0000919567-01-500051.txt : 20011008
0000919567-01-500051.hdr.sgml : 20011008
ACCESSION NUMBER: 0000919567-01-500051
CONFORMED SUBMISSION TYPE: SC 13D
PUBLIC DOCUMENT COUNT: 1
FILED AS OF DATE: 20010920
SUBJECT COMPANY:
COMPANY DATA:
COMPANY CONFORMED NAME: DANZER CORP
CENTRAL INDEX KEY: 0000825521
STANDARD INDUSTRIAL CLASSIFICATION: SHEET METAL WORK [3444]
IRS NUMBER: 133431486
STATE OF INCORPORATION: NY
FISCAL YEAR END: 1031
FILING VALUES:
FORM TYPE: SC 13D
SEC ACT: 1934 Act
SEC FILE NUMBER: 005-40250
FILM NUMBER: 1741339
BUSINESS ADDRESS:
STREET 1: 17500 YORK RD
STREET 2: UNIT 1 APPLE TREE LANE
CITY: HAGERSTOWN
STATE: MD
ZIP: 21740
BUSINESS PHONE: 3015822000
MAIL ADDRESS:
STREET 1: 17500 YORK RD
STREET 2: UNIT 1 APPLE TREE LANE
CITY: HAGERTOWN
STATE: MD
ZIP: 21740
FORMER COMPANY:
FORMER CONFORMED NAME: AFFILIATED NATIONAL INC
DATE OF NAME CHANGE: 19890716
FORMER COMPANY:
FORMER CONFORMED NAME: GLOBAL ENVIRONMENTAL CORP
DATE OF NAME CHANGE: 19920703
FILED BY:
COMPANY DATA:
COMPANY CONFORMED NAME: BFS US SPECIAL OPPORTUNITIES TRUST LLC
CENTRAL INDEX KEY: 0001159050
STANDARD INDUSTRIAL CLASSIFICATION: []
IRS NUMBER: 000000000
STATE OF INCORPORATION: X0
FILING VALUES:
FORM TYPE: SC 13D
BUSINESS ADDRESS:
STREET 1: 8080 N CENTRAL EXPRESSWAY
STREET 2: STE 210 LB 59
CITY: DALLAS
STATE: TX
ZIP: 75206
BUSINESS PHONE: 2148918294
MAIL ADDRESS:
STREET 1: 8080 N CENTRAL EXPRESSWAY
STREET 2: STE 210 LB 59
CITY: DALLAS
STATE: TX
ZIP: 75206
SC 13D
1
initial13d.txt
INITIAL FORM 13D
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Danzer Corporation
------------------------------------------------------------------------------
(Name of Issuer)
Common Stock
------------------------------------------------------------------------------
(Title of Class of Securities)
23700P109
------------------------------------------------------------------------------
(CUSIP Number)
Russell Cleveland
Renaissance Capital Group, Inc.
8080 N. Central Expressway, Suite 210, LB-59
Dallas, Texas 75206-1857
(214) 891-8294
------------------------------------------------------------------------------
(Name, Address, and Telephone Number of Person
Authorized to Receive Notices and Communications)
July 19, 2001
------------------------------------------------------------------------------
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f), or 13d-1(g), check the following
box [ ].
(Continued on following pages)
CUSIP No. 23700P109 13D
------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NUMBER
BFS US Special Opportunities Trust PLC None - Foreign
------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [x]
------------------------------------------------------------------------------
3. SEC USE ONLY
------------------------------------------------------------------------------
4. SOURCE OF FUNDS
WC
------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) OR 2(e) [ ]
------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
England
------------------------------------------------------------------------------
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
------------------------------------------------------------------------------
7. SOLE VOTING POWER
2,500,000
-----------------------------------------------------------------------
8. SHARED VOTING POWER
None
-----------------------------------------------------------------------
9. SOLE DISPOSITIVE POWER
2,500,000
-----------------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
None
------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,500,000
------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.49%
------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON
IV
CUSIP No. 45812J101 13D
------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NUMBER
Renaissance US Growth & Income Trust PLC None - Foreign
------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [x]
------------------------------------------------------------------------------
3. SEC USE ONLY
------------------------------------------------------------------------------
4. SOURCE OF FUNDS
WC
------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) OR 2(e) [ ]
------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
England
------------------------------------------------------------------------------
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
------------------------------------------------------------------------------
7. SOLE VOTING POWER
2,500,000
----------------------------------------------------------------------
8. SHARED VOTING POWER
None
----------------------------------------------------------------------
9. SOLE DISPOSITIVE POWER
2,500,000
----------------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
None
------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,500,000
------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.49%
------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON
IV
Item 1. Security and Issuer.
This statement relates to the Common Stock ("Common Shares") of Danzer
Corporation (the "Company" or "Danzer"). The principal executive offices of the
Company are located at 17500 York Road, Unit 1, Apple Tree Lane, Hagerstown,
Maryland 21740.
Item 2. Identity and Background.
(a) This Statement is filed by BFS US Special Opportunities Trust PLC ("BFS
US"), and Renaissance US Growth & Income Trust PLC ("Renaissance PLC"); BFS US
and Renaissance PLC, collectively (the "Reporting Persons"). Renaissance Capital
Group, Inc., a Dallas, Texas, firm that is registered as an Investment Adviser
under the Investment Adviser Act of 1940, is the Investment Adviser for BFS US
and the Investment Manager for Renaissance PLC. John Schmit, Vice- President,
Investments, of Renaissance Capital Group, Inc., has been appointed to the
Company's Board of Directors.
Certain information concerning the directors and executive officers of the
Reporting Persons is set forth on Attachment 1 attached hereto and incorporated
herein by reference.
(b) BFS US is an investment trust organized under the laws of England and
Wales. Its address in the United States is c/o Renaissance Capital Group, Inc.,
Investment Adviser, 8080 N. Central Expressway, Suite 210, LB-59, Dallas, Texas
75206-1857.
Renaissance PLC is an investment trust organized under the laws of England
and Wales. Its address in the United States is c/o Renaissance Capital Group,
Inc., Investment Manager, 8080 N. Central Expressway, Suite 210, LB-59, Dallas,
Texas 75206-1857.
The business addresses of the directors and executive officers of the
Reporting Persons are set forth on Attachment 1 to this Statement and
incorporated herein by reference.
(c) BFS US was organized to carry on the business of an investment trust
company and to undertake all kinds of trust and agency business, including but
not limited to investing in emerging or undervalued U.S. public companies.
Renaissance PLC is engaged in the business of investing principally in emerging
or undervalued U.S. public companies.
(d) Neither any of the Reporting Persons nor, to the best knowledge of such
persons, any person named in Attachment 1 to this Statement, has been convicted
in a criminal proceeding in the past five years (excluding traffic violations or
similar misdemeanors).
(e) Neither any of the Reporting Persons nor, to the best knowledge of such
persons, any person named in Attachment 1 to this Statement, was during the last
five years a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction as a result of which such person was or is subject
to a judgment, decree, or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities laws
or finding any violation with respect to such laws.
(f) All persons named on Attachment 1 to this Statement are citizens of the
United States or the United Kingdom, as indicated on such Attachment.
Item 3. Source and Amount of Funds or Other Consideration.
On July 19, 2001, BFS US purchased a $250,000 8% Convertible Debenture note
of Danzer ("the BFS US Debenture"), which is described in Item 6 and included as
Exhibit 2. The total amount of funds required by BFS US to acquire the
securities reported in Item 5(a) was $250,000. The source of such funds was
capital of BFS US.
On July 19, 2001, Renaissance PLC purchased a $250,000 8% Convertible
Debenture of Danzer ("the Renaissance PLC Debenture"), which is described in
Item 6 and included as Exhibit 3. The total amount of funds required by
Renaissance PLC to acquire the securities reported in Item 5(a) was $250,000.
The source of such funds was capital of Renaissance PLC.
Item 4. Purpose of Transaction.
The Reporting Persons each acquired beneficial ownership of the Common
Stock reported in Item 5(a) both in the ordinary course of business for
investment purposes.
Neither of the Reporting Persons has any present plans or proposals which
relate to or would result in any transaction, change, or event specified in
clauses (a) through (j) of Item 4 of the Schedule 13D.
Item 5. Interest in Securities of the Issuer.
(a) (1) The Common Shares beneficially owned by BFS US are comprised of
2,500,000 shares of Common Stock issuable upon conversion of the BFS US
Debenture.
The Common Shares beneficially owned by Renaissance PLC are comprised of
2,500,000 shares of Common Stock issuable upon conversion of the Renaissance PLC
Debenture.
(2) Under SEC rules, as of the date of this filing, BFS US beneficially
owns 2,500,000 Common Shares, and Renaissance PLC beneficially owns 2,500,000
Common Shares. The Reporting Persons beneficially own 5,000,000 Common Shares,
in the aggregate. Based upon information filed with the Securities and Exchange
Commission, the Common Shares beneficially owned by BFS US, Renaissance PLC, and
together represent approximately 6.49%, 6.49%, and 12.19%, respectively, of the
outstanding Common Stock of the Company. The foregoing percentages are
calculated based on the 36,007,855 shares of Common Stock reported to be
outstanding by Danzer in its most recently filed Form 10-Q for the quarter ended
July 31, 2001. BFS US and Renaissance PLC disclaim that they are members of a
group for purposes of Regulation 13D.
(b) Number of shares as to which BFS US has:
(i) Sole power to vote or to direct the vote
2,500,000
(ii) Shared power to vote or to direct the vote
None
(iii) Sole power to dispose or to direct the disposition of
2,500,000
(iv) Shared power to dispose or to direct the disposition of
None
(b) Number of shares as to which Renaissance PLC has:
(i) Sole power to vote or to direct the vote
2,500,000
(ii) Shared power to vote or to direct the vote
None
(iii) Sole power to dispose or to direct the disposition of
2,500,000
(iv) Shared power to dispose or to direct the disposition of
None
(c) Except as otherwise provided in this filing, neither of the Reporting
Persons or their affiliates have effected any transactions in the Common Stock
of Select Comfort during the past 60 days.
(d) Not applicable
(e) Not applicable
Page 6
Item 6. Contracts, Arrangements, Understandings, or Relationships With Respect
to Securities of the Issuer.
On July 19, 2001, BFS US purchased the BFS US Debenture. The BFS US
Debenture bears interest at an interest rate of 8% per year, matures on July 19,
2008, and is initially convertible into Common Stock at a rate of $0.10 per
share (subject to adjustment as provided in the BFS US Debenture).
On July 19, 2001, Renaissance PLC purchased the Renaissance PLC Debenture.
The Renaissance PLC Note bears interest at an interest rate of 8% per year,
matures on July 19, 2008, and is initially convertible into Common Stock at a
rate of $0.10 per share (subject to adjustment as provided in the Renaissance
PLC Debenture).
Item 7. Material to be Filed as Exhibits.
Exhibit 1 Joint Filing Agreement Pursuant to Rule 13d-1(k)
Exhibit 2 Danzer Corporation 8% Convertible Debenture No. 1
Exhibit 3 Danzer Corporation 8% Convertible Debenture No. 2
SIGNATURES
After reasonable inquire and to the best of their individual knowledge and
belief, the signatories below certify that the information set forth in this
statement is true, complete, and correct as of this 20th day of September, 2001.
Page 7
The persons whose signatures appear below agree that this statement on
Schedule 13D is filed on behalf of each of them.
BFS US SPECIAL OPPORTUNITIES TRUST PLC
By: /S/
Name: Russell Cleveland
Title: Director
RENAISSANCE US GROWTH & INCOME TRUST PLC
By: /S/
Name: Russell Cleveland
Title: Director
Page 8
ATTACHMENT 1
The name. business address. and principal occupation of the directors and
executive officers of BFS US are as follows:
DIRECTORS
Principal
Name Business Address Occupation
Lord Lang of Monkton c/o Sinclair Henderson Limited Director
23 Cathedral Yard
Exeter EX11HB
Russell Cleveland c/o Sinclair Henderson Limited Director
23 Cathedral Yard
Exeter EX11HB
Ernest John Fenton c/o Sinclair Henderson Limited Director
23 Cathedral Yard
Exeter EX11HB
Anthony Arthur Reid c/o Sinclair Henderson Limited Director
23 Cathedral Yard
Exeter EX11HB
William Weeks Vanderfelt c/o Sinclair Henderson Limited Director
23 Cathedral Yard
Exeter EX11HB
OFFICERS
None
Page 9
The name, business address, and principal occupation of the directors and
executive officers of Renaissance PLC are as follows:
DIRECTORS
Principal
Name Business Address Occupation
Michael B. Cannan c/o Sinclair Henderson Limited Director
23 Cathedral Yard
Exeter EX11HB
Russell Cleveland c/o Sinclair Henderson Limited Director
23 Cathedral Yard
Exeter EX11HB
Ernest J. Fenton c/o Sinclair Henderson Limited Director
23 Cathedral Yard
Exeter EX11HB
Lord Mark Fitzalan Howard OBE c/o Sinclair Henderson Limited Director
23 Cathedral Yard
Exeter EX11HB
C. A. Rundell, Jr. c/o Sinclair Henderson Limited Director
23 Cathedral Yard
Exeter EX11HB
William W. Vanderfelt c/o Sinclair Henderson Limited Director
23 Cathedral Yard
Exeter EX11HB
OFFICERS
None
Page 10
EXHIBIT 1
JOINT FILING AGREEMENT PURSUANT TO RULE 13d-1(k)
The undersigned acknowledge and agree that the foregoing statement on
Schedule 13D is filed on behalf of each of the undersigned and that all of each
of the undersigned without the necessity of filing additional joint filing
agreements. The undersigned acknowledge that each shall be responsible for the
timely filing of such amendments, and for the completeness and accuracy of the
information concerning it contained therein, but shall not be responsible for
the completeness and accuracy of the information concerning the others, except
to the extent it knows or has reason to believe that such information is
inaccurate. This Joint Filing Agreement may be executed in any number of
counterparts and all of such counterparts taken together shall constitute one
and the same instrument.
BFS US SPECIAL OPPORTUNITIES TRUST PLC
By: /S/
Name: Russell Cleveland
Title: Director
RENAISSANCE US GROWTH & INCOME TRUST PLC
By: /S/
Name: Russell Cleveland
Title: Director
Page 1
EXHIBIT 2 This Debenture has not been registered under the Securities Act of
1933, as amended ("Act"), or applicable state securities laws ("State Acts"),
and shall not be sold, hypothecated, or otherwise transferred, unless such
transfer is made in compliance with the Act and the State Acts. DANZER CORP.
8.00% CONVERTIBLE DEBENTURE
$250,000 No. 1
Date of Issue: July 19, 2001
DANZER CORP., a New York corporation (the "Company" or "Borrower"), for
value received, promises to pay to:
HSBC Global Custody Nominee (U.K.) Limited, Designation No. 896414
or to its order, (together with any assignee, jointly or severally, the "Holder"
or "Lender") on or before July 19, 2008 (the "Due Date") (unless this Debenture
shall have been sooner called for redemption or presented for conversion as
herein provided), the sum of Two Hundred Fifty Thousand Dollars ($250,000) (the
"Principal Amount") and to pay interest on the unpaid Principal Amount at the
rate of 8.00% per annum. All payments of both principal and interest shall be
made at the address of the Holder hereof as it appears in the books and records
of the Borrower, or at such other place as may be designated by the Holder
hereof.
1. Interest. Interest on the Principal Amount outstanding from time to time
shall be payable in monthly installments commencing September 1, 2001, and
subsequent payments shall be made on the first day of each month thereafter
until the Principal Amount and all accrued and unpaid interest shall have been
paid in full. Overdue principal and interest on the Debenture shall bear
interest at the maximum rate permitted by applicable law.
2. Maturity. If not sooner paid, redeemed or converted, this Debenture
shall mature on July 19, 2008 at which time the remaining unpaid Principal
Amount, and all accrued and unpaid interest and any other charges then due under
the Loan Agreement, shall be due and payable in full. This Debenture shall be
prepaid pro rata with any prepayments of Indebtedness other than Senior
Obligations. This Debenture shall be senior in right of payment to all other
Indebtedness of the Company, except the Senior Obligations.
3. Mandatory Principal Installments. If this Debenture is not sooner
redeemed or converted as provided hereunder, Borrower shall pay to Holder,
commencing on July 19, 2004 and continuing on the first day of each successive
month thereafter prior to maturity, mandatory principal redemption installments,
each of such installments to be in the amount of Ten Dollars ($10) per Thousand
Dollars ($1,000) of the then remaining Principal Amount, and further, at
Page 1
maturity, Borrower shall pay to Holder a final installment of the remaining
unpaid Principal Amount, and all accrued and unpaid interest and any other
charges then due under the Loan Agreement.
4. Optional Redemption by Holder.
(a) If, (i) at any time after June 30, 2002, the Company's Common
Stock, $.01 per share ("Common Stock"), is not listed on the New York Stock
Exchange ("NYSE") or the American Stock Exchange ("AMEX"), or quoted on the
NASDAQ National Market System ("National Market") or the NASDAQ SmallCap
System ("SmallCap"), (ii) there is a change of control of the Company's
voting securities, without the written consent of a Majority in Interest,
(iii) all or substantially all of the assets or capital stock of the
Company or its subsidiaries are sold, without the consent of a Majority in
Interest, or (iv) the Company or its subsidiaries are merged or
consolidated with or into unaffiliated entities, without the written
consent of a Majority in Interest, or if the shareholders of the Company do
not approve an amendment to the Borrower's Articles of Incorporation to
authorize a sufficient number of shares of Common Stock into which the
Debentures may be converted prior to December 31, 2001, a Majority in
Interest shall have the right to require this Debenture to be redeemed by
the Company at the sum equal to the Principal Amount, together with an
amount equal to an 18% annual yield on the Principal Amount through the
date of redemption (the "Redemption Date").
(b) A Majority in Interest may exercise its right to require that the
Company redeem this Debenture pursuant to Section 4(a) prior to maturity by
giving notice thereof to the Company, which notice shall specify the terms
of redemption (including the place at which the Holder may obtain payment),
the total redemption payment and the Redemption Date, which Redemption Date
shall be within thirty (30) days of the date of such notice.
5. Optional Redemption by Company.
(a) On any interest payment date, and after receipt of irrevocable
notice from the Borrower as provided for below, this Debenture is
redeemable, in whole but not in part, at 101% of the Principal Amount,
together with accrued and unpaid interest through the Redemption Date, by
the Company, if all of the following conditions are satisfied: (i) the
average closing bid price for the Common Stock for the 20 consecutive
trading days prior to the date of notice exceeds an amount equal to three
times the Conversion Price then in effect, and the Common Stock is listed
or quoted on the National Market, the SmallCap, AMEX or NYSE; (ii) the
average daily trading volume for the 20 consecutive trading days prior to
the date of the irrevocable notice shall be no less than 250,000 shares;
(iii) the market price for the Common Stock at the time of notice reflects
a price-to-earnings ratio of no greater than 25 times fully diluted
earnings per share, excluding any extraordinary gains; and (iv) the shares
of Common Stock issuable upon conversion of this Debenture shall have been
fully registered under applicable securities laws. The Company's right of
redemption is subject to the Holder's prior right of conversion of the
Debenture.
Page 2
(b) Upon the Holder's notification to the Company in writing of its
intent to sell, assign or transfer the Debenture pursuant to Section 14
hereof, this Debenture is redeemable at the Borrower's option, in whole but
not in part, at 101% of the Principal Amount, together with accrued and
unpaid interest through the Redemption Date, by the Company for a period of
up to 30 days after the date of notice.
(c) The Company may exercise its right to redeem this Debenture
pursuant to Sections 5(a) and (b) prior to maturity by giving notice
thereof to the Holder of this Debenture as such name appears on the books
of the Borrower, which notice shall specify the terms of redemption
(including the place at which the Holder may obtain payment), the total
redemption payment and the Redemption Date.
6. Conversion Right.
(a) The Holder of this Debenture shall have the right, at Holder's
option, at any time, to convert all, or, in multiples of $100,000, any part
of this Debenture into such number of fully paid and nonassessable shares
of Common Stock as provided herein. The Holder of this Debenture may
exercise the conversion right by giving written notice (the "Conversion
Notice") to Borrower of the exercise of such right and stating the name or
names in which the stock certificate or stock certificates for the shares
of Common Stock are to be issued and the address to which such certificates
shall be delivered. The Conversion Notice shall be accompanied by the
Debenture. The number of shares of Common Stock that shall be issuable upon
conversion of the Debenture shall equal the outstanding Principal Amount of
the Debenture divided by the Conversion Price (as defined below) and in
effect on the date the Conversion Notice is given; provided, however, that
in the event that this Debenture shall have been partially redeemed, shares
of Common Stock shall be issued pro rata, rounded to the nearest whole
share. Conversion shall be deemed to have been effected on the date the
Conversion Notice is received (the "Conversion Date"). In the case of any
Debenture called for redemption, the conversion rights will expire at the
close of business on the Redemption Date. Within 20 business days after
receipt of the Conversion Notice, Borrower shall issue and deliver by hand
against a signed receipt therefor or by United States registered mail,
return receipt requested, to the address designated in the Conversion
Notice, a stock certificate or stock certificates of Borrower representing
the number of shares of Common Stock to which Holder is entitled and a
check or cash in payment of all interest accrued and unpaid on the
Debenture up to and including the Conversion Date. The conversion rights
will be governed by the following provisions:
(b) Conversion Price. On the issue date hereof and until such time as
an adjustment shall occur, the Conversion Price shall be $0.10 per share;
provided, however, that the Conversion Price shall be subject to adjustment
at the times and in accordance with the provisions set forth below.
(i) Adjustment for Issuance of Shares at Less Than the Conversion
Price. If and whenever any Additional Common Stock shall be issued by
Borrower (the "Stock Issue Date") for a consideration per share less
than the Conversion Price, then in each such case the initial
Page 3
Conversion Price shall be reduced to a new Conversion Price in an
amount equal to the price per share for the Additional Common Stock
then issued, if issued in connection with a sale of shares, or the
value of the Additional Common Stock then issued, as determined in
accordance with generally accepted accounting principles, if issued
other than for cash, and the number of shares issuable to Holder upon
conversion shall be proportionately increased; and, in the case of
Additional Common Stock issued without consideration, the initial
Conversion Price shall be reduced in amount and the number of shares
issued upon conversion shall be increased in an amount so as to
maintain for the Holder the right to convert the Debenture into shares
equal in amount to the same percentage interest in the Common Stock of
the Company as existed for the Holder immediately preceding the Stock
Issue Date.
(ii) Sale of Shares. In case of the issuance of Additional Common
Stock for a consideration part or all of which shall be cash, the
amount of the cash consideration therefor shall be deemed to be the
gross amount of the cash paid to Borrower for such shares, before
deducting any underwriting compensation or discount in the sale,
underwriting or purchase thereof by underwriters or dealers or others
performing similar services or for any expenses incurred in connection
therewith. In case of the issuance of any shares of Additional Common
Stock for a consideration part or all of which shall be other than
cash, the amount of the consideration therefor, other than cash, shall
be deemed to be the then fair market value of the property received.
In the case of issuance of shares of Additional Common Stock for
consideration other than cash, then the value thereof shall be the
fair market value assigned such consideration by the Board of
Directors of the Company and the per share value thereof shall be that
fair market value, divided by the then outstanding shares of Common
Stock on a fully diluted basis (using the treasury method).
(iii) Stock Splits, Subdivisions or Combinations. In the event of
a stock split or subdivision of shares of Common Stock into a greater
number of shares, the Conversion Price shall be proportionately
decreased, and in the event of a combination of shares of Common Stock
into a smaller number of shares, the Conversion Price shall be
proportionately increased, such increase or decrease, as the case may
be, becoming effective at the record date.
(iv) Stock Dividends. Shares of Common Stock issued as a dividend
or other distribution on any class of capital stock of Borrower shall
be deemed to have been issued without consideration.
(v) Exceptions. The term "Additional Common Stock" herein shall
mean all shares of Common Stock or securities convertible into shares
of Common Stock hereafter issued by Borrower (including Common Stock
held in the treasury of Borrower), except (A) Common Stock issued upon
the conversion of any of the Debentures; (B) Common Stock issuable
upon exercise of presently outstanding warrants or stock options; or
(C) up to 10,000,000 shares of Common Stock issuable upon exercise of
employee or director stock options to be granted in the future at less
than the initial Conversion Price.
Page 4
(c) Adjustment for Mergers and Consolidations. In the event of any
consolidation or merger of the Company with or into, or the sale of all or
substantially all of the properties and assets of the Company, to any person,
and in connection therewith, consideration is payable to holders of Common Stock
in cash, securities or other property, then as a condition of such
consolidation, merger or sale, lawful provision shall be made, and duly executed
documents evidencing the same shall be delivered to the Holder, so that the
Holder shall have the right at any time prior to the maturity of this Debenture
to purchase, at a total price equal to the Conversion Price immediately prior to
such event, the kind and amount of cash, securities or other property receivable
in connection with such consolidation, merger or sale, by a holder of the same
number of shares of Common Stock as were convertible by the Holder immediately
prior to such consolidation, merger or sale. In any such case, appropriate
provisions shall be made with respect to the rights and interest of the Holder
so that the provisions hereof shall thereafter be applicable with respect to any
cash, securities or property deliverable upon exercise hereof. Notwithstanding
the foregoing, (i) if the Company merges or consolidates with, or sells all or
substantially all of its property and assets to, any other person, and
consideration is payable to holders of Common Stock in exchange for their Common
Stock in connection with such merger, consolidation or sale which consists
solely of cash, or (ii) in the event of the dissolution, liquidation or winding
up of the Company, then the Holder shall be entitled to receive distributions on
the date of such event on the same basis with holders of Common Stock as if this
Debenture had been converted immediately prior to such event, less the
Conversion Price. Upon receipt of such payment, if any, the rights of the Holder
shall terminate and cease and this Debenture shall expire. In case of any such
merger, consolidation or sale of assets, the surviving or acquiring person and,
in the event of any dissolution, liquidation or winding up of the Company, the
Company shall promptly, after receipt of this surrendered Debenture, make
payment by delivering a check in such amount as is appropriate (or, in the case
of consideration other than cash, such other consideration as is appropriate) to
such person as it may be directed in writing by the Holder surrendering this
Debenture.
(d) Distributions. In the event of distribution to all Common Stock holders
of any securities, cash or properties or assets or other rights to purchase
securities or assets, then, after such event, this debenture will also be
convertible into the kind and amount of securities, cash and other property
which the Holder would have been entitled to receive if the Holder owned the
Common Stock issuable upon conversion of the Debenture immediately prior to the
occurrence of such event.
(e) Capital Reorganization and Reclassification. In case of any capital
reorganization or reclassification of the Common Stock of Borrower (other than a
change in par value or as a result of a stock dividend, subdivision, split up or
combination of shares), this Debenture shall be convertible into the kind and
number of shares of stock or other securities or property of Borrower to which
the Holder of the Debenture would have been entitled to receive if the Holder
owned the Common Stock issuable upon conversion of the Debenture immediately
prior to the occurrence of such event. The provisions of the immediately
foregoing sentence shall similarly apply to successive reorganizations,
reclassifications, consolidations, exchanges, leases, transfers or other
dispositions or other share exchanges.
Page 5
(f) Notice. In the event Borrower shall propose to take any action which
shall result in an adjustment in the Conversion Price, Borrower shall give
notice to the Holder of this Debenture, which notice shall specify the record
date, if any, with respect to such action and the date on which such action is
to take place. Such notice shall be given on or before the earlier of 10 days
before the record date or the date which such action shall be taken. Such notice
shall also set forth all facts (to the extent known) material to the effect of
such action on the Conversion Price and the number, kind or class of shares or
other securities or property which shall be deliverable or purchasable upon the
occurrence of such action or deliverable upon conversion of this Debenture.
(g) Certificate. Following completion of an event which results in an
adjustment to the Conversion Price, Borrower shall furnish to the Holder of this
Debenture a statement, signed by the Chief Executive Officer and the Secretary
of the Borrower, of the facts creating such adjustment and specifying the
resultant adjusted Conversion Price then in effect, which statement shall
constitute an amendment to this Debenture.
(h) Shareholder Vote. In the event of an adjustment to the Conversion Price
due to a sale of securities by the Borrower below the Conversion Price which
would result in the Holders of all debentures evidencing the Loan having the
right to acquire more than 20% of the then outstanding shares of Common Stock,
the Borrower agrees to hold a vote of the shareholders within 120 days to
authorize such an adjustment; provided such approval is required by NASDAQ or
the rules of a national securities exchange. In the event the shareholders
reject the authorization, the Holder shall have the right to cause the Company
to redeem the Debenture in accordance with the provisions of Section 4.
7. One-Time Adjustment to Conversion Price.
(a) Notwithstanding the provisions of Section 6 hereof, if the Company does
not achieve Trailing Twelve Months EBITDA of $8.5 million for the fiscal year
2002, and the market price of the Common Stock is below the Conversion Price at
the time of publication of the Company's results for that period, then the
Conversion Price shall be automatically adjusted downward to an amount equal to
volume-weighted average closing bid price of the Common Stock, as reported in
The Wall Street Journal, for the ten consecutive trading days (the "Trading
Period") following Borrower's public press release of its fiscal year 2002
financial results. If an adjustment occurs pursuant to this Section 7, then the
Borrower shall furnish to the holder of this Debenture a statement, within ten
days of the occurrence thereof, signed by the Chief Financial Officer and the
Secretary of Borrower, of the facts creating such adjustment and specifying the
adjusted Conversion Price then in effect. The Holder shall not convert this
Debenture or sell any shares of Common Stock during the Trading Period.
(b) Under no circumstance will this adjustment to the Conversion Price
cause the holders of all debentures evidencing the Loan to acquire greater than
20% of the Borrower's then outstanding shares of Common Stock. In the event that
this adjustment to the Conversion Price allows the holders of all debentures
Page 6
evidencing the Loan to acquire greater than twenty percent (20%) of the
Borrower's then outstanding shares of Common Stock, then the Holders will be
entitled to decrease the Conversion Price, so that their potential and actual
ownership is equal to 20% of the issued and outstanding Common Stock at the time
this adjustment becomes effective.
8. Reservation of Shares. Borrower warrants and agrees that it shall at all
times reserve and keep available, free from preemptive rights, sufficient
authorized and unissued shares of Common Stock or treasury shares of Common
Stock necessary to effect conversion of this Debenture.
9. Taxes. The Company shall pay any documentary or other transactional taxes
attributable to the issuance or delivery of this Debenture or the shares of
Common Stock issued upon conversion by the Holder (excluding any federal, state
or local income taxes and any franchise taxes or taxes imposed upon the Holder
by the jurisdiction, or any political subdivision thereof, under which such
Holder is organized or is qualified to do business).
10. Default.
(a) Event of Default. An "Event of Default" shall exist if an "Event of
Default" (as defined in the Loan Agreement) shall occur and be continuing.
(b) Remedies Upon Event of Default. If an Event of Default shall have
occurred and be continuing, then the Holder may exercise any one or more of the
rights and remedies provided in the Loan Documents, as the Holder, in its sole
discretion, may deem necessary or appropriate.
(c) Remedies Nonexclusive. Each right, power or remedy of the Holder hereof
upon the occurrence of any Event of Default as provided for in this Debenture or
now or hereafter existing at law or in equity or by statute shall be cumulative
and concurrent and shall be in addition to every other right, power or remedy
provided for in this Debenture or now or hereafter existing at law or in equity
or by statute, and the exercise or beginning of the exercise by the Holder or
transferee hereof of any one or more of such rights, powers or remedies shall
not preclude the simultaneous or later exercise by the Holder of any or all such
other rights, powers or remedies.
(d) Expenses. Upon the occurrence of a Default or an Event of Default,
which occurrence is not cured within the notice provisions, if any provided
therefore, Borrower agrees to pay and shall pay all reasonable costs and
expenses (including attorneys' fees and expenses) incurred by the Holder in
connection with the preservation and enforcement of Holder's rights under the
Convertible Loan Agreement, the Debenture, or any other Loan Document.
11. Failure to Act and Waiver. No failure or delay by the Holder hereof to
require the performance of any term or terms of this Debenture or not to
exercise any right or any remedy shall constitute a waiver of any such term or
of any right or of any default, nor shall such delay or failure preclude the
Holder hereof from exercising any such right, power or remedy at any later time
or times. By accepting payment after the due date of any amount payable under
Page 7
this Debenture, the Holder hereof shall not be deemed to waive the right either
to require payment when due of all other amounts payable, or to later declare a
default for failure to effect such payment of any such other amount. The failure
of the Holder of this Debenture to give notice of any failure or breach of the
Borrower under this Debenture shall not constitute a waiver of any right or
remedy in respect of such continuing failure or breach or any subsequent failure
or breach.
12. Consent to Jurisdiction. The Company hereby agrees and consents that any
action, suit or proceeding arising out of this Debenture may be brought in any
state or federal court in the State of Texas, including the United States
District Court for the Northern District of Texas, or in any other court having
jurisdiction over the subject matter, all at the sole election of the Holder
hereof, and by the issuance and execution of this Debenture, the Borrower
irrevocably consents to the jurisdiction of each such court. The Company hereby
irrevocably appoints CT Corporation System, Dallas, Texas, as agent for the
Borrower to accept service of process for and on behalf of the Borrower in any
action, suit or proceeding arising out of this Debenture. Except for default in
payment of interest or principal when and as they become due, and except as
otherwise specifically set forth herein or otherwise agreed to in writing by the
parties, any action, dispute, claim or controversy (all such herein called
"Dispute") between or among the parties as to the facts or the interpretation of
the Debenture shall be resolved by arbitration as set forth in the Loan
Agreement.
13. Holder's Right to Request Multiple Debentures. The Holder shall, upon
written request and presentation of the Debenture, have the right, at any
interest payment date, to request division of this Debenture into two or more
instruments, each of such to be in such amounts as shall be requested; provided
however, that no Debenture shall be issued in denominations of face amount less
than $100,000.
14. Transfer. Subject to Section 12.08 of the Loan Agreement, this Debenture may
be transferred on the books of the Borrower by the registered Holder hereof, or
by Holder's attorney duly authorized in writing, in multiples of $100,000 only
upon (i) delivery to the Borrower of a duly executed assignment of the
Debenture, or part thereof, to the proposed new Holder, along with a current
notation of the amount of payments received and net Principal Amount yet
unfunded, and presentment of such Debenture to the Borrower for issue of a
replacement Debenture, or Debentures, in the name of the new Holder, (ii) the
designation by the new Holder of the Lender's agent for notice, such agent to be
the sole party to whom Borrower shall be required to provide notice when notice
to Holder is required hereunder and who shall be the sole party authorized to
represent Lender in regard to modification or waivers under the Debenture, the
Loan Agreement, or other Loan Documents; and any action, consent or waiver
(other than a compromise of principal and interest) when given or taken by
Lender's agent for notice, shall be deemed to be the action of the holders of a
majority in amount of the Principal Amount of the Debenture, as such holders are
recorded on the books of the Borrower, and (iii) in compliance with the legend
to read as follows:
"This Debenture has not been registered under the Securities Act of
1933, as amended ("Act"), or applicable state securities laws ("State
Acts"), and shall not be sold, hypothecated, or otherwise transferred,
unless such transfer is made in compliance with the Act and the State
Acts."
Page 8
The Company shall be entitled to treat any holder of record of the
Debenture as the Holder in fact thereof and of the Debenture and shall not be
bound to recognize any equitable or other claim to or interest in this Debenture
in the name of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by applicable law.
15. Notices. All notices and communications under this Debenture shall be in
writing and shall be either delivered in person or by overnight service, such as
FedEx, and accompanied by a signed receipt therefor; or mailed first-class
United States certified mail, return receipt requested, postage prepaid, and
addressed as follows: (i) if to the Borrower at its address for notice as stated
in the Loan Agreement; and (ii) if to the Holder of this Debenture, to the
address (a) of such Holder as it appears on the books of the Borrower or (b) in
the case of a partial assignment to one or more Holders, to the Lender's agent
for notice, as the case may be. Any notice of communication shall be deemed
given and received as of the date of such delivery if delivered; or if mailed,
then three days after the date of mailing.
16. Maximum Interest Rate.
(a) Regardless of any provision contained in this Debenture, Lender shall
never be entitled to receive, collect or apply as interest on the Debenture any
amount in excess of interest calculated at the Maximum Rate, and, in the event
that Lender ever receives, collects or applies as interest any such excess, the
amount which would be excessive interest shall be deemed to be a partial
prepayment of principal and treated hereunder as such; and, if the principal
amount of the Debenture is paid in full, any remaining excess shall forthwith be
paid to Borrower. In determining whether or not the interest paid or payable
under any specific contingency exceeds interest calculated at the Maximum Rate,
Borrower and Lender shall, to the maximum extent permitted under applicable law,
(i) characterize any non principal payment as an expense, fee or premium rather
than as interest, (ii) exclude voluntary prepayments and the effects thereof,
and (iii) amortize, pro rate, allocate and spread, in equal parts, the total
amount of interest throughout the entire contemplated term of the Debenture;
provided that, if the Debenture is paid and performed in full prior to the end
of the full contemplated term thereof, and if the interest received for the
actual period of existence thereof exceeds interest calculated at the Maximum
Rate, Lender shall refund to Borrower the amount of such excess or credit the
amount of such excess against the principal amount of the Debenture and, in such
event, Lender shall not be subject to any penalties provided by any laws for
contracting for, charging, taking, reserving or receiving interest in excess of
interest calculated at the Maximum Rate.
(b) "Maximum Rate" shall mean, on any day, the highest nonusurious rate of
interest (if any) permitted by applicable law on such day that, at any time or
from time to time, may be contracted for, taken, reserved, charged or received
on the Indebtedness evidenced by the Debenture under the laws which are
presently in effect of the United States of America or by the laws of any other
jurisdiction which are or may be applicable to the Holders of the Debenture and
such Indebtedness or, to the extent permitted by law, under such applicable laws
of the United States of America or by the laws of any other jurisdiction which
are or may be applicable to the Holder of the Debenture and which may hereafter
Page 9
be in effect and which allow a higher maximum nonusurious interest rate than
applicable laws now allow.
17. Loan Agreement and Guaranty. This Debenture is issued pursuant to the
Convertible Loan Agreement dated of even date herewith among the Company and the
other parties thereto, and the Holder is entitled to all the rights and benefits
thereunder. Both Borrower and the Holder have participated in the negotiation
and preparation of the Convertible Loan Agreement and of this Debenture.
Borrower agrees that a copy of the Loan Agreement with all amendments, additions
and substitutions therefor shall be available to the Holder at the offices of
Borrower. The payment and performance of this Debenture is guaranteed by the
Company's subsidiaries pursuant to their Guaranty dated of even date herewith.
18. Defined Terms. Capitalized terms used but not defined herein shall have the
meaning given them in the Loan Agreement.
19. Governing Law. This Debenture shall be governed by and construed and
enforced in accordance with the substantive laws of the State of New York,
without regard to the conflicts of laws provisions thereof, and the applicable
laws of the United States. Venue and jurisdiction shall lie in the federal or
state courts of Dallas County, Texas.
[Signature page follows.]
Page 10
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
issued, executed and delivered on the date and year above stated.
DANZER CORP.
By: /S/____________________
Name: Timothy S. Durham
Title: Chairman & CEO
Page 11
EXHIBIT 3
This Debenture has not been registered under the Securities Act of 1933, as
amended ("Act"), or applicable state securities laws ("State Acts"), and shall
not be sold, hypothecated, or otherwise transferred, unless such transfer is
made in compliance with the Act and the State Acts.
DANZER CORP.
8.00% CONVERTIBLE DEBENTURE
$250,000 No. 2
Date of Issue: July 19, 2001
DANZER CORP., a New York corporation (the "Company" or "Borrower"), for
value received, promises to pay to:
The Frost National Bank, Custodian FBO
RENAISSANCE US GROWTH & INCOME TRUST PLC
TRUST NO. W00740100
or to its order, (together with any assignee, jointly or severally, the "Holder"
or "Lender") on or before July 19, 2008 (the "Due Date") (unless this Debenture
shall have been sooner called for redemption or presented for conversion as
herein provided), the sum of Two Hundred Fifty Thousand Dollars ($250,000) (the
"Principal Amount") and to pay interest on the unpaid Principal Amount at the
rate of 8.00% per annum. All payments of both principal and interest shall be
made at the address of the Holder hereof as it appears in the books and records
of the Borrower, or at such other place as may be designated by the Holder
hereof.
1. Interest. Interest on the Principal Amount outstanding from time to time
shall be payable in monthly installments commencing September 1, 2001, and
subsequent payments shall be made on the first day of each month thereafter
until the Principal Amount and all accrued and unpaid interest shall have been
paid in full. Overdue principal and interest on the Debenture shall bear
interest at the maximum rate permitted by applicable law.
2. Maturity. If not sooner paid, redeemed or converted, this Debenture
shall mature on July 19, 2008 at which time the remaining unpaid Principal
Amount, and all accrued and unpaid interest and any other charges then due under
the Loan Agreement, shall be due and payable in full. This Debenture shall be
prepaid pro rata with any prepayments of Indebtedness other than Senior
Obligations. This Debenture shall be senior in right of payment to all other
Indebtedness of the Company, except the Senior Obligations.
3. Mandatory Principal Installments. If this Debenture is not sooner
redeemed or converted as provided hereunder, Borrower shall pay to Holder,
commencing on July 19, 2004 and continuing on the first day of each successive
month thereafter prior to maturity, mandatory principal redemption installments,
each of such installments to be in the amount of Ten Dollars ($10) per Thousand
Page 1
Dollars ($1,000) of the then remaining Principal Amount, and further, at
maturity, Borrower shall pay to Holder a final installment of the remaining
unpaid Principal Amount, and all accrued and unpaid interest and any other
charges then due under the Loan Agreement.
4. Optional Redemption by Holder.
(a) If, (i) at any time after June 30, 2002, the Company's Common
Stock, $.01 per share ("Common Stock"), is not listed on the New York Stock
Exchange ("NYSE") or the American Stock Exchange ("AMEX"), or quoted on the
NASDAQ National Market System ("National Market") or the NASDAQ SmallCap
System ("SmallCap"), (ii) there is a change of control of the Company's
voting securities, without the written consent of a Majority in Interest,
(iii) all or substantially all of the assets or capital stock of the
Company or its subsidiaries are sold, without the consent of a Majority in
Interest, or (iv) the Company or its subsidiaries are merged or
consolidated with or into unaffiliated entities, without the written
consent of a Majority in Interest, or if the shareholders of the Company do
not approve an amendment to the Borrower's Articles of Incorporation to
authorize a sufficient number of shares of Common Stock into which the
Debentures may be converted prior to December 31, 2001, a Majority in
Interest shall have the right to require this Debenture to be redeemed by
the Company at the sum equal to the Principal Amount, together with an
amount equal to an 18% annual yield on the Principal Amount through the
date of redemption (the "Redemption Date").
(b) A Majority in Interest may exercise its right to require that the
Company redeem this Debenture pursuant to Section 4(a) prior to maturity by
giving notice thereof to the Company, which notice shall specify the terms
of redemption (including the place at which the Holder may obtain payment),
the total redemption payment and the Redemption Date, which Redemption Date
shall be within thirty (30) days of the date of such notice.
5. Optional Redemption by Company.
(a) On any interest payment date, and after receipt of irrevocable
notice from the Borrower as provided for below, this Debenture is
redeemable, in whole but not in part, at 101% of the Principal Amount,
together with accrued and unpaid interest through the Redemption Date, by
the Company, if all of the following conditions are satisfied: (i) the
average closing bid price for the Common Stock for the 20 consecutive
trading days prior to the date of notice exceeds an amount equal to three
times the Conversion Price then in effect, and the Common Stock is listed
or quoted on the National Market, the SmallCap, AMEX or NYSE; (ii) the
average daily trading volume for the 20 consecutive trading days prior to
the date of the irrevocable notice shall be no less than 250,000 shares;
(iii) the market price for the Common Stock at the time of notice reflects
a price-to-earnings ratio of no greater than 25 times fully diluted
earnings per share, excluding any extraordinary gains; and (iv) the shares
of Common Stock issuable upon conversion of this Debenture shall have been
fully registered under applicable securities laws. The Company's right of
Page 2
redemption is subject to the Holder's prior right of conversion of the
Debenture.
(b) Upon the Holder's notification to the Company in writing of its
intent to sell, assign or transfer the Debenture pursuant to Section 14
hereof, this Debenture is redeemable at the Borrower's option, in whole but
not in part, at 101% of the Principal Amount, together with accrued and
unpaid interest through the Redemption Date, by the Company for a period of
up to 30 days after the date of notice.
(c) The Company may exercise its right to redeem this Debenture
pursuant to Sections 5(a) and (b) prior to maturity by giving notice
thereof to the Holder of this Debenture as such name appears on the books
of the Borrower, which notice shall specify the terms of redemption
(including the place at which the Holder may obtain payment), the total
redemption payment and the Redemption Date.
6. Conversion Right.
(a) The Holder of this Debenture shall have the right, at Holder's
option, at any time, to convert all, or, in multiples of $100,000, any part
of this Debenture into such number of fully paid and nonassessable shares
of Common Stock as provided herein. The Holder of this Debenture may
exercise the conversion right by giving written notice (the "Conversion
Notice") to Borrower of the exercise of such right and stating the name or
names in which the stock certificate or stock certificates for the shares
of Common Stock are to be issued and the address to which such certificates
shall be delivered. The Conversion Notice shall be accompanied by the
Debenture. The number of shares of Common Stock that shall be issuable upon
conversion of the Debenture shall equal the outstanding Principal Amount of
the Debenture divided by the Conversion Price (as defined below) and in
effect on the date the Conversion Notice is given; provided, however, that
in the event that this Debenture shall have been partially redeemed, shares
of Common Stock shall be issued pro rata, rounded to the nearest whole
share. Conversion shall be deemed to have been effected on the date the
Conversion Notice is received (the "Conversion Date"). In the case of any
Debenture called for redemption, the conversion rights will expire at the
close of business on the Redemption Date. Within 20 business days after
receipt of the Conversion Notice, Borrower shall issue and deliver by hand
against a signed receipt therefor or by United States registered mail,
return receipt requested, to the address designated in the Conversion
Notice, a stock certificate or stock certificates of Borrower representing
the number of shares of Common Stock to which Holder is entitled and a
check or cash in payment of all interest accrued and unpaid on the
Debenture up to and including the Conversion Date. The conversion rights
will be governed by the following provisions:
(b) Conversion Price. On the issue date hereof and until such time as
an adjustment shall occur, the Conversion Price shall be $0.10 per share;
provided, however, that the Conversion Price shall be subject to adjustment
at the times and in accordance with the provisions set forth below.
Page 3
(i) Adjustment for Issuance of Shares at Less Than the Conversion
Price. If and whenever any Additional Common Stock shall be issued by
Borrower (the "Stock Issue Date") for a consideration per share less
than the Conversion Price, then in each such case the initial
Conversion Price shall be reduced to a new Conversion Price in an
amount equal to the price per share for the Additional Common Stock
then issued, if issued in connection with a sale of shares, or the
value of the Additional Common Stock then issued, as determined in
accordance with generally accepted accounting principles, if issued
other than for cash, and the number of shares issuable to Holder upon
conversion shall be proportionately increased; and, in the case of
Additional Common Stock issued without consideration, the initial
Conversion Price shall be reduced in amount and the number of shares
issued upon conversion shall be increased in an amount so as to
maintain for the Holder the right to convert the Debenture into shares
equal in amount to the same percentage interest in the Common Stock of
the Company as existed for the Holder immediately preceding the Stock
Issue Date.
(ii) Sale of Shares. In case of the issuance of Additional Common
Stock for a consideration part or all of which shall be cash, the
amount of the cash consideration therefor shall be deemed to be the
gross amount of the cash paid to Borrower for such shares, before
deducting any underwriting compensation or discount in the sale,
underwriting or purchase thereof by underwriters or dealers or others
performing similar services or for any expenses incurred in connection
therewith. In case of the issuance of any shares of Additional Common
Stock for a consideration part or all of which shall be other than
cash, the amount of the consideration therefor, other than cash, shall
be deemed to be the then fair market value of the property received.
In the case of issuance of shares of Additional Common Stock for
consideration other than cash, then the value thereof shall be the
fair market value assigned such consideration by the Board of
Directors of the Company and the per share value thereof shall be that
fair market value, divided by the then outstanding shares of Common
Stock on a fully diluted basis (using the treasury method).
(iii) Stock Splits, Subdivisions or Combinations. In the event of
a stock split or subdivision of shares of Common Stock into a greater
number of shares, the Conversion Price shall be proportionately
decreased, and in the event of a combination of shares of Common Stock
into a smaller number of shares, the Conversion Price shall be
proportionately increased, such increase or decrease, as the case may
be, becoming effective at the record date.
(iv) Stock Dividends. Shares of Common Stock issued as a dividend
or other distribution on any class of capital stock of Borrower shall
be deemed to have been issued without consideration.
(v) Exceptions. The term "Additional Common Stock" herein shall
mean all shares of Common Stock or securities convertible into shares
of Common Stock hereafter issued by Borrower (including Common Stock
held in the treasury of Borrower), except (A) Common Stock issued upon
Page 4
the conversion of any of the Debentures; (B) Common Stock issuable
upon exercise of presently outstanding warrants or stock options; or
(C) up to 10,000,000 shares of Common Stock issuable upon exercise of
employee or director stock options to be granted in the future at less
than the initial Conversion Price.
(c) Adjustment for Mergers and Consolidations. In the event of
any consolidation or merger of the Company with or into, or the sale
of all or substantially all of the properties and assets of the
Company, to any person, and in connection therewith, consideration is
payable to holders of Common Stock in cash, securities or other
property, then as a condition of such consolidation, merger or sale,
lawful provision shall be made, and duly executed documents evidencing
the same shall be delivered to the Holder, so that the Holder shall
have the right at any time prior to the maturity of this Debenture to
purchase, at a total price equal to the Conversion Price immediately
prior to such event, the kind and amount of cash, securities or other
property receivable in connection with such consolidation, merger or
sale, by a holder of the same number of shares of Common Stock as were
convertible by the Holder immediately prior to such consolidation,
merger or sale. In any such case, appropriate provisions shall be made
with respect to the rights and interest of the Holder so that the
provisions hereof shall thereafter be applicable with respect to any
cash, securities or property deliverable upon exercise hereof.
Notwithstanding the foregoing, (i) if the Company merges or
consolidates with, or sells all or substantially all of its property
and assets to, any other person, and consideration is payable to
holders of Common Stock in exchange for their Common Stock in
connection with such merger, consolidation or sale which consists
solely of cash, or (ii) in the event of the dissolution, liquidation
or winding up of the Company, then the Holder shall be entitled to
receive distributions on the date of such event on the same basis with
holders of Common Stock as if this Debenture had been converted
immediately prior to such event, less the Conversion Price. Upon
receipt of such payment, if any, the rights of the Holder shall
terminate and cease and this Debenture shall expire. In case of any
such merger, consolidation or sale of assets, the surviving or
acquiring person and, in the event of any dissolution, liquidation or
winding up of the Company, the Company shall promptly, after receipt
of this surrendered Debenture, make payment by delivering a check in
such amount as is appropriate (or, in the case of consideration other
than cash, such other consideration as is appropriate) to such person
as it may be directed in writing by the Holder surrendering this
Debenture.
(d) Distributions. In the event of distribution to all Common
Stock holders of any securities, cash or properties or assets or other
rights to purchase securities or assets, then, after such event, this
debenture will also be convertible into the kind and amount of
securities, cash and other property which the Holder would have been
entitled to receive if the Holder owned the Common Stock issuable upon
conversion of the Debenture immediately prior to the occurrence of
such event.
(e) Capital Reorganization and Reclassification. In case of any
capital reorganization or reclassification of the Common Stock of
Borrower (other than a change in par value or as a result of a stock
dividend, subdivision, split up or combination of shares), this
Debenture shall be convertible into the kind and number of shares of
stock or other securities or property of Borrower to which the Holder
Page 5
of the Debenture would have been entitled to receive if the Holder
owned the Common Stock issuable upon conversion of the Debenture
immediately prior to the occurrence of such event. The provisions of
the immediately foregoing sentence shall similarly apply to successive
reorganizations, reclassifications, consolidations, exchanges, leases,
transfers or other dispositions or other share exchanges.
(f) Notice. In the event Borrower shall propose to take any
action which shall result in an adjustment in the Conversion Price,
Borrower shall give notice to the Holder of this Debenture, which
notice shall specify the record date, if any, with respect to such
action and the date on which such action is to take place. Such notice
shall be given on or before the earlier of 10 days before the record
date or the date which such action shall be taken. Such notice shall
also set forth all facts (to the extent known) material to the effect
of such action on the Conversion Price and the number, kind or class
of shares or other securities or property which shall be deliverable
or purchasable upon the occurrence of such action or deliverable upon
conversion of this Debenture.
(g) Certificate. Following completion of an event which results
in an adjustment to the Conversion Price, Borrower shall furnish to
the Holder of this Debenture a statement, signed by the Chief
Executive Officer and the Secretary of the Borrower, of the facts
creating such adjustment and specifying the resultant adjusted
Conversion Price then in effect, which statement shall constitute an
amendment to this Debenture.
(h) Shareholder Vote. In the event of an adjustment to the
Conversion Price due to a sale of securities by the Borrower below the
Conversion Price which would result in the Holders of all debentures
evidencing the Loan having the right to acquire more than 20% of the
then outstanding shares of Common Stock, the Borrower agrees to hold a
vote of the shareholders within 120 days to authorize such an
adjustment; provided such approval is required by NASDAQ or the rules
of a national securities exchange. In the event the shareholders
reject the authorization, the Holder shall have the right to cause the
Company to redeem the Debenture in accordance with the provisions of
Section 4.
7. One-Time Adjustment to Conversion Price.
(a) Notwithstanding the provisions of Section 6 hereof, if the Company
does not achieve Trailing Twelve Months EBITDA of $8.5 million for the
fiscal year 2002, and the market price of the Common Stock is below the
Conversion Price at the time of publication of the Company's results for
that period, then the Conversion Price shall be automatically adjusted
downward to an amount equal to volume-weighted average closing bid price of
the Common Stock, as reported in The Wall Street Journal, for the ten
consecutive trading days (the "Trading Period") following Borrower's public
press release of its fiscal year 2002 financial results. If an adjustment
occurs pursuant to this Section 7, then the Borrower shall furnish to the
holder of this Debenture a statement, within ten days of the occurrence
thereof, signed by the Chief Financial Officer and the Secretary of
Borrower, of the facts creating such adjustment and specifying the adjusted
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Conversion Price then in effect. The Holder shall not convert this
Debenture or sell any shares of Common Stock during the Trading Period.
(b) Under no circumstance will this adjustment to the Conversion Price
cause the holders of all debentures evidencing the Loan to acquire greater
than 20% of the Borrower's then outstanding shares of Common Stock. In the
event that this adjustment to the Conversion Price allows the holders of
all debentures evidencing the Loan to acquire greater than twenty percent
(20%) of the Borrower's then outstanding shares of Common Stock, then the
Holders will be entitled to decrease the Conversion Price, so that their
potential and actual ownership is equal to 20% of the issued and
outstanding Common Stock at the time this adjustment becomes effective.
8. Reservation of Shares. Borrower warrants and agrees that it shall at all
times reserve and keep available, free from preemptive rights, sufficient
authorized and unissued shares of Common Stock or treasury shares of Common
Stock necessary to effect conversion of this Debenture.
9. Taxes. The Company shall pay any documentary or other transactional
taxes attributable to the issuance or delivery of this Debenture or the shares
of Common Stock issued upon conversion by the Holder (excluding any federal,
state or local income taxes and any franchise taxes or taxes imposed upon the
Holder by the jurisdiction, or any political subdivision thereof, under which
such Holder is organized or is qualified to do business).
10. Default.
(a) Event of Default. An "Event of Default" shall exist if an "Event
of Default" (as defined in the Loan Agreement) shall occur and be
continuing.
(b) Remedies Upon Event of Default. If an Event of Default shall have
occurred and be continuing, then the Holder may exercise any one or more of
the rights and remedies provided in the Loan Documents, as the Holder, in
its sole discretion, may deem necessary or appropriate.
(c) Remedies Nonexclusive. Each right, power or remedy of the Holder
hereof upon the occurrence of any Event of Default as provided for in this
Debenture or now or hereafter existing at law or in equity or by statute
shall be cumulative and concurrent and shall be in addition to every other
right, power or remedy provided for in this Debenture or now or hereafter
existing at law or in equity or by statute, and the exercise or beginning
of the exercise by the Holder or transferee hereof of any one or more of
such rights, powers or remedies shall not preclude the simultaneous or
later exercise by the Holder of any or all such other rights, powers or
remedies.
(d) Expenses. Upon the occurrence of a Default or an Event of Default,
which occurrence is not cured within the notice provisions, if any provided
therefore, Borrower agrees to pay and shall pay all reasonable costs and
expenses (including attorneys' fees and expenses) incurred by the Holder in
connection with the preservation and enforcement of Holder's rights under
the Convertible Loan Agreement, the Debenture, or any other Loan Document.
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11. Failure to Act and Waiver. No failure or delay by the Holder hereof to
require the performance of any term or terms of this Debenture or not to
exercise any right or any remedy shall constitute a waiver of any such term or
of any right or of any default, nor shall such delay or failure preclude the
Holder hereof from exercising any such right, power or remedy at any later time
or times. By accepting payment after the due date of any amount payable under
this Debenture, the Holder hereof shall not be deemed to waive the right either
to require payment when due of all other amounts payable, or to later declare a
default for failure to effect such payment of any such other amount. The failure
of the Holder of this Debenture to give notice of any failure or breach of the
Borrower under this Debenture shall not constitute a waiver of any right or
remedy in respect of such continuing failure or breach or any subsequent failure
or breach.
12. Consent to Jurisdiction. The Company hereby agrees and consents that
any action, suit or proceeding arising out of this Debenture may be brought in
any state or federal court in the State of Texas, including the United States
District Court for the Northern District of Texas, or in any other court having
jurisdiction over the subject matter, all at the sole election of the Holder
hereof, and by the issuance and execution of this Debenture, the Borrower
irrevocably consents to the jurisdiction of each such court. The Company hereby
irrevocably appoints CT Corporation System, Dallas, Texas, as agent for the
Borrower to accept service of process for and on behalf of the Borrower in any
action, suit or proceeding arising out of this Debenture. Except for default in
payment of interest or principal when and as they become due, and except as
otherwise specifically set forth herein or otherwise agreed to in writing by the
parties, any action, dispute, claim or controversy (all such herein called
"Dispute") between or among the parties as to the facts or the interpretation of
the Debenture shall be resolved by arbitration as set forth in the Loan
Agreement.
13. Holders Right to Request Multiple Debentures. The Holder shall, upon
written request and presentation of the Debenture, have the right, at any
interest payment date, to request division of this Debenture into two or more
instruments, each of such to be in such amounts as shall be requested; provided
however, that no Debenture shall be issued in denominations of face amount less
than $100,000.
14. Transfer. Subject to Section 12.08 of the Loan Agreement, this
Debenture may be transferred on the books of the Borrower by the registered
Holder hereof, or by Holder's attorney duly authorized in writing, in multiples
of $100,000 only upon (i) delivery to the Borrower of a duly executed assignment
of the Debenture, or part thereof, to the proposed new Holder, along with a
current notation of the amount of payments received and net Principal Amount yet
unfunded, and presentment of such Debenture to the Borrower for issue of a
replacement Debenture, or Debentures, in the name of the new Holder, (ii) the
designation by the new Holder of the Lender's agent for notice, such agent to be
the sole party to whom Borrower shall be required to provide notice when notice
to Holder is required hereunder and who shall be the sole party authorized to
represent Lender in regard to modification or waivers under the Debenture, the
Loan Agreement, or other Loan Documents; and any action, consent or waiver
(other than a compromise of principal and interest) when given or taken by
Lender's agent for notice, shall be deemed to be the action of the holders of a
majority in amount of the Principal Amount of the Debenture, as such holders are
recorded on the books of the Borrower, and (iii) in compliance with the legend
to read as follows:
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"This Debenture has not been registered under the Securities Act of
1933, as amended ("Act"), or applicable state securities laws ("State
Acts"), and shall not be sold, hypothecated, or otherwise transferred,
unless such transfer is made in compliance with the Act and the State
Acts."
The Company shall be entitled to treat any holder of record of the
Debenture as the Holder in fact thereof and of the Debenture and shall not be
bound to recognize any equitable or other claim to or interest in this Debenture
in the name of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by applicable law.
15. Notices. All notices and communications under this Debenture shall be
in writing and shall be either delivered in person or by overnight service, such
as FedEx, and accompanied by a signed receipt therefor; or mailed first-class
United States certified mail, return receipt requested, postage prepaid, and
addressed as follows: (i) if to the Borrower at its address for notice as stated
in the Loan Agreement; and (ii) if to the Holder of this Debenture, to the
address (a) of such Holder as it appears on the books of the Borrower or (b) in
the case of a partial assignment to one or more Holders, to the Lender's agent
for notice, as the case may be. Any notice of communication shall be deemed
given and received as of the date of such delivery if delivered; or if mailed,
then three days after the date of mailing.
16. Maximum Interest Rate.
(a) Regardless of any provision contained in this Debenture, Lender
shall never be entitled to receive, collect or apply as interest on the
Debenture any amount in excess of interest calculated at the Maximum Rate,
and, in the event that Lender ever receives, collects or applies as
interest any such excess, the amount which would be excessive interest
shall be deemed to be a partial prepayment of principal and treated
hereunder as such; and, if the principal amount of the Debenture is paid in
full, any remaining excess shall forthwith be paid to Borrower. In
determining whether or not the interest paid or payable under any specific
contingency exceeds interest calculated at the Maximum Rate, Borrower and
Lender shall, to the maximum extent permitted under applicable law, (i)
characterize any non principal payment as an expense, fee or premium rather
than as interest, (ii) exclude voluntary prepayments and the effects
thereof, and (iii) amortize, pro rate, allocate and spread, in equal parts,
the total amount of interest throughout the entire contemplated term of the
Debenture; provided that, if the Debenture is paid and performed in full
prior to the end of the full contemplated term thereof, and if the interest
received for the actual period of existence thereof exceeds interest
calculated at the Maximum Rate, Lender shall refund to Borrower the amount
of such excess or credit the amount of such excess against the principal
amount of the Debenture and, in such event, Lender shall not be subject to
any penalties provided by any laws for contracting for, charging, taking,
reserving or receiving interest in excess of interest calculated at the
Maximum Rate.
(b) "Maximum Rate" shall mean, on any day, the highest nonusurious
rate of interest (if any) permitted by applicable law on such day that, at
any time or from time to time, may be contracted for, taken, reserved,
charged or received on the Indebtedness evidenced by the Debenture under
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the laws which are presently in effect of the United States of America or
by the laws of any other jurisdiction which are or may be applicable to the
Holders of the Debenture and such Indebtedness or, to the extent permitted
by law, under such applicable laws of the United States of America or by
the laws of any other jurisdiction which are or may be applicable to the
Holder of the Debenture and which may hereafter be in effect and which
allow a higher maximum nonusurious interest rate than applicable laws now
allow.
17. Loan Agreement and Guaranty. This Debenture is issued pursuant to the
Convertible Loan Agreement dated of even date herewith among the Company and the
other parties thereto, and the Holder is entitled to all the rights and benefits
thereunder. Both Borrower and the Holder have participated in the negotiation
and preparation of the Convertible Loan Agreement and of this Debenture.
Borrower agrees that a copy of the Loan Agreement with all amendments, additions
and substitutions therefor shall be available to the Holder at the offices of
Borrower. The payment and performance of this Debenture is guaranteed by the
Company's subsidiaries pursuant to their Guaranty dated of even date herewith.
18. Defined Terms. Capitalized terms used but not defined herein shall have
the meaning given them in the Loan Agreement.
19. Governing Law. This Debenture shall be governed by and construed and
enforced in accordance with the substantive laws of the State of New York,
without regard to the conflicts of laws provisions thereof, and the applicable
laws of the United States. Venue and jurisdiction shall lie in the federal or
state courts of Dallas County, Texas.
[Signature page follows.]
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IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
issued, executed and delivered on the date and year above stated.
DANZER CORP.
By: /S/__________________
Name: Timothy S. Durham
Title: Chairman & CEO
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