SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of event reported: April 14, 1999
DANIELSON HOLDING CORPORATION
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(Exact Name of Registrant as Specified in Charter)
Delaware 1-6732 95-6021257
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(State of Incorporation) (Commission File (IRS Employer
Number) Identification No.)
767 Third Avenue, New York, New York 10017
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (212) 888-0347
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Item 5. Other Events
Effective April 14, 1999, Danielson Holding Corporation (the
"Registrant") entered into an agreement to sell to Samstock, L.L.C.
("Samstock"), an affiliate of Equity Group Investments, L.L.C. ("EGI"), a
closely held investment firm controlled by Samuel Zell, (i) 2 million shares of
the Registrant's common stock at $4.50 per share, and (ii) a common stock
purchase warrant (the "Warrant") to purchase up to an additional 2 million
shares of common stock, at $4.75 per share. The exercise price of the Warrant is
subject to adjustment in the event that, among other things, payments and
reserves for losses and loss adjustment expenses relating to the Registrant's
insurance subsidiaries' run-off environmental liabilities exceed the reserves
for such losses and loss adjustment expenses at December 31, 1998 by more than
$5,000,000 and the Registrant has not obtained reinsurance for excess losses
exceeding $10,000,000; provided that in no event can the exercise price of the
Warrant be reduced to the lesser of $3.00 per share or the market price of the
common stock at the time of the adjustment. The Warrant will be exercisable for
four years, subject to a one year extension in the event that the exercise price
would be subject to adjustment in accordance with the previous sentence on the
expiration date.
In connection with Samstock's investment in the Registrant, the
Registrant has agreed to nominate Mr. Zell and an additional designee of
Samstock to its Board of Directors, with Mr. Zell to become the non-executive
Chairman of the Registrant. Martin J. Whitman will continue as the Registrant's
Chief Executive Officer and Chief Investment Officer. As long as Samstock
continues to directly or indirectly own at least 1,000,000 shares of the
Registrant's common stock, (i) Samstock will have the right to continue to
nominate two members (which may include Mr. Zell) of the Registrant's Board and
(ii) Mr. Whitman shall vote or cause to be voted the shares of common stock
owned or controlled by him in favor of Samstock's designees. In addition, the
Registrant agreed to form an acquisition committee of the Registrant's Board
upon the closing of the transaction, with Mr. Whitman to serve as the Chairman.
To make room for Samstock's nominees to the Board of Directors, Anthony Petrello
and Timothy Collins have agreed to resign as Directors of the Registrant.
Samstock has agreed that, so long as Mr. Whitman, an affiliate of the
Registrant, directly or indirectly owns 500,000 shares of the Registrant's
common stock, Samstock will vote the shares owned by it for the election of Mr.
Whitman and one other designee of Mr. Whitman. The Registrant has also agreed to
certain demand and piggyback registration rights with respect to the 2 million
primary shares and the shares issuable upon exercise of the Warrant.
The consummation of the transaction is subject to, among other things,
approvals by insurance regulators of the transaction and the approval by the
Registrant's shareholders of an amendment to the Registrant's certificate of
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incorporation increasing the authorized number of shares of Common Stock from
20,000,000 to 55,000,000 and eliminating cumulative voting for Directors. It is
anticipated that a meeting of shareholders to approve the amendment will be held
in July. Mr. Whitman has agreed to vote or to use his best efforts to cause to
be voted all of the shares owned or controlled by him in favor of the amendments
to the certificate of incorporation.
The Registrant has agreed to pay Samstock's expenses, up to a maximum
of $250,000, in the event that it is unable to obtain the requisite shareholder
approvals. In addition, the Registrant has agreed that, in the event it
materially breaches the agreement, it will pay Samstock a termination fee of $1
million and reimburse Samstock for its expenses in connection with the
transaction, up to a maximum of $250,000, and Samstock has agreed that, in the
event that it materially and intentionally breaches the Agreement, it will pay
the Registrant a termination fee of $1 million and reimburse the Registrant for
its expenses in connection with the transaction.
Until the consummation of the transaction with Samstock or the
termination of the Agreement, the Registrant has agreed not to solicit or
discuss any competing transactions.
The Registrant has also entered into an agreement with EGI pursuant to
which EGI has agreed to provide, at the request of the Registrant, certain
investment banking services to the Registrant in connection with potential
transactions. In the event that any transaction is consummated for which the
Registrant's Board of Directors determines that EGI provided material services,
the Registrant will pay to EGI a fee in the amount of 1% of the consideration
paid by the Registrant in connection with such transaction.
In connection with entering into the agreement with Samstock, the
Registrant has entered into two-year employment agreements with each of David M.
Barse and Michael T. Carney, its current President and Chief Financial Officer,
respectively. The employment agreements essentially confirm the current
employment arrangements with those executive officers.
Item 7. Financial Statements and Exhibits
A. Exhibits
The following exhibit is filed as part of this report.
99.1 Press Release dated April 15, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
April 21, 1999 DANIELSON HOLDING CORPORATION
By:/s/ David M. Barse
David M. Barse
President
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EXHIBIT INDEX
EXHIBIT PAGE
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99.1 Press Release dated 6
April 15, 1999
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EXHIBIT 99.1
FOR IMMEDIATE RELEASE
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Contact: David M. Barse
President & Chief Operating Officer
212/888-0347
DANIELSON HOLDING CORPORATION ANNOUNCES AGREEMENT TO
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SELL SHARES TO SAM ZELL AFFILIATE
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New York City - April 15, 1999
Danielson Holding Corporation (DHC-AMEX) announced today that
it had entered into a definitive agreement to sell to an affiliate of Equity
Group Investments, L.L.C. ("EGI"), a closely held investment firm controlled by
Sam Zell, 2 million shares of its Common Stock at $4.50 per share and issue a
warrant to purchase an additional 2 million shares, which is exercisable at
$4.75 per share, subject to adjustment.
Pursuant to the terms of the agreement, Danielson has agreed
to nominate Mr. Zell and an additional EGI designee to the Danielson Board of
Directors. In addition, it was announced that an acquisition committee of the
Board would be created with Martin J. Whitman as the Chairman of the committee.
To make room for EGI's nominees to the Board of Directors, Anthony Petrello and
Timothy Collins have agreed to resign as Directors. The transaction was
unanimously approved by the current Directors of Danielson.
The consummation of the transaction is subject to, among other
things, approvals by insurance regulators of the transaction, the approval by
Danielson's shareholders of an amendment to Danielson's certificate of
incorporation increasing the authorized number of shares of Common Stock from
20,000,000 to 55,000,000 and eliminating cumulative voting for directors. It is
presently anticipated that a meeting of shareholders to approve the amendment
will be held in July.
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EGI, which was founded more than 25 years ago, seeks
opportunities in growing businesses across many business sectors. It has a wide
range of holdings in industries ranging from radio stations and restaurants to
cruise lines and data networking products. EGI's diverse corporate holdings
include businesses that generate more than $10 billion in annual revenues.
EGI is also one of the world's largest real estate operators.
"EGI's infrastructure and contacts will bring an enormous
benefit to Danielson and we believe that together we can consummate a suitable
transaction for Danielson in short order that is in the best interest of
shareholders", said Martin J. Whitman, Chief Executive Officer.
Like all holders of 5% or more of Danielson's common stock,
the EGI affiliate will be subject to Danielson's charter restrictions, which
limits transfers by 5% shareholders and prohibits parties from acquiring 5% of
Danielson's common stock without its consent.
Danielson Holding Corporation is an American Stock Exchange
listed company, engaging in financial services.
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