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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D/A
Under the Securities Exchange Act of 1934
(Amendment No. 4)*
Danielson Holding Corporation
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(Name of Issuer)
Common Stock, Par Value $0.10 per share
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(Title of Class of Securities)
236274106
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(CUSIP Number)
Marc D. Hauser
Equity Group Investments, L.L.C.
2 North Riverside Plaza, Suite 600
Chicago, Illinois 60606
312-466-3281
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
December 2, 2003
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(Date of Event which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of ss. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box [_].
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See ss. 240.13d-7(b) for other
parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 or otherwise subject to the liabilities of that section of the Act but
shall be subject to all other provisions of the Act (however, see the Notes).
POTENTIAL PERSONS WHO ARE TO RESPOND TO THE COLLECTION OF INFORMATION CONTAINED
IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A CURRENTLY
VALID OMB CONTROL NUMBER.
CUSIP No. 236274106 13D/A Page 2 of 34 Pages
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1. Name of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
SZ Investments, L.L.C. FEIN 36-4150443
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2. Check the Appropriate Box If a Member of a Group (See Instructions)
(a) [_]
(b) [_]
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3. SEC Use Only
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4. Source of Funds (See Instructions)
WC
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5. Check If Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d)
or 2(e) [_]
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6. Citizenship or Place of Organization
Delaware
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7. Sole Voting Power
NUMBER OF 6,740,825
SHARES _________________________________________________________________
BENEFICIALLY 8. Shared Voting Power
OWNED BY 0
EACH _________________________________________________________________
REPORTING 9. Sole Dispositive Power
PERSON 6,740,825
WITH _________________________________________________________________
10. Shared Dispositive Power
0
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11. Aggregate Amount Beneficially Owned by Each Reporting Person
6,740,825
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12. Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions) [_]
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13. Percent of Class Represented by Amount in Row (11)
18.8% (1)
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14. Type of Reporting Person (See Instructions)
00
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(1) Total number of shares outstanding based on (i) the number of shares the
Issuer had outstanding as of November 7, 2003, which, to the best of SZI's
knowledge was 30,693,896 shares of Common Stock outstanding as of November 7,
2003, as set forth in the Issuer's Quarterly Report on Form 10-Q for the period
ended September 30, 2003, and (ii) the 5,120,853 issued pursuant to the Note
Purchase Agreement.
CUSIP No. 236274106 13D/A Page 3 of 34 Pages
This Amendment No. 4 to Schedule 13D relates to the common stock, par value
$0.10 per share ("Common Stock"), of Danielson Holding Corporation, a Delaware
corporation (the "Issuer"). Items 2, 3, 4, 5, 6 and 7 of the Schedule 13D are
hereby amended to read in their entirety as follows:
ITEM 2. Identity and Background
(a-c) and (f) This Statement is being filed by SZ Investments, L.L.C., a
Delaware limited liability company ("SZI"). The managing member of SZI is Zell
General Partnership, Inc., an Illinois corporation ("ZGP"). SZI is owned by
various trusts for the benefit of Samuel Zell and his family. The trustee of
each of these trusts is Chai Trust Company, L.L.C., an Illinois limited
liability company ("Chai Trust").
The executive officers and directors of SZI are as follows:
-Samuel Zell - President; Chairman of the Board of Equity Group Investments,
L.L.C. ("EGI")
-Donald J. Liebentritt - Vice President; President of EGI
-William C. Pate - Vice President; Managing Director of EGI
-Philip G. Tinkler - Treasurer; Vice President and Treasurer of EGI
The officers and directors of Chai Trust are as follows:
-Bert Cohen is a Director of Chai Trust. Mr. Cohen is also a semi-retired
investor, whose residence is 181 North Carmelina Avenue, Los Angeles, California
90049.
-Kellie Zell is a Director of Chai Trust and also works as a homemaker.
-Donald J. Liebentritt is the President and a Director of Chai Trust. Mr.
Liebentritt is also the President of EGI.
-Leah Zell Wanger is a Director of Chai Trust. Ms. Wanger also co- owns and
co-manages Wanger Asset Management, the registered advisor for the Acorn Mutual
Funds, whose business address is 227 West Monroe Street, Suite 300, Chicago,
Illinois 60603.
-JoAnn Zell Gillis is a Director of Chai Trust. Mrs. Zell Gillis is a physician.
-Matthew Zell is a Director of Chai Trust. Mr. Zell is a Manager of EGI.
-Robert M. Levin is a Senior Trust Officer of Chai Trust. Mr. Levin is also a
partner in the law firm Levin & Schreder Ltd., whose business address is 120
North LaSalle Street, Suite 3800, Chicago, Illinois 60602.
-James Bunegar is Vice President, Chief Financial Officer, Assistant Trust
Officer and Treasurer of Chai Trust. Mr. Bunegar is also the Vice President -
Taxes of EGI.
The principal business of SZI and ZGP is general investments.
The business address of each of SZI, ZGP, William Pate, Philip Tinkler, Chai
Trust, Kellie Zell, Donald Liebentritt, JoAnn Zell Gillis, Matthew Zell and
James Bunegar is Two North Riverside Plaza, Chicago, Illinois 60606.
All of the executive officers and directors of SZI and Chai Trust are United
States citizens.
(d) and (e) Neither SZI nor, to the best knowledge of SZI, ZGP, Chai Trust or
any of the persons listed in Item 2 hereto, has during the last five years (i)
been convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (ii) been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was, or is, subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
CUSIP No. 236274106 13D/A Page 4 of 34 Pages
ITEM 3. Source and Amount of Funds or Other Consideration
Initial Investment
On August 12, 1999 (the "Closing Date"), pursuant to the Stock Purchase and Sale
Agreement described in Item 4 below, SZI acquired from the Issuer: (i) 2,000,000
newly issued shares of Common Stock (the "Initial Shares") and (ii) a warrant to
purchase an additional 2,000,000 shares of Common Stock (the "Warrant"). The
aggregate amount of funds used in acquiring the Initial Shares and the Warrant
was $9,000,000. All funds used in acquiring the Initial Shares and the Warrant
were obtained from the working capital of SZI.
In connection with the Issuer's acquisition of American Commercial Lines LLC
("ACL") and the recapitalization of ACL, the Issuer announced that it would
conduct a rights offering to be issued pro rata to all holders of the Issuer's
Common Stock to purchase newly-issued shares of Common Stock in the aggregate
amount of $42 million ("Rights Offering"). SZI agreed with the Issuer pursuant
to a binding Term Sheet ("Term Sheet") to exercise the Warrant and purchase up
to 4.0 million shares of Common Stock offered in the Rights Offering which were
not otherwise subscribed for. On May 29, 2002, the Issuer closed the Rights
Offering. In accordance with the terms of the Rights Offering, SZI purchased
1,560,174 shares of Common Stock at a purchase price of $5.00 per share (the
"Rights Offering Shares"), and, pursuant to its obligations under the Term
Sheet, exercised its outstanding Warrant to purchase 1,900,437 shares of Common
Stock at a purchase price of $4.74 per share (the "Warrant Shares"). All funds
used to purchase the Rights Offering Shares and the Warrant Shares came from the
working capital of SZI.
Covanta Investment
On December 2, 2003, the Issuer entered into a Note Purchase Agreement (the
"Note Purchase Agreement") among the Issuer, SZI, D.E. Shaw Laminar Portfolios,
L.L.C. ("Laminar") and Third Avenue Value Fund Series ("Third Avenue"), pursuant
to which each of SZI, Laminar and Third Avenue has agreed, severally and not
jointly, to provide the Issuer with a Bridge Loan in the aggregate principal
amount of $40,000,000 and the Issuer issued (i) shares of its Common Stock to
each of SZI, Laminar and Third Avenue, including 1,280,213 shares to SZI (SZI's
shares referred to as the "Fee Shares"), which represent consideration for SZI,
Laminar and Third Avenue agreeing to provide the Bridge Loan, and (ii)
convertible notes, which are convertible in limited circumstances, in an
aggregate principal amount of $40,000,000 to SZI, Laminar and Third Avenue,
including $10,000,000 to SZI (SZI's notes referred to as the "Note"), which were
issued in consideration for the Bridge Loan. The Issuer has represented it will
use a portion of the proceeds of the Bridge Loan to purchase the equity of
Covanta Energy Corporation ("Covanta") pursuant to a reorganization plan under
Chapter 11 proceedings in the United States Bankruptcy Court for the Southern
District of New York (the "Bankruptcy Court"), and the remainder of the proceeds
will be used for fees and expenses related to the purchase of Covanta and for
general corporate purposes. In the event the purchase of Covanta does not occur
for any reason other than default of the Issuer, the Issuer shall have the right
to redeem all of the shares of Common Stock issued to SZI, Laminar and Third
Avenue pursuant to the Note Purchase Agreement at an aggregate consideration of
$4.00. The investment by SZI described in this paragraph is referred to as the
"Covanta Investment."
All funds used in making SZI's portion of the Bridge Loan were obtained from the
working capital of SZI.
ITEM 4. Purpose of the Transaction
Initial Investment
The acquisition of the Initial Shares and the Warrant was effected for the
purpose of investing in the Issuer and to provide funds with which the Issuer
may from time to time fund business acquisitions. In connection with the
transaction, an affiliate of SZI entered into an agreement with the Issuer to
provide certain advisory services to the Issuer and certain of its subsidiaries
in connection with such potential acquisitions.
The Issuer entered into a Stock Purchase and Sale Agreement dated as of April
14, 1999 (the "Stock Purchase Agreement") with Samstock, L.L.C., a wholly-owned
subsidiary of SZI ("Samstock"). The Stock Purchase Agreement was amended by
Amendment No. 1, Assignment and Consent to Assignment of Stock Purchase
Agreement, dated May 7, 1999 by and among Samstock, the Issuer and SZI (the
"Amendment") pursuant to which the rights and obligations of Samstock under the
Purchase Agreement were assigned to and assumed by SZI. On the Closing Date, SZI
acquired the Initial Shares and the Warrant pursuant to the Stock Purchase
Agreement, as amended.
In connection with the acquisition of the Initial Shares and the Warrant, the
Issuer granted to SZI certain registration rights, which rights are now
memorialized in a Registration Rights Agreement dated as of November 8, 2002 and
made by and between the Issuer and SZI (the "Registration Rights Agreement").
CUSIP No. 236274106 13D/A Page 5 of 34 Pages
Pursuant to the terms of the Registration Rights Agreement, SZI (or its
designee) may make up to two requests that the Issuer file a shelf registration
statement covering the resale of the Common Stock held from time to time by SZI,
subject to certain limitations. In addition, SZI has piggyback registration
rights in connection with a public offering of Common Stock by the Issuer solely
for cash.
The purpose of the transactions contemplated under the Term Sheet was to assist
the Issuer in satisfying its cash contribution obligations in connection with
the acquisition and recapitalization of ACL. On May 29, 2002, the Issuer closed
the Rights Offering. Pursuant to its obligations under the Term Sheet and in
accordance with the terms of the Rights Offering, SZI purchased 1,560,174 shares
of Common Stock under the Rights Offering and exercised its outstanding Warrant
to purchase 1,900,437 shares of Common Stock.
Covanta Investment
The acquisition of the Fee Shares and the Notes were effected for the purpose of
investing in the Issuer and to provide funds with which the Issuer has agreed to
purchase Covanta.
Upon the Bankruptcy Court's approval of the bankruptcy plan and after closing of
the acquisition of Covanta, the Issuer will initiate a rights offering (the
"Covanta Rights Offering"). During the Covanta Rights Offering, each of Laminar,
SZI and Third Avenue shall have the right to acquire additional shares of the
Issuer's Common Stock. The Issuer will use the proceeds of the Covanta Rights
Offering to prepay the convertible notes. To the extent the proceeds of the
Covanta Rights Offering are insufficient to prepay all of the principal amount
of the convertible notes outstanding, the convertible notes will automatically
convert into shares of the Issuer's Common Stock at an initial conversion price
of $1.53 per share; provided, however, that the notes will remain outstanding to
the extent conversion would result in an "ownership change" of the Issuer under
the Internal Revenue Code.
In connection with the Note Purchase Agreement, the Issuer has granted SZI,
Laminar and Third Avenue certain registration rights, which rights are now
memorialized in a Registration Rights Agreement dated as of December 2, 2003 and
made by and among the Issuer, SZI, Laminar and Third Avenue (the "Covanta
Registration Rights Agreement"; a copy of the Covanta Registration Rights
Agreement is attached hereto as Exhibit 9 and incorporated herein by reference).
The Note Purchase Agreement contains certain restrictive covenants pursuant to
which the Issuer has agreed not to, without the consent of holders of 66 2/3% of
the principal amount of the convertible notes issued to SZI, Laminar and Third
Avenue, among other things, pay dividends on any of its securities until the
convertible notes are converted or repaid in full.
The summaries contained in this Schedule 13D of certain provisions of each of
the Stock Purchase Agreement, Amendment, Term Sheet, Registration Rights
Agreement, the Note Purchase Agreement and the Covanta Registration Rights
Agreement are not intended to be complete and are qualified in their entirety by
reference to each respective agreement attached as Exhibits to Schedule 13D and
incorporated herein by reference.
Like all holders of 5% or more of Issuer's Common Stock, SZI will be subject to
restrictions contained in Issuer's Certificate of Incorporation, which limits
stock transfers by 5% or greater shareholders and prohibits parties from
acquiring 5% or more of Issuer's Common Stock without the Issuer's consent.
Subject to the restrictions contained in Issuer's Certificate of Incorporation,
SZI intends to continue to review its investment in the Common Stock and, from
time to time depending upon certain factors, including without limitation the
financial performance of the Issuer, the availability and price of shares of
Common Stock and other general market and investment conditions, may determine
to acquire through open market purchases or otherwise additional shares of
Common Stock, or may determine to sell through the open market or otherwise, in
each case, subject to the limitations of the Stock Purchase Agreement and the
Note Purchase Agreement, each as amended.
Except as stated above, neither SZI nor, to the best knowledge of SZI, any of
ZGP or the persons listed in Item 2 hereto, has any plans or proposals of the
types referred to in clauses (a) through (j) of Item 4 of Schedule 13D, as
promulgated by the Securities and Exchange Commission.
CUSIP No. 236274106 13D/A Page 6 of 34 Pages
ITEM 5. Interest in Securities of the Issuer
(a) and (b) To the best knowledge of SZI, based upon the Issuer's Quarterly
Report on Form 10-Q for the period ended September 30, 2003, there were
30,693,896 shares of Common Stock outstanding as of November 7, 2003. Based upon
the foregoing, the 6,740,825 shares of Common Stock beneficially owned by SZI
represent approximately 18.8% of the issued and outstanding Common Stock, after
giving effect to the 5,210,853 shares of Common Stock issued pursuant to the
Note Purchase Agreement.
SZI currently has the sole power to vote or to direct the vote of all shares of
Issuer's Common Stock owned by SZI.
SZI disclaims beneficial ownership of any securities of Issuer beneficially
owned by Laminar or Third Avenue.
Except as set forth below, as of the date hereof, neither SZI, nor to the best
knowledge of SZI, any of the persons set forth in Item 2 hereof, owns any shares
of Common Stock other than the shares owned by SZI. Donald Liebentritt owns
48,957 shares of Common Stock, with respect to which Mr. Liebentritt has sole
power to vote and to dispose of such shares, and vested options to purchase
10,000 shares with respect to which Mr. Liebentritt has sole power to dispose.
William Pate owns 73,438 shares of Common Stock, with respect to which Mr. Pate
has sole power to vote and dispose of such shares, and vested options to
purchase 15,200 shares with respect to which Mr. Pate has the sole power to
dispose. Philip Tinkler owns 11,900 shares of Common Stock, with respect to
which Mr. Tinkler has sole power to vote and dispose of such shares, and options
to purchase 5,000 shares with respect to which Mr. Tinkler has the sole power to
dispose.
An affiliate of SZI owns approximately 40% of the 11.25% Senior Notes and 12%
pay-in-kind Senior Subordinated Notes of ACL.
(c) Except as set forth above, during the last 60 days, no transactions in the
Common Stock were effected by SZI, or to the best knowledge of SZI, any of the
persons set forth in Item 2.
(d) No person other than SZI has the right to receive or the power to direct the
receipt of dividends from, or the proceeds from the sale of shares of Common
Stock owned by SZI.
(e) Not applicable.
CUSIP No. 236274106 13D/A Page 7 of 34 Pages
ITEM 6. Contracts, Arrangements, Understandings or Relationships with respect to
Securities of the Issuer
Except for the matters described herein, neither SZI nor, to the best knowledge
of SZI, any of ZGP, Chai Trust or the persons listed in Item 2 hereto has any
contract, arrangement, understanding or relationship with any person with
respect to any securities of the Issuer.
ITEM 7. Material to be Filed as Exhibits.
Exhibit 1 Stock Purchase and Sale Agreement (incorporated
by reference to Exhibit 10.1 of Danielson Holding
Corporation's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1999, filed with the
Securities and Exchange Commission on
August 13, 1999)
Exhibit 2 Amendment No. 1, Assignment and Consent to
Assignment of Stock Purchase Agreement
(incorporated by reference to Exhibit 10.2 of
Danielson Holding Corporation's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1999,
filed with the Securities and Exchange Commission
on August 13, 1999)
Exhibit 3 Warrant*
Exhibit 4 Summary of Terms of Standby Commitment of Rights
Offering between Danielson Holding Corporation and
SZ Investments, L.L.C., dated as of March 21,
2002**
Exhibit 5 Letter Agreement dated April 14, 1999 between
Equity Group Investments, L.L.C. and Danielson
Holding Corporation and amendments dated June 2,
1999 and April 1, 2002**
Exhibit 6 Amended and Restated Summary of Terms of Standby
Commitment of Rights Offering between Danielson
Holding Corporation and SZ Investments, L.L.C., dated
as of April 17, 2002***
Exhibit 7 Registration Rights Agreement between Danielson
Holding Corporation and SZ Investments, L.L.C., dated
as of November 8, 2002****
Exhibit 8 Note Purchase Agreement among Danielson Holding
Corporation, SZ Investments, L.L.C., D.E. Shaw
Laminar Portfolios, L.L.C. and Third Avenue
Value Fund Series, dated as of December 2, 2003
Exhibit 8 Registration Rights Agreement among Danielson Holding
Corporation, SZ Investments, L.L.C., D.E. Shaw
Laminar Portfolios, L.L.C. and Third Avenue
Value Fund Series, dated as of December 2, 2003
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* Filed on August 12, 1999 on Schedule 13D
** Filed on March 21, 2002 and April 1, 2002 on Schedule 13D/A (Amendment No. 1)
*** Filed on May 29, 2002 on Schedule 13D/A (Amendment No. 2)
**** Filed on November 8, 2002 on Schedule 13D/A (Amendment No. 3)
CUSIP No. 236274106 13D/A Page 8 of 34 Pages
SIGNATURE
After reasonable inquiry and to the best of the undersigned's knowledge and
belief, the undersigned certify that the information set forth in this statement
is true, complete and correct.
DATED: December 4, 2003
SZ INVESTMENTS, L.L.C.
By: /s/ DONALD J. LIEBENTRITT
-------------------------------------
Name: Donald J. Liebentritt
Title: Vice President
The original statement shall be signed by each person on whose behalf the
statement is filed or his authorized representative. If the statement is signed
on behalf of a person by his authorized representative (other than an executive
officer or general partner of the filing person), evidence of the
representative's authority to sign on behalf of such person shall be filed with
the statement: provided, however, that a power of attorney for this purpose
which is already on file with the Commission may be incorporated by reference.
The name and any title of each person who signs the statement shall be typed or
printed beneath his signature.
ATTENTION: INTENTIONAL MISSTATEMENTS OR OMISSIONS OF FACT CONSTITUTE FEDERAL
CRIMINAL VIOLATIONS (SEE 18 U.S.C. 1001)
CUSIP No. 236274106 13D/A Page 9 of 34 Pages
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
Exhibit 1 Stock Purchase and Sale Agreement (incorporated
by reference to Exhibit 10.1 of Danielson Holding
Corporation's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1999, filed with the
Securities and Exchange Commission on
August 13, 1999)
Exhibit 2 Amendment No. 1, Assignment and Consent to
Assignment of Stock Purchase Agreement
(incorporated by reference to Exhibit 10.2 of
Danielson Holding Corporation's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1999,
filed with the Securities and Exchange Commission
on August 13, 1999)
Exhibit 3 Warrant*
Exhibit 4 Summary of Terms of Standby Commitment of Rights
Offering between Danielson Holding Corporation and
SZ Investments, L.L.C., dated as of March 21,
2002**
Exhibit 5 Letter Agreement dated April 14, 1999 between
Equity Group Investments, L.L.C. and Danielson
Holding Corporation and amendments dated June 2,
1999 and April 1, 2002**
Exhibit 6 Amended and Restated Summary of Terms of Standby
Commitment of Rights Offering between Danielson
Holding Corporation and SZ Investments, L.L.C., dated
as of April 17, 2002***
Exhibit 7 Registration Rights Agreement between Danielson
Holding Corporation and SZ Investments, L.L.C., dated
as of November 8, 2002****
Exhibit 8 Note Purchase Agreement among Danielson Holding
Corporation, SZ Investments, L.L.C., D.E. Shaw
Laminar Portfolios, L.L.C. and Third Avenue
Value Fund Series, dated as of December 2, 2003
Exhibit 9 Registration Rights Agreement among Danielson Holding
Corporation, SZ Investments, L.L.C., D.E. Shaw
Laminar Portfolios, L.L.C. and Third Avenue
Value Fund Series, dated as of December 2, 2003
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* Filed on August 12, 1999 on Schedule 13D
** Filed on March 21, 2002 and April 1, 2002 on Schedule 13D/A (Amendment No. 1)
*** Filed on May 29, 2002 on Schedule 13D/A (Amendment No. 2)
**** Filed on November 8, 2002 on Schedule 13D/A (Amendment No. 3)
CUSIP No. 236274106 13D/A Page 10 of 34 Pages
EXHIBIT 8
This NOTE PURCHASE AGREEMENT (this "Agreement"), is dated as of the 2nd day of
December, 2003, by and among Danielson Holding Corporation, a Delaware
corporation, with its principal office at Two North Riverside Plaza, Suite 600,
Chicago, IL 60606 (the "Company"), and each of the purchasers named in Exhibit A
attached hereto (each, a "Purchaser" and collectively, the "Purchasers").
WHEREAS, the Company seeks financing (a) to facilitate the timely funding of the
Deposit, the Acquisition and related fees and expenses prior to the consummation
of the Rights Offering and (b) for general corporate purposes; and
WHEREAS, in connection therewith, the Company desires to issue and sell to each
Purchaser, and each Purchaser, severally, desires to purchase from the Company,
pursuant to this Agreement, the aggregate principal amount of Notes set forth
opposite its respective name in Exhibit A hereto; and
WHEREAS, the Company desires to issue and sell to D. E. Shaw, and D. E. Shaw
desires to purchase from the Company, the Additional Equity; and
WHEREAS, the Company desires to issue to each Purchaser, as part of its
inducement to, among other things, purchase the Notes being purchased by such
Purchaser and provide, directly or indirectly, a portion of the Exit Financing,
the total number of shares of common stock of the Company set forth opposite its
respective name in Exhibit A hereto.
NOW THEREFORE, in consideration of the mutual agreements, representations,
warranties and covenants herein contained, the parties hereto agree as follows:
Definitions. As used in this Agreement, the following terms shall have the
following respective meanings:
"ACL" means American Commercial Lines LLC, a Delaware limited liability company
and an indirect subsidiary of the Company. "Acquisition" shall have the meaning
assigned to such term in the Covanta Agreement. "Additional Equity" shall have
the meaning set forth in Section 5.5 hereof. "Affiliate" as applied to any
Person, means any other Person directly or indirectly controlling, controlled
by, or under common control with, that Person. For the 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 (other than
exclusively as a result of such Person's role as a senior executive of that
Person), whether through the ownership of voting securities or by contract or
otherwise. "Agreement" shall have the meaning set forth in Recitals hereof.
"AMEX" means the American Stock Exchange.
"Bankrupt Subsidiaries" shall have the meaning assigned to such term in the
First Lien L/C Credit Facility Credit Agreement. "Breakup Fee" means the
Termination Fee as defined in the Covanta Agreement. "Business Day" means any
day excluding Saturday, Sunday and any day which is a legal holiday under the
laws of the State of New York or is a day on which banking institutions located
in such state are authorized to or required by law or governmental action to
close.
"Change of Control" means: (a) the sale or other disposition of all or
substantially all of the Company's assets to any Person; (b) the direct or
indirect acquisition by any Person of beneficial ownership (within the meaning
of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the outstanding voting
securities of the Company entitled to vote generally in the election of
directors; or (c) the first day on which a majority of members of the Company's
Board of Directors (the "Board of Directors") are not Continuing Directors.
"Closing" shall have the meaning set forth in Section 2.4 hereof. "Closing Date"
shall have the meaning set forth in Section 2.4 hereof. "Code" means the
Internal Revenue Code of 1986, as amended. "Common Stock" means shares of common
stock, par value $.10 per share, of the Company. "Company" shall have the
meaning set forth in Recitals hereof. "Company Non-Performance" means any
circumstance in which the Deposit becomes due and payable to Covanta pursuant to
Section 11.2(c)(i)(A)(x) or 11.2(c)(i)(B) of the Covanta Agreement.
"Consideration" shall have the meaning assigned to such term in the Covanta
Agreement. "Contemplated Transactions" shall have the meaning assigned to such
term in the Covanta Agreement.
CUSIP No. 236274106 13D/A Page 11 of 34 Pages
"Continuing Directors" means, as of any date of determination, those members of
the Board of Directors of the Company who: (a) were members of the Board of
Directors on the date of this Agreement; or (b) were nominated for election or
elected to the Board of Directors with the affirmative vote of, or whose
election or appointment was otherwise approved or ratified (whether before or
after nomination or election) by, at least a majority of the Continuing
Directors who were members of the Board of Directors at the time of the
nomination, election or approval, as applicable. "Covanta" means Reorganized
Covanta as defined in the Covanta Agreement. "Covanta Agreement" means that
certain Investment and Purchase Agreement (including the exhibits and appendices
thereto), by and between Covanta Energy Corporation and the Company, dated as of
even date herewith, a copy of which is attached hereto as Exhibit D.
"CPIH" means Covanta Power International Holdings, Inc., a Delaware corporation.
"CSFB" means Credit Suisse First Boston.
"Deposit" shall have the meaning set forth in the Covanta Agreement.
"D. E. Shaw" means D. E. Shaw Laminar Portfolios, L.L.C., a Delaware limited
liability company.
"Disclaimer" shall have the meaning set forth in Section 7.3(e) hereof.
"Disclosure Documents" means the Company's Annual Report on Form 10-K for the
period ended December 28, 2002, the Company's Quarterly Reports on Form 10-Q for
the quarters ended March 31, June 30 and September 30, 2003, any Current Reports
on Form 8-K filed by the Company on or after December 29, 2002 but on or before
the date hereof, and the Company's Schedule 14A Proxy Statement for its Annual
Meeting of Stockholders, filed on October 6, 2003.
"Disclosure Schedule" shall have the meaning set forth in Section 3 hereof.
"Escrow Account" shall have the meaning set forth in Section 2.4 hereof. "Escrow
Agent" shall have the meaning set forth in Section 2.4 hereof. "Escrow
Agreement" shall have the meaning set forth in Section 2.4 hereof. "Escrow
Receipts" shall have the meaning set forth in Section 2.3(a) hereof. "Escrowed
Stock" shall have the meaning set forth in Section 2.3(a) hereof. "Event of
Default" shall have the meaning set forth in Section 8 hereof. "Exchange Act"
means the Securities Exchange Act of 1934, as amended, and all of the rules and
regulations promulgated thereunder.
"Exit Financing" shall have the meaning set forth in the Covanta Agreement.
"Extended Maturity Date" means the earlier of (x) July 15, 2005 and (y) the
issuance of a non-appealable binding decision by a court of competent
jurisdiction to the effect that either (a) Covanta is entitled to retain the
Deposit under the Covanta Agreement or (b) Covanta is obligated to pay the
Breakup Fee under the Covanta Agreement. "Extension Fee" shall have the meaning
set forth in Exhibit F.
"Final Deposit" shall have the meaning set forth in the Covanta Agreement.
"Financial Statements" shall have the meaning set forth in Section 3.6 hereof.
"First Lien L/C Credit Facility Credit Agreement" shall have the meaning set
forth in the Covanta Agreement.
"GAAP" shall have the meaning set forth in Section 3.6 hereof. "GMS" means
Global Material Services, LLC, a Tennessee limited liability company. "Initial
Deposit" shall have the meaning set forth in the Covanta Agreement.
"International Revolver Credit Facility Credit Agreement" shall have the meaning
set forth in the Covanta Agreement.
"International Term Loan Credit Facility Credit Agreement" shall have the
meaning set forth in the Covanta Agreement. "Investment Entity" shall have the
meaning set forth in the Covanta Agreement. "Investor Expense Reimbursement"
shall have the meaning set forth in Section 12.6 hereof.
"Material Adverse Effect" means (a) a material adverse effect on the
properties, assets, businesses, affairs, results of operations or financial
condition of the Company and its Subsidiaries, considered as a whole or (b) the
effect of preventing or materially interfering with the Company's ability to
consummate the Transactions; provided, however, that no effect resulting,
individually or in the aggregate, from macro-economic events or general
market-related changes shall be a Material Adverse Effect unless the Company is
affected by such events or changes in a manner that is substantially
disproportionate when compared to competitor or peer businesses. "Maturity Date"
means the Scheduled Maturity Date or, if there is a bona fide dispute concerning
either Covanta's retention of the Deposit or its payment of the Breakup Fee, the
Extended Maturity Date, if later.
"Non-Ownership Change Rollover Terms" means the terms of the Notes set forth on
Exhibit E. "Non-Performing Purchaser" means (a) any Purchaser that fails in
connection with the Second Lien L/C Credit Facility Credit Agreement (i) to
execute and deliver such credit agreement and all other documents contemplated
thereby to be delivered by such Purchaser as a lender thereunder, (ii) to
provide required collateral, or (iii) to satisfy the absence of a Material
Adverse Change condition applicable to such Purchaser, in each case as set forth
in the commitment letter dated as of December 2, 2003 among Covanta, the
Purchasers and Bank One, NA, as issuing bank and agent; or (b) D. E. Shaw, if D.
E. Shaw fails, in connection with the International Revolver Credit Facility
Credit Agreement, to cause Deutsche Bank, A.G. or its Affiliates or another
financial institution of sound reputation, to execute, deliver and make
available such International Revolver Credit Facility Credit Agreement.
CUSIP No. 236274106 13D/A Page 12 of 34 Pages
"Notes" means one or more note(s) containing the same terms and conditions, and
with the same conversion features, as set forth herein and in the form of note
attached hereto as Exhibit B; provided, however, that the terms of the Notes may
be modified pursuant to the Ownership Change Rollover Terms or the Non-Ownership
Change Rollover Terms, as applicable.
"Ownership Change" has the meaning ascribed thereto in Section 382(g) of the
Code. "Ownership Change Limitation" means any issuance of Common Stock that
would otherwise result in an Ownership Change under Section 382(g) of the Code,
computed by substituting "48.75 percentage points" for "50 percentage points"
where such phrase appears in Section 382(g)(1)(A) of the Code.
"Ownership Change Rollover Terms" means the terms of the Notes set forth on
Exhibit F. "Permitted Liens" means: (a) liens on the stock of Covanta to secure
the debt comprising the Exit Financing; (b) liens in favor of any Subsidiary;
(c) liens incurred or deposits made to secure the performance of statutory or
regulatory obligations, bankers' acceptances, surety or appeal bonds,
performance bonds, deposits to secure the performance of tenders, bids, trade
contracts, government contracts, import duties, performance, and return-of-money
bonds, leases or licenses or other obligations of a like nature incurred in the
ordinary course of business, including, without limitation, landlord liens on
leased properties; (d) existing on the date of this Agreement (other than liens
to secure debt for borrowed money); (e) liens for taxes, assessments or
governmental charges or claims that (i) are not yet delinquent, (ii) that are
not yet subject to penalties or interest for non-payment or (iii) that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded, provided that in the case of clause (iii), any reserve or
other appropriate provision as is required in conformity with GAAP has been made
therefore, (f) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's, suppliers' or other like liens arising in the ordinary course of
business and deposits made to obtain the release of such liens and with respect
to obligations not overdue for a period in excess of 60 days or which are being
contested in good faith by appropriate proceedings; provided that any reserve or
other appropriate provision as shall be required to conform with GAAP shall have
been made; (g) liens incurred or pledges or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment insurance and
other types of social security; (h) deposits made in the ordinary course of
business to secure liability to insurance carriers; (i) any attachment or
judgment lien not constituting an Event of Default under this Agreement and
liens arising from the rendering of a judgment that is not a final judgment or
order against the Company or any Subsidiary with respect to which the Company or
such Subsidiary is then proceeding with an appeal or other proceeding for review
or in connection with surety or appeal bonds in connection with such attachment
or judgment; (j) any interest or title of a lessor or sublessor under any
operating lease; (k) liens arising from Uniform Commercial Code financing
statement filings regarding operating leases entered into by the Company and its
Subsidiaries in the ordinary course of business; and (l) rights of set-off of
banks and other Persons. "Person" means an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association or joint venture. "Plan" shall have the meaning set
forth in the Covanta Agreement. "Plan Shares" shall have the meaning set forth
in Section 3.3(b) hereof. "Preferred Stock" shall have the meaning set forth in
Section 3.3(a) hereof. "Public Participation" means the following fraction, not
to exceed one: total number of shares of Common Stock purchased by Persons other
than the Purchasers and the State of California Commissioner of Insurance
pursuant to the Rights Offering, divided by 16,388,017, calculated to the fourth
decimal place.
"Purchaser" shall have the meaning set forth in Recitals hereof.
"Purchaser Group Non-Performance" means any circumstance in which the Deposit
becomes due and payable to Covanta pursuant to Section 11.2(c)(i)(A)(y) of the
Covanta Agreement.
"Registration Rights Agreement" shall have the meaning set forth in Section 5.7
hereof. "Required Majority" shall mean (i) in connection with any reduction in
the Reserve Amount or any increase in the Consideration, all Purchasers and (ii)
in all other cases, Purchasers holding at least 66 2/3 % of the aggregate
outstanding principal amount of Notes.
"Reserve Amount" shall mean $7,000,000 of the aggregate principal amount of
Notes. "Restated Certificate of Incorporation" means the Company's Restated
Certificate of Incorporation filed on July 20, 1999, as amended on September 6,
2001. "Rights Offering" shall have the meaning set forth in Section 5.4(a)
hereof. "Rollover Terms" means the Ownership Change Rollover Terms and the
Non-Ownership Change Rollover Terms.
"Scheduled Maturity Date" means January 2, 2005.
"SEC" means the Securities and Exchange Commission.
"Second Lien L/C Credit Facility Credit Agreement" shall have the meaning set
forth in the Covanta Agreement. "Securities" shall mean the Notes, the shares of
Common Stock issuable upon conversion of the Notes, and the Escrowed Stock.
CUSIP No. 236274106 13D/A Page 13 of 34 Pages
"Securities Act" shall mean the Securities Act of 1933, as amended, and all of
the rules and regulations promulgated thereunder. "Significant Subsidiary" means
any Subsidiary that, or any group of Subsidiaries (if treated as a single
Subsidiary with the revenues or assets of its members) that, would constitute a
"significant subsidiary", as defined in Section 1-02(w) of Regulation S-X under
the Securities Act, as in effect on the date of this Agreement. "Subsidiaries"
means, any corporation or other organization, whether incorporated or
unincorporated, of which, as of the date of this Agreement, (a) at least a
majority of the securities or other interests having by their terms ordinary
voting power to elect a majority of the board of directors or others performing
similar functions with respect to such corporation or other organization will be
held directly or indirectly, owned or controlled by the Company or (b) the
Company or any of the Subsidiaries will be a general partner or managing member;
provided, however, that in no event will ACL, Covanta or any of their
subsidiaries be deemed to be Subsidiaries of the Company for purposes of this
Agreement.
"TAT" means Third Avenue Trust, on behalf of the Third Avenue Value Fund Series,
a Delaware business trust. "Tax" or "Taxes" means any present or future tax,
levy, impost, duty, charge, fee, deduction or withholding of any nature and
whatever called, by whomsoever, on whomsoever and wherever imposed, levied,
collected, withheld or assessed, including interest, penalties, additions to tax
and any similar liabilities with respect thereto. "Tax Returns" shall mean
returns, reports, information statements and other documentation (including any
additional or supporting material) filed or maintained, or required to be filed
or maintained, in connection with the calculation, determination, assessment or
collection of any Tax and shall include any amended returns required as a result
of examination adjustments made by the Internal Revenue Service or other Tax
authority.
"Transactions" means the Contemplated Transactions and the transactions
contemplated by this Agreement, including the Rights Offering. "Vessel Leasing"
means Vessel Leasing, LLC, a Delaware limited liability company.
2. Authorization, Purchase and Sale of Notes.
2.1 Authorization of Securities. The Company has (i) authorized the issuance and
sale of the Notes, (ii) authorized the issuance of and reserved the shares of
Common Stock issuable upon conversion of the Notes and (iii) authorized the
issuance of the Escrow Receipts and the Escrowed Stock.
2.2 Purchase and Sale of Notes. Subject to and upon the terms and conditions set
forth in this Agreement, at the Closing, the Company shall issue and sell to
each Purchaser, and each Purchaser, severally, shall purchase from the Company
the aggregate principal amount of Notes set forth opposite the name of such
Purchaser under the heading "Principal Amount of Notes to be Purchased" on
Exhibit A hereto, at a purchase price equal to the principal amount of Notes
purchased, in an aggregate principal amount of $40,000,000.
2.3 Issuance of Escrowed Stock and Escrow Receipts.
(a) Subject to and upon the terms and conditions of this Agreement, at the
Closing, the Company hereby agrees to issue to each Purchaser, as part of its
inducement to purchase the Notes being purchased by such Purchaser and provide,
directly or indirectly, a portion of the Exit Financing, the number of shares of
Common Stock set forth opposite such Purchaser's name under the heading
"Escrowed Stock" on Exhibit A hereto, such shares to be held by the Company in
escrow pursuant to its Restated Certificate of Incorporation (the "Escrowed
Stock") as set forth in this Section 2.3. The Company shall deliver to the
Escrow Agent, with respect to the certificates reflecting the Purchasers'
ownership of the Escrowed Stock, escrow receipts (the "Escrow Receipts")
evidencing the Purchasers' beneficial ownership of the Escrowed Stock
represented thereby and record ownership of such Escrowed Stock. The Purchasers
shall retain full voting and dividend rights for all Escrowed Stock unless
redeemed as provided herein or unless voting is restricted pursuant to Section
7.3(e) hereof. Promptly following the Closing, the Company shall deliver to each
Purchaser a certificate of a duly authorized officer of the Company confirming
that the Escrowed Stock and the Escrow Receipt of such Purchaser have been
issued and are being held by the Company and the Escrow Agent, respectively, in
accordance with this Section 2.3(a). On the date the Escrowed Stock ceases to be
subject to redemption pursuant to Section 2.3(b), the Company shall cause the
Escrow Receipts or, to the extent permitted by the Restated Certificate of
Incorporation, the Escrowed Stock, to be released to the Purchasers.
(b) In the event the Covanta Agreement is terminated for any reason other than
as a result of a Company Non-Performance, the Purchasers agree to allow the
Company to redeem the Escrowed Stock, upon written notice from the Company to
each Purchaser, at an aggregate price of $4.00 for all of the Escrowed Stock. If
the Company has a right to redeem the Escrowed Stock pursuant to this Section
2.3(b), and has not given written notice of such redemption within 90 days of
the date the Covanta Agreement is terminated, the Escrowed Stock shall cease to
be subject to redemption by the Company. The Company's right to redeem the
Escrowed Stock is subject to its compliance with the provisions of
CUSIP No. 236274106 13D/A Page 14 of 34 Pages
Section 7.5(a)(i), if then applicable; provided, that in such case if at the
time the Escrowed Stock becomes subject to redemption there is a dispute
described in Section 7.5(b), such redemption right shall not terminate until the
earlier of (x) 90 days following the resolution of such dispute with respect to
the Deposit and (y) the Extended Maturity Date. When the Escrowed Stock ceases
to be subject to redemption, the Company shall cause the Escrow Receipts or, to
the extent permitted by the Restated Certificate of Incorporation, the Escrowed
Stock, to be released to the Purchasers.
2.4 Closing. The closing of the purchase and sale of the Notes (the "Closing")
shall take place at the offices of Willkie Farr & Gallagher LLP, 787 Seventh
Avenue, New York, New York 10019, on the date the Initial Deposit is scheduled
to be paid by the Company pursuant to the Covanta Agreement or such other date
as may be mutually agreed to by the Company and the Purchasers (the "Closing
Date"). At the Closing, the Company shall deliver (i) to each Purchaser, one or
more Note(s) in the principal amount set forth opposite such Purchaser's name on
Exhibit A hereto and (ii) to the Escrow Agent, the Escrow Receipts. At the
Closing, each Purchaser shall pay to the Company the purchase price for the
Notes set forth opposite the name of such Purchaser under the heading "Principal
Amount of Notes to be Purchased" on Exhibit A hereto by wire transfer as
designated by the Company of immediately available funds; provided, however,
that proceeds of the purchase price for the Notes required to fund the Final
Deposit plus the Reserve Amount shall be credited to an escrow account (the
"Escrow Account") held by The Bank of Nova Scotia Trust Company (the "Escrow
Agent") pursuant to the escrow agreement attached hereto as Exhibit G (the
"Escrow Agreement"). The Final Deposit and the Reserve Amount shall be held by
the Escrow Agent in an interest-bearing account. The Final Deposit shall be
released to the Company on the date the Final Deposit is scheduled to be paid by
the Company pursuant to the Covanta Agreement. The Reserve Amount shall remain
in the Escrow Account until the earlier of (a) the Closing of the Acquisition
(at which time it shall be released to the Company) and (b) such time as
provided in Sections 7.4 and 7.5 hereof.
2.5 Use of Proceeds. The Company shall apply the proceeds from the sale of the
Notes to fund (i) the Initial Deposit in the amount of $15,000,000 and the Final
Deposit in the amount of $15,000,000, in each case to the extent required to be
given by the Company to Covanta in connection with the Acquisition as provided
in the Covanta Agreement, (ii) the Consideration, (iii) the payment of fees and
expenses related to the Transactions, and (iv) general corporate purposes of the
Company.
3. Representations and Warranties of the Company. Except as set forth in a
corresponding numbered section of the disclosure schedule attached hereto as
Exhibit H (the "Disclosure Schedule") or as disclosed in the Disclosure
Documents, as of the date of this Agreement, the Company hereby represents and
warrants to each of the Purchasers as follows:
3.1 Incorporation. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and is qualified to
do business in each jurisdiction in which the character of its properties or the
nature of its business requires such qualification, except where the failure to
so qualify would not reasonably be expected to result in a Material Adverse
Effect. The Company has all requisite corporate power and authority to carry on
its business as now conducted.
3.2 Subsidiaries. Each Subsidiary of the Company has been duly organized, is
validly existing in good standing under the laws of the jurisdiction of its
formation, has the organizational power and authority to own its properties and
to conduct its business and is duly registered, qualified and authorized to
transact business and is in good standing in each jurisdiction in which the
conduct of its business or the nature of its properties requires such
registration, qualification or authorization, except where such failure would
not reasonably be expected to result in a Material Adverse Effect. All of the
issued and outstanding capital stock or other equity interests of each
Subsidiary have been duly authorized and validly issued, are fully paid and
non-assessable, and are owned by the Company free and clear of any mortgage,
pledge, lien, encumbrance, security interest, claim, except for any Permitted
Lien.
3.3 Capitalization.
(a) The authorized capital stock of the Company consists of 150,000,000 shares
of Common Stock and 10,000,000 shares of preferred stock, par value $.10 per
share (the "Preferred Stock"). The total number of outstanding shares of Common
Stock as of November 13, 2003 was 30,673,831, and the total number of shares of
Common Stock issuable pursuant to stock options outstanding at November 13, 2003
was 1,952,253. Since November 13, 2003, the Company has not issued any shares of
Common Stock. There are no outstanding shares of Preferred Stock. All such
shares of Common Stock have been duly authorized, and all such issued and
outstanding shares of Common Stock have been validly issued and are fully paid
and nonassessable. No such outstanding shares of Common Stock were issued in
violation of any preemptive rights, "poison pill" provisions, rights of first
offer or refusal or similar rights.
CUSIP No. 236274106 13D/A Page 15 of 34 Pages
(b) Except for the issuance of shares of Common Stock pursuant to the exercise
of outstanding options granted pursuant to the Company's option plans, the
Company has not issued any capital stock since May 29, 2002, except as
contemplated by this Agreement or the Covanta Agreement. Except (i) as set forth
in or contemplated by this Agreement or the Covanta Agreement, (ii) for the
issuance of options to purchase shares of the Company's Common Stock pursuant to
the Company's option plans and (iii) for the issuance and sale of up to
3,000,000 shares of Common Stock to certain claimholders as contemplated by the
Plan (the "Plan Shares"), there are no existing options, warrants, calls,
preemptive (or similar) rights, subscriptions or other rights, agreements,
arrangements or commitments of any character obligating the Company to issue,
transfer or sell, or cause to be issued, transferred or sold, any shares of the
capital stock of the Company or other equity interests in the Company or any
securities convertible into or exchangeable for such shares of capital stock or
other equity interests, and there are no outstanding contractual obligations of
the Company to repurchase, redeem or otherwise acquire any shares of its capital
stock or other equity interests.
3.4 Authorization. All corporate action on the part of the Company, its
officers, directors and stockholders necessary for the authorization of the
Securities, the authorization, execution, delivery and performance of this
Agreement and the consummation of the Transactions has been taken. The Board of
Directors has authorized the Transactions, has fulfilled all obligations to
complete the Transactions pursuant to Paragraph FIFTH of the Company's Restated
Certificate of Incorporation and has received an opinion of tax counsel that the
issuance of the Securities would not result in, or create an unreasonable risk
of, an Ownership Change. This Agreement constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as rights to indemnity and contribution may be limited by
state or federal securities laws or the public policy underlying such laws, and
except as may be limited by bankruptcy, insolvency, reorganization or other laws
affecting creditors' rights generally and by general equitable principles. The
Company has all requisite corporate power to enter into this Agreement and to
carry out and perform its obligations under the terms of this Agreement. The
Board of Directors has taken all action necessary to render inapplicable, as it
relates to Purchasers, the provisions of Section 203 of the General Corporation
Law of the State of Delaware in connection with this Agreement.
3.5 Valid Issuance.
(a) On the date hereof, the Escrowed Stock is, and upon their issuance in
accordance with the terms of the Notes, the shares of Common Stock issued upon
conversion of the Notes will be, duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock, free of all preemptive or similar rights,
but subject to the restrictions set forth in the Company's Restated Certificate
of Incorporation.
(b) Subject to the accuracy of the representations made by the Purchasers in
Section 4 hereof, the Securities will be issued to the Purchasers in compliance
with applicable exemptions from the registration and prospectus delivery
requirements of the Securities Act. The Company is current in its filings with
the SEC under Section 13(a) of the Exchange Act.
3.6 Financial Statements. The financial statements of the Company included in
the Disclosure Documents (collectively, the "Financial Statements") fairly
present in all material respects the consolidated financial position of the
Company and its consolidated subsidiaries as of the dates indicated, and the
results of its operations and cash flows for the periods therein specified. The
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis ("GAAP") throughout the
period therein specified except as may be otherwise indicated in such Financial
Statements or the notes thereto (except in the case of quarterly financial
statements for the absence of footnote disclosure and subject, in the case of
interim periods, to normal year-end adjustments).
3.7 No Material Adverse Change. Except as set forth in Section 3.7 of the
Disclosure Schedule or as disclosed in the Disclosure Documents, there has been
no change, event or occurrence which has had, individually or in the aggregate,
a Material Adverse Effect, and Company does not know of any such change, event
or occurrence which is threatened, nor has there been any damage, destruction or
loss which would reasonably be expected to have or has had, individually or in
the aggregate, a Material Adverse Effect.
3.8 Absence of Litigation. There is no action, suit, proceeding, arbitration or
claim, pending or, to the Company's knowledge, threatened nor, to the Company's
knowledge, is there any investigation or inquiry pending or threatened, by or
before any governmental body against the Company which, for all such matters
taken as a whole, would reasonably be expected to result in a Material Adverse
Effect. The foregoing includes, without limitation, any such action, suit,
proceeding or investigation that seeks to delay or prevent the Transactions or
the right of the Company to execute, deliver and perform under
CUSIP No. 236274106 13D/A Page 16 of 34 Pages
same. The Company is not a party to or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality that would reasonably be expected to result in a Material
Adverse Effect.
3.9 Disclosure Documents. The information contained or incorporated by reference
in the Disclosure Documents was true and correct in all material respects as of
the respective dates of the filing thereof with the SEC, and, as of such
respective dates, did not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except to the extent updated or superseded by any report
subsequently filed by the Company with the SEC.
3.10 Books and Records. The minute books and other records of the Company and
its Subsidiaries accurately reflect approval by the Board of Directors thereof
of the Transactions and accurately reflect, in all material respects the
corporate action of the stockholders and directors and any committees thereof of
the Company and its Subsidiaries with respect to the Transactions.
3.11 Consents. All consents, approvals, orders and authorizations required on
the part of the Company in connection with the execution, delivery or
performance of this Agreement and the consummation of the Transactions have been
obtained and will be effective as of the Closing Date, other than such filings
required to be made after the Closing under applicable federal and state
securities laws and except for failures which would not be reasonably expected
to result in a Material Adverse Effect. The execution, delivery or performance
of this Agreement and the consummation of the Transactions do not require the
approval of the Company's stockholders under applicable United States or
Delaware law.
3.12 No Conflict. The execution and delivery of this Agreement by the Company
and the consummation of the Transactions will not conflict with or result in any
violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to a loss of a material benefit under (i) any provision of the
Restated Certificate of Incorporation or by-laws of the Company or (ii) any
agreement or instrument, permit, franchise, license, judgment, order, statute,
law, ordinance, rule or regulations, applicable to the Company or its properties
or assets, except, in the case of clause (ii), as would not, individually or in
the aggregate, be reasonably expected to result in a Material Adverse Effect.
3.13 Brokers or Finders. Other than with respect to CSFB, the fees of which will
be borne by the Company, the Company has not incurred, and shall not incur,
directly or indirectly, any liability for any brokerage or finders' fees or
agents' commissions or any similar charges in connection with the Transactions.
3.14 American Stock Exchange. The Common Stock is registered pursuant to Section
12(b) of the Exchange Act and is listed on AMEX, and the Company has taken no
action designed to, or likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or delisting the Common
Stock from AMEX, nor has the Company received any notification that the SEC or
AMEX is contemplating terminating such registration or listing. The execution,
delivery or performance of this Agreement and the consummation of the
Transactions do not require any approval by the stockholders of the Company
under AMEX rules or the Company's listing or other agreements with AMEX.
3.15 Company Not an "Investment Company". The Company is not an "investment
company" as such term is defined in the Investment Company Act of 1940, as
amended.
3.16 Title to Property and Assets. The Company owns or possesses the necessary
right to use or title to all properties, assets, licenses, permits and the like
required to operate its business as currently operated, except for such
properties, assets, licenses, permits and the like, the absence of which would
not reasonably be expected to result in a Material Adverse Effect. The
properties and assets of the Company owned by them are owned free and clear of
all mortgages, deeds of trust, liens, charges, encumbrances and security
interests except (i) for statutory liens for the payment of current taxes that
are not yet delinquent, (ii) liens, encumbrances and security interests that
arise in the ordinary course of business and (iii) Permitted Liens.
3.17 Taxes.
(a) Except for certain late filings previously made as disclosed in Section 3.17
of the Disclosure Schedule: (i) the Company has filed (or joined in the filing
of) when due all Tax Returns required by applicable law to be filed with respect
to the Company and all Taxes shown to be due on such Tax Returns have been paid;
CUSIP No. 236274106 13D/A Page 17 of 34 Pages
(ii) all such Tax Returns were true, correct and complete in all material
respects as of the time of such filing; and (iii) any liability of the Company
for Taxes not yet due and payable, or which are being contested in good faith,
in each case as of December 2, 2003, has been accrued or reserved for on the
financial statements of the Company in accordance with GAAP. Since January 1,
1997, the Company has not incurred any material Taxes other than in the ordinary
course of business.
(b) Except as set forth in Section 3.17 of the Disclosure Schedule, no current
or former subsidiary of the Company has ever been a member of any "affiliated
group" (within the meaning of Section 1504(a) of the Code) included in any
consolidated federal income Tax Return filed with the Internal Revenue Service
other than an affiliated group of which the Company is the common parent anytime
during the five years immediately preceding the date hereof.
3.18 Insurance. All insurance policies carried by, or covering the Company's or
its Subsidiaries' properties are in full force and effect, and no notice of
cancellation has been given with respect to any such policy except when such
failure would not reasonably be expected to result in a Material Adverse Effect.
All premiums due on such policies have been paid in a timely manner and the
Company and its Subsidiaries have complied in all material respects with the
terms and provisions of such policies except when such failure would not
reasonably be expected to result in a Material Adverse Effect. The insurance
coverage provided by such policies is in such amount and types which are
adequate and customary for the industries in which the Company and its
Subsidiaries operate except when such failure would not reasonably be expected
to result in a Material Adverse Effect.
3.19 Accounting Controls. The Company and its Subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles and to maintain assets accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
3.20 Compliance with Law. Since January 1, 1997, the operations of the
businesses of the Company and its Subsidiaries have been conducted in all
material respects in accordance with all applicable laws, regulations, orders
and other requirements of all courts and other governmental or regulatory
authorities having jurisdiction over the Company and its Subsidiaries and their
respective assets, properties and operations except when such failure would not
reasonably be expected to result in a Material Adverse Effect. Since January 1,
1997, neither the Company nor any Subsidiary has received written notice of any
violation of any such law, regulation, order or other legal requirement, and is
not in default with respect to any order, writ, judgment, award, injunction or
decree of any governmental authority or arbitrator, domestic or foreign,
applicable to the Company or any Subsidiary or any of their respective assets,
properties or operations except those that would not reasonably be expected to
result in a Material Adverse Effect.
3.21 Insurance Regulation. The Company has no Subsidiaries that either are
licensed as an insurance company or required to be licensed in connection with
the conduct of an insurance business in the State of Missouri.
4. Representations and Warranties of Each Purchaser. Each Purchaser, severally
for itself and not jointly with the other Purchasers, represents and warrants to
the Company as to itself as follows:
4.1 Organization. Such Purchaser is duly and validly existing and, to the extent
relevant and necessary to enter into a binding agreement, is in good standing
under the jurisdiction of its organization.
4.2 Authorization. All action on the part of such Purchaser necessary for the
authorization, execution, delivery and performance of this Agreement and the
consummation of the Transactions has been taken. This Agreement constitutes the
legal, valid and binding obligation of such Purchaser, enforceable against such
Purchaser in accordance with its terms, except as such may be limited by
bankruptcy, insolvency, reorganization or other laws affecting creditors' rights
generally and by general equitable principles. Such Purchaser has all requisite
power to enter into this Agreement and to carry out and perform its obligations
under the terms of this Agreement.
4.3 Purchase Entirely for Own Account, Etc. Such Purchaser is acquiring the
Securities for its own account, and not with a view to, or for sale in
connection with, any distribution of the Securities in violation of the
Securities Act. Except as contemplated by this Agreement, such Purchaser has no
present agreement, undertaking, arrangement, obligation or commitment providing
for the sale or other disposition of the Securities. Such Purchaser, has not
been organized, reorganized or recapitalized specifically for the purpose of
investing in the Securities.
CUSIP No. 236274106 13D/A Page 18 of 34 Pages
4.4 Investor Status; Etc. Such Purchaser certifies and represents to the Company
that at the time such Purchaser acquires any of the Securities, such Purchaser
will be an "accredited investor" as defined in Rule 501 of Regulation D
promulgated under the Securities Act. Such Purchaser's financial condition is
such that it is able to bear the risk of holding the Securities for an
indefinite period of time and the risk of loss of its entire investment. Such
Purchaser has been afforded the opportunity to ask questions of and receive
answers from the management of the Company concerning this investment and has
sufficient knowledge and experience in investing in companies similar to the
Company so as to be able to evaluate the risks and merits of its investment in
the Company. Such Purchaser has made an independent investment decision with
respect to the Securities and such decision has been made without regard to the
investment decision of any other Person who may purchase Securities.
4.5 Securities Not Registered. Such Purchaser understands that the Securities
have not been registered under the Securities Act, by reason of their issuance
by the Company in a transaction exempt from the registration requirements of the
Securities Act, and that the Securities must continue to be held by such
Purchaser unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from such registration. Such Purchaser understands
that the exemptions from registration afforded by Rule 144 (the provisions of
which are known to it) promulgated under the Securities Act depend on the
satisfaction of various conditions, and that, if applicable, Rule 144 may afford
the basis for sales only in limited amounts.
4.6 No Conflict. The execution and delivery of this Agreement by such Purchaser
and the consummation of the Transactions will not conflict with or result in any
violation of or default by such Purchaser (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to a loss of a material benefit under (i) any
provision of the organizational documents of such Purchaser or (ii) any
agreement or instrument, permit, franchise, license, judgment, order, statute,
law, ordinance, rule or regulations, applicable to such Purchaser or its
respective properties or assets.
4.7 Brokers. Such Purchaser has not retained, utilized or been represented by
any broker or finder in connection with the transactions contemplated by this
Agreement.
4.8 Consents. All consents, approvals, orders and authorizations required on the
part of such Purchaser in connection with the execution, delivery or performance
of this Agreement and the consummation of the Transactions have been obtained
and will be effective as of the Closing Date.
5. Covenants of the Company and Purchasers.
5.1 Certain Affirmative Covenants. Until the Notes are repaid in full, or
converted in full pursuant to Section 7.3 hereof, the Company shall, and shall
cause each of its Subsidiaries to, at all times:
(a) comply with all applicable laws, regulations, orders and other requirements
of all courts and other governmental or regulatory authorities having
jurisdiction over the Company and its Subsidiaries and their respective assets,
properties and operations, except where failure to comply would not reasonably
be expected to result in a Material Adverse Effect;
(b) preserve and keep in full force and effect its corporate existence and
rights and franchises material to the business of the Company and its
Subsidiaries taken as a whole; provided, however, that the Company and its
Subsidiaries shall not be required to preserve and keep in full force and effect
any rights or franchises or the corporate existence of any of its Subsidiaries
if the Company shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries,
and that the loss thereof is not materially adverse to the Purchasers or such
action is otherwise permitted by this Agreement; and
(c) duly and timely file all Tax Returns required to be filed in compliance with
all applicable laws with respect to the Company and its Subsidiaries and shall
pay all Taxes imposed on the Company or any Subsidiary before any material
penalty or interest in a material amount accrues thereon; provided, however,
that no such Tax assessment or other charge need be paid if it is being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and if such reserve or other appropriate provision, if any,
as shall be required in conformity with GAAP shall have been made therefor.
5.2 Negative Covenants. Except as contemplated hereby, until the Notes are
repaid in full, or converted in full pursuant to Section 7.3 hereof, the Company
shall not, without the prior written consent of the Required Majority:
CUSIP No. 236274106 13D/A Page 19 of 34 Pages
(a) (i) pay dividends on or repurchase any of its outstanding securities,
whether or not accrued, other than redemptions pursuant to employee benefit
plans in the ordinary course of business, (ii) prior to conversion of the Notes
(other than Notes outstanding subject to Ownership Change Rollover Terms), make
any distribution in shares of Common Stock or, except in connection with the
Rights Offering or the Plan Shares or as otherwise contemplated herein, issue
Common Stock or securities convertible into Common Stock, or (iii) prior to
conversion of the Notes (other than Notes outstanding subject to Ownership
Change Rollover Terms), subdivide, combine or reclassify its outstanding shares
of Common Stock into a smaller number of shares;
(b) amend its certificate of incorporation, enter into any transaction of merger
or consolidation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution) or convey, sell, lease, transfer, or otherwise
dispose of, in one transaction or a series of related transactions, any material
assets, directly or through the sale of capital stock of Subsidiaries, whether
now owned or hereafter acquired, or agree to or effect any asset acquisition or
stock acquisition (except pursuant to the Covanta Agreement) other than asset
acquisitions in the ordinary course of business not exceeding an aggregate of
$250,000 per year and other than asset dispositions not exceeding an aggregate
of $250,000 per year; provided, however that the foregoing shall not apply to
(i) the sale or other disposition of the equity interests in or the assets of
any of ACL, GMS or Vessel Leasing or any of their subsidiaries; (ii) the
granting of Permitted Liens; or (iii) the disposition of marketable securities
not issued by any of its Subsidiaries for cash;
(c) enter into any transaction with or create or redomesticate any entity
regulated by any federal, state, municipal or foreign governmental, regulatory
or other public body, agency or authority (including self-regulatory
organizations) in any manner that would subject any Purchaser to any regulatory
review, oversight or approvals of any kind, in any state, including but not
limited to any entity regulated by an insurance department, banking commission
or similar body (other than the Transactions);
(d) incur any debt for borrowed money, other than debt in an aggregate principal
amount not exceeding $250,000 at any time outstanding;
(e) engage in any business other than the business currently conducted by the
Company as of the Closing and other lines of business reasonably incidental or
related thereto or as a result of the Transactions;
(f) directly or indirectly, create, incur, assume, agree to provide or permit to
exist any lien, or file, execute or agree to the execution of any financing
statement, on or with respect to any asset of the Company, whether now owned or
hereafter acquired, or any income or profits therefrom, except for Permitted
Liens;
(g) enter into any material transaction or series of transactions with any
Affiliate that is not (x) a Subsidiary of the Company, (y) Covanta, or (z) a
subsidiary of Covanta, except (i) this Agreement and the other agreements
related hereto, the Covanta Agreement, the Exit Financing and the Transactions,
(ii) pursuant to agreements in effect on the date hereof, as such agreements
(other than the Covanta Agreement) may be amended, renewed, extended or replaced
as long as not materially less favorable to the Company taken as a whole, (iii)
in the ordinary course of business, (iv) any issuance of equity or other
payments, awards or grants in cash, equity or otherwise pursuant to, or the
funding of employment arrangements, stock options and stock ownership plans or
(v) any transaction with an Investment Entity or ACL and any of its
subsidiaries; and
(h) at all times have authorized and reserved for the purpose of issue upon
exercise of the conversion rights evidenced by the Notes, a sufficient number of
shares of Common Stock to provide the exercise of the rights represented by the
Notes. In the event there is an insufficient amount of Common Stock reserved for
issuance pursuant to the conversion of Notes, the Company will take appropriate
action to authorize an increase in Common Stock to allow for such issuance.
5.3 Other Covenants of the Company
(a) The Company covenants to pay to each Purchaser in cash the Extension Fee
with respect to any Notes held by such Purchaser that are subject to the
Ownership Change Rollover Terms, on the date such terms become applicable.
(b) Between the date of this Agreement and the date of the closing of the
Acquisition, the Company will promptly advise each Purchaser of any action or
event of which it becomes aware which has the effect of rendering any of the
Company's covenants hereunder incapable of performance.
(c) Immediately following the execution of this Agreement, the Company shall
execute and deliver the Covanta Agreement.
CUSIP No. 236274106 13D/A Page 20 of 34 Pages
(d) Between the date of this Agreement and the date of the closing of the
Acquisition, the Company shall not amend the Covanta Agreement or waive any
condition, representation or warranty of the Covanta Agreement without the
Required Majority's prior written consent.
(e) The Company shall deliver to the Purchaser a certificate, dated at least 12
Business Days prior to the closing of the Acquisition, signed by the Chief
Financial Officer of the Company, certifying on behalf of the Company that there
has been no Event of Default pursuant to this Agreement as of such date.
(f) Prior to the closing of the Rights Offering, the Company shall use
commercially reasonable efforts to cause all Common Stock issuable to the
Purchasers hereunder to be approved for listing on AMEX, subject to issuance.
5.4 Rights Offering.
(a) The Company shall use all commercially reasonable efforts to (i) commence a
rights offering of Common Stock, pursuant to an effective registration statement
on the appropriate form, in the amount of .75 rights per each outstanding share
of Common Stock and offered at a price of $1.53 per share (the "Rights
Offering") within 75 days of the closing of the Acquisition and (ii) cause the
registration statement to be declared effective within 45 days of filing with
the SEC. The Company shall cause the consummation of the Rights Offering within
45 days of the date the Rights Offering registration statement is declared
effective.
(b) Each Purchaser shall participate fully in the Rights Offering in respect of
rights accruing to the Escrowed Stock then held by such Purchaser.
(c) Except as otherwise set forth herein, no Purchaser shall participate in the
Rights Offering in respect of shares of Common Stock owned by such Purchaser on
or before the date of this Agreement in excess of the level of Public
Participation. Each Purchaser shall participate fully in the Rights Offering to
the extent permitted pursuant to the immediately preceding sentence.
(d) On the date of the closing of the Rights Offering, the Company shall apply
all proceeds of the Rights Offering to prepay each Purchaser's Notes (including
accrued interest thereon) pro-rata according to the principal amount of Notes
outstanding at such time; provided that the cash otherwise payable to D. E. Shaw
pursuant to this clause (d) shall be reduced by an amount (to be retained by the
Company) equal to the D. E. Shaw Reserved Principal (as defined below) and a
principal amount of the Notes (including accrued interest) held by D. E. Shaw
equal to the D. E. Shaw Reserved Principal that would otherwise have been
prepaid pursuant to this clause (d) shall remain outstanding, to be prepaid by
conversion in accordance with Section 5.5.
5.5 D. E. Shaw Additional Equity. As soon as practicable after giving effect to
Section 5.4(d), the Company shall prepay Notes held by D. E. Shaw (including
accrued interest) in an aggregate principal amount equal to the D. E. Shaw
Reserved Principal by conversion in accordance with Section 7.3 (Common Stock so
issued, the "Additional Equity"). The D. E. Shaw Reserved Principal shall mean
that amount equal to $1.53 multiplied by the following:
(1) if Public Participation is .30 or less: (x) Public Participation, multiplied
by (y) 50,000, multiplied by
(z) 100;
(2) if Public Participation is greater than .30 but equal to or less than .50:
(x) 1,500,000, plus (y) (i) Public Participation minus .30, multiplied by
(ii) 75,000, multiplied by (iii) 100;
(3) if Public Participation is greater than .50 but equal to or less than .70:
(x) 3,000,000, plus (y) (i) Public Participation minus .50, multiplied by
(ii) 100,000, multiplied by (iii) 100;
and
(4) if Public Participation is greater than .70: (x) 5,000,000, plus (y) (i)
Public Participation minus .70, multiplied by
(ii) 125,000, multiplied by (iii) 100.
CUSIP No. 236274106 13D/A Page 21 of 34 Pages
5.6 Prepayment of Remaining Notes.
(a) After giving effect to Sections 5.4(d) and 5.5, the Company shall prepay any
remaining Notes (including accrued interest thereon) pro rata according to the
principal amount of Notes outstanding at such time by conversion in accordance
with Section 7.3.
(b) After giving effect to Sections 5.4(d), 5.5 and 5.6(a), the Ownership Change
Rollover Terms shall apply to the principal of, and accrued interest on, any
Notes that remain outstanding. For the avoidance of doubt, proceeds of the
Rights Offering equal to the D. E. Shaw Reserved Principal shall be available to
the Company for general corporate purposes.
5.7 Registration Rights Agreement. The Purchasers shall be entitled to the
benefits of the registration rights agreement for all shares of Common Stock
received upon conversion of the Notes and all Escrowed Stock not subject to
redemption hereunder (the "Registration Rights Agreement"), a copy of which is
attached hereto as Exhibit C for the term of such agreement. Pursuant to the
Registration Rights Agreement, the Company shall file with the SEC, under the
circumstances set forth therein, a shelf registration statement pursuant to Rule
415 under the Securities Act or a registration statement on the appropriate form
the Company is qualified to use, no later than the earlier of June 30, 2004, and
ten days after the date of the closing of the Rights Offering, and shall use
commercially reasonable efforts to cause such shelf registration statement or
other registration statement to be declared effective.
6. Covenants of Parties.
6.1 Other Governmental Approvals. As soon as practicable after the execution of
this Agreement, the Company and each Purchaser shall file all applications and
reports and take such other action which is reasonably required to be taken or
filed by it with any governmental authority in connection with the transactions
contemplated by this Agreement. The Company and each Purchaser shall give all
additional notices to third parties and take other action reasonably required to
be or taken by it under any authorization, lease, note, mortgage, indenture,
agreement or other instrument or any law, rule, regulation, demand or court or
administrative order in connection with the transactions contemplated by this
Agreement.
6.2 Insurance Regulatory Approvals. Each Purchaser agrees as to itself, to the
extent required by law, to file a Disclaimer in Montana and California. The
Company agrees to provide all necessary documents, information and other
assistance as reasonably may be requested by any Purchaser in connection with
any state filing of a Disclaimer or other insurance documents.
6.3 Information for Ownership Change Analysis. Each Purchaser severally agrees
to disclose to the Company, upon the Company's reasonable request, the number of
shares of Common Stock owned directly by such Purchaser and to respond to
reasonable requests by the Company for information relating to such Purchaser
necessary to calculate an Ownership Change.
6.4 International Revolving Credit Facility. D. E. Shaw commits to the Company
to cause Deutsche Bank, A.G. or its Affiliates or another financial institution
of sound reputation, to execute, deliver and make available the proposed
$10,000,000 revolving credit facility to be provided to CPIH and to deliver,
subject to an escrow arrangement mutually satisfactory to the lender and D. E.
Shaw, such agreements and consideration as may be required by such lender to be
delivered in connection therewith, all on terms and conditions satisfactory to
the lender.
6.5 Further Assurances. Each party agrees to cooperate with each other and their
respective officers, employees, attorneys, accountants and other agents, and,
generally, do such other acts and things in good faith as may be reasonable or
appropriate to timely effectuate the intents and purposes of this Agreement and
the consummation of the transactions contemplated hereby, including, but not
limited to, taking any action reasonably requested by another party to
facilitate the filing of any document or the taking of any action to assist the
other parties hereto in complying with the terms of Sections 6.1, 6.2, 6.3 and
6.4 hereof.
6.6 Release from Escrow. Whenever any assets held by the Escrow Agent are
permitted to be released pursuant hereto, the parties shall jointly instruct the
Escrow Agent to effect such release.
6.7 No Purchases. Prior to the closing of the Rights Offering, no Purchaser
will, or will permit any of its controlled Affiliates to, acquire Common Stock
otherwise than pursuant to this Agreement.
CUSIP No. 236274106 13D/A Page 22 of 34 Pages
7. Terms of Notes.
7.1 General Terms. Each Note shall bear interest, commencing on the date of
issuance thereof, payable on the Maturity Date or upon prior prepayment and
shall mature on the Maturity Date. The Notes shall bear interest on their
outstanding amount (and any interest compounded pursuant to Section 7.5(b)
hereof) at a rate of 12% per annum for period from the date of issuance through
July 15, 2004 and 16% thereafter until paid or converted in full, in each case
calculated on the basis of a 360-day year for the actual number of days elapsed;
provided, however, that the terms of the Notes shall be modified pursuant to the
Ownership Change Rollover Terms and the Non-Ownership Change Rollover Terms, as
applicable, as set forth herein. Except pursuant to the Rollover Terms, all
amounts due on each Note (including accrued interest) shall be payable in cash
unless payment by conversion into shares of Common Stock is otherwise authorized
or required herein. The terms of the Notes shall remain unchanged upon
application of the Rollover Terms, except as expressly provided in the
applicable Rollover Terms. Notwithstanding any other provision of this
Agreement, the Purchasers do not intend to charge, and the Company shall not be
required to pay, any interest or other fees or charges in excess of the maximum
permitted by applicable law, and any payments in excess of such maximum shall be
refunded to the Company or credited to reduce the principal under the Notes at
the election of each Purchaser.
7.2 Payments; Waiver of Set-Offs, Etc. Any payments in respect of the Notes
shall be made to each Purchaser by wire transfer to an account designated by any
Purchaser in writing. All payments by the Company under the Notes shall be made
without set-off, defense or counterclaim and shall be free and clear and without
any deduction or withholding for any taxes or fees of any nature whatever,
unless the obligation to make such deduction or withholding is imposed by law.
7.3 Payment by Conversion.
(a) In cases in which Notes (including accrued interest thereon) are authorized
or required by this Agreement to be paid or prepaid by conversion, such payment
shall be effected by the issuance of shares of Common Stock valued at $1.53 per
share in exchange for the principal of and accrued interest on the Notes;
provided, however, no shares of Common Stock will be issued by the Company for
payment of the Notes by conversion to the extent the issuance of such Common
Stock would result (based on the reasonable determination by the Company and its
tax advisors) in an Ownership Change Limitation. In the event the Ownership
Change Limitation prevents the payment in full by conversion of the Notes
required to be paid or prepaid by conversion, the Ownership Change Rollover
Terms shall apply to the Notes in an original principal amount equal to the
principal of, and accrued interest on, the Notes not so paid or prepaid by
conversion.
(b) No fractional shares of the Common Stock will be issued upon payment of a
Note by conversion. In lieu of any fractional share to which a Purchaser would
otherwise be entitled, the Company will pay to the Purchaser in cash the amount
of the unconverted principal balance of the Note that would otherwise be
converted into such fractional share.
(c) The Company will pay any and all documentary, stamp or similar taxes payable
to the United States of America or any political subdivision or taxing authority
thereof or therein in respect of the issue or delivery of shares of Common Stock
on conversion of Notes therefor.
(d) Upon payment or prepayment of a Note by conversion, the Purchaser shall
surrender the Note, duly endorsed, at the principal offices of the Company or
any transfer agent of the Company. At its expense, the Company will, as soon as
practicable thereafter, issue and deliver to such Purchaser, at such principal
office, a certificate or certificates for the number of shares or Escrow
Receipts as required by the Restated Certificate of Incorporation to which such
Purchaser is entitled upon such conversion, including a check payable to the
Purchaser for cash in lieu of fractional shares. Upon conversion of a Note and
payment for fractional shares as provided above, the Company will be forever
released from its payment obligations and liabilities under such Note to the
extent of the portion thereof paid or prepaid by conversion.
(e) Upon acquisition by each of D. E. Shaw and TAT, respectively, resulting in a
holding of ten percent (10%) or more of the Common Stock of the Company,
respectively, each of D. E. Shaw and TAT agrees with, and for the benefit of,
the Company and not any other Purchaser, severally and not jointly, not to vote
its shares of Common Stock in the Company on matters: (i) that directly affect
the management, policies and operations of the Company's insurance Subsidiaries
including the election of directors and appointment of officers of the insurance
Subsidiaries, (ii) that directly affect the policies and business operations of
the insurance Subsidiaries, including matters involving the business plans or
strategies of the insurance Subsidiaries, underwriting and claims handling
standards and procedures, arrangements with insurance agents and brokers,
regulatory compliance filings, or reinsurance arrangements
CUSIP No. 236274106 13D/A Page 23 of 34 Pages
of the insurance Subsidiaries, and (iii) directly regarding the management or
operations of the insurance Subsidiaries that insurance regulators in the
jurisdictions where each of D. E. Shaw and TAT, respectively, has filed a
Disclaimer of Affiliation and Control ("Disclaimer") of the insurance
Subsidiaries advise would constitute the exercise of control over the
management, policies and operations of the insurance Subsidiaries under the
applicable Insurance Holding Company Act in such jurisdictions.
7.4 Mandatory Prepayment upon the Non-Occurrence of the Contemplated
Transactions.
(a) If there is at least one, but no more than two, Non-Performing Purchaser(s),
and another Purchaser elects to assume the obligations of the Non-Performing
Purchaser(s), each Non-Performing Purchaser shall be automatically deemed to
have assigned, without charge or recourse, to the Purchaser assuming the
Non-Performing Purchaser's obligations hereunder, all right, title and interest
in the Notes held by such Non-Performing Purchaser, and the Non-Performing
Purchaser's Escrowed Stock. Except as otherwise agreed among the assuming
Purchaser(s), if more than one Purchaser elects to assume such obligations, the
assumption shall be in proportion to the assuming Purchasers' ownership
percentages of the Notes hereunder. Upon any such assignment of a Non-Performing
Purchaser's Note and Escrowed Stock and assumption by another Purchaser that
performs all of its obligations and such assumed obligations hereunder, the
Non-Performing Purchaser shall have no further liability hereunder to the
Company or to the other Purchasers.
(b) If the Deposit is not returned to the Company by Covanta solely as a result
of a Purchaser Group Non-Performance: (i) 75% of the original principal of and
accrued interest on each Note shall automatically be deemed to be cancelled and
forgiven by the Purchasers; (ii) subject to the next sentence, the remaining
principal of and accrued interest on the Notes, as well as the amount of the
Investor Expense Reimbursement then due and payable, shall be converted into
shares of Common Stock of the Company at a price of $1.53 per share on the
second Business Day following the date the Covanta Agreement is terminated and
the Reserve Amount shall be released to the Company; (iii) the Escrowed Stock
shall be subject to redemption by the Company pursuant to Section 2.3(b); and
(iv) the Purchasers shall have all right, title and interest in and to all of
the Deposit or any portion thereof received from Covanta by the Company at any
time after the date the Transactions are terminated, pursuant to Section 7.5(b).
If $3,000,000 is not due and payable by the Company to CSFB in connection with
the Acquisition: (x) the amount converted in Section 7.4(b)(ii) above shall be
reduced by $3,000,000; (y) $3,000,000 of the Reserve Amount shall be released
from the Escrow Account to the Purchasers to repay the Notes by such amount; and
(z) the remainder of the Reserve Amount shall be released to the Company. Upon
any such cancellation and conversion of the Notes, and redemption of the
Escrowed Stock, the Purchasers shall have no further liability to the Company in
connection with this Agreement.
(c) If the Covanta Agreement is terminated or the closing of the Acquisition
does not occur on or before June 30, 2004, and the Deposit is not returned to
the Company by Covanta solely as a result of a Company Non-Performance: (i) the
Reserve Amount shall be released from the Escrow Account to the Purchasers
immediately in order to repay the Notes by such amount; (ii) the Escrowed Stock
shall immediately cease to be subject to redemption by the Company and the
Escrow Receipts, or the Escrowed Stock if permitted by the Restated Certificate
of Incorporation, shall immediately be released to the Purchasers; and (iii) the
remaining outstanding principal of and accrued interest on the Notes, as well as
the amount of the Investor Expense Reimbursement then due and payable shall be
immediately due and payable in cash.
(d) The parties expressly acknowledge that neither the Company nor any Purchaser
has any liability to any other party under this Agreement for any lost profits
or losses or indirect, punitive, incidental or consequential damages in
connection with this Agreement or the Transactions.
(e) The Company hereby expressly acknowledges that no Purchaser has any
obligation to perform or discharge any obligation or commitment of any other
Purchaser. The Company and the Purchasers further agree that the remedies set
forth in this Section 7.4 shall be the sole remedies in connection with
Non-Performing Purchaser(s) or a Purchaser Group Non-Performance or a Company
Non-Performance in connection with this Agreement or the Transactions.
7.5 Mandatory Prepayment in Cash.
(a) In the event the Deposit under the Covanta Agreement is, or is required to
be, returned to the Company, then the following shall apply:
CUSIP No. 236274106 13D/A Page 24 of 34 Pages
(i) the Company shall prepay the aggregate principal amount of $30,000,000 of
the Notes in cash on July 15, 2004 or, if earlier, the third Business Day
following the return of such Deposit under the Covanta Agreement, the Reserve
Amount shall be released from the Escrow Account to the Purchasers in repayment
of the Notes in such amount, and the remaining $3,000,000 outstanding principal
amount of the Notes, if any, together with any accrued interest, shall remain
outstanding subject to the Non-Ownership Change Rollover Terms; provided, that
such outstanding principal amount shall be deemed increased by the amount of
Investor Expense Reimbursement then due and payable; or
(ii) if the Breakup Fee is due and payable, then the Company shall prepay the
Notes in accordance with the provisions of Section 7.5(a)(i) above and then
apply the proceeds of the Breakup Fee to payments in the following order of
priority: (FIRST) to outstanding principal of and then accrued and unpaid
interest on the Notes; (SECOND) to documented out-of-pocket expenses of the
Purchasers incurred in connection with the Transactions, subject to the Investor
Expense Reimbursement; (THIRD) to documented out-of-pocket expenses of the
Company incurred in connection with the Transactions to the extent not otherwise
reimbursed; and (FOURTH) 50% of the remainder to be divided among each Purchaser
in proportion to their respective ownership percentages of the Notes and 50% of
the remainder to the Company. Any principal amount and accrued interest on the
Notes that remains outstanding after all payments have been made pursuant to
this Section 7.5(a)(ii), shall remain outstanding subject to Non-Ownership
Change Rollover Terms.
(b) In the event of any bona fide dispute about the return of the Deposit under
the Covanta Agreement or the payment of the Breakup Fee, the prepayment date
with respect to the amount of the dispute only, shall be extended until not
later than the Extended Maturity Date, and interest on the Notes shall compound
as of July 15, 2004, and, if then still outstanding, as of January 2, 2005. Upon
resolution of any such dispute, any and all proceeds received by the Company
shall be applied immediately in accordance with Section 7.5(a). If the proceeds
of any such resolution are not sufficient to prepay all of the outstanding
Notes, any remaining principal amount on the Notes, plus accrued interest
thereon shall remain outstanding subject to the Non-Ownership Change Rollover
Terms.
(c) Immediately after each issuance, if any, of Common Stock otherwise than
pursuant to this Agreement (including the Plan Shares) and prior to or in
connection with the Rights Offering, the Company shall prepay Notes (and accrued
interest) in an amount equal to the net proceeds of such issuance.
8 Events of Default. Upon the occurrence of any of the following (each an "Event
of Default"), the Company agrees (i) with respect to any Event of Default
described in Sections 8(a) or 8(b), that all unpaid principal of and accrued
interest on the Notes shall become immediately due and payable in cash without
presentment, demand, protest, notice or other requirements of any kind, all of
which are hereby expressly waived by the Company and its Subsidiaries; and (ii)
with respect to all other Events of Default, the Required Majority may by
written notice to the Company, declare all or any portion of the unpaid
principal of and accrued interest on the Notes to be, and the same shall
forthwith become, immediately due and payable, subject to the cure periods
specified herein, if capable of cure:
(a) (i) commencement by the Company or any of its Significant Subsidiaries or
Covanta or any of its Significant Subsidiaries (except CPIH, its subsidiaries
and the Bankrupt Subsidiaries) of any voluntary proceeding under any provision
of Title 11 of the United States Code, as now or hereafter amended, or the
commencement by the Company or any of its Significant Subsidiaries or Covanta or
any of its Significant Subsidiaries (other than CPIH, its subsidiaries and the
Bankrupt Subsidiaries) of any other proceeding, under any law, now or hereafter
in force, relating to bankruptcy, insolvency, reorganization, liquidation, or
otherwise to the relief of debtors or the readjustment of indebtedness, (ii) the
Company or any of its Significant Subsidiaries or Covanta or any of its
Significant Subsidiaries (other than CPIH, its subsidiaries and the Bankrupt
Subsidiaries) makes any general assignment for the benefit of creditors or a
composition or similar arrangement with such creditors, or (iii) the Company or
any of its Significant Subsidiaries or Covanta or any of its Significant
Subsidiaries (other than CPIH, its subsidiaries and the Bankrupt Subsidiaries)
appoints a receiver, trustee or similar judicial officer or agent to take charge
of or liquidate any of its property or assets;
(b) commencement against the Company or any of its Significant Subsidiaries or
Covanta or any of its Significant Subsidiaries (except CPIH, its subsidiaries
and the Bankrupt Subsidiaries) of any involuntary proceeding of the kind
described in subsection (a) which is not dismissed or stayed within 60 days;
(c) acceleration due to default by the Company of any other indebtedness of the
Company or any of its Subsidiaries for borrowed money in excess of $5,000,000
which indebtedness is not paid off or acceleration not cancelled within 30 days;
CUSIP No. 236274106 13D/A Page 25 of 34 Pages
(d) rendering of a judgment or judgments against the Company or any of its
Subsidiaries involving an amount in excess of $5,000,000, to the extent not
covered by insurance, and such judgment or judgments shall not have been
vacated, discharged, stayed or bonded pending appeal within 30 days from the
entry thereof;
(e) any representation or warranty contained in Section 3 was untrue or
incorrect in any material respect as of the date hereof or such other date
specified therein;
(f) the Company breaches Sections 5.1, 5.3, 5.4, 5.5, 5.6 or 5.7 of this
Agreement and such breach is not cured within 30 days of notice thereof;
(g) the Company breaches Section 5.2 of this Agreement and such breach is not
cured within 10 days of notice thereof; or
(h) a Change of Control occurs, unless caused solely by the Purchasers acting as
a group (within the meaning of Rule 13d-3 of the Exchange Act).
9. Conditions Precedent.
9.1 Conditions to the Obligation of the Purchasers to Consummate the Closing.
The several obligations of each Purchaser to consummate the transactions to be
consummated at the Closing, and to purchase and pay for the Notes being
purchased by it at such Closing pursuant to this Agreement, are subject to the
satisfaction of the following conditions precedent:
(a) The representations and warranties of Company contained in this Agreement
shall be true and correct (without giving effect to any limitation as to
"materiality" or "Material Adverse Effect " qualifiers set forth therein) on and
as of the Closing Date, with the same force and effect as though made on and as
of the Closing Date, except in any case for such failures to be true and correct
which would not, individually or in the aggregate, result in a Material Adverse
Effect.
(b) Company shall have performed and complied in all material respects with all
covenants and agreements required by this Agreement to be performed or complied
with by Company on or prior to the Closing Date.
(c) Each Purchaser shall have received a certificate, dated the Closing Date,
signed by the Chief Financial Officer of the Company, certifying on behalf of
the Company that the conditions specified in the foregoing Sections 9.1(a) and
(b) have been fulfilled.
(d) The purchase of and payment for the Notes by each Purchaser shall not be
prohibited or enjoined by any law or governmental or court order or regulation.
(e) All corporate and other proceedings to be taken by the Company in connection
with the transactions contemplated hereby and all documents incident thereto
shall be reasonably satisfactory in form and substance to the Purchasers and the
Purchasers shall have received all such counterpart originals or certified or
other copies of such documents as it may reasonably request.
(f) All consents and waivers identified on Schedule 9.1(f) of the Disclosure
Schedule shall have been obtained.
(g) The Covanta Agreement shall have been executed and delivered by each of the
parties thereto and shall be in full force and effect.
(h) Each Purchaser's obligations under this Section 9.1 shall be several and
independent from the obligations of each other Purchaser; provided, however,
that if any Purchaser is unwilling or fails to fulfill or comply with any of the
conditions set forth in this Section 9.1, any other Purchaser shall have the
immediate right to replace such Purchaser's commitment by increasing its own
commitment, as set forth in Exhibit A; provided, further that if the remaining
purchasers both desire to replace such Purchaser's commitment, each may do so in
proportion to the percentage of their existing commitment hereunder.
9.2 Conditions to the Obligation of the Company to Consummate the Closing. The
obligation of the Company to consummate the Transactions at the Closing, and to
issue and sell to each Purchaser the Notes to be purchased by it at the Closing
pursuant to this Agreement, is subject to the satisfaction of the following
conditions precedent:
(a) The representations and warranties of such Purchaser contained in this
Agreement shall be true and correct (without giving effect to any limitation as
to "materiality" or "Material Adverse Effect" qualifiers set forth therein) on
and as of the Closing Date, with the same force and effect as though made on and
as of the Closing Date, except in any case for such failures to be true and
correct which would not, individually or in the aggregate, result in a Material
Adverse Effect.
CUSIP No. 236274106 13D/A Page 26 of 34 Pages
(b) Such Purchaser shall have performed and complied in all material respects
with all covenants and agreements required by this Agreement to be performed or
complied with by such Purchaser on or prior to the Closing Date.
(c) The Company shall have received from each Purchaser a certificate dated the
Closing Date, signed by an appropriate officer of such Purchaser, certifying on
behalf of such Purchaser that the conditions specified in the foregoing Sections
9.2(a) and (b) have been fulfilled.
(d) The sale of the Notes by the Company shall not be prohibited or enjoined by
any law or governmental or court order or regulation.
10. Registration of the Securities; Compliance with the Securities Act.
10.1 Securities Law Transfer Restrictions. No Purchaser shall sell, assign,
pledge, transfer or otherwise dispose or encumber any of the Securities being
purchased by it hereunder, except (i) pursuant to an effective registration
statement under the Securities Act or (ii) pursuant to an available exemption
from registration under the Securities Act and applicable state securities laws
and, if requested by the Company, upon delivery by such Purchaser of an opinion
of counsel reasonably satisfactory to the Company to the effect that the
proposed transfer is exempt from registration under the Securities Act and
applicable state securities laws. The Company shall not register any transfer of
the Securities in violation of this Section 10.1. The Company may, and may
instruct any transfer agent for the Company to, place such stop transfer orders
as may be required on the transfer books of the Company in order to ensure
compliance with the provisions of this Section 10.1. Notwithstanding the
foregoing, without the prior written consent of the Company: (i) the Notes shall
not be transferable, except for transfers to Affiliates of the Purchasers that
agree not to further transfer the Notes and expressly agree to assume such
Purchaser's obligations hereunder, and (ii) the Escrowed Stock shall not be
transferable prior to the earlier of July 15, 2004 and the closing of the Rights
Offering.
10.2 Legends. Each certificate representing any of the Securities shall be
endorsed with the legend set forth below, and each Purchaser covenants that,
except to the extent such restrictions are waived by the Company, it shall not
transfer the Securities represented by any such certificate without complying
with the restrictions on transfer described in this Agreement and the legends
endorsed on such certificate:
"THE SECURITIES REPRESENTED BY THIS [CERTIFICATE] [NOTE] [AND THE SECURITIES
ISSUABLE UPON ITS CONVERSION] HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR SECURITIES LAWS OF ANY STATE AND MAY NOT BE
OFFERED, SOLD, ASSIGNED, PLEDGED TRANSFERRED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION
UNDER THE ACT OR SUCH LAWS AND, IF REQUESTED BY THE COMPANY, UPON DELIVERY OF AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT THE PROPOSED
TRANSFER IS EXEMPT FROM THE ACT OR SUCH LAWS."
11. Termination.
11.1 Conditions of Termination. Notwithstanding anything to the contrary
contained herein, this Agreement may be terminated at any time before the
Closing (a) by mutual consent of the Company and the Purchasers, or (b) by
either party hereto if the Closing shall not have occurred on or prior to June
30, 2004.
11.2 Effect of Termination. In the event of termination pursuant to Section 11.1
hereof, this Agreement shall become null and void and have no effect, with no
liability on the part of the Company or the Purchasers, or their directors,
officers, agents or stockholders, with respect to this Agreement, except for
liability for any willful breach of this Agreement.
12. Miscellaneous Provisions.
12.1 Public Statements or Releases. Neither the Company nor any Purchaser shall
make any public announcement with respect to the existence or terms of this
Agreement or the transactions provided for herein without the prior approval of
the other parties, which shall not be unreasonably withheld or delayed.
Notwithstanding the foregoing, nothing in this Section 12.1 shall prevent any
party from making any public announcement it considers necessary in order to
satisfy its obligations under the law or the rules of any national securities
exchange, provided such party, to the extent practicable, provides the other
parties with an opportunity to review and comment on any proposed public
announcement before it is made.
CUSIP No. 236274106 13D/A Page 27 of 34 Pages
12.2 Rights Cumulative. Subject to the terms and conditions of Section 5, each
and all of the various rights, powers and remedies of the parties shall be
considered to be cumulative with and in addition to any other rights, powers and
remedies which such parties may have at law or in equity in the event of the
breach of any of the terms of this Agreement. The exercise or partial exercise
of any right, power or remedy shall neither constitute the exclusive election
thereof nor the waiver of any other right, power or remedy available to such
party.
12.3 Pronouns. All pronouns or any variation thereof shall be deemed to refer to
the masculine, feminine or neuter, singular or plural, as the identity of the
person, persons, entity or entities may require.
12.4 Notices.
(a) Any notices, reports or other correspondence (hereinafter collectively
referred to as "correspondence") required or permitted to be given hereunder
shall be sent by postage prepaid first class mail, courier or facsimile or
delivered by hand to the party to whom such correspondence is required or
permitted to be given hereunder. The date of giving any notice shall be the date
of its actual receipt.
(b) All correspondence to the Company shall be addressed as follows: Danielson
Holding Corporation 2 North Riverside Plaza, Suite 600 Chicago, IL 60606
Attention: Philip Tinkler Facsimile: (312) 454-9678
(c) All correspondence to any Purchaser shall be sent to such Purchaser at the
address set forth in Exhibit A.
(d) Any Person may change the address to which correspondence to it is to be
addressed by notification as provided for herein.
12.5 Captions. The captions and paragraph headings of this Agreement are solely
for the convenience of reference and shall not affect its interpretation.
12.6 Expenses. The Company agrees to pay all documented reasonable costs and
expenses incurred by the Purchasers (including reasonable attorneys' fees) in
connection with the issuance of the Notes and the other Transactions, to the
extent not otherwise reimbursed, in an amount not to exceed $900,000 (the
"Investor Expense Reimbursement"); provided, however, that no Non-Performing
Purchaser shall be entitled to its share of the Investor Expense Reimbursement,
as determined by the other Purchasers in accordance with existing arrangements
among themselves. Subject to Section 7.4(b), such payment shall be made in cash
to such accounts as the Purchasers shall jointly specify in writing to the
Company.
12.7 Severability. Should any part or provision of this Agreement be held
unenforceable or in conflict with the applicable laws or regulations of any
jurisdiction, the invalid or unenforceable part or provisions shall be replaced
with a provision which accomplishes, to the extent possible, the original
business purpose of such part or provision in a valid and enforceable manner,
and the remainder of this Agreement shall remain binding upon the parties
hereto.
12.8 Governing Law; Injunctive Relief. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.
12.9 Waiver. No waiver of any term, provision or condition of this Agreement,
whether by conduct or otherwise, in any one or more instances, shall be deemed
to be, or be construed as, a further or continuing waiver of any such term,
provision or condition or as a waiver of any other term, provision or condition
of this Agreement.
12.10 Assignment. The rights and obligations of the parties hereto shall inure
to the benefit of and shall be binding upon the authorized successors and
permitted assigns of each party. None of the parties may assign its rights or
obligations under this Agreement or designate another person (i) to perform all
or part of its obligations under this Agreement or (ii) to have all or part of
its rights and benefits under this Agreement, in each case without the prior
written consent of the other parties. In the event of any assignment in
accordance with the terms of this Agreement, the assignee shall specifically
assume and be bound by the provisions of the Agreement by executing and agreeing
to an assumption agreement reasonably acceptable to the Company.
12.11 Counterparts. This Agreement may be signed in one or more counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument.
CUSIP No. 236274106 13D/A Page 28 of 34 Pages
12.12 Transaction Disclosure. Nothing in this Agreement shall prohibit the
disclosure of the tax treatment and tax structure, each as defined in Treasury
Regulations Section 1.6011-4, of the Transactions (but no other details about
the matters covered by this Agreement, including, without limitation, the
identities of the parties) from and after the date of the public announcement of
the Transactions.
12.13 Entire Agreement. This Agreement constitutes the entire agreement between
the parties hereto respecting the subject matter hereof and supersedes all prior
agreements, negotiations, understandings, representations and statements
respecting the subject matter hereof, whether written or oral. No modification,
alteration, waiver or change in any of the terms of this Agreement shall be
valid or binding upon the parties hereto unless made in writing and duly
executed by the Company and Required Majority.
CUSIP No. 236274106 13D/A Page 29 of 34 Pages
EXHIBIT 9
This Registration Rights Agreement, dated as of December 2, 2003, (as
amended, supplemented or otherwise modified from time to time, this
"Agreement"), by and between Danielson Holding Corporation, a Delaware
corporation (the "Company"), and D. E. Shaw Laminar Portfolios, L.L.C., a
Delaware limited liability company ("DES"), SZ Investments, L.L.C., a Delaware
limited liability company ("SZI"), and Third Avenue Trust, on behalf of the
Third Avenue Value Fund Series, a Delaware business trust ("TAT"), severally
(each of DES, SZI and TAT, an "Investor" and collectively, the "Investors").
Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed thereto in the Note Purchase Agreement.
WITNESSETH:
WHEREAS, the Investors are parties to that certain Note Purchase
Agreement of even date herewith, among the Company and the Investors, severally
(the "Note Purchase Agreement"), and pursuant thereto the Company has agreed to
execute and deliver this Agreement for the benefit of the Investors;
NOW, THEREFORE, intending to be legally bound, the parties hereto agree
as follows:
ARTICLE I
REGISTRATION RIGHTS
1.1 Definitions. For purposes of this Article I:
The term "Common Stock" means the Company's common stock, par value $.10 per
share. The term "Company Voting Securities" shall mean Common Stock and any
other equity securities of the Company entitled to vote generally for the
election of directors The term "Exchange Act" means the Securities Exchange Act
of 1934, as amended. The term "Holder" shall mean any Investor who holds
Registrable Securities and any holder of Registrable Securities to whom the
registration rights conferred by this Agreement have been transferred.
The term "register," "registered" and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act of 1933, as amended (the "Act").
The term "Registrable Securities" means shares of Common Stock acquired by the
Investors pursuant to the Note Purchase Agreement. In the case of SZI,
Registrable Securities of SZI shall be governed by the provisions of this
Agreement and not by the provisions of the registration rights agreement, dated
as of November 8, 2002, between the Company and SZI.
The term "Rule 415 Offering" means an offering on a delayed or continuous basis
pursuant to Rule 415 (or any successor rule to similar effect) promulgated under
the Act.
The term "Shelf Registration Statement" means a registration statement intended
to effect a shelf registration in connection with a Rule 415 Offering.
1.2 Shelf Registrations and Piggy-Back Registrations.
(a) Pursuant to Section 5.7 of the Note Purchase Agreement, on the earlier of
June 30, 2004, or ten days after the date of the closing of the Rights Offering,
the Company shall file with the SEC a Shelf Registration Statement, or such
other registration statement as the Company may qualify to file, and shall use
commercially reasonable efforts to cause such registration statement to be
declared effective as promptly as practicable, on behalf of the Holders with
respect to all of the Registrable Securities and shall use its commercially
reasonable efforts to keep such registration statement effective until such time
as all such Registrable Securities covered thereby have been sold or disposed of
thereunder or sold, transferred or otherwise disposed of to a Person that is not
a Holder.
(b) Piggyback Registration. If (but without any obligation to do so) the Company
proposes to register any of its Common Stock under the Act in connection with
the public offering of such Common Stock by the Company solely for cash (other
than a registration relating solely to the sale of securities to participants in
a dividend reinvestment plan, stock plan or employee benefit plan; a
registration relating solely to the issuance of securities to the security
holders of an acquired company in connection with an acquisition; or a
registration on any form which does not permit inclusion of selling
stockholders), or the Company proposes to register any of its securities on
behalf of a holder exercising demand registration rights, the Company shall, at
such time, promptly give each Investor written notice of such registration. Upon
the written request any Investor given within 15 days after mailing of such
notice by the Company, the Company shall cause to be registered under the Act
all of the Registrable Securities that such Investor has requested to be
registered. Notwithstanding anything to the contrary in this Section 1.2(b), in
connection with any offering involving an underwriting of shares being issued by
the Company, the Company shall not be required under this Section 1.2(b) to
include any of the Holders' Registrable Securities in such underwriting or the
registration statement relating thereto unless they accept the terms of the
underwriting as agreed upon between the Company and the
CUSIP No. 236274106 13D/A Page 30 of 34 Pages
underwriters selected by the Company. If the total amount of securities,
including Registrable Securities, requested by Holders and other stockholders to
be included in such offering exceeds the amount of securities offered other than
by the Company that the underwriters reasonably believe can be offered without
jeopardizing the success of the offering, then the Company shall be required to
include in the offering only that number of such securities, including
Registrable Securities, which the underwriters believe will not jeopardize the
success of the offering. To achieve any necessary reduction in the securities to
be sold, the securities to be excluded from the offering shall first be selected
(in each case, pro rata among such class of holders according to the total
amount of securities proposed to be included in the registration statement or in
such other proportions as shall mutually be agreed to by such class of holders)
in the following order: (i) first, securities being included on behalf of
holders other than either the Investors or other holders of Registrable
Securities shall be excluded; (ii) next, if additional securities must be
excluded, Registrable Securities included pursuant to Section 1.2(b) shall be
excluded; (iii) finally, if additional securities must be excluded, securities
offered by the Company shall be excluded.
1.3 Additional Obligations of the Company. Whenever the Company has filed a
registration statement under this Article I, the Company shall, as expeditiously
as reasonably possible:
(a) Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to comply with the provisions of the Act with respect to the
disposition of all securities covered thereby.
(b) Furnish to the holders of Registrable Securities such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities covered by such
registration statement owned by them.
(c) Use its best efforts to register and qualify the securities covered by such
registration statement under such other securities or Blue Sky laws of such
states or other jurisdictions as shall be reasonably requested by the holders of
Registrable Securities, provided that the Company shall not be required to
qualify to do business or to file a general consent to service of process in any
such states or jurisdictions where it is not so subject.
(d) 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 Act of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and then use its
best efforts to promptly correct such statement or omission. Notwithstanding the
foregoing and anything to the contrary set forth in this Section 1.3, each
holder of Registrable Securities acknowledges that the Company shall have the
right to suspend the use of the prospectus forming a part of a registration
statement if such offering would interfere with a pending corporate transaction
or for other reasons involving material non-public information, until such time
as an amendment to the registration statement has been filed by the Company and
declared effective by the SEC, or until such time as the Company has filed an
appropriate report with the SEC pursuant to the Exchange Act. Each holder of
Registrable Securities hereby covenants that it will (a) keep any such notice
strictly confidential, and (b) not sell any shares of Common Stock pursuant to
such prospectus during the period commencing at the time at which the Company
gives the holder of Registrable Securities notice of the suspension of the use
of such prospectus and ending at the time the Company gives the holder of
Registrable Securities notice that it may thereafter effect sales pursuant to
such prospectus. The Company shall only be able to suspend the use of such
prospectus for not more than two periods of not more than 90 days each in
respect of any registration in any 12 month period.
(e) Use its best efforts to cause all Registrable Securities to be listed on all
securities exchanges on which similar securities issued by the Company are then
listed.
1.4 Furnish Information. It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Article I with respect to the
Registrable Securities of any selling holder of Registrable Securities that such
holder of Registrable Securities shall furnish to the Company such information
regarding itself, the Registrable Securities held by it, and the intended method
of disposition of such securities as shall be required to effect the
registration of such holder's Registrable Securities and as may be required from
time to time to keep such registration current.
CUSIP No. 236274106 13D/A Page 31 of 34 Pages
1.5 Expenses of Registration. All expenses incurred by or on behalf of the
Company in connection with registrations, filings or qualifications pursuant to
Section 1.2, including, without limitation, all registration, filing and
qualification fees, printers' and accounting fees, and fees and disbursements of
counsel for the Company, shall be borne by the Company. In no event shall the
Company be obligated to bear any underwriting discounts or commissions or
brokerage fees or commissions relating to Registrable Securities or the actual
fees and expenses of more than one counsel for each selling Investor; provided
that such fees and expenses in the aggregate shall not exceed $60,000.
1.6 Indemnification. In the event any Registrable Securities are included in a
registration statement under this Article I:
(a) To the extent permitted by law, the Company will indemnify and hold harmless
each holder and the affiliates of such holder, and their respective directors,
officers, general and limited partners, agents and representatives (and the
directors, officers, affiliates and controlling persons thereof), and each other
person, if any, who controls such holder within the meaning of the Act, against
any losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus (but only if such statement is
not corrected in the final prospectus) contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading (but only if such omission is not corrected in the final
prospectus), or (iii) any violation or alleged violation by the Company in
connection with the registration of Registrable Securities under the Act, the
Exchange Act, any state securities law or any rule or regulation promulgated
under the Act, the Exchange Act or any state securities law; and the Company
will pay to each such Holder, affiliate or controlling person, as incurred, any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this Section 1.6(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability
or action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by any such holder or
controlling person. Each indemnified party shall furnish such information
regarding itself or the claim in question as an indemnifying party may
reasonably request in writing and as shall be reasonably required in connection
with defense of such claim and litigation resulting therefrom.
(b) To the extent permitted by law, each selling holder of Registrable
Securities will indemnify and hold harmless the Company, each of its directors,
each of its officers who has signed the registration statement, each person, if
any, who controls the Company within the meaning of the Act, any underwriter,
any other holder selling securities in such registration statement and any
controlling person of any such underwriter or other holder, against any losses,
claims, damages or liabilities Joint or several) to which any of the foregoing
persons may become subject, under the Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such holder expressly
for use in connection with such registration; and each such holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this Section 1.6(b) in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this Section 1.6(b)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of such
holder, which consent shall not be unreasonably withheld; provided, that, in no
event shall any indemnity under this Section 1.6(b) exceed the net proceeds from
the offering received by such holder. Each indemnified party shall furnish such
information regarding itself or the claim in question as an indemnifying party
may reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom.
CUSIP No. 236274106 13D/A Page 32 of 34 Pages
(c) Promptly after receipt by an indemnified party under this Section 1.6 of
notice of the commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 1.6, deliver to the indemnifying party
a written notice of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties. The
failure to deliver written notice to the indemnifying party within a reasonable
time after the commencement of any such action, if materially prejudicial to its
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 1.6 to the extent of such
prejudice, but the omission so to deliver written notice to the indemnifying
party will not relieve it of any liability that it may have to any indemnified
party otherwise than under this Section 1.6. The indemnified party shall have
the right, but not the obligation, to participate in the defense of any action
referred to above through counsel of its own choosing and shall have the right,
but not the obligation, to assert any and all separate defenses, cross claims or
counterclaims which it may have, and the fees and expenses of such counsel shall
be at the expense of such indemnified party unless (i) the employment of such
counsel has been specifically authorized in advance by the indemnifying party ,
(ii) there is a conflict of interest that prevents counsel for the indemnifying
party from adequately representing the interests of the indemnified party or
there are defenses available to the indemnified party that are different from,
or additional to, the defenses that are available to the indemnifying party,
(iii) the indemnifying party does not employ counsel that is reasonably
satisfactory to the indemnified party within a reasonable period of time, or
(iv) the indemnifying party fails to assume the defense or does not reasonably
contest such action in good faith, in which case, if the indemnified party
notifies the indemnifying party that it elects to employ separate counsel, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party and the reasonable fees and expenses of such
separate counsel shall be borne by the indemnifying party; provided, however,
that, the indemnifying party shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees
and expenses of more than one separate firm (in addition to one firm acting as
local counsel) for all indemnified parties.
(d) The obligations of the Company and the holders under this Section 1.6 shall
survive the completion of any offering of Registrable Securities in a
registration statement under this Article I.
1.7 Reports Under the Exchange Act. With a view to making available to the
holders of Registrable Securities the benefits of Rule 144 promulgated under the
Exchange Act and any other rule or regulation of the SEC that may at any time
permit a holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
(a) use its best efforts to make and keep public information available, as those
terms are understood and defined in Rule 144;
(b) use its best efforts to file with the SEC in a timely manner all reports and
other documents required under the Act and the Exchange Act; and
(c) furnish to any Holder forthwith upon request (i) a written statement by the
Company as to its compliance with the reporting requirements of Rule 144, or as
to whether it qualifies as a registrant whose securities may be resold pursuant
to Form S-3, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information (and the Company shall take such action) as may be
reasonably requested in availing any holder of Registrable Securities of any
rule or regulation of the SEC which permits the selling of any such securities
without registration or pursuant to such form.
1.8 No Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Article I may only be assigned
by a holder of Registrable Securities to a transferee or assignee of any
Registrable Securities if immediately following such transfer the further
disposition of such securities by the transferee or assignee is restricted under
the Act.
1.9 Waiver Procedures. The observance by the Company of any provision of this
Article I may be waived (either generally or in a particular instance and either
retroactively or prospectively) with the written consent of the holders of at
least 66 2/3% of the Registrable Securities, and any waiver effected in
accordance with this paragraph shall be binding upon each holder of Registrable
Securities.
CUSIP No. 236274106 13D/A Page 33 of 34 Pages
1.10 "Market Stand-off" Agreement. Any holder of Registrable Securities, if
requested by an underwriter of any registered public offering of Company
securities being sold in a firm commitment underwriting, agrees not to sell or
otherwise transfer or dispose of any Common Stock (or other Company Voting
Securities) held by such holder other than shares of Registrable Securities
included in the registration during the seven days prior to, and during a period
of up to 180 days following, the effective date of the registration statement.
Such agreement shall be in writing in a form reasonably satisfactory to the
Company and such underwriter. The Company may impose stop-transfer instructions
with respect to the securities subject to the foregoing restriction until the
end of the required stand-off period.
ARTICLE II
MISCELLANEOUS
2.1 Remedies. Each of the Investors and the Company acknowledge and agree that
(i) the provisions of this Agreement are reasonable and necessary to protect the
proper and legitimate interests of the parties hereto, and (ii) the parties
would be irreparably damaged in the event any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that any party shall be entitled to
seek preliminary and permanent injunctive relief to prevent breaches of the
provisions of this Agreement by any other party (or its Affiliates) without the
necessity of proving actual damages or of posting any bond, and to enforce
specifically the terms and provisions hereof and thereof in any court of the
United States or any state thereof having jurisdiction, which rights shall be
cumulative and in addition to any other remedy to which the parties may be
entitled hereunder or at law or equity.
2.2 Notices. All notices, and other communications hereunder shall be in writing
and shall be deemed given if delivered personally, sent by documented overnight
delivery service or, to the extent receipt is confirmed, facsimile, to the
appropriate address or facsimile number set forth below (or at such other
address or facsimile number for a party as shall be specified by like notice):
(i) if to the Company, to Danielson Holding Corporation, 2 North Riverside
Plaza, Suite 600, Chicago, IL 60606, Attention: Philip Tinkler, Facsimile: (312)
454-9678 and (ii) if to any Investor, to such Investor at the address set forth
in EXHIBIT A.
2.3 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. The parties hereto agree that they will use
their best efforts at all times to support and defend this Agreement.
2.4 Amendments. This Agreement may be amended only by an agreement in writing
signed by each of the parties hereto.
2.5 Governing Law. This Agreement shall be governed and controlled as to
validity, enforcement, interpretation, construction, effect and in all other
respects by the internal laws of the State of Delaware applicable to contracts
made in that State.
2.6 Descriptive Headings. Descriptive headings are for convenience only and
shall not control or affect the meaning or construction of any provision of this
Agreement
2.7 Counterparts; Facsimile Signatures. This Agreement shall become binding when
one or more counterparts hereof, individually or taken together, bears the
signatures of each of the parties hereto. This Agreement may be executed in any
number of counterparts, each of which shall be an original as against the party
whose signature appears thereon, or on whose behalf such counterpart is
executed, but all of which taken together shall be one and the same agreement. A
facsimile copy of a signature of a party to this Agreement or any such
counterpart shall be fully effective as if an original signature.
2.8 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the successors and assigns of the parties
hereto.
2.9 Assignments. This Agreement may not be assigned without the prior written
consent of each party hereto, and any attempt to effect an assignment hereof
without such consent shall be void.
CUSIP No. 236274106 13D/A Page 34 of 34 Pages
2.10 Jurisdiction and Service of Process. THE COMPANY AND EACH OF THE INVESTORS,
HEREBY CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN
THE STATE OF DELAWARE AND IRREVOCABLY AGREE THAT, SUBJECT TO THE OTHER
PROVISIONS OF THIS AGREEMENT, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT WHICH MAY BE LITIGATED SHALL BE LITIGATED IN SUCH
COURTS. THE COMPANY AND EACH OF THE INVESTORS ACCEPT FOR SUCH PARTY AND IN
CONNECTION WITH SUCH PARTY'S PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. THE COMPANY AND EACH OF THE
INVESTORS AGREE TO ACCEPT SERVICE OF ALL PROCESS, BY REGISTERED OR CERTIFIED
MAIL, RETURN RECEIPT REQUESTED, IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH
SERVICE BEING HEREBY ACKNOWLEDGED BY EACH SUCH PARTY TO BE EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT. IF ANY AGENT APPOINTED BY THE COMPANY OR ANY OF THE
INVESTORS REFUSES TO ACCEPT SERVICE, SUCH PARTY HEREBY AGREES THAT SERVICE UPON
SUCH PARTY BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL
AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL
LIMIT THE RIGHT OF THE COMPANY OR ANY INVESTOR TO BRING PROCEEDINGS AGAINST THE
COMPANY OR ANY INVESTOR IN THE COURTS OF ANY OTHER JURISDICTION.
2.11 Trial. THE COMPANY AND EACH OF THE INVESTORS HEREBY WAIVE SUCH PARTY'S
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THE PARTIES HERETO RELATING TO THE
SUBJECT MATTER HEREOF. THE COMPANY AND EACH OF THE INVESTORS ALSO WAIVE ANY BOND
OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE
REQUIRED OF ANY PARTY TO THIS AGREEMENT WITH RESPECT TO ANY ACTION COMMENCED BY
ONE OF THEM AGAINST THE OTHER OF THEM. THE SCOPE OF THIS WAIVER IS INTENDED TO
BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND
THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT
LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW AND STATUTORY CLAIMS. THE COMPANY AND EACH OF THE INVESTORS
ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS
AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED
FUTURE DEALINGS. EACH OF THE COMPANY AND EACH OF THE INVESTORS FURTHER WARRANTS
AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH SUCH PARTY'S LEGAL
COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES SUCH PARTY'S JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT. IN THE EVENT OF LITIGATION, THIS AGREEMENT
MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.