign subsidiaries.

Condensed financial information of VCI subsequent to November 13, 2002, the date on which VCI filed the prepackaged Chapter 11 bankruptcy, is presented below:

As discussed above the Company emerged from bankruptcy on April 3, 2003. For the nine months ended December 31, 2003, the company recorded a net loss of $46,627 and positive cash flow from operating activities before reorganization expense of $16,645. In connection with its emergence from bankruptcy, the Company restructured its debt and equity. In addition the amounts due under capital leases were renegotiated with the lessor. As of December 31, 2003, the Company had positive working capital of approximately $52,201 and unrestricted cash of $23,160, with additional amounts available under its revolving credit facility. While the Company could decide to raise additional amounts through the issuance of new debt or equity, management believes that the existing resources available to it will be adequate to satisfy current and planned operations for at least the next twelve months.

As previously discussed, the accompanying consolidated financial statements reflect the use of fresh-start accounting as required by SOP 90-7 because the reorganized value of the Company’s assets immediately before emergence from bankruptcy was less than all post-petition liabilities, and the Predecessor Company’s stockholders received less than 50% of the Reorganized Company’s voting shares upon emergence from bankruptcy. The reorganization value of the Company was based upon the compilation of many factors and various valuation methods, including: (i) discounted cash flow analysis using five-year projected financial information applying discount rates between 16% and 18% and terminal cash flow multiples of 5.0X to 6.0X based upon review of selected publicly traded company market multiples of certain companies operating businesses viewed to be similar to that of the Company; and (ii) other applicable ratios and valuation techniques believed by the Company and its financial advisors to be representative of the Company’s business and industry. Under fresh-start accounting, the Company’s

assets and liabilities were adjusted to fair values and a reorganization value for the entity was determined by the Company based upon the estimated fair value of the enterprise before considering values allocated to debt. The portion of the reorganization value, which could not be attributed to specific tangible or identified intangible assets of the Reorganized Company, totaled $44,430. In accordance with SFAS No. 142, this amount is reported as “Goodwill” in the consolidated financial statements. Fresh-start accounting results in the creation of a new reporting entity with no accumulated deficit as of April 3, 2003.

The valuation was based upon a number of estimates and assumptions, which are inherently subject to significant uncertainties and contingencies beyond the control of the Company.

Upon the adoption of fresh-start accounting, as of April 3, 2003, the Company recorded goodwill of $44,430, which equals the reorganization value in excess of amounts allocable to identifiable net assets recorded in accordance with SOP 90-7. In the fourth quarter of 2003, the Company performed its first annual goodwill impairment analysis under SFAS No. 142. Due to the fact the fair value of the Company’s single reporting unit, as estimated by the Company’s market capitalization, was significantly less than the net book value at December 31, 2003, goodwill was evaluated for impairment. As a result of the Company’s impairment test, the entire $44,430 goodwill balance was written off in the fourth quarter of 2003.

Receivables consisted primarily of trade accounts receivable and were net of allowances for doubtful accounts of $438 and $1,334 at December 31, 2003 and 2002, respectively.

The Company has a broad base of customers, with no single customer accounting for more than 6% of sales or 4% of receivables.

Approximately 47% and 52% of the Company’s inventories at December 31, 2003 and 2002, respectively, were valued at LIFO. Remaining inventories, primarily foreign, are valued at the lower of FIFO cost or market. At December 31, 2003 and 2002, the LIFO values exceeded current manufacturing cost by approximately $317 and $687, respectively. During 2002, the Company wrote down $383 of LIFO inventories to its lower of cost or market value. The charge is included in cost of sales. Inventories were net of reserves for obsolete and slow-moving inventory of $0 and $2,725 at December 31, 2003 and 2002, respectively.

Capitalized interest for the reorganized period in 2003 and predecessor period in 2002 and 2001 totaled $98, $81 and $290, respectively. Maintenance and repairs charged to costs and expenses for 2003, 2002 and 2001 aggregated $14,548, $13,142, and $12,789 respectively. Depreciation is computed on the straight-line method over the estimated useful lives of the assets. Estimated useful lives of land improvements range from 15 to 30 years; building and improvements range from 10 to 32 years; and machinery and equipment, including capital leases, range from 2 to 15 years.

Land and buildings include property held for sale; these properties have a net book value of $2,293 and $4,162 at December 31, 2003 and December 31, 2002, respectively. During 2003, properties held for sale had a net book value of $4,963, of which property with a net book value of $2,179 was disposed of during the reorganized period.

Patents are amortized on the straight-line method over an estimated average useful life of 10 years. Other intangibles, established in fresh-start, represent the fair market value of non-compete agreements and is being amortized over two years, the term of the non-compete agreement. Miscellaneous other assets include an income tax refund receivable in the amount of $4,969 and $3,870 at December 31, 2003 and 2002, respectively.

The Company has a secured revolving credit facility (“Revolving Credit Facility”) with an initial availability of $10,000 with Arnos Corp., an affiliate of Carl C. Icahn. During February 2004, the amount of the Revolving Credit Facility availability increased by $10,000 to an aggregate amount of $20,000. The Revolving Credit Facility expires on April 3, 2006. Borrowings under the Revolving Credit Facility bear interest at a rate per annum at the prime rate plus 200 basis points. The average interest rates for borrowings during 2003 were 6.2%. There were no short-term borrowings during 2002.

The Revolving Credit Facility is secured by a collateral pool comprised of (1) all domestic accounts receivables (including intercompany receivables) and inventory, (2) all patents, trademarks and other intellectual property (subject to non-exclusive licensing agreements), (3) substantially all domestic fixed assets (other than assets subject to the Company’s lease agreement with General Electric Capital Corporation (“GECC”)) and (4) a pledge of 65% of the capital stock of Viskase Europe Limited and Viskase Brasil Embalagens Ltda. The Revolving Credit Facility is also guaranteed by the significant domestic subsidiaries. Such guarantees and substantially all of such collateral are shared by the lender under the Revolving Credit Facility, the holders of the 8% Senior Notes and GECC under the GECC lease pursuant to an intercreditor agreement. Pursuant to such intercreditor agreement, the security interest of Revolving Credit Facility has priority over all other liens on such collateral.

Under the terms of the Revolving Credit Facility, the Company is required to maintain a minimum annual level of earnings before depreciation, interest, amortization and taxes of $16,000 calculated at the end of each calendar quarter. The Revolving Credit Facility contains covenants with respect to Viskase and its subsidiaries limiting (subject to a number of important qualifications), among other things, (1) the ability to pay dividends or redeem or repurchase common stock, (2) incurrence of indebtedness, (3) creation of liens, (4) certain affiliate transactions, (5) the ability to merge into another entity, (6) the ability to consolidate with or merge with another entity and (7) the ability to dispose of assets. The Company is in compliance with the covenant at December 31, 2003.

The 8% Senior Notes bear interest at a rate of 8% per year, and will accrue interest from December 1, 2001, payable semi-annually (except annually with respect to year four and quarterly with respect to year five), with interest payable in the form of 8% Senior Notes (paid-in-kind) for the first three years. Interest for years four and five will be payable in cash to the extent of available cash flow, as defined, and the balance in the form of New 8% Senior Notes (paid-in-kind). Thereafter, interest will be payable in cash. The 8% Senior Notes would mature on December 1, 2008, with an accreted value of approximately $88,894, assuming interest in the first five years is paid-in-kind. The 8% Senior Notes were recorded on the books at April 3, 2003, at their discounted value of $33,242. The carrying value of the 8% Senior Notes at December 31, 2003, is $46,248.

The 8% Senior Notes are secured by a collateral pool comprised of (1) all domestic accounts receivable and inventory, (2) all patents, trademarks and other intellectual property (subject to non-exclusive licensing agreements), (3) all instruments, investment property and other intangible assets, and (4) substantially all domestic fixed assets, but excluding assets subject to the GECC lease, certain real estate and certain assets subject to prior liens. Pursuant to an intercreditor agreement, the security interest of the holders of the 8% Senior Notes in such collateral is subordinated to the lender under the Revolving Credit Facility and are senior to the security interest of GECC under the GECC lease.

The 8% Senior Notes were valued at market in Fresh-Start Accounting. The discount to face value is being amortized using the effective-interest rate methodology through maturity with an effective interest rate of 10.46%. The following table summarizes the carrying value of the 8% Senior Notes at December 31:

Letters of credit in the amount of $25,441 were outstanding under letter of credit facilities with commercial banks, and were cash collateralized at December 31, 2003.

The Company finances its working capital needs through a combination of internally generated cash from operations, cash on hand, and the Revolving Credit Facility.

The Company and GECC amended certain lease documents upon the emergence from bankruptcy. The amendment permanently waived prior non-compliance with the Fixed Charge Coverage Ratio and established a new Fixed Charge Coverage Ratio for the remainder of the lease term. The amendment also changed the February 28, 2004 lease payment, with $11,750 due on February 28, 2004, and $11,749 due on August 28, 2004.

In April 2004, the Company renegotiated and amended its lease arrangement with GECC. Under terms of the amended lease, six payments of approximately $6,092 are due semi-annually on February 28 and August 28 beginning in February 2005. As part of the renegotiation of the lease, the Company agreed to purchase the assets at their fair market value of $9,501. The Company has the option to terminate the lease early upon payment of $33,000 through February 28, 2005, thereafter the amount of the early termination payment will decrease upon payment of each semi-annual capital lease payment. The equipment will transfer to the Company free and clear of all liens on the earlier of (i) the payment of the early termination amount, plus any accrued interest due and payable at 6% per annum or (ii) the payment of the final installment due August 28, 2007.

The following is a schedule of minimum future lease payments under the GECC capital lease obligations together with the present value of the net minimum lease payments as of December 31, 2004, 2005, 2006 and 2007. The lease payment maturities conform to contractual payments under the lease:

The fair value of the Company’s debt obligations (excluding capital lease obligations) is estimated based upon the quoted market prices for the same or similar issues or on the current rates offered to the Company for the debt of the same remaining maturities. At December 31, 2003, the carrying amount and estimated fair value of debt obligations (excluding capital lease obligations) were $46,248 and $45,697, respectively.

On November 13, 2002, the Company filed a prepackaged Chapter 11 bankruptcy in the United States Bankruptcy Court for the Northern District of Illinois (“Bankruptcy Court”). The Chapter 11 filing was for the Company only and did not include any of the Company’s domestic or foreign subsidiaries. On December 20, 2002, the Bankruptcy Court confirmed the Plan, as modified. The Company emerged from Chapter 11 bankruptcy on April 3, 2003.

Cash flows from operations for the Company were insufficient to pay the Old Senior Notes when they matured on December 1, 2001, and, accordingly, the Company did not pay the $163,060 principal and $8,357 interest that became due at that time. In September 2001, certain of the holders of the Old Senior Notes formed an Ad Hoc Committee to participate in the development of a plan to restructure the Company’s capital structure and address its future cash flow needs. On July 15, 2002, the Company executed a restructuring agreement with the Ad Hoc Committee for the restructuring of the Old Senior Notes. Under terms of the restructuring agreement, on or about August 21, 2002, the Company initiated an exchange offer to exchange the Old Senior Notes for New 8% Senior Notes and shares of preferred stock. The proposed exchange offer was subject to acceptance by holders of 100% of the outstanding Old Senior Notes, unless waived by the Company and approved by the Ad Hoc Committee. The exchange offer was conducted simultaneously with a solicitation for the Plan by the Company which required the consent of a majority in number of the holders and at least 66 2/3% in principal amount of Old Senior Notes actually voting in the solicitation. Under the restructuring agreement, if less than 100% of the outstanding Old Senior Notes accepted the exchange offer, but a sufficient number of holders and aggregate amount of Old Senior Notes voted in favor of acceptance of the Plan, the Company agreed to commence a voluntary Chapter 11 petition to seek confirmation of the Plan. The Plan contained substantially the same economic terms as the exchange offer.

On November 13, 2002, the Company filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code in the Bankruptcy Court to seek confirmation of the Plan.

Under the terms of the Plan, the Company’s wholly-owned operating subsidiary, Viskase Corporation, was merged with and into the Company immediately prior to or upon consummation of the Plan, with the Company being the surviving corporation. Holders of Old Senior Notes received 8% Senior Notes and shares of New Common Stock on a basis of $367.96271 principal amount of 8% Senior Notes (i.e., $60,000) and 63.4122 shares of New Common Stock (i.e., 10,340,000 shares or 94% of the New Common Stock) for each one thousand dollar principal amount of Old Senior Notes. The existing shares of Old Common Stock of the Company were canceled. Holders of the Old Common Stock received Warrants with a term of seven years to purchase shares of New Common Stock equal to 2.7% of the Company’s New Common Stock on a fully diluted basis at an exercise price of $10.00 per share. Assuming all Warrants are exercised, holders of the Old Senior Notes received approximately 91.5% of the New Common Stock and approximately 5.8% of the New Common Stock was issued or reserved for issuance to the Company’s management and employees.

Under the proposed restructuring, 660,000 shares of New Common Stock, initially representing 6% of the New Common Stock, were reserved for Company management and employees. Such shares will be subject to a vesting schedule with acceleration upon the occurrence of certain events.

Under Chapter 11, certain claims against the Company (the “Debtor”) in existence prior to the Petition Date (November 13, 2002) were stayed while the Company continued business operations as a debtor-in-possession. These claims are reflected in the December 31, 2002 balance sheet as “Current liabilities subject to compromise.” As of the Petition Date, the Company stopped accruing interest on the Old Senior Notes.

The principal categories of claims reclassified in the Consolidated Balance Sheets and included in Current liabilities subject to compromise are identified below. At the Petition Date the amounts reflected below are for the Old Senior Notes and accrued interest through the Petition Date. Current liabilities subject to compromise are as follows (in thousands):

The Company has operating lease agreements for machinery, equipment and facilities. The majority of the facilities leases require the Company to pay maintenance, insurance and real estate taxes.

Future minimum lease payments for operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2003, are:

Total rent expense during 2003, 2002 and 2001 amounted to $2,259, $1,971 and $1,682, respectively.

The Company and its subsidiaries have defined contribution and defined benefit plans varying by country and subsidiary.

At December 31, 2003, the North American operations of the Company maintained several non-contributory defined benefit retirement plans. The plans cover substantially all salaried and full-time hourly employees, and benefits are based on final average compensation and years of credited service. The Company’s policy is to fund the minimum actuarially computed annual contribution required under the Employee Retirement Income Security Act of 1974. The discount rate used approximates the average yield for high-quality corporate bonds as of the valuation date.

In December of 2002, the Company recognized a minimum pension liability adjustment that is due to changes in plan return assumptions and asset performance (see note 18, Comprehensive Gain (Loss)).

For measurement purposes, a 7.0% and 9.0% annual rate of increase in the per capita cost of covered health care benefits was assumed in 2003 for the U.S. and Canadian plans, respectively. The rates were assumed to decrease to 6.5% in 2004 for the U.S. plan and gradually decrease to 5% through 2007 for the Canadian plan.

On December 8, 2003, President Bush signed into law a bill that expands Medicare, primarily by adding a prescription drug benefit for Medicare-eligible retirees starting in 2006. Pursuant to instructions in Financial Accounting Standards Board Staff Position 106-1 and the election by Viskase to defer recognition, the retiree medical obligations and costs reported in this financial statement do not yet reflect the impact of those new Medicare benefits. By 2006, the Company expects to modify its retiree medical plans to coordinate with the new Medicare prescription drug program. As a result, the Company anticipates that its overall obligations and costs will be lower once those modifications are reflected.

Upon emergence from bankruptcy, the liabilities of the plans were remeasured as of April 2, 2003. A one-time charge of $38,376 was recorded to immediately recognize all unrecognized gains and losses.

Assumed health care cost trend rates have a significant effect on the amounts reported for healthcare plans. A one-percentage point change in assumed healthcare cost trend rates would have the following effects:

The Company also has defined contribution savings and similar plans, which vary by subsidiary, and, accordingly, are available to substantially all full-time United States employees not covered by collective bargaining agreements. The defined contribution savings plans allow employees to choose among various investment alternatives. The Company’s aggregate contributions to these plans are based on eligible employee contributions and certain other factors. The Company expense for these plans was $684, $754 and $762 in 2003, 2002 and 2001, respectively.

The Company maintains various pension and statutory separation pay plans for its European employees. The expense for these plans in 2003, 2002 and 2001 was $285, $42 and $301, respectively. As of their most recent valuation dates, in plans where vested benefits exceeded plan assets, the actuarially computed value of vested benefits exceeded those plans’ assets by approximately $3,478.

During the third and fourth quarters of 2003, the Company committed to a restructuring plan to address the industry’s competitive environment. The plan resulted in a before-tax charge of $2.6 million. Approximately 2% of the Company’s worldwide workforce was laid off due to the 2003 restructuring plan. The Company reversed an excess reserve of $1.6 million, of which $1.3 million was Nucel® technology third-party license fees that had been renegotiated. The Nucel® technology third-party license fees were originally reflected in the 2000 restructuring reserve. The remaining $0.3 million represents an excess reserve for employee costs that were originally reflected in the 2002 restructuring reserve.

During the second quarter of 2002, the Company committed to a restructuring plan to address the industry’s competitive environment. The plan resulted in a before-tax charge of $3.2 million. Approximately 2% of the Company’s worldwide workforce was laid off due to the 2002 restructuring plan. In connection with the restructuring, the Company wrote off the remaining net book value of the Nucel® equipment and the costs associated with the decommissioning of this equipment. The Company also

reversed an excess reserve of $9.3 million for Nucel® technology third-party license fees that had been renegotiated during the second quarter of 2002. The Nucel® technology license fees were originally reflected in the 2000 restructuring reserve.

In the fourth quarter of 2002 and the year-to-date period, the Company paid third-party license fees of approximately $0.6 million and $2.3 million, respectively. The renegotiated Nucel® technology third-party license fee payments remaining are estimated at $0.9 million, $0.4 million, $0.2 million, $0.2 million and $0.5 million for the year periods 2003 to 2007 and are included in the 2000 restructuring reserve.

The following table provides details of the 2002 restructuring reserve for the year ended December 31, 2003:

The following table provides details of the 2002 restructuring reserve for the year ended December 31, 2002:

The following table provides details of the 2000 restructuring reserve for the year ended December 31, 2003:

The following table provides details of the 2000 restructuring reserve for the year ended December 31, 2002:

The following table provides details of the 2000 restructuring reserve for the year ended December 31, 2001:

During 2001, the Company incurred a restructuring charge of $4.8 million for the write-down of facilities held for sale. These facilities are included in property held for sale (see Note 6).

The following table provides details of the 2000 restructuring reserve for the year ended December 31, 2000:

Approximately 15% of the Company’s worldwide workforce was laid off due to the 2000 restructuring plan.

The provision (benefit) for income taxes from continuing operations consisted of:

A reconciliation from the statutory Federal tax rate to the effective tax rate for continuing operations follows:

Temporary differences and carryforwards that give rise to a significant portion of deferred tax assets and liabilities for 2003 and 2002 are as follows:

During the calendar year 2003, the Company emerged out of bankruptcy with the conversion of $163 million of Old Senior Notes being converted to 8% Senior Notes and stock. This results in a $103 million reduction of debt, which represents cancellation of debt income (“COD”), which is governed by Internal Revenue Code Section 108. Under Section 108, the Company will not recognize any taxable income for calendar year 2003 but must reduce tax attributes up to the extent of the COD income. This tax attribute reduction will be used to eliminate the Company’s Net Operating Loss carryforward and reduce the tax basis of assets that the Company had previously written off for book purposes.

The Company joins in filing a United States consolidated Federal income tax return including all of its domestic subsidiaries.

As of December 31, 2003 and 2002, the Company had capital expenditure commitments outstanding of approximately $7,373 and $332, respectively.

In 1988, Viskase Canada Inc. (“Viskase Canada”), a subsidiary of the Company, commenced a lawsuit against Union Carbide Canada Limited and Union Carbide Corporation (“Union Carbide”) in the Ontario Superior Court of Justice, Court File No.: 292270188 seeking damages resulting from Union Carbide’s breach of environmental representations and warranties under the Amended and Restated Purchase and Sale Agreement, dated January 31, 1986 (“Agreement”). Pursuant to the Agreement, Viskase Corporation and various affiliates (including Viskase Canada) purchased from Union Carbide and Union Carbide Films Packaging, Inc., its cellulosic casings business and plastic barrier films business (“Business”), which purchase included a facility in Lindsay, Ontario, Canada (“Site”). Viskase Canada is claiming that Union Carbide breached several representations and warranties and deliberately and/or negligently failed to disclose to Viskase Canada the existence of contamination on the Site.

In November 2000, the Ontario Ministry of the Environment (“MOE”) notified Viskase Canada that it had evidence to suggest that the Site was a source of polychlorinated biphenyl (“PCB”) contamination. Viskase Canada has been working with the MOE in investigating the PCB contamination and developing and implementing, if appropriate, a remedial plan for the Site and the affected area. Viskase Canada and others have been advised by the MOE that the MOE expects to issue certain Director’s Orders requiring remediation under applicable environmental legislation against Viskase Canada, The Dow Chemical Company (corporate successor to Union Carbide) (“Dow”), and others in the next few months. Dow, which has replaced or soon will replace Union Carbide as the defendant in the lawsuit against Union Carbide, has consented to an amendment to the lawsuit, which Viskase Canada will file with the court as soon as the claim can be adequately quantified, that alleges that any PCB contamination at or around the Site was generated from Union Carbide’s plastics extrusion business, which was operated at the Site by Union Carbide prior to the purchase of the Business. Union Carbide’s plastics extrusion business was not part of the Business purchased by Viskase Corporation and its affiliates. Viskase Canada will be asking the court to require Union Carbide to repurchase the Site from Viskase Canada and award Viskase Canada damages in excess of $2.0 million (Canadian). The Company has reserved $0.75 million (U.S.) for the property remediation. The lawsuit is still pending and is expected to proceed to trial in 2005.

In 1993, the Illinois Department of Revenue (“IDR”) submitted a proof of claim against Envirodyne Industries, Inc. (our former corporate name) and its subsidiaries in the Bankruptcy Court, Bankruptcy Case Number 93 B 319 for alleged liability with respect to the IDR’s denial of the Company’s allegedly incorrect utilization of certain loss carryforwards of certain of its subsidiaries. In September 2001, the Bankruptcy Court denied the IDR’s claim and determined that the debtors were not responsible for 1998 and 1999 tax liabilities, interest and penalties. The IDR appealed the Bankruptcy Court’s decision to the United States District Court, Northern District of Illinois, Case Number 01 C 7861; and in February 2002, the district court affirmed the Bankruptcy Court’s order. IDR appealed the district court’s order to the United States Court of Appeals for the Seventh Circuit, Case Number 02-1632. On January 6, 2004, the appeals court reversed the judgment of the district court and remanded the case for further proceedings. The matter is now before the Bankruptcy Court for further determination.

assessment is based upon Viskase Canada’s failure to collect and remit sales tax during the period July 1, 1997 to May 31, 2001. During this period, Viskase Canada did not collect and remit sales tax in Quebec on reliance of the written advice of its outside accounting firm. Viskase Canada filed a Notice of Objection in November 2001 with supplementary submission in October 2002. The Notice of Objection found in favor of the Department of Revenue. The Company has appealed the decision. The ultimate liability for the Quebec sales tax lies with the customers of Viskase Canada during the relevant period. Viskase Canada could be required to pay the amount of the underlying sales tax prior to receiving reimbursement for such tax from its customers. The Company has, however, provided for a reserve of $0.3 million (U.S.) for interest and penalties, if any, but has not provided for a reserve for the underlying sales tax. Viskase Canada is negotiating with the Quebec Department of Ministry to avoid having to collect the sales tax from customers who will then be entitled to credit for such sales tax collected.

During 1999 and 2000, the Company and certain of its subsidiaries and one other sausage casings manufacturer were named in 10 virtually identical civil complaints filed in the United States District Court for the District of New Jersey. Each complaint brought on behalf of a purported class of sausage casings customers alleges that the defendants unlawfully conspired to fix prices and allocate business in the sausage casings industry. In 2001, all of the consolidated cases were transferred to the United States District Court for the Northern District of Illinois, Eastern Division. The Company strongly denies the allegations set forth in these complaints.

In May 2004, the Company entered into a settlement agreement, without the admission of any liability (“Settlement Agreement”) with the plaintiffs. Under terms of the Settlement Agreement, the plaintiffs will fully released the Company and its subsidiaries from all liabilities and claims arising from the civil action in exchange for the payment of a $0.3 million settlement amount, which amount was reserved in the December 31, 2003 financial statements.

The Company and its subsidiaries are involved in these and various other legal proceedings arising out of their business and other environmental matters, none of which is expected to have a material adverse effect upon results of operations, cash flows or financial condition.

Authorized shares of preferred stock ($0.01 par value per share) and common stock ($0.01 par value per share) for the Company are 50,000,000 shares and 50,000,000 shares, respectively. A total of 10,670,053 shares of common stock were issued and outstanding as of December 31, 2003.

Under terms of the restructuring, 660,000 shares of common stock were reserved for grant to management and employees under the Viskase Companies, Inc. Restricted Stock Plan. On April 3, 2003, the Company granted 330,070 shares of restricted common stock (“Restricted Stock”) under the Restricted Stock Plan. Shares granted under the Restricted Stock Plan vested 12.5% on grant date; 17.5% on the first anniversary of grant date; 20% on the second anniversary of grant date; 20% on the third anniversary; and, 30% on the fourth anniversary of the grant date, subject to acceleration upon the occurrence of certain events. The Restricted Stock expense for the nine-month period ended December 31, 2003, for the Reorganized Company is $11 thousand. The value of the Restricted Stock was calculated based on the fair market value of the new common stock upon emergence from bankruptcy using a multiple of cash flow calculation to determine enterprise value and the related equity value.

Following are the reconciliations of the numerators and denominators of the basic and diluted EPS (in thousands, except for number of shares and per share amounts):

Common stock equivalents, consisting of common stock options (all of which were cancelled upon emergence from bankruptcy), are excluded from the weighted-average shares outstanding as the effect is antidilutive on the Predecessor Company.

A total of 330,070 issued shares of Restricted Stock are included in the weighted-average shares outstanding for basic earnings per share for the Reorganized Company. The 2010 Warrants issued by the Reorganized Company, exercisable for a total of 304,127 shares of common stock, have been excluded as their effect is antidilutive.

The following sets forth the changes in the components of other comprehensive income (loss) and the related income tax (benefit) provision (in thousands):


(1)	Foreign currency translation adjustments, net of related tax provision of $0 for the predecessor period ended April 3, 2003, and $0 for the predecessor periods ended December 31, 2002 and 2001. Foreign currency translation adjustment, net of related tax of $0, for the Reorganized Company.

(2)	Minimum pension liability adjustment, net of a related tax provision of $0 in 2002 and 2001. The minimum pension liability adjustment is due to changes in plan return assumptions and asset performance.

The following table presents the carrying value and estimated fair value for the Reorganized Company as of December 31, 2003, of the Company’s financial instruments (refer to Note 9) (dollars in thousands):

Research and development costs from continuing operations for the Predecessor Company are expensed as incurred and totaled $970, $4,837 and $5,474 for 2003, 2002 and 2001, respectively. Research and development costs from continuing operations for the Reorganized Company are expensed as incurred and totaled $2,628 for the nine-month period.

During the period from April to December 2003, Mr. Weber, the President and Chief Executive Officer of the Company, received a salary of $170,000 and other benefits (including 401(k) contributions and medical and life insurance) of approximately $10,000 from a wholly-owned subsidiary of Icahn Associates Corp. as compensation for Mr. Weber’s services to the Company and to other companies affiliated with Icahn Associates Corp.

Arnos Corp., an affiliate of Mr. Icahn, is the lender under the Company’s existing revolving credit facility. We paid Arnos Corp. origination fees, interest and unused commitment fees of $175 during the period from April 3 through December 31, 2003.

Gregory R. Page, the President and Chief Operating Officer of Cargill, Inc., resigned as a director of the Company as of the date the Company emerged from bankruptcy in April 2003. During 2003, the Company had sales in the ordinary course of business of $613 to Cargill, Inc. and its affiliates, $200 of which occurred prior to Mr. Page’s resignation in April 2003.

The Company primarily manufactures and sells cellulosic food casings. The Company’s operations are primarily in North America, South America and Europe. Intercompany sales and charges (including royalties) have been reflected as appropriate in the following information. Certain items are maintained at the Company’s corporate headquarters and are not allocated to the segments. They include most of the Company’s debt and related interest expense and income tax benefits. Other expenses for 2003 (for Reorganized Company and Predecessor Company), 2002 and 2001 includes net foreign exchange transaction gains (losses) of approximately $3,280, $1,474, $1,659 and $(2,309), respectively.

Quarterly financial information for 2003 and 2002 is as follows (in thousands, except for per share amounts):

During the period January 1 through April 2, 2003, the Predecessor Company recognized the cancellation of debt and interest as income in the amount of $153,946 as a result of the Plan.

During the second quarter of 2003, the Company recognized a reversal of $333 for an excess reserve related to the 2002 restructuring reserve. The restructuring income is the result of a revised estimate for employee costs.

During the third quarter of 2003, the Company recognized restructuring expense of $1,500. The restructuring expense is a result of addressing the industry’s competitive environment and is composed of U.S. employee costs.

During the fourth quarter of 2003, the Company recognized a write-off of goodwill of $44,430 and intangibles of $2,375. In addition, the Company recognized a European restructuring charge of $1,002 addressing the industry’s competitive environment. This amount was offset by a reversal of an excess reserve of $1,200 for the renegotiated Nucel® license fee, originally recognized in the 2000 restructuring reserve.

During the second quarter of 2002, the Company recognized a net restructuring income of $6,132. The restructuring income is the result of a reversal of $9,289 of excess reserve from the year 2000 for the reduction of the Nucel® technology third party license fees, offset by a year 2002 restructuring charge of $3,157 (see Note 12).

On January 17, 2000, the Company’s Board of Directors announced its intent to sell the Company’s plastic barrier and non-barrier shrink films business. The sale of the films business was completed on August 31, 2000. The aggregate proceeds of approximately $255,000, including a Working Capital

Adjustment of $10,300, were used to retire debt, pay GECC and for general corporate purposes. The Company recognized a net gain in the amount of $3,189 in 2001.

The operating results of the films business have been segregated from continuing operations and reported as a separate line item on the income statement under the heading Discontinued Operations.

In April 2004, the Company renegotiated and amended its lease arrangement with GECC. Under terms of the amended lease, six payments of approximately $6.1 million are due semi-annually on February 28 and August 28 beginning in February 2005. As part of the renegotiation of the lease, the Company agreed to purchase the assets at their fair market value of $9.5 million, which amount was reflected in Fresh-Start Accounting. The Company has the option to terminate the lease early upon payment of $33.0 million through February 28, 2005, thereafter the amount of the early termination payment will decrease upon payment of each semi-annual capital lease payment. The equipment will transfer to the Company free and clear of all liens on the earlier of (i) the payment of the early termination amount, plus any accrued interest due and payable at 6% per annum or (ii) the payment of the final installment due August 28, 2007.

The accompanying notes are an integral part of the consolidated financial statements.

Viskase Companies, Inc., a stand-alone-entity (“VCI”), filed a prepackaged Chapter 11 bankruptcy plan in the United States Bankruptcy Court for the Northern District of Illinois (“Bankruptcy Court”) on November 13, 2002. The Chapter 11 filing was for VCI only and did not include any domestic or foreign subsidiaries.

On April 3, 2003, VCI consummated its prepackaged Chapter 11 bankruptcy plan, as modified (“Plan”), which had previously been confirmed by order of the Bankruptcy Court. Under the Plan, holders of the Company’s 10.25% Senior Notes due 2001 (“Old Senior Notes”) received just over 90% of the VCI’s equity on a fully diluted basis. Suppliers and other trade creditors were not affected by the consummation of the Plan.

As a result of VCI’s emergence from Chapter 11 bankruptcy on April 3, 2003 and the application of fresh-start accounting (see Note 2 — Fresh-Start Accounting), consolidated financial statements for VCI and its domestic and foreign subsidiaries (collectively, the “Company”) for the periods subsequent to the effective date of VCI’s plan of reorganization in the bankruptcy proceedings are referred to as the “Reorganized Company” and are not comparable to those for the periods prior to this date, which are referred to as the “Predecessor Company.” The March 31, 2003 unaudited consolidated financial statements were used for the predecessor period ended April 2, 2003; subsequent to March 31, 2003 and through the period ending April 2, 2003, net income reflects a $153,946 gain representing the gain on debt extinguishment (refer to Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 2). A black line has been drawn in the consolidated financial statements to distinguish, for accounting purposes, the periods associated with the Reorganized Company and the Predecessor Company. Aside from the effects of fresh-start accounting and new accounting pronouncements adopted as of the effective date of the plan of reorganization, the Reorganized Company follows the same accounting policies as the Predecessor Company.

Condensed financial information of VCI subsequent to the Petition Date is presented below:

As discussed above, VCI emerged from bankruptcy on April 3, 2003. For the nine months ended September 30, 2004, the Company recorded a net loss of $(15,103) and cash flow provided by operating activities of $14,277. In connection with its emergence from bankruptcy, the Company restructured its debt and equity, and the amount due under its capital lease was renegotiated with the lessor. As of September 30, 2004, the Company had positive working capital of approximately $63,624 including restricted cash of $2,710, with additional amounts available under its revolving credit facility. While the Company could decide to raise additional amounts through the issuance of new debt or equity, management believes that the existing resources available to it will be adequate to satisfy current and planned operations for at least the next twelve months.

Under the terms of the Plan, the Company’s wholly owned operating subsidiary, Viskase Corporation, was merged into the Company with the Company being the surviving corporation.

The holders of the Company’s outstanding $163,060 of Old Senior Notes received a pro rata share of $60,000 face value of new 8% Senior Subordinated Secured Notes due December 1, 2008 (“8% Senior

Notes”) and 10,340,000 shares of new common stock (“New Common Stock”) issued by the Company on a basis of $367.96271 principal amount of 8% Senior Notes and 63.4122 shares of New Common Stock for each one thousand dollar ($1,000) principal amount of Old Senior Notes.

The 8% Senior Notes were originally secured by a collateral pool consisting of substantially all of the Company’s personal property other than assets that were subject to the Company’s capital lease obligations. On June 29, 2004, in accordance with the indenture for the 8% Senior Notes, holders of at least 66 2/3% of the 8% Senior Notes consented to the release of all of the collateral and the related liens. As of June 29, 2004, the 8% Senior Notes are no longer secured by the collateral pool nor are the 8% Senior Notes senior to the other existing senior secured debt of the Company.

Shares of common stock (“Old Common Stock”), including the stock issued to employees to celebrate the Company’s 75th Anniversary, and options of the Company outstanding prior to the Company’s emergence from bankruptcy were canceled pursuant to the Plan. In addition, the Company’s Stockholder Rights Plan was terminated pursuant to the Plan. Holders of the Old Common Stock received a pro rata share of 306,291 warrants (“2010 Warrants”) to purchase shares of New Common Stock. The 2010 Warrants have a seven-year term expiring on April 2, 2010, and have an exercise price of $10.00 per share.

The Company also entered into a three year $20,000 revolving credit facility (“Old Revolving Credit Facility”) to provide the Company with additional financial flexibility. The Old Revolving Credit Facility, which was subsequently terminated and replaced with a new revolving credit facility, was senior to the 8% Senior Notes. The Old Revolving Credit Facility was a three-year facility. Interest under the Old Revolving Credit Facility was prime plus 200 basis points. The Old Revolving Credit Facility contained one financial covenant that required a $16.0 million minimum level of earnings before depreciation, interest, amortization and taxes (“EBITDA”) calculated on a rolling four-quarter basis.

Following the approval of the Plan, the Company adopted Statement of Position (“SOP”) 90-7, “Fresh Start” accounting, resulting in recording all assets and liabilities at fair value. As a result, the effects of the adjustments on reported amounts of individual assets and liabilities resulting from the adoption of fresh-start accounting and the effects of the forgiveness of debt are reflected in the Company’s historical statement of operations. Upon emergence from bankruptcy, the amounts and classifications reported in the consolidated historical financial statements materially changed.

The conversion of $163,060 of Old Senior Notes to 8% Senior Notes and New Common Stock resulted in a $103,060 reduction of debt, which represented cancellation of debt income (“COD”), which is governed by Internal Revenue Code Section 108. Under Section 108, the Company did not recognize any taxable income for calendar year 2003, but must reduce tax attributes up to the extent of the COD income. This tax attribute reduction was used to eliminate the Company’s Net Operating Loss carryforward and reduce the tax basis of assets that the Company had previously written off for book purposes.

As previously discussed, the accompanying consolidated financial statements reflect the use of fresh-start accounting as required by SOP 90-7, because the reorganized value of the Company’s assets immediately before emergence from bankruptcy was less than all post-petition liabilities, and the Predecessor Company’s stockholders received less than 50% of the Reorganized Company’s voting shares upon emergence from bankruptcy. Under fresh-start accounting, the Company’s assets and liabilities were adjusted to fair values and a reorganization value for the entity was determined by the Company based upon the estimated fair value of the enterprise before considering values allocated to debt. The portion of the reorganization value, which could not be attributed to specific tangible or identified intangible assets of the Reorganized Company, totaled $44,430. In accordance with SFAS No. 142, this amount is reported as “Goodwill” in the consolidated financial statements. Fresh-start accounting resulted in the creation of a new reporting entity with no accumulated deficit as of April 3, 2003. The reorganization value of the Company was based upon the compilation of many factors and various valuation methods, including: (i) discounted cash flow analysis using five-year projected financial information applying discount rates between 16% and 18% and terminal cash flow multiples of 5.0X to 6.0X based upon review of selected publicly traded company market multiples of certain companies operating businesses viewed to be similar to that of the Company; and (ii) other applicable ratios and valuation techniques believed by the Company and its financial advisors to be representative of the Company’s business and industry.

The valuation was based upon a number of estimates and assumptions, which are inherently subject to significant uncertainties and contingencies beyond the control of the Company.

less than the net book value at December 31, 2003, the Company wrote off the entire $44,430 goodwill balance in the fourth quarter of 2003.

As of September 30, 2004, cash equivalents and restricted cash of $27,422 are invested in short-term investments.

Approximately 47% of the Company’s inventories at September 30, 2004 are valued at LIFO. Remaining inventories, primarily foreign, are valued at the lower of first-in, first-out (“FIFO”) cost or market.

On June 29, 2004, the Company issued $90,000 of new 11.5% Senior Secured Notes due 2011 (“11.5% Senior Secured Notes”) and 90,000 warrants (“New Warrants”) to purchase an aggregate of 805,230 shares of common stock of the Company. The proceeds of the 11.5% Senior Secured Notes and the 90,000 New Warrants totaled $90,000. The 11.5% Senior Secured Notes have a maturity date of, and the New Warrants expire on June 15, 2011. The $90,000 proceeds were used for the (i) repurchase $55,527 principal amount of the 8% Senior Notes at a price of 90% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon; (ii) early termination of the General Electric Capital Corporation (“GECC”) capital lease and repurchase of the operating assets subject thereto for a purchase price of $33,000; and (iii) payment of fees and expenses associated with the refinancing and repurchase of existing debt. In addition, the Company entered into a new $20,000 revolving credit facility with a financial institution. The revolving credit facility is a five-year facility with a June 29, 2009 maturity date.

Each of the 90,000 New Warrants entitles the holder to purchase 8.947 shares of the Company’s common stock at an exercise price of $.01 per share. The New Warrants were valued for accounting purposes using the Black-Scholes model. Using the Black-Scholes model, each of the 90,000 New Warrants was valued at $11.117 for an aggregate fair value of the warrant issuance of $1,001. The remaining $88,899 of aggregate proceeds were allocated to the carrying value of the 11.5% Senior Secured Notes as of June 29, 2004.

On June 29, 2004, the Company entered into a new $20,000 secured revolving credit facility (“New Revolving Credit Facility”). The New Revolving Credit Facility includes a letter of credit subfacility of up to $10,000 of the total $20,000 maximum facility amount. The New Revolving Credit Facility expires on June 29, 2009. Borrowings under the loan and security agreement governing this New Revolving Credit Facility are subject to a borrowing base formula based on percentages of eligible domestic receivables and eligible domestic inventory. Under the New Revolving Credit Facility, we will be able to choose between two per annum interest rate options: (i) the lender’s prime rate and (ii) LIBOR plus a margin of 2.50% (which margin will be subject to performance based increases up to 2.50% and decreases down to 2.00%); provided that the minimum interest rate shall be at least equal to 3.00%. Letter of credit fees will be charged a per annum rate equal to the then applicable LIBOR rate margin less 50 basis points. The New Revolving Credit Facility also provides for an unused line fee of 0.375% per annum.

Indebtedness under the New Revolving Credit Facility is secured by liens on substantially all of the Company and the Company’s domestic subsidiaries’ assets, with liens (i) on inventory, account receivables, lockboxes, deposit accounts into which payments are deposited and proceeds thereof, will be contractually senior to the liens securing the 11.5% Senior Secured Notes and the related guarantees pursuant to an intercreditor agreement, (ii) on real property, fixtures and improvements thereon, equipment and proceeds thereof, will be contractually subordinate to the liens securing the 11.5% Senior Secured Notes and such guarantees pursuant to such intercreditor agreement, (iii) on all other assets, will be contractually pari passu with the liens securing the 11.5% Senior Secured Notes and such guarantees pursuant to such intercreditor agreement.

The New Revolving Credit Facility contains various covenants which will restrict the Company’s ability to, among other things, incur indebtedness, enter into mergers or consolidation transactions, dispose of assets (other than in the ordinary course of business), acquire assets, make certain restricted payments, prepay any of the 8% Senior Notes at a purchase price in excess of 90% of the aggregate principal amount thereof (together with accrued and unpaid interest to the date of such prepayment), create liens on our assets, make investments, create guarantee obligations and enter into sale and leaseback transactions and transactions with affiliates, in each case subject to permitted exceptions. The New Revolving Credit Facility also requires that we comply with various financial covenants, including meeting a minimum EBITDA requirement and limitations on capital expenditures in the event our usage of the New Revolving

Credit Facility exceeds 30% of the facility amount. The New Revolving Credit Facility also requires payment of a prepayment premium in the event that it is terminated prior to maturity. The prepayment premium, as a percentage of the $20,000 facility amount, is 3% through June 29, 2005, 2% through June 29, 2006, and 1% through June 29, 2007.

The Company had a secured revolving credit facility (“Old Revolving Credit Facility”) with an initial availability of $10,000 with Arnos Corp., an affiliate of Carl C. Icahn. During February 2004, the amount of the Old Revolving Credit Facility availability increased by $10,000 to an aggregate amount of $20,000. The Old Revolving Credit Facility was terminated on June 29, 2004 in connection with the issuance of the 11.5% Senior Secured Notes discussed below. Borrowings under the Old Revolving Credit Facility bore interest at a rate per annum at the prime rate plus 200 basis points.

The Old Revolving Credit Facility was secured by a collateral pool (“Collateral Pool”) comprised of (i) all domestic accounts receivable (including intercompany receivables) and inventory; (ii) all patents, trademarks and other intellectual property (subject to non-exclusive licensing agreements); (iii) substantially all domestic fixed assets (other than assets subject to the Company’s lease agreement with GECC); and (iv) a pledge of 65% of the capital stock of Viskase Europe Limited and Viskase Brasil Embalagens Ltda. The Old Revolving Credit Facility was also guaranteed by the Company’s significant domestic subsidiaries. Such guarantees and substantially all of such collateral were shared by the lender under the Old Revolving Credit Facility, the holders of the 8% Senior Notes and GECC under the GECC lease pursuant to intercreditor agreements. Pursuant to such intercreditor agreements, the security interest of the Old Revolving Credit Facility had priority over all other liens on such Collateral Pool.

Under the terms of the Old Revolving Credit Facility, the Company was required to maintain a minimum annual level of EBITDA of $16,000 calculated at the end of each calendar quarter. The Old Revolving Credit Facility contained covenants with respect to the Company limiting (subject to a number of important qualifications), among other things, (i) the ability to pay dividends or redeem or repurchase common stock, (ii) incurrence of indebtedness, (iii) creation of liens, (iv) certain affiliate transactions, (v) the ability to merge into another entity, (vi) the ability to consolidate with or merge with another entity and (vi) the ability to dispose of assets.

The average interest rate for borrowings during 2003 under the Old Revolving Credit Facility was 6.2%.

There were no short-term borrowings under either of the revolving credit facilities during the first nine months of 2004.

On June 29, 2004, the Company issued $90,000 of 11.5% Senior Secured Notes that bear interest at a rate of 11.5% per annum, payable semi-annually in cash on June 15 and December 15, commencing on December 15, 2004. The 11.5% Senior Secured Notes mature on June 15, 2011.

The 11.5% Senior Secured Notes will be guaranteed on a senior secured basis by all of our future domestic restricted subsidiaries that are not immaterial subsidiaries (as defined). The 11.5% Senior Secured Notes and the related guarantees (if any) are secured by substantially all of the tangible and intangible assets of the Company and guarantor subsidiaries (if any); and includes the pledge of the capital stock directly owned by the Company or the guarantors; provided that no such pledge will include more than 65% of any foreign subsidiary directly owned by the Company or the guarantor. The Indenture and the security documents related thereto provide that, to the extent that any rule is adopted, amended or interpreted that would require the filing with the SEC (or any other governmental agency) of separate

financial statements for any of our subsidiaries due to the fact that such subsidiary’s capital stock secures the Notes, then such capital stock will automatically be deemed not to be part of the collateral securing the Notes to the extent necessary to not be subject to such requirement. In such event, the security documents may be amended, without the consent of any holder of Notes, to the extent necessary to release the liens on such capital stock.

With limited exceptions, the 11.5% Senior Secured Notes require that the Company maintain a minimum annual level of EBITDA calculated at the end of each fiscal quarter as follows:

unless the sum of (i) unrestricted cash of the Company and its restricted subsidiaries as of such day and (ii) the aggregate amount of advances that the Company is actually able to borrow under the New Revolving Credit Facility on such day (after giving effect to any borrowings thereunder on such day) is at least $15.0 million. The minimum annual level of EBITDA covenant is not currently in effect as the Company’s unrestricted cash and the amount of available credit under the New Revolving Credit Facility exceeds $15.0 million.

The 11.5% Senior Secured Notes limit the ability of the Company to (i) incur additional indebtedness; (ii) pay dividends, redeem subordinated debt, or make other restricted payments, (iii) make certain investments or acquisitions; (iv) issue stock of subsidiaries; (v) grant or permit to exist certain liens; (vi) enter into certain transactions with affiliates; (vii) merge, consolidate, or transfer substantially all of our assets; (viii) incur dividend or other payment restrictions affecting certain subsidiaries; (ix) transfer, sell or acquire assets, including capital stock of subsidiaries; and, (x) change the nature of our business. At any time prior to June 15, 2008, the Company may redeem, at its option, some or all of the 11.5% Senior Secured Notes at a make-whole redemption price equal to the greater of (i) 100% of the aggregate principal amount of the 11.5% Senior Secured Notes being redeemed and (ii) the sum of the present values of 105 3/4% of the aggregate principal amount of such 11.5% Senior Secured Notes and scheduled payments of interest on such 11.5% Senior Secured Notes to and including June 15, 2008, discounted to the date of redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 50 basis points, together with, in each case, accrued and unpaid interest and additional interest, if any, to the date of redemption. The make-whole redemption price as of September 30, 2004 is approximately 133%.

On or after June 15, 2008, the Company may redeem, at its option, some or all of the 11.5% Senior Secured Notes at the following redemption prices, plus accrued and unpaid interest to the date of redemption:

Prior to June 15, 2007, the Company may redeem, at its option, up to 35% of the aggregate principal amount of the 11.5% Senior Secured Notes with the net proceeds of any equity offering at 111 1/2% of their principal amount, plus accrued and unpaid interest to the date of redemption, provided that at least 65% of the aggregate principal amount of the 11.5% Senior Secured Notes remains outstanding immediately following the redemption.

Within 90 days after the end of each fiscal year ending in 2006 and thereafter, for which the Company’s Excess Cash Flow (as defined) was greater than or equal to $2.0 million, the Company must offer to purchase a portion of the 11.5% Senior Secured Notes at 101% of principal amount, together with accrued and unpaid interest to the date of purchase, with 50% of our Excess Cash Flow from such fiscal year (“Excess Cash Flow Offer Amount”); except that no such offer shall be required if the New Revolving Credit Facility prohibits such offer from being made because, among other things, a default or an event of default is then outstanding thereunder. The Excess Cash Flow Offer Amount shall be reduced by the aggregate principal amount of 11.5% Senior Secured Notes purchased in eligible open market purchases as provided in the indenture.

If the Company undergoes a change of control (as defined), the holders of the 11.5% Senior Secured Notes will have the right to require the Company to repurchase their 11.5% Senior Secured Notes at 101% of their principal amount, plus accrued and unpaid interest to the date of purchase.

If the Company engages in asset sales, it must either invest the net cash proceeds from such sales in its business within a certain period of time (subject to certain exceptions), prepay indebtedness under the New Revolving Credit Facility (unless the assets that are the subject of such sales are comprised of real property, fixtures or improvements thereon or equipment) or make an offer to purchase a principal amount of the 11.5% Senior Secured Notes equal to the excess net cash proceeds. The purchase price of each 11.5% Senior Secured Note so purchased will be 100% of its principal amount, plus accrued and unpaid interest to the date of purchase.

The 8% Senior Notes bear interest at a rate of 8% per year, and accrue interest from December 1, 2001, payable semi-annually (except annually with respect to year four and quarterly with respect to year five), with interest payable in the form of 8% Senior Notes (pay-in-kind) for the first three years. Interest for years four and five will be payable in cash to the extent of available cash flow, as defined, and the balance in the form of 8% Senior Notes (pay-in-kind). Thereafter, interest will be payable in cash. The 8% Senior Notes mature on December 1, 2008.

On June 29, 2004, the Company repurchased $55,527 aggregate principal amount of its 8% Notes, and the holders (i) released the liens on the collateral that secured the 8% Notes, (ii) contractually subordinated the Company’s obligations under the 8% Senior Notes to obligations under certain indebtedness, including the new 11.5% Senior Secured Notes and the New Revolving Credit Facility; and (iii) eliminated substantially all of the restrictive covenants contained in the indenture governing the 8% Senior Notes. The carrying amount of the remaining 8% Senior Notes outstanding at September 30, 2004 is $11,234.

Prior to June 29, 2004, the 8% Senior Notes were secured by a collateral pool comprised of (1) all domestic accounts receivable and inventory; (2) all patents, trademarks and other intellectual property (subject to non-exclusive licensing agreements); (3) all instruments, investment property and other intangible assets, (4) substantially all domestic fixed assets and (5) a pledge of 100% of the capital stock of two of the Company’s domestic subsidiaries, but excluding assets subject to the GECC lease, certain real estate and certain assets subject to prior liens. Pursuant to an intercreditor agreement, the prior security interest of the holders of the 8% Senior Notes in such collateral was subordinated to the lender under the Old Revolving Credit Facility and was senior to the security interest of GECC under the GECC lease. As of June 29, 2004, the 8% Senior Notes are no longer secured by the collateral pool and accordingly, are effectively subordinated to the 11.5% Senior Secured Notes.

The 8% Senior Notes were valued at market in fresh-start accounting. The discount to face value is being amortized using the effective-interest rate methodology through maturity with an effective interest rate of 10.46%. The principal amount and the carrying amount of the remaining 8% Senior Notes outstanding at September 30, 2004 are $15,675 and $11,234, respectively.

The following table summarizes the carrying value of the 8% Senior Notes at December 31 assuming interest through 2006 is paid in the form of 8% Senior Notes (paid-in-kind):

Letters of credit in the amount of $1,902 were outstanding under letter of credit facilities with commercial banks, and were cash collateralized at September 30, 2004.

The Company finances its working capital needs through a combination of internally generated cash from operations and cash on hand. The New Revolving Credit Facility provides additional financial flexibility.

In April 2004, the Company renegotiated and amended its lease arrangement with GECC. Under terms of the amended lease, six payments of approximately $6,092 were due semi-annually on February 28 and August 28 beginning in February 2005. As part of the renegotiation of the lease, the Company agreed to purchase the assets at their fair market value of $9,500. The Company obtained the option to terminate the lease early upon payment of $33,000 through February 28, 2005; thereafter the amount of the early termination payment would decrease upon payment of each semi-annual capital lease payment. The equipment would transfer to the Company free and clear of all liens on the earlier of (i) the payment of the early termination amount, plus any accrued interest due and payable at 6% per annum or (ii) the payment of the final installment due August 28, 2007.

On June 29, 2004, the Company exercised its $33,000 early termination payment option, terminated the lease and acquired title to the leased equipment. The leased equipment was transferred to the Company free and clear of all liens.

In November 2000, the Ontario Ministry of the Environment (“MOE”) notified Viskase Canada that it had evidence to suggest that the Site was a source of polychlorinated biphenyl (“PCB”) contamination. Viskase Canada has been working with the MOE in investigating the PCB contamination and developing and implementing, if appropriate, a remedial plan for the Site and the affected area. Viskase Canada and others have been advised by the MOE that the MOE expects to issue certain Director’s Orders requiring remediation under applicable environmental legislation against Viskase Canada, The Dow Chemical Company, corporate successor to Union Carbide (“Dow”), and others in the next few months. Dow, which has replaced or soon will replace Union Carbide as the defendant in the lawsuit against Union Carbide, has consented to an amendment to the lawsuit, which Viskase Canada will file with the court as soon as the claim can be adequately quantified, that alleges that any PCB contamination at or around the Site was generated from Union Carbide’s plastics extrusion business, which was operated at the Site by Union Carbide prior to the purchase of the Business. Union Carbide’s plastics extrusion business was not part of the Business purchased by Viskase Corporation and its affiliates. Viskase Canada will be asking the court to require Union Carbide to repurchase the Site from Viskase Canada and award Viskase Canada damages in excess of $2.0 million (Canadian). The Company has reserved $0.75 million (U.S.) for the property remediation. The lawsuit is still pending and is expected to proceed to trial in 2005.

In 1993, the Illinois Department of Revenue (“IDR”) submitted a proof of claim against Envirodyne Industries, Inc. (now known as Viskase Companies, Inc.) and its subsidiaries in Bankruptcy Court, Bankruptcy Case Number 93 B 319 for alleged liability with respect to the IDR’s denial of the Company’s allegedly incorrect utilization of certain loss carry-forwards of certain of its subsidiaries. In September 2001, the Bankruptcy Court denied the IDR’s claim and determined the debtors were not responsible for 1998 and 1999 tax liabilities, interest and penalties. The IDR appealed the Bankruptcy Court’s decision to

the United States District Court, Northern District of Illinois, Case Number 01 C 7861; and in February 2002 the district court affirmed the Bankruptcy Court’s order. IDR appealed the district court’s order to United States Court of Appeals for the Seventh Circuit, Case Number 02-1632. On January 6, 2004, the appeals court reversed the judgment of the district court and remanded the case for further proceedings. The matter is now before the Bankruptcy Court for further determination.

In August 2001, the Department of Revenue of the Province of Quebec, Canada issued an assessment against Viskase Canada in the amount of $2.7 million (Canadian) plus interest and possible penalties. This assessment is based upon Viskase Canada’s failure to collect and remit sales tax during the period July 1, 1997 to May 31, 2001. During this period, Viskase Canada did not collect and remit sales tax in Quebec on reliance of the written advice of its outside accounting firm. Viskase Canada filed a Notice of Objection in November 2001 with supplementary submission in October 2002. The Notice of Objection found in favor of the Department of Revenue. The Company has appealed the decision. The ultimate liability for the Quebec sales tax lies with the customers of Viskase Canada during the relevant period. Viskase Canada could be required to pay the amount of the underlying sales tax prior to receiving reimbursement for such tax from its customers. The Company has, however, provided for a reserve of $0.3 million (U.S.) for interest and penalties, if any, but has not provided for a reserve for the underlying sales tax. Viskase Canada is negotiating with the Quebec Department of Ministry to avoid having to collect the sales tax from customers who will then be entitled to credit for such sales tax collected.

During 1999 and 2000, the Company and certain of its subsidiaries and one other sausage casings manufacturer were named in ten virtually identical civil complaints filed in the United States District Court for the District of New Jersey. The District Circuit ordered all of these cases consolidated in Civil Action No. 99-5195-MLC (D.N.J.). Each complaint brought on behalf of a purported class of sausage casings customers alleges that the defendants unlawfully conspired to fix prices and allocate business in the sausage casings industry. In 2001, all of the consolidated cases were transferred to the United States District Court for the Northern District of Illinois, Eastern Division. The Company strongly denies the allegations set forth in these complaints.

In May 2004, the Company entered into settlement agreement, without the admission of any liability (“Settlement Agreement”) with the plaintiffs. Under terms of the Settlement Agreement, the plaintiffs fully released the Company and its subsidiaries from all liabilities and claims arising from the civil action in exchange for the payment of a $0.3 million settlement amount, which amount was reserved in the December 31, 2003 financial statements.

Under the Clean Air Act Amendments of 1990, various industries, including casings manufacturers, will be required to meet maximum achievable control technology (“MACT”) air emissions standards for certain chemicals. MACT standards applicable to all U.S. cellulosic casing manufacturers were promulgated June 11, 2002. The Company submitted extensive comments to the EPA during the public comment period. Compliance with these new rules is required by June 13, 2005, although the Company has obtained a one-year extension for both of its facilities. To date, the Company has over $2.9 million in capital expenditures, and expects to spend over $7.4 million over the next 12 months, to become compliant with MACT rules at our two U.S. extrusion facilities. Although the Company is in the process of installing the technology necessary to meet these emissions standards at our two extrusion facilities, our failure to do so, or our failure to receive a compliance extension from the regulatory agencies, could result in substantial penalties, including civil fines of up to $50,000 per facility per day or a shutdown of our U.S. extrusion operations.

The Company is involved in these and various other legal proceedings arising out of their business and other environmental matters, none of which is expected to have a material adverse effect upon results of operations, cash flows or financial condition.

During the first quarter of 2004, the Company committed to a restructuring plan to continue to address the Company’s competitive environment. The plan resulted in a before tax charge of $0.8 million. Approximately 13% of the home office personnel were laid off due to the restructuring plan. The 2004 restructuring charge is offset by a reversal of an excess reserve of $0.1 million relating to the 2003 restructuring reserve.

During the third and fourth quarters of 2003, the Company committed to a restructuring plan to address the industry’s competitive environment. The plan resulted in a before tax charge of $2.6 million. Approximately 2% of the Company’s worldwide workforce was laid off due to the 2003 restructuring plan. The Company reversed an excess reserve of $1.6 million of which $1.3 was Nucel® technology third party license fees that had been renegotiated. The Nucel® technology third party license fees were originally reflected in the 2000 restructuring reserve. The remaining $0.3 million represents an excess reserve for employee costs that were originally reflected in the 2002 restructuring reserve.

The following table provides details of the 2004, 2003 and 2000 restructuring reserves for the period ended September 30, 2004:

On June 29, 2004, the Company issued $90,000 of 11.5% Senior Secured Notes together with the 90,000 New Warrants to purchase an aggregate of 805,230 shares of common stock of the Company. The aggregate purchase price of the 11.5% Senior Secured Notes and the 90,000 of New Warrants was $90,000. Each of the New Warrants entitles the holder to purchase 8.947 shares of the Company’s common stock at an exercise price of $.01 per share through the June 15, 2011 expiration date.

The New Warrants were valued for accounting purposes using the Black-Scholes model. Using the Black-Scholes model, each of the New Warrants was valued at $11.117 for an aggregate fair value of the warrant issuance of $1,001.

In connection with the June 29, 2004 refinancing transaction, the Company purchased 805,270 shares of its common stock from the underwriter for a purchase price of $298. The common stock has been accounted for as treasury stock. The treasury shares are being held for use in connection with any exercise of the New Warrants.

Following are the reconciliations of the numerators and denominators of the basic and diluted EPS.

For the 9 months ended September 30, 2004 and for the predecessor company, common stock equivalents are excluded from the loss per share calculations as the result is antidilutive.

The Company paid $5,032 during the third quarter of 2004 bringing the total to $6,724 for the year; and expects to contribute an additional $237 during the remainder of the year.

The Company has expensed $210 in the third quarter of 2004 and expects its pension expense to be $2,324 for the year.

The Company has paid $963 of net contributions during the third quarter of 2004 and expects to pay approximately $947 for the remainder of the year, totaling $3,518 for the year.

The Company has expensed $1,399 in the third quarter of 2004 and expects its postretirement benefits expense to be $5,075 for the year.

than March 31, 2004. The Company believes that the adoption of Revised FIN 46 will not have a material impact on the Company’s results of operations or financial position.

In December 2003, The FASB issued SFAS No. 132, “Employers’ Disclosures About Pensions and Other Postretirement Benefits — an Amendment of FASB Statements No. 87, 88, and 106.” The statement was developed in response to concerns expressed by users of financial statements regarding more information about pension plan assets, obligations, benefit payments, contributions and net benefit cost. Disclosures about postretirement benefits other than pensions are required. All new provisions for domestic plans are effective for fiscal years ending after December 15, 2003. Foreign and non-public entities disclosures are required effective for fiscal years ending after June 15, 2004. The Company has adopted the standard for the year 2004.

On December 17, 2003, the Staff of Securities and Exchange Commission (“SEC” or the “Staff”) issued Staff Accounting Bulletin (“SAB”) 104, “Revenue Recognition,” which amends SAB 101, “Revenue Recognition in Financial Statements.” SAB 104’s primary purpose is to rescind accounting guidance contained in SAB 101 related to multiple element revenue arrangements, superseded as a result of the issuance of EITF No. 00-21. Additionally, SAB 104 rescinds the SEC’s “Revenue Recognition in Financial Statements Frequently Asked Questions and Answers” (the “FAQ”) issued with SAB 101 (that had been codified in SEC Topic 13, “Revenue Recognition”). Selected portions of the FAQ have been incorporated into SAB 104. While the wording of SAB 104 has changed to reflect the issuance of EITF No. 00-21, the revenue recognition principles of SAB 101 remain largely unchanged by the issuance of SAB 104. The adoption of SAB 104 did not have a material impact on the Company’s results of operations or financial position.

The following table shows our net sales, operating (loss) income, identifiable assets and U.S. export sales by geographic region for the third quarter of 2004 and for the comparable prior year period (in millions):

The Company will terminate postretirement medical benefits as of December 31, 2004 for all active employees and retirees in the United States who are not covered by a collective bargaining agreement. It is estimated that said termination will result in a projected $35 million reduction in the unfunded postretirement liability included in “Accrued Employee Benefits” on the Consolidated Balance Sheets.

Until l (90 days after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments of subscriptions.

The following table sets forth the various expenses to be incurred in connection with the sale and distribution of the securities being registered hereby, all of which will be borne by the registrant. The table does not include any underwriting discounts and commissions and expenses incurred by the selling shareholders for brokerage, accounting, tax or legal services or any other expenses incurred by the selling shareholders in disposing of the securities. All amounts shown are estimates except the SEC registration fee.

The Company is incorporated under the laws of the State of Delaware. Section 145 (“Section 145”) of the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended (the “General Corporation Law”), inter alia, provides that a Delaware corporation may indemnify any persons who were, are or are threatened to be made, parties to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person is or was an officer, director, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the corporation’s best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his conduct was illegal. A Delaware corporation may indemnify any persons who are, were or are threatened to be made, a party to any threatened, pending or completed action or suit by or in the right of the corporation by reason of the fact that such person was a director, officer, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit, provided such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the corporation’s best interests, provided that no indemnification is permitted without judicial approval if the officer, director, employee or agent is adjudged to be liable to the corporation. Where an officer, director, employee or agent is successful on the merits or otherwise in the defense of any action referred to above, a Delaware corporation must indemnify him against the expenses which such officer or director has actually and reasonably incurred.

Section 145 further authorizes a corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the

The Company’s Certificate of Incorporation and Bylaws provide for the indemnification of officers and directors to the fullest extent permitted by the General Corporation Law.

The Company’s directors and officers are covered under directors’ and officers’ liability insurance policies maintained by us with coverage up to $5.0 million.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described under Item 20 or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities 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 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 Securities Act and will be governed by the final adjudication of such issue.

During the three years preceding the filing of this registration statement, we have issued and sold the following securities without registration under the Securities Act:

On April 3, 2003, the Company consummated its prepackaged Chapter 11 bankruptcy plan, which had previously been confirmed by order of the United States Bankruptcy Court for the Northern District of Illinois, Eastern Division. The holders of the Company’s outstanding $163,060,000 of 10.25% Notes due 2001 (“Old Senior Notes”) received a pro rata share of $60,000,000 face value of 8% Senior Subordinated Notes due December 1, 2008 (“8% Senior Notes”), and 10,340,000 shares of new common stock (“New Common Stock”) issued by the Company on a basis of $367.96271 principal amount of 8% Senior Notes and 63.4122 shares of New Common Stock for each one thousand dollar ($1,000) principal amount of Old Senior Notes. The New Common Stock was issued under Section 1145 of the Bankruptcy Code, which exempts the original issuance of securities, as well as the other securities described below, under a plan of reorganization (as well as subsequent distributions by the distribution agent) from registration under the Securities Act and state securities laws.

The 8% Senior Notes bear interest at a stated rate of 8% per year, and accrue interest from December 1, 2001, payable semi-annually (except annually with respect to year four and quarterly with respect to year five), with interest payable in the form of 8% Senior Notes (paid-in-kind) for the first three years. The first interest payment date on the 8% Senior Notes was June 30, 2003 (paid-in-kind). Interest for years four and five will be payable in cash to the extent of available cash flow, as defined, and the balance in the form of 8% Senior Notes (paid-in-kind). Thereafter, interest will be payable in cash. The 8% Senior Notes mature on December 1, 2008, with an accreted value of approximately $88,894,000, assuming interest in the first five years is paid in the form of 8% Senior Notes (paid-in-kind). On June 29, 2004, we purchased $55.5 million aggregate principal amount of the outstanding 8% Senior Notes. Following our repurchase of $55.5 million principal amount 8% Senior Notes at a price of 90% of the aggregate principal amount thereof, the accreted value of the 8% Senior Notes at their maturity will be approximately $18.7 million.

Shares of the Company’s old common stock (“Old Common Stock”) were canceled pursuant to the Plan. In addition, the Company’s stockholder rights plan was terminated pursuant to the prepackaged plan. Holders of the Old Common Stock received a pro rata share of 306,291 warrants (“2010 Warrants”) to purchase shares of New Common Stock. The 2010 Warrants have a seven year term expiring on April 2, 2010, and an exercise price of $10.00 per share. Under the restructuring, 660,000 shares of Restricted Stock were authorized for Company management and employees under a new Restricted Stock Plan. Any such shares that are issued are subject to a vesting schedule with acceleration upon the occurrence of certain events.

On June 29, 2004, the Company completed the private offering of 90,000 units (the “Units”) consisting of $90,000,000 aggregate principal amount of 11.5% Senior Secured Notes due 2011 and 90,000 common stock purchase warrants to purchase 8.947 shares of New Common Stock (the “Warrants”). The Company originally sold the Units to Jefferies & Company, Inc., the initial purchaser, under the terms of a purchase agreement dated June 17, 2004. The initial purchaser subsequently resold the Units to qualified institutional buyers in reliance on Rule 144A and Regulation S under the Securities Act.

The exhibits listed below in the “Index to Exhibits” are part of this Registration Statement on Form S-1 and are numbered in accordance with Item 601 of Regulation S-K.

All other schedules for which provision is made in the applicable accounting regulations of the Commission are not required under the related instructions, are inapplicable or not material, or the information called for thereby is otherwise included in the financial statements and therefore has been omitted.

Insofar as indemnification for liabilities arising under the Securities Act 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 SEC such indemnification is against public policy as expressed in the Securities 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.


	(1) to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:


	(a) to include any prospectus required by section 10(a)(3) of the Securities Act;

	(b) 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 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 SEC 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;


	(c) 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;


	(2) that, for the purpose of determining any liability under the Securities Act, 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; and

	(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.

Pursuant to the requirements of the Securities Act of 1933, Viskase Companies, Inc. has duly caused this Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Willowbrook, State of Illinois on December 27, 2004.


	By:	/s/ GORDON S. DONOVAN



	Gordon S. Donovan
	Vice President and Chief Financial Officer

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Robert L. Weisman and Gordon S. Donovan as his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each said attorney-in-fact and agent, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement on Form S-1 and Power of Attorney have been signed by the following persons in the capacities and on the dates indicated:


(1)	Incorporated herein by reference to the Company’s Registration Statement on Form S-4, as filed with the Commission on October 27, 2004 (No. 333-10002).

(2)	Incorporated herein by reference to the Company’s Amendment No. 1 to the Registration Statement on Form S-4, as filed with the Commission on December 22, 2004 (No. 333-10002).

EX-4.3 2 c90665exv4w3.txt EQUITY REGISTRATION RIGHTS AGREEMENT EXHIBIT 4.3 EXECUTION COPY EQUITY REGISTRATION RIGHTS AGREEMENT DATED AS OF JUNE 29, 2004 BETWEEN VISKASE COMPANIES, INC. AND JEFFERIES & COMPANY, INC. This Equity Registration Rights Agreement (the "Agreement") is made and entered into as of June 29, 2004, between Viskase Companies, Inc., a Delaware corporation (the "Company"), and Jefferies & Company, Inc. (the "Initial Purchaser"), who has agreed to purchase from the Company, pursuant to the Purchase Agreement (as defined below) (i) 90,000 units (the "Units"), each Unit consisting of (A) $1,000 in aggregate principal amount of an 11-1/2% Senior Secured Note due 2011 of the Company (the "Notes") and (B) one warrant representing the right to purchase 8.947 shares of common stock, par value $0.01 per share, of the Company (the "Common Stock"), at an exercise price of $0.01 per share, subject to adjustment (collectively, the "Warrants"). The Common Stock issuable upon exercise of the Warrants are hereinafter collectively referred to as the "Warrant Shares". This Agreement is made pursuant to the Purchase Agreement (the "Purchase Agreement"), dated as of June 17, 2004, between the Company and the Initial Purchaser. To induce the Initial Purchaser to purchase the Warrants, the Company has agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligations of the Initial Purchaser set forth in Section 3 of the Purchase Agreement. Unless otherwise defined herein, capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Purchase Agreement. The parties hereby agree as follows: Section 1. Definitions. As used in this Agreement, the following capitalized terms shall have the following meanings: "Affiliate": As defined in Rule 144 of the Securities Act. "Closing Date": The date hereof. "Common Stock": The common stock, par value $0.01 per share, of the Company. "Effectiveness Date": The 270th day after the Closing Date. "Exchange Act": The Securities Exchange Act of 1934, as amended. "Existing Holders": As defined in Section 6(b) hereof. "Filing Date": The 180th day after the Closing Date. "Holder": As defined in Section 2 hereof. "NASD": means the National Association of Securities Dealers, Inc. "Person": Any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Piggy-Back Registration": As defined in Section 6 hereof. "Prospectus: The prospectus included in a Registration Statement at the time such Registration Statement is declared effective, as supplemented by any prospectus supplement, and all material incorporated by reference into such prospectus. "Public Equity Offering": means an underwritten offering of Common Stock pursuant to a registration statement that has been declared effective by the SEC pursuant to the Securities Act (other than a registration statement on Form S-8 or otherwise relating to equity securities issuable under any employee benefit plan of the Company). "Registrable Securities": At any time, any of (i) the Warrant Shares (whether or not the related Warrants have been exercised) and (ii) any other securities issued or issuable with respect to any Warrant Shares by way of stock dividends or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when (a) a Registration Statement with respect to the offering of such securities by the Holder thereof shall have been declared effective under the Securities Act and such securities shall have been disposed of by such Holder pursuant to such Registration Statement, (b) such securities have been sold to the public pursuant to Rule 144(k) (or any similar provisions then in force, but not Rule 144A) promulgated under the Securities Act, (c) such securities shall have been otherwise transferred by the Holder thereof and new certificates for such securities not bearing a legend restricting further transfer shall have been delivered by the Company or its transfer agent and subsequent disposition of such securities shall not require registration or qualification under the Securities Act or any similar state law then in force or (d) such securities shall have ceased to be outstanding. "Registration Statement": Any registration statement of the Company relating to, or entitling a Holder to request, the registration for resale of Registrable Securities, including the Prospectus included therein, all amendments thereto (including post-effective amendments) and all exhibits and all material incorporated by reference therein. "Restricted Securities": As defined in Rule 144 of the Securities Act. "SEC": The Securities and Exchange Commission. "Securities Act": The Securities Act of 1933, as amended. "Shelf Registration Statement": As defined in Section 4 hereof. "Warrant Agreement": The Warrant Agreement dated the Closing Date by and between the Company and Wells Fargo Bank, National Association, as Warrant Agent. "Warrant Shares": The Common Stock or other securities that any Holder may acquire upon exercise of a Warrant, together with any other securities which such Holder may acquire on account of any such securities, including, without limitation, as the result of any dividend or other distribution on Common Stock or any split or combination of such Common Stock as provided for in the Warrant Agreement. -2- "Warrants": The warrants of the Company issued and sold pursuant to the Purchase Agreement and the Warrant Agreement, together with any warrants issued in substitution or replacement therefor. Section 2. Holders of Registrable Securities. A Person is deemed to be a Holder of Registrable Securities (a "Holder") whenever such Person owns Registrable Securities or has the right to acquire such Registrable Securities by exercising Warrants held by such Person, whether or not such acquisition has actually been effected. Section 3. Registration Procedures. In connection with any Registration Statement filed by the Company, the Company shall: (a) (i) furnish to the Holders, prior to the filing thereof with the Commission, a copy of the Registration Statement (including all such documents incorporated therein by reference) and each amendment thereof and each supplement, if any, to the Prospectus, which documents will be subject to the review and comment of such Holders in connection with such sale, if any, for a period of at least five business days, and the Company will not file any such Registration Statement or related Prospectus or any amendment or supplement to any such Registration Statement or Prospectus (including all documents incorporated therein by reference) to which such selling Holders shall reasonably object within five business days after the receipt thereof; and (ii) include the names of the Holders who propose to sell Registrable Securities pursuant to the Registration Statement as selling securityholders. A selling Holder shall be deemed to have reasonably objected to such filing if such Registration Statement, amendment, related Prospectus or supplement, as applicable, as proposed to be filed, contains an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading or fails to comply with the applicable requirements of the Securities Act; (b) give written notice to the Initial Purchaser and the Holders: (i) when the Registration Statement or any amendment thereto has been filed with the SEC and when the Registration Statement or any post-effective amendment thereto has become effective; (ii) of any request by the SEC for amendments or supplements to the Registration Statement or the Prospectus or for additional information; (iii) of the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (iv) of the receipt by the Company or its legal counsel of any notification with respect to the suspension of the qualification of the Registrable -3- Securities for sale in any jurisdiction or the initiation or threatening in writing of any proceeding for such purpose; and (v) of the happening of any event that requires the Company to make changes in the Registration Statement or the Prospectus in order that the Registration Statement or the Prospectus does not contain an untrue statement of a material fact nor omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in light of the circumstances under which they were made) not misleading.; (c) make every reasonable effort to obtain the withdrawal at the earliest possible time, of any order suspending the effectiveness of the Registration Statement; (d) furnish to each Holder, without charge, at least one copy of the Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference); (e) during the period which the Registration Statement is effective, deliver to each Holder, without charge, as many copies of the Prospectus (including each preliminary Prospectus) included in the Registration Statement as such Holder may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the Prospectus by each of the Holders in connection with the offering and sale of Registrable Securities; (f) prior to any public offering of the Registrable Securities pursuant to any Registration Statement, register or qualify or reasonably cooperate with the Holders and their respective counsel in connection with the registration or qualification of the Registrable Securities for offer and sale under the securities or "blue sky" laws of such states of the United States as any Holder reasonably requests in writing and do any and all other acts or things necessary or reasonably advisable to enable the offer and sale in such jurisdictions of the Registrable Securities; provided, however, that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it is not then so qualified or (ii) take any action which would subject it to general service of process or to taxation in any jurisdiction where it is not then so subject; (g) use reasonable good faith efforts to cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing the Registrable Securities to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as the Holders may request a reasonable period of time prior to sales of the Registrable Securities pursuant to such Registration Statement; (h) upon the occurrence of any event contemplated by paragraphs (ii) through (v) of Section 3(b) above during the period for which the Company is required to maintain an effective Registration Statement, prepare and file as soon as reasonably practicable a post-effective amendment to the Registration Statement or a supplement to -4- the related Prospectus and any other required document so that, as thereafter delivered to Holders or purchasers of Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (i) not later than the effective date of the Registration Statement, provide a CUSIP number for the Registrable Securities and provide the Warrant Agent with printed certificates for the Registrable Securities, in a form eligible for deposit with The Depository Trust Company; (j) use its reasonable best efforts to comply with all rules and regulations of the Commission to the extent and so long as they are applicable to the Registration Statement and will make generally available to its security holders (or otherwise provide in accordance with Section 11(a) of the Securities Act) an earnings statement satisfying the provisions of Section 11(a) of the Securities Act, no later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Registration Statement, which statement shall cover such 12-month period; (k) require, at the Company's option, each Holder of Registrable Securities to be sold pursuant to a Registration Statement to furnish to the Company such information as may be required or reasonably advisable (i) under applicable requirements of the SEC or (ii) to obtain any acceleration of the effective date of a Registration Statement, and the Company may exclude from such registration the Registrable Securities of any Holder that fails to furnish such information within 20 business days after receiving such request; (l) enter into such customary agreements and take all such other action, if any, in order to facilitate the disposition of the Registrable Securities pursuant to any Registration Statement; (m) (i) make reasonably available for inspection by the Holders of the Registrable Securities and any attorney, accountant or other agent retained by the Holders of the Registrable Securities all pertinent financial and other relevant corporate records of the Company and its subsidiaries and (ii) cause the officers, directors, employees, accountants and auditors of the Company and its subsidiaries to supply all relevant information reasonably requested by the Holders of the Registrable Securities or any such attorney, accountant or agent in connection with the Registration Statement, in each case, as shall be reasonably necessary to enable such Persons, to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, any such records, documents, properties and such information that is designated in writing by the Company, in good faith, as confidential at the time of delivery of such records, documents, properties or information shall be kept confidential by any such Persons pursuant to the terms of a confidentiality agreement between the Company and such Persons containing customary terms and provisions and in form and substance reasonably satisfactory to the Company and such Persons, prohibiting the use or disclosure of any such information, except as required by law or legal process or as otherwise provided therein. -5- (n) if requested by any Holder of Registrable Securities, cause (i) its counsel to deliver an opinion and updates thereof relating to the Registrable Securities, containing opinions customary for transactions of this type and customary assumptions and qualifications, addressed to such Holders thereof and dated, in the case of the initial opinion, the effective date of such Registration Statement (it being agreed that the matters to be covered by such opinion shall include, without limitation, as of the date of the opinion and as of the effective date of the Registration Statement or most recent post-effective amendment thereto, as the case may be, a statement that it has not come to such counsel's attention that such Registration Statement and the prospectus included therein, as then amended or supplemented, and any documents incorporated by reference therein contain an untrue statement of a material fact or omit to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of the prospectus, in light of the circumstances under which they were made, and in the case of any such documents, in light of the circumstances existing at the time that such documents were filed with the SEC under the Exchange Act) not misleading); (ii) its independent public accountants to provide to the Holders a comfort letter in customary form and covering matters of the type customarily covered in comfort letters in connection with primary underwritten offerings, subject to receipt of appropriate documentation as contemplated, and only if permitted, by Statement of Auditing Standards No. 72; and (iii) use its reasonable best efforts to cause the disposition of the Registrable Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Registrable Securities; provided, however, that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it is not then so qualified or (ii) take any action which would subject it to general service of process or to taxation in any jurisdiction where it is not then so subject. If any such Registration Statement refers to any Holder by name or otherwise as the holder or any securities of the Company, then such Holder shall have the right to require (i) the insertion therein of language, in form and substance reasonably satisfactory to such Holder, to the effect that the holding by such Holder of such securities is not to be construed as a recommendation by such Holder of the investment quality of the Company's securities covered thereby and that such holding does not imply that such Holder will assist in meeting any future financial requirements of the Company, or (ii) in the event that such reference to such Holder by name or otherwise is not required by the Securities Act or any similar Federal statute then in force, the deletion of the reference to such Holder in any amendment or supplement to the Registration Statement filed or prepared subsequent to the time that such reference ceases to be required. Section 4. Shelf Registration. (a) The Company shall use its reasonable best efforts to (i) on or before the Filing Date, prepare and cause to be filed with the SEC pursuant to Rule 415 under the Securities Act a shelf registration statement on the appropriate form relating to resales of all Registrable Securities (the "Shelf Registration Statement", (ii) cause the Shelf Registration Statement to be declared effective under the Securities Act on or prior to the -6- Effectiveness Date and (iii) keep any Shelf Registration Statement required by this Section 4(a) continuously effective, supplemented, amended and current as required by and subject to the provisions of Section 4(a) hereof and in conformity with the requirements of this Agreement, the Securities Act and the rules and regulations of the Commission promulgated thereunder from time to time (including (A) preparing and filing with the SEC such amendments and post-effective amendments to the Shelf Registration Statement as may be necessary to keep such Shelf Registration Statement effective; (B) cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act, and complying fully with Rules 424, 430A and 462, as applicable, under the Securities Act in a timely manner; and (C) comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Shelf Registration Statement), until the second anniversary of the effective date of such Shelf Registration Statement; provided that such obligation shall expire before such date if all the Registrable Securities covered by the Shelf Registration Statement (i) have been sold pursuant thereto or (ii) are no longer Restricted Securities. (b) No Holder may include any of its Registrable Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 20 business days after receipt of a request therefor, the information specified in Item 507 or 508 of Regulation S-K, as applicable, of the Securities Act for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. Each selling Holder agrees to promptly furnish additional information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading. (c) The Company shall be deemed not to have used its best efforts to keep the Shelf Registration Statement effective during the requisite period if it voluntarily takes any action that would result in Holders of Registrable Securities covered thereby not being able to offer and sell such Registrable Securities during that period, unless such action is required by applicable law or this Agreement. Section 5. Limitations, Conditions and Qualifications to Obligations under Registration Covenants. (a) The obligations of the Company described in Section 4 and Section 6 of this Agreement are subject to the obligations of the Holders (i) to furnish all information and materials described in Section 3(k) hereof and (ii) to take any and all actions as may be required under Federal and state securities laws and regulations to permit the Company to comply with all applicable requirements of the SEC and to obtain any acceleration of the effective date of such Registration Statement. (b) Notwithstanding anything to the contrary in this Agreement, subject to the next sentence of this paragraph, the Company shall be entitled to postpone, for a reasonable period of time, the effectiveness of, or suspend the rights of any selling Holders Registrable Securities to make sales pursuant to any Registration Statement otherwise required to be prepared, filed and kept effective by it under Section 4 or 6 in -7- the event that, and for a period (a "Blackout Period") not to exceed an aggregate of 90 days in any 12-month period, the board of directors of the Company determines, in good faith, that (1) an event or circumstance occurs and is continuing as a result of which the Registration Statement, any related Prospectus or any document incorporated therein by reference as then amended or supplemented or proposed to be filed would, in the good faith judgment of the Company's board of directors, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and (2) (a) the disclosure of an event, occurrence or other item at that time would reasonably be expected to have a material adverse effect on the Company's business, operations or prospects or (b) the disclosure otherwise relates to a material business transaction or development that has not yet been publicly disclosed and the board of directors also determines, in good faith, that any disclosure thereof would jeopardize the success of the transaction or that disclosure of the transaction is prohibited by the terms thereof. If the Company shall so postpone the effectiveness of, or suspend the rights of any selling Holders of Registrable Securities to make sales pursuant to, a Registration Statement, it shall, as promptly as possible, notify any selling Holders of Registrable Securities of such determination, and the selling Holders of Registrable Securities shall (x) have the right, in the case of a postponement of the effectiveness of a Registration Statement, upon the affirmative vote of selling Holders of Registrable Securities of not less than a majority of the Registrable Securities to be included in such Registration Statement, to withdraw the request for registration by giving written notice to the Company within 10 days after receipt of such notice or (y) in the case of a suspension of the right to make sales, receive an extension of the registration period referred to in Section 4(a) or Section 6(a) hereof, as applicable, equal to the number of days of the suspension. (c) Each Holder agrees, if and to the extent requested by the managing underwriter or underwriters in a Public Equity Offering, not to effect any public sale or distribution of Resalable Securities, including a sale pursuant to Rule 144A (except as part of such Public Equity Offering), during the 90 day period beginning on the closing date of any such Public Equity Offering (which period may be extended to 180 days in the case of the Company's initial Public Equity Offering), to the extent timely notified in writing by the Company or such managing underwriter or underwriters. In the event that the Company is not otherwise in compliance with the provisions of this Agreement at the time the Company or such managing underwriter or underwriters send notice pursuant to this Section 5(c), the Holders shall not be required to comply with this Section 5(c). In addition, the provisions of this Section 5(c) shall not apply to any Holder of Registrable Securities if such Holder is prevented by applicable statute or regulation from entering into any such agreement; provided, that any such Holder shall undertake not to effect any public sale or distribution of any Registrable Securities commencing on the closing date of any such Public Equity Offering unless it has provided 45 days' prior written notice of such sale or distribution to the managing underwriter or underwriters. Section 6. Piggy-Back Registration of Registrable Securities. -8- (a) If at any time after the Closing Date the Company proposes to file a registration statement under the Securities Act with respect to a Public Equity Offering, then the Company shall give written notice of such proposed filing to the Holders of Registrable Securities as soon as practicable (but in no event fewer than 20 days before the anticipated filing date), and such notice shall offer such Holders the opportunity to register such number of Registrable Securities as each Holder may request in writing within 10 business days after receipt of such written notice from the Company (which request shall specify the Registrable Securities intended to be disposed of by such selling Holder of Registrable Securities and the intended method of distribution thereof) (a "Piggy-Back Registration"); provided that any holder of Warrants so requesting shall agree, upon or prior to effectiveness of any such Registration Statement other than a registration statement filed with the SEC pursuant to Rule 415 under the Securities Act (but in no event earlier than the Separation Date (as defined in the Warrant Agreement)), to exercise their Warrants at least to the extent necessary for such holder to acquire the number of Registrable Securities for which such holder has requested registration; provided, further, that no Holder of Registrable Securities shall have "piggy-back" registration rights with respect to their Registrable Securities for any registration statement filed by the Company to register exchange notes for the Notes pursuant to the Registration Rights Agreement, dated as of June 29, 2004, by and between the Company and the Initial Purchaser. The Company shall use its reasonable best efforts to keep such Piggy-Back Registration continuously effective under the Securities Act until at least the earlier of (a) the second anniversary of the effective date thereof or (b) the consummation of the distribution by the Holders of all of the Registrable Securities covered thereby. The Company shall use its reasonable best efforts to cause the managing underwriter or underwriters, if any, of such proposed offering to permit the Registrable Securities requested to be included in a Piggy-Back Registration to be included on the same terms and conditions as any similar securities of the Company or any other security holder included therein and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method of distribution thereof. Any selling Holder of Registrable Securities shall have the right to withdraw its request for inclusion of its Registrable Securities in any Shelf Registration Statement pursuant to this Section 6 by giving written notice to the Company of its request to withdraw a reasonable time prior to the filing of such Shelf Registration Statement with the SEC. The Company will pay all registration expenses described in Section 7 hereof in connection with each registration of Registrable Securities requested pursuant to this Section 6, and each Holder of Registrable Securities shall pay all underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder's Registrable Warrant Shares pursuant to a Piggy-Back Registration effected pursuant to this Section 6. No registration effected under this Section 6, and no failure to effect a registration under this Section 6, shall relieve the Company of its obligations to effect a registration pursuant to Section 4 hereof of any Registrable Securities not included in such Piggy-Back Registration, and no failure to effect a registration required under this Section 6 and to complete the sale of securities registered thereunder in connection therewith shall relieve the Company of any other obligation under this Agreement. -9- (b) Priority in Piggy-Back Registration. In a registration pursuant to this Section 6 involving an underwritten offering, if the managing underwriter or underwriters of such underwritten offering have informed, in writing, the Company and the selling Holders of Registrable Securities requesting inclusion in such offering that in such underwriter's or underwriters' opinion the total number of securities which the Company, the selling Holders of Registrable Securities and any other Persons desiring to participate in such registration intend to include in such offering is such as to adversely affect the success of such offering, including the price at which such securities can be sold, then the Company will be required to include in such registration only the amount of securities which it is so advised should be included in such registration. In such event: (x) in cases initially involving the registration for sale of securities for the Company's own account, securities shall be registered in such offering in the following order of priority: (i) first, the securities which the Company proposes to register, (ii) second, provided that no securities proposed to be registered by the Company have been excluded from such registration, the securities that have been requested to be included in such registration statement by the holders (collectively, the "Existing Holders") of Registrable Securities (as defined in that certain Registration Rights Agreement by and among the Company and High River Limited Partnership, Debt Strategies Fund, Inc. and Northeast Investors Trust, dated as fo April 15, 2003, (iii) third, provided that no securities sought to be included by the Existing Holders have been excluded from such registration, the securities that have been requested to be included in such registration by the selling Holders of Registrable Securities (pro rata based on the amount of securities sought to be registered by such Persons) pursuant to this Agreement, and (iii) fourth, provided that no securities sought to be included by the selling Holders of Registrable Securities have been excluded from such registration, the securities of other Persons entitled to exercise "piggy-back" registration rights pursuant to contractual commitments of the Company (pro rata based on the amount of securities sought to be registered by such Persons); and (y) in cases initially involving the registration for sale of securities pursuant to demand registration rights, securities shall be registered in such offering in the following order of priority: (i) first, the securities of any Person whose exercise of a "demand" registration right pursuant to a contractual commitment of the Company is the basis for the registration, (ii) second, provided that no securities of any Person whose exercise of a "demand" registration right pursuant to a contractual commitment of the Company is the basis for such registration have been excluded from such registration, the securities requested to be included in such registration by the Existing Holders, (iii) third, provided that no securities sought to be included by the Existing Holders have been excluded from such registration, the securities requested to be included in such registration by the selling Holders of Registrable Securities pursuant to this Agreement (pro rata based on the amount of securities sought to be registered by such Persons), (iv) fourth, provided that no securities sought to be included by the selling Holders of Registrable Securities have been excluded from such registration, securities of other Persons entitled to exercise "piggy-back" registration rights pursuant to contractual commitments of the Company (pro rata based on the amount of securities sought to be registered by such Persons) and (v) fifth, provided that no securities sought to be included by other Persons entitled to exercise "piggy-back" registration rights pursuant to such contractual commitments have -10- been excluded from such registration, any securities which the Company proposes to register. (c) Exclusion of Registrable Warrant Shares. The Company shall not be required by this Section 6 to include Registrable Securities in a Piggy-Back Registration if (i) in the written opinion of outside counsel to the Company, addressed to the Holders of Registrable Securities and delivered to them, the Holders of such Registrable Securities seeking registration would be free to sell all such Registrable Securities within the current calendar quarter without registration under Rule 144, which opinion may be based in part upon the representation by the Holders of such Registrable Securities seeking registration, which representation shall not be unreasonably withheld, that each such Holder is not an affiliate of the Company within the meaning of the Securities Act, and (ii) all requirements under the Securities Act for effecting such sales are satisfied at such time. Section 7. Registration Expenses. (a) All expenses incurred by the Company in connection with its performance of and compliance with this Agreement will be borne by the Company, regardless of whether a Registration Statement is ever filed or becomes effective, including without limitation: (i) all registration and filing fees and expenses (including all SEC and stock exchange and NASD fees and expenses); (ii) all fees and expenses of compliance with federal securities and state "blue sky" or securities laws (including, without limitation, reasonable fees and disbursements of counsel for any underwriters in connection with blue sky qualifications of the Registrable Securities); (iii) all expenses of printing, preparing, filing, duplicating and distributing a Registration Statement and the related prospectus (including certificates for the Securities to be issued in the registration and printing of Prospectuses) requested in accordance with this Agreement, (iv) messenger and delivery services and telephone usage and costs and charges of any transfer agent; (v) all fees and disbursements of counsel for the Company; (vi) all fees and disbursements of independent certified public accountants of the Company (including the expenses of any special audit required by or incident to such performance); (vii) the fees and commissions of underwriters customarily paid by issuers or sellers of securities (but not including any underwriting discounts or commissions or transfer taxes, if any, attributable to the sale of Registrable Securities by selling Holders); -11- (viii) fees and expenses of one counsel for the selling Holders and other reasonable out-of-pocket expenses of the selling holders not to exceed $15,000 in the aggregate; (ix) Securities Act liability insurance, if the Company desires such insurance; (x) the fees and expenses of all other Persons retained by the Company; (xi) fees and expenses of any "qualified independent underwriter" or other independent appraiser participating in an offering pursuant to Section 3 of Schedule E to the By-laws of the NASD, but only where such a "qualified independent underwriter" is required due to a relationship with the Company; (xii) internal expenses of the Company (including, without limitation, all salaries and expenses of officers and employees of the Company performing legal or accounting duties); (xiii) the expense of any annual audit; (xiv) the fees and expenses of the Trustee and the Exchange Agent; and (xv) the expenses relating to printing, word processing and distributing all Registration Statements, underwriting agreements, securities sales agreements, indentures and any other documents necessary in order to comply with this Agreement. (b) The Company will bear its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Company. (c) The Holders shall pay the underwriting discounts, commissions, and transfer taxes, if any, in connection with the Registration Statement requested under Section 4 or 6, which costs shall be allocated pro rata among all Holders on whose behalf Registrable Securities of the Company are included in such registration on the basis of the respective amounts of the Registrable Securities then being registered on their behalf. Section 8. Indemnification. (a) The Company agrees to indemnify and hold harmless each Holder and each Person, if any, who controls such Holder within the meaning of the Securities Act or the Exchange Act from and against any losses, claims, damages or liabilities, joint or several, or any actions in respect thereof (including, but not limited to, any losses, claims, damages, liabilities or actions relating to purchases and sales of the Registrable Securities) to which each Indemnified Party (as defined in Section 8(c) below) may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or Prospectus or in any amendment or supplement thereto or in any preliminary Prospectus relating to a Registration, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in light of the circumstances under which they were made) not misleading, except to the extent that Losses are based upon information relating to such Holder or -12- Participating Broker-Dealer and furnished in writing to the Company (or reviewed and approved in writing) by or on behalf of such Holder or Participating Broker-Dealer or their counsel expressly for use therein, and shall reimburse, as incurred, the Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action in respect thereof; provided, however, that (i) the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement or Prospectus or in any amendment or supplement thereto or in any preliminary Prospectus relating to a Registration Statement in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein and (ii) with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary Prospectus relating to the Registration Statement, the indemnity agreement contained in this subsection (a) shall not inure to the benefit of any Holder from whom the Person asserting any such losses, claims, damages or liabilities purchased the Registrable Securities concerned, to the extent that the Prospectus was required to be delivered by such Holder under the Securities Act in connection with such purchase and any such loss, claim, damage or liability of such Holder results from the fact that there was not sent or given to such Person, at or prior to the written confirmation of the sale of such Registrable Securities to such Person, a copy of the final Prospectus if the Company had previously furnished copies thereof to such Holder; provided further, however, that this indemnity agreement will be in addition to any liability which the Company may otherwise have to such Indemnified Party. (b) Each Holder of the Registrable Securities, severally and not jointly, will indemnify and hold harmless the Company and each Person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act from and against any and all losses, claims, damages or liabilities or any actions in respect thereof, to which the Company or any such controlling Person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or Prospectus or in any amendment or supplement thereto or in any preliminary Prospectus relating to a Registration Statement, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein (in the case of the Prospectus, in light of the circumstances under which they were made) not misleading, but in each case only to the extent that the untrue statement or omission or alleged untrue statement or omission was made in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein; and, subject to the limitation set forth immediately preceding this clause, shall reimburse, as incurred, the Company for any legal or other expenses reasonably incurred by the Company or any such controlling Person in connection with investigating or defending any loss, claim, damage, liability or action in respect thereof. This indemnity agreement will be in addition to any liability which such Holder may otherwise have to the Company or any of its controlling Persons. (c) Promptly after receipt by any Person in respect of which indemnity may be sought pursuant to Section 8(a) or (b) (any such Person, an "Indemnified Party") under this Section 8 of notice of the commencement of any action or proceeding (including a governmental investigation), such Indemnified Party will, if a claim in respect thereof is to be made against the -13- indemnifying party under this Section 8, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not, in any event, relieve the indemnifying party from any obligations to any Indemnified Party other than the indemnification obligation provided in paragraph (a) or (b) above. In case any such action is brought against any Indemnified Party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such Indemnified Party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such Indemnified Party of its election so to assume the defense thereof the indemnifying party will not be liable to such Indemnified Party under this Section 8 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such Indemnified Party in connection with the defense thereof. No indemnifying party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending or threatened action in respect of which any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party unless such settlement includes an unconditional release of such Indemnified Party from all liability on any claims that are the subject matter of such action, and does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any Indemnified Party. The indemnifying party shall not be liable for the costs and expenses of any settlement of such action effected by such Indemnified Party without the consent of the indemnifying party, which consent shall not be unreasonably withheld. (d) If the indemnification provided for in this Section 8 is unavailable or insufficient to hold harmless an Indemnified Party under subsections (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such Indemnified Party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) covered by subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the Indemnified Party on the other from the sale of the Registrable Securities by the Holders, or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying party or parties on the one hand and the Indemnified Party on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) covered by subsection (a) or (b) above as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or such Holder or such other Indemnified Party, as the case may be, on the other, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid by an Indemnified Party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding any other provision of this Section 8(d), the Holders of the Registrable Securities shall not be required to contribute any amount in excess of the amount by which the net proceeds received by such Holders from -14- the sale of the Registrable Securities pursuant to the Registration Statement exceeds the amount of damages which such Holders have otherwise been required to pay (and for which it was entitled to indemnification hereunder) by reason of such untrue or alleged untrue statement or omission or alleged omission and with respect to which such Holder was entitled to indemnification hereunder. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. For purposes of this paragraph (d), each Person, if any, who controls such Indemnified Party within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as such Indemnified Party, and each Person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as the Company. (e) The agreements contained in this Section 8 shall survive the sale of the Registrable Securities pursuant to the Registration Statement and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any Indemnified Party. Section 9. Rule 144A and Rule 144. Subject to the Indenture, the Company shall file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company is not required to file such reports, it will, upon the request of any Holder, make publicly available other information so long as necessary to permit sales of their securities pursuant to Rules 144 and 144A. The Company covenants that it will take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including the requirements of Rule 144A(d)(4)). The Company will provide a copy of this Agreement to prospective purchasers of Registrable Securities identified to the Company by the Initial Purchaser upon request. Upon the request of any Holder, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements. Notwithstanding the foregoing, nothing in this Section 9 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act. Section 10. Miscellaneous. (a) Remedies. The Company acknowledges and agrees that any failure by the Company to comply with its obligations under Section 4 and Section 6 hereof may result in material irreparable injury to the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, any Holder may obtain such relief as may be required to specifically enforce the Company's obligations under Section 4 and Section 6 hereof. (b) No Inconsistent Agreements. The Company will not on or after the date of this Agreement enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not -15- inconsistent with the rights granted to the holders of the Company's securities under any agreement in effect on the date hereof. (c) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, except by the Company and the written consent of the Holders of a majority of the Registrable Securities affected by such amendment, modification, supplement, waiver or consent. (d) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, first-class mail, facsimile transmission, or air courier which guarantees overnight delivery: (1) if to a Holder of the Securities, at the most current address given by such Holder to the Company or Warrant Agent. (2) if to the Company, at the address as follows: 625 Willowbrook Centre Willowbrook, Illinois 60527 Telephone No. (630) 789-4900 with a copy (which shall not constitute notice) to: Jenner & Block LLC One IBM Plaza Chicago, IL 60611 Facsimile No.: (312) 527-0484 Attention: Thomas A. Monson, Esq (3) if to the Warrant Agent, at its address as follows: Wells Fargo Bank, N.A. Corporate Trust Services Sixth and Marquette MAC N9303-120 Minneapolis, MN 55479 Facsimile: 612-667-9825 Attention: Jane Y. Schweiger All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; three business days after being deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged by recipient's facsimile machine operator, if sent by facsimile transmission; and on the day delivered, if sent by overnight air courier guaranteeing next day delivery. (e) Third Party Beneficiaries. It is expressly understood and agreed that each Holder is intended to be a beneficiary of the Company's covenants contained in this Agreement to the -16- same extent as if those covenants were made directly to such Holder by the Company, and each such Holder shall have the right to take action against the Company to enforce, and obtain damages for any breach of, those covenants. (f) Successors and Assigns. This Agreement shall be binding upon the Company, the Initial Purchaser and each of their successors and assigns. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. (j) Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) Securities Held by the Company. Whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company or its Affiliates (other than subsequent Holders of Registrable Securities if such subsequent Holders are deemed to be Affiliates solely by reason of their holdings of such Registrable Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. [Signature Page Follows] -17- IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. VISKASE COMPANIES, INC. By: /s/ Gordon S. Donovan ----------------------------------- Name: Gordon S. Donovan Title: Vice President 18 EQUITY REGISTRATION RIGHTS AGREEMENT JEFFERIES & COMPANY, INC. By: /s/ Andrew Whittaker -------------------------- Name: Andrew Whittaker Title: Vice Chairman -19- EQUITY REGISTRATION RIGHTS AGREEMENT EX-4.5 3 c90665exv4w5.txt WARRANT AGREEMENT EXHIBIT 4.5 EXECUTION COPY VISKASE COMPANIES, INC. Warrants to Purchase Shares of Common Stock WARRANT AGREEMENT Dated as of June 29, 2004 WELLS FARGO BANK, NATIONAL ASSOCIATION Warrant Agent WARRANT AGREEMENT, dated as of June 29, 2004 (this "Agreement"), between Viskase Companies, Inc., a Delaware corporation (the "Company"), and Wells Fargo Bank, National Association, as warrant agent (the "Warrant Agent"). WHEREAS, the Company proposes to issue warrants (the "Warrants") to initially purchase up to an aggregate of 805,230 shares of common stock, par value $0.01 per share (the "Common Stock"), of the Company (the Common Stock issuable on exercise of the Warrants being referred to herein as the "Warrant Shares"), each Warrant initially representing the right to purchase 8.947 Warrant Shares, in connection with the offering (the "Offering") by the Company of 90,000 units (the "Units"), each Unit consisting of (i) $1,000 principal amount at maturity of the 11 -1/2% Senior Secured Notes due 2011 of the Company (the "Notes") and (ii) one Warrant. WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing so to act in connection with the issuance of Warrant Certificates (as defined) and other matters as provided herein. WHEREAS, the Company has entered into that certain Capital Equity Registration, Rights Agreement, dated as of June 29, 2004, between the Company and Jefferies & Company, Inc. for the benefit of holders of the Warrants. NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereto agree as follows: Section 1. Certain Definitions. As used in this Agreement, the following terms shall have the following respective meanings: "144A Global Warrant" means a global Warrant substantially in the form of Exhibit A hereto bearing the Global Warrant Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control," as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person will be deemed to be control. For purposes of this definition, the terms "controlling," "controlled by" and "under common control with" have correlative meanings. "Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Warrant, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange. "Board of Directors" means, as to any Person, the board of directors or similar governing body of such Person or any duly authorized committee thereof. "Business Day" means any day other than a Legal Holiday. "Clearstream" means Clearstream Banking, S.A. "Closing Date" means the date hereof. "Definitive Warrant" means a Warrant Certificate issued in registered form as a definitive Warrant Certificate. "Depositary" means, with respect to the Warrants issuable or issued in whole or in part in global form, the Person specified in Section 3.3 hereof as the Depositary with respect to the Warrants, and any and all successors thereto appointed as Depositary hereunder and having become such pursuant to the applicable provision of this Agreement. "Equity Registration Rights Agreement" means the registration rights agreement, dated as of June 29, 2004, by and among the Company and the Initial Purchaser relating to the Warrant Shares. "Euroclear" means Euroclear Bank S.A./N.V., as operator of the Euroclear system. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exercise Price" means the amount set forth in the form of Warrant Certificate attached hereto as Exhibit A, as adjusted as herein provided. "Global Warrants" means, individually and collectively, each of the Restricted Global Warrants and the Unrestricted Global Warrants, substantially in the form of Exhibit A hereto issued in accordance with Section 3.1(b) and 3.5 hereof. "Global Warrant Legend" means the legend set forth in Section 3.5(f)(ii), which is required to be placed on all Global Warrants issued under this Agreement. "IAI Global Warrant" means the Global Warrant substantially in the form of Exhibit A hereto bearing the Global Warrant Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee. "Indenture" means the indenture, dated as of June 29, 2004, among the Company, the Guarantors set forth therein and LaSalle Bank, National Association, as trustee, relating to the Notes. "Indirect Participant" means a Person who holds a beneficial interest in a Global Warrant through a Participant. "Initial Purchaser" means Jefferies & Company, Inc. -2- "Institutional Accredited Investor" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, which is not also a QIB. "Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions in the City of New York, the city in which the corporate trust office of the Warrant Agent is located 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 interest shall accrue on such payment for the intervening period. "Non-U.S. Person" means any Person other than a U.S. Person. "Officer" means, with respect to any Person, means the Chief Executive Officer, the President, the Chief Financial Officer, any Vice President or the Treasurer of such Person. "Opinion of Counsel" means an opinion from legal counsel who is reasonably acceptable to the Warrant Agent in form and substance reasonably acceptable to the Warrant Agent. The counsel may without limitation be an employee of or counsel to the Company, any subsidiary of the Company or the Warrant Agent. "Participant" means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and, with respect to DTC, shall include Euroclear and Clearstream). "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity. "Private Placement Legend" means the legend set forth in Section 3.5(f)(i) to be placed on all Warrants issued under this Warrant Agreement except where otherwise permitted by the provisions of this Warrant Agreement. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Registrable Security" means, at any time, any of (i) the Warrant Shares (whether or not the related Warrants have been exercised) and (ii) any other securities issued or issuable with respect to any Warrant Shares by way of stock dividends or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when (a) a registration statement with respect to the offering of such securities by the holder thereof shall have been declared effective under the Securities Act and such securities shall have been disposed of by such holder pursuant to such registration statement, (b) such securities have been sold to the public pursuant to Rule 144(k) (or any similar provisions then in force, but not Rule 144A) promulgated under the Securities Act, (c) such securities shall have been otherwise transferred by the holder thereof and new certificates for such securities not bearing a legend restricting further transfer shall have been delivered by the Company or its transfer agent and subsequent disposition of such securities shall not require -3- registration or qualification under the Securities Act or any similar state law then in force or (d) such securities shall have ceased to be outstanding. "Regulation S" means Regulation S promulgated under the Securities Act. "Regulation S Global Warrant" means a Global Warrant in the form of Exhibit A hereto bearing the Global Warrant Legend, the Private Placement Legend and the Regulation S Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee. "Regulation S Legend" means the legend set forth in Section 3.5(f)(iv) to be placed on all Regulation S Global Warrants issued pursuant to Regulation S. "Restricted Definitive Warrant" means a Definitive Warrant bearing the Private Placement Legend. "Restricted Global Warrant" means a Global Warrant bearing the Private Placement Legend. "Rule 144" means Rule 144 promulgated under the Securities Act. "Rule 144A" means Rule 144A promulgated under the Securities Act. "Rule 903" means Rule 903 promulgated under the Securities Act. "Rule 904" means Rule 904 promulgated under the Securities Act. "Securities Act" means the Securities Act of 1933, as amended. "Separation Date" means the earliest of (i) 180 days following the consummation of the offering of the Units, (ii) the date on which a registration statement for a registered exchange offer with respect to the Notes is declared effective under the Securities Act, (iii) the date on which a shelf registration statement with respect to the Warrant Shares is declared effective under the Securities Act and (iv) such date as Jefferies & Company, Inc., as the initial purchaser of the Units, in its sole discretion shall determine. "Trustee" means the trustee under the Indenture. "Unrestricted Global Warrant" means a Global Warrant that does not bear the Private Placement Legend. "Unrestricted Definitive Warrant" means one or more Definitive Warrants that do not bear and are not required to bear the Private Placement Legend. "U.S. Person" means a U.S. person as defined in Rule 902(k) under the Securities Act. "Warrant Paying Agent" means an office or agency where Warrants may be presented for surrender. The Company initially appoints the Warrant Agent to act as Warrant Paying Agent. -4- Section 2. Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent to act as agent for the Company in accordance with the instructions set forth hereinafter in this Agreement and the Warrant Agent hereby accepts such appointment. Section 3. Issuance of Warrants; Warrant Certificates. 3.1. Form and Dating. (a) General. The Warrants shall be substantially in the form of Exhibit A hereto (each a "Warrant Certificate"). The Warrants may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Warrant shall be dated the date of the countersignature. The terms and provisions contained in the Warrants shall constitute, and are hereby expressly made, a part of this Warrant Agreement. The Company and the Warrant Agent, by their execution and delivery of this Warrant Agreement, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Warrant conflicts with the express provisions of this Warrant Agreement, the provisions of this Warrant Agreement shall govern and be controlling. (b) Global Warrants. Warrants issued in global form shall be substantially in the form of Exhibit A attached hereto (including the Global Warrant Legend thereon and the "Schedule of Exchanges of Interests in the Global Warrant" attached thereto). Warrants issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without the Global Warrant Legend thereon and without the "Schedule of Exchanges of Interests in the Global Warrant" attached thereto). Each Global Warrant shall represent such of the outstanding Warrants as shall be specified therein and each shall provide that it shall represent the number of outstanding Warrants from time to time endorsed thereon and that the number of outstanding Warrants represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Warrant to reflect the amount of any increase or decrease in the number of outstanding Warrants represented thereby shall be made by the Warrant Agent in accordance with instructions given by the holder thereof as required by Section 3.5 hereof. (c) Euroclear and Clearstream Procedures Applicable. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Clearstream Banking" and "Customer Handbook" of Clearstream shall be applicable to transfers of beneficial interests in the Regulation S Global Warrant that are held by Participants through Euroclear or Clearstream. 3.2. Execution. An Officer shall sign the Warrants on behalf of the Company by manual or facsimile signature. -5- If the Officer whose signature is on a Warrant no longer holds that office at the time a Warrant is countersigned, the Warrant shall nevertheless be valid. A Warrant shall not be valid until countersigned by the manual signature of the Warrant Agent. The signature shall be conclusive evidence that the Warrant has been properly issued under this Warrant Agreement. The Warrant Agent shall, upon a written order of the Company signed by an Officer (a "Warrant Countersignature Order"), countersign Warrants for original issue up to the number stated in the preamble hereto. The Warrant Agent may appoint an agent acceptable to the Company to countersign Warrants. Such an agent may countersign Warrants whenever the Warrant Agent may do so. Each reference in this Warrant Agreement to a countersignature by the Warrant Agent includes a countersignature by such agent. Such an agent has the same rights as the Warrant Agent to deal with the Company or an Affiliate of the Company. 3.3. Warrant Registrar and Depositary. The Company shall maintain an office or agency where Warrants may be presented for registration of transfer or for exchange ("Warrant Registrar"). The Warrant Registrar shall keep a register of the Warrants and of their transfer and exchange. The Company may appoint one or more co-Warrant Registrars. The term "Warrant Registrar" includes any co-Warrant Registrar. The Company may change any Warrant Registrar without notice to any holder. The Company shall notify the Warrant Agent in writing of the name and address of any agent not a party to this Warrant Agreement. If the Company fails to appoint or maintain another entity as Warrant Registrar, the Warrant Agent shall act as such. The Company or any of its subsidiaries may act as Warrant Registrar. The Company initially appoints the Warrant Agent to act as the Warrant Registrar with respect to the Global Warrants. The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Warrants. 3.4. Holder Lists. The Warrant Agent 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 of Warrants. If the Warrant Agent is not the Warrant Registrar, the Company shall promptly furnish to the Warrant Agent at such times as the Warrant Agent may request in writing, a list in such form and as of such date as the Warrant Agent may reasonably require of the names and addresses of the holders as set forth in the Company's books and records. 3.5. Transfer and Exchange. (a) Transfer and Exchange of Global Warrants. A Global Warrant may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of -6- the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Warrants will be exchanged by the Company for Definitive Warrants if (i) the Company delivers to the Warrant Agent notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary or (ii) the Company in its sole discretion determines that the Global Warrants (in whole but not in part) should be exchanged for Definitive Warrants and delivers a written notice to such effect to the Warrant Agent. Upon the occurrence of either of the preceding events in (i) or (ii) above, Definitive Warrants shall be issued in such names as the Depositary shall instruct the Warrant Agent. Global Warrants also may be exchanged or replaced, in whole or in part, as provided in Sections 3.6 and 3.7 hereof. A Global Warrant may not be exchanged for another Warrant other than as provided in this Section 3.5(a), however, beneficial interests in a Global Warrant may be transferred and exchanged as provided in Section 3.5(b) or (c) hereof. (b) Transfer and Exchange of Beneficial Interests in the Global Warrants. The transfer and exchange of beneficial interests in the Global Warrants shall be effected through the Depositary, in accordance with the provisions of this Warrant Agreement and the Applicable Procedures. Beneficial interests in the Restricted Global Warrants shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Warrants also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable: (i) Transfer of Beneficial Interests in the Same Global Warrant. Beneficial interests in any Restricted Global Warrant may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Warrant in accordance with the transfer restrictions set forth in the Private Placement Legend. Beneficial interests in any Unrestricted Global Warrant may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Warrant. No written orders or instructions shall be required to be delivered to the Warrant Registrar to effect the transfers described in this Section 3.5(b)(i). (ii) All Other Transfers and Exchanges of Beneficial Interests in Global Warrants. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 3.5(b)(i) above, the transferor of such beneficial interest must deliver to the Warrant Registrar both (A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Warrant in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or both (B) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Warrant in an amount equal to the beneficial interest to be -7- transferred or exchanged and (2) instructions given by the Depositary to the Warrant Registrar containing information regarding the Person in whose name such Definitive Warrant shall be registered. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Warrants contained in this Agreement and the Warrants or otherwise applicable under the Securities Act, the Warrant Agent shall adjust the principal amount of the relevant Global Warrant(s) pursuant to Section 3.5(g) hereof. (iii) Transfer of Beneficial Interests to Another Restricted Global Warrant. A beneficial interest in any Restricted Global Warrant may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Warrant if the transfer complies with the requirements of Section 3.5(b)(ii) above and the Warrant Registrar receives the following: (A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Warrant, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; and (B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Global Warrant, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof, if (C) if the transferee will take delivery in the form of a beneficial interest in the IAI Global Warrant, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications and certificates and Opinion of Counsel required by item (3) thereof, if applicable. (iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Warrant for Beneficial Interests in the Unrestricted Global Warrant. A beneficial interest in any Restricted Global Warrant may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Warrant or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Warrant if the exchange or transfer complies with the requirements of Section 3.5(b)(ii) above and the Warrant Registrar receives the following: (A) if the holder of such beneficial interest in a Restricted Global Warrant proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Warrant, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or (B) if the holder of such beneficial interest in a Restricted Global Warrant proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Warrant, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; -8- and, in each such case set forth in this subparagraph (iv), if the Warrant Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Warrant Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to subparagraph (iv) above at a time when an Unrestricted Global Warrant has not yet been issued, the Company shall issue and, upon receipt of an Warrant Countersignature Order in accordance with Section 3.2 hereof, the Warrant Agent shall countersign one or more Unrestricted Global Warrants in the number equal to the number of beneficial interests transferred pursuant to subparagraph (iv) above. (c) Transfer and Exchange of Beneficial Interests for Definitive Warrants. (i) Beneficial Interests in Restricted Global Warrants to Restricted Definitive Warrants. If any holder of a beneficial interest in a Restricted Global Warrant proposes to exchange such beneficial interest for a Restricted Definitive Warrant or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Warrant, then, upon receipt by the Warrant Registrar of the following documentation: (A) if the holder of such beneficial interest in a Restricted Global Warrant proposes to exchange such beneficial interest for a Restricted Definitive Warrant, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; or -9- (F) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; the Warrant Agent shall cause, in accordance with the standing instructions and procedures existing between the Depositary and the Warrant Agent, the number of Warrants represented by the Global Warrant to be reduced by the number of Warrants to be represented by the Definitive Warrant pursuant to Section 3.5(g) hereof, and the Company shall execute and the Warrant Agent shall countersign and deliver to the Person designated in the instructions a Definitive Warrant in the appropriate amount. Any Definitive Warrant issued in exchange for a beneficial interest in a Restricted Global Warrant pursuant to this Section 3.5(c) shall be registered in such name or names as the holder of such beneficial interest shall instruct the Warrant Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Warrant Agent shall deliver such Definitive Warrants to the Persons in whose names such Warrants are so registered. Any Definitive Warrant issued in exchange for a beneficial interest in a Restricted Global Warrant pursuant to this Section 3.5(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. (ii) Beneficial Interests in Restricted Global Warrants to Unrestricted Definitive Warrants. A holder of a beneficial interest in a Restricted Global Warrant may exchange such beneficial interest for an Unrestricted Definitive Warrant or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Warrant only if the Warrant Registrar receives the following: (A) if the holder of such beneficial interest in a Restricted Global Warrant proposes to exchange such beneficial interest for an Unrestricted Definitive Warrant, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or (B) if the holder of such beneficial interest in a Restricted Global Warrant proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Warrant, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (ii), if the Warrant Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Warrant Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Beneficial Interests in Unrestricted Global Warrants to Unrestricted Definitive Warrants. If any holder of a beneficial interest in an Unrestricted Global Warrant proposes to exchange such beneficial interest for a Definitive Warrant or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Warrant, then, upon satisfaction of the conditions set forth in Section 3.5(b)(ii) hereof, the Warrant Agent shall cause the amount of the applicable Global Warrant to be -10- reduced accordingly pursuant to Section 3.5(g) hereof, and the Company shall execute and the Warrant Agent shall countersign and deliver to the Person designated in the instructions a Definitive Warrant in the appropriate principal amount. Any Definitive Warrant issued in exchange for a beneficial interest pursuant to this Section 3.5(c)(iii) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Warrant Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Warrant Agent shall deliver such Definitive Warrants to the Persons in whose names such Warrants are so registered. Any Definitive Warrant issued in exchange for a beneficial interest pursuant to this Section 3.5(c)(iii) shall not bear the Private Placement Legend. (d) Transfer and Exchange of Definitive Warrants for Beneficial Interests. (i) Restricted Definitive Warrants to Beneficial Interests in Restricted Global Warrants. If any holder of a Restricted Definitive Warrant proposes to exchange such Warrant for a beneficial interest in a Restricted Global Warrant or to transfer such Restricted Definitive Warrants to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Warrant, then, upon receipt by the Warrant Registrar of the following documentation: (A) if the holder of such Restricted Definitive Warrant proposes to exchange such Warrant for a beneficial interest in a Restricted Global Warrant, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof; (B) if such Restricted Definitive Warrant is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such Restricted Definitive Warrant is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such Restricted Definitive Warrant is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such Restricted Definitive Warrant is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; or -11- (F) if such Restricted Definitive Warrant is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; the Warrant Agent shall cancel the Restricted Definitive Warrant and increase or cause to be increased the amount of, in the case of clause (A) above, the appropriate Restricted Global Warrant, in the case of clause (B) above, the 144A Global Warrant, in the case of clause (C) above, the Regulation S Global Warrant, and in all other cases, the IAI Global Warrant. (ii) Restricted Definitive Warrants to Beneficial Interests in Unrestricted Global Warrants. A holder of a Restricted Definitive Warrant may exchange such Warrant for a beneficial interest in an Unrestricted Global Warrant or transfer such Restricted Definitive Warrant to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Warrant only if the Warrant Registrar receives the following: (A) if the holder of such Definitive Warrants proposes to exchange such Warrants for a beneficial interest in the Unrestricted Global Warrant, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or (B) if the holder of such Definitive Warrants proposes to transfer such Warrants to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Warrant, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (ii), if the Warrant Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Warrant Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the subparagraphs in this Section 3.5(d)(ii), the Warrant Agent shall cancel the Definitive Warrants and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Warrant. (iii) Unrestricted Definitive Warrants to Beneficial Interests in Unrestricted Global Warrants. A holder of an Unrestricted Definitive Warrant may exchange such Warrant for a beneficial interest in an Unrestricted Global Warrant or transfer such Definitive Warrants to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Warrant at any time. Upon receipt of a request for such an exchange or transfer, the Warrant Agent shall cancel the applicable Unrestricted Definitive Warrant and increase or cause to be increased the amount of one of the Unrestricted Global Warrants. -12- If any such exchange or transfer from a Definitive Warrant to a beneficial interest is effected pursuant to subparagraphs (ii)(B) or (iii) above at a time when an Unrestricted Global Warrant has not yet been issued, the Company shall issue and, upon receipt of an Warrant Countersignature Order in accordance with Section 3.2 hereof, the Warrant Agent shall countersign one or more Unrestricted Global Warrants in the number equal to the number of beneficial interests of Definitive Warrants so transferred. (e) Transfer and Exchange of Definitive Warrants for Definitive Warrants. Upon request by a holder of Definitive Warrants and such holder's compliance with the provisions of this Section 3.5(e), the Warrant Registrar shall register the transfer or exchange of Definitive Warrants. Prior to such registration of transfer or exchange, the requesting holder shall present or surrender to the Warrant Registrar the Definitive Warrants duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Warrant Registrar duly executed by such holder or by its attorney, duly authorized in writing. In addition, the requesting holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 3.5(e). (i) Restricted Definitive Warrants to Restricted Definitive Warrants. Any Restricted Definitive Warrant may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Warrant if the Warrant Registrar receives the following: (A) if the transfer will be made pursuant to Rule 144A, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; or (C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable. (ii) Restricted Definitive Warrants to Unrestricted Definitive Warrants. Any Restricted Definitive Warrant may be exchanged by the holder thereof for an Unrestricted Definitive Warrant or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Warrant if the Warrant Registrar receives the following: (A) if the holder of such Restricted Definitive Warrants proposes to exchange such Warrants for an Unrestricted Definitive Warrant, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or -13- (B) if the holder of such Restricted Definitive Warrants proposes to transfer such Warrants to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Warrant, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (ii), if the Warrant Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Warrant Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Unrestricted Definitive Warrants to Unrestricted Definitive Warrants. A holder of Unrestricted Definitive Warrants may transfer such Warrants to a Person who takes delivery thereof in the form of an Unrestricted Definitive Warrant. Upon receipt of a request to register such a transfer, the Warrant Registrar shall register the Unrestricted Definitive Warrants pursuant to the instructions from the holder thereof. (f) Legends. The following legends shall appear on the face of all Global Warrants and Definitive Warrants issued under this Warrant Agreement unless specifically stated otherwise in the applicable provisions of this Warrant Agreement. (i) Private Placement Legend. (A) Except as permitted by subparagraph (B) below, each Global Warrant and each Definitive Warrant (and all Warrants issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: "THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT (THE "WARRANT SHARES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS WARRANT, THE WARRANT SHARES NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS WARRANT, BY ITS ACCEPTANCE HEREOF, (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS A NON-U.S. PURCHASER AND IS ACQUIRING THIS WARRANT IN AN OFFSHORE TRANSACTION WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT, AND (2) AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH WARRANT, PRIOR TO THE DATE (THE -14- "RESALE RESTRICTION TERMINATION DATE") THAT IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY (AS HEREINAFTER DEFINED) OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS WARRANT (OR ANY PREDECESSOR OF SUCH WARRANT), ONLY (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THIS WARRANT IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PURCHASERS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS WARRANT FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE WARRANT AGENT'S, OR TRANSFER AGENT'S, AS APPLICABLE, RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS WARRANT IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE WARRANT AGENT OR THE TRANSFER AGENT. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. THE HOLDER OF THIS WARRANT AND THE WARRANT SHARES TO BE ISSUED UPON ITS EXERCISE, BY ITS ACCEPTANCE HEREOF, AGREES NOT TO ENGAGE IN ANY HEDGING TRANSACTION UNLESS IN COMPLIANCE WITH THE SECURITIES ACT. THE HOLDER OF THIS WARRANT AND THE WARRANT SHARES TO BE ISSUED UPON ITS EXERCISE, BY ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS WARRANT OR ANY INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THESE LEGENDS." (B) Notwithstanding the foregoing, any Global Warrant or Definitive Warrant issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii), -15- (e)(ii) or (e)(iii) to this Section 3.5 (and all Warrants issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (ii) Global Warrant Legend. Each Global Warrant shall bear a legend in substantially the following form: "THIS GLOBAL WARRANT IS HELD BY THE DEPOSITARY (AS DEFINED IN THE WARRANT AGREEMENT GOVERNING THIS WARRANT) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE WARRANT AGENT MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 3.5 OF THE WARRANT AGREEMENT, (II) THIS GLOBAL WARRANT MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 3.5(a) OF THE WARRANT AGREEMENT, (III) THIS GLOBAL WARRANT MAY BE DELIVERED TO THE WARRANT AGENT FOR CANCELLATION PURSUANT TO SECTION 3.8 OF THE WARRANT AGREEMENT AND (IV) THIS GLOBAL WARRANT MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY." (iii) Unit Legend. Each Warrant issued prior to the Separation Date shall bear a legend in substantially the following form: "THIS WARRANT WAS INITIALLY ISSUED AS PART OF AN ISSUANCE OF UNITS (THE "UNITS"), EACH OF WHICH CONSISTS OF $1,000 PRINCIPAL AMOUNT OF THE COMPANY'S 11-1/2% SENIOR SECURED NOTES DUE 2011 (THE "NOTES") AND ONE WARRANT TO PURCHASE 8.947 SHARES OF THE COMPANY'S COMMON STOCK (THE "WARRANT SHARES"). PRIOR TO THE EARLIEST TO OCCUR OF (I) 180 DAYS FOLLOWING THE CONSUMMATION OF THE OFFERING OF THE UNITS, (II) THE DATE ON WHICH A REGISTRATION STATEMENT FOR A REGISTERED EXCHANGE OFFER WITH RESPECT TO THE NOTES IS DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (III) THE DATE ON WHICH A SHELF REGISTRATION STATEMENT WITH RESPECT TO THE WARRANT SHARES IS DECLARED EFFECTIVE UNDER THE SECURITIES ACT AND (IV) SUCH DATE AS JEFFERIES & COMPANY, INC., AS THE INITIAL PURCHASER OF THE UNITS, IN ITS SOLE DISCRETION SHALL DETERMINE, THIS WARRANT MAY NOT BE TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED OR EXCHANGED ONLY AS, A UNIT (THE "SEPARATION DATE")." (iv) Regulation S Legend. Each Warrant that is a Registrable Security and issued pursuant to Regulation S shall bear the following legend on the face thereof: "THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT AND THE -16- WARRANT MAY NOT BE EXERCISED BY OR ON BEHALF OF ANY U.S. PERSON UNLESS REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. IN ORDER TO EXERCISE THIS WARRANT, THE HOLDER MUST FURNISH TO THE COMPANY AND THE WARRANT AGENT EITHER (A) A WRITTEN CERTIFICATION THAT IT IS NOT A U.S. PERSON AND THE WARRANT IS NOT BEING EXERCISED ON BEHALF OF A U.S. PERSON OR (B) A WRITTEN OPINION OF COUNSEL TO THE EFFECT THAT THE SECURITIES DELIVERED UPON EXERCISE OF THE WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OR THAT THE DELIVERY OF SUCH SECURITIES IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. TERMS IN THIS LEGEND HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT." (g) Cancellation and/or Adjustment of Global Warrants. At such time as all beneficial interests in a particular Global Warrant have been exercised or exchanged for Definitive Warrants or a particular Global Warrant has been exercised, redeemed, repurchased or canceled in whole and not in part, each such Global Warrant shall be returned to or retained and canceled by the Warrant Agent in accordance with Section 3.8 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Warrant is exercised or exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Warrant or for Definitive Warrants, the amount of Warrants represented by such Global Warrant shall be reduced accordingly and an endorsement shall be made on such Global Warrant by the Warrant Agent or by the Depositary at the direction of the Warrant Agent to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Warrant, such other Global Warrant shall be increased accordingly and an endorsement shall be made on such Global Warrant by the Warrant Agent or by the Depositary at the direction of the Warrant Agent to reflect such increase. (h) General Provisions Relating to Transfers and Exchanges. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Warrant Agent shall countersign Global Warrants and Definitive Warrants upon the Company's order or at the Warrant Registrar's request. (ii) No service charge shall be made to a holder of a beneficial interest in a Global Warrant or to a holder of a Definitive Warrant 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. (iii) All Global Warrants and Definitive Warrants issued upon any registration of transfer or exchange of Global Warrants or Definitive Warrants shall be the duly authorized, executed and issued warrants for Common Stock of the Company, not subject to any preemptive rights, and entitled to the same benefits under this Warrant Agreement, -17- as the Global Warrants or Definitive Warrants surrendered upon such registration of transfer or exchange. (iv) In connection with the due presentment for the registration of a transfer of any Warrant, the Warrant Agent and the Company may deem and treat the Person in whose name any Warrant is registered as the absolute owner of such Warrant for all purposes and neither the Warrant Agent nor the Company shall be affected by notice to the contrary. (v) The Warrant Agent shall countersign Global Warrants and Definitive Warrants in accordance with the provisions of Section 3.2 hereof. (i) Facsimile Submissions to Warrant Agent. All certifications, certificates and Opinions of Counsel required to be submitted to the Warrant Registrar pursuant to this Section 3.5 to effect a registration of transfer or exchange may be submitted by facsimile. Notwithstanding anything herein to the contrary, as to any certificates and/or certifications delivered to the Warrant Registrar pursuant to this Section 3.5, the Warrant Registrar's duties shall be limited to confirming that any such certifications and certificates delivered to it are in the form of Exhibits B and C attached hereto. The Warrant Registrar shall not be responsible for confirming the truth or accuracy of representations made in any such certifications or certificates. As to any Opinions of Counsel delivered pursuant to this Section 3.5, the Warrant Registrar may rely upon, and be fully protected in relying upon, such opinions. 3.6. Replacement Warrants. If any mutilated Warrant is surrendered to the Warrant Agent or the Company and the Warrant Agent receives evidence to its satisfaction of the destruction, loss or theft of any Warrant, the Company shall issue and the Warrant Agent, upon receipt of a Warrant Countersignature Order, shall countersign a replacement Warrant if the Warrant Agent's requirements are met. If required by the Warrant Agent or the Company, an indemnity bond must be supplied by the holder that is sufficient in the judgment of the Warrant Agent and the Company to protect the Company, the Warrant Agent and any agent for purposes of the countersignature from any loss that any of them may suffer if a Warrant is replaced. The Company may charge for its expenses in replacing a Warrant. Every replacement Warrant is an additional warrant of the Company and shall be entitled to all of the benefits of this Warrant Agreement equally and proportionately with all other Warrants duly issued hereunder. 3.7. Temporary Warrants. Until certificates representing Warrants are ready for delivery, the Company may prepare and issue and the Warrant Agent, upon receipt of a Warrant Countersignature Order, shall countersign temporary Warrants. Temporary Warrants shall be substantially in the form of certificated Warrants but may have variations that the Company considers appropriate for temporary Warrants and that shall be reasonably acceptable to the Warrant Agent. Without -18- unreasonable delay, the Company shall prepare and the Warrant Agent shall countersign definitive Warrants in exchange for temporary Warrants. Holders of temporary Warrants shall be entitled to all of the benefits of this Warrant Agreement. 3.8. Cancellation. Subject to Section 3.5(g) hereof, the Company at any time may deliver Warrants to the Warrant Agent for cancellation. The Warrant Registrar and Warrant Paying Agent shall forward to the Warrant Agent any Warrants surrendered to them for registration of transfer, exchange or exercise. The Warrant Agent and no one else shall cancel all Warrants surrendered for registration of transfer, exchange, exercise, replacement or cancellation and shall destroy canceled Warrants (subject to the record retention requirements of the Exchange Act). Certification of the destruction of all canceled Warrants shall be delivered to the Company. The Company may not issue new Warrants to replace Warrants that have been exercised or that have been delivered to the Warrant Agent for cancellation. Section 4. Separation of Warrants; Exercise of Warrants; Terms of Warrants. (a) The Notes and Warrants will not be separately transferable until the Separation Date. Subject to the terms of this Agreement, each Warrant holder shall have the right, which may be exercised during the period commencing at the opening of business on the Separation Date and until 5:00 p.m., New York City time on June 15, 2011 (the "Exercise Period"), to receive from the Company the number of fully paid and nonassessable Warrant Shares which the holder may at the time be entitled to receive on exercise of such Warrants and payment of the aggregate Exercise Price for all Warrant Shares being purchased (i) in cash, by wire transfer or by certified or official bank check payable to the order of the Company, (ii) by tendering Notes having a principal amount at the time of tender equal to the aggregate Exercise Price for all Warrant Shares being purchased, (iii) by tendering Warrants as set forth below or (iv) any combination of cash, Notes or Warrants. Each holder may elect, upon exercise of its Warrants during the Exercise Period, to receive Warrant Shares on a net basis, such that, without the exchange of any funds, the holder will receive such number of Warrant Shares as shall equal the product of (A) the number of Warrant Shares for which such Warrant is exercisable as of the date of exercise (if the Exercise Price were being paid in cash) and (B) the Cashless Exercise Ratio. The "Cashless Exercise Ratio" shall equal a fraction the numerator of which is the Market Value (as defined below) per share of Common Stock on the date of exercise minus the Exercise Price per share as of the date of exercise and the denominator of which is the Market Value per share on the date of exercise. Each Warrant not exercised prior to 5:00 p.m., New York City time, on June 15, 2011 (the "Expiration Date") shall become void and all rights thereunder and all rights in respect thereof under this Agreement shall cease as of such time. The Warrant Agent shall have no obligation to calculate the Cashless Exercise Ratio. The "Market Value" per share of Common Stock as of any date shall equal (i) if Common Stock is primarily traded on a securities exchange, the last sale price of such Common Stock on such securities exchange on the trading day immediately prior to the date of determination, or if no sale occurred on such day, the mean between the closing "bid" and -19- "asked" prices on such day, (ii) if the principal market for Common Stock is in the over-the-counter market, the closing sale price of such Common Stock on the trading day immediately prior to the date of the determination, as published by the National Association of Securities Dealers Automated Quotation System or similar organization, or if such price is not so published on such day, the mean between the closing "bid" and "asked" prices, if available, on such day, which prices may be obtained from any reputable pricing service, broker or dealer reasonably satisfactory to the Company, and (iii) if neither clause (i) nor clause (ii) is applicable, the fair market value on the date of determination of Common Stock as determined in good faith by the Board of Directors of the Company. (b) In order to exercise all or any of the Warrants represented by a Warrant Certificate, (i) in the case of a Definitive Warrant, the holder thereof must surrender upon exercise the Warrant Certificate to the Company at the corporate trust office of the Warrant Agent set forth in Section 15 hereof, (ii) in the case of a book-entry interest in a Global Warrant, the exercising Participant whose name appears on a securities position listing of the Depositary as the holder of such book-entry interest must comply with the Depositary's procedures relating to the exercise of such book-entry interest in such Global Warrant and (iii) in the case of interests in both Global Warrants and Definitive Warrants, the holder thereof or the Participant, as applicable, shall deliver to the Company at the corporate trust office of the Warrant Agent the form of election to purchase on the reverse thereof duly completed and signed, which signature shall be medallion guaranteed by an institution which is a member of a Securities Transfer Association recognized signature guarantee program, and upon payment to the Warrant Agent for the account of the Company of the Exercise Price, for the number of Warrant Shares in respect of which such Warrants are then exercised. Payment of the aggregate Exercise Price shall be made in accordance with Section 4(a) hereof. (c) Subject to the provisions of Section 5 hereof, upon compliance with clause (b) above, the Company shall deliver or cause to be delivered with all reasonable dispatch, to or to the written order of the holder and in such name or names as the holder may designate, a certificate or certificates for the number of whole Warrant Shares issuable upon the exercise of such Warrants or other securities or property to which such holder is entitled hereunder, together with cash as provided in Section 9 hereof; provided that if any consolidation, merger or lease or sale of assets is proposed to be effected by the Company or its subsidiaries as described in Section 8(k) hereof, or a tender offer or an exchange offer for shares of Common Stock shall be made, upon such surrender of Warrants and payment of the aggregate Exercise Price in accordance with Section 4(b) above, the Company shall, as soon as possible, but in any event not later than two business days thereafter, deliver or cause to be delivered the full number of Warrant Shares issuable upon the exercise of such Warrants in the manner described in this sentence or other securities or property to which such holder is entitled hereunder, together with cash as provided in Section 9 hereof. All certificates in this Section 4(c) shall be deemed to have been issued and any Person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares as of the date of the surrender of such Warrants and payment of the aggregate Exercise Price. (d) The Warrants shall be exercisable, at the election of the holders thereof, either in full or from time to time in part. If less than all the Warrants represented by a Warrant -20- Certificate are exercised, such Warrant Certificate shall be surrendered and a new Warrant Certificate of the same tenor and for the number of Warrants which were not exercised shall be executed by the Company and delivered to the Warrant Agent and the Warrant Agent shall countersign the new Warrant Certificate, registered in such name or names as may be directed in writing by the holder, and shall deliver or cause to be delivered the new Warrant Certificate to the Person or Persons entitled to receive the same. (e) All Warrant Certificates surrendered upon exercise of Warrants shall be cancelled by the Warrant Agent. Such cancelled Warrant Certificates shall then be disposed of by the Warrant Agent in a manner satisfactory to the Company. The Warrant Agent shall report promptly to the Company with respect to Warrants exercised and concurrently pay to the Company all monies received by the Warrant Agent for the purchase of the Warrant Shares through the exercise of such Warrants. (f) The Warrant Agent shall keep copies of this Agreement and any notices given or received hereunder available for inspection by the holders during normal business hours at its office. The Company shall supply the Warrant Agent from time to time with such numbers of copies of this Agreement as the Warrant Agent may request. Section 5. Payment of Taxes. The Company shall pay all documentary stamp taxes attributable to the initial issuance of Warrant Shares upon the exercise of Warrants; provided that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issue of any Warrant Certificates or any certificates for Warrant Shares in a name other than that of the registered holder of a Warrant Certificate surrendered upon the exercise of a Warrant, and the Company shall not be required to issue or deliver such Warrant Certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. Section 6. Reservation of Warrant Shares; Registration of Warrant Shares. (a) The Company shall at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock and/or the authorized and issued Common Stock held in its treasury, for the purpose of enabling it to satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the maximum number of shares of Common Stock which may then be deliverable upon the exercise of all outstanding Warrants. (b) The Company or, if appointed, the transfer agent for the Common Stock (the "Transfer Agent") and every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of any of the rights of purchase aforesaid will be irrevocably authorized and directed at all times to reserve such number of authorized shares as shall be required for such purpose. The Company shall keep a copy of this Agreement on file with the Transfer Agent and with every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of the rights of purchase represented by the Warrants. The Warrant Agent is hereby irrevocably authorized to requisition from time to time from such Transfer Agent the stock certificates required to honor outstanding Warrants upon exercise -21- thereof in accordance with the terms of this Agreement. The Company shall supply such Transfer Agent with duly executed certificates for such purposes and shall provide or otherwise make available any cash which may be payable as provided in Section 9 hereof. The Company shall furnish such Transfer Agent a copy of all notices of adjustments, and certificates related thereto, transmitted to each holder pursuant to Section 10 hereof. (c) Before or concurrently with taking any action which would cause an adjustment pursuant to Section 8 hereof to reduce the Exercise Price below the then par value (if any) of the Warrant Shares, the Company shall take any corporate action which may, in the opinion of its counsel (which may be counsel employed by the Company), be necessary in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares at the Exercise Price as so adjusted. (d) The Company covenants that all Warrant Shares which may be issued upon exercise of Warrants shall, upon issue, be fully paid, nonassessable, free of preemptive rights and free from all taxes, liens, charges and security interests with respect to the issuance thereof. Section 7. Obtaining Stock Exchange Listings. The Company shall from time to time take all action which may be necessary so that the Warrant Shares, immediately upon their issuance upon the exercise of Warrants, will be listed on a principal securities exchange, automated quotation system or other market within the United States of America, if any, on which other shares of Common Stock are then listed, if any. Section 8. Adjustment of Exercise Price and Number of Warrant Shares Issuable. The Exercise Price and the number of Warrant Shares issuable upon the exercise of each Warrant shall be subject to adjustment from time to time upon the occurrence of the events enumerated in this Section 8. Notwithstanding anything to the contrary in this Agreement, in no event shall the Exercise Price be less than the lower of the par value of the Common Stock or $0.01 per share of Common Stock. For purposes of this Section 8, "Common Stock" means shares now or hereafter authorized of any class of common shares of the Company however designated, that has the right (subject to any prior rights of any class or series of preferred stock) to participate in any distribution of the assets or earnings of the Company without limit as to per share amount. In addition to the adjustments required under this Section 8, the Company may, at any time reduce the Exercise Price to any amount greater than or equal to $0.01 per share for any period of time (but not less than 20 Business Days) deemed appropriate by the Board of Directors of the Company. (a) Adjustment for Change in Capital Stock. If the Company (i) pays a dividend or makes a distribution on its Common Stock payable in shares of its Common Stock, (ii) subdivides its outstanding shares of Common Stock into a greater number of shares, (iii) combines its outstanding shares of Common Stock into a smaller number of shares, (iv) makes a distribution on its Common Stock in shares of its capital stock other than Common Stock or (v) issues by reclassification of its Common Stock any shares of its capital stock, then the Exercise -22- Price in effect immediately prior to such action shall, subject to the second sentence of the first paragraph of this Section 8, be proportionately adjusted so that the holder of any Warrant exercised after such action may receive the aggregate number and kind of shares of capital stock of the Company which such holder would have owned immediately following such action assuming the exercise of such Warrant immediately prior to such action. The adjustment shall become effective immediately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a subdivision, combination or reclassification. If, after an adjustment pursuant to clause (v) above, a holder of a Warrant upon exercise of it may receive shares of two or more classes of capital stock of the Company, the Company shall determine, in good faith, the allocation of the adjusted Exercise Price between the classes of capital stock. After such allocation, the exercise privilege and the Exercise Price of each class of capital stock shall after such action be subject to adjustment on terms comparable to those applicable to Common Stock in this Section 8. Such adjustment shall be made successively whenever any event listed above shall occur. (b) Adjustment for Rights Issue. If the Company distributes any rights, options or warrants to all holders of its Common Stock entitling them for a period expiring within 45 days after the record date set forth below to subscribe for shares of Common Stock or securities convertible into, or exchangeable or exercisable for, shares of Common Stock, in either case, at a price per share less than the Fair Market Value (as defined in subsection (g) of this Section 8) per share on that record date, the Exercise Price shall be adjusted in accordance with the formula: O + N x P ----- E' = E x M ------------------------ O + N where: E' = the adjusted Exercise Price. E = the current Exercise Price. O = the number of shares of Common Stock outstanding on the record date. N = the number of additional shares of Common Stock issued pursuant to such rights, options or warrants. P = the price per share of the additional shares. M = the Fair Market Value per share of Common Stock on the record date. The adjustment shall be made successively whenever any such rights, options or warrants are issued and shall become effective immediately after the record date for the determination of stockholders entitled to receive the rights, options or warrants. If at the end of the period during which such rights, options or warrants are exercisable, not all rights, options or warrants shall -23- have been exercised, the Exercise Price shall be immediately readjusted to what it would have been if "N" in the above formula had been the number of shares actually issued. (c) Adjustment for Other Distributions. If the Company distributes to all holders of its Common Stock any of its assets (including cash), debt securities, preferred stock or any rights or warrants to purchase assets (including cash), debt securities, preferred stock or other securities of the Company, the Exercise Price shall be adjusted in accordance with the formula: E' = E x M - F ------------- M where: E' = the adjusted Exercise Price. E = the current Exercise Price. M = the Fair Market Value per share of Common Stock on the record date mentioned below. F = the fair market value on the record date of the debt securities, preferred stock, assets, securities, rights or warrants to be distributed in respect of one share of Common Stock as determined in good faith by the Board of Directors of the Company. The adjustment shall be made successively whenever any such distribution is made and shall become effective immediately after the record date for the determination of stockholders entitled to receive the distribution. This Section 8(c) shall not apply to cash dividends or other cash distributions paid out of consolidated current or retained earnings as shown on the books of the Company prepared in accordance with generally accepted accounting principles. In addition, this Section 8(c) shall not apply to rights, options or warrants referred to in Section 8(b) hereof. (d) Adjustment for Common Stock Issue. (i) If the Company issues shares of Common Stock for a consideration per share less than the Fair Market Value per share on the date the Company fixes the offering price of such additional shares, the Exercise Price shall be adjusted in accordance with the formula: E' = E x O + P/M ------------ A where: E' = the adjusted Exercise Price. E = the then current Exercise Price. -24- O = the number of shares outstanding immediately prior to the issuance of such additional shares. P = the aggregate consideration received for the issuance of such additional shares. M = the Fair Market Value per share on the date of issuance of such additional shares. A = the number of shares outstanding immediately after the issuance of such additional shares. The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance. (ii) This Section 8(d) shall not apply to: (1) any of the transactions described in subsections (a), (b) and (c) of this Section 8, (2) the exercise of Warrants, (3) the conversion, exchange or exercise of other securities convertible into or exchangeable or exercisable for Common Stock the issuance of which convertible securities requires an adjustment to be made under Section 8(e), (4) the issuance of Common Stock (and options exercisable therefore) to employees, officers or directors of the Company or its subsidiaries under bona fide employee benefit plans adopted by the Board of Directors and approved by the holders of Common Stock when required by law, if such Common Stock would otherwise be covered by this Section 8(d) (but only to the extent that the aggregate number of shares excluded hereby and issued after the date of this Warrant Agreement shall not exceed 25% of the Common Stock outstanding at the time of the adoption of the most recent of such plans, exclusive of anti-dilution adjustments thereunder), (5) the issuance of Common Stock to shareholders or equity holders of any Person which merges into the Company, or with a subsidiary of the Company, in proportion to their stock or equity holdings of such Person immediately prior to such merger, upon such merger, provided that if such Person is an Affiliate of the Company, the Board of Directors, including a majority of the independent directors, shall have determined that the consideration received in such merger is fair to the Company from a financial point of view; provided further that if the Board of Directors shall not consist of at least one independent director who was not appointed, nominated or designated to the Board of Directors through any right of appointment, nomination or designation by an Affiliate of the Company, the Company shall have obtained a fairness opinion from a nationally recognized investment banking, appraisal or valuation firm which is not an Affiliate of the Company to the effect that the consideration received in such merger is fair to the Company from a financial point of view, -25- (6) the issuance of securities upon the conversion, exchange or exercise of other securities, warrants, options or similar rights if the conversion, exchange or exercise price is not less than the Fair Market Value per share of Common Stock at the time the security, warrant, option or right so converted, exchanged or exercised was issued or granted, or (7) the issuance of shares of Common Stock pursuant to rights, options or warrants which were originally issued in a Non-Affiliate Sale (as defined below) together with one or more other securities as part of a unit at a price per unit. (e) Adjustment for Convertible Securities Issue. If the Company issues any securities convertible into or exchangeable or exercisable for Common Stock (other than securities issued in transactions described in subsections (a), (b) and (c) of this Section 8 or excluded from the application of Section 8(d) pursuant to clause (ii) of Section 8(d)) for a consideration per share of Common Stock initially deliverable upon conversion, exchange or exercise of such securities less than the Fair Market Value per share on the date of issuance of such securities, the Exercise Price shall be adjusted in accordance with the formula: E' = E x O + P/M --------- O + D where: E' = the adjusted Exercise Price. E = the then current Exercise Price. O = the number of shares outstanding immediately prior to the issuance of such securities. P = the aggregate consideration received for the issuance of such securities. M = the Fair Market Value per share on the date of issuance of such securities. D = the maximum number of shares deliverable upon conversion or in exchange for such securities at the initial conversion, exchange or exercise rate. The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance. If all of the Common Stock deliverable upon conversion, exchange or exercise of such securities have not been issued when such securities are no longer outstanding, then the Exercise Price shall promptly be readjusted to the Exercise Price which would then be in effect had the adjustment upon the issuance of such securities been made on the basis of the actual number of shares of Common Stock issued upon conversion, exchange or exercise of such securities. This subsection (e) shall not apply to warrants or other convertible securities issued to shareholders or equity holders of any Person which merges into the Company, or with a -26- subsidiary of the Company, in proportion to their stock or equity holdings of such person immediately prior to such merger, upon such merger, provided that if such Person is an Affiliate of the Company, the Board of Directors, including a majority of the independent directors, shall have determined that the consideration received in such merger is fair to the Company from a financial point of view; provided further that if the Board of Directors shall not consist of at least one independent director who was not appointed, nominated or designated to the Board of Directors through any right of appointment, nomination or designation by an Affiliate of the Company, the Company shall have obtained a fairness opinion from a nationally recognized investment banking, appraisal or valuation firm which is not an Affiliate of the Company to the effect that the consideration received in such merger is fair to the Company from a financial point of view. (f) Consideration Received. For purposes of any computation respecting consideration received pursuant to subsections (d) and (e) of this Section 8, the following shall apply: (1) in the case of the issuance of shares of Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any commissions, discounts or other expenses incurred by the Company for any underwriting of the issue or otherwise in connection therewith; (2) in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined in good faith by the Board of Directors (irrespective of the accounting treatment thereof), whose determination shall be conclusive and non-appealable, and described in a Board resolution which shall be filed with the Warrant Agent; (3) in the case of the issuance of securities convertible into or exchangeable or exercisable for shares, the aggregate consideration received therefor shall be deemed to be the consideration received by the Company for the issuance of such securities plus the additional minimum consideration, if any, to be received by the Company upon the conversion, exchange or exercise thereof (the consideration in each case to be determined in the same manner as provided in clauses (1) and (2) of this subsection (f)); and (4) in the case of the issuance of shares of Common Stock pursuant to rights, options or warrants which rights, options or warrants were originally issued together with one or more other securities as part of a unit at a price per unit, the consideration shall be deemed to be the fair value of such rights, options or warrants at the time of issuance thereof as determined in good faith by the Board of Directors whose determination shall be conclusive and non-appealable and described in a Board resolution which shall be filed with the Warrant Agent plus the additional consideration, if any, to be received by the Company upon the exercise, conversion or exchange thereof (as determined in the same manner as provided in clauses (1) and (2) of this subsection (f)). (g) Fair Market Value. For purposes of Sections 8 (b), (c), (d) and (e) hereof, the "Fair Market Value" per share of Common Stock at any date of determination shall be (1) in -27- connection with a sale by the Company to a party that is not an Affiliate of the Company in an arm's-length transaction (a "Non-Affiliate Sale"), the price per security at which such security is sold and (2) in connection with any sale by the Company to an Affiliate of the Company, (A) the last price per security at which such security was sold in a Non-Affiliate Sale within the three-month period preceding such date of determination and (B), if clause (A) is not applicable, the fair market value of such security determined in good faith by (i) a majority of the Board of Directors of the Company, including a majority of the Disinterested Directors, and approved in a Board resolution delivered to the Warrant Agent or (ii) a nationally recognized investment banking, appraisal or valuation firm, which is not an Affiliate of the Company, in each case, taking into account, among all other factors deemed relevant by the Board of Directors or such investment banking, appraisal or valuation firm, the trading price and volume of such security on any national securities exchange or automated quotation system on which such security is traded. For purposes of this Section 8(g), "Disinterested Director" means, in connection with any issuance of securities that gives rise to a determination of the Fair Market Value thereof, each member of the Board of Directors who is not an officer, employee, director or other Affiliate of the party to whom the Company is proposing to issue the securities giving rise to such determination. For purposes of this Section 8(g), "Affiliate" of any specified Person means (A) any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person and (B) any director or officer of such specified Person. For purposes of this definition "Control" (including, with correlative meanings, the terms "Controlling," "Controlled By" and "Under Common Control With") as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise. (h) When De Minimis Adjustment May Be Deferred. No adjustment in the Exercise Price need be made unless the adjustment would require an increase or decrease of at least 1% in the Exercise Price. Any adjustments that are not made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 8 shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be, it being understood that no such rounding shall be made under Section 8(p). (i) When No Adjustment Required. With respect to Warrants of any holder, no adjustment need be made for a transaction referred to Section 8(a), (b), (c), (d), (e) or (f) hereof, if such holder is to participate (without being required to exercise its Warrants) in the transaction on a basis and with notice that the Board of Directors determines to be fair and appropriate in light of the basis and notice on which holders of Common Stock participate in the transaction. No adjustment need be made for (i) rights to purchase Common Stock pursuant to a Company plan for reinvestment of dividends or interest or (ii) a change in the par value or no par value of the Common Stock. To the extent the Warrants become convertible into cash, no adjustment need be made thereafter as to the cash. Interest will not accrue on the cash. (j) Notice of Adjustment. Whenever the Exercise Price is adjusted, the Company shall provide the notices required by Section 10 hereof. -28- (k) Reorganization of Company. Immediately after the date hereof, if the Company consolidates or merges with or into, or transfers or leases all or substantially all its assets to, any Person, upon consummation of such transaction the Warrants shall automatically become exercisable for the kind and amount of securities, cash or other assets which the holder of a Warrant would have owned immediately after the consolidation, merger, transfer or lease if the holder had exercised the Warrant immediately before the consummation of the transaction. Concurrently with the consummation of such transaction, the corporation formed by or surviving any such consolidation or merger if other than the Company, or the Person to which such sale or conveyance shall have been made, shall enter into (i) a supplemental Warrant Agreement so providing and further providing for adjustments which shall be as nearly equivalent as may be practical to the adjustments provided for in this Section 8(k) and (ii) a supplement to the Equity Registration Rights Agreement providing for the assumption of the Company's obligations thereunder. The successor Company shall mail to Warrant holders a notice describing the supplemental Warrant Agreement and Equity Registration Rights Agreement. If the issuer of securities deliverable upon exercise of Warrants under the supplemental Warrant Agreement is an Affiliate of the formed, surviving, transferee or lessee corporation, such issuer shall join in the supplemental Warrant Agreement and Equity Registration Rights Agreement. If this Section 8(k) shall be applicable, Sections 8(a), (b), (c), (d), (e) and (f) hereof shall not be applicable. (l) Company Determination Final. Any determination that the Company or the Board of Directors must make pursuant to Section 8(a), (c), (d), (e), (f), (g), (h) or (i) hereof is conclusive and non-appealable. (m) Warrant Agent's Disclaimer. The Warrant Agent shall have no duty to determine when an adjustment under this Section 8 should be made, how it should be made or what it should be. The Warrant Agent shall have no duty to determine whether a supplemental Warrant Agreement under Section 8(k) need be entered into or whether any provisions of a supplemental Warrant Agreement under Section 8(k) hereof are correct. The Warrant Agent makes no representation as to the validity or value of any securities or assets issued upon exercise of Warrants. The Warrant Agent shall not be responsible for the Company's failure to comply with this Section 8. (n) When Issuance or Payment May Be Deferred. In any case in which this Section 8 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event (i) issuing to the holder of any Warrant exercised after such record date the Warrant Shares and other capital stock of the Company, if any, issuable upon such exercise over and above the Warrant Shares and other capital stock of the Company, if any, issuable upon such exercise on the basis of the Exercise Price and (ii) paying to such holder any amount in cash in lieu of a fractional share pursuant to Section 10 hereof; provided that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional Warrant Shares, other capital stock and cash upon the occurrence of the event requiring such adjustment. (o) Adjustment in Number of Shares. Upon each adjustment of the Exercise Price pursuant to this Section 8, each Warrant outstanding prior to the making of the adjustment in the Exercise Price shall thereafter evidence the right to receive upon payment of the adjusted -29- Exercise Price that number of shares of Common Stock (calculated to the nearest hundredth) obtained from the following formula: N' = N x E --- E' where: N' = the adjusted number of Warrant Shares issuable upon exercise of a Warrant by payment of the adjusted Exercise Price. N = the number or Warrant Shares previously issuable upon exercise of a Warrant by payment of the Exercise Price prior to adjustment. E' = the adjusted Exercise Price. E = the Exercise Price prior to adjustment. (p) Form of Warrants. Irrespective of any adjustments in the Exercise Price or the number or kind of shares purchasable upon the exercise of the Warrants, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the Warrants initially issuable pursuant to this Agreement. Section 9. Fractional Interests. The Company shall not be required to issue fractional Warrant Shares on the exercise of Warrants. If more than one Warrant shall be presented for exercise in full at the same time by the same holder, the number of full Warrant Shares which shall be issuable upon the exercise thereof shall be computed on the basis of the aggregate number of Warrant Shares purchasable on exercise of the Warrants so presented. If any fraction of a Warrant Share would, except for the provisions of this Section 9, be issuable on the exercise of any Warrants (or specified portion thereof), the Company shall pay an amount in cash equal to the Fair Market Value per Warrant Share, as determined on the day immediately preceding the date the Warrant is presented for exercise, multiplied by such fraction, computed to the nearest whole U.S. cent. Section 10. Notices to Warrant Holders. (a) Upon any adjustment of the Exercise Price pursuant to Section 8 hereof, the Company shall promptly thereafter (i) cause to be filed with the Warrant Agent a certificate of a firm of independent public accountants of recognized standing selected by the Board of Directors of the Company (who may be the regular auditors of the Company) setting forth the Exercise Price after such adjustment and setting forth in reasonable detail the method of calculation and the facts upon which such calculations are based and setting forth the number of Warrant Shares (or portion thereof) issuable after such adjustment in the Exercise Price, upon exercise of a Warrant and payment of the adjusted Exercise Price, which certificate shall be conclusive evidence of the correctness of the matters set forth therein, and (ii) cause to be given to each of the registered holders of Warrants at the address appearing on the Warrant register for each such registered holder written notice of such adjustments by first-class mail, postage prepaid. Where -30- appropriate, such notice may be given in advance and included as a part of the notice required to be mailed under the other provisions of this Section 10. (b) In the event: (i) that the Company shall authorize the issuance to all holders of shares of Common Stock of rights, options or warrants to subscribe for or purchase shares of Common Stock or of any other subscription rights or warrants; (ii) that the Company shall authorize the distribution to all holders of shares of Common Stock of evidences of its indebtedness or assets (other than dividends or cash distributions paid out of consolidated current or retained earnings as shown on the books of the Company prepared in accordance with generally accepted accounting principles or dividends payable in shares of Common Stock or distributions); (iii) of any consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company is required, or of the conveyance or transfer of the properties and assets of the Company substantially as an entirety, or of any reclassification or change of Common Stock issuable upon exercise of the Warrants (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or a tender offer or exchange offer by the Company for shares of Common Stock; (iv) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; or (v) that the Company proposes to take any action (other than actions of the character described in Section 8(a) hereof) which would require an adjustment of the Exercise Price pursuant to Section 8 hereof; then the Company shall cause to be filed with the Warrant Agent and shall cause to be given to each registered holder of Warrants at his address appearing on the Warrant register, at least 10 days prior to the applicable record date hereinafter specified, or promptly in the case of events for which there is no record date, by first-class mail, postage prepaid, a written notice stating (x) the date as of which the holders of record of shares of Common Stock to be entitled to receive any such rights, options, warrants or distribution are to be determined, (y) the initial expiration date set forth in any tender offer or exchange offer for shares of Common Stock, or (z) the date on which any such consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up is expected to become effective or consummated, and the date as of which it is expected that holders of record of shares of Common Stock shall be entitled to exchange such shares for securities or other property, if any, deliverable upon such reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up. The failure to give the notice required by this Section 10 or any defect therein shall not affect the legality or validity of any distribution, right, option, warrant, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up, or the vote upon any action. -31- (c) Nothing contained in this Agreement or in any of the Warrant Certificates shall be construed as conferring upon the holders of Warrants the right to vote or to consent or to receive notice as stockholders in respect of the meetings of stockholders or the election of directors of the Company or any other matter, or any rights whatsoever as stockholders of the Company. Section 11. Merger, Consolidation or Change of Name of Warrant Agent. (a) Any corporation into which the Warrant Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Warrant Agent shall be a party, or any corporation succeeding to the business of the Warrant Agent, shall be the successor to the Warrant Agent hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor warrant agent under the provisions of Section 13 hereof. In case at the time such successor to the Warrant Agent shall succeed to the agency created by this Agreement, and in case at that time any of the Warrant Certificates shall have been countersigned but not delivered, any such successor to the Warrant Agent may adopt the countersignature of the original Warrant Agent; and in case at that time any of the Warrant Certificates shall not have been countersigned, any successor to the Warrant Agent may countersign such Warrant Certificates either in the name of the predecessor Warrant Agent or in the name of the successor to the Warrant Agent; and in all such cases such Warrant Certificates shall have the full force and effect provided in the Warrant Certificates and in this Agreement. (b) In case at any time the name of the Warrant Agent shall be changed and at such time any of the Warrant Certificates shall have been countersigned but not delivered, the Warrant Agent whose name has been changed may adopt the countersignature under its prior name, and in case at that time any of the Warrant Certificates shall not have been countersigned, the Warrant Agent may countersign such Warrant Certificates either in its prior name or in its changed name, and in all such cases such Warrant Certificates shall have the full force and effect provided in the Warrant Certificates and in this Agreement. Section 12. Warrant Agent. The Warrant Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Warrants, by their acceptance thereof, shall be bound: (a) The statements contained herein and in the Warrant Certificates shall be taken as statements of the Company and the Warrant Agent assumes no responsibility for the correctness of any of the same except such as describe the Warrant Agent or action taken or to be taken by it. The Warrant Agent assumes no responsibility with respect to the distribution of the Warrant Certificates except as herein otherwise provided. (b) The Warrant Agent shall not be responsible for any failure of the Company to comply with any of the covenants contained in this Agreement or in the Warrant Certificates to be complied with by the Company. -32- (c) The Warrant Agent may consult at any time with counsel satisfactory to it (who may be counsel for the Company) and the Warrant Agent shall incur no liability or responsibility to the Company or to any holder of any Warrant Certificate in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the opinion or the advice of such counsel. (d) The Warrant Agent shall incur no liability or responsibility to the Company or to any holder of any Warrant Certificate for any action taken in reliance on any Warrant Certificate, certificate of shares, notice, resolution, waiver, consent, order, certificate, or other paper, document or instrument believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. (e) The Company agrees to pay to the Warrant Agent reasonable compensation for all services rendered by the Warrant Agent in the execution of this Agreement, to reimburse the Warrant Agent for all expenses, taxes and governmental charges and other charges of any kind and nature incurred by the Warrant Agent in the execution of this Agreement. The Company shall indemnify the Warrant Agent against any and all losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Warrant Agreement, including the costs and expenses of enforcing this Agreement against the Company and defending itself 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 powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its gross negligence, bad faith or breach of this Agreement. The Warrant Agent shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Warrant Agent to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Warrant Agent shall cooperate in the defense. The Warrant Agent 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, conditioned or delayed. (f) The Warrant Agent shall be under no obligation to institute any action, suit or legal proceeding or to take any other action likely to involve expense unless the Company or one or more registered holders of Warrants shall furnish the Warrant Agent with reasonable security and indemnity for any costs and expenses which may be incurred, but this provision shall not affect the power of the Warrant Agent to take such action as it may consider proper, whether with or without any such security or indemnity. All rights of action under this Agreement or under any of the Warrants may be enforced by the Warrant Agent without the possession of any of the Warrant Certificates or the production thereof at any trial or other proceeding relative thereto, and any such action, suit or proceeding instituted by the Warrant Agent shall be brought in its name as Warrant Agent and any recovery of judgment shall be for the ratable benefit of the registered holders of the Warrants, as their respective rights or interests may appear. (g) The Warrant Agent, and any stockholder, director, officer or employee of it, may buy, sell or deal in any of the Warrants or other securities of the Company or -33- become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity. (h) The Warrant Agent shall act hereunder solely as agent for the Company, and its duties shall be determined solely by the provisions hereof. The Warrant Agent shall not be liable for anything which it may do or refrain from doing in connection with this Agreement except for its own gross negligence, bad faith or breach of this Agreement. (i) The Warrant Agent shall not at any time be under any duty or responsibility to any holder of any Warrant Certificate to make or cause to be made any adjustment of the Exercise Price or number of the Warrant Shares or other securities or property deliverable as provided in this Agreement, or to determine whether any facts exist which may require any of such adjustments, or with respect to the nature or extent of any such adjustments, when made, or with respect to the method employed in making the same. The Warrant Agent shall not be accountable with respect to the validity or value or the kind or amount of any Warrant Shares or of any securities or property which may at any time be issued or delivered upon the exercise of any Warrant or with respect to whether any such Warrant Shares or other securities will when issued be validly issued and fully paid and nonassessable, and makes no representation with respect thereto. (j) The Warrant Agent shall not be required to risk or expend its own funds on the performance of it obligations and duties hereunder. (k) The obligations of the Company under this Section 12 shall survive the exercise and the expiration of the Warrant Certificates and the resignation and removal of the Warrant Agent. (l) The Warrant Agent shall not be under any liability for interest on, and shall not be required to invest, any monies at any time received by it pursuant to any of the provisions of this Agreement or of the Warrant Certificates. (m) Any corporation or bank into which the Warrant Agent hereunder may be merged or converted, or any corporation or bank with which the Warrant Agent may be consolidated, or any corporation or bank resulting from any merger, conversion or consolidation to which the Warrant Agent shall be a party, or any corporation or bank to which the Warrant Agent shall sell or otherwise transfer all or substantially all of its corporate trust business, shall be the successor to the Warrant Agent under this Agreement (provided that such corporation or bank shall be qualified as aforesaid) without the execution or filing of any document or any further act on the part of any of the parties hereto. (n) No Warrant Agent under this Agreement shall be personally liable for any action or omission of any successor Warrant Agent. -34- Section 13. Change of Warrant Agent. If the Warrant Agent shall resign or become incapable of acting as Warrant Agent, the Company shall appoint a successor to such Warrant Agent. If the Company shall fail to make such appointment within a period of 30 days after it has been notified in writing of such incapacity by the Warrant Agent or by the registered holder of a Warrant Certificate, then the registered holder of any Warrant may apply to any court of competent jurisdiction for the appointment of a successor to the Warrant Agent. Pending appointment of a successor to such Warrant Agent, either by the Company or by such a court, the duties of the Warrant Agent shall be carried out by the Company. The holders of a majority of the unexercised Warrants shall be entitled at any time to remove the Warrant Agent and appoint a successor to such Warrant Agent. Such successor to the Warrant Agent need not be approved by the Company or the former Warrant Agent. After appointment the successor to the Warrant Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Warrant Agent without further act or deed; provided that the former Warrant Agent shall deliver and transfer to the successor to the Warrant Agent any property at the time held by it hereunder and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Failure to give any notice provided for in this Section 13, however, or any defect therein, shall not affect the legality or validity of the appointment of a successor to the Warrant Agent. Section 14. Reports. (a) The Company agrees with each holder, for so long as any Warrants or Warrant Shares remain outstanding and during any period in which the Company (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make available, upon request of any holder, to such holder or beneficial owner of Warrants or Warrant Shares in connection with any sale thereof and any prospective purchaser of such Warrants or Warrant Shares designated by such holder or beneficial owner, the information required by Rule 144(A)(d)(4) under the Act in order to permit resales of such Warrants or Warrant Shares pursuant to Rule 144A, and (ii) is subject to Section 13 or 15(d) of the Exchange Act, to make all filings required thereby in a timely manner in order to permit resales of such Warrants or Warrant Shares pursuant to Rule 144A. (b) The Company shall provide the Warrant Agent with a sufficient number of copies of all such reports that the Warrant Agent may be required to deliver to the holders of the Warrants and the Warrant Shares under this Section 14. Section 15. Notices to Company and Warrant Agent. Any notice or demand authorized by this Agreement to be given or made by the Warrant Agent or by the registered holder of any Warrant to or on the Company shall be sufficiently given or made when received if deposited in the mail, first class or registered, postage prepaid, addressed (until another address is filed in writing by the Company with the Warrant Agent) as follows: Viskase Companies, Inc. 625 Willowbrook Centre Parkway Willowbrook, Illinois 60527 -35- Facsimile No.: (630) 455-2155 Attention: Jon Weber, Chief Executive Officer With a copy to: Jenner & Block LLC One IBM Plaza Chicago, IL 60611 Facsimile No.: (312) 840-8711 Attention: Thomas A. Monson In case the Company shall fail to maintain such office or agency or shall fail to give such notice of the location or of any change in the location thereof, presentations may be made and notices and demands may be served at the corporate trust office of the Warrant Agent. Any notice pursuant to this Agreement to be given by the Company or by the registered holder(s) of any Warrant to the Warrant Agent shall be sufficiently given when and if deposited in the mail, first-class or registered, postage prepaid, addressed (until another address is filed in writing by the Warrant Agent with the Company) to and received by the Warrant Agent at its corporate trust office as follows: Wells Fargo Bank, National Association Sixth St. and Marquette Ave. MAC N9303-120 Minneapolis, MN 55479 Telecopier No.: 612-667-9825 Attention: Corporate Trust Services- Viskase Section 16. Supplements and Amendments. The Company and the Warrant Agent may from time to time supplement or amend this Agreement without the approval of any holders of Warrants in order to cure any ambiguity or to correct or supplement any provision contained herein which may be defective or inconsistent with any other provision herein, or to make any other provisions in regard to matters or questions arising hereunder which the Company and the Warrant Agent may deem necessary or desirable and which shall not in any way materially adversely affect the interests of the holders of Warrants. Any amendment or supplement to this Agreement that has a materially adverse effect on the interests of the holders of Warrants shall require the written consent of the holders of a majority of the then outstanding Warrants (excluding Warrants held by the Company or any of its Affiliates). The consent of each holder of Warrants affected shall be required for any amendment pursuant to which the Exercise Price would be increased or the number of Warrant Shares purchasable upon exercise of Warrants would be decreased (other than pursuant to adjustments provided in this Agreement). -36- Section 17. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. Section 18. Termination. This Agreement shall terminate at 5:00 p.m., New York City time on June 15, 2011. Notwithstanding the foregoing, this Agreement will terminate on any earlier date if all Warrants have been exercised. The provisions of Section 12 shall survive such termination. Section 19. Governing Law. (a) This Agreement and each Warrant Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of New York and for all purposes shall be construed in accordance with the internal laws of said State. (b) Each of the parties hereto irrevocably consents to the non-exclusive jurisdiction of Supreme Court of New York, New York county and the United States District Court for the Southern District of New York, New York county and waives trial by jury in any action or proceeding with respect to this Agreement. Section 20. Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company, the Warrant Agent and the registered holders of Warrants any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Warrant Agent and the registered holders of Warrants. Section 21. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. [Signature Page Follows] -37- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written. Viskase Companies, Inc. By: /s/ Gordon S. Donovan _____________________________________ Name: Gordon S. Donovan Title: Vice President WELLS FARGO BANK, NATIONAL ASSOCIATION, as Warrant Agent By: /s/ Jane Y. Schweiger _____________________________________ Name: Jane Y. Schweiger Title: Vice President EXHIBIT A [FORM OF WARRANT CERTIFICATE] THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT (THE "WARRANT SHARES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS WARRANT, THE WARRANT SHARES NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS WARRANT, BY ITS ACCEPTANCE HEREOF, (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS A NON-U.S. PURCHASER AND IS ACQUIRING THIS WARRANT IN AN OFFSHORE TRANSACTION WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT, AND (2) AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH WARRANT, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") THAT IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY (AS HEREINAFTER DEFINED) OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS WARRANT (OR ANY PREDECESSOR OF SUCH WARRANT), ONLY (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THIS WARRANT IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PURCHASERS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS WARRANT FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE A-1 SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE WARRANT AGENT'S, OR TRANSFER AGENT'S, AS APPLICABLE, RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS WARRANT IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE WARRANT AGENT OR THE TRANSFER AGENT. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. THIS WARRANT WAS INITIALLY ISSUED AS PART OF AN ISSUANCE OF UNITS (THE "UNITS"), EACH OF WHICH CONSISTS OF $1,000 PRINCIPAL AMOUNT OF THE COMPANY'S 11-1/2% SENIOR SECURED NOTES DUE 2011 (THE "NOTES") AND ONE WARRANT TO PURCHASE 8.947 SHARES OF THE COMPANY'S COMMON STOCK (THE "WARRANT SHARES"). PRIOR TO THE EARLIEST TO OCCUR OF (I) 180 DAYS FOLLOWING THE CONSUMMATION OF THE OFFERING OF THE UNITS, (II) THE DATE ON WHICH A REGISTRATION STATEMENT FOR A REGISTERED EXCHANGE OFFER WITH RESPECT TO THE NOTES IS DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (III) THE DATE ON WHICH A SHELF REGISTRATION STATEMENT WITH RESPECT TO THE WARRANT SHARES IS DECLARED EFFECTIVE UNDER THE SECURITIES ACT AND (IV) SUCH DATE AS JEFFERIES & COMPANY, INC., AS THE INITIAL PURCHASER OF THE UNITS, IN ITS SOLE DISCRETION SHALL DETERMINE, THIS WARRANT MAY NOT BE TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED OR EXCHANGED ONLY AS, A UNIT (THE "SEPARATION DATE"). THE HOLDER OF THIS WARRANT AND THE WARRANT SHARES TO BE ISSUED UPON ITS EXERCISE, BY ITS ACCEPTANCE HEREOF, AGREES NOT TO ENGAGE IN ANY HEDGING TRANSACTION UNLESS IN COMPLIANCE WITH THE SECURITIES ACT. THE HOLDER OF THIS WARRANT AND THE WARRANT SHARES TO BE ISSUED UPON ITS EXERCISE, BY ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS WARRANT OR ANY INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THESE LEGENDS. THIS GLOBAL WARRANT IS HELD BY THE DEPOSITARY (AS DEFINED IN THE WARRANT AGREEMENT GOVERNING THIS WARRANT) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE WARRANT AGENT MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION A-2 3.5 OF THE WARRANT AGREEMENT, (II) THIS GLOBAL WARRANT MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 3.5(a) OF THE WARRANT AGREEMENT, (III) THIS GLOBAL WARRANT MAY BE DELIVERED TO THE WARRANT AGENT FOR CANCELLATION PURSUANT TO SECTION 3.8 OF THE WARRANT AGREEMENT AND (IV) THIS GLOBAL WARRANT MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY. A-3 VISKASE COMPANIES, INC. WARRANT CERTIFICATE CUSIP No. No. Warrants This Warrant Certificate certifies that Cede & Co., or its registered assigns, is the registered holder of [ _____ ] Warrants expiring June 15, 2011 (the "Warrants") to purchase shares of common stock, par value $0.01 (the "Common Stock"), of Viskase Companies, Inc., a Delaware corporation (the "Company"). Each Warrant entitles the registered holder upon exercise at any time from 9:00 a.m. on the Separation Date referred to below until 5:00 p.m. New York City Time on June 15, 2011 to receive from the Company 8.947 fully paid and nonassessable shares of Common Stock (the "Warrant Shares") at the initial exercise price (the "Exercise Price") of $0.01 per share payable upon surrender of this Warrant Certificate and payment of the Exercise Price at the office or agency of the Warrant Agent (as hereinafter defined), but only subject to the conditions set forth herein and in the Warrant Agreement (as hereinafter defined) referred to on the reverse hereof. The Exercise Price and number of Warrant Shares issuable upon exercise of the Warrants are subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement. No Warrant may be exercised after 5:00 p.m., New York City Time on June 15, 2011. To the extent not exercised by such time, any such Warrant shall become void. Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Warrant Certificate shall not be valid unless countersigned by the Warrant Agent, as such term is used in the Warrant Agreement. This Warrant Certificate shall be governed by and construed in accordance with the internal laws of the State of New York. * * * * * * * * * A-4 IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be signed below. DATED: June 29, 2004 VISKASE COMPANIES, INC. By:_____________________________________ Name: Title: Countersigned: WELLS FARGO BANK, NATIONAL ASSOCIATION, as Warrant Agent By:_____________________________________ Authorized Signature A-5 [Reverse of Warrant Certificate] The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants expiring at 5:00 p.m. New York City time on June 15, 2011 entitling the holder on exercise to receive shares of Common Stock, and are issued or to be issued pursuant to a Warrant Agreement dated as of June 29, 2004 (the "Warrant Agreement"), duly executed and delivered by the Company to Wells Fargo Bank, N.A., as the initial warrant agent (the "Warrant Agent"), which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Warrant Agent, the Company and the holders (the words "holders" or "holder" meaning the registered holders or registered holder) of the Warrants. Capitalized terms used but not defined herein have the meaning ascribed to such terms in the Warrant Agreement. A copy of the Warrant Agreement may be obtained by the holder hereof upon written request to the Company. Warrants may be exercised at any time on or after the Separation Date and on or before 5:00 p.m. New York City time on June 15, 2011. In order to exercise all or any of the Warrants represented by this Warrant Certificate, the holder must deliver to the Warrant Agent at its corporate trust office set forth in Section 15 of the Warrant Agreement this Warrant Certificate and the form of election to purchase on the reverse hereof duly completed and signed, which signature shall be medallion guaranteed by an institution which is a member of a Securities Transfer Association recognized signature guarantee program, and upon payment to the Warrant Agent for the account of the Company of the Exercise Price, for the number of Warrant Shares in respect of which such Warrants are then exercised. No adjustment shall be made for any dividends on any Common Stock issuable upon exercise of this Warrant. The Warrant Agreement provides that upon the occurrence of certain events the Exercise Price set forth on the face hereof may, subject to certain conditions, be adjusted; provided that no adjustment may be made that reduces the Exercise Price below the par value of the Common Stock. If the Exercise Price is adjusted, the Warrant Agreement provides that the number of shares of Common Stock issuable upon the exercise of each Warrant shall be adjusted. No fractions of a share of Common Stock will be issued upon the exercise of any Warrant, but the Company will pay the cash value thereof determined as provided in the Warrant Agreement. The Company has agreed pursuant to an Equity Registration Rights Agreement dated as of June 29, 2004 by and among the Company and the Initial Purchaser (the "Equity Registration Rights Agreement") to, within 180 days of the Closing Date, use reasonable best efforts to file a shelf registration statement on an appropriate form under the Securities Act covering the resale of the Warrant Shares. The Company will use reasonable best efforts to cause such registration statement to become effective within 270 days of the Closing Date. The Company will use its reasonable best efforts to keep such registration statement continuously effective, subject to certain exceptions, under the Securities Act in order to permit the resale of the Warrant Shares by the holders thereof for the earlier of (i) two years or (ii) until such time as all registrable securities have been sold pursuant to such registration statement. The Company shall use its reasonable best efforts to keep such shelf registration statement continuously effective under the Securities Act until at least the earlier of (i) an aggregate of 180 days after the effective date A-6 thereof or (ii) the consummation of the distribution by the holders of all of the Warrant Shares covered thereby. In addition, pursuant to the Equity Registration Rights Agreement, subject to certain limitations, the Company has agreed to provide the holders certain "piggyback" registration rights if at any time after the Closing Date the Company proposes to file a registration statement with respect to an offering of its Common stock. Warrant Certificates, when surrendered at the corporate trust office of the Warrant Agent by the registered holder thereof in person or by legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor evidencing in the aggregate a like number of Warrants. Upon due presentation for registration of transfer of this Warrant Certificate at the corporate trust office of the Warrant Agent a new Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith. Each holder, by its acceptance of this Warrant, agrees to be bound by the terms of the Warrant Agreement and the Equity Registration Rights Agreement, and all such replacements thereof, and each holder hereby authorizes the Warrant Agent to bind the holders to the extent provided in the Warrant Agreement. The Company and the Warrant Agent may deem and treat the registered holder(s) thereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the holder(s) hereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary. Neither the Warrants nor this Warrant Certificate entitles any holder hereof to any rights of a stockholder of the Company. A-7 [Form of Election to Purchase] (To Be Executed Upon Exercise Of Warrant) The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive __________ shares of Common Stock and herewith tenders payment for such shares to the order of Viskase Companies, Inc., [cash] [Warrants] [Notes] equal [in fair market value] [in principal amount] to $__________ in accordance with the terms hereof. The undersigned requests that a certificate for such shares be registered in the name of _______________, whose address is __________________ and that such shares be delivered to ___________, whose address is ____________________________. If said number of shares is less than all of the shares of Common Stock purchasable hereunder, the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares be registered in the name of ______________________, whose address is ____________________, and that such Warrant Certificate be delivered to whose address is ____________________. ___________________________ Signature Date: ___________________________ Signature Guaranteed Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Warrant Agent, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("Stamp") or such other "signature guarantee program" as may be determined by the Warrant Agent in addition to, or in substitution for, Stamp, all in accordance with the Securities Exchange Act of 1934, as amended. A-8 VISKASE COMPANIES, INC. COUNTERSIGNATURE ORDER June 29, 2004 Wells Fargo Bank, N.A. Sixth and Marquette Minneapolis, MN 55479 Attn: Jane Y. Schweiger Re: 90,000 WARRANTS TO PURCHASE COMMON STOCK Ladies and Gentlemen: Pursuant to Section 3.2 of the Warrant Agreement dated as the date hereof (the "Indenture"), among Viskase Companies, Inc., a Delaware corporation (the "Company"), and Wells Fargo Bank, N.A., as warrant agent (the "Warrant Agent"), relating to the Company's 90,000 Warrants (as defined in the Warrant Agreement) to purchase its Common Stock (as defined in the Warrant Agreement), you are hereby directed (i) to countersign on June 29, 2004, in the manner provided in the Warrant Agreement, the Warrants, heretofore duly executed by a proper officer of the Company and delivered to you as provided in the Warrant Agreement, (ii) to deliver such countersigned Warrants in the denominations and registered in the names heretofore requested by Jefferies & Company, Inc. and (iii) to hold the certificates representing the Warrants, as custodian for The Depository Trust Company. Very truly yours, VISKASE COMPANIES, INC. By:___________________________________ Name: Title: A-9 WARRANT AGENT CERTIFICATE OF AUTHENTICATION This is one of the Warrants referred to in the within-mentioned Warrant Agreement. WELLS FARGO BANK, N.A., as Warrant Agent Dated: ______, 2004 By: _______________________________ Authorized Signatory A-10 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER Viskase Companies, Inc. 625 Willowbrook Centre Parkway Willowbrook, Illinois 60527 Wells Fargo Bank, National Association Sixth St. and Marquette Ave. MAC N9303-120 Minneapolis, MN 55479 Attn: Corporate Trust Services Re: Warrants Reference is hereby made to the Warrant Agreement, dated as of June 29, 2004 (the "Warrant Agreement"), between Viskase Companies, Inc., as issuer (the "Company"), and Wells Fargo Bank, National Association, as warrant agent. Capitalized terms used but not defined herein shall have the meanings given to them in the Warrant Agreement. ___________________, (the "Transferor") owns and proposes to transfer the ___________ Warrant[s] or interest in such Warrant[s] specified in Annex A hereto (the "Transfer"), to ________________________ (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1. [ ] Check if Transferee Will Take Delivery of a Beneficial Interest in the 144A Global Warrant or a Definitive Warrant Pursuant to Rule 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Warrant is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Warrant for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Warrant Agreement, the transferred beneficial interest or Definitive Warrant will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Warrant and/or the Definitive Warrant and in the Warrant Agreement and the Securities Act. 2. [ ] Check if Transferee Will Take Delivery of a Beneficial Interest in the Regulation S Global Warrant or a Definitive Warrant Pursuant to Regulation S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act B-1 and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Warrant Agreement, the transferred beneficial interest or Definitive Warrant will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Warrant and/or the Definitive Warrant and in the Warrant Agreement and the Securities Act. 3. [ ] Check and Complete if Transferee Will Take Delivery of a Beneficial Interest in the IAI Global Warrant or a Definitive Warrant Pursuant to any Provision of the Securities Act other than Rule 144A or Regulation S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Warrants and Restricted Definitive Warrants and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) [ ] such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b) [ ] such Transfer is being effected to the Company or a subsidiary thereof or (c) [ ] such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Warrant or Restricted Definitive Warrants and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of Exhibit D to the Warrant Agreement and (2) if the Company requests, an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Warrant Agreement, the transferred beneficial interest or Definitive Warrant will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the IAI Global Warrant and/or the Definitive Warrants and in the Warrant Agreement and the Securities Act. B-2 4. [ ] Check if Transferee Will Take Delivery of a Beneficial Interest in an Unrestricted Global Warrant or of an Unrestricted Definitive Warrant. (a) [ ] Check if Transfer is Pursuant to Rule 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Warrant Agreement and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Warrant Agreement and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Warrant Agreement, the transferred beneficial interest or Definitive Warrant will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Warrants, on Restricted Definitive Warrants and in the Warrant Agreement. (b) [ ] Check if Transfer is Pursuant to Regulation S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Warrant Agreement and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Warrant Agreement and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Warrant Agreement, the transferred beneficial interest or Definitive Warrant will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Warrants, on Restricted Definitive Warrants and in the Warrant Agreement. (c) [ ] Check if Transfer is Pursuant to Other Exemption. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Warrant Agreement and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Warrant Agreement and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Warrant Agreement, the transferred beneficial interest or Definitive Warrant will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Warrants or Restricted Definitive Warrants and in the Warrant Agreement. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. [Insert Name of Transferor] By:_____________________________________ B-3 Name: Title: Dated: _____________________ B-4 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (a) OR (b)] (a) [ ] a beneficial interest in the: (i) [ ] 144A Global Warrant, or (ii) [ ] Regulation S Global Warrant, or (iii) [ ] IAI Global Warrant, or (b) [ ] a Restricted Definitive Warrant. 2. After the Transfer the Transferee will hold: [CHECK ONE] (a) [ ] a beneficial interest in the: (i) [ ] 144A Global Warrant, or (ii) [ ] Regulation S Global Warrant, or (iii) [ ] Unrestricted Global Warrant; or (iv) [ ] Regulation S Global Warrant; or (b) [ ] a Restricted Definitive Warrant; or (c) [ ] an Unrestricted Definitive Warrant, in accordance with the terms of the Warrant Agreement. B-5 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE Viskase Companies, Inc. 625 Willowbrook Centre Parkway Willowbrook, Illinois 60527 Wells Fargo Bank, National Association Sixth St. and Marquette Ave. MAC N9303-120 Minneapolis, MN 55479 Attn: Corporate Trust Services Re: Warrants (CUSIP ____________) Reference is hereby made to the Warrant Agreement, dated as of June 29, 2004 (the "Warrant Agreement"), between Viskase Companies, Inc., as issuer (the "Company"), and Wells Fargo Bank, National Association, as warrant agent. Capitalized terms used but not defined herein shall have the meanings given to them in the Warrant Agreement. __________________________, (the "Owner") owns and proposes to exchange ________________ Warrant[s] or interest in such Warrant[s] specified herein (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that: 3. Exchange of Restricted Definitive Warrants or Beneficial Interests in a Restricted Global Warrant for Unrestricted Definitive Warrants or Beneficial Interests in an Unrestricted Global Warrant. (a) [ ] Check if Exchange is from Beneficial Interest in a Restricted Global Warrant to Beneficial Interest in an Unrestricted Global Warrant. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Warrant for a beneficial interest in an Unrestricted Global Warrant in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Warrants and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Warrant Agreement and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Warrant is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (b) [ ] Check if Exchange is from Beneficial Interest in a Restricted Global Warrant to Unrestricted Definitive Warrant. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Warrant for an Unrestricted Definitive C-1 Warrant, the Owner hereby certifies (i) the Definitive Warrant is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Warrants and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Warrant Agreement and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Warrant is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (c) [ ] Check If Exchange Is from Restricted Definitive Warrant to Beneficial Interest in an Unrestricted Global Warrant. In connection with the Owner's Exchange of a Restricted Definitive Warrant for a beneficial interest in an Unrestricted Global Warrant, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Warrants and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Warrant Agreement and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (d) [ ] Check if Exchange is from Restricted Definitive Warrant to Unrestricted Definitive Warrant. In connection with the Owner's Exchange of a Restricted Definitive Warrant for an Unrestricted Definitive Warrant, the Owner hereby certifies (i) the Unrestricted Definitive Warrant is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Warrants and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Warrant Agreement and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Warrant is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 4. Exchange of Restricted Definitive Warrants or Beneficial Interests in Restricted Global Warrants for Restricted Definitive Warrants or Beneficial Interests in Restricted Global Warrants. (a) [ ] Check if Exchange is from Beneficial Interest in a Restricted Global Warrant to Restricted Definitive Warrant. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Warrant for a Restricted Definitive Warrant in a number equal to the number of beneficial interests exchanged, the Owner hereby certifies that the Restricted Definitive Warrant is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Warrant Agreement, the Restricted Definitive Warrant issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Warrant and in the Warrant Agreement and the Securities Act. C-2 (b) [ ] Check if Exchange is from Restricted Definitive Warrant to Beneficial Interest in a Restricted Global Warrant. In connection with the Exchange of the Owner's Restricted Definitive Warrant for a beneficial interest in the [CHECK ONE] [ ] 144A Global Warrant, [ ] Regulation S Global Warrant, [ ] IAI Global Warrant in a number equal to the number of beneficial interests exchanged, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Warrants and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Warrant Agreement, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Warrant and in the Warrant Agreement and the Securities Act. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. [Insert Name of Transferor] By:____________________________________ Name: Title: Date: _______________________ C-3 EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Viskase Companies, Inc. 625 Willowbrook Centre Parkway Willowbrook, Illinois 60527 Wells Fargo Bank, National Association Sixth St. and Marquette Ave. MAC N9303-120 Minneapolis, MN 55479 Attn: Corporate Trust Services Re: Warrants Reference is hereby made to the Warrant Agreement, dated as of June 29, 2004 (the "Warrant Agreement"), between Viskase Companies, Inc., as issuer (the "Company"), and Wells Fargo Bank, National Association, as warrant agent. Capitalized terms used but not defined herein shall have the meanings given to them in the Warrant Agreement. In connection with our proposed purchase of: (a) [ ] a beneficial interest in a Global Warrant representing the right to acquire __________ Warrant Shares, or (b) [ ] a Definitive Warrant representing the right to acquire __________ Warrant Shares, we confirm that: 5. We understand that any subsequent transfer of the Warrants or any interest therein is subject to certain restrictions and conditions set forth in the Warrant Agreement and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Warrants or any interest therein except in compliance with, such restrictions and conditions and the United States Securities Act of 1933, as amended (the "Securities Act"). 6. We understand that the offer and sale of the Warrants have not been registered under the Securities Act, and that the Warrants and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Warrants or any interest therein, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (C) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form of this letter and, if requested by the Company, D-1 an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such transfer is in compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing the Definitive Warrant or beneficial interest in a Global Warrant from us in a transaction meeting the requirements of clauses (A) through (E) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein. 7. We understand that, on any proposed resale of the Warrants or beneficial interest therein, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Warrants purchased by us will bear a legend to the foregoing effect. 8. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Warrants, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 9. We are acquiring the Warrants or beneficial interest therein purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. We agree not to engage in any hedging transactions with regard to the Warrants unless such hedging transactions are in compliance with the Securities Act. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. [Insert Name of Transferor] By:_____________________________________ Name: Title: Dated: _______________________ D-2 EX-4.6 4 c90665exv4w6.txt REGISTRATION RIGHTS AGREEMENT EXHIBIT 4.6 EXECUTION COPY VISKASE COMPANIES, INC. REGISTRATION RIGHTS AGREEMENT Dated as of April 15, 2003 TABLE OF CONTENTS THIS TABLE OF CONTENTS IS NOT PART OF THE AGREEMENT TO WHICH IT IS ATTACHED BUT IS INSERTED FOR CONVENIENCE ONLY.

i (k) Governing Law............................................................................ 19 (l) Counterparts................................................................................. 20 (m) Restrictions on Transfer................................................................. 20

ii VISKASE COMPANIES, INC. REGISTRATION RIGHTS AGREEMENT This REGISTRATION RIGHTS AGREEMENT dated as of April 15, 2003 is made and entered into by and among HIGH RIVER LIMITED PARTNERSHIP, a Delaware limited partnership, DEBT STRATEGIES FUND, INC., a Maryland corporation, NORTHEAST INVESTORS TRUST, a Massachusetts business trust (each an "Investor" and collectively the "Investors"), and VISKASE COMPANIES, INC., a Delaware corporation (the "Company"). Capitalized terms not otherwise defined herein have the meanings given such term in the Restructuring Agreement (defined below). WHEREAS, the Investors and the Company have entered into that certain Restructuring Agreement, dated as of July 15, 2002, by and among the Investors and the Company (the "Restructuring Agreement") which Restructuring Agreement contemplated that the parties hereto enter into this Agreement; WHEREAS, pursuant to the Plan of Reorganization (each as defined in the Restructuring Agreement), the Investors are entitled to receive Shares; and NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Requested Registrations. (a) Registration Requests. At any time after the second anniversary of the Effective Date, upon the written request of one or more Initiating Holders requesting that the Company effect the registration under the Securities Act of all or part of such Initiating Holders' Registrable Securities and specifying the number of Registrable Securities to be registered and the intended method of disposition thereof, the Company will promptly, and in no event more than ten Business Days after receipt of such request, give written notice (a "Notice of Requested Registration" of such request to all other holders of Registrable Securities, and thereupon will use reasonable efforts to effect the registration under the Securities Act of (i) the Registrable Securities which the Company has been so requested to register by such Initiating Holder or Holders, and (ii) all other Registrable Securities the holders of which have made written requests to the Company for registration thereof within 15 days after the giving of the Notice of Requested Registration, all to the extent requisite to permit the disposition (in accordance with the intended methods thereof) of the Registrable Securities so to be registered; provided, however that the Company shall not be obligated to register the Registrable Securities pursuant to this Section 1 prior to the third anniversary of the Effective Date if the Initiating Holder or Holders has failed to comply with the restrictions on transfer set forth in Section 5.03(b) of the Restructuring Agreement (as amended by Section 10(m) hereof). If requested by the holders of a majority of the Registrable 1 Securities requested to be included in any Requested Registration, the method of disposition of all Registrable Securities and any other securities included in such registration shall be an underwritten offering effected in accordance with Section 4(a); provided, however, only if at the time of such Requested Registration, the securities to be registered are listed for trading on any national securities exchange or traded on the Nasdaq National Market System; provided further that no Requesting Holder may require the Company to cause any securities of the Company to be so listed or traded. Notwithstanding the foregoing, upon written notice (executed by the chief executive officer of the Company) to all holders of Registrable Securities, the Company may postpone taking action with respect to a Requested Registration for a reasonable period of time after receipt of the original request (not exceeding 120 days) if, in the good faith opinion of the Company's Board of Directors, effecting the registration would adversely affect a material financing, acquisition, disposition of assets or stock, merger or other comparable transaction or would require the Company to make public disclosure of information the public disclosure of which would have a material adverse effect upon the Company; provided that the Company shall not delay such action pursuant to this sentence more than once in any 12-month period. Subject to paragraph (e) the Company may include in such registration other securities for sale for its own account or for the account of any other Person. If any securityholders of the Company (other than the holders of Registrable Securities in such capacity) register securities of the Company in a Requested Registration in accordance with this Section 1, such holders shall pay the fees and expenses of their counsel and their pro rata share, on the basis of the respective amounts of the securities included in such registration on behalf of each such holder, of the Registration Expenses. (b) Limitations on Requested Registrations. Notwithstanding anything herein to the contrary, the Company shall not be required to honor a request for a Requested Registration if: (i) in the case of a Long-Form Registration, the Company has previously effected three Effective Long-Form Registrations; provided, that no holder of Registrable Securities which was, or whose Affiliate was, an Initiating Holder for a previous Effective Long-Form Registration may deliver a Notice of Requested Registration for a further Long-Form Registration; provided, however, that there shall be no limit on the number of registrations effected as Short-Form Registrations, subject to the other provisions of this Section 1(b); (ii) the Registrable Securities requested by Initiating Holders to be so registered does not constitute at least 25% of the total Registrable Securities then outstanding; or (iii) such request is received by the Company less than 180 days following the effective dale of any previous registration statement filed in connection with a Requested Registration or a Piggyback Registration unless the holder making the request had requested inclusion of Registrable Securities in such Registration but was unable to participate fully as a result of Sections 1(e) or 2(c). (c) Registration Statement Form. Requested Registrations shall be on such appropriate registration form promulgated by the Commission as shall be selected by the Company, and shall be reasonably acceptable to the holders of a majority of the Registrable 2 Securities to which such registration relates, and shall permit the disposition of such Registrable Securities in accordance with the intended method or methods specified in their request for such registration. (d) Registration Expenses. The Company will pay all Registration Expenses incurred in connection with any Requested Registration. (e) Priority in Cutback Registrations. If a Requested Registration becomes a Cutback Registration, the Company will include in any such registration to the extent of the number which the Managing Underwriter advises the Company can be sold in such offering (i) first, Registrable Securities requested to be included in such registration by the Requesting Holders, pro rata on the basis of the number of Registrable Securities requested to be included by such holders and (ii) second other securities of the Company proposed to be included in such registration, allocated in accordance with the priorities then existing among the Company and the holders of such other securities; and any securities so excluded shall be withdrawn from and shall not be included in such Requested Registration. 2. Piggyback Registrations. (a) Right to Include Registrable Securities. Notwithstanding any limitation contained in Section 1, if the Company at any time proposes after the date hereof to effect a Piggyback Registration, it will each such time give written notice (a "Notice of Piggyback Registration"), at least 15 days prior to the anticipated filing date, to all holders of Registrable Securities of its intention to do so and of such holders' rights under this Section 2, which Notice of Piggyback Registration shall include a description of the intended method of disposition of such securities. Upon the written request of any such holder made within 15 days after receipt of a Notice of Piggyback Registration (which request shall specify the Registrable Securities intended to be disposed of by such holder), the Company will, subject to the other provisions of this Agreement, include in the registration statement relating to such Piggyback Registration all Registrable Securities which the Company has been so requested to register, all to the extent requisite to permit the disposition of such Registrable Securities in accordance with the intended method of disposition set forth in the Notice of Piggyback Registration. Notwithstanding the foregoing, if, at any time after giving a Notice of Piggyback Registration and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to each holder of Registrable Securities and, thereupon, (i) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay the Registration Expenses in connection therewith) without prejudice, however, to the rights of any Requesting Holder entitled to do so to request that such registration be effected as a Requested Registration under Section 1, and (ii) in the case of a determination to delay registering, shall be permitted to delay registering any Registrable Securities for the same period as the delay in registering such other securities. No registration effected under this Section 2 shall relieve the Company of its obligations to effect a Requested Registration under Section 1. (b) Registration Expenses. The Company will pay all Registration Expenses incurred in connection with any Piggyback Registration. 3 (c) Priority in Cutback Registrations. If a Piggyback Registration becomes a Cutback Registration, the Company will include in such registration to the extent of the amount of the securities which the Managing Underwriter advises the Company can be sold in such offering: (i) if such registration as initially proposed by the Company was solely a primary registration of its securities, (x) first, the securities proposed by the Company to be sold for its own account, (y) second, (1) any Registrable Securities requested to be included in such registration by Requesting Holders and (2) any other securities of the Company proposed to be included in such registration, allocated among the holders thereof in accordance with the priorities then existing among the Holders and such holders; and (ii) if such registration as initially proposed by the Company was in whole or in part requested by holders of securities of the Company, other than holders of Registrable Securities in their capacities as such, pursuant to demand registration rights, (x) first, such securities held by the holders initiating such registration and, if applicable, any securities proposed by the Company to be sold for its own account, allocated in accordance with the priorities then existing among the Company and such holders, (y) second, any Registrable Securities requested to be included in such registration by Requesting Holders, pro rata on the basis of the number of Registrable Securities requested to be included by such holders, and (z) third, any other securities of the Company proposed to be included in such registration, allocated among the holders thereof in accordance with the priorities then existing among the Company and the holders of such other securities; and any securities so excluded shall be withdrawn from and shall not be included in such Piggyback Registration. 3. Registration Procedures. If and whenever the Company is required to effect the registration of any Registrable Securities under the Securities Act pursuant to Section 1 or Section 2, the Company will use reasonable efforts to effect the registration and sale of such Registrable Securities in accordance with the intended method of disposition thereof. Without limiting the foregoing, the Company in each such case will, as expeditiously as possible, use reasonable efforts to: (a) prepare and file with the Commission the requisite registration statement to effect such registration and to cause such registration statement to become effective; (b) prepare and file with the Commission such amendments and supplements to such registration statement and any prospectus used in connection therewith as may be necessary to maintain the effectiveness of such registration statement and to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such registration statement, in accordance with the intended methods of disposition thereof, until the earlier of (i) such time as all of such securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers 4 thereof set forth in such registration statement and (ii) 120 days after such registration statement becomes effective; (c) promptly notify each Requesting Holder and the underwriter or underwriters, if any: (i) when such registration statement or any prospectus used in connection therewith, or any amendment or supplement thereto, has been filed and, with respect to such registration statement or any post-effective amendment thereto, when the same has become effective; (ii) of any written request by the Commission for amendments or supplements to such registration statement or prospectus; (iii) of the notification to the Company by the Commission of its initiation of any proceeding with respect to the issuance by the Commission of, or of the issuance by the Commission of, any stop order suspending the effectiveness of such registration statement; and (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the applicable securities or blue sky laws of any jurisdiction; (d) furnish to each seller of Registrable Securities covered by such registration statement such number of conformed copies of such registration statement and of each amendment and supplement thereto (in each case including all exhibits and documents incorporated by reference), such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 promulgated under the Securities Act relating to such holder's Registrable Securities, and such other documents, as such seller may reasonably request to facilitate the disposition of its Registrable Securities; (e) register or qualify all Registrable Securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as each holder thereof shall reasonably request, to keep such registration or qualification in effect for so long as such registration statement remains in effect, and take any other action which may be reasonably necessary or advisable to enable such holder to consummate the disposition in such jurisdictions of the Registrable Securities owned by such holder, except that the Company shall not for any such purpose be required (i) to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this paragraph (e) be obligated to be so qualified, (ii) to subject itself to taxation in any such jurisdiction or (iii) to consent to general service of process in any jurisdiction; (f) use reasonable efforts to cause all Registrable Securities covered by such registration statement to be registered with or approved by such other 5 governmental agencies or authorities as may be necessary to enable each holder thereof to consummate the disposition of such Registrable Securities; (g) furnish to each Requesting Holder a signed counterpart, addressed to such holder (and the underwriters, if any), of (i) an opinion of counsel for the Company, dated the effective date of such registration statement (or, if such registration includes an underwritten Public Offering, dated the date of any closing under the underwriting agreement), reasonably satisfactory in form and substance to such holder, and (ii) a "comfort" letter, dated the effective date of such registration statement (and, if such registration includes an underwritten Public Offering, dated the date of any closing under the underwriting agreement), signed by the independent public accountants who have certified the Company's financial statements included in such registration statement, in each case covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of the accountants' letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer's counsel and in accountants' letters delivered to the underwriters in underwritten Public Offerings of securities and, in the case of the accountants' letter, such other financial matters, as such holder (or the underwriters, if any) may reasonably request; (h) notify each holder of Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which any prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and at the request of any such holder promptly prepare and furnish to such holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (i) provide a CUSIP number and a transfer agent and registrar for all Registrable Securities covered by such registration statement not later than the effective date of such registration statement; and 6 (j) use reasonable efforts to cause all Registrable Securities covered by such registration statement to be listed, upon official notice of issuance, on any securities exchange on which any of the securities of the same class as the Registrable Securities are then listed. The Company may require each holder of Registrable Securities as to which any registration is being effected to, and each such holder, as a condition to including Registrable Securities in such registration, shall, furnish the Company with such information and affidavits regarding such holder and the distribution of such securities as the Company may from time to time reasonably request in writing in connection with such registration. Each holder of Registrable Securities agrees by acquisition of such Registrable Securities that upon receipt of any notice from the Company of the happening of any event of the kind described in paragraph (h), such holder will forthwith discontinue such holder's disposition of Registrable Securities pursuant to the registration statement relating to such Registrable Securities until such holder's receipt of the copies of the supplemented or amended prospectus contemplated by paragraph (h) and, if so directed by the Company, will deliver to the Company all copies, other than permanent file copies, then in such holder's possession of the prospectus relating to such Registrable Securities current at the time of receipt of such notice. In the event the Company shall give any such notice, the period referred to in paragraph (b) shall be extended by a number of days equal to the number of days during the period from and including the giving of notice pursuant to paragraph (h) and to and including the date when each holder of any Registrable Securities covered by such registration statement shall receive the copies of the supplemented or amended prospectus contemplated by paragraph (h). 4. Underwritten Offerings (a) Underwritten Requested Offerings. In the case of any underwritten Public Offering being effected pursuant to a Requested Registration, the Managing Underwriter and any other underwriter or underwriters with respect to such offering shall be selected, after consultation with the Company, by the holders of a majority of the Registrable Securities to be included in such underwritten offering with the consent of the Company, which consent shall not be unreasonably withheld. The Company shall enter into an underwriting agreement in customary form with such underwriter or underwriters, which shall include, among other provisions, indemnities to the effect and to the extent provided in Section 6 The holders of Registrable Securities to be distributed by such underwriters shall be parties to such underwriting agreement and may, at their option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters also be made to and for their benefit and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement also be conditions precedent to their obligations. No holder of Registrable Securities shall be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such holder and its ownership of the securities being registered on its behalf and such holder's intended method of distribution and any other representation required by law. No Requesting Holder may participate in such underwritten offering unless such holder agrees to sell its Registrable Securities on the basis provided in such underwriting agreement and completes and executes all questionnaires, powers 7 of attorney, indemnities and other documents reasonably required under the terms of such underwriting agreement. If any Requesting Holder disapproves of the terms of an underwriting, such holder may elect to withdraw therefrom and from such registration by notice to the Company and the Managing Underwriter, and each of the remaining Requesting Holders shall be entitled to increase the number of Registrable Securities being registered to the extent of the Registrable Securities so withdrawn in the proportion which the number of Registrable Securities being registered by such remaining Requesting Holder bears to the total number of Registrable Securities being registered by all such remaining Requesting Holders. (b) Underwritten Piggyback Offerings. If the Company at any time proposes to register any of its securities in a Piggyback Registration and such securities are to be distributed by or through one or more underwriters, the Company will, subject to the provisions of Section 2(c), use its best efforts to arrange for such underwriters to include the Registrable Securities to be offered and sold by such holder among the securities to be distributed by such underwriter, and such holders shall be obligated to sell their Registrable Securities in such Piggyback Registration through such underwriters on the same terms and conditions as apply to the other Company securities to be sold by such underwriters in connection with such Piggyback Registration. The holders of Registrable Securities to be distributed by such underwriters shall be parties to the underwriting agreement between the Company and such underwriter or underwriters and may, at their option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters also be made to and for their benefit and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement also be conditions precedent to their obligations. No holder of Registrable Securities shall be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such holder and its ownership of the securities being registered on its behalf and any other representation required by law. No Requesting Holder may participate in such underwritten offering unless such holder agrees to sell its Registrable Securities on the basis provided in such underwriting agreement and completes and executes all questionnaires, powers of attorney, indemnities and other documents reasonably required under the terms of such underwriting agreement. If any Requesting Holder disapproves of the terms of an underwriting, such holder may elect to withdraw therefrom and from such registration by notice to the Company and the Managing Underwriter, and each of the remaining Requesting Holders shall be entitled to increase the number of Registrable Securities being registered to the extent of the Registrable Securities so withdrawn in the proportion which the number of Registrable Securities being registered by such remaining Requesting Holder bears to the total number of Registrable Securities being registered by all such remaining Requesting Holders. 5. Holdback Agreements. (a) By the Holders of Registrable Securities. Unless the Managing Underwriter (or, in the case of a non-underwritten Public Offering, the Company) otherwise agrees, in connection with the first Public Offering hereunder, each holder of Registrable Securities, by acquisition of such Registrable Securities, agrees, and agrees to cause its Affiliates, not to effect any public sale or distribution (including a sale under Rule 144) of such securities, or any securities convertible into or exchangeable or exercisable for such securities, during the 14 days prior to and the longer 8 of the 90 days or such number of days specified by the Managing Underwriter not exceeding the 180 days after the effective date of any registration statement filed by the Company in connection with a Public Offering (or for such shorter period of time as is sufficient and appropriate, in the opinion of the Managing Underwriter, in order to complete the sale and distribution of the securities included in such registration), except as part of such registration statement, whether or not such holder participates in such registration. Unless the Managing Underwriter (or, in the case of a non-underwritten Public Offering, the Company) otherwise agrees, in connection with any registration other than the first Public Offering hereunder, each holder of Registrable Securities, by acquisition of such Registrable Securities, agrees, and agrees to cause its Affiliates, not to effect any public sale or distribution (including a sale under Rule 144) of such securities, or any securities convertible into or exchangeable or exercisable for such securities, during the 14 days prior to and the longer of the 90 days or such number of days specified by the Managing Underwriter not exceeding the 180 days after the effective date of any registration statement filed by the Company in connection with a Public Offering (or for such shorter period of time as is sufficient and appropriate, in the opinion of the Managing Underwriter, in order to complete the sale and distribution of the securities included in such registration), except as part of such registration statement, whether or not such holder participates in such registration. Notwithstanding anything to the contrary in this Section 5(a) no holder of Registrable Securities, or any of its Affiliates, shall be prohibited from any public sale or distribution of such securities in connection with any Effective Registration unless all officers, directors and any Person which beneficially owns (as determined under Rule 13d-3 of the Exchange Act) securities of the Company entitling such Person to vote 5% or more of the votes eligible to be voted in the election of directors agrees to substantially the same limitations on public sale or distribution applicable to holders of Registrable Securities. (b) By the Company, Affiliates and Other Securityholders. Unless the Managing Underwriter otherwise agrees, in connection with the first Effective Registration hereunder, the Company agrees, and agrees to cause its Affiliates, (x) not to effect any public sale or distribution of the Company's equity securities, or any securities convertible into or exchangeable or exercisable for such securities, during the 14 days prior to and the longer of the 90 days (or for such shorter period of time as is sufficient and appropriate, in the opinion of the Managing Underwriter, in order to complete the sale and distribution of the securities included in such registration), except as part of such underwritten registration and except pursuant to registrations on Form S-4 or Form S-8 promulgated by the Commission or any successor or similar forms thereto, and (y) to cause each holder of the Company's equity securities, or of any securities convertible into or exchangeable or exercisable for such securities, in each case purchased from the Company at any time after the date of this Agreement (other than in a Public Offering), to agree not to effect any such public sale or distribution of such securities (including a sale under Rule 144), during such period, except as part of such underwritten registration. Unless the Managing Underwriter otherwise agrees, in connection with any Effective Registration other than the first Effective Registration hereunder, the Company agrees, and agrees to cause its Affiliates, (x) not to effect any public sale or distribution of the Company's equity securities, or any securities convertible into or exchangeable or exercisable for such securities, during the 14 days prior to and the longer of the 90 days or such number of days specified by the Managing Underwriter not exceeding the 180 days after the effective date of the registration statement filed in connection with an underwritten offering made pursuant to a Requested Registration or a Piggyback Registration (or for such shorter period of time as is ` and 9 appropriate, in the opinion of the Managing Underwriter, in order to complete the sale and distribution of the securities included in such registration), except as part of such underwritten registration and except pursuant to registrations on Form S-4 or Form S-8 promulgated by the Commission or any successor or similar forms thereto, and (y) to cause each holder of the Company's equity securities, or of any securities convertible into or exchangeable or exercisable for such securities, in each case purchased from the Company at any time after the date of this Agreement (other than in a Public Offering), to agree not to effect any such public sale or distribution of such securities (including a sale under Rule 144), during such period, except as part of such underwritten registration. 6. Indemnification. (a) Indemnification by the Company. The Company shall, to the full extent permitted by law, indemnify and hold harmless each seller of Registrable Securities included in any registration statement filed in connection with a Requested Registration or a Piggyback Registration, its directors and officers, and each other Person, if any, who controls any such seller within the meaning of the Securities Act, against any Losses, claims, damages, expenses or liabilities, joint or several (together, "Losses"), to which such seller or any such director or officer or controlling Person may become subject under the Securities Act or otherwise, including but not limited to under the Exchange Act and state securities laws, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading, and the Company will reimburse such seller and each such director, officer and controlling Person for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such Loss (or action or proceeding in respect thereof); provided that the Company shall not be liable in any such case to the extent that any such Loss (or action or proceeding in respect thereof) arises out of or is based upon (x) an untrue statement or alleged untrue statement or omission or alleged omission made in any such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by such seller specifically stating that it is for use in the preparation thereof, (y) such seller's failure to send or give a copy of the final prospectus to the Persons asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such final prospectus or (z) such seller's use of any prospectus, or supplement or amendment thereof, or distribution of securities therewith, of which such seller was notified to discontinue use pursuant to Section 3(h) hereof. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such seller or any such director, officer or controlling Person, and shall survive the transfer of such securities by such seller. The Company shall also indemnify each other Person who participates (including as an underwriter) in the offering or sale of Registrable Securities, their officers and directors and each other Person, if any, who 10 controls any such participating Person within the meaning of the Securities Act to the same extent as provided above with respect to sellers of Registrable Securities. (b) Indemnification by the Sellers. Each holder of Registrable Securities which are included or are to be included in any registration statement filed in connection with a Requested Registration or a Piggyback Registration, as a condition to including Registrable Securities in such registration statement, shall, to the full extent permitted by law, indemnify and hold harmless the Company, its directors and officers, and each other Person, if any, who controls the Company within the meaning of the Securities Act, against any Losses to which the Company or any such director or officer or controlling Person may become subject under the Securities Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading, if such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by such seller specifically stating that it is for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement provided, however, that the obligation to provide indemnification pursuant to this Section 6(b) shall be several, and not joint and several, among such Indemnifying Parties on the basis of the number of Registrable Securities included in such registration statement and the aggregate amount which may be recovered from any holder of Registrable Securities pursuant to the indemnification provided for in this Section 6(b) in connection with any registration and sale of Registrable Securities shall be limited to the total gross proceeds received by such holder from the sale of such Registrable Securities. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling Person and shall survive the transfer of such securities by such seller. Such holders shall also indemnify each other Person who participates (including as an underwriter) in the offering or sale of Registrable Securities, their officers and directors and each other Person, if any, who controls any such participating Person within the meaning of the Securities Act to the same extent as provided above with respect to the Company. (c) Notices of Claims, etc. Promptly after receipt by an Indemnified Party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding paragraph (a) or (b) of this Section 6, such Indemnified Party will, if a claim in respect thereof is to be made against an Indemnifying Party pursuant to such paragraphs, give written notice to the latter of the commencement of such action, provided that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under the preceding paragraphs of this Section 6, except to the extent that the Indemnifying Party is actually prejudiced by such failure to give notice. In case any such action is brought against an Indemnified Party, the Indemnifying Party shall be entitled to participate in and, unless, in the reasonable judgment of any Indemnified Party, a conflict of interest between such Indemnified Party and any Indemnifying Party exists with respect to such claim, to assume the defense 11 thereof, jointly with any other Indemnifying Party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such Indemnified Party, and after notice from the Indemnifying Party to such Indemnified Party of its election so to assume the defense thereof, the Indemnifying Party shall not be liable to such Indemnified Party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation; provided that the Indemnified Party may participate in such defense at the Indemnified Party's expense; and provided further that the Indemnified Party or Indemnified Parties shall have the right to employ one counsel to represent it or them if, in the reasonable judgment of the Indemnified Party or Indemnified Parties, it is advisable for it or them to be represented by separate counsel by reason of having legal defenses which are different from or in addition to those available to the Indemnifying Party, and in that event the reasonable fees and expenses of such one counsel shall be paid by the Indemnifying Party. If the Indemnifying Party is not entitled to, or elects not to, assume the defense of a claim, it will not be obligated to pay the fees and expenses of more than one counsel for the Indemnified Parties with respect to such claim, unless in the reasonable judgment of any Indemnified Party a conflict of interest may exist between such Indemnified Party and any other Indemnified Parties with respect to such claim, in which event the Indemnifying Party shall be obligated to pay the fees and expenses of such additional counsel for the Indemnified Parties or counsels. No Indemnifying Party shall consent to entry of any judgment or enter into any settlement without the consent of the Indemnified Party which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. No Indemnifying Party shall be subject to any liability for any settlement made without its consent, which consent shall not be unreasonably withheld. (d) Contribution. If the indemnity and reimbursement obligation provided for in any paragraph of this Section 6 is unavailable or insufficient to hold harmless an Indemnified Party in respect of any Losses (or actions or proceedings in respect thereof) referred to therein, then the Indemnifying Party shall contribute to the amount paid or payable by the Indemnified Party as a result of such Losses (or actions or proceedings in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and the Indemnified Party on the other hand in connection with statements or omissions which resulted in such Losses, as well as any other relevant equitable considerations; provided, however, that the aggregate amount which may be recovered from any holder of Registrable Securities pursuant to this Section 6(d) in connection with any registration and sale of Registrable Securities shall be limited to the total proceeds received by such holder from the sale of such Registrable Securities. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Indemnifying Party or the Indemnified Party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid by an Indemnified Party as a result of the Losses referred to in the first sentence of this paragraph shall be deemed to include any legal and other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any Loss which is the subject of this paragraph. 12 No Indemnified Party guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from the Indemnifying Party if the Indemnifying Party was not guilty of such fraudulent misrepresentation. (e) Other Indemnification. Indemnification similar to that specified in the preceding paragraphs of this Section 6 (with appropriate modifications) shall be given by the Company and each seller of Registrable Securities with respect to any required registration or other qualification of securities under any federal or state law or regulation of any governmental authority other than the Securities Act. The provisions of this Section 6 shall be in addition to any other rights to indemnification or contribution which an Indemnified Party may have pursuant to law, equity, contract or otherwise. To the extent that the indemnity provisions contained in any underwriting agreement to which the Company is a party conflict with this Section 6 such underwriting agreement shall control. (f) Indemnification Payments. The indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Losses are incurred; provided that the Person to whom expenses are paid or advanced provides any undertaking to repay such advance if it is ultimately determined that such Person is not entitled to indemnification hereunder. 7. Covenants Relating to Rule 144. The Company will file reports in compliance with the Exchange Act, will comply with all rules and regulations of the Commission applicable in connection with the use of Rule 144 and take such other actions and furnish such holder with such other information as such holder may request in order to avail itself of such rule or any other rule or regulation of the Commission allowing such holder to sell any Registrable Securities without registration, and will, at its expense, forthwith upon the request of any holder of Registrable Securities, deliver to such holder a certificate, signed by the Company's principal financial officer, stating (a) the Company's name, address and telephone number (including area code), (b) the Company's Internal Revenue Service identification number, (c) the Company's Commission file number, (d) the number of shares of each class of Stock outstanding as shown by the most recent report or statement published by the Company, and (e) whether the Company has filed the reports required to be filed under the Exchange Act for a period of at least 90 days prior to the date of such certificate and in addition has filed the most recent annual report required to be filed thereunder. If at any time the Company is not required to file reports in compliance with either Section 13 or Section 15(d) of the Exchange Act, the Company at its expense will, forthwith upon the written request of the holder of any Registrable Securities, make available adequate current public information with respect to the Company within the meaning of paragraph (c)(2) of Rule 144. 8. Other Registration Rights. The Company represents and warrants to the Investor that there is not in effect on the date hereof any agreement by the Company (other than this Agreement) pursuant to which any holders of securities of the Company have a right to cause the Company to register or qualify such securities under the Securities Act or any securities or blue sky laws of any jurisdiction. The Company shall not provide, or agree to provide, any rights to cause the Company to register or qualify any securities of the Company under the Securities Act or any securities or blue sky laws of any jurisdiction which rights are adverse to the rights granted to the Investors hereunder. 13 9. Definitions. (a) Except as otherwise specifically indicated, the following terms will have the following meanings for all purposes of this Agreement: "Affiliate," as applied to any Person, shall mean any other Person directly or indirectly controlling, controlled by, or under common control with, that Person; for purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities, by contract or otherwise. "Agreement" means this Registration Rights Agreement, as the same shall be amended from time to time. "Business Day" means a day other than Saturday, Sunday or any other day on which banks located in the State of Illinois are authorized or obligated to close. "Commission" means the United States Securities and Exchange Commission, or any successor governmental agency or authority. "Common Stock" means shares of common stock, par value $0.01 per share, of the Company, as constituted on the date hereof, and any stock into which such common stock shall have been changed or any stock resulting from any reclassification of such common stock. "Company" has the meaning ascribed to it in the preamble. "Cutback Registration" means any Requested Registration or Piggyback Registration to be effected as an underwritten Public Offering in which the Managing Underwriter with respect thereto advises the Company and the Requesting Holders in writing that, in its opinion, the number of securities requested to be included in such registration (including securities of the Company which are not Registrable Securities) exceed the number which can be sold in such offering without a reduction in the selling price anticipated to be received for the securities to be sold in such Public Offering. "Effective Date" means April 3, 2003, the effective date of the Plan of Reorganization. "Effective Long-Form Registration" means a Long-Form Registration that results in an Effective Registration. "Effective Registration" means a Requested Registration which has been (a) declared or ordered effective in accordance with the rules of the Commission, and (b) kept effective for the period of time contemplated by Section 3(b) Notwithstanding the foregoing, a registration that does not become effective after it has been filed with the Commission solely by reason of the refusal to proceed of the Requesting Holders shall be deemed to be an Effective Registration for purposes of this Agreement. 14 "Effective Short-Form Registration" means a Short-Form Registration that results in an Effective Registration. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "Form S-1" means Form S-I promulgated by the Commission under the Securities Act, or any successor or similar long-form registration statement. "Form S-3" means Form S-3 promulgated by the Commission under the Securities Act, or any successor or similar short-form registration statement. "Holder" has the meaning given in the Restructuring Agreement. "Indemnified Party" means a party entitled to indemnity in accordance with Section 6. "Indemnifying Party" means a party obligated to provide indemnity in accordance with Section 6. "Initiating Holders" means any holder or holders of Registrable Securities making a written request pursuant to Section 1 for the registration of Registrable Securities. "Investor" has the meaning ascribed to it in the preamble. "Long-Form Registration" means a Requested Registration effected by the filing of a registration statement on Form S-1 with the Commission. "Losses" has the meaning ascribed to it in Section 6(a). "Managing Underwriter" means, with respect to any Public Offering, the underwriter or underwriters managing such Public Offering. "NASD" means the National Association of Securities Dealers. "Notice of Piggyback Registration" has the meaning ascribed to it in Section 2(a). "Person" means any natural person, corporation, limited liability company, general partnership, limited partnership, proprietorship, other business organization, trust, union or association. "Piggyback Registration" means any registration of equity securities of the Company under the Securities Act (other than a registration in respect of a dividend reinvestment or similar plan for stockholders of the Company or on Form S-4 or Form 5-8 promulgated by the Commission, or any successor or similar forms thereto), whether for sale for the account of the Company or for the account of any holder of securities of the Company (other than Registrable Securities). 15 "Public Offering" means any offering of Common Stock to the public, either on behalf of the Company or any of its securityholders, pursuant to an effective registration statement under the Securities Act. "Registrable Securities" means (i) the Shares and (ii) any additional shares of Common Stock issued or distributed by way of a dividend, stock split or other distribution in respect of the Shares, or acquired by way of any rights offering or similar offering made in respect of the Shares. As to any particular Registrable Securities, once issued such securities shall cease to be Registrable Securities when (i) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (ii) they shall have been distributed to the public pursuant to Rule 144, (iii) they are transferred to or become owned by a Person who is not an Investor or (iv) they shall have ceased to be outstanding. "Registration Expenses" means all expenses incident to the Company's performance of or compliance with its obligations under this Agreement to effect the registration of Registrable Securities in a Requested Registration or a Piggyback Registration, including, without limitation, all registration, filing, securities exchange listing and NASD fees, all registration, filing, qualification and other fees and expenses of complying with securities or blue sky laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, the fees and disbursements of counsel for the Company and of its independent public accountants, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, premiums and other costs of policies of insurance against liabilities arising out of the Public Offering of the Registrable Securities being registered and any fees and disbursements of underwriters customarily paid by issuers or sellers of securities, but excluding underwriting discounts and commissions and transfer taxes, if any, in respect of Registrable Securities, which shall be payable by each holder thereof provided that the Company will not pay the fees, expenses and disbursements of any counsel, accountants or advisors (financial or otherwise) of any Person on whose behalf securities of the Company are included in such registration. "Requesting Holders" means, with respect to any Requested Registration or Piggyback Registration, the holders of Registrable Securities requesting to have Registrable Securities included in such registration in accordance with this Agreement. "Requested Registration" means any registration of Registrable Securities under the Securities Act effected in accordance with Section 1. "Restructuring Agreement" has the meaning ascribed to it in the preamble. "Rule 144" means Rule 144 promulgated by the Commission under the Securities Act, and any successor provision thereto. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "Shares" means shares of Common Stock received pursuant to the Plan of Reorganization. 16 "Short-Form Registration" means a Requested Registration effected by the filing of a registration statement on Form S-3 with the Commission. (b) Unless the context of this Agreement otherwise requires, (1) words of any gender include each other gender; (ii) words using the singular or plural number also include the plural or singular number, respectively; (iii) the terms "hereof," "herein," "hereby" and derivative or similar words refer to this entire Agreement; and (iv) the term "Section" refers to the specified Section of this Agreement. `Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified. 10. Miscellaneous (a) Notices. All notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally or by facsimile transmission or mailed (first class postage prepaid) to the parties at the following addresses or facsimile numbers: If to any Investor, to the appropriate address below: High River Limited Partnership c/o Icahn Associates Corp. 767 Fifth Avenue New York, New York 10153 Facsimile No. (212) 750-5815 Attn.: Vincent J. Intrieri Debt Strategies Fund Inc. c/o Merrill Lynch investment Managers, L.P. 800 Scudders Mill Road Plainsboro, New Jersey 08536 Facsimile No.: (609) 282-2756 Attn.: Michael A. Brown Northeast Investors Trust c/o Northeast Investors 50 Congress Street, Suite 1000 Boston, Massachusetts 02109 Facsimile No.: (617) 523-5412 Attn.: Bruce Monrad with copies to: Brown Rudnick Berlack Israels LLP 120 West 45 Street New York, New York 10036 Facsimile No.: (212) 704-0196 Attn.: Steven E. Greenbaum, Esq. 17 If to the Company, to: Viskase Companies, Inc. 625 Willowbrook Centre Parkway Willowbrook, IL 60527 Facsimile No.: (630) 455-2152 Attn: President with a copy to: Milbank, Tweed, Hadley & McCloy LLP 1 Chase Manhattan Plaza New York, NY 10005-1413 Facsimile No.: (212) 530-5219 Attn: Allan Brilliant, Esq. All such notices, requests and other communications will (i) if delivered personally to the address as provided in this Section, be deemed given upon delivery, (ii) if delivered by facsimile transmission to the facsimile number as provided in this Section, be deemed given upon receipt, and (iii) if delivered by mail in the manner described above to the address as provided in this Section, be deemed given upon receipt (in each case regardless of whether such notice, request or other communication is received by any other Person to whom a copy of such notice is to be delivered pursuant to this Section). Any party from time to time may change its address,. facsimile number or other information for the purpose of notices to that party by giving notice specifying such change to the other parties hereto. (b) Entire Agreement. This Agreement supersedes all prior discussions and agreements between the parties with respect to the subject matter hereof, and contains the sole and entire agreement between the parties hereto with respect to the subject matter hereof. (c) Amendment. This Agreement may be amended, supplemented or modified only by a written instrument (which may be executed in any number of counterparts) duly executed by or on behalf of each of the Company and Persons owning 66 2/3% or more of the Registrable Securities. (d) Waiver. Subject to paragraph (e of this Section, any term or condition of this Agreement may be waived at any time by the party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the party waiving such term or condition. No waiver by any party of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same term or condition of this Agreement on any future occasion. (e) Consents and Waivers by Holders of Registrable Securities. Any consent of the holders of Registrable Securities pursuant to this Agreement, and any waiver by such holders of any provision of this Agreement, shall be in writing (which may be executed in any number of counterparts) and may be given or taken by Persons owning 66 2/3% or more of the Registrable Securities, and any such consent or waiver so given or taken will be binding on all the holders of Registrable Securities. 18 (f) No Third Party Beneficiary. The terms and provisions of this Agreement are intended solely for the benefit of each party hereto, their respective successors or permitted assigns and any other holder of Registrable Securities, and it is not the intention of the parties to confer third-party beneficiary rights upon any other Person other than any Person entitled to indemnity under Section 6 (g) Assignment; Successors and Assigns Neither this Agreement nor any right, interest or obligation hereunder may be assigned by any Investor without the prior written consent of the Company and any attempt to do so will be void; provided, however, any Investor may make such an assignment to an Affiliate of such Investor provided that such Affiliate agrees to be bound by the terms hereof. Subject to the preceding sentence, this Agreement is binding upon, inures to the benefit of and is enforceable by the parties hereto and their respective successors and assigns. (h) Headings. The headings used in this Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof. (i) Invalid Provisions. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future law, and if the rights or obligations of any party hereto under this Agreement will not be materially and adversely affected thereby, (i) such provision will be fully severable, (ii) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof and (iii) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom. (j) Remedies. Except as otherwise expressly provided for herein, no remedy conferred by any of the specific provisions of this Agreement is intended to be exclusive of any other remedy, and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise. The election of any one or more remedies by any party hereto shall not constitute a waiver by any such party of the right to pursue any other available remedies. Damages in the event of breach of this Agreement by a party hereto or any other holder of Registrable Securities would be difficult, if not impossible, to ascertain, and it is therefore agreed that each such Person, in addition to and without limiting any other remedy or right it may have, will have the right to an injunction or other equitable relief in any court of competent jurisdiction, enjoining any such breach, and enforcing specifically the terms and provisions hereof, and the Company and each holder of Registrable Securities, by its acquisition of such Registrable Securities, hereby waives any and all defenses it may have on the ground of lack of jurisdiction or competence of the court to grant such an injunction or other equitable relief. The existence of this right will not preclude any such Person from pursuing any other rights and remedies at law or in equity which such Person may have. (k) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to a contract executed and performed in such State, without giving effect to the conflicts of laws principles thereof. 19 (l) Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. (m) Restrictions on Transfer. In order to clarify that the transfer restrictions in Section 5.03(b) of the Restructuring Agreement are fully applicable to the Registrable Securities, Section 5.03(b) of the Restructuring Agreement is hereby amended by deleting such Section in its entirety and replacing it with the following: "Until April 4, 2006, no Holder may transfer (other than to another Holder or to an affiliate of a Holder that agrees to be bound by the terms of this Agreement as a Holder) any Registrable Securities (as defined in the Registration Rights Agreement, dated as of April 15, 2003, between the Company and the Holders). For this purpose, "transfer" means any mode (direct or indirect, absolute or conditional, voluntary or involuntary) of disposing of or parting with property or an interest therein. Notwithstanding the foregoing, and other than transfers to another Holder or to an affiliate of another Holder that agrees to be bound by the provisions of this paragraph (b), beginning on April 4, 2005, a Holder may transfer Registrable Securities for cash, provided that, until and including April 3, 2006, (i) at least 20 business days before such transfer such Holder shall have furnished to the Company with respect to the transferee the information that would be required in a Schedule I 3D filed by the transferee with respect to the transfer and (ii) the Company shall not have notified the Holder within that period that it or a person it designates will purchase the securities to be transferred on the same terms as the proposed transferee (in which case such Holder shall transfer them to the Company or its designee on such terms). If the Company does not so notify the Holder, the Holder shall be free for a period of 90 days to transfer the securities to the proposed transferee on terms no more favorable to the transferee than the terms described to the Company, after which the transfer will again be subject to the terms of this Section. The Registrable Securities held by each Holder will be appropriately legended to reflect the provisions of this Section." IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officer of each party hereto as of the date first above written. HIGH RIVER LIMITED PARTNERSHIP By: ____________________________________ Name: Title: DEBT STRATEGIES FUND, INC. By: ____________________________________ Name: Title: 20 NORTHEAST INVESTORS TRUST By: ____________________________________ Name: Title: VISKASE COMPANIES, INC. By: ____________________________________ Name: Title: 21 EX-4.7 5 c90665exv4w7.txt WARRANT AGREEMENT EXHIBIT 4.7 EXECUTION COPY ================================================================================ VISKASE COMPANIES, INC. AND WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION AS WARRANT AGENT ------------------------------ WARRANT AGREEMENT DATED AS OF APRIL 3, 2003 WARRANT AGREEMENT TABLE OF CONTENTS(1) SECTION 1. APPOINTMENT OF WARRANT AGENT...................................... 1 SECTION 2. WARRANT CERTIFICATES.............................................. 1 SECTION 3. EXECUTION OF WARRANT CERTIFICATES................................. 1 SECTION 4. REGISTRATION AND COUNTERSIGNATURE................................. 2 SECTION 5. REGISTRATION OF TRANSFERS AND EXCHANGES........................... 2 SECTION 6. TERMS OF WARRANTS; EXERCISE OF WARRANTS........................... 3 SECTION 7. PAYMENT OF TAXES.................................................. 4 SECTION 8. MUTILATED OR MISSING WARRANT CERTIFICATES......................... 4 SECTION 9. RESERVATION OF WARRANT SHARES..................................... 5 SECTION 10. OBTAINING STOCK EXCHANGE LISTINGS. ETC............................ 5 SECTION 11. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES ISSUABLE........................................... 6 SECTION 12. FRACTIONAL INTERESTS.............................................. 11 SECTION 13. NOTICES TO WARRANT HOLDERS........................................ 12 SECTION 14. MERGER. CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT.......... 13 SECTION 15. WARRANT AGENT..................................................... 13 SECTION 16. CHANGE OF WARRANT AGENT........................................... 16 SECTION 17. NOTICES TO COMPANY AND WARRANT AGENT.............................. 16 SECTION 18. SUPPLEMENTS AND AMENDMENTS........................................ 17 SECTION 19. SUCCESSORS........................................................ 17 SECTION 20. TERMINATION....................................................... 17

- ------------ (1) This Table of Contents does not constitute a part of this Agreement or have any bearing upon the interpretation of any of its terms or provisions. (i) SECTION 21. GOVERNING LAW..................................................... 17 SECTION 22. BENEFITS OF THIS AGREEMENT........................................ 17 SECTION 23. COUNTERPARTS...................................................... 18

(ii) WARRANT AGREEMENT dated as of April 3, 2003 between Viskase Companies, Inc. a Delaware corporation (the "COMPANY"), and Wells Fargo Bank Minnesota, National Association, a national banking association, as Warrant Agent (the "WARRANT AGENT"). WHEREAS, the Company proposes to issue 306,291 Common Stock Purchase Warrants, as hereinafter described (each a "WARRANT" and collectively the "WARRANTS"), which in the aggregate initially entitle the holders thereof to purchase up to 306,291 shares of the Common Stock (outstanding on a fully diluted basis on the date hereof), par value $0.01 per share (the "COMMON STOCK"), of the Company (the Common Stock issuable on exercise of the Warrants being referred to herein as the "WARRANT SHARES"), in connection with the Plan of Reorganization approved by the bankruptcy court in In re: Viskase Companies. Inc., Case No. 02 B 44669, Bankr. N.D. Ill. (the "PLAN OF REORGANIZATION"). WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing so to act, in connection with the issuance, transfer, exchange and exercise of Warrants and other matters as provided herein; NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereto agree as follows: SECTION 1. Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent to act as agent for the Company in accordance with the instructions set forth hereinafter in this Agreement, and the Warrant Agent hereby accepts such appointment. SECTION 2. Warrant Certificates. The certificates evidencing the Warrants (the "WARRANT CERTIFICATES") to be delivered pursuant to this Agreement shall be in registered form only and shall be substantially in the form set forth in Exhibit A attached hereto. SECTION 3. Execution of Warrant Certificates. Warrant Certificates shall be signed on behalf of the Company by its Chairman of the Board or its President or a Vice President and by its Secretary or an Assistant Secretary. Each such signature upon the Warrant Certificates may be in the form of a facsimile signature of the present or any future Chairman of the Board, President, Vice President, Secretary or Assistant Secretary and may be imprinted or otherwise reproduced on the Warrant Certificates and for that purpose the Company may adopt and use the facsimile signature of any person who shall have been Chairman of the Board, President, Vice President, Secretary or Assistant Secretary, notwithstanding the fact that at the time the Warrant Certificates shall be countersigned and delivered or disposed of he or she shall have ceased to hold such office. In case any officer of the Company who shall have signed any of the Warrant Certificates shall cease to be such officer before the Warrant Certificates so signed shall have been countersigned by the Warrant Agent, or disposed of by the Company, such Warrant Certificates nevertheless may be countersigned and delivered or disposed of as though such person had not ceased to be such officer of the Company; and any Warrant Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Warrant Certificate, shall be a proper officer of the Company to sign such Warrant Certificate, although at the date of the execution of this Warrant Agreement any such person was not such officer. Warrant Certificates shall be dated the date of countersignature by the Warrant Agent. SECTION 4. Registration and Countersignature. The Warrant Agent, on behalf of the Company, shall hold the Warrants unnumbered and unregistered. Warrant Certificates shall be manually countersigned by the Warrant Agent and shall not be valid for any purpose unless so countersigned. The Warrant Agent shall, upon written instructions of the Chairman of the Board, the President, a Vice President, the Treasurer or the Chief Financial Officer of the Company, initially countersign, issue and deliver Warrants entitling the holders thereof to purchase not more than the number of Warrant Shares referred to above in the first recital hereof and shall countersign and deliver Warrants as otherwise provided in this Agreement. The Company and the Warrant Agent may deem and treat the registered holder(s) of the Warrant Certificates as the absolute owner(s) thereof (notwithstanding any notation of ownership or other writing thereon made by anyone), for all purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary. SECTION 5. Registration of Transfers and Exchanges. The Warrant Agent shall from time to time, subject to the limitations of Section 6 hereof, register the transfer of any outstanding Warrant Certificates upon the records to be maintained by it for that purpose, upon surrender thereof duly endorsed or accompanied (if so required by it) by a written instrument or instruments of transfer in form satisfactory to the Warrant Agent, duly executed by the registered holder or holders thereof or by the duly appointed legal representative thereof or by a duly authorized attorney. Upon any such registration of transfer, a new Warrant Certificate shall be issued to the transferee(s) and the surrendered Warrant Certificate shall be cancelled by the Warrant Agent. Cancelled Warrant Certificates shall thereafter be disposed of by the Warrant Agent in its customary manner. Subject to the terms of this Agreement, Warrant Certificates may be exchanged at the option of the holder(s) thereof, when surrendered to the Warrant Agent at its principal office, which is currently located at the address listed in Section 17 hereof, for another Warrant Certificate or other Warrant Certificates of like tenor and representing in the aggregate a like number of Warrants. Any holder desiring to exchange a Warrant Certificate shall deliver a written request to the Warrant Agent, and shall surrender, duly endorsed or accompanied (if so required by the Warrant Agent) by a written instrument or instruments of transfer in form satisfactory to the Warrant Agent, the Warrant Certificate or Certificates to be so exchanged. Warrant Certificates surrendered for exchange shall be cancelled by the Warrant Agent. Such 2 cancelled Warrant Certificates shall then be disposed of by such Warrant Agent in its customary manner. The Warrant Agent is hereby authorized to countersign, in accordance with the provisions of this Section 5 and of Section 4 hereof, the new Warrant Certificates required pursuant to the provisions of this Section 5. SECTION 6. Terms of Warrants; Exercise of Warrants. The initial exercise price per share at which Warrant Shares shall be purchasable upon the exercise of Warrants shall be $10.00 (the "EXERCISE PRICE"). Each Warrant shall be initially exercisable for that number of shares of Common Stock equal to the Exercise Ratio (as defined below). For purposes of this Agreement, the "EXERCISE RATIO" shall be, as of the date of this Agreement, equal to one, subject to adjustment pursuant to Section 11 hereof. Subject to the terms of this Agreement, each Warrant holder shall have the right, which may be exercised commencing at the opening of business on the date of such Warrant and until 5:00 p.m., New York City time on April 2, 2010, to receive from the Company the number of fully paid and nonassessable Warrant Shares which the holder may at the time be entitled to receive on exercise of such Warrants and payment of the Exercise Price then in effect for such Warrant Shares. In the alternative, each Warrant holder may exercise its right, during the Exercise Period, to receive all, but not less than all, Warrant Shares on a net basis, such that, without the exchange of any funds, the holder receives that number of Warrant Shares otherwise issuable (or payable) upon exercise of its Warrants less that number of Warrant Shares having an aggregate Current Market Price (as defined in Section 11(d)), determined as of the business day immediately preceding the day the Company received the election to purchase, equal to the aggregate Exercise Price that would otherwise have been paid by the holder of the Warrant Shares. Each Warrant not exercised prior to 5:00 p.m., New York City time, on April 2, 2010 shall become void and all rights thereunder and all rights in respect thereof under this Agreement shall cease as of such time. No adjustments as to dividends will be made upon exercise of the Warrants. A Warrant may be exercised upon surrender to the Company at the principal office of the Warrant Agent, which is currently located at the address listed in Section 17 hereof, of the certificate or certificates evidencing the Warrants to be exercised with the form of election to purchase on the reverse thereof duly filled in and signed and such other documentation as the Warrant Agent may reasonably request, and upon payment to the Warrant Agent for the account of the Company of the Exercise Price which is set forth in the form of Warrant Certificate attached hereto as Exhibit A as adjusted as herein provided, for the number of Warrant Shares in respect of which such Warrants are then exercised. Payment of the aggregate Exercise Price shall be made (i) in cash or by certified or official bank check or federal wire transfer payable to the order of the Warrant Agent for the account of the Company in immediately available funds or (ii) in the manner provided in the second paragraph of this Section 6. Subject to the provisions of Section 7 hereof, upon such surrender of Warrants and payment of the Exercise Price, the Company shall issue and cause to be delivered with all reasonable dispatch to and in such name or names as the Warrant holder may designate a 3 certificate or certificates for the number of full Warrant Shares issuable upon the exercise of such Warrants together with cash as provided in Section 12 hereof. Such certificate or certificates shall be deemed to have been issued and any person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares as of the date of the surrender of such Warrants and payment of the Exercise Price. The Warrants shall be exercisable, at the election of the holders thereof, either in full or from time to time in part and, in the event that a certificate evidencing Warrants is exercised in respect of fewer than all of the Warrant Shares issuable on such exercise at any time prior to the date of expiration of the Warrants, a new certificate evidencing the remaining Warrant or Warrants will be issued, and the Warrant Agent is hereby irrevocably authorized to countersign and to deliver the required new Warrant Certificate or Certificates pursuant to the provisions of this Section 6 and of Section 3 hereof, and the Company, whenever required by the Warrant Agent, shall supply the Warrant Agent with Warrant Certificates duly executed on behalf of the Company for such purpose. The Warrant Agent may assume that any Warrant presented for exercise is permitted to be so exercised under applicable law and shall have no liability for acting in reliance on such assumption. All Warrant Certificates surrendered upon exercise of Warrants shall be cancelled by the Warrant Agent. Such cancelled Warrant Certificates shall then be disposed of by the Warrant Agent in its customary manner. The Warrant Agent shall account promptly to the Company with respect to Warrants exercised and concurrently pay to the Company all monies received by the Warrant Agent for the purchase of the Warrant Shares through the exercise of such Warrants. The Warrant Agent shall keep copies of this Agreement and any notices given or received hereunder available for inspection by the holders with reasonable prior written notice during normal business hours at its office. The Company shall supply the Warrant Agent from time to time with such numbers of copies of this Agreement as the Warrant Agent may request. SECTION 7. Payment of Taxes. The Company will pay all documentary stamp taxes attributable to the initial issuance of Warrant Shares upon the exercise of Warrants; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issue of any Warrant Certificates or any certificates for Warrant Shares in a name other than that of the registered holder of a Warrant Certificate surrendered upon the exercise of a Warrant, and the Company shall not be required to issue or deliver such Warrant Certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. SECTION 8. Mutilated or Missing Warrant Certificates. In case any of the Warrant Certificates shall be mutilated, lost, stolen or destroyed, the Company, at its expense, shall issue and the Warrant Agent shall countersign, in exchange and substitution for and upon cancellation of the mutilated Warrant Certificate, or in 4 lieu of and substitution for the Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor and representing an equivalent number of Warrants, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of such Warrant Certificate and indemnity, if requested, also reasonably satisfactory to the Company. SECTION 9. Reservation of Warrant Shares. The Company will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock or its authorized and issued Common Stock held in its treasury, for the purpose of enabling it to satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the maximum number of shares of Common Stock which may then be deliverable upon the exercise of all outstanding Warrants. The Warrant Agent shall have no duty to verify availability of such shares set aside by the Company. The Company or, if appointed, the transfer agent for the Common Stock (the "TRANSFER AGENT") and every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of any of the rights of purchase aforesaid will be irrevocably authorized and directed at all times to reserve such number of authorized shares as shall be required for such purpose. The Company will keep a copy of this Agreement on file with the Transfer Agent and with every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of the rights of purchase represented by the Warrants. The Warrant Agent is hereby irrevocably authorized to requisition from time to time from such Transfer Agent the stock certificates required to honor outstanding Warrants upon exercise thereof in accordance with the terms of this Agreement. The Company will supply such Transfer Agent with duly executed certificates for such purposes and will provide or otherwise make available any cash which may be payable as provided in Section 12 hereof. The Company will furnish such Transfer Agent a copy of all notices of adjustments and certificates related thereto, transmitted to each holder pursuant to Section 13 hereof. Before taking any action which would cause an adjustment pursuant to Section 11 hereof to reduce the Exercise Price below the then par value (if any) of the Warrant Shares, the Company will take any corporate action which may, in the opinion of its counsel (which may be counsel employed by the Company), be necessary in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares at the Exercise Price as so adjusted. The Company covenants that all Warrant Shares which may be issued upon exercise of Warrants will, upon payment of the Exercise Price therefor and issue, be fully paid, nonassessable, free of preemptive rights and free from all taxes, liens, charges and security interests with respect to the issue thereof. SECTION 10. Obtaining Stock Exchange Listings, Etc. The Company will from time to time take all action which may be necessary so that the Warrant Shares, immediately upon their issuance upon the exercise of Warrants, will be listed on the principal securities exchanges and markets within the United States of America, if any, on which other shares of Common Stock are then listed. The Company will endeavor to 5 comply with all securities laws regulating the offer and delivery of Common Stock on the exercise of Warrants. SECTION 11. Adjustment of Exercise Price and Number of Warrant Shares Issuable. The Exercise Ratio and number of Warrant Shares issuable upon the exercise of each Warrant are subject to adjustment from time to time upon the occurrence of the events enumerated in this Section 11. For purposes of this Section 11, "COMMON STOCK" means shares now or hereafter authorized of any class of common stock of the Company and any other stock of the Company, however designated, that has the right (subject to any prior rights of any class or series of preferred stock) to participate in any distribution of the assets or earnings of the Company without limit as to per share amount. (a) Adjustment for Change in Capital Stock. If the Company: (1) pays a dividend or makes a distribution on its Common Stock in shares of its Common Stock; (2) subdivides its outstanding shares of Common Stock into a greater number of shares; (3) combines its outstanding shares of Common Stock into a smaller number of shares; (4) makes a distribution on its Common Stock in shares of its capital stock other than Common Stock; or (5) issues by reclassification of its Common Stock any shares of its capital stock, then the Exercise Ratio in effect immediately prior to such action shall be proportionately adjusted so that the holder of any Warrant thereafter exercised may receive the aggregate number and kind of shares of capital stock of the Company which he or she would have owned immediately following such action if such Warrant had been exercised immediately prior to such action. The adjustment shall become effective immediately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a subdivision, combination or reclassification. If after an adjustment a holder of a Warrant upon exercise of it may receive shares of two or more classes of capital stock of the Company, the Company shall reasonably determine the allocation of the adjusted Exercise Price between the classes of capital stock. After such allocation, the exercise privilege and the Exercise Price of each class of capital stock shall 6 thereafter be subject to adjustment on terms comparable to those applicable to Common Stock in this Section 11. Such adjustment shall be made successively whenever any event listed above shall occur. (b) Adjustment for Rights Issue. If the Company distributes any rights, options or warrants to all holders of its Common Stock entitling them for a period expiring within 45 days after the record date mentioned below to purchase shares of Common Stock at a price per share less than the Current Market Price (as defined in Section 11(d)) per share on that record date, the Exercise Ratio shall be adjusted in accordance with the formula: E' = E x O + N ----------------------------- O + [N+P] ----- [M] E' = the adjusted Exercise Ratio. E = the current Exercise Ratio. O = the number of shares of Common Stock outstanding on the record date. N = the number of additional shares of Common Stock offered. P = the purchase price per share of the additional shares. M = the Current Market Price per share of Common Stock on the record date. The adjustment shall be made successively whenever any such rights, options or warrants are issued and shall become effective immediately after the record date for the determination of stockholders entitled to receive the rights, options or warrants. If at the end of the period during which such rights, options or warrants are exercisable, not all rights, options or warrants shall have been exercised, the Exercise Ratio shall be immediately readjusted to what it would have been if "N" in the above formula had been the number of shares actually issued. (c) Adjustment for Other Distributions. If the Company distributes to all holders of its Common Stock any of its assets (including cash) or debt securities or any rights or warrants to purchase debt securities, assets or other securities of the Company, the Exercise Ratio shall be adjusted in accordance with the formula: E' = E x M ------- M - F 7 where: E' = the adjusted Exercise Ratio. E = the current Exercise Ratio. M = the Current Market Price per share of Common Stock on the record date mentioned below. F = the fair market value on the record date of the assets, securities, rights or warrants distributable to one share of Common Stock. The Board of Directors shall reasonably determine the fair market value of such assets, securities, rights or warrants. The adjustment shall be made successively whenever any such distribution is made and shall become effective immediately after the record date for the determination of stockholders entitled to receive the distribution. This subsection (c) does not apply to regular quarterly cash dividends or rights, options or warrants referred to in subsection (b) of this Section 11. (d) Current Market Price. In subsections (b) and (c) of this Section 11 and Section 6, the "Current Market Price" per share of Common Stock on any date is the average of the Quoted Prices of the Common Stock for 30 consecutive trading days commencing 45 trading days before the date in question. The "Quoted Price" of the Common Stock is the last reported sales price of the Common Stock as reported by NASDAQ, National Market System, or if the Common Stock is listed on a securities exchange, the last reported sales price of the Common Stock on such exchange which shall be for consolidated trading if applicable to such exchange, or if neither so reported or listed, the last reported bid price of the Common Stock. In the absence of one or more such quotations, the Board of Directors of the Company shall determine the Current Market Price on the basis of such quotations as it reasonably considers appropriate. (e) When De Minimis Adjustment May Be Deferred. No adjustment in the Exercise Ratio need be made unless the adjustment would require an increase or decrease of at least 1% in the Exercise Ratio. Any adjustments that are not made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest 1/100th of a whole share, as the case may be. (f) When No Adjustment Required. No adjustment need be made for a transaction referred to in subsections (b) or (c) of this Section 11 if Warrant holders are to participate, without requiring the Warrants to be exercised, in the transaction on a basis and with notice that the Board of Directors of the 8 Company reasonably determines to be fair and appropriate in light of the basis and notice on which holders of Common Stock participate in the transaction. No adjustment need be made for a change in the par value or no par value of the Common Stock. To the extent the Warrants become convertible into cash, no adjustment need be made thereafter as to the amount of cash into which such Warrants are exercisable. Interest will not accrue on the cash. (g) Notice of Adjustment. Whenever the Exercise Ratio is adjusted, the Company shall provide the notices required by Section 13 hereof. (h) Voluntary Reduction. The Company from time to time may increase the Exercise Ratio by any amount for any period of time (including, without limitation, permanently) if such period is at least 20 days; provided, however, that in no event may the Exercise Price be less than the par value of a share of Common Stock; provided further that no Warrant may be adjusted pursuant to this paragraph (h) unless all outstanding Warrants issued pursuant to this Agreement are proportionately adjusted simultaneously. Whenever the Exercise Ratio is increased, the Company shall mail to Warrant holders a notice of the increase. The Company shall mail the notice to each holder of Warrants at least 15 days before the date the increased Exercise Ratio takes effect. The notice shall state the reduced Exercise Price and the period it will be in effect. An increase in the Exercise Ratio does not change or adjust the Exercise Ratio otherwise in effect for purposes of subsections (a), (b) and (c) of this Section 11. (i) [intentionally omitted.] (j) Reorganization of Company. If the Company consolidates or merges with or into, or transfers or leases all or substantially all its assets to, any person, upon consummation of such transaction the Warrants shall automatically become exercisable for the kind and amount of securities, cash or other assets which the holder of a Warrant would have owned immediately after the consolidation, merger, transfer or lease if such holder had exercised the Warrant immediately before the effective date of the transaction; provided that (i) if the holders of Common Stock were entitled to exercise a right of election as to the kind or amount of securities, cash or other assets receivable upon such consolidation or merger, then the kind and amount of securities, cash or other assets for which each Warrant shall become exercisable shall be deemed to be the kind and amount so receivable per share by a majority of the holders of Common Stock in such consolidation or merger or (ii) if a tender or exchange offer shall have been made to and accepted by the holders of Common Stock under circumstances in which, upon completion of such tender or exchange offer, the 9 maker thereof, together with members of any group (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) of which such maker is a part, and together with any affiliate or associate of such maker (within the meaning of Rule 12b-2 under the Exchange Act) and any members of any such group of which any such affiliate or associate is a part, own beneficially (within the meaning of Rule 13d-3 under the Exchange Act) more than 50% of the outstanding shares of Common Stock, the holder of a Warrant shall be entitled to receive the highest amount of cash, securities or other property to which such holder would actually have been entitled as a shareholder if such Warrant holder had exercised the Warrant prior to the expiration of such tender or exchange offer, accepted such offer and all of the Common Stock held by such holder had been purchased pursuant to such tender or exchange offer, subject to adjustments (from and after the consummation of such tender or exchange offer) as nearly equivalent as possible to the adjustments provided for in this Section 11. Concurrently with the consummation of any such transaction, the corporation formed by or surviving any such consolidation or merger if other than the Company, or the person to which such sale or conveyance shall have been made, shall enter into a supplemental Warrant Agreement so providing and further providing for adjustments which shall be as nearly equivalent as may be practical to the adjustments provided for in this Section. The successor Company shall mail to Warrant holders a notice describing the supplemental Warrant Agreement. If the issuer of securities deliverable upon exercise of Warrants under the supplemental Warrant Agreement is an affiliate of the former, surviving, transferee or lessee corporation, that issuer shall join in the supplemental Warrant Agreement. If this subsection (j) applies, subsections (a), (b) or (c) of this Section 11 do not apply. (k) Warrant Agent's Disclaimer. The Warrant Agent has no duty to determine when an adjustment under this Section 11 should be made, how it should be made or what it should be. The Warrant Agent has no duty to determine whether any provisions of a supplemental Warrant Agreement under subsection (i) of this Section 11 are correct. The Warrant Agent makes no representation as to the validity or value of any securities or assets issued upon exercise of Warrants. The Warrant Agent shall not be responsible for the Company's failure to comply with this Section. (l) When Issuance or Payment May Be Deferred. In any case in which this Section 11 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event (i) issuing to the holder of any Warrant exercised after such record date the Warrant Shares and other capital stock of the Company, if any, issuable upon such exercise over and above the Warrant Shares and other capital stock of the Company, if any, issuable upon such exercise on the basis of the Exercise Price and (ii) paying to such holder any amount in cash in lieu of a fractional share pursuant to Section 12 hereof; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional Warrant Shares, other capital stock and cash upon the occurrence of the event requiring such adjustment. 10 (m) Adjustment in Exercise Price. Upon each event that provides for an adjustment of the Exercise Ratio pursuant to this Section 11, the Exercise Price for each Warrant Share shall be equal to the result of the following formula: E' = E x N ---- N' where: N' = the adjusted number of Warrant Shares issuable upon exercise of a Warrant by payment of the adjusted Exercise Price. N = the number of Warrant Shares previously issuable upon exercise of a Warrant by payment of the Exercise Price prior to adjustment. E' = the adjusted Exercise Price. E = the Exercise Price prior to adjustment. (n) Form of Warrants. Irrespective of any adjustments in the Exercise Ratio or the number or kind of shares purchasable upon the exercise of the Warrants, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the Warrants initially issuable pursuant to this Agreement. SECTION 12. Fractional Interests. (a) The Company shall not be required to issue fractional Warrant Shares on the exercise of Warrants. If more than one Warrant shall be presented for exercise in full at the same time by the same holder, the number of full Warrant Shares which shall be issuable upon the exercise thereof shall be computed on the basis of the aggregate number of Warrant Shares purchasable on exercise of the Warrants so presented. If any fraction of a Warrant Share would, except for the provisions of this Section 12 be issuable on the exercise of any Warrants (or specified portion thereof), the Company shall pay an amount in cash equal to the Current Market Price as of the Business Day immediately preceding the date the Warrant is presented for exercise, multiplied by such fraction. (b) Warrants may be issued in fractional interests. Holders of fractional interests in Warrants will be entitled to purchase a number of Warrant Shares equal to the product obtained by multiplying the number of Warrant Shares issuable with respect to one Warrant (as such number of shares may be adjusted pursuant to Section 11 of this Warrant Agreement) multiplied by the fractional interest owned by such holder in the Warrant. 11 SECTION 13. Notices to Warrant holders. Upon any adjustment pursuant to Section 11 the Company shall promptly thereafter, and in any event within five days, (1) cause to be filed with the Warrant Agent a certificate executed by the Chief Financial Officer of the Company setting forth the Exercise Ratio after such adjustment and setting forth in reasonable detail the method of calculation and the facts upon which such calculations are based and setting forth the number of Warrant Shares (or portion thereof) issuable after such adjustment in the Exercise Ratio, upon exercise of a Warrant and payment of the adjusted Exercise Ratio, and (ii) cause to be given to each of the registered holders of the Warrant Certificates at his address appearing on the Warrant register written notice of such adjustments by first-class mail, postage prepaid. Where appropriate, such notice may be given in advance and included as a part of the notice required to be mailed under the other provisions of this Section 13. The Warrant Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained and shall not be deemed to have knowledge of such adjustment unless and until it shall have received such certificate. In case: (a) the Company shall authorize the issuance to all holders of shares of Common Stock of rights, options or warrants to subscribe for or purchase shares of Common Stock or of any other subscription rights or warrants; or (b) the Company shall authorize the distribution to all holders of shares of Common Stock of evidences of its indebtedness or assets (other than regular cash dividends or dividends payable in shares of Common Stock or distributions referred to in subsection (a) of Section 11 hereof); or (c) of any consolidation or merger to which the Company is a party and for which approval of any shareholders of the Company is required, or of the conveyance or transfer of the properties and assets of the Company substantially as an entirety, or of any reclassification or change of Common Stock issuable upon exercise of the Warrants (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or a tender offer or exchange offer for shares of Common Stock; or (d) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; or (e) the Company proposes to take any action (other than actions of the character described in Section 11(a) hereof) which would require an adjustment of the Exercise Ratio pursuant to Section 11 hereof; then the Company shall cause to be filed with the Warrant Agent and shall cause to be given to each of the registered holders of the Warrant Certificates at his address appearing on the Warrant register, at least 20 calendar days (or 10 calendar days in any case specified in clauses (a) or (b) above) prior to the applicable record date hereinafter specified, or promptly in the case of events for which there is no record date, by first-class mail, postage prepaid, a written notice stating (i) the date as of which the holders of record of shares of Common Stock to be entitled to receive any such rights, options, warrants or distribution are to be determined, or (ii) the initial expiration 12 date set forth in any tender offer or exchange offer for shares of Common Stock, or (iii) the date on which any such consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up is expected to become effective or consummated, and the date as of which it is expected that holders of record of shares of Common Stock shall be entitled to exchange such shares for securities or other property, if any, deliverable upon such reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up. The failure to give the notice required by this Section 13 or any defect therein shall not affect the legality or validity of any distribution, right, option, warrant, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up, or the vote upon any action. Nothing contained in this Agreement or in any of the Warrant Certificates shall be construed as conferring upon the holders thereof the right to vote or to consent or to receive notice as shareholders in respect of the meetings of shareholders or the election of Directors of the Company or any other matter, or any rights whatsoever as shareholders of the Company. SECTION 14. Merger. Consolidation or Change of Name of Warrant Agent. Any corporation into which the Warrant Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Warrant Agent shall be a party, or any corporation succeeding to the business of the Warrant Agent, shall be the successor to the Warrant Agent hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case at the time such successor to the Warrant Agent shall succeed to the agency created by this Agreement, and in case at that time any of the Warrant Certificates shall have been countersigned but not delivered, any such successor to the Warrant Agent may adopt the countersignature of the original Warrant Agent; and in case at that time any of the Warrant Certificates shall not have been countersigned, any successor to the Warrant Agent may countersign such Warrant Certificates either in the name of the predecessor Warrant Agent or in the name of the successor to the Warrant Agent; and in all such cases such Warrant Certificates shall have the full force and effect provided in the Warrant Certificates and in this Agreement. In case at any time the name of the Warrant Agent shall be changed and at such time any of the Warrant Certificates shall have been countersigned but not delivered, the Warrant Agent whose name has been changed may adopt the countersignature under its prior name, and in case at that time any of the Warrant Certificates shall not have been countersigned, the Warrant Agent may countersign such Warrant Certificates either in its prior name or in its changed name, and in all such cases such Warrant Certificates shall have the full force and effect provided in the Warrant Certificates and in this Agreement. SECTION 15. Warrant Agent. The Warrant Agent undertakes the duties and obligations imposed by this Agreement (and no implied duties or obligations shall be read into this Agreement against the Warrant Agent) upon the following terms and conditions, by all of which the Company and the holders of Warrants, by their acceptance thereof, shall be bound: 13 (a) The statements contained herein and in the Warrant Certificates shall be taken as statements of the Company and the Warrant Agent assumes no responsibility for the correctness of any of the same except such as describe the Warrant Agent or action taken or to be taken by it. The Warrant Agent assumes no responsibility with respect to the distribution of the Warrant Certificates except as herein otherwise provided. (b) The Warrant Agent shall not be responsible for any failure of the Company to comply with any of the covenants contained in this Agreement or in the Warrant Certificates to be complied with by the Company. (c) The Warrant Agent may consult at any time with counsel of its own selection (who may be counsel for the Company) and the Warrant Agent shall incur no liability or responsibility to the Company or to any holder of any Warrant Certificate in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the opinion or the advice of such counsel. (d) The Warrant Agent shall incur no liability or responsibility to the Company or to any holder of any Warrant Certificate for any action taken in reliance on any Warrant Certificate, certificate of shares, notice, resolution, waiver, consent, order, certificate, or other paper, document or instrument (whether in its original or facsimile form) believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. (e) The Company agrees to pay to the Warrant Agent reasonable compensation for all services rendered by the Warrant Agent in accordance with the schedule of fees attached hereto as Exhibit B (including fees and expenses of its counsel) in the administration and execution of this Agreement, to reimburse the Warrant Agent for all expenses, taxes and governmental charges and other charges of any kind and nature incurred by the Warrant Agent in the execution of this Agreement and to indemnify the Warrant Agent (and any predecessor Warrant Agent) and save it harmless against any and all claims (whether asserted by the Company, a holder or any other person), damages, losses, expenses (including taxes other than taxes based on the income of the Warrant Agent) and liabilities, including judgments, costs and counsel fees and expenses, for anything done or omitted by the Warrant Agent in the execution of this Agreement except as a result of its gross negligence or willful misconduct. The provisions of this Section 15(e) shall survive the expiration of the Warrants and the termination of this Agreement. (f) [intentionally omitted.] (g) The Warrant Agent, and any stockholder, director, officer or employee of it, may buy, sell or deal in any of the Warrants or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity. (h) The Warrant Agent shall act hereunder solely as agent for the Company, and its duties shall be determined solely by the provisions hereof. The Warrant Agent shall not 14 be liable for anything which it may do or refrain from doing in connection with this Agreement except for its own gross negligence or willful misconduct. (i) The Warrant Agent shall not at any time be under any duty or responsibility to any holder of any Warrant Certificate to make or cause to be made any adjustment of the Exercise Price or number of the Warrant Shares or other securities or property deliverable as provided in this Agreement, or to determine whether any facts exist which may require any of such adjustments, or with respect to the nature or extent of any such adjustments, when made, or with respect to the method employed in making the same. The Warrant Agent shall not be accountable with respect to the validity or value or the kind or amount of any Warrant Shares or of any securities or property which may at any time be issued or delivered upon the exercise of any Warrant or with respect to whether any such Warrant Shares or other securities will, when issued, be validly issued and fully paid and nonassessable, and makes no representation with respect thereto. (j) Notwithstanding anything in this Agreement to the contrary, neither the Company nor the Warrant Agent shall have any liability to any holder of a Warrant or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority prohibiting or otherwise restraining performance of such obligation; provided that the Company must use its reasonable best efforts to have any such order, decree or ruling lifted or otherwise overturned as soon as possible. (k) Any application by the Warrant Agent for written instructions from the Company may, at the option of the Warrant Agent, set forth in writing any action proposed to be taken or omitted by the Warrant Agent under this Agreement and the date on and/or after which such action shall be taken or such omission shall be effective. The Warrant Agent shall not be liable for any action taken by, or omission of, the Warrant Agent in accordance with a proposal included in such application on or after the date specified in such application (which date shall not be less than three business days after the date any officer of the Company actually receives such application, unless any such officer shall have consented in writing to any earlier date) unless prior to taking any such action (or the effective date in the case of an omission), the Warrant Agent shall have received written instructions in response to such application specifying the action to be taken or omitted. (l) No provision of this Agreement shall require the Warrant Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it. (m) In addition to the foregoing, the Warrant Agent shall be protected and shall incur no liability for, or in respect of, any action taken or omitted by it in connection with its administration of this Agreement if such acts or omissions are in reliance upon (i) the proper execution of the certification concerning beneficial ownership appended to the form of 15 assignment and the form of the election attached hereto unless the Warrant Agent shall have actual knowledge that, as executed, such certification is untrue, or (ii) the non-execution of such certification including, without limitation, any refusal to honor any otherwise permissible assignment or election by reason of such non-execution. SECTION 16. Change of Warrant Agent. If the Warrant Agent shall (i) resign, (ii) be removed in accordance with this Section or (iii) become incapable of acting as Warrant Agent, the Company shall appoint a successor to such Warrant Agent. If the Company shall fail to make such appointment within a period of 30 days after it has been notified in writing of such incapacity by the Warrant Agent or by the registered holder of a Warrant Certificate, then the registered holder of any Warrant Certificate may apply to any court of competent jurisdiction for the appointment of a successor to the Warrant Agent. Pending appointment of a successor to such Warrant Agent, either by the Company or by such a court, the duties of the Warrant Agent shall be carried out by the Company. The Company shall be entitled at any time to remove the Warrant Agent and appoint a successor to such Warrant Agent. Such successor to the Warrant Agent need not be approved by the holders of the Warrants or the former Warrant Agent. After appointment the successor to the Warrant Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Warrant Agent without further act or deed; but the former Warrant Agent upon payment of all fees and expenses due it and its agents and counsel shall deliver and transfer to the successor to the Warrant Agent any property at the time held by it hereunder and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Failure to give any notice provided for in this Section 16, however, or any defect therein, shall not affect the legality or validity of the appointment of a successor to the Warrant Agent. SECTION 17. Notices to Company and Warrant Agent. Any notice or demand authorized by this Agreement to be given or made by the Warrant Agent or by the registered holder of any Warrant Certificate to or on the Company shall be sufficiently given or made when and if deposited in the mail, first class or registered, postage prepaid, addressed (until another address is filed in writing by the Company with the Warrant Agent), as follows: Viskase Companies, Inc 625 Willowbrook Centre Parkway Willowbrook, IL 60527 Attention: Secretary Any notice pursuant to this Agreement to be given by the Company or by the registered holder(s) of any Warrant Certificate to the Warrant Agent shall be sufficiently given when and if deposited in the mail, first- class or registered, postage prepaid, addressed (until another address is filed in writing by the Warrant Agent with the Company) to the Warrant Agent as follows: 16 Wells Fargo Bank Minnesota, National Association Corporate Trust Services Sixth Street and Marquette Avenue MAC N9303-120| Minneapolis, MN 55479 Telecopier: (612) 667-9825 Attention: Viskase Administrator SECTION 18. Supplements and Amendments. The Company and the Warrant Agent may from time to time supplement or amend this Agreement without the approval of any holders of Warrant Certificates in order to cure any ambiguity or to correct or supplement any provision contained herein which may be defective or inconsistent with any other provision herein, or to make any other provisions in regard to matters or questions arising hereunder which the Company and the Warrant Agent may deem necessary or desirable and which shall not in any way adversely affect the interests of the holders of Warrant Certificates. Notwithstanding the prior sentence, if the Company and the holders of a majority of Warrant Certificates agree to such supplement or amendment, the Warrant Agent shall from time to time supplement or amend this Agreement in any way; provided that such supplement or amendment shall not adversely affect the rights of the Trustee under this Agreement. Notwithstanding anything in this Agreement to the contrary, the prior written consent of the Warrant Agent must be obtained in connection with any supplement or amendment which alters the rights or duties of the Warrant Agent. SECTION 19. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. SECTION 20. Termination. This Agreement will terminate on any earlier date if all Warrants have been exercised or expired without exercise. The provisions of Section 15 hereof shall survive such termination. SECTION 21. Governing Law. This Agreement and each Warrant Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of New York and for all purposes shall be construed in accordance with the internal laws of said State. SECTION 22. Benefits of This Agreement. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company, the Warrant Agent and the registered holders of the Warrant Certificates any legal or equitable right, remedy or claim under this Agreement, and this 17 Agreement shall be for the sole and exclusive benefit of the Company, the Warrant Agent and the registered holders of the Warrant Certificates. SECTION 23. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. [SIGNATURE PAGE FOLLOWS] 18 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written. VISKASE COMPANIES, INC. By: /s/ Gordon S. Donovan ______________________________________ Gordon S. Donovan Vice President WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Warrant Agent By: /s/ Jane S. Schweiger ______________________________________ Name: Jane S. Schweiger Title: Vice President 19 EXHIBIT A [FORM OF WARRANT CERTIFICATE] [FACE] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS A BENEFICIAL INTEREST HEREIN. EXERCISABLE ON OR BEFORE 5:00 P.M. NEW YORK CITY TIME ON APRIL 2, 2010. No. 306,291 Warrants CUSIP No. 9283 1R128 WARRANT CERTIFICATE VISKASE COMPANIES, INC. This Warrant Certificate certifies that Cede & Co., or registered assigns, is the registered holder of 306,291 Warrants expiring April 2, 2010 (the "WARRANTS") to purchase Common Stock, $0.01 (the "COMMON STOCK"), of Viskase Companies, Inc., a Delaware corporation (the "COMPANY"). Each Warrant entitles the holder upon exercise to receive from the Company on or before 5:00 p.m. New York City Time on April 2, 2010, that number of fully paid and nonassessable shares of Common Stock (each, a "WARRANT SHARE") equal to the Exercise Ratio (as defined in the Warrant Agreement) and at the exercise price (the "EXERCISE PRICE") as determined pursuant to the Warrant Agreement referenced below payable in lawful money of the United States of America upon surrender of this Warrant Certificate and payment of the Exercise Price at the office or agency of the Warrant Agent, but only subject to the conditions set forth herein and in the Warrant Agreement referred to on the reverse hereof. Notwithstanding the foregoing, Warrants may be exercised without the exchange of funds pursuant to the net exercise provisions of Section 6 of the Warrant Agreement. The Exercise Ratio and the Exercise Price are subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement. The initial value of the Exercise Ratio is equal to one. The Exercise Ratio is subject to adjustment as described in Section 11 of the Warrant Agreement. The initial Exercise Price per share of Common Stock for any Warrant shall be equal to $10.00 per Warrant Share issued upon exercise of such Warrant. A-1 Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Warrant Certificate shall not be valid unless countersigned by the Warrant Agent, as such term is used in the Warrant Agreement. This Warrant Certificate shall be governed and construed in accordance with the internal laws of the State of New York. IN WITNESS WHEREOF, Viskase Companies, Inc. has caused this Warrant Certificate to be signed by its Vice President and by its Secretary. VISKASE COMPANIES, INC. By:____________________________________ [Name] President By:____________________________________ [Name] Secretary Countersigned: Dated: __________________________, as Warrant Agent By________________________ Authorized Signatory A-2 [FORM OF WARRANT CERTIFICATE] [REVERSE] The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants expiring April 2, 2010 entitling the holder on exercise to receive shares of Common Stock, par value $0.01 per share, of the Company (the "COMMON STOCK"), and are issued or to be issued pursuant to a Warrant Agreement dated as of April 3, 2003 (the "WARRANT AGREEMENT"), duly executed and delivered by the Company to Wells Fargo Bank Minnesota, National Association, a national banking association, as warrant agent (the "WARRANT AGENT"), which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Warrant Agent, the Company and the holders (the words "holders" or "holder" meaning the registered holders or registered holder) of the Warrants. A copy of the Warrant Agreement may be obtained by the holder hereof upon written request to the Company. Warrants may be exercised at any time on or before 5:00 p.m. New York City time on April 2, 2010. The holder of Warrants evidenced by this Warrant Certificate may exercise them by surrendering this Warrant Certificate, with the form of election to purchase set forth hereon properly completed and executed, together with payment of the Exercise Price as specified in the Warrant Agreement at the office of the Warrant Agent. In the event that upon any exercise of Warrants evidenced hereby the number of Warrants exercised shall be less than the total number of Warrants evidenced hereby, there shall be issued to the holder hereof or his assignee a new Warrant Certificate evidencing the number of Warrants not exercised. No adjustment shall be made for any dividends on any Common Stock issuable upon exercise of this Warrant. The Warrant Agreement provides that upon the occurrence of certain events the Exercise Ratio set forth on the face hereof may, subject to certain conditions, be adjusted. If the Exercise Ratio is adjusted, the Warrant Agreement provides that the Exercise Price and number of shares of Common Stock issuable upon the exercise of each Warrant shall be adjusted. No fractions of a share of Common Stock will be issued upon the exercise of any Warrant, but the Company will pay the cash value thereof determined as provided in the Warrant Agreement. Warrant Certificates, when surrendered at the principal corporate trust office of the Warrant Agent by the registered holder thereof in person or by legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor evidencing in the aggregate a like number of Warrants. Upon due presentation for registration of transfer of this Warrant Certificate at the office of the Warrant Agent a new Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant A-3 Agreement, without charge except for any tax or other governmental charge imposed in connection therewith. The Company and the Warrant Agent may deem and treat the registered holder(s) thereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the holder(s) hereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary. Neither the Warrants nor this Warrant Certificate entitles any holder hereof to any rights of a stockholder of the Company. A-4 PART A - ELECTION TO PURCHASE (TO BE EXECUTED UPON EXERCISE OF WARRANT FOR CASH) The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive __________ shares of Common Stock and herewith tenders payment for such shares to the order of Viskase Companies, Inc. in the amount of $______ in accordance with the terms hereof unless the holder is exercising Warrants pursuant to the net exercise provisions of Section 6 of the Warrant Agreement (Part B below). The undersigned requests that a certificate for such shares be registered in the name of __________________, whose address is ________________________________ and that such shares be delivered to _________________ whose address is ____________ ________________________. If said number of shares is less than all of the shares of Common Stock purchasable hereunder, the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares be registered in the name of _______________, whose address is __________________________ and that such Warrant Certificate be delivered to __________________, whose address is ____________________. Signature: Date: Signature Guaranteed: PART B -- ELECTION TO PURCHASE (TO BE EXECUTED UPON EXERCISE OF WARRANTS WITHOUT CASH) The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive all, but not less than all, that number of shares of Common Stock represented by this Warrant less that number of Warrant Shares having an aggregate Current Market Price (as defined in the Warrant Agreement), determined as of the business day immediately preceding the day the Company received this Election to Purchase, equal to the aggregate Exercise Price that would otherwise have been paid by the holder of the Warrant Shares. The undersigned requests that a certificate for such shares be registered in the name of ________________ whose address is _____________________________ and that such shares be delivered to _______________ whose address is ___________________________________. Signature: Date: Signature Guaranteed: A-5 EX-5.1 6 c90665exv5w1.txt OPINION OF JENNER & BLOCK LLP EXHIBIT 5.1 December 23, 2004 [JENNER & BLOCK LOGO] Jenner & Block LLP Chicago One IBM Plaza Dallas Chicago, IL 60611 Washington, DC Tel 312-222-9350 www.jenner.com Viskase Companies, Inc. 625 Willowbrook Centre Parkway Willowbrook, Illinois 60527 Ladies and Gentlemen: We have acted as special counsel to Viskase Companies, Inc., a Delaware corporation (the "Company"), in connection with the Registration Statement on Form S-1 (the "Registration Statement") filed by the Company with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Securities Act"), relating to the sale from time to time, pursuant to Rule 415 of the General Rules and Regulations promulgated under the Securities Act, by certain shareholders of the Company of up to 3,673,235 shares of Common Stock, par value $0.01 per share (the "Common Stock"), of the Company, including 2,868,005 shares of Common Stock that are currently outstanding (the "Secondary Shares") and 805,230 shares of Common Stock that may be issued upon the exercise of currently outstanding warrants (the "Warrant Shares"). We have examined the Registration Statement and the Warrant Agreement, dated as of June 29, 2004, between the Company and Wells Fargo Bank, National Association, as warrant agent (the "Warrant Agreement"), pursuant to which the Warrant Shares may be issued. We also have examined the originals, or duplicates or certified or conformed copies, of such records, agreements, instruments and other documents and have made such other and further investigations as we have deemed relevant and necessary in connection with the opinions expressed herein. As to questions of fact material to this opinion, we have relied upon certificates of officers and representatives of the Company. In rendering the opinions that follow, we have assumed: (i) the genuineness of all signatures; (ii) the legal capacity of natural persons; (iii) the authenticity of all documents submitted to us as originals; (iv) the conformity to the original documents of all documents submitted to us as duplicates or certified or conformed copies; and (v) the authenticity of the originals of such latter documents. Based upon the foregoing, and subject to the qualifications and limitations stated herein, we are of the opinion that: 1. With respect to any Secondary Shares to be offered pursuant to the Registration Statement (the "Offered Secondary Shares"), the Offered Secondary Shares have been legally issued and are fully paid and nonassessable. 2. With respect to any Warrant Shares to be offered pursuant to the Registration Statement (the "Offered Warrant Shares"), the Offered Warrant Shares, when issued in accordance with the terms and conditions of the Warrant Agreement, will be legally issued, fully paid and nonassessable. Our opinions set forth above are subject to the effects of: (1) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally; (2) general equitable principles (whether considered in a proceeding in equity or at law); (3) the implied covenant of good faith and fair dealing; and (4) public policy. We do not express any opinion herein concerning any law other than the General Corporation Law of the State of Delaware, the law of the State of Illinois and the Federal law of the United States. We hereby consent to the filing of this letter as Exhibit 5.1 to the Registration Statement and the use of our name under the caption "Legal Matters" in the Prospectus included in the Registration Statement. Very truly yours, /s/ Jenner & Block LLP Jenner & Block LLP 2 EX-16.1 7 c90665exv16w1.txt LETTER RE: CHANGE IN CERTIFYING ACCOUNTANT EXHIBIT 16.1 PRICEWATERHOUSECOOPERS PRICEWATERHOUSECOOPERS LLP One North Wacker Chicago IL 60606 Telephone (312) 298-2000 Facsimile (312) 298 2001 December 23, 2004 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, DC 20549 Commissioners: We have read the statements made by Viskase Companies, Inc. (the "Company") included in the "Experts" heading (copy attached), which we understand will be filed with the Commission as part of the Company's Form S-1 Registration Statement dated December 23, 2004. We agree with the statements concerning our Firm in such Form S-1. Very truly yours, PricewaterhouseCoopers LLP EX-23.1 8 c90665exv23w1.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP EXHIBIT 23.1 PRICEWATERHOUSECOOPERS PRICEWATERHOUSECOOPERS LLP One North Wacker Chicago IL 60606 Telephone (312) 298-2000 Facsimile (312) 298 2001 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the use in this Registration Statement on Form S-1 of Viskase Companies, Inc. of our report dated March 14, 2003 relating to the financial statements and financial statement schedule of Viskase Companies, Inc., which appears in such Registration Statement. We also consent to the referencee to us under the heading "Experts" in such Registration Statement. /s/ PricewaterhouseCoopers LLP - ------------------------------ PricewaterhouseCoopers LLP Chicago, Illinois December 22, 2004 EX-23.2 9 c90665exv23w2.txt CONSENT OF GRANT THORNTON LLP EXHIBIT 23.2 GRANT THORNTON ACCOUNTANTS AND BUSINESS ADVISORS CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We have issued our report dated April 4, 2004, accompanying the financial statements and schedules of Viskase Companies, Inc. contained in the Registration Statement and Prospectus. We consent to the use of the aforementioned reports in the Registration Statement and Prospectus, and to the use of our name as it appears under the caption "Experts." /s/ Grant Thornton LLP Chicago, Illinois December 22, 2004 175 W. Jackson Blvd. 20th Floor Chicago, IL 60604 T 312.856.0200 F 312.565.4719 W www.grantthornton.com GRANT THORNTON LLP US MEMBER OF GRANT THORNTON INTERNATIONAL GRAPHIC 10 c90665c9066501.gif GRAPHIC begin 644 c90665c9066501.gif M1TE&.#EAC0`F`,00`,*`B_CP\8P0)ILP0[)@;O#@XY,@-.C0U-&@J=FPMZM0 M8,F0FKIP?:-`4>'`QH0`%____P`````````````````````````````````` M`````````````````````````"'Y!`$``!``+`````"-`"8```7_("2.4(`, M3ZJNJ3`F;"S/=&W?>,X*1$'^0-%!D".,%+JD=JZRM0`&@#P*9/WN4B[$/IJZ\ MO9JPMS^H*0TC!0@`R0`.M,8QS7H.TM(^OIH)R@`+S+73WM_2@"(%=[,_!BOB M:2RB),,I"@XLQ2,.@SL,U2(Q)`0R>?=:1`G@:$:/>CGHC0"P`LJ(`RORE(@A M$4(N!/)6*&1@0\`N?B+\41QQJ120`^AJ_P@`E/&&PBMW!I!@J$*H'T1A MO!G"(U/#F:\0$._'#=Q=;2CD+F97^AM[?TA5N.)++@(_0YL&#`%K#`/5P0<$ M63/HPQH-!K"$0_]\,R$U0GVCJ$&@*N\Y>!,.[>"`FV&Y8%<"6C$H5YE>4WA&D,S1P5F%/;4)"%6#-!2!>C^ODH.(#@C*' M)PMZ!L+>+F#5&`222B[9DU0M2/<)HBS8&`,#3\K@Y`ZB.`!J"MLD!$1^#U0' M*GHCP*A"1:-QV1R1*`K"A1])^"CK#T-U2NM=#\U0Z7"%TF`.2"4\DEC_&>*= MD(-COC*Y%CP_\&$F7?]-QQ\P-TA';7\=_0":"@J$88-BW?;4#R'(8MDD8V8!%4^,<0.3K,&`H%%5 M_`/&%6>#'C85`Q+``@`H0`8`()-<`]`)I?'%`8XYAG/H,!!""@&DH,!""9$LZ/E6WZZ:8W_?1V##20#P0A #```[ ` end -----END PRIVACY-ENHANCED MESSAGE-----


Delaware	3089	95-2677354
(State or other jurisdiction of	(Primary Standard Industrial	(I.R.S. Employer
incorporation or organization)	Classification Code Number)	Identification No.)






		Proposed Maximum	Proposed Maximum
Title of Each Class of	Amount	Offering Price	Aggregate	Amount of
Securities to be Registered	to be Registered	Per Unit (1)	Offering Price (1)	Registration Fee


Common Stock, par value $0.01 per share	3,673,235 shares (2)	$2.94	$10,799,310.90	$1,271.08


		As of September 30, 2004

		(Dollars in millions)
Cash and Cash Equivalents		$	33.2	(1)

Debt:
	Revolving Credit Facility		0.0	(2)
	11 1/2% Senior Secured Notes due 2011		90.0	(3)
	8% Senior Notes due 2008		15.7	(4)
Other Debt			0.5

Total Debt			106.2
Stockholder’s (Deficit)			(55.8	)

Total Capitalization		$	50.4



		Predecessor Company															Reorganized Company

														January 1			April 3			April 3			Nine Months
		Year Ended December 31,												Through			Through			Through			Ended
														April 2,			December 31,			September 30,			September 30,
		1999			2000			2001			2002			2003			2003			2003			2004


		(Dollars in thousands, except for number of shares and per share amounts)
Statements of Operations Data:
Net sales		$	225,767		$	200,142		$	189,315		$	183,577		$	45,402		$	152,408		$	101,094		$	154,366
Cost of sales			166,079			157,560			156,258			146,841			38,031			119,989			78,648			121,690

Gross margin			59,688			42,582			33,057			36,736			7,371			32,419			22,446			32,676
Other expenses:
	Selling, general and administrative		41,854			39,374			40,027			38,526			8,890			24,664			16,645			22,779
	Amortization of intangibles		2,000			2,000			2,000			2,000			500			809			539			808
	Restructuring expense (income)		—			94,910			4,766			(6,132	)		—			954			1,162			668
	Asset writedown		—			—			—			—			—			46,805			—			—

Operating (loss) income			15,834			(93,702	)		(13,736	)		2,342			(2,019	)		(40,813	)		4,100			8,421
	Interest income		375			2,299			2,479			1,161			323			517			354			349
	Interest expense		44,403			45,406			25,520			22,222			1,204			10,362			6,821			9,747
	(Loss) gain on early extinguishment of debt		—			6,511			8,137			—			153,946			—			—			(13,083	)
	Other (income) expense, net		3,923			5,330			3,445			(1,493	)		(1,505	)		(3,844	)		(2,292	)		1,436
	Patent infringement settlement income		—			46,900			—			—			—			—			—			—

(Loss) income from continuing operations before taxes and reorganization expense			(32,117	)		(88,728	)		(32,085	)		(17,226	)		152,551			(46,814	)		(75	)		(15,496	)
	Reorganization expense		—			—			—			3,401			399			403			403			—
	Income tax (benefit) provision		(2,190	)		728			(3,370	)		(1,297	)		279			(590	)		(13	)		(393	)

	(Loss) income from continuing operations		(29,927	)		(89,456	)		(28,715	)		(19,330	)		151,873			(46,627	)		(465	)		(15,103	)
	Income (loss) from discontinued operations net of income taxes		(1,831	)		3,435			—			—			—			—			—			—
	Gain on sale of discontinued operations net of income tax provision of $0 in 2001 and $6,633 in 2000		—			68,185			3,189			—			—			—			—			—

Net (loss) income		$	(31,758	)	$	(17,836	)	$	(25,526	)	$	(19,330	)	$	151,873		$	(46,627	)	$	(465	)	$	(15,103	)

Net (loss) income from continuing operations per common share		$	(2.00	)	$	(5.91	)	$	(1.88	)	$	(1.26	)	$	9.91		$	(4.37	)	$	(0.04	)	$	(1.45	)
Net (loss) income per common share		$	(2.12	)	$	(1.18	)	$	(1.67	)	$	(1.26	)	$	9.91		$	(4.37	)	$	(0.04	)	$	(1.45	)
Cash dividends declared per common share			—			—			—			—			—			—			—			—



		Reorganized Company

		3 Months Ended			3 Months Ended			%
		September 30, 2004			September 30, 2003			Change

NET SALES		$	52,954		$	51,458			2.9	%
COSTS AND EXPENSES
	Cost of sales		42,048			39,774			5.7	%
	Selling, general and administrative		7,373			8,313			-11.3	%
	Amortization of intangibles		269			269			0.0	%
	Restructuring (income)		—			1,500			NM

OPERATING INCOME			3,264			1,602			103.7	%
	Interest income		131			145			-9.7	%
	Interest expense		3,409			3,496			-2.5	%
	Other expense (income), net		(1,860	)		(335	)		455.2	%
	Loss on early extinguishment of debt, net of income tax provisions of $0 in 2004		—			—			NM

	(LOSS) INCOME BEFORE REORGANIZATION EXPENSES AND INCOME TAXES		1,846			(1,414	)		NM
	Reorganization expense		—			17			NM

(LOSS) INCOME BEFORE INCOME TAXES			1,846			(1,431	)		NM
	Income tax (benefit) provision	$	(154	)	$	(136	)		13.2


Additional Information			ii
Prospectus Summary			1
Risk Factors			5
Use of Proceeds			15
Dividend Policy			16
Capitalization			17
Selected Consolidated Historical Financial Data			18
Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
Business			39
Management			48
Security Ownership of Certain Beneficial Owners and Management			55
Selling Shareholders			57
Determination of Offering Price and Plan of Distribution			58
Certain Relationships and Related Transactions			60
Description of Certain Indebtedness			61
Description of Capital Stock			63
Shares Eligible for Future Sales			65
Legal Matters			67
Experts			67
Forward-Looking Statements			67
Index To Consolidated Financial Statements			F-1
Equity Registration Rights Agreement
Warrant Agreement
Registration Rights Agreement
Warrant Agreement
Opinion of Jenner & Block LLP
Letter re: Change in Certifying Accountant
Consent of PricewaterhouseCoopers LLP
Consent of Grant Thornton LLP


(1)	Capital expenditures total does not include $9,500 for reacquisition of leased assets.

(2)	Pro forma total interest expense includes $183 of amortization of deferred financing costs.

(3)	The effect of the 11.5% Notes issuance, repayment of the GECC lease and repurchase of the 8% Senior Notes on pro forma interest expense was $7,812, $(5,304) and $(2,148), respectively.

(4)	Pro forma cash interest expense is calculated as total interest expense less non-cash interest on 8% Senior Notes of $2,200, effective interest of $143 on the 11.5% Notes and non-cash charges of $183 related to the amortization of deferred financing costs.

(5)	Domestic collateral is defined as the sum of domestic receivables, domestic inventories and domestic property, plant and equipment, net as of September 30, 2004. Domestic collateral does not include the value of the stock of foreign subsidiaries.

(6)	Net debt is defined as total debt less cash and cash equivalents as of September 30, 2004.

(7)	Calculated as the pro forma domestic collateral divided by the pro forma net debt at September 30, 2004.

(8)	Pro forma numbers assume $55.5 million of our 8% Senior Notes were repurchased by the Company concurrently with completion of the June 29, 2004 offering of the 11.5% Notes, at a price equal to 90% of the aggregate principal amount as of December 31, 2003.

(9)	Includes $2.7 million of restricted cash primarily securing letters of credit.


	*There may be dilution of the value of our shares of Common Stock when warrants become exercised.*


	*There is no established trading market for the Common Stock and any market for the Common Stock may be illiquid.*


	*We do not intend to pay dividends on the Common Stock in the foreseeable future.*


	*Our substantial level of indebtedness could adversely affect our results of operations, cash flows and ability to compete in our industry.*


	*Despite current indebtedness levels, we may still be able to incur substantially more debt. This could further exacerbate the risks associated with our substantial leverage.*


	*We may not be able to generate the significant amount of cash needed to pay interest and principal amounts on our debt, including any outstanding notes.*


	A substantial portion of our business is conducted through foreign subsidiaries, and our failure to generate sufficient cash flow from these subsidiaries, or otherwise repatriate or receive cash from the subsidiaries, could adversely affect our cashflow.


	Our Board of Directors has the ability to issue preferred shares without the further vote or action of our stockholders, which may adversely affect the rights of the holders of Common Stock.


	*The interests of our significant stockholder may not be aligned with your interests, and his actions may conflict with your interests.*


	*We have recently emerged from bankruptcy, have a history of losses and may not become profitable.*


	Our results of operations and financial condition for the periods subsequent to our emergence from bankruptcy may vary significantly from any projections that were prepared in connection with our plan of reorganization and you may be unable to make meaningful comparisons to our historical financial statements for the period prior to our bankruptcy.


	We face competitors that are better capitalized, and the continuous-flow nature of the casings manufacturing process forces competitors to compete based on volume, which could adversely affect our revenues and operating results.


	*We receive our raw materials from a limited number of suppliers, and problems with their supply could impair our ability to meet our customer’s product demands.*


	*Our failure to efficiently respond to industry changes in casings technology could jeopardize our ability to retain our customers and maintain our market share.*


	*Sales of our products could be negatively affected by problems or concerns with the safety and quality of food products.*


	*Changing dietary trends and consumer preferences could weaken the demand for our products.*


	*Our facilities are capital intensive and we may not be able to obtain financing to fund necessary capital expenditures.*


	*Business interruptions at any of our production facilities could increase our operating costs, decrease our sales or cause us to lose customers.*


	We are subject to significant minimum contribution requirements with respect to our pension plan, and we are subject to market exposure with respect to our defined benefit plan, both of which could adversely affect our cash flow.


	*Underfunding with respect to our postretirement medical and life insurance benefits provided to our eligible North American retirees could adversely affect our cash position.*


	Our international operations expose us to political and economic risks in foreign countries, as well as to risks related to currency fluctuations, all of which could impair our ability to do business at the international level.


	*Continued consolidation of our customers and increasing competition for those customers may put pressures on our operating margins.*


	*We may engage in strategic transactions, which could require significant attention and resources.*


	*Continued compliance with environmental regulations may result in significant costs, which could negatively affect our financial condition.*


	Our Canadian subsidiary is a subject of an investigation by Canadian provincial governmental authorities in connection with contamination at its Lindsay, Ontario facility, and we could be held responsible for costs associated with the clean-up of such facility.


	*We may be subject to significant tax assessments, which could affect our financial condition.*


	*Our intellectual property rights may be inadequate or violated, or we may be subject to claims of infringement.*


	*Comparison of Results of Operations for the Three Months Ended September 30, 2003 and the Three Months Ended September 30, 2004*