EXHIBIT 2.2
EXECUTION
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NOTE PURCHASE AGREEMENT
BY AND BETWEEN
DANIELSON HOLDING CORPORATION
AND
THE PURCHASERS NAMED HEREIN
DATED AS OF DECEMBER 2, 2003
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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:
1. Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
1.1. "ACL" means American Commercial Lines LLC, a Delaware
limited liability company and an indirect subsidiary of the Company.
1.2. "Acquisition" shall have the meaning assigned to such
term in the Covanta Agreement.
1.3. "Additional Equity" shall have the meaning set forth
in Section 5.5 hereof.
1.4. "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.
1.5. "Agreement" shall have the meaning set forth in
Recitals hereof.
1.6. "AMEX" means the American Stock Exchange.
1.7. "Bankrupt Subsidiaries" shall have the meaning
assigned to such term in the First Lien L/C Credit Facility Credit
Agreement.
1.8. "Breakup Fee" means the Termination Fee as defined in
the Covanta Agreement.
1.9. "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.
1.10. "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.
1.11. "Closing" shall have the meaning set forth in Section
2.4 hereof.
1.12. "Closing Date" shall have the meaning set forth in
Section 2.4 hereof.
1.13. "Code" means the Internal Revenue Code of 1986, as
amended.
1.14. "Common Stock" means shares of common stock, par
value $.10 per share, of the Company.
1.15. "Company" shall have the meaning set forth in
Recitals hereof.
1.16. "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.
1.17. "Consideration" shall have the meaning assigned to
s uch term in the Covanta Agreement.
1.18. "Contemplated Transactions" shall have the meaning
assigned to such term in the Covanta Agreement.
1.19. "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
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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.
1.20. "Covanta" means Reorganized Covanta as defined in the
Covanta Agreement.
1.21. "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.
1.22. "CPIH" means Covanta Power International Holdings,
Inc., a Delaware corporation.
1.23. "CSFB" means Credit Suisse First Boston.
1.24. "Deposit" shall have the meaning set forth in the
Agreement.
1.25. "D. E. Shaw" means D. E. Shaw Laminar Portfolios,
L.L.C., a Delaware limited liability company.
1.26. "Disclaimer" shall have the meaning set forth in
Section 7.3(e) hereof.
1.27. "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.
1.28. "Disclosure Schedule" shall have the meaning set
forth in Section 3 hereof.
1.29. "Escrow Account" shall have the meaning set forth in
Section 2.4 hereof.
1.30. "Escrow Agent" shall have the meaning set forth in
Section 2.4 hereof.
1.31. "Escrow Agreement" shall have the meaning set forth
in Section 2.4 hereof.
1.32. "Escrow Receipts" shall have the meaning set forth in
Section 2.3(a) hereof.
1.33. "Escrowed Stock" shall have the meaning set forth in
Section 2.3(a) hereof.
1.34. "Event of Default" shall have the meaning set forth
in Section 8 hereof.
1.35. "Exchange Act" means the Securities Exchange Act of
1934, as amended, and all of the rules and regulations promulgated
thereunder.
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1.36. "Exit Financing" shall have the meaning set forth in
the Covanta Agreement.
1.37. "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.
1.38. "Extension Fee" shall have the meaning set forth in
EXHIBIT F.
1.39. "Final Deposit" shall have the meaning set forth in
the Covanta Agreement.
1.40. "Financial Statements" shall have the meaning set
forth in Section 3.6 hereof.
1.41. "First Lien L/C Credit Facility Credit Agreement"
shall have the meaning set forth in the Covanta Agreement.
1.42. "GAAP" shall have the meaning set forth in Section
3.6 hereof.
1.43. "GMS" means Global Material Services, LLC, a
Tennessee limited liability company.
1.44. "Initial Deposit" shall have the meaning set forth in
the Covanta Agreement.
1.45. "International Revolver Credit Facility Credit
Agreement" shall have the meaning set forth in the Covanta Agreement.
1.46. "International Term Loan Credit Facility Credit
Agreement" shall have the meaning set forth in the Covanta Agreement.
1.47. "Investment Entity" shall have the meaning set forth
in the Covanta Agreement.
1.48. "Investor Expense Reimbursement" shall have the
meaning set forth in Section 12.6 hereof.
1.49. "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.
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1.50. "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.
1.51. "Non-Ownership Change Rollover Terms" means the terms
of the Notes set forth on EXHIBIT E.
1.52. "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.
1.53. "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.
1.54. "Ownership Change" has the meaning ascribed thereto
in Section 382(g) of the Code.
1.55. "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.
1.56. "Ownership Change Rollover Terms" means the terms of
the Notes set forth on EXHIBIT F.
1.57. "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
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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.
1.58. "Person" means an individual, partnership,
corporation, limited liability company, business trust, joint stock
company, trust, unincorporated association or joint venture.
1.59. "Plan" shall have the meaning set forth in the
Covanta Agreement.
1.60. "Plan Shares" shall have the meaning set forth in
Section 3.3(b) hereof.
1.61. "Preferred Stock" shall have the meaning set forth in
Section 3.3(a) hereof.
1.62. "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.
1.63. "Purchaser" shall have the meaning set forth in
Recitals hereof.
1.64. "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.
1.65. "Registration Rights Agreement" shall have the
meaning set forth in Section 5.7 hereof.
1.66. "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.
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1.67. "Reserve Amount" shall mean $7,000,000 of the
aggregate principal amount of Notes.
1.68. "Restated Certificate of Incorporation" means the
Company's Restated Certificate of Incorporation filed on July 20, 1999,
as amended on September 6, 2001.
1.69. "Rights Offering" shall have the meaning set forth in
Section 5.4(a) hereof.
1.70. "Rollover Terms" means the Ownership Change Rollover
Terms and the Non-Ownership Change Rollover Terms.
1.71. "Scheduled Maturity Date" means January 2, 2005.
1.72. "SEC" means the Securities and Exchange Commission.
1.73. "Second Lien L/C Credit Facility Credit Agreement"
shall have the meaning set forth in the Covanta Agreement.
1.74. "Securities" shall mean the Notes, the shares of
Common Stock issuable upon conversion of the Notes, and the Escrowed
Stock.
1.75. "Securities Act" shall mean the Securities Act of
1933, as amended, and all of the rules and regulations promulgated
thereunder.
1.76. "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.
1.77. "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.
1.78. "TAT" means Third Avenue Trust, on behalf of the
Third Avenue Value Fund Series, a Delaware business trust.
1.79. "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.
1.80. "Tax Returns" shall mean returns, reports,
information statements and other documentation (including any
additional or supporting material) filed or maintained, or
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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.
1.81. "Transactions" means the Contemplated Transactions
and the transactions contemplated by this Agreement, including the
Rights Offering.
1.82. "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
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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 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.
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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.
(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
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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).
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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 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,
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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; (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
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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.
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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.
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.
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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:
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(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
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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.
(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
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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
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(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.
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.
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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.
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
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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
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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 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
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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:
(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
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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
-25-
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;
(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.
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(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.
(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.
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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
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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.
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.
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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
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.
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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.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement under seal as of the day and year first above written.
DANIELSON HOLDING CORPORATION
By: /s/ Philip G. Tinkler
--------------------------------
Name: Philip G. Tinkler
Title: Chief Financial Officer
PURCHASERS:
D. E. SHAW LAMINAR PORTFOLIOS, L.L.C.
By: /s/ Max Holmes
--------------------------------
Name: Max Holmes
Title: Authorized Signatory
SZ INVESTMENTS, L.L.C.
By: /s/ William Pate
--------------------------------
Name: William Pate
Title: Vice President
THIRD AVENUE TRUST, ON BEHALF OF THE
THIRD AVENUE VALUE FUND SERIES
By: /s/ David M. Barse
--------------------------------
Name: David M. Barse
Title: Chief Executive Officer
[Signature Page to Note Purchase Agreement]
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EXHIBIT A
PURCHASERS
Purchaser Principal Amount of
Name and Address Escrowed Stock Notes to be Purchased
D. E. SHAW LAMINAR PORTFOLIOS, L.L.C 2,560,427 $ 20,000,000.00
120 West Forty-Fifth Street
Floor 39, Tower 45
New York, NY 10036
Attention: Max Holmes
Facsimile: (212) 478-0100
with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019
Attention: Steven Wilamowsky, Esq
Facsimile: (212) 728-8111
SZ INVESTMENTS, L.L.C 1,280,213 $ 10,000,000.00
2 N. Riverside Plaza, Suite 600
Chicago, IL 60606
Attention: Joseph Paolucci, Esq
Facsimile: (312) 559-1280
with a copy to:
Sidley Austin Brown & Wood LLP
Bank One Plaza
10 South Dearborn Street
Chicago, IL 60603
Attention: Imad I. Qasim, Esq
Jeffrey S. Rothstein, Esq
Facsimile: (312) 853-7036
THIRD AVENUE TRUST, ON BEHALF OF THE 1,280,213 $ 10,000,000.00
THIRD AVENUE VALUE FUND SERIES
622 Third Avenue, 32nd Floor
New York, NY 10017
Attention: Willard J. Hall
Facsimile: (212) 735-0003
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with a copy to:
Pillsbury Winthrop LLP
One Battery Park Plaza
New York, NY 10004
Attention: Richard L. Epling, Esq
Facsimile: (212) 858-1500
TOTAL 5,120,853 $ 40,000,000.00
-----
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EXHIBIT B
FORM OF NOTE
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
EXHIBIT D
COVANTA AGREEMENT
EXHIBIT E
NON-OWNERSHIP CHANGE ROLLOVER TERMS
EXTENDED MATURITY DATE The last day of the calendar quarter ending
immediately prior to the second anniversary
of the date on which the Non-Ownership
Change Rollover Terms first apply.
CONVERSION The Notes are not convertible.
INTEREST The Notes will bear interest at 18% per
annum. Interest will compound quarterly on
the last day of each calendar quarter.
Interest will be on a 30/360 basis.
EXHIBIT F
OWNERSHIP CHANGE ROLLOVER TERMS
AGGREGATE PRINCIPAL AMOUNT $8 million. Amounts in excess of this amount
shall be subject to the Non-Ownership Change
Rollover Terms, unless prepaid in full in
cash.
EXTENSION FEE 2% flat fee payable in cash on the date the
Ownership Change Rollover Terms first apply.
EXTENDED MATURITY DATE The last day of the calendar quarter ending
immediately prior to the second anniversary
of the date on which the Ownership Change
Rollover Terms first apply.
INTEREST RATE In the first year in which Notes are
outstanding under the Ownership Change
Rollover Terms, interest will be 12% per
annum. Thereafter, until the Extended
Maturity Date, interest will be 14.5% per
annum. Interest shall be calculated
quarterly on a 30/360 basis and shall be
payable in arrears on the last day of each
calendar quarter (the interest rate in
effect on a given date, the "Effective
Rate").
PAYMENT IN KIND At the Company's option upon written notice
to the holder, at the beginning of each
quarter, the Company may pay interest for
such quarter in the form of increased
principal on the Note (in lieu of cash), in
which case the interest rate for such
quarter shall be the Effective Rate plus 200
bps.
CONVERSION The Notes are not convertible.
EXHIBIT G
ESCROW AGREEMENT
DISCLOSURE SCHEDULE
Note Purchase Agreement Disclosure Schedule
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Schedule 3 Authorization
Schedule 3.7 No Material Adverse Change
Schedule 3.17 Taxes
Schedule 9.1(f) Consents