<PAGE> 1
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 3, 2000
Altiva Financial Corporation
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 0-21689 88-0286042
(State or other jurisdiction of incorporation) (Commission File Number) (IRS Employer Identification Number)
</TABLE>
1000 PARKWOOD CIRCLE, 6TH FLOOR
ATLANTA, GEORGIA 30339
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (770) 952-6700
NOT APPLICABLE
(Former Name or Former Address, if Changed Since Last Report)
- --------------------------------------------------------------------------------
<PAGE> 2
Item 5. Other Events
On March 3, 2000, Altiva Financial Corporation ("Altiva") issued a
press release announcing consummation of the sale of $14.0 million principal
amount of 12% Secured Convertible Senior Notes due 2006.
On March 24, 2000, Altiva issued a press release announcing the
issuance of $12.5 million of 12% Secured Convertible Senior Notes and 6.2
million shares of Altiva's common stock, par value $.01, in exchange for $29.6
million principal amount of the outstanding 12 1/2% Subordinated Notes due 2001
of Altiva.
Item 7. Exhibits.
<TABLE>
<S> <C> <C>
Exhibit No.
- -----------
4.1 - $14,000,000 Amended and Restated Secured Convertible Senior
Note due 2006 of Altiva dated February 29, 2000 issued to
Value Partners, Ltd.
4.2 - Indenture dated February 29, 2000 by and between Altiva and
United States Trust Company of New York, as Trustee
10.1 - Amended and Restated Secured Convertible Senior Note Purchase
Agreement between Altiva and Value Partners, Ltd. dated for
reference purposes only as of February 29, 2000
10.2 - Amended and Restated Pledge and Security Agreement dated for
reference purposes only as of February 29, 2000
10.3 - Amended and Restated Registration Rights Agreement, dated as
of February 29, 2000, by and among Altiva and the Holders (as
defined therein) of the Amended and Restated 12% Secured
Convertible Senior Notes due 2006 of Altiva
10.4 - Exchange Agreement, dated as of March 17, 2000, by and among
Altiva and the holders of the outstanding 12% Secured
Convertible Senior Notes of Altiva due 2001
10.5 - Pledge and Security Agreement, dated as of March 17, 2000 by
Altiva in favor of United States Trust Company of New York, as
Collateral Agent, and the Noteholders (as defined therein)
10.6 - Stock Pledge Agreement, dated as of March 17, 2000, by Altiva
in favor of the Noteholders and the Collateral Agent, as agent
of the Noteholders (each as defined therein)
10.7 - Registration Rights Agreement, dated as of March 17, 2000, by
and between Altiva and United States Trust Company of New York
for the benefit of the holders of the Company's 12% Secured
Convertible Senior Notes due 2006
10.8 - Intercreditor and Collateral Sharing Agreement dated as of
February 29, 2000 by and among Altiva, Value Partners, Ltd.
("Value Partners"), the Replacement QIB Noteholders (as
defined therein), the Replacement Non-QIB Noteholders (as
defined therein), and United States Trust Company of New York,
as collateral agent.
99.1 - Press release dated March 3, 2000
99.2 - Press release dated March 24, 2000
</TABLE>
<PAGE> 3
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.
Date: March 28, 2000
Altiva Financial Corporation
By: /s/ J. Richard Walker
------------------------------------
J. Richard Walker
Executive Vice President and
Chief Financial Officer
<PAGE> 4
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
4.1 - $14,000,000 Amended and Restated Secured Convertible Senior
Note due 2006 of Altiva dated February 29, 2000 issued to
Value Partners, Ltd.
4.2 - Indenture dated February 29, 2000 by and between Altiva and
United States Trust Company of New York, as Trustee
10.1 - Amended and Restated Secured Convertible Senior Note Purchase
Agreement between Altiva and Value Partners, Ltd. dated for
reference purposes only as of February 29, 2000
10.2 - Amended and Restated Pledge and Security Agreement dated for
reference purposes only as of February 29, 2000
10.3 - Amended and Restated Registration Rights Agreement, dated as
of February 29, 2000, by and among Altiva and the Holders (as
defined therein) of the Amended and Restated 12% Secured
Convertible Senior Notes due 2006 of Altiva
10.4 - Exchange Agreement, dated as of March 17, 2000, by and among
Altiva and the holders of the outstanding 12% Secured
Convertible Senior Notes of Altiva due 2001
10.5 - Pledge and Security Agreement, dated as of March 17, 2000 by
Altiva in favor of United States Trust Company of New York, as
Collateral Agent, and the Noteholders (as defined therein)
10.6 - Stock Pledge Agreement, dated as of March 17, 2000, by Altiva
in favor of the Noteholders and the Collateral Agent, as agent
of the Noteholders (each as defined therein)
10.7 - Registration Rights Agreement, dated as of March 17, 2000, by
and between Altiva and United States Trust Company of New York
for the benefit of the holders of the Company's 12% Secured
Convertible Senior Notes due 2006
10.8 - Intercreditor and Collateral Sharing Agreement dated as of
February 29, 2000 by and among Altiva, Value Partners, Ltd.
("Value Partners"), the Replacement QIB Noteholders (as
defined therein), the Replacement Non-QIB Noteholders (as
defined therein), and United States Trust Company of New York,
as collateral agent.
99.1 - Press release dated March 3, 2000
99.2 - Press release dated March 24, 2000
</TABLE>
<PAGE> 1
Exhibit 4.1
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAW. NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE OFFERED, SOLD OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH
REGISTRATION.
THE HOLDER HEREOF, BY ITS ACCEPTANCE HEREOF, AGREES FOR THE BENEFIT OF
ALTIVA FINANCIAL CORPORATION (THE "COMPANY") THAT THIS NOTE MAY BE OFFERED, SOLD
OR OTHERWISE DISPOSED OF ONLY (1) TO THE COMPANY, (2) SO LONG AS THIS NOTE IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE
144A"), TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" ("QIB") AS DEFINED IN RULE 144A, THAT IS PURCHASING FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB TO WHOM NOTICE IS GIVEN THAT THE SALE OR
OTHER DISPOSITION IS BEING MADE IN RELIANCE ON RULE 144A, (3) PURSUANT TO AN
EXEMPTION FROM REGISTRATION IN ACCORDANCE WITH RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE), (4) TO AN "ACCREDITED INVESTOR," AS DEFINED IN RULE 501 UNDER
THE SECURITIES ACT ("ACCREDITED INVESTOR"), THAT IS ACQUIRING THIS NOTE FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER ACCREDITED INVESTOR FOR INVESTMENT
PURPOSES AND NOT FOR DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, IF A
SIGNED CERTIFICATION LETTER (A FORM OF WHICH MAY BE OBTAINED FROM THE COMPANY)
IS DELIVERED BY THE TRANSFEREE TO THE COMPANY, (5) AS OTHERWISE PROVIDED IN THE
AGREEMENT (AS DEFINED BELOW) OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, AND IN EACH CASE IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, PROVIDED THAT,
NOTWITHSTANDING THE FOREGOING, SO LONG AS CERTAIN OF THE COLLATERAL FOR THIS
NOTE MAY BE HELD ONLY BY A QIB, AS REASONABLY DETERMINED BY THE COMPANY (THE
"COLLATERAL RESTRICTION"), THIS NOTE MAY BE OFFERED, SOLD OR OTHERWISE DISPOSED
OF ONLY PURSUANT TO CLAUSES (1) OR (2) ABOVE. BY PURCHASING THIS NOTE, THE
HOLDER HEREOF AGREES AND REPRESENTS FOR THE BENEFIT OF THE COMPANY THAT (A) IT
IS (1) A QIB WITHIN THE MEANING OF RULE 144A OR (2) IN THE EVENT THAT THE
COLLATERAL RESTRICTION IS NO LONGER IN EFFECT, AN ACCREDITED INVESTOR ACQUIRING
THIS NOTE FOR INVESTMENT PURPOSES FOR ITS OWN ACCOUNT
<PAGE> 2
OR THE ACCOUNT OF ANOTHER ACCREDITED INVESTOR FOR INVESTMENT PURPOSES AND NOT
FOR DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT AND (B) IT WILL NOTIFY ANY
PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO ABOVE.
THIS AGREEMENT IS SUBJECT TO THE TERMS OF THE AMENDED AND RESTATED
SECURED CONVERTIBLE SENIOR NOTE PURCHASE AGREEMENT, DATED FOR REFERENCE PURPOSES
ONLY AS OF FEBRUARY 29, 2000, BETWEEN THE COMPANY AND VALUE PARTNERS, LTD. (AS
AMENDED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME, THE "AGREEMENT").
COPIES OF THE AGREEMENT MAY BE OBTAINED FROM THE COMPANY.
THIS AGREEMENT IS SUBJECT TO THE TERMS AND CONDITIONS OF THE
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT, DATED AS OF FEBRUARY 29, 2000,
BY AND AMONG THE COMPANY, VALUE PARTNERS, LTD., AS ORIGINAL PURCHASER OF CERTAIN
12% SECURED CONVERTIBLE SENIOR NOTES DUE 2006 ISSUED BY THE COMPANY, AND U.S.
TRUST COMPANY OF TEXAS, N.A., AS COLLATERAL AGENT FOR THE HOLDERS FROM TIME TO
TIME OF SUCH CONVERTIBLE NOTES AND THE HOLDERS FROM TIME TO TIME OF THE 12%
SECURED CONVERTIBLE SENIOR NOTES DUE 2006 ISSUED PURSUANT TO THE EXCHANGE
AGREEMENT, AS DEFINED HEREIN (AS AMENDED, SUPPLEMENTED OR OTHERWISE MODIFIED
FROM TIME TO TIME, THE "INTERCREDITOR AGREEMENT"). COPIES OF THE INTERCREDITOR
AGREEMENT MAY BE OBTAINED FROM THE COMPANY.
ALTIVA FINANCIAL CORPORATION
AMENDED AND RESTATED
12% SECURED CONVERTIBLE SENIOR NOTE DUE 2006
No.1
$14,000,000
Altiva Financial Corporation (together with its permitted successors
and assigns hereunder, the "Company"), a corporation duly organized and validly
existing under the laws of the State of Delaware, for value received, hereby
promises to pay Value Partners, LTD, 4514 Cole Avenue, Suite 808, Dallas, Texas
75205 or registered assigns, the principal sum of
<PAGE> 3
$14,000,000 in such coin or currency of the United States of America as at the
time of payment shall be legal tender for the payment of public and private
debts, no later than 12:00 noon, Eastern Time, on June 15, 2006 (the "Maturity
Date") (or earlier to the extent provided in Article V hereof), and to pay
interest thereon semi-annually as provided herein in like coin or currency, at
the rate per annum of 12%, subject to adjustment as provided herein, such
payments to be made without presentation or surrender of this Note or the making
of any notation thereon, except that any Note paid or prepaid in full shall,
after such payment or prepayment in full, be surrendered to be Company at its
principal office for cancellation.
ARTICLE I
DEFINITIONS
For all purposes hereof, except as otherwise expressly provided or
unless the context otherwise requires, the terms defined in this Article have
the meanings assigned to them in this Article and include the plural as well as
the singular.
"Acquisition" means any transaction, or any series of related
transactions, consummated on or after the Issue Date, by which the Company or
any of its Subsidiaries (i) acquires any going business or all or substantially
all of the assets of any firm, corporation or limited liability company, or
division thereof, whether through purchase of assets, merger or otherwise, or
(ii) directly or indirectly acquires (in one transaction or in a series of
transactions) at least a majority (in number of votes) of the securities of a
corporation which have ordinary voting power for the election of directors
(other than securities having such power only by reason of the happening of a
contingency) or a majority (by percentage or voting power) of the Outstanding
ownership interests of a partnership or a limited liability company.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing, provided, however, that for purposes of this definition none of Value
Partners, T. Rowe Price Recovery Fund and Lutheran Brotherhood High Yield Fund
shall be deemed to be an Affiliate of the Company.
"Agreement" has the meaning set forth in Section 2.1 hereof.
"Beneficial Owners" means the beneficial owners of the Notes identified
in the registry of Beneficial Owners maintained by the Company pursuant to
Section 2.3.
"Board of Directors" means either the Board of Directors of the Company
or any committee of such Board duly authorized to act for it hereunder.
<PAGE> 4
"Business Day" means any day other than (i) a Saturday or Sunday or
(ii) a day on which banking institutions in the City of Atlanta, Georgia or New
York, New York are authorized or required by law or executive order to remain
closed.
"Capital Stock" in any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents or
interests in (however designated) capital stock in such Person, including, with
respect to a corporation or limited liability company, Preferred Stock and other
corporate stock and, with respect to a partnership, including limited liability
partnerships, partnership interests, whether general or limited, and any rights
(other than debt securities convertible into corporate stock, partnership
interests or other capital stock), warrants or options exchangeable for or
convertible into such corporate stock, partnership interests or other capital
stock.
"Capitalized Lease Obligation" means indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP; the amount of such indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
"Closing Price" has the meaning set forth in Section 7.5(i).
"Collateral Agent" means U.S. Trust Company of New York, and its
successors and assigns.
"Collateral Documents" means any agreement entered into by the Company,
any Subsidiary of the Company or any other Person to provide collateral or
security for the repayment of the Notes and the Exchange Notes or to Guarantee
the Notes and the Exchange Notes, including without limitation the Security
Agreement, the Exchange Note Indenture, the Exchange Note Security Agreements
and the Intercreditor Agreement, in each case as defined in the Agreement.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted.
"Common Stock" means the common stock, par value $0.01 per share, of
the Company.
"Company" has the meaning set forth in the first paragraph hereof.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus (i)
provision for taxes based on income or profits of such Person and its
Subsidiaries for such period, to the extent that such provision for taxes was
included in computing such Consolidated Net Income, plus (ii) consolidated
interest expense of such Person and its Subsidiaries for such period, whether
paid or accrued and whether or not capitalized (including, without limitation,
amortization of debt issuance costs and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital
4
<PAGE> 5
Lease Obligations, commissions, discounts and other fees and charges incurred in
respect of letters of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), to the extent that any such expense
was deducted in computing such Consolidated Net Income, plus (iii) depreciation
and amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior
period) and other non-cash expenses (excluding any such non-cash expenses to the
extent that it represents an accrual of or reserve for cash expenses in any
future period or amortization of a prepaid cash expense that was paid in a prior
period) of such Person and its Subsidiaries for such period to the extent that
such depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, minus (v) non-cash revenues increasing
such Consolidated Net Income for such period, including without limitation
non-cash income recorded in connection with the ownership of mortgage-related
securities (excluding any non-cash income to the extent it represents an accrual
of cash revenues in any future period), in each case, on a consolidated basis
and determined in accordance with GAAP. Notwithstanding the foregoing, the
provision for taxes based on the income or profits of, and the depreciation and
amortization and other non-cash charges of, a Subsidiary of a Person shall be
added to Consolidated Net Income to compute Consolidated Cash Flow only to the
extent (and in the same proportion) that the Net Income of such Subsidiary was
included in calculating the Consolidated Net Income of such Person and only if a
corresponding amount would be permitted at the date of termination to be
dividended to the Company by such Subsidiary without prior approval of any
Person (that has not been obtained), pursuant to the terms of its charter and
all agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Subsidiary or its stockholders;
provided that any contingent restriction contained in any thereof shall not be
deemed to prevent any such dividend until the applicable contingency shall have
occurred.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income of any Person that is not a Subsidiary or that
is accounted for by the equity method of accounting shall be included only to
the extent of the amount of dividends or distributions paid in cash (or to the
extent converted into cash) to the referent Person or a Wholly-Owned Subsidiary
thereof, (ii) the Net Income of any Subsidiary shall be excluded to the extent
that the declaration or payment of dividends or similar distributions by that
Subsidiary of its Net Income is not at the date of determination permitted
without prior approval of any Person (that has not been obtained) or, directly
or indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary or its stockholders unless waived; provided that
any contingent restriction contained in any thereof shall not be deemed to
prevent any such dividend until the applicable contingency shall have occurred,
(iii) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded, (iv) the cumulative effect of a change in accounting principles shall
be excluded and (v) any net after-tax extraordinary gains or losses shall be
excluded.
5
<PAGE> 6
"Consolidated Net Worth" of a Person means as of the date of
determination all amounts that would be included under stockholders' equity on a
consolidated balance sheet of the Person and its Subsidiaries determined in
accordance with GAAP.
"Consolidated Tangible Net Worth" of a Person means as of the date of
determination all amounts that would be included under stockholders' equity on a
consolidated balance sheet of the Person and its Subsidiaries determined in
accordance with GAAP less an amount equal to the consolidated intangible assets
of the Person and its Subsidiaries determined in accordance with GAAP.
"Default" means any event which is, or after notice or passage of time,
or both, would be, an Event of Default.
"Disqualified Capital Stock" means any Capital Stock which, by its
terms (or by the terms of any security into which it is convertible or
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part on, or prior to, or is
exchangeable for debt securities of the Company or its Subsidiaries prior to,
the Stated Maturity of principal of the Notes, provided that only the amount of
such Capital Stock that matures or is redeemable prior to the Stated Maturity of
principal of the Notes shall be deemed to be Disqualified Capital Stock.
"Eligible Collateral" means any asset or property of the Company other
than the Note Security.
"Event of Default" means any event specified in Section 5.1.
"Excess Spread" means (i) with respect to a "pool" of Receivables that
has been sold to a trust or other Person in a securitization, the excess of (a)
the weighted average coupon on each pool of Receivables sold over (b) the sum of
the pass-through interest rate plus a normal servicing fee, a trustee fee, an
insurance fee and an estimate of annual future credit losses related to such
assets, in each case calculated in accordance with any applicable GAAP, and (ii)
with respect to Receivables that have been sold to a Person in a whole loan
sale, the cash flow of the Company and its Subsidiaries from such Receivables,
net of, to the extent applicable, a normal servicing fee, a trustee fee, an
insurance fee and an estimate of annual future credit losses related to such
assets, in each case calculated in accordance with any applicable GAAP.
"Excess Spread Receivables" of a Person means the contractual or
certified right to Excess Spread capitalized on such Person's consolidated
balance sheet (the amount of which shall be the present value of the Excess
Spread, calculated in accordance with GAAP, net of any allowance for losses on
loans sold with recourse or other liability allocable thereto, to the extent not
otherwise reflected in such amount). Excess Spread Receivables (a) include
mortgage-related securities backed by Receivables sold by the Company or any
Subsidiary and (b) do not include any servicing rights.
"Exchange" has the meaning set forth in the Agreement.
6
<PAGE> 7
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Exchange Agreement" means the agreement between the Company and the
holders of the Company's 12 1/2% Subordinated Notes due 2001 providing for the
Exchange, as amended, supplemented or otherwise modified from time to time.
"Exchange Notes" means the 12% Secured Convertible Notes due 2006
issued to holders of the Subordinated Notes upon consummation of the Exchange.
"Exchange Note Obligations" means all present and future liabilities,
obligations and indebtedness of the Company, any of its Subsidiaries or any
other obligor owing to any holder of Exchange Notes under or in connection with
the Exchange Agreement, the Exchange Notes and the Collateral Documents,
including without limitation obligations in respect of (i) principal, premium,
if any, and interest on the Exchange Notes, (ii) reimbursement of costs, fees,
taxes or other items and (iii) indemnification and related obligations.
"Fixed Charges" means, with respect to the Company and its Subsidiaries
for any period, the sum, without duplication, of:
(i) the consolidated interest expense of the Company and its
Subsidiaries for such period, whether paid or accrued, including,
without limitation, amortization of debt issuance costs and original
issue discount, non-cash interest payments, the interest component of
any deferred payment obligations, the interest component of all
payments associated with Capitalized Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter of
credit or bankers' acceptance financings, and net of the effect of all
payments made or received pursuant to Hedging Obligations; plus
(ii) the consolidated interest of the Company and its
Subsidiaries that was capitalized during such period; plus
(iii) any interest expense on Indebtedness of another Person
that is Guaranteed by the Company or one of its Subsidiaries or secured
by a Lien on assets of the Company or one of its Subsidiaries, whether
or not such Guarantee or Lien is called upon; plus
(iv) the product of (a) all dividends, whether paid or accrued
and whether or not in cash, on any series of Preferred Stock of the
Company or any of its Subsidiaries, other than dividends on Capital
Stock payable solely in Capital Stock of the Company (other than
Disqualified Capital Stock) or to the Company or a Subsidiary of the
Company, times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal,
state and local statutory tax rate of the Company and its Subsidiaries,
expressed as a decimal, in each case, on a consolidated basis and in
accordance with GAAP.
7
<PAGE> 8
"Fixed Charge Coverage Ratio" means with respect to the Company and its
Subsidiaries for any period, the ratio of the Consolidated Cash Flow of the
Company for such period to the Fixed Charges of the Company and its Subsidiaries
for such period. In the event that the Company or any of its Subsidiaries
Incurs, repays, repurchases or redeems any Indebtedness subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated and on or prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such Incurrence, repayment, repurchase or redemption of Indebtedness, and, if
applicable, the use of the proceeds therefrom to repay other Indebtedness as if
the same had occurred at the beginning of the applicable four-quarter reference
period.
"GAAP" means generally accepted accounting principles as in effect from
time to time, consistently applied.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person and any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or other obligation of such Person
(whether arising by virtue of partnership arrangements, or by agreements to
keep-well, to purchase assets, goods, securities or services, to take-or-pay or
to maintain financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner the obligee of such Indebtedness
or other obligation of the payment thereof or to protect such obligee against
loss in respect thereof (in whole or in part); provided, however, that the term
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Guarantor" means any Person Guaranteeing any Indebtedness or other
obligation.
"Hedging Obligations" means with respect to any Person, the obligations
of such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements with respect to Indebtedness that
is permitted by the terms of the Notes and (ii) other agreements or arrangements
designed to protect such Person against fluctuations in interest rates or the
value of foreign currencies purchased or received by such Person in the ordinary
course of business.
"Holder" means a Person in whose name a Note is registered on the Note
Register.
"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for. The term "Incurrence" when used as a noun shall have a corresponding
meaning. The accretion of principal of a non-interest bearing or other discount
security shall be deemed the Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication): (i) the principal of and premium, if any,
in respect of (A) indebtedness of such
8
<PAGE> 9
Person for money borrowed, (B) indebtedness evidenced by notes, debentures,
bonds or other similar instruments for the payment of which such Person is
responsible or liable; (ii) all Capital Lease Obligations of such Person; (iii)
all obligations of such Person issued or assumed as the deferred purchase price
of property, all conditional sale obligations of such Person and all obligations
of such Person under any title retention agreement (including any such
obligations under repurchase agreements), but excluding trade accounts payable
and expense accruals arising in the ordinary course of business; (iv) all
obligations of such Person for the reimbursement of any obligor on any letter of
credit, banker's acceptance or similar credit transaction; (v) the amount of all
obligations of such Person with respect to the redemption, repayment or other
repurchase of any Disqualified Stock or, in the case of a Subsidiary of such
Person, any Preferred Stock (vi) all obligations of the type referred to in
clauses (i) through (v) of other Persons and all dividends of other Persons the
payment of which, in either case, such Person is responsible or liable, directly
or indirectly, as obligor, Guarantor or otherwise, including by means of any
Guarantee; (vii) all obligations of the type referred to in clauses (i) through
(vi) of other Persons secured by any Lien on any property or asset of such
Person, and (viii) to the extent not otherwise included in this definition,
Hedging Obligations of such Person. The amount of Indebtedness of any Person at
any date shall be the outstanding balance at such date of all unconditional
obligations, as described above, and the amount of any Indebtedness under clause
(vi) of this definition for which such Person is responsible or liable, directly
or indirectly, including by way of any Guarantee. Notwithstanding the foregoing,
any securities issued in a securitization by a Securitization Subsidiary formed
by or on behalf of a Person and to which Receivables have been sold or otherwise
transferred by or on behalf of such Person or its Subsidiaries shall not be
treated as Indebtedness of such Person or its Subsidiaries, regardless whether
such securities are treated as indebtedness for tax purposes, provided that (1)
neither the Company nor any of its Subsidiaries (other than the Securitization
Subsidiary) (a) provides credit support of any kind (including any undertaking,
agreement or instrument that would constitute Indebtedness), except for credit
support in the form of "over-collateralization" of the senior certificates
issued in, or subordination of or recourse to all or a portion of Excess Spread
Receivables attributable to, such securitization, in each case to the extent of
the book value of such Excess Spread Receivables, or (b) is directly or
indirectly liable (as a guarantor or otherwise) for such securities, and (2) no
default with respect to such securities would permit (upon notice, lapse of time
or both) any holder of any other Indebtedness of the Company or any of its
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its Stated Maturity.
"Indenture" means the Indenture between the Company and U.S. Trust
Company of Texas, N.A., as trustee for the holders of the Exchange Notes, as
amended, supplemented or otherwise modified from time to time.
"Intercreditor Agreement" has the meaning set forth in the Agreement.
"Interest Payment Date" has the meaning set forth in Section 2.2
hereof.
"Interest Rate" means 12% per annum, subject to increase as specified
in the third and fourth paragraphs of Section 2.2 hereof.
9
<PAGE> 10
"Investment" of a Person means any loan, advance (other than
commission, travel and similar advances to officers and employees made in the
ordinary course of business), extension of credit (other than accounts
receivable arising in the ordinary course of business on terms customary in the
trade) or contribution of capital by such Person; stocks, bonds, mutual funds,
partnership interests, notes, debentures or other securities owned by such
Person; and structured notes, derivative financial instruments and other similar
instruments or contracts owned by such Person.
"IO Securities" means a security representing an undivided interest in
all or a portion of the interest payments due on a pool of Receivables which
back the mortgage-related security to which the IO Securities relate.
"Issue Date" means February 29, 2000.
"Junior Indebtedness" means any Indebtedness of the Company
subordinated in right of payment of either principal, premium (if any) or
interest thereon to the Notes.
"Liens" means any mortgage, charge, pledge, lien (statutory or
otherwise), security interest, hypothecation, assignment for security, claim, or
preference or priority or other encumbrance (whether or not filed, recorded or
otherwise perfected under applicable law) upon or with respect to any asset or
property owned by a Person.
"Liquid Assets" means: (i) cash; (ii) any of the following instruments
that have a remaining term to maturity not in excess of 90 days from the
determination date: (a) repurchase agreements on obligations of, or are
guaranteed as to timely receipt of principal and interest by, the United States
or any agency or instrumentality thereof when such obligations are backed by the
full faith and credit of the United States, provided that the party agreeing to
repurchase such obligations is a primary dealer in U.S. Government securities,
(b) federal funds and deposit accounts, including but not limited to
certificates of deposit, time deposits and bankers' acceptances of any U.S.
depository institution or trust company incorporated under the laws of the
United States or any state thereof, provided that the debt of such depository
institution or trust company at the date of acquisition thereof has been rated
by Standard & Poor's Corporation in the highest short-term rating category or
has an equivalent rating from another nationally-recognized rating agency, or
(c) commercial paper of any corporation incorporated under the laws of the
United States or any state thereof that on the date of acquisition is rated
investment grade by Standard & Poor's Corporation or has an equivalent rating
from another nationally-recognized rating agency; (iii) any debt instrument
which is an obligation of, or is guaranteed as to the receipt of principal and
interest by, the United States, its agencies or any U.S. Government sponsored
enterprise and (iv) the amount of unused credit available to the Company in the
form of Permitted Warehouse Indebtedness under lines of such Indebtedness in
existence on the determination date which may be secured by existing net loans
or other Receivables held for sale by the Company on the determination date.
10
<PAGE> 11
"Liquidated Damages" shall have the meaning set forth in the
Registration Rights Agreement.
"Mark-to-Market Adjustments" shall have the meaning set forth in
Section 4.12(a)(1).
"Material Adverse Effect" has the meaning set forth in the Agreement.
"Maturity Date" has the meaning set forth in the first paragraph
hereof.
"MCI" means The Money Centre, Inc., a North Carolina corporation.
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of Preferred Stock dividends.
"Notes" has the meaning set forth in Section 2.1, provided that upon
consummation of the Exchange the Notes and the Exchange Notes shall be
considered as a single class of Pari Passu Indebtedness of the Company.
Notwithstanding any provision to the contrary contained in this Note, except as
expressly provided herein, references herein to actions by the Holders of the
Notes shall in all cases include the holders of the Exchange Notes, such holders
acting together as the holders of a single class of securities of the Company.
"Note Obligations" means all present and future liabilities,
obligations and Indebtedness of the Company, any of its Subsidiaries or any
other obligor owing to any Holder under or in connection with the Agreement, or
any Related Agreement, including without limitation obligations in respect of
(i) principal, premium, if any, and interest on the Notes, (ii) reimbursement of
costs, fees, taxes or other items and (iii) indemnification and related
obligations.
"Note Register" has the meaning set forth in Section 2.3.
"Note Security" means all assets now or from time to time after the
Issue Date subjected to a security interest or other charge (or intended to be
so subjected pursuant to the Agreement or any Related Agreement) to secure the
payment or performance of any of the Note Obligations.
"Officer" means the Chairman of the Board, the President, the Chief
Financial Officer, the Controller, the Secretary, any Assistant Secretary or any
Vice President of the Company.
"Officer's Certificate" means, unless otherwise specified herein, a
certificate signed by two Officers, one of whom must be the Chairman of the
Board, the President, the Chief Executive Officer or the Chief Financial Officer
of the Company.
"Outstanding," (i) when used as of any particular time with reference
to the Notes, means all of the Notes theretofore issued by the Company and
outstanding, which shall not include (x) the Notes theretofore canceled by the
Company or surrendered to the Company for cancellation, and (y) the Notes for
the transfer or exchange of or in lieu of or in substitution for which other
11
<PAGE> 12
Notes shall have been delivered by the Company pursuant to the Notes, and (ii)
when used as of any particular time with reference to the Exchange Notes, shall
have the meaning set forth in the Indenture. In determining whether the
registered holders of the requisite aggregate principal amount of Notes and
Exchange Notes have concurred in any demand, request, direction, consent, or
waiver under the Notes, Notes which are owned or held by or for the account of
the Company, or by any other obligor on the Notes, or by any Affiliate of the
Company or any other obligor on the Notes, shall be disregarded and deemed not
to be Outstanding for the purpose of any such determination. Notes so owned
which have been pledged in good faith may be regarded as Outstanding if the
pledgee shall have the exclusive right to vote such Notes and is not a Person
which is an Affiliate of the Company or any other obligor on the Notes.
"Pari Passu Indebtedness" means any Indebtedness of the Company that is
pari passu in right of payment of principal, premium (if any) and interest
thereon to the Notes.
"Permitted Indebtedness" means:
(i) Permitted Warehouse Indebtedness of the Company and
its Subsidiaries, provided that to the extent any such Indebtedness
ceases to constitute Permitted Warehouse Indebtedness of the Company or
a Subsidiary, such event shall be deemed to constitute the Incurrence
of such Indebtedness (and any related Guarantees, but without
duplication) by the Company or such Subsidiary, as the case may be;
(ii) the Note Obligations and the Exchange Note
Obligations;
(iii) Indebtedness of the Company or a Subsidiary
Outstanding on the Issue Date;
(iv) Hedging Obligations;
(v) Capital Lease Obligations, mortgage financings or
purchase money obligations, in each case incurred for the purpose of
financing all or any part of the purchase price, lease or cost of
construction or improvement of property, plant or equipment used in the
business of the Company or such Subsidiary, in an aggregate principal
amount not to exceed $3.0 million at any time outstanding;
(vi) intercompany Indebtedness between or among the
Company and any Subsidiary, provided, however, that (i) if the Company
is the obligor on such Indebtedness, such Indebtedness is expressly
subordinated to the prior payment in full in cash of all Note
Obligations and (ii) (A) any subsequent issuance or transfer of Capital
Stock that results in any such Indebtedness being held by a Person
other than the Company or a Subsidiary and (B) any sale or other
transfer of any such Indebtedness to a Person that is not either the
Company or a Subsidiary shall be deemed, in each case, to constitute an
Incurrence of such Indebtedness by the Company or such Subsidiary, as
the case may be; and
12
<PAGE> 13
(vii) Permitted Refinancing Indebtedness in exchange for,
or the net proceeds of which are used to refund, refinance or replace
Indebtedness Incurred pursuant to Section 4.13(a) or clause (iii) or
(v) above.
"Permitted Liens" means, with respect to the Company and any
Subsidiary:
(i) Liens for taxes, assessments or governmental charges
or levies on the assets or property of the Company or any Subsidiary if
the same shall not at the time be delinquent or thereafter can be paid
without penalty, or are being contested in good faith and by
appropriate proceedings and for which adequate reserves in accordance
with GAAP shall have been set aside on its books;
(ii) Liens imposed by law, such as carriers',
warehousemen's and mechanics' liens and other similar liens arising in
the ordinary course of business which secure payment of obligations not
more than 60 days past due;
(iii) Liens arising out of pledges or deposits under
worker's compensation laws, unemployment insurance, old age pensions or
other social security or retirement benefits, or similar legislation;
(iv) Utility easements, building restrictions and such
other encumbrances or charges against real property as are of a nature
generally existing with respect to properties of a similar character
and which do not in any material way affect the marketability of the
same or interfere with the use thereof in the business of the Company
or its Subsidiaries;
(v) Liens securing Permitted Indebtedness;
(vi) Liens with respect to IO Securities, Residual
Certificates or excess servicing rights arising from the documents
creating and governing such securities, certificates and rights as a
result of the subordinate nature of such assets to other senior
interests created and governed by such documents; and
(vii) Liens on the Capital Stock of, or the assets or
property of, a Subsidiary acquired by the Company in existence at the
time of such acquisition provided that (a) such Liens are not created,
incurred or assumed in connection with, or in contemplation of, such
acquisition and (b) such Liens do not extend to assets or property
owned by the Company or any other Subsidiary.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund
Indebtedness of the Company or any of its Subsidiaries, provided that (i) the
principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount (or accreted
value, if
13
<PAGE> 14
applicable), plus accrued interest on, the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus the amount of reasonable expenses
incurred in connection therewith, including premiums paid, if any, to the
holders thereof); (ii) such Permitted Refinancing Indebtedness has a final
maturity date at or later than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; (iii) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of payment to
the Notes, such Permitted Refinancing Indebtedness has a final maturity date
later than 91 days after the final maturity date of, and is subordinated in
right of payment to, the Notes on terms at least as favorable to the Holders as
those contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness
is incurred either by the Company or by the Subsidiary which is the obligor on
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Permitted Warehouse Indebtedness" means Indebtedness of any Person
under any warehouse line of credit, loan repurchase agreement or similar
facility or under any commercial paper program (a) that is incurred for the
purpose of funding the origination or purchase of Receivables that are intended
to be sold to investors and are eligible to be recorded as held for sale on the
consolidated balance sheet of such Person in accordance with GAAP and are so
recorded, (b) that in the case of any warehouse line of credit or similar
facility is, or, in the case of any commercial paper program, the letters of
credit or revolving credit facility providing credit enhancement or liquidity
backup for such commercial paper program are, secured by Receivables or
securities backed by such receivables or any combination thereof owned by such
Person, (c) the outstanding amount of which shall not exceed 100% of the
aggregate principal amount of the Receivables and/or securities backed by such
receivables securing such Indebtedness and (d) that has not been outstanding in
excess of 360 days.
"Person" means any individual, corporation, partnership, joint venture,
trust, association, joint stock company, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Stock" means, with respect to any Person, any Capital Stock
of any class or classes (however designated) which is preferred as to the
payment of dividends or distributions, or as to the distribution of assets upon
any voluntary or involuntary liquidation or dissolution of such Person, over
Capital Stock of any other class in such Person.
"Receivables" means loans, leases and other credit receivables commonly
financed by companies in the mortgage lending or consumer finance business in
the United States which are purchased or originated by the Company or any
Subsidiary of the Company in the ordinary course of business.
"Record Date" means, with respect to any Interest Payment Date, the
June 1 or December 1 preceding an Interest Payment Date of June 15 and December
15, respectively.
14
<PAGE> 15
"Redemption Date," when used with respect to any Note to be redeemed,
means the date fixed for such redemption by or pursuant to the provisions of the
Note.
"Redemption Price," when used with respect to any Note to be redeemed,
means the price at which it is to be redeemed pursuant to the provisions of the
Note.
"Related Agreements" means the Notes and the Collateral Documents.
"Repurchase Event" has the meaning set forth in Section 8.3.
"Repurchase Price," when used with respect to any Note to be
repurchased, means the price at which it is to be repurchased pursuant to the
terms of the Notes.
"Registration Rights Agreement" has the meaning set forth in the
Agreement.
"Residual Certificate" means a security (whether identified as a
certificate, instrument or interest) representing the residual interest in a
real estate mortgage investment conduit or other entity formed by the Company or
a Subsidiary and in which the Company or a Subsidiary has retained a residual
interest which is only payable on a fully subordinated basis after all regular
interests in and/or debt issued by such entity has been fully repaid.
"Restricted Payment" means
(i) the declaration, payment or setting apart of any funds for
the payment of any dividend on, or making of any distribution to
holders of, the Capital Stock of the Company or any Subsidiary of the
Company (including, without limitation, any payment in connection with
any merger or consolidation involving the Company or any of its
Subsidiaries) or make any payment or distribution to or for the benefit
of the direct or indirect holders of the Capital Stock of the Company
or any Subsidiary of the Company (other than (a) dividends or
distributions payable in its Capital Stock (other than Disqualified
Capital Stock) and (b) dividends or distributions payable to the
Company or a Subsidiary of the Company (and if such Subsidiary is not a
Wholly-Owned Subsidiary, to its other holders of Capital Stock on a pro
rata basis);
(ii) the purchase, redemption or other acquisition or
retirement for value, directly or indirectly, of any Capital Stock of
the Company or any Subsidiary of the Company (other than any such
Capital Stock owned by the Company or any of its Subsidiaries and other
than the acquisition of Capital Stock in Subsidiaries solely in
exchange for Capital Stock (other than Disqualified Capital Stock ) of
the Company); or
(iii) the making of any principal payments on, or repurchase,
redemption, defeasance, retirement or other acquisition for value,
directly or indirectly, of any Junior Indebtedness or Pari Passu
Indebtedness, prior to the Stated Maturity of principal or
15
<PAGE> 16
scheduled redemption or defeasance of, or any scheduled sinking fund
payment on, such Junior Indebtedness or Pari Passu Indebtedness.
Notwithstanding the above, a Restricted Payment shall not include: (A)
any future payments required to be made to the former shareholders of MCI
pursuant to the Stock Purchase Agreement, dated as of July 15, 1999, by and
among Rodney D. Atkinson, Charles R. Cunningham, Stuart A. Lewis, John Richard
Love, Stephen L. Walker, MCI and the Company; or (B) the repurchase, redemption,
defeasance, retirement or other acquisition for value directly or indirectly of
the Notes in accordance with the terms of the Notes (including without
limitation Section 4.20 hereof).
"SEC" means the Securities and Exchange Commission and any successor
thereto.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Securitization Subsidiary" means a Subsidiary of the Company formed in
connection with a securitization of Receivables (i) all the Capital Stock of
which (other than directors' qualifying shares and shares held by other Persons
to the extent such shares are required by applicable law to be held by a Person
other than the Company or a Subsidiary) is owned by the Company or one or more
of its Subsidiaries, (ii) that has no assets other than Excess Spread
Receivables created in such securitization, (iii) that conducts no business
other than holding such Excess Spread Receivables, and (iv) that has no
Indebtedness (other than short-term Indebtedness to the Company or any
Wholly-Owned Subsidiary attributable to the purchase by such Subsidiary from the
Company or such Wholly-Owned Subsidiary of such Receivables, which Indebtedness
is paid in full upon closing of such securitization).
"Significant Subsidiary" means, with respect to any Person, any
Subsidiary which is a "significant subsidiary" (as defined in Article 1, Rule
1-02 of Regulation S-X, promulgated pursuant to the Securities Act) of such
Person.
"Stated Maturity" when used with respect to any Indebtedness
(including, without limitation, the Notes) means the dates specified in the
instrument governing such Indebtedness as the fixed dates on which any principal
amount of such Indebtedness is due and payable (including, without limitation,
by reason of any required redemption, purchase, defeasance or sinking fund
payment) and, when used with respect to any installment of interest on
Indebtedness, means the date on which such installment is due and payable.
"Stockholder Approvals" means the approval of the stockholders of the
Company, pursuant to Section 5.1 of the Agreement, of (i) the issuance of Common
Stock upon conversion of the Notes in their entirety and (ii) the issuance of
Common Stock upon conversion of the Exchange Notes in accordance with their
terms.
16
<PAGE> 17
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more Subsidiaries of such Person (or a combination thereof) and
(ii) any partnership (a) the sole general partner or managing general partner of
which is such Person or a Subsidiary of such Person or (b) the only general
partners of which are such Person or one or more Subsidiaries of such Person (or
any combination thereof).
"Substantial Portion" means, with respect to the assets of the Company
and its Subsidiaries, assets which (i) represent more than 10% of the
consolidated assets of the Company and its Subsidiaries as would be shown in the
consolidated financial statements of the Company and its Subsidiaries as at the
beginning of the twelve-month period ending with the month in which such
determination is made, or (ii) is responsible for more than 10% of the
Consolidated Net Income of the Company and its Subsidiaries as reflected in the
financial statements referred to in clause (i) above.
"Supermajority Covenants" has the meaning set forth in Section 4.25.
"Value Partners" means Value Partners, Ltd., a Texas limited
partnership.
"Trading Day" has the meaning set forth in Section 7.5(i).
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at Stated Maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly-Owned Subsidiary" means a Subsidiary all of the Capital Stock
of which is owned by the Company or another Wholly-Owned Subsidiary.
ARTICLE II
ISSUANCE OF NOTES
SECTION 2.1 DESIGNATION AND AMOUNT OF NOTES; RANKING.
This Note is one of a duly authorized issue of notes of the Company,
designated as its Amended and Restated 12% Secured Convertible Senior Notes due
2006 (herein called the "Notes") in the maximum aggregate principal amount of
$14,000,000 issued pursuant to an
17
<PAGE> 18
Amended and Restated Secured Convertible Senior Note Purchase Agreement, dated
for reference purposes only as of February 29, 2000, by and among Altiva
Financial Corporation and the purchaser listed on the signature page thereto (as
amended, supplemented or otherwise modified from time to time, the "Agreement"),
to which all the terms of this Note are subject.
The Notes constitute senior obligations of the Company and shall not be
subordinated in right or priority of payment to any existing or future
Indebtedness of the Company.
SECTION 2.2. DATE AND DENOMINATION OF NOTES; PAYMENTS OF INTEREST AND PRINCIPAL.
The Notes shall be issuable in registered form without coupons in
denominations of $1,000 principal amount and any integral multiple thereof.
Subject to adjustment pursuant to the penultimate sentence of this
paragraph and the next two paragraphs of this Section 2.2, interest shall accrue
at the Interest Rate on (i) $7,000,000 principal amount of the Notes (the "First
Notes") from August 31, 1999, (ii) $250,000 principal amount of the Notes (the
"Second Notes") from December 13, 1999, (iii) $750,000 principal amount of the
Notes from December 31, 1999, (iv) $1,000,000 principal amount of the Notes
(together with the Notes in clause (III), the "Third Notes" ) from January 5,
2000 , (v) $700,000 principal amount of Notes (the "Fourth Notes") from February
2, 2000, (vi) $300,000 principal amount of Notes from February 11, 2000 and
(vii) the total Outstanding principal amount of the Notes from February 29,
2000. Interest on the Notes shall be payable by the Company in cash to Holders
(i) from the most recent date to which interest has been paid or, if no interest
has been paid, from August 31, 1999, on June 15 and December 15 of each year
(each an "Interest Payment Date"), commencing on June 15, 2001, and (ii) on the
Maturity Date (or earlier to the extent provided in Article V hereof) to the
extent accrued but theretofore unpaid. In addition to the foregoing, pursuant to
the term of the First Notes, the Second Notes and the Third Notes, the Interest
Rate on the Notes shall be increased by 1% per annum for the period from
February 15 through the date immediately preceding the date of receipt of the
Stockholder Approvals, and pursuant to the terms of the Fourth Notes, the
Interest Rate on the Notes shall be increased by 1% per annum for the period
from February 29, 2000 through the date immediately preceding the date of
receipt of the Stockholder Approvals. Interest on the Notes shall be computed on
the basis of a 360-day year comprised of twelve 30-day months.
In the event that the Company is obligated to pay Liquidated Damages to
Holders, the Interest Rate shall be increased for the period during which the
Company is obligated to pay Liquidated Damages by the amount of such Liquidated
Damages and all references herein to interest shall include Liquidated Damages,
if any. The Company shall promptly notify each Holder at its address as it
appears on the Note Register in the event that the Company is obligated to pay
Liquidated Damages to Holders.
In the event that the Company does not obtain the Stockholder Approvals
on or before March 9, 2000 (as may be extended pursuant to Section 8.3 hereof),
the Interest Rate shall increase monthly, commencing on March 9, 2000 (or as
extended), by 1% per annum, up to a maximum interest rate of 18% (exclusive of
Liquidated Damages, if any), provided that if the
18
<PAGE> 19
Company subsequently obtains the Stockholder Approvals, the Interest Rate shall
revert as of the date of receipt thereof to the amount otherwise payable
hereunder and shall not thereafter reflect any increase in the Interest Rate as
a result of the requirements of this sentence. The Company shall promptly notify
each Holder at its address as it appears on the Note Register in the event that
the Company is obligated to increase the Interest Rate pursuant to the
requirements of this paragraph.
The Person in whose name any Note is registered at the close of
business on any Record Date with respect to any Interest Payment Date (including
any Note that is converted after the Record Date and on or before the Interest
Payment Date) shall receive the interest payable on such Interest Payment Date
notwithstanding the cancellation of such Note upon any transfer, exchange or
conversion subsequent to the Record Date and on or prior to such Interest
Payment Date. Interest shall be paid by check mailed to the address of such
Person on the Note Register, provided that at the request of a Holder in writing
to the Company at least five days prior to the date set for payment of interest,
interest on such Holder's Notes shall be paid by wire transfer in immediately
available funds in accordance with the wire transfer instructions supplied by
such Holder to the Company. Payment of principal, premium, if any, and interest
due on the Maturity Date similarly shall be paid by the Company by check or, at
the request of a Holder, wire transfer.
Any interest on any Note which is payable, but is not punctually paid
or duly provided for, on any Interest Payment Date (herein called "Defaulted
Interest") shall be paid by the Company, at its election in each case, as
provided in clause (1) or (2) below.
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names Notes are registered at the
close of business on a special record date for the payment of such
Defaulted Interest, which shall be not more than 15 days and not less
than 10 days prior to the date of the proposed payment. The Company
shall cause notice of the proposed payment of such Defaulted Interest
and the special record date therefor to be mailed, first-class postage
prepaid, to each Holder at his address as it appears in the Note
Register not less than 10 days prior to such special record date.
Notice of the proposed payment of such Defaulted Interest and the
special record date therefor having been so mailed, such Defaulted
Interest shall be paid to the Persons in whose names the Notes were
registered at the close of business on such special record date and
shall no longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner.
SECTION 2.3. EXCHANGE AND REGISTRATION OF TRANSFER OF NOTES; RESTRICTIONS ON
TRANSFER.
The Company shall cause to be kept at its executive offices a register
(the "Note Register") in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of Notes and of
transfers of Notes. The Note Register shall be
19
<PAGE> 20
in written form or in any form capable of being converted into written form
within a reasonably prompt period of time.
The Company shall also maintain a register of Beneficial Owners of the
Notes, which Beneficial Owners shall be placed thereon upon receipt by the
Company of written certification of any such Beneficial Owner as to its
beneficial ownership of a specified principal amount of the Notes accompanied by
evidence thereof reasonably satisfactory to the Company and setting forth its
address and other information which will permit the Company to communicate with
such Beneficial Owners as required herein and deem such Beneficial Owners as
registered Holders for purposes hereof. A copy of any notice sent hereunder to
Holders also shall be sent to the Beneficial Owners on the Company's registry
and any consent, request, direction, approval, objection or other instrument or
action required or permitted by the Notes to be executed or taken by any Holder
(other than a transfer or conversion of a Note) shall be fully effective if
executed or taken by the Beneficial Owner thereof on the Company's registry,
provided that, in the event of conflicting instruments executed by the
registered Holder and the Beneficial Owner, the action by the registered Holder
shall govern. The Company may presume that the Persons that is enters on the
registry of Beneficial Owners are such Beneficial Owners unless it receives
written notification to the contrary.
Upon surrender for registration of transfer of any Note to the Company
and satisfaction of the requirements for such transfer set forth in this Section
2.4 and in the Agreement, the Company shall execute and deliver, in the name of
the designated transferee or transferees, one or more new Notes of any
authorized denominations and of a like aggregate principal amount and bearing
such restrictive legends as may be required by the Agreement.
Subject to the requirements of the immediately succeeding paragraph,
Notes may be exchanged for other Notes of any authorized denominations and of a
like aggregate principal amount upon surrender of the Notes to be exchanged to
the Company. Whenever any Notes are so surrendered for exchange, the Company
shall execute and deliver the Notes which the Holder making the exchange is
entitled to receive bearing registration numbers not contemporaneously
Outstanding.
Each initial Holder of the Notes shall be issued a Note with a
principal amount equal to such Holder's initial aggregate investment in the
Notes and may not exchange such Note for other Notes of any authorized
denominations and of a like aggregate principal amount unless it has a valid
business reason therefor, provided that nothing herein shall be deemed to
restrict an initial Holder from exchanging Notes for other Notes of authorized
denominations and of a like aggregate principal amount in connection with any
sale, disposition or other transfer of the Notes or any conversion of the Notes
in accordance with Article VII hereof.
All Notes issued upon registration of transfer or exchange of Notes
shall be the valid obligations of the Company, evidencing the same debt and
entitled to the same benefits as the Notes surrendered upon such registration of
transfer or exchange.
20
<PAGE> 21
All Notes presented or surrendered for registration of transfer or for
exchange, redemption, repurchase or conversion shall (if so required by the
Company) be duly endorsed, or be accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company, and the Notes shall
be duly executed by the Holder thereof or his attorney duly authorized in
writing.
No service charge shall be made for any registration of transfer or
exchange of Notes, but the Company may require payment of a sum sufficient to
cover any tax, assessment or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes.
SECTION 2.4. MUTILATED, DESTROYED, LOST OR STOLEN NOTES.
In case any Note shall become mutilated or be destroyed, lost or
stolen, the Company in its discretion may execute and deliver a new Note,
bearing a number not contemporaneously Outstanding, in exchange and substitution
for the mutilated Note, or in lieu of and in substitution of the Note so
destroyed, lost or stolen. In every case the applicant for a substituted Note
shall furnish to the Company such indemnity as may be required by the Company to
save it harmless for any loss, liability, cost or expense caused by or connected
with such substitution, and, in every case of destruction, loss or theft, the
applicant shall furnish to the Company, evidence to its satisfaction of the
destruction, loss or theft of such Note and of the ownership thereof.
Every substitute Note issued pursuant to the provisions of this Section
2.4 by virtue of the fact that any Note is destroyed, lost or stolen shall
constitute an additional contractual obligation of the Company, whether or not
the destroyed, lost or stolen Note shall be found at any time, and shall be
entitled to all the benefits of and subject to all the limitations set forth
herein equally and proportionally with any and all other duly issued Notes. To
the extent permitted by law, all Notes shall be held and owned upon the express
condition that the foregoing provisions are exclusive with respect to the
replacement or payment or conversion of mutilated, destroyed, lost or stolen
Notes and shall preclude any and all other rights or remedies notwithstanding
any law or statute existing or hereafter enacted to the contrary with respect to
the replacement or payment or conversion of negotiable instruments or other
securities without their surrender.
ARTICLE III
REDEMPTION OF NOTES
SECTION 3.1. OPTIONAL RIGHTS TO REDEEM NOTES.
(a) Except as provided in paragraph (b) below, the Notes are not
redeemable at the Company's option prior to June 15, 2004. Thereafter, the Notes
may be redeemed, in whole but not in part, at the option of the Company at the
Redemption Prices specified below (expressed as percentages of the principal
amount thereof), in each case, together with accrued and unpaid interest, if
any, thereon to the Redemption Date, if redeemed during the 12-month period
beginning on June 15 of the years indicated below:
21
<PAGE> 22
<TABLE>
<CAPTION>
Year Redemption Rate
<S> <C>
2004 106%
2005 100%
</TABLE>
Notwithstanding the foregoing, the Notes may be redeemed at the
Company's option prior to June 15, 2004, in whole but not in part, at a
Redemption Price equal to 100% of the principal amount thereof, together with
accrued and unpaid interest, if any, thereon to the Redemption Date, if the
Closing Price of the Common Stock equals or exceeds $5.00 per share (subject to
adjustment as provided herein, the "Redemption Trading Price") for 35
consecutive Trading Days after the Issue Date and prior to June 15, 2004.
In case outstanding shares of Common Stock shall be subdivided into a
greater number of shares of Common Stock, the Redemption Trading Price in effect
at the opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately reduced, and conversely,
in case outstanding shares of Common Stock shall be combined into a smaller
number of shares of Common Stock, the Redemption Trading Price in effect at the
opening of business on the day following the day upon which such combination
becomes effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately after the opening
of business on the day following the day upon which such subdivision or
combination becomes effective.
(b) Notwithstanding any provision hereof to the contrary, if it any
time the total Outstanding principal amount of the Notes shall be less than 10%
of the aggregate principal amount Outstanding on the Issue Date, the Company
may, at its option, redeem all or any part of the Notes then Outstanding at a
Redemption Price equal to the applicable amount set forth in Section 3.1(a)
hereof of the principal amount of the Notes then Outstanding, together with
accrued and unpaid interest, if any, thereon to the Redemption Date.
SECTION 3.2. NOTICE OF OPTIONAL REDEMPTION.
At least 30 days but not more than 90 days before a Redemption Date,
the Company shall mail or cause to be mailed a notice of optional redemption by
first-class mail to each Holder of Notes to be redeemed at such Holder's address
as it appears on the Note Register.
The notice shall identify the Notes to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) the then current Conversion Price;
22
<PAGE> 23
(4) that Notes called for redemption must be presented and
surrendered to the Company to collect the Redemption Price;
(5) that the Notes called for redemption may be converted at
any time before the close of business on the fifth Business Day
immediately preceding the Redemption Date;
(6) that Holders who wish to convert Notes must satisfy the
requirements in Article VII of the Notes;
(7) that, unless the Company defaults in making the redemption
payment, the only remaining right of the Holder shall be to receive
payment of the Redemption Price upon presentation and surrender to the
Company of the Notes; and
(8) that interest on Notes called for redemption ceases to
accrue on and after the Redemption Date.
SECTION 3.3. EFFECT OF NOTICE OF OPTIONAL REDEMPTION.
Once notice of optional redemption is mailed, Notes called for
redemption become due and payable on the Redemption Date and at the Redemption
Price stated in the notice, except for Notes that are converted in accordance
with the provisions of Section 7.1. Upon presentation and surrender to the
Company, Notes called for redemption shall be paid at the Redemption Price, plus
accrued interest up to but not including the Redemption Date.
ARTICLE IV
CERTAIN COVENANTS
SECTION 4.1. PAYMENT OF NOTES.
The Company shall pay the principal of, premium, if any, and interest
on the Notes on the dates and in the manner provided herein. To the extent
lawful, the Company shall pay interest (including post-petition interest in any
proceeding under any bankruptcy law) on (i) overdue principal, at the rate borne
by the Notes at the time, and (ii) overdue installments of interest (without
regard to any applicable grace period) at the same rate, compounded
semi-annually.
23
<PAGE> 24
SECTION 4.2. STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay, extension or usury law or other
law which would prohibit or forgive the Company from paying all or any portion
of the principal of, premium, if any, or interest on the Notes as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of its obligations herein, and the
Company (to the extent it may lawfully do so) hereby expressly waives all
benefits or advantages of any such law.
SECTION 4.3. REPORTS AND CERTIFICATES.
(a) Whether or not required by the rules and regulations of the
SEC, so long as any Notes are Outstanding, the Company will furnish to the
Holders, within five days after the time periods specified in the SEC's rules
and regulations (including any extensions expressly permitted by such rules and
regulations):
(1) all quarterly and annual information,
financial and other, that would be required to be contained in
a filing with the SEC on Forms 10-Q and 10-K (or any successor
forms) if the Company were required to file such forms,
including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and an annual report on
the Company's consolidated financial statements by the
Company's independent certified public accountants; and
(2) all current reports that would be required
to be filed with the SEC on Form 8-K (or any successor form)
if the Company were required to file such reports.
(b) For so long as any Notes are Outstanding, the Company will
furnish to the Holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
(c) Concurrently with the delivery of the annual report described
in Section 4.3(a)(1), the Company will deliver to each Holder at such Holder's
address as it appears on the Note Register a statement of the Company's
independent certified public accountants to the effect that they have reviewed
the Agreement and the Related Agreements and that based on their examination of
the affairs of the Company and its Subsidiaries, performed in connection with
their audit of the Company's annual financial statements, they are not aware of
the occurrence or existence of any condition or event which constitutes a
Default or an Event of Default, or, if they are aware thereof, the nature
thereof.
(d) Concurrently with the delivery of the annual report described
in Section 4.3(a)(1), the Company will deliver to each Holder at such Holder's
address as it appears in the Note Register, within 90 days after the end of each
fiscal year of the Company, an Officer's
24
<PAGE> 25
Certificate, signed by each of the Company's Chief Executive Officer and Chief
Financial Officer, to the effect that each such officer has reviewed the
Agreement and the Related Agreements and is not aware of the occurrence or
existence of any condition or event which constitutes a Default or an Event of
Default, or, if they are aware thereof, the nature thereof and what action the
Company is taking or proposes to take with respect thereto.
(e) Notwithstanding any other provision hereof to the contrary,
promptly upon acquiring knowledge of any Default or Event of Default, the
Company will promptly deliver to each Holder at such Holder's address as it
appears in the Note Register an Officer's Certificate specifying such Default or
Event of Default and what action the Company is taking or proposes to take with
respect thereto.
(f) The Company will deliver to each Holder of at least $1.0
million aggregate principal amount of Notes who so requests at such Holder's
address as it appears in the Note Register, within 30 days after the end of each
fiscal quarter of the Company, an Officer's Certificate, signed by the Company's
Chief Executive Officer and Chief Financial Officer, which (i) sets forth in
reasonable detail the calculations which demonstrate the Company's compliance
with the financial covenants set forth in Section 4.12 (regardless whether such
covenants are in effect) and Section 4.13 (regardless whether the Company is
seeking to Incur additional Indebtedness) and (ii) to the effect that each such
officer is not aware of the occurrence or existence of any condition or event
which constitutes a Default or an Event of Default with respect to Section 4.6
or, if they are aware thereof, the nature thereof and what action the Company is
taking or proposes to take with respect thereto.
(g) The Company will deliver to each Holder of at least $1.0
million aggregate principal amount of Notes who so requests at such Holder's
address as it appears in the Note Register, within 30 days after the end of each
calendar month, (i) an unaudited balance sheet and income statement showing the
results of the Company's operations for such month, certified by an Officers'
Certificate which is signed by the Company's Chief Financial Officer or Chief
Accounting Officer, (ii) the amount of originations, purchases and sales of each
type of Receivable by the Company and each Subsidiary of the Company during such
month and fiscal year to date and (iii) the amount of (x) delinquent loans or
other Receivables and (y) real estate owned of the Company and each Subsidiary
of the Company at the end of such month.
SECTION 4.4 TAXES AND OTHER CHARGES.
(a) Each of the Company and its Subsidiaries will duly pay and
discharge, or cause to be paid and discharged, before the same becomes in
arrears, all taxes, assessments and other governmental charges imposed upon such
Person and its properties, sales or activities, or upon the income or profits
therefrom, as well as all claims for labor, materials, supplies or services
which if unpaid might by law become a Lien upon any of its assets; provided,
however, that any such tax, assessment, charge or claim need not be paid if the
validity or amount thereof shall at the time be contested in good faith by
appropriate proceedings and if such Person shall, in accordance with GAAP, have
set aside on its books adequate reserves with respect thereto; and provided,
further, that each of the Company and its Subsidiaries shall pay or bond, or
cause to be
25
<PAGE> 26
paid or bonded, all such taxes, assessments, charges or other governmental
claims immediately upon the commencement of proceedings to foreclose any Lien
which may have attached as security therefor (except to the extent such
proceedings have been dismissed or stayed).
(b) Each of the Company and its Subsidiaries will promptly pay
when due, or in conformity with ordinary business practices, all accounts
payable incident to the operations of such Person not referred to in paragraph
(a) of this Section 4.4; provided, however, that any such Indebtedness need not
be paid if the validity or amount thereof shall at the time be contested in good
faith and if such Person shall, in accordance with GAAP, have set aside on its
books adequate reserves with respect thereto.
SECTION 4.5 CONDUCT OF BUSINESS.
(a) Each of the Company and its Subsidiaries (i) will carry on and
conduct its business in substantially the same manner and in substantially the
same fields of enterprise as is conducted generally from time to time by
companies in the mortgage lending business or the consumer finance business in
the United States and will not engage in any other business activities and (ii)
do all things necessary to remain duly incorporated, validly existing and in
good standing as a domestic corporation in its jurisdiction of incorporation and
maintain all requisite authority to conduct its business in each jurisdiction in
which its business is conducted to the extent failure to do so would have, or
could reasonably be expected to have, a Material Adverse Effect.
(b) Each of the Company and its Subsidiaries will comply in all
material respects with all valid and applicable statutes, laws, ordinances,
zoning and building codes and other rules and regulations of the United States
of America, of the states and territories thereof and their counties,
municipalities and other subdivisions and of any foreign country or other
jurisdictions applicable to such Person, except where failure so to comply would
not, individually or in the aggregate, result in any Material Adverse Effect.
SECTION 4.6. CORPORATE EXISTENCE.
(a) Subject to Article VI, the Company will do or cause to be done
all things necessary to preserve and keep in full force and effect its corporate
existence, rights (charter and statutory) and franchises and those of any
Subsidiary of the Company, provided, however, that the Company and any
Subsidiary of the Company shall not be required to preserve any such right or
franchise if the Board of Directors of the Company shall determine in good faith
that the preservation is no longer desirable in the conduct of the Company's
business and that the loss thereof is not, and will not be, reasonably likely to
result in any Material Adverse Effect.
(b) Notwithstanding anything in paragraph (a) to the contrary, the
Company will exercise its reasonable best efforts to operate MCI in a manner
that will maintain the corporate
26
<PAGE> 27
existence and enterprise value of MCI, including but not limited to maintenance
of its production, administration and secondary marketing functions in a fashion
that would make its business a commercially marketable asset, which shall
include:
(i) the maintenance of separate books, records and accounts,
including detailed intercompany payables and receivables accounts;
(ii) separate revenue generation (including loan origination and
loan sales), collection, and credit functions;
(iii) separate expense allocation;
(iv) separate employment of employees, consultants and agents; (v)
separate compensation of employees, consultants and agents; (vi)
maintenance of separate licenses; (vii) maintenance of separate
borrowing facilities, whether in MCI's own name, or as a named borrower
under the Company facilities, including warehouse facilities;
(viii) separation of all material operational functions, including
telephone systems, computer systems, etc.
(ix) separate corporate existence; and
(x) separate business leases and contracts, including as to office
space, phone systems, copy systems, leased furniture and equipment.
(c) The Company will take reasonable steps to ensure that all data
and information reasonably necessary for the operation of MCI as an independent
corporation, including accounting, loan production and loan sales information,
shall be transferable to MCI promptly and without material expense upon
reasonable request by MCI. MCI shall maintain, at MCI, computer systems capable
of maintaining and processing the above and such data shall be forwarded to such
system periodically.
(d) The Company will ensure that all business relations with MCI,
including any services provided to MCI by the Company, are properly documented.
All contracts between MCI and the Company shall include a provision permitting
MCI to terminate such contracts without penalty, at its discretion. The Company
will take no action which it reasonably believes will result in a material
reduction in the enterprise value or marketability of MCI, provided that this
restriction shall not prohibit the Company from transferring money from MCI to
the Company in such manner as the Company determines is necessary, in its
discretion.
(e) The covenants in paragraphs (b) and (c) above shall cease to
be effective at such time on or after August 31, 2001 as the Company shall have
established compliance with all of the financial tests specified in Section 4.12
(a), (b) and (c).
27
<PAGE> 28
SECTION 4.7. MAINTENANCE OF PROPERTIES.
The Company and its Subsidiaries will cause all material properties
(real and personal) owned, leased or licensed in the conduct of their business
to be maintained and kept in good condition, repair and working order and
supplied with all necessary equipment and will cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof and
thereto, all as in the reasonable judgment of the Board of Directors may be
necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times while any Notes are
Outstanding, provided, however, that nothing in this Section 4.7 shall prevent
the Company and its Subsidiaries from discontinuing the maintenance of any such
properties if, in the reasonable judgment of the Board of Directors, such
discontinuance is desirable in the conduct of the Company's business and is not,
and will not be, reasonably likely to result in any Material Adverse Effect.
SECTION 4.8 INSURANCE.
Each of the Company and its Subsidiaries will maintain with financially
sound and reputable insurers insurance against liability for hazards, risks and
liability to persons and property, to the extent, in amounts and with
deductibles at least as favorable as those generally maintained by businesses of
similar size engaged in similar activities.
SECTION 4.9. RESTRICTED PAYMENTS.
The Company will not, and will not permit any Subsidiary to, directly
or indirectly, make any Restricted Payment.
SECTION 4.10. RESTRICTIONS ON ISSUANCE AND SALE OF CAPITAL STOCK OF
SUBSIDIARIES.
The Company will not sell, transfer or otherwise dispose of shares of
Capital Stock of any Subsidiary of the Company or permit any Subsidiary of the
Company to issue, sell or otherwise dispose of shares of its Capital Stock
unless in either case such Subsidiary remains a Wholly-Owned Subsidiary of the
Company.
SECTION 4.11 RESTRICTIONS ON SUBSIDIARY MERGERS AND SALES OF ASSETS.
(a) The Company will not permit any Subsidiary to merge or
consolidate with any Person, except that a Subsidiary, other than MCI, may merge
into the Company or another Wholly-Owned Subsidiary of the Company.
(b) The Company will not permit any Subsidiary to sell, lease or
otherwise dispose of its assets to any other Person, except (i) sales of
Receivables in the ordinary course of business, (ii) sales of mortgage-related
securities which are issued or sponsored by the Subsidiary or an Affiliate of
the Subsidiary in the ordinary course of business or (iii) sales, leases
28
<PAGE> 29
or other dispositions of its assets that, together with all other assets of the
Subsidiary previously sold, leased or disposed of (other than Receivables and
securities referred to in clauses (i) and (ii) of this sentence) in accordance
with this Section 4.11(b) during the 12-month period ending with the month in
which any such sale, lease or other disposition occurs, do not constitute a
Substantial Portion of the consolidated assets of the Company under GAAP.
SECTION 4.12. FINANCIAL COVENANTS.
(a) The Company will not at any time permit its Consolidated Net
Worth to be less than the sum of (1) $30.0 million plus (2) 60% of the sum of
the Company's positive Consolidated Net Income (determined in accordance with
GAAP) for each fiscal semi-annual period ending after the Issue Date, commencing
with the semi-annual period ending August 31, 2000, plus (3) 100% of the net
proceeds obtained by the Company through the issuance or sale of Capital Stock
(after the deduction of all costs of such issuance). For purposes of this
Section 4.12(a), Consolidated Net Worth shall not include (i) up to an aggregate
of $5.0 million of increases in the carrying value of the mortgage-related
securities owned by the Company as of the Issue Date (the "Issue Date
Securities") recorded by the Company under GAAP and (ii) up to an aggregate of
$5.0 million of decreases in the carrying value of the Issue Date Securities
recorded by the Company under GAAP, in each case measured from the carrying
value of the Issue Date Securities as of the month-end preceding the Closing
Date, as set forth on an Officers' Certificate delivered to Value Partners and
the Collateral Agent, and as subsequently reflected on any statement of
financial condition of the Company included in a report filed by the Company
pursuant to Section 4.3(a)(1) (the "Mark-to-Market Adjustments"). To illustrate,
if the Company decreased the carrying value of the Issue Date Securities under
GAAP as of the month-end preceding the Issue Date by $4.0 million and $3.0
million at August 31, 2000 and November 30, 2000, respectively, the Consolidated
Net Worth of the Company at November 30, 2000 for purposes of Section 4.12(a)(1)
shall be increased by $5.0 million. Similarly, if the Company increased the
carrying value of the Issue Date Securities by such respective amounts at such
respective dates, the Consolidated Net Worth of the Company at November 30, 2000
for purposes of Section 4.12(a)(1) shall be decreased by $5.0 million.
(b) Commencing on August 31, 2001 and thereafter, the Company will
not at any time permit the ratio of (i) the aggregate amount of consolidated
liabilities of the Company and its Subsidiaries (determined in accordance with
GAAP) to (ii) the Consolidated Net Worth of the Company and its Subsidiaries to
exceed 7.0 to 1.0.
(c) Commencing with the fiscal quarter ending August 31, 2001 and
as of the end of each fiscal quarter of the Company thereafter, the Company will
not permit the Fixed Charge Coverage Ratio of the Company to be less than 1.5 to
1.0 on a trailing four-quarter basis.
29
<PAGE> 30
SECTION 4.13. LIMITATION ON INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF
DISQUALIFIED CAPITAL STOCK.
(a) The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, Incur any Indebtedness or issue any
Disqualified Capital Stock, provided, that the Company and any Subsidiary may
Incur Indebtedness, other than in the case of the Company Indebtedness as a
result of its Guarantee of the Indebtedness of any Person, including without
limitation any Subsidiary of the Company, if at the time of Incurrence no
Default or Event of Default shall have occurred and be continuing or would occur
as a consequence thereof and each of the following requirements is satisfied:
(i) The Fixed Charge Coverage Ratio for the Company's most
recently ended four fiscal quarters for which internal financial
statements are available immediately preceding the date on which such
additional Indebtedness is Incurred would have been at least 1.6 to
1.0, determined on a pro forma basis (including, if applicable, a pro
forma application of the net proceeds therefrom to repay other
Indebtedness), as if the additional Indebtedness had been Incurred at
the beginning of such four-quarter period; and
(ii) the ratio of (i) the aggregate amount of consolidated
liabilities of the Company and its Subsidiaries to (ii) the
Consolidated Net Worth of the Company does not exceed 6.0 to 1.0,
determined on a pro forma basis (including a pro forma application of
the net proceeds therefrom).
(b) Notwithstanding paragraph (a) of this Section 4.13, the
Company and its Subsidiaries may incur Permitted Indebtedness while no Default
or Event of Default exists.
SECTION 4.14. LIENS.
(a) The Company will not, and will not permit any Subsidiary to,
create, assume or otherwise cause or suffer to exist or to become effective any
Lien upon any Note Security (or become contractually committed to do so), except
the following:
(i) Liens created under the agreements governing the
securitization of the Receivables underlying the mortgage-related
securities included in the Note Security;
(ii) Liens to secure taxes, assessments and other governmental
charges, to the extent that payment thereof shall not at the time be
required by Section 4.4;
(iii) restrictions under federal and state securities laws on
the transfer of securities; and
(iv) Liens which solely secure the Note Obligations and the
Exchange Note Obligations.
30
<PAGE> 31
(b) The Company will not, and will not permit any Subsidiary to,
create, assume or otherwise cause or suffer to exist or become effective any
Lien upon any Eligible Collateral, other than Permitted Liens, to secure any
Indebtedness of the Company (other than the Note Obligations and the Exchange
Note Obligations), any Subsidiary of the Company or any other Person, without in
each case making effective provision whereby all Notes and Exchange Notes shall
be directly secured equally and ratably with (or prior to in the case of Liens
with respect to Junior Indebtedness) such Indebtedness.
SECTION 4.15. SUBSIDIARY GUARANTEES.
The Company will not permit any Subsidiary of the Company, directly or
indirectly, to Guarantee or assume, or subject any of its assets to a Lien to
secure, any Pari Passu Indebtedness or Junior Indebtedness unless (i) such
Subsidiary simultaneously provides for a Guarantee of, or pledge of assets to
secure, the Note Obligations and the Exchange Note Obligations by such
Subsidiary on terms at least as favorable to the Holders as such Guarantee or
security interest in such assets is to the holders of such Pari Passu
Indebtedness or Junior Indebtedness, except that in the event of a Guarantee or
security interest in such assets with respect to (x) Pari Passu Indebtedness,
the Guarantee or security interest in such assets shall be made pari passu to
the Guarantee or security interest in such assets with respect to such Pari
Passu Indebtedness or (y) Junior Indebtedness, any such Guarantee or security
interest in such assets with respect to such Junior Indebtedness shall be
subordinated to such Subsidiary's guarantee or security interest in such assets
with respect to the Note Obligations and the Exchange Note Obligations to the
same extent as such Junior Indebtedness is subordinated to the Note Obligations
and the Exchange Note Obligations and (ii) such Subsidiary waives and agrees in
writing that it will not in any manner whatsoever claim, or take the benefit or
advantage of, any rights of reimbursement, indemnity or subrogation or any other
rights against the Company or any other Subsidiary of the Company as a result of
any payment by such Subsidiary under its guarantees.
SECTION 4.16. PAYMENT OF DIVIDENDS FROM SUBSIDIARIES.
To the extent necessary to enable it to make payments on the Notes in
accordance with their terms, the Company shall cause dividends to be paid to it
by its Subsidiaries (whether in existence as of the date of issuance of the
Notes or thereafter formed or acquired) in amounts which are sufficient to
enable the Company to satisfy its payment obligations under the Notes (and which
shall be so used by the Company), provided that the Company shall not be
required to take any action which would result in a Subsidiary paying dividends
to the extent not permitted by applicable law and regulation and/or restrictions
existing under agreements in effect on the Issue Date if the Company receives an
opinion of counsel (in form and substance satisfactory to the registered holders
of a majority in aggregate principal amount of the Notes and the Exchange Notes,
considered as a single class, at the time Outstanding) as to the existence of
the relevant restriction no later than the applicable Interest Payment Date or
the Stated Maturity of the Notes, whether by acceleration or otherwise.
31
<PAGE> 32
SECTION 4.17. LIMITATIONS ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES.
The Company will not, and will not permit any of its Subsidiaries
(whether in existence as of the date of issuance of the Notes or thereafter
formed or acquired) to, create, assume or otherwise cause or suffer to exist or
to become effective any consensual encumbrance or consensual restriction on the
ability of any such Subsidiary to:
(a) pay any dividends or make any other distribution to the
Company or any other Subsidiary on its Capital Stock or with
respect to any other interest or participation in, or measured
by, its profits;
(b) make payments in respect to any Indebtedness owed to the
Company or any other Subsidiary; or
(c) make loans or advances to the Company or any other Subsidiary
or to guarantee Indebtedness of the Company or any other
Subsidiary;
other than, in the case of (a), (b) and (c),
(1) restrictions existing under agreements in effect on the
Issue Date;
(2) consensual encumbrances or consensual restrictions binding
upon any Person at the time such Person becomes a Subsidiary of the Company so
long as such encumbrances or restrictions (i) are not created, incurred or
assumed in contemplation of such Person becoming a Subsidiary and (ii) do not
encumber or restrict the Company or any other Subsidiary of the Company as set
forth in (a), (b) or (c) above.
(3) restrictions on the transfer of assets which are subject
to Liens; and
(4) restrictions existing under any agreement which refinances
or replaces any of the agreements containing the restrictions in clauses (1) and
(2), provided that the terms and conditions of any such restrictions are not
materially less favorable to the Holders than those under the agreement
evidencing or relating to the Indebtedness refinanced.
SECTION 4.18. INVESTMENTS AND ACQUISITIONS.
The Company will not, nor will it permit any Subsidiary to, make or
suffer to exist any Investments (including, without limitation, loans and
advances to, and other Investments in, Subsidiaries), or commitments therefor,
or create any Subsidiary or become a partner in any partnership or joint
venture, or make any Acquisition of any Person, in each case whether directly or
indirectly through a transaction which may otherwise be permissible pursuant to
Section 6.1 hereof or otherwise, except:
(i) Short-term obligations of, or fully guaranteed by, the United
States of America;
32
<PAGE> 33
(ii) Commercial paper rated A-1 or better by Standard and Poor's
Ratings Group or P-1 or better by Moody's Investors Service,
Inc.;
(iii) Demand deposit accounts maintained in the ordinary course of
business;
(iv) Certificates of deposit issued by and time deposits with
federally-insured financial institutions having capital and
surplus in excess of $100,000,000;
(v) Investments in existence on the Issue Date;
(vi) Investments in the ordinary course of the Company's business
to originate or purchase (a) Receivables (and in connection
with commitments to purchase the same) and (b) real estate
acquired by foreclosure or by deed-in-lieu thereof, whether
directly or indirectly through a Subsidiary formed for the
sole purpose of holding the same;
(vii) Hedging Obligations; and
(viii) Investments in Securitization Subsidiaries.
SECTION 4.19. LIMITATION ON INVESTMENT COMPANY STATUS.
The Company will not take, and will not permit any Subsidiary to take,
any action, or otherwise permit to exist any circumstance, that would require
the Company or such Subsidiary to register as an "investment company" under the
Investment Company Act of 1940, as amended.
SECTION 4.20. PAYMENTS ON NOTES; REPURCHASE OF NOTES.
(a) Except as expressly provided in the Intercreditor Agreement, the
Company will not make any payment of interest, premium, if any, or principal on
the Notes or the Exchange Notes without making a pro rata payment to all holders
of Notes and Exchange Notes.
(b) The Company will not, and will not permit any Subsidiary or other
Affiliate of the Company to, redeem or purchase (whether in public or private
transactions) any Notes or the Exchange Notes other than pursuant to a
redemption or repurchase offer made to each holder of a Note or an Exchange Note
pro rata in accordance with the aggregate principal amount of Notes and Exchange
Notes held by such holders.
SECTION 4.21. TRANSACTIONS WITH AFFILIATES.
Neither the Company nor any Subsidiary will enter into any transaction,
including, without limitation, any purchase, sale, lease or exchange of any
asset or the rendering of any service, with any Affiliate (other than the
Company or a Subsidiary of the Company) unless such
33
<PAGE> 34
transaction (a) is otherwise not in violation of the Agreement and the Related
Agreements (including without limitation the Notes), and (b) is approved by a
majority of the disinterested members of the Board of Directors, is in the
ordinary course of its business and is upon fair and reasonable terms no less
favorable to it than it would obtain in a comparable arm's-length transaction
with a Person not an Affiliate, provided that the requirements of this clause
(b) shall not apply to (i) any transaction pursuant to agreements in effect on
the Issue Date and (ii) any transaction or series of related transactions in
which the amount involved does not exceed $250,000.
SECTION 4.22. PAYMENTS FOR CONSENT.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any holder of a Note or an Exchange Note
as an inducement to any consent, waiver or amendment of any of the terms or
provisions of the Notes (other than article VII thereof) or the Exchange Notes
unless such consideration is paid to all holders of Notes and Exchange Notes
that provide such consent or so waive or agree to amend.
SECTION 4.23 BOARD OF DIRECTORS.
(a) In the event that there is a Default or an Event of Default, the
Holders of a majority in aggregate principal amount of the Notes at the time
Outstanding shall have the right to nominate a director to the Board of
Directors of the Company, which action may be taken by the written consent of
such Holders. In the event that the Holders elect to nominate a director under
this Section, the Company shall call and hold, within 10 Business Days, a
meeting of its Board of Directors for the purpose of considering electing the
nominee of the Holders for a term expiring at the next annual meeting of
stockholders of the Company and until his or her successor is elected and
qualified. Thereafter, in the event of the election of such nominee by the Board
of Directors of the Company, and subject to the fiduciary duties of the Board of
Directors of the Company, the Company shall include such person on the list of
nominees for director presented by the Board of Directors of the Company and for
which said Board shall solicit proxies at the next annual meeting of
stockholders of the Company.
(b) So long as it is the holder of at least $1.0 million principal
amount of Notes, Value Partners, Ltd. may designate a representative who shall
have the right to attend all regular and special meetings of the Board of
Directors of the Company. The Company shall notify such representative at least
48 hours in advance of the time and place of any meeting of the Board of
Directors of the Company.
SECTION 4.24 SOLVENCY TEST.
Commencing on May 31, 2000, the Company will not permit the sum of the
amount of (i) the Liquid Assets owned by the Company, as of the end of each
fiscal month of the Company,
34
<PAGE> 35
which are not subject to any Lien and (ii) the Consolidated Cash Flow of the
Company during the preceding three fiscal months to amount to zero or less.
SECTION 4.25 WAIVER OF CERTAIN COVENANTS.
Except as provided in the next sentence, the Company may omit in any
particular instance to comply with any covenant or condition set forth in
Sections 4.3 to 4.24, inclusive, if before the time for such compliance the
record holders of at least a majority in principal amount of the Notes and the
Exchange Notes, considered as a single class, at the time Outstanding, shall
either waive such compliance in such instance or generally waive compliance with
such covenant or condition. Notwithstanding the foregoing, the Company may omit
in any particular instance to comply with the covenants or conditions set forth
in any of the following sections if before the time for such compliance the
registered holders of at least 70% in aggregate principal amount of the Notes
and the Exchange Notes, considered as a single class, at the time Outstanding,
shall either waive such compliance in such instance or generally waive
compliance with such covenant or condition: Section 4.5(a); Section 4.9; Section
4.11; Section 4.12(a), but only to the extent that the waiver relates to a
Consolidated Net Worth of less than $25.0 million ($20.0 million exclusive of
Mark-to-Market Adjustments, if any); Section 4.12(b), but only to the extent
that the waiver relates to an increase in the ratio set forth therein above 8.0
to 1.0; Section 4.12(c), but only to the extent that the waiver relates to a
decrease in the ratio set forth therein below 1.2 to 1.0; Section 4.13(a), but
only to the extent that the waiver relates to a decrease in the ratio set forth
in Section 4.13(a)(i) below 1.3 to 1.0 and/or an increase in the ratio set forth
in Section 4.13(a)(ii) above 7.0 to 1.0; Section 4.14; Section 4.15; Section
4.18, but only to the extent that the waiver relates to an acquisition of the
capital stock or assets of a corporation, firm or other entity which would
constitute a Significant Subsidiary of the Company; Section 4.20; and Section
4.22 (collectively, the "Supermajority Covenants"). No waiver of a covenant
pursuant to this Section 4.25 shall extend to or affect such covenant or
condition except to the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Company in respect of any such covenant
or condition shall remain in full force and effect.
ARTICLE V
REMEDIES OF NOTEHOLDERS
ON AN EVENT OF DEFAULT
SECTION 5.1. EVENTS OF DEFAULT.
In case one or more of the following Events of Default (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) shall have occurred and be continuing:
(a) default in the payment of any installment of interest upon
any of the Notes as and when the same shall become due and payable, and
continuance of such default for a period of 30 days; or
35
<PAGE> 36
(b) default in the payment of the principal of or premium, if
any, on any of the Notes as and when the same shall become due and
payable at maturity of the Notes, by acceleration or otherwise, or in
connection with any redemption pursuant to Article III; or
(c) failure on the part of the Company duly to observe or
perform any other of the covenants or agreements on the part of the
Company in the Agreement or in any of the Related Agreements or in the
Exchange Agreement (other than a covenant or agreement a default in
whose performance or whose breach is elsewhere in this Section 5.1
specifically dealt with) continued for a period of 60 days after the
date on which written notice of such failure, requiring the Company to
remedy the same, shall have been given to the Company by the registered
holders of at least 25% in aggregate principal amount of the Notes and
the Exchange Notes, considered as a single class, at the time
Outstanding; or
(d) failure of the Company or any Subsidiary of the Company to
make any payment, including any applicable grace period, in respect of
principal or interest on any Indebtedness which default shall have
resulted in Indebtedness in an amount in excess of $1,000,000; or
(e) default by the Company or a Subsidiary of the Company with
respect to any Indebtedness of the Company or such Subsidiary, which
default results in acceleration of any such Indebtedness which is in an
amount in excess of $1,000,000 without such Indebtedness having been
discharged, or such acceleration having been rescinded or annulled,
within the applicable grace period; or
(f) the entry by a court having jurisdiction in the premises
of a final judgment, decree or order against the Company or any
Subsidiary of the Company which shall require the payment by the
Company or any Subsidiary of the Company of an amount (to the extent
not covered by insurance) in excess of $1,000,000 and the continuance
of any such judgment, decree or order unstayed or unsatisfied and in
effect for a period of 60 consecutive days which is not being contested
in good faith by appropriate judicial proceedings; or
(g) the Company or any Subsidiary that is a Significant
Subsidiary of the Company shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment
of a trustee, receiver, liquidator, custodian or other similar official
of it or any substantial part of
its property, or shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due; or
36
<PAGE> 37
(h) an involuntary case or other proceeding shall be commenced
against the Company or any Subsidiary that is a Significant Subsidiary
of the Company seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of
it or any substantial part of its property, and such involuntary case
or other proceeding shall remain undismissed and unstayed for a period
of 60 consecutive days; or
(i) failure on the part of the Company duly to observe or
perform any of the covenants or agreements of the Company in any of the
Collateral Documents continued for a period of 10 days after the date
on which written notice of such failure, requiring the Company to
remedy the same, shall have been given to the Company by the registered
holders of at least 25% in aggregate principal amount of the Notes and
the Exchange Notes, considered as a single class, at the time
Outstanding; or
(j) any of the Collateral Documents after delivery thereof
shall for any reason, except to the extent permitted by the terms
thereof, cease to be in full force and effect and valid, binding and
enforceable against the Company in all material respects in accordance
with their terms, or cease in any material respect to create a valid
and perfected Lien of the priority required thereby on any of the
collateral purported to be covered thereby, or the Company shall so
state in writing, and such default shall continue unremedied for a
period of 10 days; or
(k) default by the Company with respect to any of its
obligations contained in Article VIII hereof; or
(l) default by the Company with respect to any of its
obligations contained in Section 4.24 hereof, unless waived pursuant to
Section 5.5 hereof within 10 calendar days thereafter; or
(m) any annual audited financial statement of the Company is
qualified as to going concern or similar qualifications;
then, and in each and every such case (other than an Event of Default specified
in Section 5.1(g) or (h)), unless the principal of all of the Notes shall have
already become due and payable, the registered holders of not less than 25% in
aggregate principal amount of the Notes and the Exchange Notes, considered as a
single class, then Outstanding, by notice in writing to the Company, may declare
the principal of all the Notes and the interest accrued thereon to be due and
payable immediately, without presentment, demand, protest, notice of protest or
dishonor, notice of intent to accelerate or other notice of default of any kind,
all of which are expressly waived by the Company, and upon any such declaration
the same shall become and shall be immediately due and payable, anything herein
contained to the contrary notwithstanding.
If an Event of Default specified in Section 5.1(g) or (h) occurs, the
principal of all the Notes and the interest accrued thereon shall be immediately
and automatically due and payable
37
<PAGE> 38
without presentment, demand, protest, notice of protest or dishonor, notice of
intent to accelerate or other notice of default of any kind, all of which are
expressly waived by the Company.
SECTION 5.2. PAYMENT OF NOTES ON DEFAULT; SUIT THEREFOR.
The Company covenants that (a) in case default shall be made in the
payment of any installment of interest upon any of the Notes as and when the
same shall become due and payable, and such default shall have continued for a
period of 30 days, or (b) in case default shall be made in the payment of the
principal of or premium, if any, on any of the Notes as and when the same shall
have become due and payable, whether at maturity of the Notes or in connection
with any redemption or repurchase hereunder, by declaration or otherwise, then
the Company will pay to the Holders the whole amount that then shall have become
due and payable on the Notes for principal and premium, if any, or interest, or
both, as the case may be, with interest upon the overdue principal and premium,
if any, and (to the extent that payment of such interest is enforceable under
applicable law) upon the overdue installments of interest at the rate then borne
by the Notes and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection.
In case the Company shall fail forthwith to pay such amounts, a Holder
shall be entitled and empowered to institute any actions or proceedings at law
or in equity for the collection of the sums so due and unpaid to it and to
exercise any of the rights or remedies provided in the Collateral Documents, and
may prosecute any such action or proceeding to judgment or final decree, and may
enforce any such judgment or final decree against the Company and collect in the
manner provided by law out of the property of the Company (including without
limitation the collateral held pursuant to the Collateral Documents) wherever
situated the monies adjudged or decreed to be payable.
In the case there shall be pending proceedings for the bankruptcy or
for the reorganization of the Company under Title 11 of the United States Code,
or any other applicable law, or in case a receiver, assignee or trustee in
bankruptcy or reorganization, liquidator, sequestrator or similar official shall
have been appointed for or taken possession of the Company, the property of the
Company, or in the case of any other judicial proceedings relative to the
Company or to the creditors or property of the Company, a Holder, irrespective
of whether the principal of the Notes shall then be due and payable as herein
expressed or by declaration or otherwise, shall be entitled and empowered, by
intervention in such proceedings or otherwise, to file and prove a claim or
claims for the whole amount of principal, premium, if any, and interest owing
and unpaid in respect of the Notes, and, in case of any judicial proceedings, to
file such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Holders allowed in such judicial
proceedings relative to the Company or its creditors or its property, and to
collect and receive any monies or other property payable or deliverable on any
such claims.
38
<PAGE> 39
SECTION 5.3. APPLICATION OF MONIES COLLECTED.
Subject to the terms of the Intercreditor Agreement and Section 4.20
hereof, any monies collected by or on behalf of a Holder pursuant to this
Article V shall be applied in the following order:
First, to reimbursement of expenses and indemnities provided in the
Agreement, the Exchange Agreement, the Notes, the Exchange Notes and the
Collateral Documents;
Second, in case the principal of the Outstanding Notes shall not have
become due and be unpaid, to the payment of interest on the Notes in default in
the order of the maturity of the installments of such interest, with interest
upon the overdue installments of interest at the rate then borne by the Notes,
such payments to be made ratably to the Holders entitled thereto;
Third, in case the principal of the Outstanding Notes shall have become
due, by declaration or otherwise, and be unpaid, to the payment of the whole
amount then owing and unpaid upon the Notes for principal and premium, if any,
and interest, with interest on the overdue principal and premium, if any, and
upon overdue payments of interest at the rate then borne by the Notes, and in
case such monies shall be insufficient to pay in full the whole amounts so due
and unpaid upon the Notes, then to the payment of such principal and premium, if
any, and interest without preference or priority of principal and premium, if
any, over interest, or of interest over principal and premium, if any, or of any
installment of interest over any other installment of interest, or of any Note
over any other Note, ratably to the aggregate of such principal and premium, if
any, and accrued and unpaid interest; and
Fourth, to the payment of the remainder, if any, to the Company or any
other Person lawfully entitled thereto.
SECTION 5.4. REMEDIES CUMULATIVE AND CONTINUING.
Except as provided in the last paragraph of Section 2.4, all powers and
remedies given by this Article V to a Holder shall, to the extent permitted by
law, be deemed cumulative and not exclusive of any thereof or of any other
powers and remedies available to a Holder by judicial proceedings or otherwise,
to enforce the performance or observance of the covenants and agreements
contained herein, and no delay or omission of any Holder of any of the Notes to
exercise any right or power accruing upon an Event of Default shall impair any
such right or power, or shall be construed to be a waiver of any such default or
any acquiescence therein and every power and remedy given herein, by the
Collateral Documents or by law to the Holders may be exercised from time to
time, and as often as shall be deemed expedient, by the Holders.
39
<PAGE> 40
SECTION 5.5. WAIVER OF DEFAULTS BY HOLDERS.
Except as provided in the next sentence, the registered holders of a
majority in aggregate principal amount of the Notes and the Exchange Notes,
considered as a single class, at the time Outstanding may on behalf of the
Holders of all of the Notes waive any past Default or Event of Default hereunder
and its consequences, except (i) a default in the payment of interest or
premium, if any, on, or the principal of, the Notes, (ii) a failure by the
Company to convert any Notes into Common Stock in accordance with the provisions
hereof, (iii) a default in the payment of the Redemption Price pursuant to
Article III or the Repurchase Price pursuant to Article VIII or (iv) a default
in respect of a covenant or provision hereof which under Article X cannot be
modified or amended without the consent of the Holder of each Note affected
thereby. Notwithstanding the foregoing, the record holders of at least 70% in
aggregate principal amount of the Notes and the Exchange Notes, considered as a
single class, at the time Outstanding shall be required on behalf of the Holders
of all the Notes to waive any past Default or Event of Default under any of the
Supermajority Covenants. Upon any waiver pursuant to this Section 5.5, the
Company and the Holders shall be restored to their former positions and rights
hereunder, but no such waiver shall extend to any subsequent or other Default or
Event of Default or impair any right consequent thereon. Whenever any Default or
Event of Default hereunder shall have been waived as permitted by this Section
5.5, said Default or Event of Default shall for all purposes of the Notes be
deemed to have been cured and to be not continuing, but no such waiver shall
extend to any subsequent or other Default or Event of Default or impair any
right consequent thereon.
ARTICLE VI
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
SECTION 6.1. COMPANY MAY CONSOLIDATE ETC. ONLY ON CERTAIN TERMS.
Subject to the provisions of Article VIII, nothing contained herein
shall prevent any consolidation or merger of the Company with or into any other
Person (whether or not affiliated with the Company), or successive
consolidations or mergers in which the Company or its successor or successors
shall be a party or parties, or shall prevent any sale, conveyance or lease (or
successive sales, conveyances or leases) of the property of the Company,
substantially as an entirety, to any other Person (whether or not affiliated
with the Company), authorized to acquire and operate the same and which, in each
case, shall be organized under the laws of the United States of America, any
state thereof or the District of Columbia, provided, that (i) upon any such
consolidation, merger, sale, conveyance or lease, if the Company is not the
surviving entity, the due and punctual payment of the Note Obligations,
including without limitation the principal of and premium, if any, and interest
on all of the Notes, according to their tenor, and the due and punctual
performance and observance of all of the covenants and conditions to be
performed by the Company under the Agreement, the Notes, the Exchange Notes, the
Collateral Documents and the Exchange Agreement shall be expressly and
unconditionally assumed, by agreement in form and substance reasonably
satisfactory to the registered holders of not less than a majority in
40
<PAGE> 41
aggregate principal amount of the Notes and the Exchange Notes, considered as a
single class, at the time Outstanding, executed and delivered to such holders by
the Person (if other than the Company) formed by such consolidation, or into
which the Company shall have been merged, or by the Person which shall have
acquired or leased such property, (ii) the agreement referred to in clause (i)
shall provide for the applicable conversion rights set forth in Section 7.6 and
the applicable repurchase rights set forth in Section 8.5, (iii) immediately
after giving effect to such transaction, no Default or Event of Default shall
have occurred and be continuing (iv) immediately after giving effect to such
transaction, the Company (or the surviving entity if the Company is not
continuing) would be able to incur an additional $1.00 of Indebtedness pursuant
to Section 4.13, (v) immediately after giving effect to such transaction, the
Company (or the surviving entity if the Company is not continuing) shall have a
Consolidated Tangible Net Worth equal to or greater than the Consolidated
Tangible Net Worth of the Company immediately prior to such transaction and (vi)
the Company or the Person formed by such consolidation, or into which the
Company shall have been merged, or which shall have acquired or leased such
property, as applicable, shall have delivered an Officer's Certificate to the
Holders to the effect that such consolidation, merger, sale, conveyance or lease
complies with the terms hereof and that all conditions precedent provided for
herein relating to such transaction have been complied with.
SECTION 6.2. SUCCESSOR CORPORATION TO BE SUBSTITUTED.
In case of any such consolidation, merger, sale, conveyance or lease
referenced in Section 6.1, and upon the assumption by any Person of the due and
punctual payment of the principal of and premium, if any, and interest on all of
the Notes and the due and punctual performance of all of the covenants and
conditions to be performed by the Company under the Agreement and the Related
Agreements, in accordance with Section 6.1 such Person shall succeed to and be
substituted for the Company, with the same effect as if it had been named herein
as such. In the event of any such consolidation, merger, sale or conveyance (but
not in the event of any such lease), the Person named as the "Company" in the
first paragraph hereof or any successor which shall thereafter have become such
in the manner prescribed in this Article VI shall be released from its
liabilities as obligor and maker of the Notes and from its obligations
hereunder.
41
<PAGE> 42
ARTICLE VII
CONVERSION OF NOTES
SECTION 7.1. RIGHT TO CONVERT.
Subject to and upon compliance with the provisions of this Article, the
Holder of any Note shall have the right, at his option, at any time before the
close of business on the last Business Day prior to the Maturity Date (except
that, with respect to any Note or portion of a Note which shall be called for
redemption, such right shall terminate, except as provided in Section 7.2, at
the close of business on the last Business Day preceding the date fixed for
redemption of such Note or portion of a Note, unless the Company shall default
in payment due upon redemption thereof), to convert the principal amount of any
such Note, or any portion of such principal amount which is $1,000 or an
integral multiple thereof, into that number of fully paid and non-assessable
shares of Common Stock (as such shares shall then be constituted) obtained by
dividing the principal amount of the Note or portion thereof surrendered for
conversion by the Conversion Price in effect at such time, by surrender of the
Note so to be converted in whole or in part in the manner provided in Section
7.2. A Holder is not entitled to any rights of a holder of Common Stock until
such Holder has converted his Notes to Common Stock, and only to the extent such
Notes are deemed to have been converted to Common Stock under this Article VII.
SECTION 7.2. EXERCISE OF CONVERSION PRIVILEGE; ISSUANCE OF COMMON STOCK ON
CONVERSION; NO ADJUSTMENT FOR INTEREST OR DIVIDENDS.
In order to exercise the conversion privilege with respect to any Note,
the Holder of any such Note, to be converted in whole or in part, shall
surrender such Note, duly endorsed, to the Company, and shall give written
notice of conversion in the form provided herein (or such other notice which is
acceptable to the Company) to the Company that the Holder elects to convert such
Note or the portion thereof specified in said notice. Such notice shall also
state the name or names (with address or addresses) in which the certificate or
certificates for shares of Common Stock which shall be issuable on such
conversion shall be issued, and shall be accompanied by transfer taxes, if
required pursuant to Section 7.7. Each such Note surrendered for conversion
shall, unless the shares issuable on conversion are to be issued in the same
name as the registration of such Note, be duly endorsed by, or be accompanied by
instruments of transfer in form satisfactory to the Company duly executed by,
the Holder or his duly authorized attorney.
As promptly as practicable after satisfaction of the requirements for
conversion set forth above, subject to compliance with any restrictions on
transfer if shares issuable on conversion are to be issued in a name other than
that of the Holder (as if such transfer were a transfer of the Note or Notes (or
portion thereof) so converted), the Company shall issue and shall deliver to
such Holder a certificate or certificates for the number of full shares of
Common Stock issuable upon the conversion of such Note or portion thereof in
accordance with the provisions of this Article VII and a check or cash in
respect of any fractional interest in respect of a share of Common Stock arising
upon such conversion, as provided in Section 7.3. In case any Note of a
42
<PAGE> 43
denomination greater than $1,000 shall be surrendered for partial conversion,
the Company shall execute and deliver to the Holder of the Note so surrendered,
without charge to him, a new Note or Notes in authorized denominations in an
aggregate principal amount equal to the unconverted portion of the surrendered
Note.
Each conversion shall be deemed to have been effected as to any such
Note (or portion thereof) on the date on which the requirements set forth above
in this Section 7.2 have been satisfied as to such Note (or portion thereof),
and the Person in whose name any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become on said date the Holder of record of the shares represented thereby,
provided, however, that any such surrender on any date when the stock transfer
books of the Company shall be closed shall constitute the Person in whose name
the certificates are to be issued as the registered Holder thereof for all
purposes on the next succeeding day on which such stock transfer books are open,
but such conversion shall be at the Conversion Price in effect on the date upon
which such Note shall be surrendered.
SECTION 7.3. CASH PAYMENTS IN LIEU OF FRACTIONAL SHARES.
No fractional shares of Common Stock or scrip representing fractional
shares shall be issued upon conversion of Notes. If more than one Note shall be
surrendered for conversion at one time by the same Holder, the number of full
shares which shall be issuable upon conversion shall be computed on the basis of
the aggregate principal amount of the Notes (or specified portions thereof to
the extent permitted hereby) so surrendered. If any fractional share of stock
would be issuable upon the conversion of any Note or Notes, the Company shall
make an adjustment and payment therefor in cash at the current market value
thereof to the Holder of the Notes. The current market value of a share of
Common Stock shall be the Closing Price on the last Trading Day prior to the day
on which the Notes (or specified portions thereof) are deemed to have been
converted.
SECTION 7.4. CONVERSION PRICE.
Subject to adjustment as provided in this Article VII, the conversion
price shall be $1.78 (herein called the "Conversion Price").
SECTION 7.5. ADJUSTMENT OF CONVERSION PRICE.
The Conversion Price shall be adjusted from time to time by the Company
as follows:
(a) If the Company shall hereafter pay a dividend or make a
distribution to all holders of the outstanding Common Stock in shares of Common
Stock, the Conversion Price in effect at the opening of business on the date
following the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution shall be reduced by multiplying such
Conversion Price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination and of which the denominator shall be the sum of such
number of shares and the total number of shares
43
<PAGE> 44
constituting such dividend or other distribution, such reduction to become
effective immediately after the opening of business on the day following the
date fixed for such determination. The Company will not pay any dividend or make
any distribution on shares of Common Stock held in the treasury of the Company.
If any dividend or distribution of the type described in this Section 7.5(a) is
declared but not so paid or made, the Conversion Price shall again be adjusted
to the Conversion Price which would then be in effect if such dividend or
distribution had not been declared.
(b) If the Company shall issue rights or warrants to all holders
of its outstanding shares of Common Stock entitling them to subscribe for or
purchase shares of Common Stock at a price per share less than the Current
Market Price (as defined below) on the date fixed for determination of
stockholders entitled to receive such rights or warrants, the Conversion Price
shall be adjusted so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the date fixed
for determination of stockholders entitled to receive such rights or warrants by
a fraction of which the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for determination of
stockholders entitled to receive such rights and warrants plus the number of
shares which the aggregate offering price of the total number of shares so
offered would purchase at such Current Market Price, and of which the
denominator shall be the number of shares of Common Stock outstanding on the
date fixed for determination of stockholders entitled to receive such rights and
warrants plus the total number of additional shares of Common Stock offered for
subscription or purchase. Such adjustment shall be successively made whenever
any such rights and warrants are issued, and shall become effective immediately
after the opening of business on the day following the date fixed for
determination of stockholders entitled to receive such rights or warrants. To
the extent that shares of Common Stock are not delivered after the expiration of
such rights or warrants, the Conversion Price shall be readjusted to the
Conversion Price which would then be in effect had the adjustments made upon the
issuance of such rights or warrants been made on the basis of delivery of only
the number of shares of Common Stock actually delivered. In the event that such
rights or warrants are not so issued, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect if such date
fixed for the determination of stockholders entitled to receive such rights or
warrants had not been fixed. In determining whether any rights or warrants
entitle the Holders to subscribe for or purchase shares of Common Stock at less
than such Current Market Price, and in determining the aggregate offering price
of such shares of Common Stock, there shall be taken into account any
consideration received by the Company for such rights or warrants, the value of
such consideration, if other than cash, to be determined by the Board of
Directors.
(c) If the outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Conversion Price in effect
at the opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately reduced, and conversely,
in case outstanding shares of Common Stock shall be combined into a smaller
number of shares of Common Stock, the Conversion Price in effect at the opening
of business on the day following the day upon which such combination becomes
effective shall be proportionately increased, such reduction or increase, as the
case may be, to
44
<PAGE> 45
become effective immediately after the opening of business on the day following
the day upon which such subdivision or combination becomes effective.
(d) If the Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock shares of any class of capital stock of the
Company (other than any dividends or distributions to which Section 7.5(a)
applies) or evidences of indebtedness or assets (including securities, but
excluding any rights or warrants referred to in Section 7.5(b), and excluding
any dividend or distribution paid exclusively in cash (any of the foregoing
hereinafter in this Section 7.5(d) called the "Securities")), then, in each such
case (unless the Company elects to reserve such Securities for distribution to
the Holders upon the conversion of the Notes so that any such Holder converting
Notes will receive upon such conversion, in addition to the shares of Common
Stock to which such Holder is entitled, the amount and kind of such Securities
which such Holder would have received if such Holder had converted its Notes
into Common Stock immediately prior to the Record Date (as defined in Section
7.5(i) for such distribution of the Securities)), the Conversion Price shall be
reduced so that the same shall be equal to the price determined by multiplying
the Conversion Price in effect on the Record Date (as defined below) with
respect to such distribution by a fraction of which the numerator shall be the
Current Market Price per share of the Common Stock on such Record Date less the
fair market value (as determined by the Board of Directors, whose determination
shall be conclusive, and described in a resolution of the Board of Directors) on
the Record Date of the portion of the Securities so distributed applicable to
one share of Common Stock and the denominator of which shall be the Current
Market Price per share of the Common Stock, such reduction to become effective
immediately prior to the opening of business on the day following such Record
Date, provided, however, that in the event the then fair market value (as so
determined) of the portion of the Securities so distributed applicable to one
share of Common Stock is equal to or greater than the Current Market Price of
the Common Stock on the Record Date, in lieu of the foregoing adjustment,
adequate provision shall be made so that each Holder shall have the right to
receive upon conversion the amount of Securities such Holder would have received
had such Holder converted each Note on the Record Date. In the event that such
dividend or distribution is not so paid or made, the Conversion Price shall
again be adjusted to be the Conversion Price which would then be in effect if
such dividend or distribution had not been declared. If the Board of Directors
determines the fair market value of any distribution under and for purposes of
this Section 7.5(d) by reference to the actual or when issued trading market for
any securities, it shall in doing so consider the prices in such market over the
same period used in computing the Current Market Price of the Common Stock to
the extent possible.
Rights or warrants distributed by the Company to all holders of Common
Stock entitling the holders thereof to subscribe for or purchase shares of the
Company's capital stock (either initially or under certain circumstances), which
rights or warrants, until the occurrence of a specified event or events
("Trigger Event"): (i) are deemed to be transferred with such shares of Common
Stock, (ii) are not exercisable and (iii) are also issued in respect of future
issuances of Common Stock, shall be deemed not to have been distributed for
purposes of this Section 7.5 (and no adjustment to the Conversion Price under
this Section 7.5 will be required) until the occurrence of the earliest Trigger
Event, whereupon such rights and warrants shall be deemed to have been
distributed and an appropriate adjustment (if any is required) to the Conversion
Price
45
<PAGE> 46
shall be made under this Section 7.5(d). If any such rights or warrants are
subject to events upon the occurrence of which such rights or warrants become
exercisable to purchase different securities, evidences of indebtedness or other
assets, then the date of the occurrence of any and each such event shall be
deemed to be the date of distribution and record date with respect to new rights
or warrants with such rights (and a termination or expiration of the existing
rights or warrants without exercise by any of the Holders thereof). In addition,
in the event of any distribution (or deemed distribution) of rights or warrants,
or any Trigger Event or other event (of the type described in the preceding
sentence) with respect thereto that was counted for purposes of calculating a
distribution amount for which an adjustment to the Conversion Price under this
Section 7.5 was made, (1) in the case of any such rights or warrants which shall
all have been redeemed or repurchased without exercise by any Holders thereof,
the Conversion Price shall be readjusted upon such final redemption or
repurchase to give effect to such distribution or Trigger Event, as the case may
be, as though it were a cash distribution, equal to the per share redemption or
repurchase price received by a holder or holders of Common Stock with respect to
such rights or warrants (assuming such holder had retained such rights or
warrants), made to all holders of Common Stock as of the date of such redemption
or repurchase, and (2) in the case of such rights or warrants which shall have
expired or been terminated without exercise by any holders thereof, the
Conversion Price shall be readjusted as if such rights and warrants had not been
issued.
For purposes of this Section 7.5(d) and Sections 7.5(a) and (b), any
dividend or distribution to which this Section 7.5(d) is applicable that also
includes shares of Common Stock, or rights or warrants to subscribe for or
purchase shares of Common Stock (or both), shall be deemed instead to be (1) a
dividend or distribution of the evidences of indebtedness, assets or shares of
capital stock other than such shares of Common Stock or rights or warrants (and
any further Conversion Price reduction required by this Section 7.5(d) with
respect to such dividend or distribution shall then be made) immediately
followed by (2) a dividend or distribution of such shares of Common Stock or
such rights or warrants (and any further Conversion Price reduction required by
Sections 7.5(a) and (b) with respect to such dividend or distribution shall then
be made), except (A) the Record Date of such dividend or distribution shall be
substituted as "the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution" and "the date fixed for such
determination" within the meaning of Sections 7.5(a) and (b), and (B) any shares
of Common Stock included in such dividend or distribution shall not be deemed
"outstanding at the close of business on the date fixed for such determination"
within the meaning of Section 7.5(a).
(e) If the Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock cash (excluding any cash that is distributed
upon a merger or consolidation to which Section 7.6 applies or as part of a
distribution referred to in Section 7.5(d)) in an aggregate amount that,
combined together with (1) the aggregate amount of any other such distributions
to all holders of its Common Stock made exclusively in cash within the 12 months
preceding the date of payment of such distribution, and in respect of which no
adjustment pursuant to this Section 7.5(e) has been made, and (2) the aggregate
of any cash plus the fair market value (as determined by the Board of Directors,
whose determination shall be conclusive and described in a resolution of the
Board of Directors) of consideration payable in respect of any tender offer by
46
<PAGE> 47
the Company for all or any portion of the Common Stock concluded within the 12
months preceding the date of payment of such distribution, and in respect of
which no adjustment pursuant to Section 7.5(f) has been made, exceeds 10% of the
product of the Current Market Price (determined as provided in Section 7.5(i))
on the Record Date with respect to such distribution times the number of shares
of Common Stock outstanding on such date, then, and in each such case,
immediately after the close of business on such date, the Conversion Price shall
be reduced so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the close of business on such
Record Date by a fraction (i) the numerator of which shall be equal to the
Current Market Price on the Record Date less an amount equal to the quotient of
(x) the excess of such combined amount over such 10% and (y) the number of
shares of Common Stock outstanding on the Record Date and (ii) the denominator
of which shall be equal to the Current Market Price on such Record Date
provided, however, that, if the portion of the cash so distributed applicable to
one share of Common Stock is equal to or greater than the Current Market Price
of the Common Stock on the Record Date, in lieu of the foregoing adjustment,
adequate provision shall be made so that each Holder shall have the right to
receive upon conversion the amount of cash such Holder would have received had
such Holder converted such Note immediately prior to such Record Date. If such
dividend or distribution is not so paid or made, the Conversion Price shall
again be adjusted to be the Conversion Price which would then be in effect if
such dividend or distribution had not been declared.
(f) If a tender offer made by the Company or any of its
Subsidiaries for all or any portion of the Common Stock expires and such tender
offer (as amended upon the expiration thereof) requires the payment to
stockholders (based on the acceptance (up to any maximum specified in the terms
of the tender offer) of Purchased Shares (as defined below)) of an aggregate
consideration having a fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a resolution
of the Board of Directors) that, combined together with (1) the aggregate of the
cash plus the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the Board of
Directors), as of the expiration of such tender offer, of consideration payable
in respect of any other tender offers, by the Company or any of its Subsidiaries
for all or any portion of the Common Stock expiring within the 12 months
preceding the expiration of such tender offer and in respect of which no
adjustment pursuant to this Section 7.5(f) has been made and (2) the aggregate
amount of any distributions to all Holders of the Common Stock made exclusively
in cash within 12 months preceding the expiration of such tender offer and in
respect of which no adjustment pursuant to Section 7.5(e) has been made, exceeds
10% of the product of the Current Market Price (determined as provided in
Section 7.5(i)) as of the last time (the "Expiration Time") tenders could have
been made pursuant to such tender offer (as it may be amended) times the number
of shares of Common Stock outstanding (including any tendered shares) at the
Expiration Time, then, and in each such case, immediately prior to the opening
of business on the day after the date of the Expiration Time, the Conversion
Price shall be adjusted so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the close of
business on the date of the Expiration Time by a fraction of which the numerator
shall be the number of shares of Common Stock Outstanding (including any
tendered shares) at the Expiration Time multiplied by the Current Market Price
of the Common
47
<PAGE> 48
Stock on the Trading Day next succeeding the Expiration Time and the denominator
shall be the sum of (x) the fair market value (determined as aforesaid) of the
aggregate consideration payable to stockholders based on the acceptance (up to
any maximum specified in the terms of the tender offer) of all shares validly
tendered and not withdrawn as of the Expiration Time (the shares deemed so
accepted, up to any such maximum, being referred to as the "Purchased Shares")
and (y) the product of the number of shares of Common Stock outstanding (less
any Purchased Shares) at the Expiration Time and the Current Market Price of the
Common Stock on the Trading Day next succeeding the Expiration Time, such
reduction (if any) to become effective immediately prior to the opening of
business on the day following the Expiration Time. If the Company is obligated
to purchase shares pursuant to any such tender offer, but the Company is
permanently prevented by applicable law from effecting any such purchases or all
such purchases are rescinded, the Conversion Price shall again be adjusted to be
the Conversion Price which would then be in effect if such tender offer had not
been made. If the application of this Section 7.5(f) to any tender offer would
result in an increase in the Conversion Price, no adjustment shall be made for
such tender offer under this Section 7.5(f).
(g) If the Company shall issue Common Stock or securities
convertible into, or exchangeable for, Common Stock at a price per share (or, as
applicable, having a conversion or exchange price per share) that is less than
the Current Market Price (determined as provided in Section 7.5(i)) determined
at the time of such issuance, the Conversion Price shall be adjusted so that the
holder of each Note shall be entitled to receive, upon the conversion thereof,
the number of shares of Common Stock determined by multiplying (i) the
Conversion Price on the date (the "Measurement Date") immediately prior to the
day of such issuance by (ii) a fraction, the numerator of which shall be the sum
of (1) the number of shares of Common Stock outstanding on the Measurement Date
day and (2) the number of shares of Common Stock which the aggregate
consideration receivable by the Company for the total number of shares of Common
Stock so issued (or into which the convertible securities may convert) would
purchase at such Conversion Price on the Measurement Date, and the denominator
of which shall be the sum of (x) the number of shares of Common Stock
outstanding on the Measurement Date and (y) the number of additional shares of
Common Stock so issued (or into which the convertible securities may convert).
An adjustment made pursuant to this Section 7.5(g) shall be made on the next
business day following the day on which any such issuance is made and shall be
effective retroactively to the day of such issuance immediately after the close
of business on such date. For purposes of this Section 7.5(g), the aggregate
consideration receivable by the Company in connection with the issuance of
shares of Common Stock or of securities convertible into shares of Common Stock
shall be deemed to be equal to the sum of the aggregate offering price (before
deduction of underwriting discounts or commissions and expenses payable to third
parties) of all such securities plus the minimum aggregate amount, if any,
payable upon conversion of any such convertible securities into shares of Common
Stock; provided, however, that any non-cash consideration received or receivable
by the Company shall be valued at its fair market value as of the date of the
adjustment made pursuant to this Section 7.5(g), such fair market value to be as
determined by the Company's Board of Directors (whose determination shall be
conclusive and described in a resolution of the Board of Directors).
48
<PAGE> 49
Notwithstanding any other provision of this Section 7.5(g) to the
contrary, the following shall be deemed not to have been issued for purposes of
this Section 7.5(g): (a) issuances pursuant to any bona fide plan for the
benefit of employees or directors of the Company or any Subsidiary in effect on
the date of issuance of the Notes or thereafter, (b) issuances to acquire all or
any portion of a business in an arm's-length transaction between the Company and
an unaffiliated third party, including, if applicable, issuances upon exercise
of options or warrants assumed or issued in connection with such an acquisition,
(c) issuances in a bona fide public offering pursuant to a firm commitment
underwriting or sales at the market pursuant to a continuous offering stock
program, (d) issuances pursuant to the exercise of rights or warrants, or upon
the conversion of convertible securities, which are issued and outstanding on
the date of issuance of the Notes, or which may be issued in the future at fair
value and with an exercise price or conversion price at least equal to the
Current Market Price (determined as provided in Section 7.5(i)) at the time of
issuance of such right, warrant or convertible security, (e) issuances pursuant
to a dividend reinvestment plan or other plan hereafter adopted for the
reinvestment of dividends or interest, provided, that such Common Stock is
issued at a price at least equal to 95% of the Current Market Price (determined
as provided in Section 7.5(i)) determined at the time of such issuance and (f)
issuances to which Section 7.5(a), (b) or (d) applies.
(h) Upon mandatory conversion of the Exchange Notes in accordance
with their terms, the Conversion Price shall be reduced to an amount which is
equal to the quotient determined by dividing the aggregate principal amount of
the Outstanding Notes by the number of Fully-Diluted Shares. For purposes of
this Section 7.5(i), Fully-Diluted Shares shall consist of the sum of (i) the
number of issued and outstanding shares of Common Stock immediately prior to
consummation of the Exchange plus (ii) the number of shares of Common Stock
issued by the Company upon mandatory conversion of the Exchange Notes plus (iii)
the number of shares of Common Stock issuable by the Company upon conversion of
the outstanding shares of the Company's Series A Convertible Preferred Stock
plus (iv) the number of shares of Common Stock issuable by the Company upon
conversion of outstanding options to acquire Common Stock granted by the Company
with an exercise price on the date of consummation of the Exchange which is
equal to or less than the Current Market Price (regardless whether such options
are then convertible in accordance with their terms).
(i) For purposes of this Section 7.5, the following terms shall
have the meaning indicated:
(1) "Closing Price" with respect to any securities on any day
shall mean the closing sale price regular way on such day or, in case
no such sale takes place on such day, the average of the reported
closing bid and asked prices, regular way, in each case on the New York
Stock Exchange, or, if such security is not listed or admitted to
trading on such Exchange, on the principal national security exchange
or quotation system on which such security is quoted or listed or
admitted to trading, or, if not quoted or listed or admitted to trading
on any national securities exchange or quotation system, the average of
the closing bid and asked prices of such security on the
over-the-counter market on the day in question as reported by the
National Quotation Bureau Incorporated, or a similar
49
<PAGE> 50
generally accepted reporting service, or if not so available, in such
manner as furnished by any New York Stock Exchange member firm selected
from time to time by the Board of Directors for that purpose, or a
price determined in good faith by the Board of Directors or, to the
extent permitted by applicable law, a duly authorized committee
thereof, whose determination shall be conclusive and described in a
resolution of the Board of Directors or the applicable committee.
(2) "Current Market Price" shall mean the average of the
daily Closing Prices per share of Common Stock for the ten consecutive
Trading Days immediately prior to the date in question, provided,
however, that (1) if the "ex" date (as hereinafter defined) for any
event (other than the issuance or distribution requiring such
computation) that requires an adjustment to the Conversion Price
pursuant to Section 7.5(a), (b), (c), (d), (e), (f), (g) or (h) occurs
during such ten consecutive Trading Days, the Closing Price for each
Trading Day prior to the "ex" date for such other event shall be
adjusted by multiplying such Closing Price by the same fraction by
which the Conversion Price is so required to be adjusted as a result of
such other event, (2) if the "ex" date for any event (other than the
issuance or distribution requiring such computation) that requires an
adjustment to the Conversion Price pursuant to Section 7.5(a), (b),
(c), (d), (e), (f), (g) or (h) occurs on or after the "ex" date for the
issuance or distribution requiring such computation and prior to the
day in question, the Closing Price for each Trading Day on and after
the "ex" date for such other event shall be adjusted by multiplying
such Closing Price by the reciprocal of the fraction by which the
Conversion Price is so required to be adjusted as a result of such
other event, and (3) if the "ex" date for the issuance or distribution
requiring such computation is prior to the day in question, after
taking into account any adjustment required pursuant to clause (1) or
(2) of this proviso, the Closing Price for each Trading Day on or after
such "ex" date shall be adjusted by adding thereto the amount of any
cash and the fair market value (as determined by the Board of Directors
or, to the extent permitted by applicable law, a duly authorized
committee thereof in a manner consistent with any determination of such
value for purposes of Section 7.5(d), (f) or (g), whose determination
shall be conclusive and described in a resolution of the Board of
Directors or such duly authorized committee thereof, as the case may
be) of the evidences of indebtedness, shares of capital stock or assets
being distributed applicable to one share of Common Stock as of the
close of business on the day before such "ex" date. For purposes of any
computation under Section 7.5(f) or (g), the Current Market Price of
the Common Stock on any date shall be deemed to be the average of the
daily Closing Prices per share of Common Stock for such day and the
next two succeeding Trading Days, provided, however, that if the "ex"
date for any event (other than the tender or exchange offer requiring
such computation) that requires an adjustment to the Conversion Price
pursuant to Section 7.5(a), (b), (c), (d), (e), (f), (g) or (h) occurs
on or after the Expiration Time for the tender or exchange offer
requiring such computation and prior to the day in question, the
Closing Price for each Trading Day on and after the "ex" date for such
other event shall be adjusted by multiplying such Closing Price by the
reciprocal of the fraction by which the Conversion Price is so required
to be adjusted as a result of such other event. For purposes of this
paragraph, the term "ex"
50
<PAGE> 51
date, (1) when used with respect to any issuance or distribution, means
the first date on which the Common Stock trades regular way on the
relevant exchange or in the relevant market from which the Closing
Price was obtained without the right to receive such issuance or
distribution, (2) when used with respect to any subdivision or
combination of shares of Common Stock, means the first date on which
the Common Stock trades regular way on such exchange or in such market
after the time at which such subdivision or combination becomes
effective, and (3) when used with respect to any tender or exchange
offer means the first date on which the Common Stock trades regular way
on such exchange or in such market after the Expiration Time of such
offer.
(3) "fair market value" shall mean the amount which a
willing buyer would pay a willing seller in an arm's-length
transaction.
(4) "Record Date" shall mean, for purposes of this
Article VII, with respect to any dividend, distribution or other
transaction or event in which the holders of Common Stock have the
right to receive any cash, securities or other property or in which the
Common Stock (or other applicable security) is exchanged for or
converted into any combination of cash, securities or other property,
the date fixed for determination of stockholders entitled to receive
such cash, securities or other property (whether such date is fixed by
the Board of Directors or by statute, contract or otherwise).
(5) "Trading Day" shall mean (x), if the applicable
security is listed or admitted for trading on the New York Stock
Exchange, the Nasdaq Stock Market (National Market) or another national
security exchange, a day on which the New York Stock Exchange, the
Nasdaq Stock Market (National Market) or another national security
exchange is open for business or (y) if the applicable security is
quoted on the Nasdaq National Market, a day on which trades may be made
thereon or (z) if the applicable security is not so listed, admitted
for trading or quoted, any day other than a Saturday or Sunday or a day
on which banking institutions in the State of Georgia are authorized or
obligated by law or executive order to close.
(j) The Company may make such reductions in the Conversion Price,
in addition to those required by Sections 7.5(a), (b), (c), (d), (e), (f), (g)
and (h) as the Board of Directors considers to be advisable to avoid or diminish
any income tax to Holders of Common Stock or rights to purchase Common Stock
resulting from any dividend or distribution of stock (or rights to acquire
stock) or from any event treated as such for income tax purposes.
To the extent permitted by applicable law, the Company from time to
time may reduce the Conversion Price by any amount for any period of time if the
period is at least 20 days, the reduction is irrevocable during the period and
the Board of Directors shall have made a determination that such reduction would
be in the best interests of the Company, which determination shall be conclusive
and described in a resolution of the Board of Directors. Whenever the Conversion
Price is reduced pursuant to the preceding sentence, the Company shall mail to
Holders a notice of the reduction at least 15 days prior to the date the reduced
51
<PAGE> 52
Conversion Price takes effect, and such notice shall state the reduced
Conversion Price and the period during which it will be in effect.
(k) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 1.00% in such
price, provided, however, that any adjustments which by reason of this Section
7.5(k) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Article VIII
shall be made by the Company and shall be made to the nearest cent or to the
nearest one hundredth of a share, as the case may be.
(l) Whenever the Conversion Price is adjusted as herein provided,
the Company shall prepare a notice of such adjustment of the Conversion Price
setting forth the adjusted Conversion Price and the date on which each
adjustment becomes effective and shall mail notice of such adjustment of the
Conversion Price to the Holder of each Note at his last address reflected in the
Note Register. Failure to deliver such notice shall not affect the legality or
validity of any such adjustment.
(m) In any case in which this Section 7.5 provides that an
adjustment shall become effective immediately after a record date for an event,
the Company may defer until the occurrence of such event (i) issuing to the
Holder of any Note converted after such record date and before the occurrence of
such event the additional shares of Common Stock issuable upon such conversion
by reason of the adjustment required by such event over and above such
conversion by reason of the adjustment required by such event and above the
Common Stock issuable upon such conversion before giving effect to such
adjustment and (ii) paying to such Holder any amount in cash in lieu of any
fraction pursuant to Section 7.5.
(n) For purposes of this Section 7.5, the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock. The Company
will not pay any dividend or make any distribution on shares of Common Stock
held in the treasury of the Company.
52
<PAGE> 53
SECTION 7.6. EFFECT OF RECLASSIFICATION, CONSOLIDATION MERGER OR SALE.
If any of the following events occur, namely (i) any reclassification
or change of the outstanding shares of Common Stock (other than a subdivision or
combination to which Section 7.5(c) applies), (ii) any consolidation, merger or
combination of the Company with another corporation as a result of which holders
of Common Stock shall be entitled to receive stock, securities or other property
or assets (including cash) with respect to or in exchange for such Common Stock
or (iii) any sale or conveyance of the properties and assets of the Company as,
or substantially as, an entirety to any other corporation as a result of which
holders of Common Stock shall be entitled to receive stock, securities or other
property or assets (including cash) with respect to or in exchange for such
Common Stock, then the Company and the successor or purchasing corporation, as
the case may be, shall take appropriate steps to ensure that the legal
documentation evidencing any such transaction provides, in form and substance
reasonably satisfactory to the holders of not less than a majority in aggregate
principal amount of the Notes at the time Outstanding, that the Notes shall be
convertible into the kind and amount of shares of stock and other securities or
property or assets (including cash) receivable upon such reclassification,
change, consolidation, merger, combination, sale or conveyance by a holder of a
number of shares of Common Stock issuable upon conversion of such Notes
immediately prior to such reclassification, change, consolidation, merger,
combination, sale or conveyance, assuming such holder of Common Stock did not
exercise his rights of election, if any, as to the kind or amount of shares of
stock and other securities or property or assets (including cash) receivable
upon such reclassification, change, consolidation, merger, combination, sale or
conveyance, provided that, if the kind or amount of shares of stock and other
securities or property or assets (including cash) receivable upon such
reclassification, change, consolidation, merger, combination, sale or conveyance
is not the same for each share of Common Stock in respect of which such rights
of election shall not have been exercised ("non-electing share"), then for the
purposes of this Section 7.6 the kind and amount of shares of stock and other
securities or property or assets (including cash) receivable upon such
reclassification, change, consolidation, merger, combination, sale or conveyance
for each non-electing share shall be deemed to be the kind and amount so
receivable per share by a plurality of the non-electing shares. Such legal
documentation shall provide for adjustments which shall be as nearly equivalent
as may be practicable to the adjustments provided for in this Article.
The Company shall cause notice of the execution of such legal
documentation to be mailed to each Holder, at his last address reflected in the
Note Register, within 20 days after execution thereof. Failure to deliver such
notice shall not affect the legality or validity of such legal documentation.
The above provisions of this Section shall similarly apply to
successive reclassifications, changes, consolidations, mergers, combinations,
sales and conveyances.
If this Section 7.6 applies to any event or occurrence, Section 7.5
shall not apply.
53
<PAGE> 54
SECTION 7.7. TAXES ON SHARES ISSUED.
The issue of stock certificates on conversions of Notes shall be made
without charge to the converting Holder for any tax in respect of the issue
thereof. The Company shall not, however, be required to pay any tax which may be
payable in respect of any transfer involved in the issue and delivery of stock
in any name other than that of the Holder of any Note converted, and the Company
shall not be required to issue or deliver any such stock certificate unless and
until the Person or Persons requesting the issue thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
SECTION 7.8. RESERVATION OF SHARES TO BE FULLY PAID; COMPLIANCE WITH
GOVERNMENTAL REQUIREMENTS; LISTING OF COMMON STOCK.
The Company shall reserve, free from preemptive rights, out of its
authorized but unissued shares or shares held in treasury, sufficient shares of
Common Stock to provide for the conversion of the Notes from time to time as
such Notes are presented for conversion.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the shares of Common Stock
issuable upon conversion of the Notes, the Company will take all corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue shares of such Common Stock at such
adjusted Conversion Price.
The Company covenants that all shares of Common Stock which may be
issued upon conversion of Notes will upon issue be fully paid and non-assessable
by the Company and free from all taxes and Liens with respect to the issue
thereof.
The Company covenants that it will in good faith and as expeditiously
as possible comply with its obligations under the Registration Rights Agreement.
The Company further covenants that so long as the Common Stock shall be
listed or quoted on the New York Stock Exchange, the Nasdaq Stock Market
(National Market) or any other national securities exchange the Company will, if
permitted by the rules of such exchange, list and keep listed so long as the
Common Stock shall be so listed on such market or exchange, all Common Stock
issuable upon conversion of the Notes.
SECTION 7.9. NOTICE TO HOLDERS PRIOR TO CERTAIN ACTIONS.
If:
(a) the Company shall declare a dividend (or any other
distribution) on its Common Stock that would require an adjustment in
the Conversion Price pursuant to Section 7.5, or
54
<PAGE> 55
(b) the Company shall authorize the granting to all or
substantially all the holders of its Common Stock of rights or warrants
to subscribe for or purchase any share of any class of Common Stock or
any other rights or warrants, or
(c) there is a reclassification or reorganization of the
Common Stock (other than a subdivision or combination of outstanding
Common Stock, or a change in par value, or from par value to no par
value, or from no par value to par value), or a consolidation or merger
to which the Company is a party and for which approval of any
stockholders of the Company is required, or a sale or transfer of all
or substantially all of the assets of the Company, or
(d) there is a voluntary or involuntary dissolution,
liquidation or winding-up of the Company,
the Company shall cause to be mailed to each Holder at his last address
reflected in the Note Register, as promptly as possible but in any event at
least 15 days prior to the applicable date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution or rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution or rights or warrants are to be determined, or
(y) the date on which such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up is expected to become effective
or occur, and the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer, dissolution, liquidation or winding-up. Failure to give such
notice, or any defect therein, shall not affect the legality or validity of such
dividend, distribution, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up.
SECTION 7.10. RESTRICTION ON CONVERSION OF NOTES.
Notwithstanding any other provision hereof to the contrary, unless and
until the Company has obtained stockholder approval of the issuance of Common
Stock upon the conversion of the Notes in their entirety, the Notes may be
converted into a maximum of 11,027 shares (subject to adjustment as provided
below, the "Maximum Number"), which is equal to 19.99% of the number of shares
of Common Stock issued and outstanding on the date of issuance of the Notes,
less the 600,000 shares issued by the Company in connection with its acquisition
of MCI. Unless and until the Company has obtained such stockholder approval, and
subject to the $1,000 authorized denomination of the Notes set forth in Section
2.2, any individual Note may be converted pursuant to Section 7.1 into a maximum
number of shares of Common Stock equal to the amount determined by multiplying
the Maximum Number by a fraction (rounded to the nearest one-thousandth) of
which the numerator is the principal amount of the Note to be converted and the
denominator of which is the total principal amount of the Outstanding Notes, and
thereafter the remaining Notes shall not be convertible into shares of Common
Stock unless and until the Company has obtained such stockholder approval. To
illustrate, prior to obtainment of such stockholder approval, a Holder of a Note
with a principal amount of $2,000,000 may convert $15,000 principal amount of
such Note into 3,000 shares of Common Stock and the $1,985,000 principal amount
of Note or Notes to be issued by the Company to the converting Holder upon such
conversion may not be converted into shares of Common Stock unless
55
<PAGE> 56
and until the Company has obtained such stockholder approval. The Maximum Number
shall be subject to appropriate adjustment by reason of a stock dividend,
split-up, merger, recapitalization, combination, subdivision, conversion,
exchange of shares, distribution on or in respect of the Common Stock or any
similar transaction, and proper provision shall be made in the agreements
governing such transaction, so that a Holder shall receive upon conversion the
number of shares of Common Stock that a Holder would have held immediately after
such event if the Notes had been converted immediately prior to such event, or
the record date therefor, as applicable.
ARTICLE VIII
REPURCHASE OF NOTES AT OPTION OF THE HOLDER
SECTION 8.1. RIGHT TO REQUIRE REPURCHASE.
In the event that a Repurchase Event (as hereinafter defined) shall
occur, then each Holder shall have the right, at the Holder's option, to require
the Company to repurchase, and upon the exercise of such right the Company shall
repurchase, all of such Holder's Notes, or any portion of the principal amount
thereof that is an integral multiple of $1,000 (provided that no single Note may
be repurchased in part unless the portion of the principal amount of such Note
to be Outstanding after such repurchase is equal to $1,000 or an integral
multiple of $1,000), on the date (the "Repurchase Date") that is 60 days after
the date of the Company Notice (as defined in Section 8.2) for cash at a
purchase price equal to 101% of the aggregate principal amount of such Notes in
the event that the Repurchase Event is the event specified in clause (i) of the
definition such term and 112% of the aggregate principal amount of such Notes in
the event that the Repurchase Event is an event specified in clause (ii) or
clause (iii) of the definition of such term (the "Repurchase Price"), plus
interest accrued and unpaid to, but excluding, the Repurchase Date.
Whenever in this Note there is a reference, in any context, to the
principal of any Note as of any time, such reference shall be deemed to include
reference to the Repurchase Price payable in respect of such Note to the extent
that such Repurchase Price is, was or would be so payable at such time, and
express mention of the Repurchase Price in any provision of this Note shall not
be construed as excluding the Repurchase Price in those provisions of this Note
when such express mention is not made.
56
<PAGE> 57
SECTION 8.2. NOTICES; METHOD OF EXERCISING PURCHASE RIGHT, ETC.
(a) Unless the Company shall have theretofore called for
redemption all of the Outstanding Notes pursuant to Article III, on or before
the fifth day after the occurrence of a Repurchase Event, the Company shall give
to all Holders of Notes notice (the "Company Notice") of the occurrence of the
Repurchase Event and of the repurchase right set forth herein arising as a
result thereof.
Each notice of a repurchase right shall state:
(1) the Repurchase Event and the Repurchase Date,
(2) the date by which the repurchase right must be
exercised,
(3) the Repurchase Price,
(4) a description of the procedure which a Holder must
follow to exercise a repurchase right,
(5) that on the Repurchase Date the Repurchase Price will
become due and payable upon each such Note designated by the Holder to
be repurchased, and that interest thereon shall cease to accrue on and
after said date,
(6) the Conversion Price, the date on which the right to
convert the Notes to be repurchased will terminate and the place where
such Notes may be surrendered for conversion, and
(7) the place where such Notes are to be surrendered for
payment of the Repurchase Price and accrued interest, if any.
No failure of the Company to give the foregoing notices or defect
therein shall limit any Holder's right to exercise a repurchase right or affect
the validity of the proceedings for the repurchase of Notes.
If any of the foregoing provisions or other provisions of this Article
are inconsistent with applicable law, such law shall govern.
(b) To exercise a repurchase right, a Holder shall deliver to the
Company on or before the 30th day after the date of the Company Notice (i)
written notice of the Holder's exercise of such right, which notice shall set
forth the name of the Holder, the principal amount of the Notes to be
repurchased (and, if any Note is to be repurchased in part, the portion of the
principal amount thereof to be repurchased and the name of the Person in which
the portion thereof to remain Outstanding after such repurchase is to be
registered) and a statement that an election to exercise the repurchase right is
being made thereby, and (ii) the Notes with respect to which the repurchase
right is being exercised.
57
<PAGE> 58
(c) In the event a repurchase right shall be exercised in
accordance with the terms hereof, the Company shall pay or cause to be paid the
Repurchase Price in cash to the Holder on the Repurchase Date, together with
accrued and unpaid interest to, but excluding, the Repurchase Date payable with
respect to the Notes as to which the repurchase right has been exercised.
(d) If any Note (or portion thereof) surrendered for repurchase
shall not be so paid on the Repurchase Date, the principal amount of such Note
(or portion thereof, as the case may be) shall, until paid, bear interest from
the Repurchase Date at the rate per annum then currently in effect, and each
Note shall remain convertible into Common Stock until the principal of such Note
(or portion thereof, as the case may be) shall have been paid or duly provided
for.
(e) Any Note which is to be repurchased only in part shall be
surrendered to the Company (with, if the Company so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company duly
executed by, the Holder thereof or his attorney duly authorized in writing), and
the Company shall execute and deliver to the Holder of such Note without service
charge, a new Note or Notes, containing identical terms and conditions, each in
an authorized denomination in aggregate principal amount equal to and in
exchange for the portion of the principal of the Note so surrendered that was
not repurchased.
(f) Any Holder that has delivered to the Company its written
notice exercising its right to require the Company to repurchase its Notes upon
a Repurchase Event shall have the right to withdraw such notice at any time
prior to the close of business on the Repurchase Date by delivery of a written
notice of withdrawal to the Company prior to the close of business on such date.
A Note in respect of which a Holder is exercising its option to require
repurchase upon a Repurchase Event may be converted into Common Stock in
accordance with Article VII only if such Holder withdraws its notice in
accordance with the preceding sentence.
SECTION 8.3. REPURCHASE EVENT.
A "Repurchase Event" shall be deemed to occur (i) upon the occurrence
of a Change in Control, (ii) in the event that the Company fails to obtain
either of the Stockholder Approvals on or before March 9, 2000 or (iii) in the
event that the Exchange Notes are not mandatorily converted into shares of
Common Stock in accordance with their terms on or before March 9, 2000, provided
that the date set forth in clauses (ii) and (iii) may be extended to March 31,
2000 with the consent of the registered holders of a majority of the aggregate
principal amount of the Notes and the Exchange Notes, considered as a single
class, at the time Outstanding.
58
<PAGE> 59
SECTION 8.4. CERTAIN DEFINITIONS.
For purposes of this Article VIII,
(a) the term "beneficial owner" shall be determined in accordance
with Rule 13d-3 promulgated by the Commission pursuant to the Exchange Act;
(b) the term "Person" shall include any syndicate or group which
would be deemed to be a "Person" under Section 13(d)(3) of the Exchange Act;
(c) the term "controlled" shall mean ownership or control of more
than 50% of the voting power of an entity; and
(d) the term "Change in Control" shall mean the occurrence of any
of the following events after the Issue Date:
(i) any Person, other than the Company, any Subsidiary of the
Company or any entity controlled by the foregoing, or any employee
benefit plan of the Company or any such Subsidiary, becomes the
beneficial owner, directly or indirectly, through a purchase or other
acquisition transaction or series of transactions (other than a merger
or consolidation involving the Company), of shares of capital stock of
the Company entitling such Person to exercise in excess of 50% of the
total voting power of all shares of Capital Stock of the Company
entitled to vote generally in the election of directors, provided that
a Change in Control shall not be deemed to have occurred pursuant to
this paragraph (a) as a result of issuances of capital stock by the
Company upon the exercise of rights or warrants, or upon conversion of
convertible securities, which are issued and outstanding on the Issue
Date to the holders of such rights, warrants or convertible securities
on the date of issuance of the Notes;
(ii) there occurs any consolidation of the Company with, or
merger of the Company into, any other Person, any merger of another
Person into the Company, or any sale or transfer of the assets of the
Company as, or substantially as, an entirety to another Person (other
than (i) any such transaction pursuant to which the holders of the
Common Stock immediately prior to such transaction have, directly or
indirectly, shares of capital stock of the continuing or surviving
corporation immediately after such transaction which entitle such
holders to exercise in excess of 50% of the total voting power of all
shares of capital stock of the continuing or surviving corporation
entitled to vote generally in the election of directors and (ii) any
merger (1) which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Common Stock or (2)
which is effected solely to change the jurisdiction of incorporation of
the Company and results in a reclassification, conversion or exchange
of outstanding shares of Common Stock solely into shares of Common
Stock and separate series of Common Stock carrying substantially the
same relative rights as the Common Stock); or
(iii) individuals who constituted the Board of Directors of
the Company at the beginning of any one-year period (together with any
other director whose election by the Board of Directors of the Company
or whose nomination for election by the stockholders of the Company was
approved by a vote of at least a majority of the directors then in
59
<PAGE> 60
office either who were directors at the beginning of such period or
whose election or nomination for election was previously so approved)
cease for any reason to constitute a majority of the directors then in
office.
SECTION 8.5. CONSOLIDATION, MERGER, ETC.
In the case of any reclassification, change, consolidation, merger,
combination, sale or conveyance in which the Common Stock is changed or
exchanged as a result into the right to receive shares of stock and other
securities or property or assets (including cash) which includes shares of
Common Stock or common stock of another Person that are, or upon issuance will
be, traded on a United States national securities exchange or approved for
trading on an established automated over-the-counter trading market in the
United States and such shares constitute at the time such change or exchange
becomes effective in excess of 50% of the aggregate fair market value of such
shares of stock and other securities, property and assets (including cash) (as
determined in good faith by the Board of Directors of the Company, which
determination shall be conclusive and binding), then the Person formed by such
consolidation or resulting from such merger or combination or which acquires the
properties or assets (including cash) of the Company, as the case may be, shall
execute and deliver to the Holders, at their last address reflected in the Note
Register, an amendment to the Notes, in form and substance satisfactory to the
registered holders of not less than a majority in aggregate principal amount of
the Notes and the Exchange Notes, considered as a single class, at the time
Outstanding, modifying the provisions of the Notes relating to the right of
Holders to cause the Company to repurchase the Notes following a Repurchase
Event, including without limitation the applicable provisions of this Article
VIII and the definitions of Common Stock and Change in Control, as appropriate,
and such other related definitions set forth herein as determined in good faith
by the Board of Directors of the Company (which determination shall be
conclusive and binding), to make such provisions apply to the common stock and
the issuer thereof if different from the Company and the Common Stock (in lieu
of the Company and the Common Stock).
ARTICLE IX
CONCERNING THE NOTEHOLDERS
SECTION 9.1. ACTION BY HOLDERS.
When herein it is provided that the registered holders of a specified
percentage in aggregate principal amount of the Notes and the Exchange Notes may
take any action (including the making of any demand or request, the giving of
any notice, consent or waiver or the taking of any other action), the fact that
at the time of taking any such action, the registered holders of such specified
percentage have joined therein may be evidenced (a) by any instrument or any
number of instruments of similar tenor executed by such registered holders in
person or by agent or proxy appointed in writing and delivered to the Company
and the Collateral Agent, which shall be available for inspection by any Holder,
or (b) by the record of such registered holders
60
<PAGE> 61
voting in favor thereof at any meeting of such holders duly called and held in
accordance with the provisions hereof and applicable law, a copy of which record
shall be maintained by the Company and delivered to the Collateral Agent and be
available for inspection by any Holder, or (c) by a combination of such
instrument or instruments and any such record of such a meeting of such
registered holders. Whenever the Company solicits the taking of any action by
the record holders of the Notes and the Exchange Notes, the Company may fix in
advance of such solicitation a date as the record date for determining such
record holders entitled to take such action. The record date shall be not more
than 15 days prior to the date of commencement of solicitation of such action.
SECTION 9.2 WHO ARE DEEMED ABSOLUTE OWNERS.
Except to the extent provided in the second paragraph of Section 2.3,
the Company may deem the Person in whose name a Note is registered on the Note
Register to be, and may treat him as, the absolute owner of such Note (whether
or not such Note shall be overdue and notwithstanding any notation of ownership
or other writing thereon) for the purpose of receiving payment of or on account
of the principal of, premium, if any, and interest on such Note, for conversion
of such Note and for all other purposes and the Company shall not be affected by
any notice to the contrary. All such payments so made to any Holder for the time
being, or upon his order, shall be valid, and, to the extent of the sum or sums
so paid, effectual to satisfy and discharge the liability for monies payable
upon such Note.
61
<PAGE> 62
ARTICLE X
AMENDMENT, ETC.
No provision of the Notes may be amended, modified, supplemented or
waived without notice to the Company and the written consent of the registered
holders of not less than a majority in aggregate principal amount of the Notes
and the Exchange Notes, considered as a single class, at the time Outstanding,
provided that (i) no such amendment, modification, supplement or waiver shall,
unless signed by each Holder affected hereby, (x) extend the fixed maturity of
such Note, or reduce the rate or extend the time of payment of interest thereon,
or reduce the principal amount thereof or premium, if any, thereon, or reduce
any amount payable on redemption thereof, or impair the right of any such Holder
to institute suit for the payment thereof, or make the principal thereof or
interest or premium, if any, thereon payable in any coin or currency other than
that provided herein, or change the obligation of the Company to repurchase any
Note upon the occurrence of a Repurchase Event in a manner adverse to such
Holder, or impair the right to convert the Notes into Common Stock in any
material respect, or (y) reduce the aforesaid percentage of Notes and the
Exchange Notes, considered as a single class, the record holders of which are
required to consent to any such amendment, modification, supplement or waiver;
(ii) the provisions of Article VII hereof may be amended, modified, supplemented
or waived by notice to and the written consent of the Company and the Holders of
not less than a majority in aggregate principal amount of the Notes at the time
Outstanding; (iii) the Supermajority Covenants, the second sentence of Section
4.25, the date March 31, 2000 in the proviso clause to Section 8.3 and the
provisions of this clause (iii) may be amended, modified, supplemented or waived
without notice to the Company and the written consent of the registered holders
of not less than 70% in aggregate principal amount of the Notes and the Exchange
Notes, considered as a single class, at the time Outstanding.
ARTICLE XI
SECURITY FOR NOTES; RELATED AGREEMENTS
The Notes shall be secured by the Collateral Documents, duly executed
by the Company and the other parties thereto for the ratable benefit of the
holders of the Notes and the Exchange Notes granting a security interest in the
collateral covered thereby, which security interest shall not be subordinate in
priority to any other Liens. The Notes are entitled to the benefits of and
subject to the limitations contained in the Agreement and the Related
Agreements, and the Holder of any Note may enforce such rights in accordance
with the terms hereof and thereof, as applicable.
62
<PAGE> 63
ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 12.1. ASSIGNMENT; SUCCESSORS.
A Note and the rights and obligations of the Company thereunder may not
be assigned or otherwise transferred by the Company without the prior written
consent of the Holder thereof. A Note may not be assigned or otherwise
transferred by any Holder to any Person, other than an Affiliate of such Holder,
unless the Holder has complied with the applicable requirements set forth in
Section 3.2(b) of the Agreement. This Note shall be binding upon and inure to
the benefit of the Company and the Holder and their respective permitted
successors and assigns.
SECTION 12.2. OFFICIAL ACTS BY SUCCESSOR CORPORATION.
Any act or proceeding by any provision hereof authorized or required to
be done or performed by any board, committee or officer of the Company shall and
may be done and performed with like force and effect by the like board,
committee or officer of any corporation that shall at the time be the lawful
sole successor of the Company.
SECTION 12.3. ADDRESSES FOR NOTICES, ETC.
All notices, demands and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, registered first-class
mail, telex, telecopier, or air courier guaranteeing overnight delivery:
(a) if to the Holder of this Note, initially at the address
set forth above, and thereafter at such other address, notice of which
is given in accordance with this Section 12.3;
(b) if to the Issuer, initially at Altiva Financial
Corporation,1000 Parkwood Circle, Suite 600, Atlanta, Georgia 30339,
and thereafter at such other address, notice of which is given in
accordance with this Section 12.3; and
(c) If to the Collateral Agent, initially at U.S. Trust
Company of New York, 2001 Ross Avenue, Suite 2700, Dallas, Texas,
75201, Attention: John C. Stohlmann, and thereafter at such other
address, notice of which is given in accordance with this Section 12.3.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being sent by certified mail, return receipt requested, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next Business Day if timely delivered to an air courier guaranteeing
overnight delivery.
63
<PAGE> 64
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
SECTION 12.4. GOVERNING LAW.
THE PARTIES HERETO ACKNOWLEDGE THAT THE TRANSACTIONS CONTEMPLATED BY
THE AGREEMENT AND THE NOTES BEAR A REASONABLE RELATION TO THE STATE OF MARYLAND
IN THAT, INTERALIA, A PARTICIPANT IN THE NOTES HAS ITS PRINCIPAL PLACE OF
BUSINESS IN THE STATE OF MARYLAND AND PART OF THE NEGOTIATIONS RELATING TO THE
ISSUANCE OF THE NOTES AND THE CLOSING OF SUCH ISSUANCE OCCURRED IN THE STATE OF
MARYLAND. THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF MARYLAND, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF
LAWS THEREOF.
SECTION 12.5. USURY.
All agreements between the Company and the Holders, whether now
existing or hereafter arising and whether written or oral, are hereby limited so
that in no contingency, whether by reason of acceleration of the maturity of the
Notes or otherwise, shall the interest contracted for, charged, received, paid
or agreed to be paid to the Holders exceed the maximum amount permissible under
the laws of the State of Maryland (hereinafter the "Applicable Law"). If, from
any circumstance whatsoever, interest would otherwise be payable to the Holders
in excess of the maximum amount permissible under the Applicable Law, the
interest payable to the Holders shall be reduced to the maximum amount
permissible under the Applicable Law, and if from any circumstance the Holders
shall ever receive anything of value deemed interest by the Applicable Law in
excess of the maximum amount permissible under the Applicable Law, an amount
equal to the excessive interest shall be applied to the reduction of the
principal of the Notes and not to the payment of interest, or if such excessive
amount of interest exceeds the unpaid principal amount of the Notes, such excess
shall be refunded to the Company. All interest paid or agreed to be paid to the
Holders shall, to the extent permitted by the Applicable Law, be amortized,
prorated, allocated and spread throughout the full term of the Notes (including
any renewal or extension) until payment in full of the principal so that the
interest on the Notes for such full term shall not exceed the maximum amount
permissible under the Applicable Law. Each Holder expressly disavows any intent
to contract for, charge or receive interest in an amount which exceeds the
maximum amount permissible under the Applicable Law. This paragraph as well as
similar paragraphs set forth in the Agreement and the Collateral Documents shall
control all agreements between the Company and the Holders.
64
<PAGE> 65
SECTION 12.6. LEGAL HOLIDAYS.
In any case where the date of maturity of interest on or principal of
the Notes or the date fixed for redemption or repurchase of any Note will not be
a Business Day, then payment of such interest on or principal of the Notes need
not be made on such date, but may be made on the next succeeding Business Day
with the same force and effect as if made on the date of maturity or the date
fixed for redemption or repurchase, and no interest shall accrue for the period
from and after such date.
SECTION 12.7 SEVERABILITY OF PROVISIONS.
Any provision of this Note which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability only without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
SECTION 12.8. HEADINGS AND GENDER.
The titles and headings of the articles and sections hereof have been
inserted for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms or provisions
hereof. Use of a particular gender herein shall be considered to represent the
masculine, feminine or neuter gender whenever appropriate.
SECTION 12.9 BENEFITS OF NOTES.
Except to the extent provided in the definition of the term "Notes" in
Article I hereof, nothing in the Notes, express or implied, shall give any
Person, other than the holders of the Notes, any benefit or legal or equitable
right, remedy or claim under the Notes.
65
<PAGE> 66
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed under its corporate seal.
Dated for References Purposes only: February 29, 2000.
ALTIVA FINANCIAL CORPORATION
By: /s/ Edward B. Meyercord
---------------------------------------
Name: Edward B. Meyercord
Title:Chairman and Chief Executive
Officer
<PAGE> 1
EXHIBIT 4.2
---------
ALTIVA FINANCIAL CORPORATION
TO
UNITED STATES TRUST COMPANY OF NEW YORK, TRUSTEE
---------
12% SECURED CONVERTIBLE SENIOR NOTES
DUE 2006
---------
INDENTURE
DATED AS OF FEBRUARY 29, 2000
---------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE ONE - Definitions and Other Provisions of General Application.............................................1
Section 1.1 Definitions.....................................................................................1
Section 1.2 Compliance Certificates and Opinions...........................................................19
Section 1.3 Form of Documents Delivered to Trustee.........................................................19
Section 1.4 Acts of Holders; Record Dates..................................................................20
Section 1.5 Notices, Etc., to Trustee and Company..........................................................22
Section 1.6 Notice to Holders; Waiver......................................................................22
Section 1.7 Conflict with Trust Indenture Act..............................................................23
Section 1.8 Effect of Headings and Table of Contents.......................................................22
Section 1.9 Successors and Assigns.........................................................................23
Section 1.10 Separability Clause............................................................................23
Section 1.11 Benefits of Indenture..........................................................................23
Section 1.12 Governing Law, Choice of Forum.................................................................23
Section 1.13 Legal Holidays.................................................................................24
ARTICLE TWO - Note Forms.........................................................................................25
Section 2.1 Forms Generally................................................................................25
Section 2.2 Form of Face of Note...........................................................................25
Section 2.3 Form of Reverse of Note........................................................................27
Section 2.4 Form of Legends for Global Notes...............................................................29
Section 2.5 Form of Trustee's Certificate of Authentication................................................29
Section 2.6 Form of Assignment.............................................................................29
ARTICLE THREE - The Notes........................................................................................30
Section 3.1 Global Note; Depositary........................................................................30
Section 3.2 Amount.........................................................................................31
Section 3.3 Denominations..................................................................................31
Section 3.4 Execution, Authentication, Delivery and Dating.................................................31
Section 3.5 Temporary Notes................................................................................32
Section 3.6 Registration; Registration of Transfer and Exchange............................................32
Section 3.7 Mutilated, Destroyed, Lost and Stolen Notes....................................................33
Section 3.8 Payment of Interest and Principal; Additional Interest.........................................34
Section 3.9 Persons Deemed Owners..........................................................................36
Section 3.10 Cancellation...................................................................................36
Section 3.11 Computation of Interest........................................................................36
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE FOUR - Book-Entry Provisions for Global Notes............................................................37
Section 4.1 Applicability of Article.......................................................................37
Section 4.2 Book-Entry Provisions For Global Note..........................................................37
Section 4.3 Special Transfer Provisions....................................................................39
ARTICLE FIVE - Remedies of Holders on an Event of Default........................................................40
Section 5.1 Events of Default..............................................................................40
Section 5.2 Payment of Notes on Default; Suit Therefor.....................................................42
Section 5.3 Application of Monies Collected................................................................44
Section 5.4 Remedies Cumulative and Continuing.............................................................45
Section 5.5 Waiver of Defaults by Holders..................................................................45
Section 5.6 Limitation on Suits............................................................................45
Section 5.7 Control by Holders.............................................................................46
ARTICLE SIX - The Trustee........................................................................................47
Section 6.1 Certain Duties and Responsibilities............................................................47
Section 6.2 Notice of Defaults.............................................................................47
Section 6.3 Certain Rights of Trustee......................................................................47
Section 6.4 Not Responsible for Recitals or Issuance of Notes..............................................48
Section 6.5 May Hold Notes.................................................................................48
Section 6.6 Money Held in Trust............................................................................48
Section 6.7 Compensation and Reimbursement.................................................................49
Section 6.8 Disqualification; Conflicting Interests........................................................49
Section 6.9 Corporate Trustee Required; Eligibility........................................................50
Section 6.10 Resignation and Removal; Appointment of Successor..............................................50
Section 6.11 Acceptance of Appointment by Successor.........................................................51
Section 6.12 Merger, Conversion, Consolidation or Succession to Business....................................52
Section 6.13 Preferential Collection of Claims Against Company..............................................52
Section 6.14 Appointment of Authenticating Agent............................................................52
ARTICLE SEVEN - Lists of Holders of Notes and Convertible Notes and Reports by Trustee
and Company......................................................................................54
Section 7.1 Company to Furnish Trustee Names and Addresses of Holders of Notes and
Convertible Notes..............................................................................54
Section 7.2 Preservation of Information; Communications to Holders.........................................55
Section 7.3 Reports by Trustee.............................................................................55
Section 7.4 Reports by Company.............................................................................55
Section 7.5 Provision of Reports and Other Documents to Holders of Convertible Notes.......................56
ARTICLE Eight - Amendments, Supplements and Waivers..............................................................56
Section 8.1 Supplemental Indentures with Consent of Holders................................................56
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
Section 8.2 Execution of Supplemental Indentures...........................................................57
Section 8.3 Effect of Supplemental Indentures..............................................................57
Section 8.4 Conformity with Trust Indenture Act............................................................57
Section 8.5 Reference in Notes to Supplemental Indentures..................................................57
Section 8.6 Notice of Supplemental Indenture...............................................................57
ARTICLE NINE - Covenants.........................................................................................57
Section 9.1 Payment of Notes...............................................................................57
Section 9.2 Stay, Extension and Usury Laws.................................................................58
Section 9.3 Reports and Certificates.......................................................................58
Section 9.4 Taxes and Other Charges........................................................................59
Section 9.5 Conduct of Business............................................................................60
Section 9.6 Corporate Existence............................................................................60
Section 9.7 Maintenance of Properties......................................................................62
Section 9.8 Insurance......................................................................................62
Section 9.9 Restricted Payments............................................................................62
Section 9.10 Restrictions on Issuance and Sale of Sale of Capital Stock of Subsidiaries.....................62
Section 9.11 Restrictions on Subsidiary Mergers and Sales of Assets.........................................62
Section 9.12 Financial Covenants............................................................................63
Section 9.13 Limitation on Incurrence of Indebtedness and Issuance of Disqualified
Capital Stock..................................................................................63
Section 9.14 Liens..........................................................................................64
Section 9.15 Subsidiary Guarantees..........................................................................64
Section 9.16 Payment of Dividends from Subsidiaries.........................................................65
Section 9.17 Limitations on Dividends and Other Payment Restrictions Affecting
Subsidiaries...................................................................................65
Section 9.18 Investments and Acquisitions...................................................................66
Section 9.19 Limitation on Investment Company Status........................................................67
Section 9.20 Payments on Notes; Repurchase of Notes.........................................................67
Section 9.21 Transactions with Affiliates...................................................................67
Section 9.22 Payments for Consent...........................................................................68
Section 9.23 Solvency Test..................................................................................68
Section 9.24 Waiver of Certain Covenants....................................................................68
ARTICLE TEN - Merger, Consolidation and Transfer of Assets.......................................................69
Section 10.1 Company May Consolidate Etc. Only on Certain Terms.............................................69
Section 10.2 Successor Corporation to be Substituted........................................................69
ARTICLE ELEVEN - Security for Notes; Related Agreements..........................................................70
ARTICLE TWELVE - Redemption and Repurchase of Notes..............................................................70
Section 12.1 Optional Rights to Redeem Notes................................................................70
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C>
Section 12.2 Notice of Optional Redemption..................................................................71
Section 12.3 Effect of Notice of Optional Redemption........................................................72
Section 12.4 Right to Require Repurchase....................................................................72
Section 12.5 Notices; Method of Exercising Purchase Right, Etc..............................................73
Section 12.6 Repurchase Event...............................................................................74
Section 12.7 Certain Definitions............................................................................74
Section 12.8 Consolidation, Merger, Etc.....................................................................76
ARTICLE THIRTEEN - Defeasance and Covenant Defeasance............................................................76
Section 13.1 Option to Effect Legal Defeasance or Covenant Defeasance.......................................76
Section 13.2 Legal Defeasance and Discharge.................................................................76
Section 13.3 Covenant Defeasance............................................................................77
Section 13.4 Conditions to Legal or Covenant Defeasance.....................................................77
Section 13.5 Deposited Money and U.S. Government Obligations to be Held in Trust;
Other Miscellaneous Provisions................................................................79
Section 13.6 Repayment to Company...........................................................................79
Section 13.7 Reinstatement..................................................................................79
Section 13.8 Defeasance of Convertible Notes................................................................80
ARTICLE FOURTEEN - Conversion....................................................................................80
Section 14.1 Mandatory Conversion upon Stockholder Approval.................................................80
Section 14.2 Issuance of Common Stock on Conversion; No Adjustment for Interest or
Dividends......................................................................................80
Section 14.3 Disbursement of Shares.........................................................................81
Section 14.4 Taxes on Shares Issued.........................................................................81
Section 14.5 Reservation of Shares to Be Fully Paid; Compliance with Governmental
Requirements; Listing of Common Stock.........................................................82
ARTICLE FIFTEEN - Miscellaneous..................................................................................82
Section 15.1 No Recourse Against Others.....................................................................82
Section 15.2 Execution in Counterparts......................................................................82
Section 15.3 Waiver of Trial by Jury........................................................................82
</TABLE>
-iv-
<PAGE> 6
<TABLE>
<CAPTION>
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
- ----------- -----------------
<S> <C> <C>
310 (a)(1)......................................................................... 6.9
(a)(2)......................................................................... 6.9
(a)(3)......................................................................... Not Applicable
(a)(4)......................................................................... Not Applicable
(a)(5)......................................................................... 6.9
(b)............................................................................ 1.5, 6.8, 6.9, 6.10,
6.11
(c)............................................................................ Not applicable
311 (a)............................................................................ 6.13
(b)............................................................................ 6.13
(c)............................................................................ Not Applicable
312 (a)............................................................................ 7.1, 7.2
(b)............................................................................ 7.2
(c)............................................................................ 7.2
313 (a)............................................................................ 7.3
(b)(1)......................................................................... 7.3
(b)(2)......................................................................... 7.3
(c)............................................................................ 1.6, 7.3
(d)............................................................................ 7.3
314 (a)............................................................................ 1.5, 1.6, 7.4
(b)............................................................................ Not applicable
(c)(1)......................................................................... 1.2
(c)(2)......................................................................... 1.2
(c)(3)......................................................................... 7.4
(d)............................................................................ 7.4
(e)............................................................................ 1.2
(f)............................................................................ Not Applicable
315 (a)............................................................................ 6.1
(b)............................................................................ 1.6, 6.2
(c)............................................................................ 6.1
(d)............................................................................ 6.1
(e)............................................................................ 5.14
316 (a)(last sentence)............................................................. 1.1 (definition of
"Outstanding")
(a)(1)(A)...................................................................... 5.7
(a)(1)(B)...................................................................... 5.13
(a)(2)......................................................................... Not Applicable
(b)............................................................................ 5.6, 8.1
(c)............................................................................ 1.4(c)
317 (a)(1)......................................................................... 5.3
(a)(2)......................................................................... 5.4
(b)............................................................................ 6.6
318 (a)............................................................................ 1.7
(c)............................................................................ 1.7
</TABLE>
-v-
<PAGE> 7
INDENTURE, dated as of February 29, 2000, by and between
ALTIVA FINANCIAL CORPORATION, a corporation duly organized and existing under
the laws of the State of Delaware (herein called the "COMPANY"), having its
principal office at 1000 Parkwood Circle, Suite 600, Atlanta, Georgia 30339 and
UNITED STATES. TRUST COMPANY OF NEW YORK, a New York Banking corporation, as
Trustee (herein called the "TRUSTEE").
RECITALS OF THE COMPANY
A. The Company has duly authorized the execution and
delivery, of this Indenture to provide for the issuance of a series of its 12%
Secured Convertible Senior Notes due 2006 with an aggregate principal amount of
$19,382,000 (as amended, supplemented or otherwise modified from time to time,
the "NOTES").
B. All things necessary to make this Indenture a valid
agreement of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Notes by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Notes, as follows:
ARTICLE ONE -
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.1 Definitions.
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the
singular,
(b) all other terms used herein which are defined in the
Trust Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) all accounting determinations hereunder shall be made,
and all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with GAAP;
(d) the words "HEREIN," "HEREOF" and "HEREUNDER" and other
words of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision;
1
<PAGE> 8
(e) the word "INCLUDING" is not limiting;
(f) references in this Indenture to any agreement, other
document or law "AS AMENDED" or "AS AMENDED FROM TIME TO TIME," or to
"AMENDMENTS" of any document or law, shall include any amendments, supplements,
replacements, renewals or other modifications from time to time, provided in
the case of modifications to documents, such modifications are permissible
under this Indenture; and
"ACQUISITION" means any transaction, or any series of related
transactions, consummated on or after the Issue Date, by which the Company or
any of its Subsidiaries (i) acquires any going business or all or substantially
all of the assets of any firm, corporation or limited liability company, or
division thereof, whether through purchase of assets, merger or otherwise, or
(ii) directly or indirectly acquires (in one transaction or in a series of
transactions) at least a majority (in number of votes) of the securities of a
corporation which have ordinary voting power for the election of directors
(other than securities having such power only by reason of the happening of a
contingency) or a majority (by percentage or voting power) of the Outstanding
ownership interests of a partnership or a limited liability company.
"ACT" has the meaning set forth in Section 1.4 hereof.
"ADDED INTEREST" means any increases in the Interest Rate
pursuant to the second and third paragraphs of Section 3.8 hereunder.
"AFFILIATE" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing, provided, however, that for purposes of this definition neither
Value Partners nor Lutheran Brotherhood High Yield Fund shall be deemed to be
an Affiliate of the Company.
"AGREEMENT" means the Exchange Agreement between the Company
and the holders of the Company's 12 1/2% Subordinated Notes due 2001 providing
for the Exchange, as amended, supplemented or otherwise modified from time to
time.
"BENEFICIAL OWNERS" means the beneficial owners of the Notes
identified in the registry of Beneficial Owners maintained by the Trustee
pursuant to Section 3.6 of this Indenture.
"BENEFICIAL OWNER REGISTRY" has the meaning set forth in
Section 3.6.
"BOARD OF DIRECTORS" means either the Board of Directors of
the Company or any committee of such Board duly authorized to act for it
hereunder.
2
<PAGE> 9
"BOARD RESOLUTION" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly
adopted by the Board of Directors, and to be in full force and effect on the
date of such certification, and delivered to the Trustee.
"BUSINESS DAY" means any day other than (i) a Saturday or
Sunday or (ii) a day on which banking institutions in the City of Atlanta,
Georgia, or New York, New York are authorized or required by law or executive
order to remain closed.
"CAPITAL STOCK" in any Person means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents or interests in (however designated) capital stock in such Person,
including, with respect to a corporation or limited liability company,
Preferred Stock and other corporate stock and, with respect to a partnership,
including limited liability partnerships, partnership interests, whether
general or limited, and any rights (other than debt securities convertible into
corporate stock, partnership interests or other capital stock), warrants or
options exchangeable for or convertible into such corporate stock, partnership
interests or other capital stock.
"CAPITALIZED LEASE OBLIGATION" means indebtedness represented
by obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP; the amount of such indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
"COLLATERAL AGENT" means United States Trust Company of New
York and its successors and assigns.
"COLLATERAL DOCUMENTS" means any agreement entered into by
the Company, any Subsidiary of the Company or any other Person to provide
collateral or security for the repayment of the Notes or to Guarantee the Notes
and the Convertible Notes, including without limitation this Indenture, the
Security Agreements, the Value Partners Security Agreement and the
Intercreditor Agreement, in each case as defined herein or in the Agreement.
"COMMISSION" means the Securities and Exchange Commission, as
from time to time constituted.
"COMMON STOCK" means the common stock, par value $0.01 per
share, of the Company.
"COMPANY" has the meaning set forth in the first paragraph
hereof.
"CONSOLIDATED CASH FLOW" means, with respect to any Person
for any period, the Consolidated Net Income of such Person for such period plus
(i) provision for taxes based on income or profits of such Person and its
Subsidiaries for such period, to the extent that such provision for taxes was
included in computing such Consolidated Net Income, plus (ii) consolidated
interest expense of such Person and its Subsidiaries for such period, whether
paid or accrued and whether or not capitalized (including, without limitation,
amortization of debt
3
<PAGE> 10
issuance costs and original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letters of credit
or bankers' acceptance financings, and net payments (if any) pursuant to
Hedging Obligations), to the extent that any such expense was deducted in
computing such Consolidated Net Income, plus (iii) depreciation and
amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior
period) and other non-cash expenses (excluding any such non-cash expenses to
the extent that it represents an accrual of or reserve for cash expenses in any
future period or amortization of a prepaid cash expense that was paid in a
prior period) of such Person and its Subsidiaries for such period to the extent
that such depreciation, amortization and other non-cash expenses were deducted
in computing such Consolidated Net Income, minus (v) non-cash revenues
increasing such Consolidated Net Income for such period, including without
limitation non-cash income recorded in connection with the ownership of
mortgage related securities (excluding any non-cash income to the extent it
represents an accrual of cash revenues in any future period), in each case, on
a consolidated basis and determined in accordance with GAAP. Notwithstanding
the foregoing, the provision for taxes based on the income or profits of, and
the depreciation and amortization and other non-cash charges of, a Subsidiary
of a Person shall be added to Consolidated Net Income to compute Consolidated
Cash Flow only to the extent (and in the same proportion) that the Net Income
of such Subsidiary was included in calculating the Consolidated Net Income of
such Person and only if a corresponding amount would be permitted at the date
of termination to be dividended to the Company by such Subsidiary without prior
approval of any Person (that has not been obtained), pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that Subsidiary or
its stockholders; provided that any contingent restriction contained in any
thereof shall not be deemed to prevent any such dividend until the applicable
contingency shall have occurred.
"CONSOLIDATED NET INCOME" means, with respect to any Person
for any period, the aggregate of the Net Income of such Person and its
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income of any Person that is not a
Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash (or to the extent converted into cash) to the referent Person or a
Wholly-Owned Subsidiary thereof, (ii) the Net Income of any Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Subsidiary of its Net Income is not at the date of
determination permitted without prior approval of any Person (that has not been
obtained) or, directly or indirectly, by operation of the terms of its charter
or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary or its stockholders
unless waived; provided that any contingent restriction contained in any
thereof shall not be deemed to prevent any such dividend until the applicable
contingency shall have occurred, (iii) the Net Income of any Person acquired in
a pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded, (iv) the cumulative effect of a change in
accounting principles shall be excluded and (v) any net after-tax extraordinary
gains or losses shall be excluded.
4
<PAGE> 11
"CONSOLIDATED NET WORTH" of a Person means as of the date of
determination all amounts that would be included under stockholders' equity on
a consolidated balance sheet of the Person and its Subsidiaries determined in
accordance with GAAP.
"CONSOLIDATED TANGIBLE NET WORTH" of a Person means as of the
date of determination all amounts that would be included under stockholders'
equity on a consolidated balance sheet of the Person and its Subsidiaries
determined in accordance with GAAP less an amount equal to the consolidated
intangible assets of the Person and its Subsidiaries determined in accordance
with GAAP.
"CONVERTIBLE NOTE OBLIGATIONS" means all present and future
liabilities, obligations and indebtedness of the Company, any of its
Subsidiaries or any other obligor owing to any holder of Convertible Notes
under or in connection with the Value Partners Agreement, the Convertible Notes
or the Collateral Documents, including without limitation obligations in
respect of (i) principal, premium, if any, and interest on the Convertible
Notes, (ii) reimbursement of costs, fees, taxes or other items and (iii)
indemnification and related obligations.
"CONVERTIBLE NOTE REGISTRIES" has the meaning set forth in
Section 1.4(g).
"CONVERTIBLE NOTES" means the $14,000,000 principal amount of
12% Secured Convertible Senior Notes issued to Value Partners pursuant to the
Value Partners Agreement, as amended, supplemented or otherwise modified from
time to time.
"CORPORATE TRUST OFFICE" means with respect to the Trustee,
2001 Ross Avenue Suite 2700, Dallas, Texas, or such other office as the Trustee
or successor shall designate from time to time.
"DEFAULT" means any event which is, or after notice or
passage of time, or both, would be, an Event of Default.
"DEFAULTED INTEREST" has the meaning specified in Section
3.8.
"DEFINITIVE NOTE" is defined in Section 4.3(b).
"DEPOSITARY" has the meaning specified in Section 3.1.
"DISQUALIFIED CAPITAL STOCK" means any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is
redeemable at the option of the holder thereof, in whole or in part on, or
prior to, or is exchangeable for debt securities of the Company or its
Subsidiaries prior to, the Stated Maturity of principal of the Notes, provided
that only the amount of such Capital Stock that
5
<PAGE> 12
matures or is redeemable prior to the Stated Maturity of principal of the Notes
shall be deemed to be Disqualified Capital Stock.
"ELIGIBLE COLLATERAL" means any asset or property of the
Company other than the Note Security.
"EVENT OF DEFAULT" means any event specified in Section 5.1.
"EXCESS SPREAD" means (i) with respect to a "pool" of
Receivables that has been sold to a trust or other Person in a securitization,
the excess of (a) the weighted average coupon on each pool of Receivables sold
over (b) the sum of the pass-through interest rate plus a normal servicing fee,
a trustee fee, an insurance fee and an estimate of annual future credit losses
related to such assets, in each case calculated in accordance with any
applicable GAAP, and (ii) with respect to Receivables that have been sold to a
Person in a whole loan sale, the cash flow of the Company and its Subsidiaries
from such Receivables, net of, to the extent applicable, a normal servicing
fee, a trustee fee, an insurance fee and an estimate of annual future credit
losses related to such assets, in each case calculated in accordance with any
applicable GAAP.
"EXCESS SPREAD RECEIVABLES" of a Person means the contractual
or certified right to Excess Spread capitalized on such Person's consolidated
balance sheet (the amount of which shall be the present value of the Excess
Spread, calculated in accordance with GAAP, net of any allowance for losses on
loans sold with recourse or other liability allocable thereto, to the extent
not otherwise reflected in such amount). Excess Spread Receivables (a) include
mortgage-related securities backed by Receivables sold by the Company or any
Subsidiary and (b) do not include any servicing rights.
"EXCHANGE" has the meaning set forth in the Agreement.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"FIXED CHARGES" means, with respect to the Company and its
Subsidiaries for any period, the sum, without duplication, of:
(i) the consolidated interest expense of the Company
and its Subsidiaries for such period, whether paid or
accrued, including, without limitation, amortization of debt
issuance costs and original issue discount, non-cash interest
payments, the interest component of any deferred payment
obligations, the interest component of all payments
associated with Capitalized Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of
letter of credit or bankers' acceptance financings, and net
of the effect of all payments made or received pursuant to
Hedging Obligations; plus
(ii) the consolidated interest of the Company and
its Subsidiaries that was capitalized during such period;
plus
6
<PAGE> 13
(iii) any interest expense on Indebtedness of
another Person that is Guaranteed by the Company or one of
its Subsidiaries or secured by a Lien on assets of the
Company or one of its Subsidiaries, whether or not such
Guarantee or Lien is called upon; plus
(iv) the product of (a) all dividends, whether paid
or accrued and whether or not in cash, on any series of
Preferred Stock of the Company or any of its Subsidiaries,
other than dividends on Capital Stock payable solely in
Capital Stock of the Company (other than Disqualified Capital
Stock) or to the Company or a Subsidiary of the Company,
times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined
federal, state and local statutory tax rate of the Company
and its Subsidiaries, expressed as a decimal, in each case,
on a consolidated basis and in accordance with GAAP.
"FIXED CHARGE COVERAGE RATIO" means with respect to the
Company and its Subsidiaries for any period, the ratio of the Consolidated Cash
Flow of the Company for such period to the Fixed Charges of the Company and its
Subsidiaries for such period. In the event that the Company or any of its
Subsidiaries Incurs, repays, repurchases or redeems any Indebtedness subsequent
to the commencement of the period for which the Fixed Charge Coverage Ratio is
being calculated and on or prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation
Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro
forma effect to such Incurrence, repayment, repurchase or redemption of
Indebtedness, and, if applicable, the use of the proceeds therefrom to repay
other Indebtedness as if the same had occurred at the beginning of the
applicable four-quarter reference period.
"GAAP" means generally accepted accounting principles as in
effect from time to time, consistently applied.
"GLOBAL NOTE" means a Note bearing the legend prescribed in
Section 2.4 evidencing all or part of the Notes, authenticated and delivered to
the Depositary or its custodian, and registered in the name of such Depositary
or its nominee.
"GLOBAL NOTE HOLDER" has the meaning specified in Section
3.1.
"GUARANTEE" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person and any obligation, direct or indirect.
contingent or otherwise, of such Person (i) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Indebtedness or other
obligation of such Person (whether arising by virtue of partnership
arrangements, or by agreements to keep-well, to purchase assets, goods,
securities or services, to take-or-pay or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in
any other manner the obligee of such Indebtedness or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); provided, however, that the term "GUARANTEE" shall not
include endorsements for collection or deposit in
7
<PAGE> 14
the ordinary course of business. The term "GUARANTEE" used as a verb has a
corresponding meaning.
"GUARANTOR" means any Person Guaranteeing any Indebtedness or
other obligation.
"HEDGING OBLIGATIONS" means with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements with respect to
Indebtedness that is permitted by the terms of the Notes and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates or the value of foreign currencies purchased or received by
such Person in the ordinary course of business.
"HOLDER" means a Person in whose name a Note is registered on
the Note Register.
"INCUR" means issue, assume, Guarantee, incur or otherwise
become liable for. The term "Incurrence" when used as a noun shall have a
corresponding meaning. The accretion of principal of a non-interest bearing or
other discount security shall be deemed the Incurrence of Indebtedness.
"INDEBTEDNESS" means, with respect to any Person on any date
of determination (without duplication): (i) the principal of and premium, if
any, in respect of (A) indebtedness of such Person for money borrowed, (B)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable; (ii) all Capital
Lease Obligations of such Person; (iii) all obligations of such Person issued
or assumed as the deferred purchase price of property, all conditional sale
obligations of such Person and all obligations of such Person under any title
retention agreement (including any such obligations under repurchase
agreements), but excluding trade accounts payable and expense accruals arising
in the ordinary course of business; (iv) all obligations of such Person for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction; (v) the amount of all obligations of such Person
with respect to the redemption, repayment or other repurchase of any
Disqualified Stock or, in the case of a Subsidiary of such Person, any
Preferred Stock (vi) all obligations of the type referred to in clauses (i)
through (v) of other Persons and all dividends of other Persons the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, Guarantor or otherwise, including by means of any
Guarantee; (vii) all obligations of the type referred to in clauses (i) through
(vi) of other Persons secured by any Lien on any property or asset of such
Person, and (viii) to the extent not otherwise included in this definition,
Hedging Obligations of such Person. The amount of Indebtedness of any Person at
any date shall be the outstanding balance at such date of all unconditional
obligations, as described above, and the amount of any Indebtedness under
clause (vi) of this definition for which such Person is responsible or liable,
directly or indirectly, including by way of any Guarantee. Notwithstanding the
foregoing, any securities issued in a securitization by a Securitization
Subsidiary formed by or on behalf of a Person and to which Receivables have
been sold or otherwise transferred by or on behalf of such Person or its
Subsidiaries shall not be treated as Indebtedness of such Person or its
8
<PAGE> 15
Subsidiaries, regardless whether such securities are treated as indebtedness
for tax purposes, provided that (1) neither the Company nor any of its
Subsidiaries (other than the Securitization Subsidiary) (a) provides credit
support of any kind (including any undertaking, agreement or instrument that
would constitute Indebtedness), except for credit support in the form of
"over-collateralization" of the senior certificates issued in, or subordination
of or recourse to all or a portion of Excess Spread Receivables attributable
to, such securitization, in each case to the extent of the book value of such
Excess Spread Receivables, or (b) is directly or indirectly liable (as a
guarantor or otherwise) for such securities, and (2) no default with respect to
such securities would permit (upon notice, lapse of time or both) any holder of
any other Indebtedness of the Company or any of its Subsidiaries to declare a
default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its Stated Maturity.
"INDENTURE" shall mean this Indenture by and between the
Company and the Trustee.
"INTERCREDITOR AGREEMENT" has the meaning set forth in the
Agreement.
"INTEREST RATE" means 12% per annum, subject to increase as
specified in the second and third paragraphs of Section 3.8 hereof.
"INTEREST PAYMENT DATE" has the meaning set forth in Section
3.8 hereof.
"INVESTMENT" of a Person means any loan, advance (other than
commission, travel and similar advances to officers and employees made in the
ordinary course of business), extension of credit (other than accounts
receivable arising in the ordinary course of business on terms customary in the
trade) or contribution of capital by such Person; stocks, bonds, mutual funds,
partnership interests, notes, debentures or other securities owned by such
Person; and structured notes, derivative financial instruments and other
similar instruments or contracts owned by such Person.
"IO SECURITIES" means a security representing an undivided
interest in all or a portion of the interest payments due on a pool of
Receivables which back the mortgage-related security to which the IO Securities
relate.
"ISSUE DATE" means February 29, 2000.
"JUNIOR INDEBTEDNESS" means any Indebtedness of the Company
subordinated in right of payment of either principal, premium (if any) or
interest thereon to the Notes.
"LEGAL DEFEASANCE" has the meaning specified in Section 13.2.
"LEGAL HOLIDAY" means any Saturday, Sunday or other day on
which banks in the States of New York, Texas or Georgia are authorized or
obligated by law to be closed for business.
9
<PAGE> 16
"LIENS" means any mortgage, charge, pledge, lien (statutory
or otherwise), security interest, hypothecation, assignment for security,
claim, or preference or priority or other encumbrance (whether or not filed,
recorded or otherwise perfected under applicable law) upon or with respect to
any asset or property owned by a Person.
"LIQUID ASSETS" means: (i) cash; (ii) any of the following
instruments that have a remaining term to maturity not in excess of 90 days
from the determination date: (a) repurchase agreements on obligations of, or
are guaranteed as to timely receipt of principal and interest by, the United
States or any agency or instrumentality thereof when such obligations are
backed by the full faith and credit of the United States, provided that the
party agreeing to repurchase such obligations is a primary dealer in U.S.
Government securities, (b) federal funds and deposit accounts, including but
not limited to certificates of deposit, time deposits and bankers' acceptances
of any U.S. depository institution or trust company incorporated under the laws
of the United States or any state thereof, provided that the debt of such
depository institution or trust company at the date of acquisition thereof has
been rated by Standard & Poor's Corporation in the highest short-term rating
category or has an equivalent rating from another nationally-recognized rating
agency, or (c) commercial paper of any corporation incorporated under the laws
of the United States or any state thereof that on the date of acquisition is
rated investment grade by Standard & Poor's Corporation or has an equivalent
rating from another nationally-recognized rating agency; (iii) any debt
instrument which is an obligation of, or is guaranteed as to the receipt of
principal and interest by, the United States, its agencies or any U.S.
Government sponsored enterprise and (iv) the amount of unused credit available
to the Company in the form of Permitted Warehouse Indebtedness under lines of
such Indebtedness in existence on the determination date which may be secured
by existing net loans or other Receivables held for sale by the Company on the
determination date.
"LIQUIDATED DAMAGES" shall have the meaning set forth in the
Registration Rights Agreement.
"MARK-TO-MARKET ADJUSTMENTS" shall have the meaning set forth
in Section 9.12(a)(1).
"MATERIAL ADVERSE EFFECT" has the meaning set forth in the
Agreement
"MATURITY", when used with respect to any Note, means the
date on which the principal of such Note or an installment of principal becomes
due and payable as therein or herein provided, whether at the Stated Maturity
or by declaration of acceleration, call for redemption, upon repurchase or
otherwise.
"MATURITY DATE" shall mean the date of Maturity specified in
a Note and such date will be the "STATED MATURITY" of the Note.
"MCI" means The Money Centre, Inc., a North Carolina
corporation.
10
<PAGE> 17
"NET INCOME" means, with respect to any Person, the net
income (loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of Preferred Stock dividends.
"NOTES" has the meaning set forth in the Recitals, provided
that upon consummation of the Exchange the Notes and the Convertible Notes
shall be considered as a single class of Pari Passu Indebtedness of the
Company. Notwithstanding any provision to the contrary continued in this
Indenture, references herein to actions by the Holders of the Notes shall in
all cases include the holders of the Convertible Notes, such holders acting
together as the holders of a single class of securities of the Company.
"NOTE OBLIGATIONS" means all present and future liabilities,
obligations and Indebtedness of the Company, any of its Subsidiaries or any
other obligor owing to any Holder under or in connection with the Agreement or
any Related Agreement, including without limitation obligations in respect of
(i) principal, premium, if any, and interest on the Notes, (ii) reimbursement
of costs, fees, taxes or other items and (iii) indemnification and related
obligations.
"NOTE REGISTER" has the meaning set forth in Section 3.6.
"NOTE REGISTRAR" has the meaning specified in Section 3.6.
"NOTE SECURITY" means all assets now or from time to time
after the Issue Date subjected to a security interest or other charge (or
intended to be so subjected pursuant to the Agreement or any Related Agreement)
to secure the payment or performance of any of the Note Obligations.
"OBLIGOR" means the Company or any Guarantor.
"OFFICER" means the Chairman of the Board, the President, the
Chief Financial Officer, the Controller, the Secretary, any Assistant Secretary
or any Vice President of the Company.
"OFFICERS' CERTIFICATE" means, unless otherwise specified
herein, a certificate signed by two Officers, one of whom must be the Chairman
of the Board, the President, the Chief Executive Officer or the Chief Financial
Officer of the Company.
"OPINION OF COUNSEL" means a written opinion of counsel, who
may be counsel for the Obligors and who shall be acceptable to the Trustee.
"OUTSTANDING" when used as of any particular time with
reference to the Notes, means all of the Notes theretofore issued by the
Company and outstanding, which shall not include (x) the Notes theretofore
canceled by the Company or surrendered to the Trustee for cancellation, and (y)
the Notes for the transfer or exchange of or in lieu of or in substitution for
which other Notes shall have been delivered by the Trustee pursuant to this
Indenture, and (ii)
11
<PAGE> 18
when used as of any particular time with reference to the Convertible Notes
shall have the meaning set forth in the Convertible Notes. In determining
whether the registered holders of the requisite aggregate principal amount of
Notes and Convertible Notes have concurred in any demand, request, direction,
consent, or waiver under the Notes, Notes which are owned or held by or for the
account of the Company, or by any other obligor on the Notes, or by any
Affiliate of the Company or any other obligor on the Notes, shall be
disregarded and deemed not to be Outstanding for the purpose of any such
determination. Notes so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee shall have the exclusive right to vote
such Notes and is not a Person which is an Affiliate of the Company or any
other obligor on the Notes.
"PARI PASSU INDEBTEDNESS" means any Indebtedness of the
Company that is pari passu in right of payment of principal, premium (if any)
and interest thereon to the Notes.
"PAYING AGENT" means any Person authorized by the Company to
pay the principal of or any premium or interest on any Notes on behalf of the
Company or, if the Company is acting as its own Paying Agent, the Company.
"PERMITTED INDEBTEDNESS" means:
(i) Permitted Warehouse Indebtedness of the Company
and its Subsidiaries, provided that to the extent any such
Indebtedness ceases to constitute Permitted Warehouse
Indebtedness of the Company or a Subsidiary, such event shall
be deemed to constitute the Incurrence of such Indebtedness
(and any related Guarantees, but without duplication) by the
Company or such Subsidiary, as the case may be;
(ii) the Note Obligations and Convertible Note
Obligations;
(iii) Indebtedness of the Company or a Subsidiary
outstanding on the Issue Date;
(iv) Hedging Obligations;
(v) Capital Lease Obligations, mortgage financings
or purchase money obligations, in each case incurred for the
purpose of financing all or any part of the purchase price,
lease or cost of construction or improvement of property,
plant or equipment used in the business of the Company or
such Subsidiary, in an aggregate principal amount not to
exceed $3.0 million at any time outstanding;
(vi) intercompany Indebtedness between or among the
Company and any Subsidiary, provided, however, that (i) if
the Company is the obligor on such Indebtedness, such
Indebtedness is expressly subordinated to the prior payment
in full in cash of all Note Obligations and (ii) (A) any
subsequent issuance or transfer of Capital Stock that results
in any such Indebtedness being held by a
12
<PAGE> 19
Person other than the Company or a Subsidiary and (B) any
sale or other transfer of any such Indebtedness to a Person
that is not either the Company or a Subsidiary shall be
deemed, in each case, to constitute an Incurrence of such
Indebtedness by the Company or such Subsidiary, as the case
may be; and
(vii) Permitted Refinancing Indebtedness in exchange
for, or the net proceeds of which are used to refund,
refinance or replace Indebtedness Incurred pursuant to
Section 9.13(a) or clause (iii) or (v) above.
"PERMITTED LIENS" means, with respect to the Company and any
Subsidiary:
(i) Liens for taxes, assessments or governmental
charges or levies on the assets or property of the Company or
any Subsidiary if the same shall not at the time be
delinquent or thereafter can be paid without penalty, or are
being contested in good faith and by appropriate proceedings
and for which adequate reserves in accordance with GAAP shall
have been set aside on its books;
(ii) Liens imposed by law, such as carriers',
warehousemen's and mechanics' liens and other similar liens
arising in the ordinary course of business which secure
payment of obligations not more than 60 days past due;
(iii) Liens arising out of pledges or deposits under
worker's compensation laws, unemployment insurance, old age
pensions or other social security or retirement benefits, or
similar legislation;
(iv) Utility easements, building restrictions and
such other encumbrances or charges against real property as
are of a nature generally existing with respect to properties
of a similar character and which do not in any material way
affect the marketability of the same or interfere with the
use thereof in the business of the Company or its
Subsidiaries;
(v) Liens securing Permitted Indebtedness;
(vi) Liens with respect to IO Securities, Residual
Certificates or excess servicing rights arising from the
documents creating and governing such securities,
certificates and rights as a result of the subordinate nature
of such assets to other senior interests created and governed
by such documents; and
(vii) Liens on the Capital Stock of, or the assets
or property of, a Subsidiary acquired by the Company in
existence at the time of such acquisition provided that (a)
such Liens are not created, incurred or assumed in connection
with, or in contemplation of, such acquisition and (b) such
Liens do not extend to assets or property owned by the
Company or any other Subsidiary.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness
of the Company or any of its Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend,
13
<PAGE> 20
refinance, renew, replace, defease or refund Indebtedness of the Company or any
of its Subsidiaries, provided that (i) the principal amount (or accreted value,
if applicable) of such Permitted Refinancing Indebtedness does not exceed the
principal amount (or accreted value, if applicable), plus accrued interest on,
the Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of reasonable expenses incurred in connection
therewith, including premiums paid, if any, to the holders thereof); (ii) such
Permitted Refinancing Indebtedness has a final maturity date at or later than
the final maturity date of, and has a Weighted Average Life to Maturity equal
to or greater than the Weighted Average Life to Maturity of, the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded is subordinated in right of payment to the Notes, such Permitted
Refinancing Indebtedness has a final maturity date later than 91 days after the
final maturity date of, and is subordinated in right of payment to, the Notes
on terms at least as favorable to the Holders as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either
by the Company or by the Subsidiary which is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"PERMITTED WAREHOUSE INDEBTEDNESS" means Indebtedness of any
Person under any warehouse line of credit, loan repurchase agreement or similar
facility or under any commercial paper program (a) that is incurred for the
purpose of funding the origination or purchase of Receivables that are intended
to be sold to investors and are eligible to be recorded as held for sale on the
consolidated balance sheet of such Person in accordance with GAAP and are so
recorded, (b) that in the case of any warehouse line of credit or similar
facility is, or, in the case of any commercial paper program, the letters of
credit or revolving credit facility providing credit enhancement or liquidity
backup for such commercial paper program are, secured by Receivables or
securities backed by such receivables or any combination thereof owned by such
Person, (c) the outstanding amount of which shall not exceed 100% of the
aggregate principal amount of the Receivables and/or securities backed by such
receivables securing such Indebtedness and (d) that has not been outstanding in
excess of 360 days.
"PERSON" means any individual, corporation, partnership,
joint venture, association, joint-stock company, limited liability company,
trust, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
"PLACE OF PAYMENT" means the place or places where the
principal of and any premium and interest on the Notes are payable.
"PREDECESSOR NOTE" of any particular Note means every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 3.7 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Note shall be deemed to evidence the same
debt as the mutilated, destroyed, lost or stolen Note.
14
<PAGE> 21
"PREFERRED STOCK" means with respect to any Person, any
Capital Stock of any class or classes (however designated) which is preferred
as to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over shares of Capital Stock of any other class in such Person.
"PRINCIPAL" of a Note means the principal of the Note payable
on the Note which is due or overdue or is to become due at the relevant time.
"QUALIFIED INSTITUTIONAL BUYER" or "QIB" has the meaning
specified in Rule 144A under the Securities Act.
"RECEIVABLES" means loans, leases and other credit
receivables commonly financed by companies in the mortgage lending or consumer
finance business in the United States which are purchased or originated by the
Company or any Subsidiary of the Company in the ordinary course of business.
"RECORD DATE" means, with respect to any Interest Payment
Date, the June 1 or December 1 preceding an Interest Payment Date of June 15
and December 15, respectively.
"REDEMPTION DATE," when used with respect to any Note to be
redeemed, means the date fixed for such redemption by or pursuant to the
provisions of the Note.
"REDEMPTION PRICE," when used with respect to any Note to be
redeemed, means the price at which it is to be redeemed pursuant to the
provisions of the Note.
"REGISTRATION RIGHTS AGREEMENT" has the meaning set forth in
the Agreement.
"RELATED AGREEMENTS" means the Notes and the Collateral
Documents.
"REPURCHASE EVENT" has the meaning set forth in Section 12.6.
"REPURCHASE PRICE," when used with respect to any Note to be
repurchased, means the price at which it is to be repurchased pursuant to the
terms of the Notes.
"RESIDUAL CERTIFICATE" means a security (whether identified
as a certificate, instrument or interest) representing the residual interest in
a real estate mortgage investment conduit or other entity formed by the Company
or a Subsidiary and in which the Company or a Subsidiary has retained a
residual interest which is only payable on a fully subordinated basis after all
regular interests in and/or debt issued by such entity has been fully repaid.
"RESPONSIBLE OFFICER", when used with respect to the Trustee,
means the chairman or any vice-chairman of the board of directors, the chairman
or any vice-chairman of the executive committee of the board of directors, the
chairman of the trust committee, the president, any vice president, any
assistant vice president, the secretary, any assistant secretary, the
treasurer, any assistant treasurer, the cashier, any assistant cashier, any
senior trust officer,
15
<PAGE> 22
trust officer or assistant trust officer, the controller or any assistant
controller or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers and also
means, with respect to a particular corporate trust matter, any other officer
to whom such matter is referred because of his knowledge of and familiarity
with the particular subject.
"RESTRICTED PAYMENT" means
(i) the declaration, payment or setting apart of any
funds for the payment of any dividend on, or making of any
distribution to holders of, the Capital Stock of the Company
or any Subsidiary of the Company (including, without
limitation, any payment in connection with any merger or
consolidation involving the Company or any of its
Subsidiaries) or make any payment or distribution to or for
the benefit of the direct or indirect holders of the Capital
Stock of the Company or any Subsidiary of the Company (other
than (a) dividends or distributions payable in its Capital
Stock (other than Disqualified Capital Stock) and (b)
dividends or distributions payable to the Company or a
Subsidiary of the Company (and if such Subsidiary is not a
Wholly-Owned Subsidiary, to its other holders of Capital
Stock on a pro rata basis);
(ii) the purchase, redemption or other acquisition
or retirement for value, directly or indirectly, of any
Capital Stock of the Company or any Subsidiary of the Company
(other than any such Capital Stock owned by the Company or
any of its Subsidiaries and other than the acquisition of
Capital Stock in Subsidiaries solely in exchange for Capital
Stock (other than Disqualified Capital Stock ) of the
Company); or
(iii) the making of any principal payments on, or
repurchase, redemption, defeasance, retirement or other
acquisition for value, directly or indirectly, of any Junior
Indebtedness or Pari Passu Indebtedness, prior to the Stated
Maturity of principal or scheduled redemption or defeasance
of, or any scheduled sinking fund payment on, such Junior
Indebtedness or Pari Passu Indebtedness.
Notwithstanding the above, a Restricted Payment shall not include: (A)
any future payments required to be made to the former shareholders of MCI
pursuant to the Stock Purchase Agreement, dated as of July 15, 1999, by and
among Rodney D. Atkinson, Charles R. Cunningham, Stuart A. Lewis, John Richard
Love, Stephen L. Walker, MCI and the Company; or (B) the repurchase,
redemption, defeasance, retirement or other acquisition for value directly or
indirectly of the Notes in accordance with the terms of the Indenture
(including without limitation Section 9.20 hereof).
"SECURITIES ACT" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
16
<PAGE> 23
"SECURITY AGREEMENTS" shall have the meaning specified in the
Agreement.
"SECURITIZATION SUBSIDIARY" means a Subsidiary of the Company
formed in connection with a securitization of Receivables (i) all the Capital
Stock of which (other than directors' qualifying shares and shares held by
other Persons to the extent such shares are required by applicable law to be
held by a Person other than the Company or a Subsidiary) is owned by the
Company or one or more of its Subsidiaries, (ii) that has no assets other than
Excess Spread Receivables created in such securitization, (iii) that conducts
no business other than holding such Excess Spread Receivables, and (iv) that
has no Indebtedness (other than short-term Indebtedness to the Company or any
Wholly-Owned Subsidiary attributable to the purchase by such Subsidiary from
the Company or such Wholly-Owned Subsidiary of such Receivables, which
Indebtedness is paid in full upon closing of such securitization).
"SERIES ISSUE DATE" means the date on which a series of Notes
is issued under this Indenture.
"SIGNIFICANT SUBSIDIARY" means, with respect to any Person,
any Subsidiary which is a "significant subsidiary" (as defined in Article 1,
Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act) of
such Person.
"SPECIAL RECORD DATE" for the payment of any Defaulted
Interest means a date fixed by the Company pursuant to Section 3.8.
"STATED MATURITY" shall have the meaning set forth in the
definition of "MATURITY DATE."
"STOCKHOLDER APPROVALS" means the approval of the
stockholders of the Company, pursuant to the Agreement, of (i) the issuance of
Common Stock upon mandatory conversion of the applicable portion of the Notes
and (ii) the issuance of Common Stock upon conversion of the Convertible Notes
in accordance with their terms.
"SUBSIDIARY" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or indirectly,
by such Person or one or more Subsidiaries of such Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or one or more Subsidiaries
of such Person (or any combination thereof).
"SUBSTANTIAL PORTION" means, with respect to the assets of
the Company and its Subsidiaries, assets which (i) represent more than 10% of
the consolidated assets of the Company and its Subsidiaries as would be shown
in the consolidated financial statements of the Company and its Subsidiaries as
at the beginning of the twelve-month period ending with the month in which such
determination is made, or (ii) is responsible for more than 10% of the
Consolidated
17
<PAGE> 24
Net Income of the Company and its Subsidiaries as reflected in the financial
statements referred to in clause (i) above.
"SUCCESSOR COMPANY" has the meaning specified in Section
10.1.
"SUPERMAJORITY COVENANTS" has the meaning set forth in
Section 9.24.
"TRADING DAY" shall mean (x) if the applicable security is
listed or admitted for trading on the New York Stock Exchange, the Nasdaq Stock
Market (National Market) or another national security exchange, a day on which
the New York Stock Exchange, the Nasdaq Stock Market (National Market) or
another national security exchange is open for business or (y) if the
applicable security is quoted on the Nasdaq National Market, a day on which
trades may be made thereon or (z) if the applicable security is not so listed,
admitted for trading or quoted, any day other than a Saturday or Sunday or a
day on which banking institutions in the State of Georgia are authorized or
obligated by law or executive order to close.
"TRUSTEE" means the Person named as the "TRUSTEE" in the
first paragraph of this instrument until a successor Trustee shall have become
such pursuant to the applicable provisions of this Indenture and thereafter
"TRUSTEE" shall mean or include each Person who is then a Trustee hereunder,
and if at any time there is more than one such Person. "TRUSTEE" as used with
respect to the Notes shall mean the Trustee with respect to the Notes.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939
as in force at the date as of which this instrument was executed; provided,
however, that in the event the Trust Indenture Act of 1939 is amended after
such date, "TRUST INDENTURE ACT" means, to the extent required by any such
amendment, the Trust Indenture Act of 1939 as so amended.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency, or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the issuer's option.
"VALUE PARTNERS AGREEMENT" means the Amended and Restated
Secured Convertible Senior Note Purchase Agreement dated as of February 29,
2000 by and between the Company and Value Partners, Ltd., as amended,
supplemented or otherwise modified from time to time.
"VALUE PARTNERS SECURITY AGREEMENT" means the Amended and
Restated Pledge and Security Agreement, dated as of February 29, 2000 for
reference purposes only, between the Company and Value Partners, Ltd., as
amended, supplemented or otherwise modified from time to time to time.
"VICE PRESIDENT", when used with respect to the Trustee,
means any vice president (but shall not include any assistant vice president),
whether or not designated by a number or a word or words added before or after
the title "vice president."
18
<PAGE> 25
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to
any Indebtedness at any date, the number of years obtained by dividing (i) the
sum of the products obtained by multiplying (a) the amount of each then
remaining installment, sinking fund, serial maturity or other required payments
of principal, including payment at Stated Maturity, in respect thereof, by (b)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"WHOLLY-OWNED SUBSIDIARY" means a Subsidiary all of the
Capital Stock of which is owned by the Company or another Wholly-Owned
Subsidiary.
Section 1.2 Compliance Certificates and Opinions.
Upon any application or request by any Obligor to the Trustee
to take any action under any provision of this Indenture, the Obligor shall
furnish to the Trustee such certificates and opinions as may be required under
the Trust Indenture Act. Each such certificate or opinion shall be given in the
form of an Officers' Certificate, if to be given by an officer of the Obligor,
or an Opinion of Counsel, if to be given by counsel, and shall comply with the
requirements of the Trust Indenture Act and any other requirements set forth in
this Indenture.
Every certificate or opinion (other than the Officers'
Certificate delivered under Section 10.4 hereof) with respect to compliance
with a condition or covenant provided for in this Indenture shall include:
(a) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions herein
relating thereto;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(c) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and
(d) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with;
Section 1.3 Form of Documents Delivered to Trustee.
In any case where several matters are required to be
certified by, or covered by an opinion of, any specified Person, it is not
necessary that all such matters be certified by, or covered by the opinion of,
only one such Person, or that they be so certified or covered by only one
document, but one such Person may certify or give an opinion with respect to
some matters and one or more other such Persons as to other matters, and any
such Person may certify or give an opinion as to such matters in one or several
documents.
19
<PAGE> 26
Any certificate or opinion of an officer of any Obligor may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate or opinion of counsel may
be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an officer or officers of the Obligor
stating that the information with respect to such factual matters is in the
possession of the Obligor, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
Section 1.4 Acts of Holders; Record Dates.
(a) When herein it is provided that the registered holders of
a specified percentage in aggregate principal amount of the Notes and the
Convertible Notes may take any action (including the making of any demand or
request, the giving of any notice, consent or waiver or the taking of any other
action), the fact that at the time of taking any such action, the registered
holders of such specified percentage have joined therein may be evidenced (a)
by any instrument or any number of instruments of similar tenor executed by
such registered holders in person or by agent or proxy appointed in writing and
delivered to the Trustee, or (b) by the registered of such registered holders
voting in favor thereof at any meeting of registered holders duly called and
held in accordance with the provisions hereof and applicable law, a copy of
which shall be delivered to the Trustee, or (c) by a combination of such
instrument or instruments and any such record of such a meeting of such
registered holders. Such instrument or instruments or such record (and the
action embodied therein and evidenced thereby) are herein sometimes referred to
as the "ACT" of the Holders. Such Acts shall become effective upon delivery of
such instrument or instruments or such record to the Trustee. Proof of
execution of any such instrument or authentication of such record shall be
sufficient for any purpose of this Indenture and (subject to Section 6.1)
conclusive in favor of the Trustee and the Company, if made in the manner
provided in this Section.
Without limiting the generality of the foregoing, a Holder,
including a Depositary that is a Holder of a Global Note, may make, give or
take, by a proxy or proxies, duly appointed in writing, any request, demand,
authorization, direction, notice, consent, waiver or other action provided or
pertained in this Indenture to be made, given or taken by Holders, and a
Depositary that is a Holder of a Global Note may provide its proxy or proxies
to the beneficial owners of interest in any such Global Note.
(b) The fact and date of the execution by any Person of any
such instrument or writing or the authentication of any such record of a
meeting may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law
20
<PAGE> 27
to take acknowledgments of deeds, certifying that the individual signing such
instrument or writing or record acknowledged to him the execution thereof.
Where such execution is by a signer acting in a capacity other than his
individual capacity, such certificate or affidavit shall also constitute
sufficient proof of authority. The fact and date of the execution of such
instrument or writing or record, or the authority of the Person executing the
same, may also be proved in any other manner which the Trustee deems
sufficient.
(c) The Company may, in the circumstances permitted by the
Trust Indenture Act, fix any day as the record date for the purpose of
determining the Holders of Notes entitled to give or take any request, demand,
authorization, direction, notice, consent, waiver or other action, or to vote
on any action, authorized or permitted to be given or taken by Holders of
Notes. If not set by the Company prior to the first solicitation of a Holder of
Notes made by any Person in respect of any such action, or, in the case of any
such vote, prior to such vote, the record date for any such action or vote
shall be the 30th day (or, if later, the date of the most recent list of
Holders required to be provided pursuant to Section 7.1) prior to such first
solicitation or vote, as the case may be. With regard to any record date for
action to be taken by the Holders Notes, only the Holders of Notes on such date
(or their duly designated proxies) shall be entitled to give or take, or vote
on, the relevant action.
(d) The ownership of Notes shall be proved by the Note
Register.
(e) Any request, demand, authorization, direction, notice,
consent, waver or other Act of the Holder of any Note shall bind every future
Holder of the same Note and the Holder of every Note issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made
upon such Note.
(f) Without limiting the foregoing, a Holder entitled
hereunder to give or take any action hereunder with regard to any particular
Note may do so with regard to all or any part of the principal amount of such
Note or by one or more duly appointed agents each of which may do so pursuant
to such appointment with regard to all or any different part of such principal
amount.
(g) For purposes of actions required by this Indenture to be
taken by the record holders of the Notes and the Convertible Notes acting as a
single class or other actions required to be taken by the record holders of the
Convertible Notes hereunder (i) the Trustee shall be entitled to rely on the
registries of record and beneficial owners of the Convertible Notes maintained
by the Company pursuant to Section 2.3 of the Convertible Notes (the
"Convertible Note Registries"), copies of which shall be delivered by the
Company to the Trustee in accordance with Section 7.1(c) hereof, and shall
treat beneficial owners of Convertible Notes as record holders of Convertible
Notes to the extent provided in Section 2.3 of the Convertible Notes and (ii)
the Trustee shall be entitled to rely on the Beneficial Owner Registry, and
shall treat beneficial owners of Notes as registered holders of Notes to the
extent provided in this Section 1.4(g). A copy of any notice sent by the
Company or the Trustee hereunder to the Holders also shall be sent to each
record and beneficial owner of the Convertible Notes, as
21
<PAGE> 28
reflected in the Convertible Note Registries and to each beneficial owner of
the Notes shown on the Beneficial Owner Registry. With respect to any consent,
request, direction, approval, objection or other instrument or action required
or permitted by this Indenture to be executed or taken by the Trustee, the
Trustee shall be entitled to rely on the registries of record and beneficial
owners of the Convertible Notes and the Beneficial Owner Registry and shall
treat beneficial owners of Convertible Notes as record holders of Convertible
Notes to the extent provided in Section 2.3 of the Convertible Notes and shall
treat beneficial owners of the Notes as registered owners of the Notes. Any
action so taken shall be fully effective if executed or taken by any such
holders reflected in the Convertible Note Registries and the Beneficial Note
Registry, unless the Trustee receives written notification to the contrary.
Section 1.5 Notices, Etc., to Trustee and Company.
Except as otherwise expressly provided herein, any request,
demand, authorization, direction, notice, consent, waiver or Act of Holders or
other document provided or permitted by this Indenture to be made upon, given
or furnished to, or filed with,
(a) the Trustee by any Holder or by any Obligor shall be
sufficient for every purpose hereunder if made, given, furnished or filed in
writing to or with the Trustee at its Corporate Trust Office, or
(b) any Obligor by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to the Obligor
addressed to it at the address of the Company's principal office specified in
the first paragraph of this instrument or at any other address previously
furnished in writing to the Trustee by such Obligor, Attention: George
Karfunkel, Executive Vice President.
Section 1.6 Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any
event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid, to
each Holder affected by such event, at his address as it appears in the Note
Register, not later than the latest date (if any), and not earlier than the
earliest date (if any), prescribed for the giving of such notice. In any case
where notice to Holders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular Holder shall
affect the sufficiency of such notice with respect to other Holders. Where this
Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.
In case by reason of the suspension of regular mail service
or by reason of any other cause it shall be impracticable to give such notice
by mail, then such notification as shall be
22
<PAGE> 29
made with the approval of the Trustee shall constitute a sufficient
notification for every purpose hereunder.
Section 1.7 Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be a
part of and govern this Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall
be deemed to apply to this Indenture as so modified or to be excluded, as the
case may be.
Section 1.8 Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
Section 1.9 Successors and Assigns.
All covenants and agreements in this Indenture by the Company
shall bind its successors and assigns, whether so expressed or not.
Section 1.10 Separability Clause.
In case any provision in this Indenture or in the Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
Section 1.11 Benefits of Indenture.
Except to the extent provided in the definition of the term
"Notes" in Section 1.1 hereof, nothing in this Indenture or in the Notes,
express or implied, shall give any Person, other than (a) the parties hereto
and their successors hereunder and (b) the Holders, any benefit or any legal or
equitable right, remedy or claim under this Indenture.
Section 1.12 Governing Law, Choice of Forum.
(a) THIS INDENTURE AND THE NOTES WILL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING
EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE
APPLICATION OF THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
(b) EACH OBLIGOR HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN
IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS INDENTURE AND THE NOTES, AND IRREVOCABLY ACCEPTS FOR
ITSELF AND IN
23
<PAGE> 30
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE
AFORESAID COURTS. EACH OBLIGOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION
OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.
(c) Each Obligor hereby irrevocably appoints CT Corporation
System (the "PROCESS AGENT," which has consented thereto) with offices on the
date hereof at _______________________________________, as Process Agent to
receive for and on behalf of such Obligor service of process in the Borough of
Manhattan of relating to this Indenture and the Notes. SERVICE OF PROCESS IN
ANY SUIT, ACTION OR PROCEEDING AGAINST ANY OBLIGOR MAY BE MADE ON THE PROCESS
AGENT BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, OR BY ANY
OTHER METHOD OF SERVICE PROVIDED FOR UNDER APPLICABLE LAWS IN EFFECT IN THE
STATE OF NEW YORK, AND THE PROCESS AGENT IS HEREBY AUTHORIZED AND DIRECTED TO
ACCEPT SUCH SERVICE FOR AND ON BEHALF OF SUCH OBLIGOR AND TO ADMIT SERVICE WITH
RESPECT THERETO. SUCH SERVICE UPON THE PROCESS AGENT SHALL BE DEEMED EFFECTIVE
PERSONAL SERVICE ON SUCH OBLIGOR, SUFFICIENT FOR PERSONAL JURISDICTION, 10 DAYS
AFTER MAILING, AND SHALL BE LEGAL AND BINDING UPON SUCH OBLIGOR FOR ALL
PURPOSES, NOTWITHSTANDING ANY FAILURE OF THE PROCESS AGENT TO MAIL COPIES OF
SUCH LEGAL PROCESS TO SUCH OBLIGOR OR ANY FAILURE ON THE PART OF SUCH OBLIGOR
TO RECEIVE THE SAME. Each Obligor confirms that it has instructed the Process
Agent to mail to such Obligor, upon service of process being made on the
Process Agent pursuant to this Section, a copy of the summons and complaint or
other legal process served upon it, by registered mail, return receipt
requested, at such Obligor's address set forth on the signature page hereto, or
to such other address as such Obligor may notify the Process Agent in writing.
Each Obligor agrees that it will at all times maintain a process agent to
receive service of process in the Borough of Manhattan on its behalf with
respect to this Indenture and the Notes. If for any reason the Process Agent or
any successor thereto shall no longer serve as such process agent or shall have
changed its address without notification thereof to the Trustee, such Obligor,
immediately after gaining knowledge thereof, irrevocably shall appoint a
substitute process agent acceptable to the Trustee in the Borough of Manhattan
and advise the Trustee thereof.
(d) NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR
ANY HOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY OBLIGOR IN ANY OTHER
JURISDICTION.
Section 1.13 Legal Holidays.
24
<PAGE> 31
In any case where any Interest Payment Date, Redemption Date
or Stated Maturity of any Note shall not be a Business Day at any Place of
Payment, then (notwithstanding any other provision of this Indenture or of the
Notes (other than a provision of the Notes which specifically states that such
provision shall apply in lieu of this Section)) payment of interest or
principal (and premium, if any) need not be made at such Place of Payment on
such date, but may be made on the next succeeding Business Day at such Place of
Payment with the same force and effect as if made on the Interest Payment Date
or Redemption Date, or at the Stated Maturity, provided that no interest shall
accrue with respect to such payment for the period from and after such Interest
Payment Date, Redemption Date or Stated Maturity, as the case may be.
ARTICLE TWO -
NOTE FORMS
Section 2.1 Forms Generally.
The Notes shall be in substantially the form set forth in
this Article, with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture, and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the roles of any
securities exchange or as may, consistently herewith, be determined by the
officers executing such Notes, as evidenced by their execution of the Notes.
The Definitive Notes shall be printed, lithographed or
engraved on steel engraved borders or may be produced in any other manner, all
as determined by the officers of the Obligor executing such Notes, as evidenced
by their execution of such Notes.
Section 2.2 Form of Face of Note.
ALTIVA FINANCIAL CORPORATION
12% SECURED CONVERTIBLE SENIOR NOTES DUE 2006
NO. ____________ $__________
Altiva Financial Corporation, a corporation duly organized
and existing under the laws of Delaware (herein called the
"Company", which term includes any Successor Company under
the Indenture hereinafter referred to), for value received,
hereby promises to pay to ________________, or registered
assigns, the principal sum of _______________ Dollars on June
15, 2006, and to pay interest thereon from [insert Series
Issue Date of the relevant series] or from the most recent
Interest Payment Date to which interest has been paid or duly
provided for, semi-annually on June 15 and December 15 in
each year, commencing [insert first Interest Payment Date
after relevant Series Issue Date], at the rate of 12%
25
<PAGE> 32
per annum, or such other rate as prescribed by the Indenture,
until the principal hereof is paid or made available for
payment. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided
in such Indenture, be paid to the Person in whose name this
Note (or one or more Predecessor Notes) is registered at the
close of business on the Record Date for such interest, which
shall be the June 1 or December 1 (whether or not a Business
Day), as the case may be, next preceding such Interest
Payment Date. Any such interest not so punctually paid or
duly provided for will forthwith cease to be payable to the
Holder on such Record Date and may either be paid to the
Person in whose name this Note (or one or more Predecessor
Notes) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest,
notice whereof shall be given to Holders of Notes not less
than 10 days prior to such Special Record Date, or be paid at
any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Notes
may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in said Indenture.
The principal amount or redemption price of this
Note shall be payable upon presentation and surrender of this
Note, at the office of United States Trust Company of New
York, in New York, New York (such bank and any successor in
such capacity being referred to as the "Trustee") or at the
office of any other Paying Agent designated by the Company.
Interest shall be paid by check mailed to the address of such
person on the Note Register, provided that at the request of
a Holder in writing to the Company at least five days prior
to the date set for the payment of interest, interest on such
Holder's Notes shall be paid by wire transfer in immediately
available funds in accordance with the wire transfer
instructions supplied by such Holder to the Company. Payment
of principal, premium, if any and interest due on the Notes
on the Maturity Date similarly shall be paid by the Company
by check or, at the request of a Holder, wire transfer.
Notwithstanding the foregoing, for so long as the Depositary
is the exclusive registered owner of the Notes, or if the
Notes are not in book entry as provided in the Indenture
described herein, the principal amount and redemption price
of the Notes and the interest thereon shall be payable by
wire transfer in immediately available funds to the
Depositary without necessity of any immediate presentation
and surrender of the Notes pursuant to the letter of
representations of the Depositary or written instructions
from the registered owner.
Reference is hereby made to the further provisions
of this Note set forth on the reverse hereof, which further
provisions shall for all purposes have the same effect as if
set forth at this place.
Unless the certificate of authentication hereon has
been executed by the Trustee referred to on the reverse
hereof by manual signature, this Note shall not be entitled
to any benefit under the Indenture or be valid or obligatory,
for any purpose.
26
<PAGE> 33
IN WITNESS WHEREOF, the Company has caused this
instrument to be duly executed under its corporate seal.
Dated:
ALTIVA FINANCIAL CORPORATION
By
-----------------------------------
Name:
Title:
Attest:
- -----------------------------------
Name:
Title:
Section 2.3 Form of Reverse of Note.
This Note is one of a duly authorized issue of securities of
the Company (herein called the "NOTES"), issued under an Indenture, dated as of
February 29, 2000 (herein called the "INDENTURE"), by and between the Company,
and United States Trust Company of New York, as Trustee (herein called the
"TRUSTEE", which term includes any successor three under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby
made for a statement of the respective rights, limitations of rights, duties
and immunities thereunder of the Company, the Trustee and the Holders of the
Notes and of the terms upon which the Notes are, and are to be, authenticated
and delivered. This Note is one of the Notes designated on the face hereof,
limited in aggregate principal amount to $19,328,000 ($12,954,000 after giving
effect to the mandatory conversion pursuant to Article Fourteen of the
Indenture).
The Notes are redeemable, in whole but not in part, prior to
maturity at the option of the Company at any time and from time to time at a
redemption price (the "Redemption Price") (expressed as a percentage of
principal amount), on or after June 15, 2004 but prior to June 15, 2005, of
106% and (ii) on or after June 15, 2005, of 100%, in either case plus accrued
and unpaid interest (including Added Interest, if any) to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest (including Added Interest, if any) due on the relevant
interest payment date).
At issuance, the Notes that were issued to Qualified
Institutional Buyers, as such term is defined in the Securities Act of 1933 (a
"QIB"), were secured, in part, by a security interest in certain
mortgage-related securities and other assets of the Company. Notes that are
secured by such mortgage-related securities may not be transferred or pledged
to any person or entity that is not a QIB.
27
<PAGE> 34
The Indenture contains provisions for defeasance at any time
of (a) the entire indebtedness evidenced by this Note and (b) certain
restrictive covenants, in each case upon compliance by the Company with certain
conditions set forth therein, which provisions apply to this Note.
If an Event of Default with respect to Notes shall occur and
be continuing, the principal of the Notes may be declared due and payable in
the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Notes to be
affected under the Indenture at any time by the Company and the Trustee with
the consent of the holders of the specified aggregate principal amount of the
Notes and the Convertible Notes (set forth in the Indenture) at the time
Outstanding. The Indenture also contains provisions permitting the registered
holders of specified percentages in aggregate principal amount of the Notes and
the Convertible Notes, considered as a single class at the time Outstanding, on
behalf of the Holders of all Notes, to waive certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Note shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of
such consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of and any premium
and interest on this Note at the times, place and rate, and in the coin or
currency, herein prescribed.
The Notes are issuable only in registered form without
coupons in denominations of $100 and any integral multiple thereof. As provided
in the Indenture and subject to certain limitations therein set forth, Notes
are exchangeable for a like aggregate principal amount of Notes of like tenor
of a different authorized denomination, as requested by the Holder surrendering
the same.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
For notes issued to QIBs on the Issue Date and thereafter -
"This Note may not be transferred to any person or entity that is not a
Qualified Institutional Buyer as such term is defined in Rule 144A promulgated
under the Securities Act of 1933, as amended."
Prior to due presentment of this Note for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Note is registered as the owner hereof
for all purposes, whether or not this Note be overdue, and neither the Company,
the Trustee nor any such agent shall be affected by notice to the contrary.
28
<PAGE> 35
All terms used in this Note which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
Section 2.4 Form of Legends for Global Notes.
Any Global Note authenticated and delivered hereunder shall
bear a legend in substantially the following form:
"This Note is a Global Note within the meaning of the Indenture
hereinafter referred to and is registered in the name of a Depositary or a
nominee thereof. This Note may not be transferred to, or registered or exchanged
for Notes registered in the name of, any Person other than the Depositary or a
nominee thereof or a successor of such Depositary or a nominee of such successor
and no such transfer may be registered, except in the limited circumstances
described in the Indenture. Every Note authenticated and delivered upon
registration of transfer of, or in exchange for or in lieu of, this Note shall
be a Global Note subject to the foregoing, except in such limited
circumstances."
For notes issued to QIBs on the Issue Date and thereafter-
"This Note may not be transferred to any person or entity that is not a
Qualified Institutional Buyer as such term is defined in Rule 144A promulgated
under the Securities Act of 1933, as amended."
Section 2.5 Form of Trustee's Certificate of Authentication.
The Trustee's certificate of authentication shall be in
substantially the, following form:
This is one of the Notes designated and referred to in the
within-mentioned Indenture.
-----------------------------------
as Trustee
By
---------------------------------
Authorized Officer
Section 2.6 Form of Assignment.
Each Note shall include the following form of Assignment:
29
<PAGE> 36
EXHIBIT 4.2
ASSIGNMENT
(TO BE EXECUTED BY THE REGISTERED HOLDER
IF SUCH HOLDER DESIRES TO TRANSFER THIS NOTE)
FOR VALUE RECEIVED _____________________ hereby sells, assigns
and transfers unto ________________________________
PLEASE INSERT SOCIAL SECURITY OR OTHER
TAX IDENTIFYING NUMBER OF TRANSFEREE
(PLEASE PRINT NAME AND ADDRESS OF TRANSFEREE)
this Note, together with all right, title and interest herein, and does hereby
irrevocably constitute and appoint Attorney to transfer this Note on the Note
Register, with full power of substitution.
Dated:
Signature of Holder Signature Guaranteed:
NOTICE: The signature to the foregoing Assignment must correspond to the Name as
written upon the face of this Note in every particular, without alteration or
any change whatsoever.
ARTICLE THREE -
THE NOTES
Section 3.1 Global Note; Depositary.
(a) The Notes initially will be issued in the form of one
or more Global Notes. Each Global Note will be deposited on the date of
consummation of the Exchange Offer with The Depository Trust Company or any
other depositary designated for the Notes evidenced thereby (the "DEPOSITARY"),
or the Trustee on its behalf, and registered in the name of Cede & Co. or any
other relevant Person, as nominee of the Depositary (such nominee being referred
to herein as the "GLOBAL NOTE HOLDER").
(b) Notes offered and sold to QIB's shall be issued
initially in the form of two Global Notes, one in the principal amount of
$10,109,400.00 (the "QIB PERMANENT GLOBAL NOTE") and the second in the principal
amount of $5,016,495.00 (the "QIB CONVERTIBLE GLOBAL NOTE," together with the
QIB Permanent Global Note, the "QIB NOTES"), and Notes offered and sold to
persons or entities that are note QIB's ("NON-QIBS") shall be issued initially
in the form of two Global Notes, one in the principal amount of $2,436,200.00
(the "NON-QIB PERMANENT
30
<PAGE> 37
GLOBAL NOTE") and the second in the principal amount of $1,209,039.00 (the
"NON-QIB CONVERTIBLE GLOBAL NOTE," together with the Non-QIB Permanent Global
Note, the "NON-QIB NOTES," and each Global Note referred to in this sentence, a
"GLOBAL NOTE").
Section 3.2 Amount.
The aggregate principal amount of Notes which may be
authenticated and delivered under this Indenture is $19,382,000.00 (Nineteen
Million Three Hundred Eighty Two Thousand Dollars and no cents), except as for
Notes authenticated and delivered pursuant to Section 3.5, 3.6, 3.7 or 4.2.
The Notes constitute senior obligations of the Company and
shall not be subordinated in right or priority of payment to any existing or
future Indebtedness of the Company.
Section 3.3 Denominations.
The Notes shall be issuable in registered form without coupons
in denominations of $100 and any integral multiple thereof.
Section 3.4 Execution, Authentication, Delivery and
Dating.
The Notes shall be executed on behalf of each Obligor by its
Chairman of the Board, its Vice Chairman of the Board, its President or one of
its Vice Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Notes may be manual or facsimile.
Notes bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of any Obligor shall bind
the Obligor, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Notes or did
not hold such offices at the date of such Notes.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Notes executed by each
Obligor to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Notes, and the Trustee in accordance with
the Company Order shall authenticate and deliver such Notes.
Each Note shall be dated the date of its authentication.
No Note shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature of an Responsible Officer, and such
certificate upon any Note shall be conclusive evidence, and the only evidence,
that such Note has been duly authenticated and delivered hereunder.
Notwithstanding the foregoing, if any Note shall have been authenticated and
delivered hereunder but never issued and sold by the Company, and the Company
shall deliver such Note to the Trustee for cancellation as provided in Section
3.11, for all purposes of this Indenture such
31
<PAGE> 38
Note shall be deemed never to have been authenticated and delivered hereunder
and shall never be entitled to the benefits of this Indenture.
Section 3.5 Temporary Notes.
Pending the preparation of Definitive Notes, the Obligors may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Notes which are printed, lithographed, typewritten, mimeographed or
otherwise produced, in any authorized denomination, substantially of the tenor
of the Definitive Notes in lieu of which they are issued and with such
appropriate insertions, omissions, substitutions and other variations as the
officers executing such Notes may determine, as evidenced by their execution of
such Notes.
If temporary Notes are issued, the Company will cause
Definitive Notes to be prepared without unreasonable delay. After the
preparation of Definitive Notes, the temporary Notes shall be exchangeable for
Definitive Notes upon surrender of the temporary Notes at the office or agency
of the Company in a Place of Payment, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Notes the Obligors shall
execute and the Trustee shall authenticate and deliver in exchange therefor one
or more Definitive Notes of any authorized denominations and of a like aggregate
principal amount and tenor. Until so exchanged the temporary Notes shall in all
respects be entitled to the same benefits under this Indenture as Definitive
Notes of such tenor.
Section 3.6 Registration; Registration of Transfer and
Exchange.
The Company shall cause to be kept at the Corporate Trust
Office of the Trustee a register (the register maintained in such office being
herein sometimes collectively referred to as the "NOTE REGISTER") in which,
subject to such reasonable regulations as it may prescribe, the Company shall
provide for the registration of Notes and of transfers of Notes. The Trustee is
hereby appointed "Note Registrar" for the purpose of registering Notes and
transfers of Notes as herein provided.
The Trustee shall also maintain a register of Beneficial
Owners of the Notes (the "BENEFICIAL OWNER REGISTRY"), which Beneficial Owners
shall be placed thereon upon receipt by the Trustee of written certification of
any such Beneficial Owner as to its beneficial ownership of a specified
principal amount of the Notes accompanied by evidence thereof reasonably
satisfactory to the Trustee and setting forth its address and other information
which will permit the Trustee to communicate with such Beneficial Owners as
required herein and deem such Beneficial Owners as registered holders for
purposes hereof. A copy of any notice sent hereunder to Holders shall also be
sent to the Beneficial Owners on the Beneficial Owner Registry and any consent,
request, direction, approval, objection, or other instrument or action required
or permitted by this Indenture to be executed or taken by any Holder (other than
a transfer or conversion of a Note) shall be fully effective if executed or
taken by the Beneficial Owner thereof on the Beneficial Owner Registry, provided
that, in the event of conflicting instruments executed by the registered Holder
and the Beneficial Owner, the action by the registered Holder shall govern. The
Trustee may presume that the Persons that is enters on the
32
<PAGE> 39
Beneficial Owner Registry are such Beneficial Owners unless the Trustee receives
written notification to the contrary.
Upon surrender for registration of transfer of any Note at the
office or agency, in a Place of Payment, the Company shall execute, and the
Trustee shall authenticate and deliver, in the name of the designated transferee
or transferees, one or more new Notes of any authorized denominations and of a
like aggregate principal amount and tenor.
At the option of the Holder, Notes may be exchanged for other
Notes of any authorized denominations and of a like aggregate principal amount
and tenor, upon surrender of the Notes to be exchanged at such office or agency.
Whenever any Notes are so surrendered for exchange, the Company shall execute,
and the Trustee shall authenticate and deliver, the Notes which the Holder
making the exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange
of Notes shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Notes
surrendered upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Trustee) be
duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Note Registrar duly executed, by the Holder
thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange of Notes, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 3.5, 3.6, 3.7 or 4.2 not involving any transfer.
The Company shall not be required (i) to issue, register the
transfer of or exchange Notes during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of
Notes selected for redemption under Article Eight and ending at the close of
business on the day of such mailing or (ii) to register the transfer of or
exchange any Note so selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part.
Section 3.7 Mutilated, Destroyed, Lost and Stolen Notes.
If any mutilated Note is surrendered to the Trustee, the
Obligors shall execute and the Trustee shall authenticate and deliver in
exchange therefor a new Note of like tenor and principal amount and bearing a
number not contemporaneously Outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Note and
(ii) such indemnity as may be
33
<PAGE> 40
required by them to save each of them and any agent of either of them harmless,
then, in the absence of notice to any Obligor or the Trustee that such Note has
been acquired by a bona fide purchaser, the Obligors shall execute and the
Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or
stolen Note, a new Note of like tenor and principal amount and bearing a number
not contemporaneously Outstanding.
In case any such mutilated, destroyed, lost or stolen Note has
become or is about to become due and payable, the Obligors in their discretion
may, instead of issuing a new Note, pay such Note.
Upon the issuance of any new Note under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Note issued pursuant to this Section in lieu of any
destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Obligors, whether or not the destroyed, lost or
stolen Note shall be at any time enforceable by anyone, and shall be entitled to
all the benefits of this Indenture equally and proportionately with any and all
other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Notes.
Section 3.8 Payment of Interest and Principal;
Additional Interest.
Interest on the Notes shall be payable by the Company in cash
to Holders (i) from the most recent date to which interest has been paid or, if
no interest has been paid, from the Issue Date, on June 15 and December 15 of
each year (each an "Interest Payment Date"), commencing on June 15, 2001, and
(ii) on the Maturity Date (or earlier to the extent provided in Article V
hereof) to the extent accrued but theretofore unpaid. Interest on the Notes
shall be computed on the basis of a 360-day year comprised of twelve 30-day
months.
In the event that the Company is obligated to pay Liquidated
Damages to Holders, the Interest Rate shall be increased for the period during
which the Company is obligated to pay Liquidated Damages by the amount of such
Liquidated Damages and all references herein to interest shall include
Liquidated Damages, if any. The Company shall promptly notify each Holder at its
address as it appears on the Note Register in the event that the Company is
obligated to pay Liquidated Damages to Holders.
In the event that the Company does not obtain the Stockholder
Approvals on or before March 9, 2000 (or as extended), the Interest Rate shall
increase monthly, commencing on March 9, 2000 (or as may be extended pursuant to
Section 12.6 hereof), by 1% per annum, up to a maximum interest rate of 18%
(exclusive of Liquidated Damages, if any), provided that if the Company
subsequently obtains the Stockholders Approvals, the Interest Rate shall revert
as of
34
<PAGE> 41
the date of receipt of such approvals to the amount otherwise payable hereunder
and shall not thereafter reflect any increase in the Interest Rate as a result
of the requirements of this sentence. The Company shall promptly notify each
Holder at its address as it appears on the Note Register and the Trustee in the
event that the Company is obligated to increase the Interest Rate pursuant to
the requirements of this paragraph or in the event the interest rate shall
revert to the amount otherwise payable hereunder. The Trustee shall not be
required to investigate whether the Interest Rate is required to change pursuant
to this paragraph.
The Person in whose name any Note is registered at the close
of business on any Record Date with respect to any Interest Payment Date
(including any Note that is converted after the Record Date and on or before the
Interest Payment Date) shall receive the interest payable on such Interest
Payment Date notwithstanding the cancellation of such Note upon any transfer,
exchange or conversion subsequent to the Record Date and on or prior to such
Interest Payment Date. Interest shall be paid by check mailed to the address of
such Person on the Note Register, provided that at the request of a Holder in
writing to the Company at least five days prior to the date set for payment of
interest, interest on such Holder's Notes shall be paid by wire transfer in
immediately available funds in accordance with the wire transfer instructions
supplied by such Holder to the Company. Payment of principal, premium, if any,
and interest due on the Notes on the Maturity Date similarly shall be paid by
the Company by check or, at the request of a Holder, wire transfer.
The principal amount or redemption price of this Note shall be
payable upon presentation and surrender of this Note, at the office of the
Trustee in New York, New York or at the office of any other Paying Agent
designated by the Company. The interest on the Notes shall be payable by check
mailed on the Interest Payment Date to the Person in whose name such Note is
registered as of the Regular Record Date, at the address of such Person as shown
on the Note Register maintained by the Trustee, as Note Registrar.
Notwithstanding the foregoing, for so long as the Depositary is the exclusive
registered owner of the Notes, or if the notes are not in book entry as provided
in this Indenture, the principal amount and redemption price of the Notes and
the interest thereon shall be payable by wire transfer in immediately available
funds to the Depositary or such owners (at their request to the Company and the
Trustee in writing at least five days prior to the date set for payment of
principal, redemption price, or interest), without necessity of any immediate
presentation and surrender of the Notes pursuant to the letter of
representations of the Depositary or written instructions from the registered
owner.
Any interest on any Note which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall be paid by the Company, at its election in
each case, as provided in clause (1) or (2) below.
(1) The Company may elect to make payment of any
Defaulted Interest to the Persons in whose names Notes are registered
at the close of business on a special record date (the "SPECIAL RECORD
DATE") for the payment of such Defaulted Interest, which shall be not
more than 15 days and not less than 10 days prior to the date of the
proposed payment. The Company shall cause notice of the proposed
payment of such Defaulted Interest and the special record date therefor
to be mailed, first-class postage prepaid, to
35
<PAGE> 42
each Holder at his address as it appears in the Note Register not less
than 10 days prior to such special record date. Notice of the proposed
payment of such Defaulted Interest and the special record date therefor
having been so mailed, such Defaulted Interest shall be paid to the
Persons in whose names the Notes were registered at the close of
business on such special record date and shall no longer be payable
pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted
Interest in any other lawful manner.
Section 3.9 Persons Deemed Owners.
Prior to due presentment of a Note for registration of
transfer, the Obligors, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Note is registered as the owner of such
Note for the purpose of receiving payment of principal of and any premium and
any interest on such Note and for all other purposes whatsoever, whether or not
such Note be overdue, and neither the Obligors, the Trustee nor any agent of the
Company or the Trustee shall be affected by notice to the contrary.
So long as the Global Note Holder is the registered owner of
any Notes, the Global Note Holder will be considered the sole Holder under this
Indenture of any Notes evidenced by the Global Note for the purposes of
receiving payment on the Notes, receiving notices, and for all other purposes
under this Indenture and the Notes. Beneficial owners of Notes evidenced by the
Global Note will not be considered the owners or Holders thereof under this
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Obligors nor the Trustee will have any responsibility or liability for any
aspect of the records of the Depositary or for maintaining, supervising or
reviewing any records of the Depositary relating to the Notes.
Section 3.10 Cancellation.
All Notes surrendered for payment, redemption, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly canceled by it. The Company may at any time deliver to the
Trustee for cancellation any Notes previously authenticated and delivered
hereunder which the Company may have acquired in any manner whatsoever, and may
deliver to the Trustee (or to any other Person for delivery to the Trustee) for
cancellation any Notes previously authenticated hereunder which the Company has
not issued and sold, and all Notes so delivered shall be promptly canceled by
the Trustee. No Notes shall be authenticated in lieu of or in exchange for any
Notes canceled as provided in this Section, except as expressly permitted by
this Indenture. All canceled Notes held by the Trustee shall be disposed of in
accordance with the Trustee's regulations in accordance with the regulations
under the Exchange Act.
36
<PAGE> 43
Section 3.11 Computation of Interest.
Interest on the Notes shall be computed on the basis of a
360-day year of twelve 30-day months.
Section 3.12 Restrictions on Transfer to Non-QIB's
No Global or Definitive Note that is held by a QIB on the
Issue Date may be transferred to a Non-QIB and such notes will bear a legend to
such effect.
ARTICLE FOUR -
BOOK-ENTRY PROVISIONS FOR GLOBAL NOTES
Section 4.1 Applicability of Article.
Each Global Note shall be subject to this Article.
Section 4.2 Book-Entry Provisions For Global Note.
(a) Members of, or participants in, the Depositary
("AGENT MEMBERS") shall have no rights under this Indenture with respect to any
Global Note held on their behalf by the Depositary or under any Global Note, and
the Depositary may be treated by the Company, the Trustee and any agent of the
Company or the Trustee as the absolute owner of any Global Note for all purposes
whatsoever. Any Holder of any Global Note shall, by acceptance of such Global
Note, agree that the transfers of Interests in such Global Note may be effected
only through a book-entry system maintained by the Holder of such Global Note
(or its agent), and that ownership of an Interest in such Global Note shall be
required to be reflected in a book-entry system. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or an agent of the Company
or the Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the Depositary
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Note.
(b) The Depositary must, at the time of its designation
and at all times while it serves as Depositary, be a clearing agency registered
under the Exchange Act and any other applicable statute or regulation.
(c) Notwithstanding any other provision of this Section,
unless and until it is exchanged in whole or in part for individual Notes
represented thereby, a Global Note representing all or a portion of the Notes
may not be transferred except as a whole by the Depositary to a nominee of such
Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by such Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary. Interests of
beneficial owners in the Global Notes (each an "INTEREST") may be transferred to
Agent Members or other beneficial owners or exchanged for Definitive Notes in
accordance with the rules and procedures of the Depositary, the provisions of
this Indenture and applicable law.
37
<PAGE> 44
(d) If specified by the Company pursuant to Section 3.4,
the Depositary may surrender a Global Note in exchange in whole or in part for
Definitive Notes of like tenor and terms on such terms as are acceptable to the
Company, the Trustee and the Depositary. In addition, Definitive Notes shall be
issued to all beneficial owners in exchange for their Interests in Global Notes
if (i) the Depositary for the Notes notifies the Company that the Depositary is
unwilling or unable to continue as Depositary for the Global Notes or is no
longer eligible to serve as Depositary pursuant to the terms of this Indenture
and a successor Depositary is not appointed by the Company within 90 days after
delivery of such notice; (ii) the Company, at its sole discretion, notifies the
Trustee in writing that it elects to cause the issuance of Definitive Notes
under this Indenture; or (iii) there shall have occurred and be continuing a
Default with respect to any Notes represented by the Global Notes.
(e) In connection with the transfer of any Interest from
one Agent Member to another Agent Member not taking a Definitive Note, but an
Interest, the Depositary shall reflect on its books and records the date. the
name of the transferor and transferee, and the amount of the Interest
transferred.
(f) In connection with the issuance to beneficial owners
of Definitive Notes in exchange for any Global Note pursuant to paragraph (c) or
(h) of this Section, such Global Note shall be deemed to be surrendered to the
Trustee for cancellation, and the Company shall execute and the Trustee upon
receipt of a Company Order for the authentication and delivery of Definitive
Notes shall authenticate and deliver, without service charge:
(i) to the Depositary or to each Person
specified by such Depositary a new Definitive Note or
Definitive Notes of like tenor and terms and of any authorized
denomination as requested by such Person in aggregate
principal amount equal to and in exchange for such Person's
Interest in the Global Note; and
(ii) to such Depositary a new Global Note of like
tenor and terms and in an authorized denomination equal to the
difference, if any, between the principal mount of the
surrendered Global Note and the aggregate principal amount of
Definitive Notes delivered to Holders thereof.
Except as otherwise provided in this Indenture, any
Note authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, any Global Note shall
also be a Global Note and shall bear the legend specified in
Section 2.4 except for any Note authenticated and delivered in
exchange for, or upon registration of transfer of, a Global
Note pursuant to the preceding sentence.
(g) The Holder of any Global Note may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold Interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
(h) Upon the exchange of any Global Note in its entirety
for Definitive Notes or another Global Note, such Global Note shall be canceled
by the Trustee.
38
<PAGE> 45
(i) Notwithstanding anything herein to the contrary, if
at any time the Depositary for the Notes notifies the Company that it is
unwilling or unable to continue as a Depositary for the Notes or if at any time
the Depositary for the Notes shall no longer be registered or in good standing
under the Exchange Act, or other. applicable statute or regulation, the Company
shall appoint a successor Depositary with respect to the Notes. If a successor
Depositary for the Notes is not appointed by the Company within 90 days after
the Company receives such notice or becomes aware of such condition, the Company
will execute, and the Trustee, upon Company Request, will authenticate and
deliver Definitive Notes in an aggregate principal amount equal to the principal
amount of the Global Note or Global Notes representing Notes in exchange for
such Global Note or Global Notes.
(j) With respect to Notes registered in the Note Register
in the name of the Depositary or its nominee, the Company and the Trustee shall
have no responsibility or obligation to any Agent Member. Without limiting the
immediately preceding sentence, the Company and the Trustee shall have no
responsibility or obligation with respect to (a) the accuracy of the records of
the Depositary or any Agent Member with respect to any ownership interest in the
Notes, (b) the delivery to any Agent Member or any other Person, other than a
Holder, as shown in the Note Register or a Beneficial Owner, of any notice with
respect to the Notes, including any notice of redemption, (c) the payment to any
Agent Member or any other Person, other than a Holder as shown in the Note
Register or a Beneficial Owner, of any amount with respect to principal of,
premium, if any, or interest or Additional Interest on, the Notes or (d) any
consent given by the Depositary as registered owner. So long as certificates for
the Notes are registered in book entry in the name of the Depositary, the
Company and the Trustee shall treat the Depositary or any successor securities
depository as, and deem the Depositary or any successor securities depository to
be, the absolute owner of the Notes, for all purposes whatsoever, including
without limitation (i) the payment of principal and interest or Liquidated
Damages on such Notes (ii) giving notice of redemption and other matters with
respect to the Notes, (iii) registering transfers with respect to the Notes and
(iv) the selection of Notes for redemption. While the Notes are in the book
entry as provided in this Section, no Person other than the Depositary or its
nominee, or any successor thereto, as nominee for the Depositary shall receive a
Note certificate with respect to any Note. Notwithstanding any other provision
of this Indenture to the contrary, so long as any of the Notes are registered in
the name of the Depositary or its nominee, all payments with respect to
principal of, premium, if any, and interest and Additional Interest on such
Notes and all notices with respect to such Notes shall be made and given,
respectively, in the manner provided in the representation letter or other
agreement with the Depositary in regard to the Notes.
Section 4.3 Special Transfer Provisions.
(a) Transfers to QIBs. With respect to any proposed
transfer to a QIB of any Definitive Note:
(i) in the case of the transfer of any
Definitive Note, the Note Registrar shall register the
transfer only upon receipt of instructions in accordance with
the Depositary's and the Note Registrar's procedures and only
if (y) the
39
<PAGE> 46
transferor has delivered to the Note Registrar a certificate substantially in
the form of Annex A hereto; and
(ii) With respect to all such transfers, (A) the
Note Registrar shall reflect on its books and records the date
of such transfer, (B) if the transfer affects a Global Note,
the Company shall execute, and the Trustee shall authenticate
and deliver to the Depositary, a new Global Note or Global
Notes in a principal amount as appropriate to reflect such
transfer, and (C) if the transfer is of a Definitive Note, the
transferred Definitive Note shall be cancelled and, if the
entire amount of such Definitive Note was not transferred, a
new Definitive Note, in the amount of the untransferred
portion of the original Definitive Note, shall be executed by
the Company, authenticated by the Trustee, and delivered to
such transferor.
(b) The Note Registrar shall retain copies of all
letters, notices and other written communications received pursuant to Section
4.2 or this Section 4.3 in accordance with its usual procedures. The Company
shall have the right to inspect and make copies of all such letters, notices or
other written communications at any reasonable time upon the giving of
reasonable written notice to the Note Registrar.
Interests in a Global Note may be exchanged for a certificated
note or notes (a "DEFINITIVE NOTE"); however, no Global Note may be exchanged
for a Definitive Note prior to day next following the day on which the meeting
of stockholders at which Stockholder Approval is sought, including any
adjournments thereof.
ARTICLE FIVE -
REMEDIES OF HOLDERS ON AN EVENT OF DEFAULT
Section 5.1 Events of Default.
In case one or more of the following Events of Default (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) shall have occurred and be continuing:
(a) default in the payment of any installment of interest
upon any of the Notes as and when the same shall become due and payable, and
continuance of such default for a period of 30 days; or
(b) default in the payment of the principal of or
premium, if any, on any of the Notes as and when the same shall become due and
payable at maturity of the Notes, by acceleration or otherwise, or in connection
with any redemption pursuant to Article Twelve; or
(c) failure on the part of the Company duly to observe or
perform any other of the covenants or agreements on the part of the Company in
the Agreement or in any of the
40
<PAGE> 47
Related Agreements or the Value Partners Agreement (other than a covenant or
agreement a default in whose performance or whose breach is elsewhere in this
Section 5.1 specifically dealt with) continued for a period of 60 days after the
date on which written notice of such failure, requiring the Company to remedy
the same, shall have been given to the Company by the Trustee or by the
registered holders of at least 25% in aggregate principal amount of the Notes
and the Convertible Notes, considered as a single class, at the time
Outstanding; or
(d) failure of the Company or any Subsidiary of the
Company to make any payment, including any applicable grace period, in respect
of principal or interest on any Indebtedness which default shall have resulted
in Indebtedness in an amount in excess of $1,000,000; or
(e) default by the Company or a Subsidiary of the Company
with respect to any Indebtedness of the Company or such Subsidiary, which
default results in acceleration of any such Indebtedness which is in an amount
in excess of $1,000,000 without such Indebtedness having been discharged, or
such acceleration having been rescinded or annulled, within the applicable grace
period; or
(f) the entry by a court having jurisdiction in the
premises of a final judgment, decree or order against the Company or any
Subsidiary of the Company which shall require the payment by the Company or any
Subsidiary of the Company of an amount (to the extent not covered by insurance)
in excess of $1,000,000 and the continuance of any such judgment, decree or
order unstayed or unsatisfied and in effect for a period of 60 consecutive days
which is not being contested in good faith by appropriate judicial proceedings;
or
(g) the Company or any Subsidiary that is a Significant
Subsidiary of the Company shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, or shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against it, or shall make a general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become due; or
(h) an involuntary case or other proceeding shall be
commenced against the Company or any Subsidiary that is a Significant Subsidiary
of the Company seeking liquidation, reorganization or other relief with respect
to it or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 consecutive days; or
(i) failure on the part of the Company duly to observe or
perform any of the covenants or agreements of the Company in any of the
Collateral Documents continued for a period of 10 days after the date on which
written notice of such failure, requiring the Company to remedy the same, shall
have been given to the Company by the Trustee or by the registered
41
<PAGE> 48
holders of at least 25% in aggregate principal amount of the Notes and the
Convertible Notes, considered as a single class, at the time Outstanding; or
(j) any of the Collateral Documents after delivery
thereof shall for any reason, except to the extent permitted by the terms
thereof, cease to be in full force and effect and valid, binding and enforceable
against the Company in all material respects in accordance with their terms, or
cease in any material respect to create a valid and perfected Lien of the
priority required thereby on any of the collateral purported to be covered
thereby, or the Company shall so state in writing, and such default shall
continue unremedied for a period of 10 days; or
(k) default by the Company with respect to any of its
obligations contained in Sections 12.4 through 12.8 hereof; or
(l) default by the Company with respect to any of its
obligations contained in Section 9.23 hereof, unless waived pursuant to Section
5.5 hereof within 10 calendar days thereafter;
(m) any annual audited financial statement of the Company
is qualified as to going concern or similar qualifications;
then, and in each and every such case (other than an Event of Default specified
in Section 5.1(g) or (h)), unless the principal of all of the Notes shall have
already become due and payable, the registered holders of not less than 25% in
aggregate principal amount of the Notes and the Convertible Notes, considered as
a single class, then Outstanding, by notice in writing to the Trustee, may
declare the principal of all the Notes and the interest accrued thereon to be
due and payable immediately, without presentment, demand, protest, notice of
protest or dishonor, notice of intent to accelerate or other notice of default
of any kind, all of which are expressly waived by the Company, and upon any such
declaration the same shall become and shall be immediately due and payable,
anything herein contained to the contrary notwithstanding.
If an Event of Default specified in Section 5.1(g) or (h) occurs, the
principal of all the Notes and the interest accrued thereon shall be immediately
and automatically due and payable without presentment, demand, protest, notice
of protest or dishonor, notice of intent to accelerate or other notice of
default of any kind, all of which are expressly waived by the Company.
Section 5.2 Payment of Notes on Default; Suit Therefor.
(a) The Company covenants that (1) in case default shall
be made in the payment of any installment of interest upon any of the Notes as
and when the same shall become due and payable, and such default shall have
continued for a period of 30 days, or (2) in case default shall be made in the
payment of the principal of or premium, if any, on any of the Notes as and when
the same shall have become due and payable, whether at maturity of the Notes or
in connection with any redemption or repurchase hereunder, by declaration or
otherwise, then the Company will pay to the Holders the whole amount that then
shall have become due and payable on the Notes for principal and premium, if
any, or interest, or both, as the case may be, with interest upon the overdue
principal and premium, if any, and (to the extent that payment of such
42
<PAGE> 49
interest is enforceable under applicable law) upon the overdue installments of
interest at the rate then borne by the Notes and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection.
(b) If the Company fails to pay such amounts forthwith
upon such demand, the Trustee, in its own name and as trustee of an express
trust, may (or, at the direction of registered holders of not less than 25% of
the aggregate principal amount of the Notes and the Convertible Notes,
considered as a single class, then Outstanding, shall), in addition to any other
remedies available to it, institute a judicial proceeding for the collection of
the sums so due and unpaid and may prosecute such proceeding to judgment or
final decree, and may enforce the same against the Company or any other obligor
upon the Notes and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any other obligor
upon the Notes, wherever situated. If an Event of Default with respect to Notes
occurs and is continuing, the Trustee may in its discretion proceed to protect
and enforce its rights and the rights of the Holders of Notes by such
appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy.
(c) In case of any judicial proceeding relative to the
Company (or any other Obligor upon the Notes), its property or its creditors,
the Trustee shall be entitled and empowered, by intervention in such proceeding
or otherwise, to take any and all actions authorized under the Trust Indenture
Act in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 6.7.
(d) No provision of this Indenture shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf of
any Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding;
provided, however, the Trustee may vote on behalf of the Holders for the
election of a trustee in bankruptcy or similar official and may be a member of a
creditors' or other similar committee.
(e) All rights of action and claims under this Indenture
or the Notes may be prosecuted and enforced by the Trustee without the
possession of any of the Notes or the production thereof in any proceeding
relating thereto, and any such proceeding instituted by the Trustee shall be
brought in its own name as trustee of an express trust, and any recovery of
judgment shall, after provision for the payment of the reasonable compensation,
expenses,
43
<PAGE> 50
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Notes in respect of which such judgment
has been recovered.
(f) In the case there shall be pending proceedings for
the bankruptcy or for the reorganization of the Company under Title 11 of the
United States Code, or any other applicable law, or in case a receiver, assignee
or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar
official shall have been appointed for or taken possession of the Company, the
property of the Company, or in the case of any other judicial proceedings
relative to the Company or to the creditors or property of the Company, the
Trustee shall be entitled to and shall, irrespective of whether the principal of
the Notes shall then be due and payable as herein expressed or by declaration or
otherwise, shall be entitled and empowered, by intervention in such proceedings
or otherwise, file and prove a claim or claims for the whole amount of
principal, premium, if any, and interest owing and unpaid in respect of the
Notes, and, in case of any judicial proceedings, to file such proofs of claim
and other papers or documents as may be necessary or advisable in order to have
the claims of the Holders allowed in such judicial proceedings relative to the
Company or its creditors or its property, and shall be entitled to collect and
receive any monies or other property payable or deliverable on any such claims.
Section 5.3 Application of Monies Collected.
Subject to the terms of the Intercreditor Agreement, and Section 9.20
hereof, any monies collected by or on behalf of a Holder pursuant to this
Article V shall be applied in the following order:
First, to reimbursement of expenses and indemnities provided in Section
6.7 of this Indenture, the Agreement, the Value Partners Agreement, the Notes,
the Convertible Notes and the Collateral Documents;
Second, in case the principal of the Notes then Outstanding shall not
have become due and be unpaid, to the payment of interest on the Notes in
default in the order of the maturity of the installments of such interest, with
interest upon the overdue installments of interest at the rate then borne by the
Notes, such payments to be made ratably to the Holders entitled thereto;
Third, in case the principal of the Notes then Outstanding shall have
become due, by declaration or otherwise, and be unpaid, to the payment of the
whole amount then owing and unpaid upon the Notes for principal and premium, if
any, and interest, with interest on the overdue principal and premium, if any,
and upon overdue payments of interest at the rate then borne by the Notes, and
in case such monies shall be insufficient to pay in full the whole amounts so
due and unpaid upon the Notes, then to the payment of such principal and
premium, if any, and interest without preference or priority of principal and
premium, if any, over interest, or of interest over principal and premium, if
any, or of any installment of interest over any other installment of interest,
or of any Note over any other Note, ratably to the aggregate of such principal
and premium, if any, and accrued and unpaid interest; and
44
<PAGE> 51
Fourth, to the payment of the remainder, if any, to the Company or any
other Person lawfully entitled thereto.
Section 5.4 Remedies Cumulative and Continuing.
Except as provided in the last paragraph of Section 3.7, all powers and
remedies given by this Article V to a Holder shall, to the extent permitted by
law, be deemed cumulative and not exclusive of any thereof or of any other
powers and remedies available to a Holder by judicial proceedings or otherwise,
to enforce the performance or observance of the covenants and agreements
contained herein, and no delay or omission of any Holder of any of the Notes to
exercise any right or power accruing upon an Event of Default shall impair any
such right or power, or shall be construed to be a waiver of any such default or
any acquiescence therein and every power and remedy given herein, by the
Collateral Documents or by law to the Holders may be exercised from time to
time, and as often as shall be deemed expedient, by the Holders.
Section 5.5 Waiver of Defaults by Holders.
Except as provided in the next sentence, the registered holders of a
majority in aggregate principal amount of the Notes and the Convertible Notes,
considered as a single class, at the time Outstanding may on behalf of the
Holders of all of the Notes waive any past Default or Event of Default hereunder
and its consequences, except (i) a default in the payment of interest or
premium, if any, on, or the principal of, the Notes, (ii) a failure by the
Company to convert any Notes into Common Stock in accordance with the provisions
hereof, (iii) a default in the payment of the Redemption Price or the Repurchase
Price pursuant to Article Twelve or (iv) a default in respect of a covenant or
provision hereof which under Article Eight cannot be modified or amended without
the consent of the Holder of each Note affected thereby. Notwithstanding the
foregoing, the registered holders of at least 70% in aggregate principal amount
of the Notes and the Convertible Notes, considered as a single class, at the
time Outstanding shall be required on behalf of the Holders of all the Notes to
waive any past Default or Event of Default under any of the Supermajority
Covenants. Upon any waiver pursuant to this Section 5.5, the Company and the
Holders shall be restored to their former positions and rights hereunder, but no
such waiver shall extend to any subsequent or other Default or Event of Default
or impair any right consequent thereon. Whenever any Default or Event of Default
hereunder shall have been waived as permitted by this Section 5.5, said Default
or Event of Default shall for all purposes of the Notes be deemed to have been
cured and to be not continuing, but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereon.
Section 5.6 Limitation on Suits
No Holder of any Note shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
45
<PAGE> 52
(a) such Holder has previously given written notice to
the Trustee of a continuing Event of Default with respect to the Notes;
(b) the registered holders of not less than 25% in
aggregate principal amount of the Notes and the Convertible Notes, considered as
a single class, then Outstanding shall have made written request to the Trustee
to institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder,
(c) such Holder or Holders have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities to
be incurred in compliance with such request;
(d) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute any such
proceeding; and
(e) no direction inconsistent with such written request
has been given to the Trustee during such 60-day period by the registered
holders of a majority in aggregate principal amount of the Notes and the
Convertible Notes, considered as a single class, then Outstanding;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.
Section 5.7 Control by Holders
The registered holders of a majority of the aggregate
principal amount of the Notes and the Convertible Notes, considered as a single
class, then Outstanding shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with respect to the
Notes, provided that
(a) such direction shall not be in conflict with any rule
of law or with this Indenture,
(b) the Trustee may take any other action deemed proper
by the Trustee which is not inconsistent with such direction, and
(c) subject to the provisions of Section 6.1, the Trustee
shall have the right to decline to follow any such direction if the Trustee in
good faith shall, by a Responsible Officer or Officers of the Trustee, determine
that the proceeding so directed would be unduly prejudicial to the rights of any
other Holder or would involve the Trustee in personal liability.
46
<PAGE> 53
ARTICLE SIX -
THE TRUSTEE
Section 6.1 Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as
provided by the Trust Indenture Act. Whether or not therein expressly so
provided, every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Trustee shall be subject to the
provisions of this Section. If an Event of Default occurs (and is not cured),
the Trustee, in the exercise of its power, must use the degree of care of a
prudent man in the conduct of his own affairs. Subject to the requirement in the
foregoing sentence, the Trustee is under no obligation to exercise any of its
rights or powers under this Indenture at the request of any Holder, unless such
Holder shall have offered to the Trustee security and indemnity satisfactory to
it against any loss, liability or expense and then only to the extent required
by the terms of this Indenture.
Section 6.2 Notice of Defaults.
If a Default occurs and is continuing and is known to the Trustee, the
Trustee shall mail to each Holder notice of the Default within 60 days after it
occurs. Except in the case of a Default in the payment of principal of, premium,
if any, or interest on any Note, the Trustee may withhold notice if and so long
as a committee of its trust officers determines that withholding notice is not
opposed to the interest of the Holders. The Trustee shall not be deemed to have,
or be required to take, notice of Default or Event of Default under this
Indenture except any default under Section 5.1(a) or (b) hereof or in the event
of written notification of such Default or Event of Default by the owners of any
of the Notes, and in the absence of such notice the Trustee may conclusively
presume there is no default except as aforesaid. The Trustee may nevertheless
require the Company to furnish information regarding performance of its
obligations under this Indenture, but is not obligated or does not have a duty
to the Holders to do so.
Section 6.3 Certain Rights of Trustee.
Subject to the provisions of Section 6.1:
(a) the Trustee may rely and shall be protected in acting
or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented by the proper
party or parties;
(b) any request or direction of any Obligor mentioned
herein shall be sufficiently evidenced by a Company Request or Company Order and
any resolution of the Board of Directors of any Obligor may be sufficiently
evidenced by a Board Resolution;
47
<PAGE> 54
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith on
its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the advice
of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such Holders
shall have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance with
such request or direction;
(f) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if the Trustee
shall determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Company, personally
or by agent or attorney, and
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys and the Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney appointed with due care by it
hereunder.
Section 6.4 Not Responsible for Recitals or Issuance of
Notes.
The recitals contained herein and in the Notes, except the
Trustee's certificate of authentication, shall be taken as the statements of the
Company, and the Trustee or any Authenticating Agent assumes no responsibility
for their correctness. The Trustee makes no representations as to the validity
or sufficiency of this Indenture or of the Notes. The Trustee or any
Authenticating Agent shall not be accountable for the use or application by the
Company of Notes or the proceeds thereof.
Section 6.5 May Hold Notes.
The Trustee, any Authenticating Agent, any Paying Agent, any
Note Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Notes and, subject to Sections 6.8
and 6.13, may otherwise deal with the Company with the same rights it would have
if it were not Trustee, Authenticating Agent, Paying Agent, Note Registrar or
such other agent.
48
<PAGE> 55
Section 6.6 Money Held in Trust.
Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no liability for interest on any money received by it hereunder
except as otherwise agreed with the Company.
Section 6.7 Compensation and Reimbursement.
The Company agrees:
(a) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which compensation shall
not be limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(b) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any provision of this Indenture (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad faith;
(c) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability, or expense incurred without negligence or bad
faith on its part, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the reasonable costs
and expenses of defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties hereunder, and
(d) when the Trustee incurs any expenses or renders any
services after the occurrence of an Event of Default specified in Section 5.1(g)
such expenses and the compensation for such services are intended to constitute
expenses of administration under the Bankruptcy Code or any similar federal or
state law for the relief of debtors.
As security for the performance of the obligations of the
Company under this Section, the Trustee shall have a lien prior to the Notes
upon all property and funds held or collected by the Trustee as such, except
funds (i) held in trust for the payment of principal of and interest on Notes or
(ii) held in the Trustee's capacity as Paying Agent.
The obligations of the Company under this Section to
compensate and indemnify the Trustee and each predecessor Trustee and to pay or
reimburse the Trustee and each predecessor Trustee for expenses, disbursements
and advances shall constitute an additional obligation hereunder and shall
survive the satisfaction and discharge of this Indenture and the resignation or
removal of the Trustee and each predecessor Trustee.
Section 6.8 Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest
within the meaning of the Trust Indenture Act, the Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Indenture.
49
<PAGE> 56
Section 6.9 Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
a Person that is eligible pursuant to the Trust Indenture Act to act as such and
has a combined capital and surplus of at least $100,000,000. If such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such Person shall be deemed
to be its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article.
Section 6.10 Resignation and Removal; Appointment of
Successor.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 6.11.
(b) The Trustee may resign at any time with respect to
the Notes by giving written notice thereof to the Company. If the instrument of
acceptance by a successor Trustee required by Section 6.11 shall not have been
delivered to the Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Notes.
(c) The Trustee may be removed at any time with respect
to the Notes by Act of the Holders of a majority in principal amount of the
Notes then Outstanding, delivered to the Trustee and to the Company.
(d) If at any time:
(i) the Trustee shall fail to comply with
Section 6.8 after written request therefor by the Company or
by any Holder who has been a bona fide Holder of a Note for at
least six months, or
(ii) the Trustee shall cease to be eligible under
Section 6.9 and shall fail to resign after written request
therefor by the Company or by any such Holder, or
(iii) the Trustee shall become incapable of acting
or shall be adjudged a bankrupt or insolvent or a receiver of
the Trustee or of its property shall be appointed or any
public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution
may remove the Trustee with respect to all securities, or (ii) subject to
Section 5.14, any Holder who has been a bona fide Holder of a Note for at least
six months may, on behalf of himself and all others
50
<PAGE> 57
similarly situated, petition any court of competent jurisdiction for the removal
of the Trustee with respect to all Notes and the appointment of a successor
Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause, with respect to the Notes, the Company, by a Board Resolution, shall
promptly appoint a successor Trustee or Trustees with respect to the Notes and
shall comply with the applicable requirements of Section 6.11. If, within one
year after such resignation, removal or incapability, or the occurrence of such
vacancy, a successor Trustee with respect to the Notes shall be appointed by Act
of the Holders of a majority in principal amount of the Notes then Outstanding
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment in accordance
with the applicable requirements of Section 6.11, become the successor Trustee
with respect to the Notes and to that extent supersede the successor Trustee
appointed by the Company. If no successor Trustee with respect to the Notes
shall have been so appointed by the Company or the Holders and accepted
appointment in the manner required by Section 6.1l, any Holder who has been a
bona fide Holder of a Note for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the appointment of a successor Trustee with respect to the Notes.
(f) The Company shall give notice of each resignation and
each removal of the Trustee with respect to the Notes and each appointment of a
successor Trustee with respect to the Notes to all Holders of Notes in the
manner provided in Section 1.6. Each notice shall include the name of the
successor Trustee with respect to the Notes and the address of its Corporate
Trust Office.
Section 6.11 Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor
Trustee with respect to the Notes, every such successor Trustee so appointed
shall execute, acknowledge and deliver to the Company and to the retiring
Trustee an instrument accepting such appointment, and thereupon the resignation
or removal of the retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Trustee; but, on the
request of the Company or the successor Trustee, such retiring Trustee shall,
upon payment of its charges, execute and deliver an instrument transferring to
such successor Trustee all the rights, powers and trusts of the retiring Trustee
and shall duly assign, transfer and deliver to such successor Trustee all
property and money held by such retiring Trustee hereunder.
(b) Upon request of any such successor Trustee, the
Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts referred to in paragraph (a) of this Section.
(c) No successor Trustee shall accept its appointment
unless at the time of such acceptance such successor Trustee shall be qualified
and eligible under this Article.
51
<PAGE> 58
Section 6.12 Merger, Conversion, Consolidation or
Succession to Business.
Any corporation into which the Trustee may be merged or
convened or with which it may be consolidated, or any corporation resulting from
any merger, conversion or consolidation to which the Trustee shall be a party,
or any corporation succeeding to all or substantially all the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Notes shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Notes so authenticated with the same effect
as if such successor Trustee had itself authenticated such Notes.
Section 6.13 Preferential Collection of Claims Against
Company.
If and when the Trustee shall be or become a creditor of the
Company (or any other obligor upon the Notes), the Trustee shall be subject to
the provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).
Section 6.14 Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents
(which may be an affiliate of the Company) with respect to the Notes which shall
be authorized to act on behalf of the Trustee to authenticate Notes issued upon
original issue and upon exchange, registration of transfer or partial redemption
thereof or pursuant to Section 3.7, and Notes so authenticated shall be entitled
to the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder. Wherever reference is
made in this Indenture to the authentication and delivery of Notes by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation organized and
doing business under the laws of the United States of America, any state thereof
or the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $100,000,000 and
subject to supervision or examination by federal or state authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion
52
<PAGE> 59
or consolidation to which such Authenticating Agent shall be a party, or any
corporation succeeding to the corporate agency or corporate trust business of an
Authenticating Agent, shall continue to be an Authenticating Agent, provided
such corporation shall be otherwise eligible under this Section, without the
execution or filing of any paper or any further act on the part of the Trustee
or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving
written notice thereof to the Trustee and to the Company. The Trustee may at any
time terminate the agency of an Authenticating Agent by giving written notice
thereof to such Authenticating Agent and to the Company. Upon receiving such a
notice of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail written notice of
such appointment by first-class mail, postage prepaid, to all Holders of Notes
with respect to which such Authenticating Agent will serve, as their names and
addresses appear in the Note Register. Any successor Authenticating Agent upon
acceptance of its appointment hereunder shall become vested with all the rights,
powers and duties of its predecessor hereunder, with like effect as if
originally named as an Authenticating Agent. No successor Authenticating Agent
shall be appointed unless eligible under the provisions of this Section.
Unless the Authenticating Agent has been appointed by the
Trustee at the request of the Company, the Trustee agrees to pay to each
Authenticating Agent from time to time reasonable compensation for its services
under this Section, and the Trustee shall be entitled to be reimbursed for such
payments, subject to the provisions of Section 6.7.
If an appointment is made pursuant to this Section, the Notes
may have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternative certificate of authentication in the following
form:
This is one of the Notes designated and referred to in the
within-mentioned Indenture.
, as Trustee
--------------------------------
By:
------------------------------------------
As Authenticating Agent
By:
------------------------------------------
Authorized Officer
53
<PAGE> 60
ARTICLE SEVEN -
LISTS OF HOLDERS OF NOTES AND CONVERTIBLE NOTES AND REPORTS BY TRUSTEE AND
COMPANY
Section 7.1 Company to Furnish Trustee Names and
Addresses of Holders of Notes and
Convertible Notes.
(a) The Company will furnish or cause to be furnished to
the Trustee:
(i) semi-annually, not later than five Business
Days after each Record Date, a list, in such form as the
Trustee may reasonably require, of the names and addresses of
each of (x) the Holders of Notes and (y) the Beneficial Owners
as of such Record Date, and
(ii) at such other times as the Trustee may
request in writing, within 30 days after the receipt by the
Company of any such request, lists of similar form and content
as of a date not more than 15 days prior to the time such list
is furnished;
excluding from any such list names and addresses received by
the Trustee in its capacity as Note Registrar.
(b) If and whenever the Company or any Affiliate of the
Company acquires any Notes, the Company shall within 10 Business Days after such
acquisition by the Company and within 10 Business Days after the date on which
it obtains knowledge of any such acquisition by an Affiliate of the Company,
provide the Trustee with written notice of such acquisition, the aggregate
principal amount acquired (to the extent known by the Company), the Holder from
whom such Notes were acquired and the date of such acquisition.
(c) The Company will furnish or cause to be furnished to
the Trustee:
(i) semi-annually, not later than five Business
Days after each Record Date, list, in such form as the trustee
may reasonably require, of the names and addresses of each of
the record and the beneficial owners of the Convertible Notes,
as reflected in the Convertible Note Registries, as of such
Record Date; and
(ii) at such other times as the Trustee may
request in writing, within 30 days after the receipt by the
Company of any such request, lists of similar form and content
as of a date not more than 15 days prior to the time such list
is furnished.
(d) If and whenever the Company or any Affiliate of the
Company acquires any Convertible Notes, the Company shall within 10 Business
Days after such acquisition by the Company and within 10 Business Days after the
date on which it obtains knowledge of any such acquisition by an Affiliate of
the Company, provide the Trustee with written notice of such
54
<PAGE> 61
acquisition, the aggregate principal amount acquired (to the extent known by the
Company), the holder from whom such Convertible Notes were acquired and the date
of such acquisition.
Section 7.2 Preservation of Information; Communications
to Holders.
(a) The Trustee shall preserve, in as current a form as
is reasonably practicable, the names and addresses of Holders contained in the
most recent list furnished to the Trustee as provided in Section 7.1 and the
names and addresses of Holders received by the Trustee in its capacity as Note
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.1 upon receipt of a new list so furnished.
(b) The rights of the Holders to communicate with other
Holders with respect to their rights under this Indenture or under the Notes,
and the corresponding rights and privileges of the Trustee, shall be as provided
by the Trust Indenture Act.
(c) Every Holder of Notes, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by reason of
any disclosure of information as to names and addresses of Holders made pursuant
to the Trust Indenture Act.
Section 7.3 Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports
concerning the Trustee and its actions under this Indenture as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant thereto. To the extent that any such report is required by the Trust
Indenture Act with respect to any 12-month period, such report shall cover the
12-month period ending December 31 and shall be transmitted by the next
succeeding March 1.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which any Notes are listed, with the Commission and with the Company. The
Company will notify the Trustee when any Notes are listed on any stock exchange.
Section 7.4 Reports by Company.
The Company shall file with the Commission and shall furnish
to the Trustee and the Holders, within 5 days after it files them with the
Commission, copies of its annual report and the information, documents and other
reports which the Company is required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act. Notwithstanding that the Company may
not be required to remain subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act, the Company shall continue to file with the
Commission and to provide to the Trustee and the Holders the annual reports and
the information, documents and other reports which are specified in Section 13
or 15(d) of the Exchange Act and applicable to a US corporation subject to such
sections, such information, documents and other reports to be filed and provided
at the times specified for the filing of such information, documents and reports
55
<PAGE> 62
under such section. The Company also shall comply with the other provisions of
ss. 314(a) of the Trust Indenture Act.
Section 7.5 Provision of Reports and Other Documents to
Holders of Convertible Notes.
Notwithstanding any other provision of this Indenture to the contrary,
the Company and the Trustee shall provide to each record and beneficial owner of
a Convertible Note, as reflected in the Convertible Note Registries, at the same
time and in the same manner as is provided to Holders, copies of any notice,
report or other document provided to the Holders hereunder.
ARTICLE EIGHT -
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.1 Supplemental Indentures with Consent of
Holders.
(a) With the written consent of the registered holders of
a majority in aggregate principal amount of the Notes and the Convertible Notes,
considered as a single class, at the time Outstanding, by Act of such registered
holders delivered to the Company and the Trustee, the Company, when authorized
by a Board Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating or waiving any of the provisions of this Indenture or
of modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Note affected thereby (i) extend the fixed
maturity of such Note, or reduce the rate or extend the time of payment of
interest thereon, or reduce the principal amount thereof or premium, if any,
thereon, or reduce any amount payable on redemption thereof, or impair the right
of any such Holder to institute suit for the payment thereof, or make the
principal thereof or interest or premium, if any, thereon payable in any coin or
currency other than that provided herein, or change the obligation of the
Company to repurchase any Note upon the occurrence of a Repurchase Event in a
manner adverse to such Holder, or impair the right to convert the Notes into
Common Stock in any material respect, or (ii) reduce the aforesaid percentage of
Notes and the Convertible Notes, considered as a single class, the registered
holders of which are required to consent to any such amendment, modification,
supplement or waiver; and further provided that no such supplemental indenture
shall amend, modify, supplement or waive the Supermajority Covenants, the second
sentence of Section 9.24, the date March 31, 2000 in the proviso clause to
Section 12.6 and this proviso clause without the written consent of the
registered holders of not less than 70% in aggregate principal amount of the
Notes and the Convertible Notes, considered as a single class, at the time
Outstanding.
(b) It shall not be necessary for any Act of the
registered holders of the Notes and Convertible Notes under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act and such notice shall approve the substance thereof.
56
<PAGE> 63
Section 8.2 Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by,
any supplemental indenture permitted by this Article or the modifications
thereby of the trusts created by this Indenture, the Trustee shall receive, and
(subject to Section 6.1) shall be fully protected in relying upon, an Opinion of
Counsel stating that this Indenture, as amended by such supplemental indenture,
constitutes the legal, valid and binding obligation of all Obligors, enforceable
against each of them in accordance with its terms.
Section 8.3 Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes; and
every Holder of Notes theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby and entitled to the benefits thereof.
Section 8.4 Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article
shall conform to the requirements of the Trust Indenture Act as then in effect.
Section 8.5 Reference in Notes to Supplemental
Indentures.
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form acceptable to the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Notes so modified as to conform, in the opinion of the Trustee and the Board
of Directors, to any such supplemental indenture may be prepared and executed by
the Obligors and authenticated and delivered by the Trustee in exchange for
Notes then Outstanding.
Section 8.6 Notice of Supplemental Indenture.
After an supplemental indenture hereunder becomes effective,
the Company shall mail to Holders a notice briefly describing such supplemental
indenture; provided, that the failure to give such notice to all Holders, or any
defect therein, will not impair or affect the validity of the supplemental
indenture.
ARTICLE NINE -
COVENANTS
Section 9.1 Payment of Notes.
The Company shall pay the principal of, premium, if any, and
interest on the Notes on the dates and in the manner provided herein. To the
extent lawful, the Company shall pay interest (including post-petition interest
in any proceeding under any bankruptcy law) on (i)
57
<PAGE> 64
overdue principal, at the rate borne by the Notes at the time, and (ii) overdue
installments of interest (without regard to any applicable grace period) at the
same rate, compounded semi-annually.
Section 9.2 Stay, Extension and Usury Laws.
The Company covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or
usury law or other law which would prohibit or forgive the Company from paying
all or any portion of the principal of, premium, if any, or interest on the
Notes as contemplated herein, wherever enacted, now or at any time hereafter in
force, or which may affect the covenants or the performance of its obligations
herein, and the Company (to the extent it may lawfully do so) hereby expressly
waives all benefits or advantages of any such law.
Section 9.3 Reports and Certificates.
(a) Whether or not required by the rules and regulations
of the Commission, so long as any Notes are Outstanding, the Company will
furnish to the Trustee and the Holders, within five days after the time periods
specified in the Commission's rules and regulations (including any extensions
expressly permitted by such rules and regulations):
(1) all quarterly and annual information, financial and
other, that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K (or any successor forms) if the
Company were required to file such forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and an annual report on the Company's consolidated
financial statements by the Company's independent certified public
accountants; and
(2) all current reports that would be required to be
filed with the Commission on Form 8-K (or any successor form) if the
Company were required to file such reports.
(b) For so long as any Notes are Outstanding, the Company
will furnish to the Holders and to securities analysts and prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act.
(c) Concurrently with the delivery of the annual report
described in Section 9.3(a)(1), the Company will deliver to each Holder at such
Holder's address as it appears on the Note Register a statement of the Company's
independent certified public accountants to the effect that they have reviewed
the Agreement and the Related Agreements and that based on their examination of
the affairs of the Company and its Subsidiaries, performed in connection with
their audit of the Company's annual financial statements, they are not aware of
the occurrence or existence of any condition or event which constitutes a
Default or an Event of Default, or, if they are aware thereof, the nature
thereof.
(d) Concurrently with the delivery of the annual report
described in Section 9.3(a)(1), the Company will deliver to each Holder at such
Holder's address as it appears in the
58
<PAGE> 65
Note Register, within 90 days after the end of each fiscal year of the Company,
an Officer's Certificate, signed by each of the Company's Chief Executive
Officer and Chief Financial Officer, to the effect that each such officer has
reviewed the Agreement and the Related Agreements and is not aware of the
occurrence or existence of any condition or event which constitutes a Default or
an Event of Default, or, if they are aware thereof, the nature thereof and what
action the Company is taking or proposes to take with respect thereto.
(e) Notwithstanding any other provision hereof to the
contrary, promptly upon acquiring knowledge of any Default or Event of Default,
the Company will promptly deliver to each Holder at such Holder's address as it
appears in the Note Register an Officer's Certificate specifying such Default or
Event of Default and what action the Company is taking or proposes to take with
respect thereto.
(f) The Company will deliver to each Holder of at least
$1.0 million aggregate principal amount of Notes who so requests at such
Holder's address as it appears in the Note Register, within 30 days after the
end of each fiscal quarter of the Company, an Officers' Certificate, signed by
the Company's Chief Executive Officer and Chief Financial Officer, which (i)
sets forth in reasonable detail the calculations which demonstrate the Company's
compliance with the financial covenants set forth in Section 9.12 (regardless
whether such covenants are in effect) and Section 9.13 (regardless whether the
Company is seeking to incur additional Indebtedness) and (ii) to the effect that
each such officer is not aware of the occurrence or existence of any condition
or event which constitute a Default or an Event of Default with respect to
Section 9.6 or, if they are aware thereof, the nature thereof and what action
the Company is taking or proposes to take with respect thereto.
(g) The Company will deliver to each Holder of at least
$1.0 million aggregate principal amount of Notes who so requests at such
Holder's address as it appears in the Note Register, within 30 days after the
end of each calendar month, (i) an unaudited balance sheet and income statement
showing the results of the Company's operations for such month, certified by an
Officers' Certificate which is signed by the Company's Chief Financial Officer
or Chief Accounting Officer, (ii) the amount of originations, purchases and
sales of each type of Receivable by the Company and each Subsidiary of the
Company during such month and fiscal year to date and (iii) the amount of (x)
delinquent loans or other Receivables and (y) real estate owned of the Company
and each Subsidiary of the Company at the end of such month.
Section 9.4 Taxes and Other Charges.
(a) Each of the Company and its Subsidiaries will duly
pay and discharge, or cause to be paid and discharged, before the same becomes
in arrears, all taxes, assessments and other governmental charges imposed upon
such Person and its properties, sales or activities, or upon the income or
profits therefrom, as well as all claims for labor, materials, supplies or
services which if unpaid might by law become a Lien upon any of its assets;
provided, however, that any such tax, assessment, charge or claim need not be
paid if the validity or amount thereof shall at the time be contested in good
faith by appropriate proceedings and if such Person shall, in accordance with
GAAP, have set aside on its books adequate reserves with respect thereto;
59
<PAGE> 66
and provided, further, that each of the Company and its Subsidiaries shall pay
or bond, or cause to be paid or bonded, all such taxes, assessments, charges or
other governmental claims immediately upon the commencement of proceedings to
foreclose any Lien which may have attached as security therefor (except to the
extent such proceedings have been dismissed or stayed).
(b) Each of the Company and its Subsidiaries will
promptly pay when due, or in conformity with ordinary business practices, all
accounts payable incident to the operations of such Person not referred to in
paragraph (a) of this Section 9.4; provided, however, that any such Indebtedness
need not be paid if the validity or amount thereof shall at the time be
contested in good faith and if such Person shall, in accordance with GAAP, have
set aside on its books adequate reserves with respect thereto.
Section 9.5 Conduct of Business.
(a) Each of the Company and its Subsidiaries (i) will
carry on and conduct its business in substantially the same manner and in
substantially the same fields of enterprise as is conducted generally from time
to time by companies in the mortgage lending business or the consumer finance
business in the United States and will not engage in any other business
activities and (ii) do all things necessary to remain duly incorporated, validly
existing and in good standing as a domestic corporation in its jurisdiction of
incorporation and maintain all requisite authority to conduct its business in
each jurisdiction in which its business is conducted to the extent failure to do
so would have, or could reasonably be expected to have, a Material Adverse
Effect.
(b) Each of the Company and its Subsidiaries will comply
in all material respects with all valid and applicable statutes, laws,
ordinances, zoning and building codes and other rules and regulations of the
United States of America, of the states and territories thereof and their
counties, municipalities and other subdivisions and of any foreign country or
other jurisdictions applicable to such Person, except where failure so to comply
would not, individually or in the aggregate, result in any Material Adverse
Effect.
Section 9.6 Corporate Existence.
(a) Subject to Article Ten, the Company will do or cause
to be done all things necessary to preserve and keep in full force and effect
its corporate existence, rights (charter and statutory) and franchises and those
of any Subsidiary of the Company, provided, however, that the Company and any
Subsidiary of the Company shall not be required to preserve any such right or
franchise if the Board of Directors of the Company shall determine in good faith
that the preservation is no longer desirable in the conduct of the Company's
business and that the loss thereof is not, and will not be, reasonably likely to
result in any Material Adverse Effect.
(b) Notwithstanding anything in paragraph (a) to the
contrary, the Company will exercise its reasonable best efforts to operate MCI
in a manner that will maintain the corporate existence and enterprise value of
MCI, including but not limited to maintenance of its
60
<PAGE> 67
production, administration and secondary marketing functions in a fashion that
would make its business a commercially marketable asset, which shall include:
(i) the maintenance of separate books, records
and accounts, including detailed intercompany payables and
receivables accounts;
(ii) separate revenue generation (including loan
origination and loan sales), collection, and credit functions;
(iii) separate expense allocation;
(iv) separate employment of employees,
consultants and agents;
(v) separate compensation of employees,
consultants and agents;
(vi) maintenance of separate licenses;
(vii) maintenance of separate borrowing
facilities, whether in MCI's own name, or as a named borrower
under the Company facilities, including warehouse facilities;
(viii) separation of all material operational
functions, including telephone systems, computer systems, etc.
(ix) separate corporate existence; and
(x) separate business leases and contracts,
including as to office space, phone systems, copy systems,
leased furniture and equipment.
(c) The Company will take reasonable steps to ensure that
all data and information reasonably necessary for the operation of MCI as an
independent corporation, including accounting, loan production and loan sales
information, shall be transferable to MCI promptly and without material expense
upon reasonable request by MCI. MCI shall maintain, at MCI, computer systems
capable of maintaining and processing the above and such data shall be forwarded
to such system periodically.
(d) The Company will ensure that all business relations
with MCI, including any services provided to MCI by the Company, are properly
documented. All contracts between MCI and the Company shall include a provision
permitting MCI to terminate such contracts without penalty, at its discretion.
The Company will take no action which it reasonably believes will result in a
material reduction in the enterprise value or marketability of MCI, provided
that this restriction shall not prohibit the Company from transferring money
from MCI to the Company in such manner as the Company determines is necessary,
in its discretion.
(e) The covenants in paragraphs (b) and (c) above shall
cease to be effective at such time on or after August 31, 2001 as the Company
shall have established compliance with all of the financial tests specified in
Section 9.12 (a), (b) and (c).
61
<PAGE> 68
Section 9.7 Maintenance of Properties.
The Company and its Subsidiaries will cause all material
properties (real and personal) owned, leased or licensed in the conduct of their
business to be maintained and kept in good condition, repair and working order
and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof
and thereto, all as in the reasonable judgment of the Board of Directors may be
necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times while any Notes are
Outstanding, provided, however, that nothing in this Section 9.7 shall prevent
the Company and its Subsidiaries from discontinuing the maintenance of any such
properties if, in the reasonable judgment of the Board of Directors, such
discontinuance is desirable in the conduct of the Company's business and is not,
and will not be, reasonably likely to result in any Material Adverse Effect.
Section 9.8 Insurance.
Each of the Company and its Subsidiaries will maintain with
financially sound and reputable insurers insurance against liability for
hazards, risks and liability to persons and property, to the extent, in amounts
and with deductibles at least as favorable as those generally maintained by
businesses of similar size engaged in similar activities.
Section 9.9 Restricted Payments.
The Company will not, and will not permit any Subsidiary to,
directly or indirectly, make any Restricted Payment.
Section 9.10 Restrictions on Issuance and Sale of Sale of
Capital Stock of Subsidiaries.
The Company will not sell, transfer or otherwise dispose of
shares of Capital Stock of any Subsidiary of the Company or permit any
Subsidiary of the Company to issue, sell or otherwise dispose of shares of its
Capital Stock unless in either case such Subsidiary remains a Wholly-Owned
Subsidiary of the Company.
Section 9.11 Restrictions on Subsidiary Mergers and Sales
of Assets.
(a) The Company will not permit any Subsidiary to merge
or consolidate with any Person, except that a Subsidiary, other than MCI, may
merge into the Company or another Wholly-Owned Subsidiary of the Company.
(b) The Company will not permit any Subsidiary to sell,
lease or otherwise dispose of its assets to any other Person, except (i) sales
of Receivables in the ordinary course of business, (ii) sales of
mortgage-related securities which are issued or sponsored by the Subsidiary or
an Affiliate of the Subsidiary in the ordinary course of business or (iii)
sales, leases or other dispositions of its assets that, together with all other
assets of the Subsidiary previously sold, leased or disposed of (other than
Receivables and securities referred to in clauses (i) and (ii) of
62
<PAGE> 69
this sentence) in accordance with this Section 9.11(b) during the 12-month
period ending with the month in which any such sale, lease or other disposition
occurs, do not constitute a Substantial Portion of the consolidated assets of
the Company under GAAP.
Section 9.12 Financial Covenants.
(a) The Company will not at any time permit its
Consolidated Net Worth to be less than the sum of (1) $30.0 million plus (2) 60%
of the sum of the Company's positive Consolidated Net Income (determined in
accordance with GAAP) for each fiscal semi-annual period ending after the Issue
Date, commencing with the semi-annual period ending August 31, 2000, plus (3)
100% of the net proceeds obtained by the Company through the issuance or sale of
Capital Stock (after the deduction of all costs of such issuance). For purposes
of this Section 9.12(a), Consolidated Net Worth shall not include (i) up to an
aggregate of $5.0 million of increases in the carrying value of the
mortgage-related securities owned by the Company as of the Issue Date (the
"Issue Date Securities") recorded by the Company under GAAP and (ii) up to an
aggregate of $5.0 million of decreases in the carrying value of the Issue Date
Securities recorded by the Company under GAAP, in each case measured from the
carrying value of the Issue Date Securities as of the month-end preceding the
Closing Date, as set forth on an Officers' Certificate delivered to Value
Partners and the Collateral Agent, and as subsequently reflected on any
statement of financial condition of the Company included in a report filed by
the Company pursuant to Section 9.3(a)(1) (the "Mark-to-Market Adjustments"). To
illustrate, if the Company decreased the carrying value of the Issue Date
Securities under GAAP as of the month-end preceding the Issue Date by $4.0
million and $3.0 million at August 31, 2000 and November 30, 2000, respectively,
the Consolidated Net Worth of the Company at November 30, 2000 for purposes of
Section 9.12(a)(1) shall be increased by $5.0 million. Similarly, if the Company
increased the carrying value of the Issue Date Securities by such respective
amounts at such respective dates, the Consolidated Net Worth of the Company at
November 30, 2000 for purposes of Section 9.12(a)(1) shall be decreased by $5.0
million.
(b) Commencing on August 31, 2001 and thereafter, the
Company will not at any time permit the ratio of (i) the aggregate amount of
consolidated liabilities of the Company and its Subsidiaries (determined in
accordance with GAAP) to (ii) the Consolidated Net Worth of the Company and its
Subsidiaries to exceed 7.0 to 1.0.
(c) Commencing with the fiscal quarter ending August 31,
2001 and as of the end of each fiscal quarter of the Company thereafter, the
Company will not permit the Fixed Charge Coverage Ratio of the Company to be
less than 1.5 to 1.0 on a trailing four-quarter basis.
Section 9.13 Limitation on Incurrence of Indebtedness
and Issuance of Disqualified Capital Stock.
(a) The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, Incur any Indebtedness or issue any
Disqualified Capital Stock, provided, that the Company and any Subsidiary may
Incur Indebtedness, other than in the case of the Company Indebtedness as a
result of its Guarantee of the Indebtedness of any Person, including without
limitation any Subsidiary of the Company, if at the time of Incurrence no
Default or
63
<PAGE> 70
Section 9.15 Subsidiary Guarantees.
Event of Default shall have occurred and be continuing or would occur as a
consequence thereof and each of the following requirements is satisfied:
(i) The Fixed Charge Coverage Ratio for the
Company's most recently ended four fiscal quarters for which
internal financial statements are available immediately
preceding the date on which such additional Indebtedness is
Incurred would have been at least 1.6 to 1.0, determined on a
pro forma basis (including, if applicable, a pro forma
application of the net proceeds therefrom to repay other
Indebtedness), as if the additional Indebtedness had been
Incurred at the beginning of such four-quarter period; and
(ii) the ratio of (i) the aggregate amount of
consolidated liabilities of the Company and its Subsidiaries
to (ii) the Consolidated Net Worth of the Company does not
exceed 6.0 to 1.0, determined on a pro forma basis (including
a pro forma application of the net proceeds therefrom).
(b) Notwithstanding paragraph (a) of this Section 9.13,
the Company and its Subsidiaries may incur Permitted Indebtedness while no
Default or Event of Default exists.
Section 9.14 Liens.
(a) The Company will not, and will not permit any
Subsidiary to, create, assume or otherwise cause or suffer to exist or to become
effective any Lien upon any Note Security (or become contractually committed to
do so), except the following:
(i) liens created under the agreements governing
the securitization of the Receivables underlying the
mortgage-related securities included in the Note Security;
(ii) liens to secure taxes, assessments and other
governmental charges, to the extent that payment thereof shall
not at the time be required by Section 9.4;
(iii) restrictions under federal and state
securities laws on the transfer of securities; and
(iv) liens which solely secure the Note
Obligations.
(b) The Company will not, and will not permit any
Subsidiary to, create, assume or otherwise cause or suffer to exist or become
effective any Lien upon any Eligible Collateral, other than Permitted Liens, to
secure any Indebtedness of the Company (other than the Note Obligations and
Convertible Note Obligations), any Subsidiary of the Company or any other
Person, without in each case making effective provision whereby all Notes and
Convertible Notes shall be directly secured equally and ratably with (or prior
to in the case of Liens with respect to Junior Indebtedness) such Indebtedness.
64
<PAGE> 71
Section 9.15 Subsidiary Guarantees.
The Company will not permit any Subsidiary of the Company,
directly or indirectly, to Guarantee or assume, or subject any of its assets to
a Lien to secure, any Pari Passu Indebtedness or Junior Indebtedness unless (i)
such Subsidiary simultaneously provides for a Guarantee of, or pledge of assets
to secure, the Note Obligations and the Convertible Note Obligations by such
Subsidiary on terms at least as favorable to the Holders as such Guarantee or
security interest in such assets is to the holders of such Pari Passu
Indebtedness or Junior Indebtedness, except that in the event of a Guarantee or
security interest in such assets with respect to (x) Pari Passu Indebtedness,
the Guarantee or security interest in such assets shall be made pari passu to
the Guarantee or security interest in such assets with respect to such Pari
Passu Indebtedness or (y) Junior Indebtedness, any such Guarantee or security
interest in such assets with respect to such Junior Indebtedness shall be
subordinated to such Subsidiary's guarantee or security interest in such assets
with respect to the Note Obligations and the Convertible Note Obligations to the
same extent as such Junior Indebtedness is subordinated to the Note Obligations
and the Convertible Note Obligations and (ii) such Subsidiary waives and agrees
in writing that it will not in any manner whatsoever claim, or take the benefit
or advantage of, any rights of reimbursement, indemnity or subrogation or any
other rights against the Company or any other Subsidiary of the Company as a
result of any payment by such Subsidiary under its guarantees.
Section 9.16 Payment of Dividends from Subsidiaries.
To the extent necessary to enable it to make payments on the
Notes in accordance with their terms, the Company shall cause dividends to be
paid to it by its Subsidiaries (whether in existence as of the date of issuance
of the Notes or thereafter formed or acquired) in amounts which are sufficient
to enable the Company to satisfy its payment obligations under the Notes (and
which shall be so used by the Company), provided that the Company shall not be
required to take any action which would result in a Subsidiary paying dividends
to the extent not permitted by applicable law and regulation and/or restrictions
existing under agreements in effect on the Issue Date if the Company receives an
opinion of counsel (in form and substance satisfactory to the registered holders
of a majority in aggregate principal amount of the Notes and the Convertible
Notes, considered as a single class, at the time Outstanding) as to the
existence of the relevant restriction no later than the applicable Interest
Payment Date or the Stated Maturity of the Notes, whether by acceleration or
otherwise.
Section 9.17 Limitations on Dividends and Other Payment
Restrictions Affecting Subsidiaries.
The Company will not, and will not permit any of its
Subsidiaries (whether in existence as of the date of issuance of the Notes or
thereafter formed or acquired) to, create, assume or otherwise cause or suffer
to exist or to become effective any consensual encumbrance or consensual
restriction on the ability of any such Subsidiary to:
(a) pay any dividends or make any other distribution to
the Company or any other Subsidiary on its Capital Stock or with respect to any
other interest or participation in, or measured by, its profits;
65
<PAGE> 72
(b) make payments in respect to any Indebtedness owed to
the Company or any other Subsidiary; or
(c) make loans or advances to the Company or any other
Subsidiary or to guarantee Indebtedness of the Company or any other Subsidiary;
other than, in the case of (a), (b) and (c),
(1) restrictions existing under agreements in effect on
the Issue Date;
(2) consensual encumbrances or consensual restrictions
binding upon any Person at the time such Person becomes a Subsidiary of
the Company so long as such encumbrances or restrictions (i) are not
created, incurred or assumed in contemplation of such Person becoming a
Subsidiary and (ii) do not encumber or restrict the Company or any
other Subsidiary of the Company as set forth in (a), (b) or (c) above.
(3) restrictions on the transfer of assets which are
subject to Liens; and
(4) restrictions existing under any agreement which
refinances or replaces any of the agreements containing the
restrictions in clauses (1) and (2), provided that the terms and
conditions of any such restrictions are not materially less favorable
to the Holders than those under the agreement evidencing or relating to
the Indebtedness refinanced.
Section 9.18 Investments and Acquisitions.
The Company will not, nor will it permit any Subsidiary to,
make or suffer to exist any Investments (including, without limitation, loans
and advances to, and other Investments in, Subsidiaries), or commitments
therefor, or create any Subsidiary or become a partner in any partnership or
joint venture, or make any Acquisition of any Person, in each case whether
directly or indirectly through a transaction which may otherwise be permissible
pursuant to Section 10.1 hereof or otherwise, except:
(i) Short-term obligations of, or fully
guaranteed by, the United States of America;
(ii) Commercial paper rated A-1 or better by
Standard and Poor's Ratings Group or P-1 or better by Moody's
Investors Service, Inc.;
(iii) Demand deposit accounts maintained in the
ordinary course of business;
(iv) Certificates of deposit issued by and time
deposits with federally-insured financial institutions having
capital and surplus in excess of $100,000,000;
66
<PAGE> 73
(v) Investments in existence on the Issue Date;
(vi) Investments in the ordinary course of the
Company's business to originate or purchase (a) Receivables
(and in connection with commitments to purchase the same) and
(b) real estate acquired by foreclosure or by deed-in-lieu
thereof, whether directly or indirectly through a Subsidiary
formed for the sole purpose of holding the same;
(vii) Hedging Obligations; and
(viii) Investments in Securitization Subsidiaries.
Section 9.19 Limitation on Investment Company Status.
The Company will not take, and will not permit any Subsidiary
to take, any action, or otherwise permit to exist any circumstance, that would
require the Company or such Subsidiary to register as an "investment company"
under the Investment Company Act of 1940, as amended.
Section 9.20 Payments on Notes; Repurchase of Notes.
(a) Except as expressly provided in the Intercreditor
Agreement, the Company will not make any payment of interest, premium, if any,
or principal on the Notes or the Convertible Notes without making a pro rata
payment to all holders of the Notes and Convertible Notes.
(b) The Company will not, and will not permit any
Subsidiary or other Affiliate of the Company to, redeem or purchase (whether in
public or private transactions) any Notes or Convertible Notes other than
pursuant to a redemption or repurchase offer made to each holder of a Note or
Convertible Note pro rata in accordance with the aggregate principal amount of
Notes and Convertible Notes held by such holders.
Section 9.21 Transactions with Affiliates.
Neither the Company nor any Subsidiary will enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of any asset or the rendering of any service, with any Affiliate (other
than the Company or a Subsidiary of the Company) unless such transaction (a) is
otherwise not in violation of the Agreement and the Related Agreements
(including without limitation the Notes), and (b) is approved by a majority of
the disinterested members of the Board of Directors, is in the ordinary course
of its business and is upon fair and reasonable terms no less favorable to it
than it would obtain in a comparable arm's-length transaction with a Person not
an Affiliate, provided that the requirements of this clause (b) shall not apply
to (i) any transaction pursuant to agreements in effect on the Issue Date and
(ii) any transaction or series of related transactions in which the amount
involved does not exceed $250,000.
67
<PAGE> 74
Section 9.22 Payments for Consent.
The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any holder of
Note or an Exchange Note as an inducement to any consent, waiver or amendment of
any of the terms or provisions of the Notes or the Convertible Notes (other than
Article Seven thereof) unless such consideration is paid to all holders of Notes
and Convertible Notes that provide such consent or so waive or agree to amend.
Section 9.23 Solvency Test.
Commencing on May 31, 2000, the Company will not permit the
sum of the amount of (i) the Liquid Assets owned by the Company, as of the end
of each fiscal month of the Company, which are not subject to any Lien and (ii)
the Consolidated Cash Flow of the Company during the preceding three fiscal
months to amount to zero or less.
Section 9.24 Waiver of Certain Covenants.
Except as provided in the next sentence, the Company may omit
in any particular instance to comply with any covenant or condition set forth in
Sections 9.3 to 9.23, inclusive, if before the time for such compliance the
registered holders of at least a majority in principal amount of the Notes and
the Convertible Notes, considered as a single class, at the time Outstanding,
shall either waive such compliance in such instance or generally waive
compliance with such covenant or condition. Notwithstanding the foregoing, the
Company may omit in any particular instance to comply with the covenants or
conditions set forth in any of the following sections if before the time for
such compliance the registered holders of at least 70% in aggregate principal
amount of the Notes and the Convertible Notes, considered as a single class, at
the time Outstanding, shall either waive such compliance in such instance or
generally waive compliance with such covenant or condition: Section 9.5(a);
Section 9.9; Section 9.11; Section 9.12(a), but only to the extent that the
waiver relates to a Consolidated Net Worth of less than $25.0 million ($20.0
million exclusive of Mark-to-Market Adjustments, if any); Section 9.12(b), but
only to the extent that the waiver relates to an increase in the ratio set forth
therein above 8.0 to 1.0; Section 9.12(c), but only to the extent that the
waiver relates to a decrease in the ratio set forth therein below 1.2 to 1.0;
Section 9.13(a), but only to the extent that the waiver relates to a decrease in
the ratio set forth in Section 9.13(a)(i) below 1.3 to 1.0 and/or an increase in
the ratio set forth in Section 9.13(a)(ii) above 7.0 to 1.0; Section 9.14;
Section 9.15; Section 9.18, but only to the extent that the waiver relates to an
acquisition of the capital stock or assets of a corporation, firm or other
entity which would constitute a Significant Subsidiary of the Company; Section
9.20; and Section 9.22 (collectively, the "Supermajority Covenants"). No waiver
of a covenant pursuant to this Section 9.25 shall extend to or affect such
covenant or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company in respect of any
such covenant or condition shall remain in full force and effect.
68
<PAGE> 75
ARTICLE TEN -
MERGER, CONSOLIDATION AND TRANSFER OF ASSETS
Section 10.1 Company May Consolidate Etc. Only on Certain
Terms.
Subject to the provisions of Sections 12.1 through 12.8,
nothing contained herein shall prevent any consolidation or merger of the
Company with or into any other Person (whether or not affiliated with the
Company), or successive consolidations or mergers in which the Company or its
successor or successors shall be a party or parties, or shall prevent any sale,
conveyance or lease (or successive sales, conveyances or leases) of the property
of the Company, substantially as an entirety, to any other Person (whether or
not affiliated with the Company), authorized to acquire and operate the same and
which, in each case, shall be organized under the laws of the United States of
America, any state thereof or the District of Columbia, provided, that (i) upon
any such consolidation, merger, sale, conveyance or lease, if the Company is not
the surviving entity, the due and punctual payment of the Notes Obligations,
including without limitation the principal of and premium, if any, and interest
on all of the Notes, according to their tenor, and the due and punctual
performance and observance of all of the covenants and conditions to be
performed by the Company under the Agreement, the Notes, the Convertible Notes,
the Collateral Documents and the Value Partners Agreement shall be expressly and
unconditionally assumed, by agreement in form and substance reasonably
satisfactory to the registered holders of not less than a majority in aggregate
principal amount of the Notes and the Convertible Notes, considered as a single
class, at the time Outstanding, executed and delivered to such holders by the
Person (if other than the Company) formed by such consolidation, or into which
the Company shall have been merged, or by the Person which shall have acquired
or leased such property, (ii) the agreement referred to in clause (i) shall
provide for the applicable conversion rights set forth in Section 7.6 of the
Convertible Notes and the applicable repurchase rights set forth in Section 12.8
hereof, (iii) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing (iv) immediately after
giving effect to such transaction, the Company (or the surviving entity if the
Company is not continuing) would be able to incur an additional $1.00 of
Indebtedness pursuant to Section 9.13, (v) immediately after giving effect to
such transaction, the Company (or the surviving entity if the Company is not
continuing) shall have a Consolidated Tangible Net Worth equal to or greater
than the Consolidated Tangible Net Worth of the Company immediately prior to
such transaction and (vi) the Company or the Person formed by such
consolidation, or into which the Company shall have been merged, or which shall
have acquired or leased such property, as applicable, shall have delivered an
Officer's Certificate to the Trustee to the effect that such consolidation,
merger, sale, conveyance or lease complies with the terms hereof and that all
conditions precedent provided for herein relating to such transaction have been
complied with.
Section 10.2 Successor Corporation to be Substituted.
In case of any such consolidation, merger, sale, conveyance or
lease referenced in Section 10.1, and upon the assumption by any Person of the
due and punctual
69
<PAGE> 76
payment of the principal of and premium, if any, and interest on all of the
Notes and the due and punctual performance of all of the covenants and
conditions to be performed by the Company under the Agreement and the Related
Agreements, in accordance with Section 10.1 such Person shall succeed to and be
substituted for the Company, with the same effect as if it had been named herein
as such. In the event of any such consolidation, merger, sale or conveyance (but
not in the event of any such lease), the Person named as the "Company" in the
first paragraph hereof or any successor which shall thereafter have become such
in the manner prescribed in this Article Ten shall be released from its
liabilities as obligor and maker of the Notes and from its obligations
hereunder.
ARTICLE ELEVEN -
SECURITY FOR NOTES; RELATED AGREEMENTS
The Notes shall be secured by the Collateral Documents, duly
executed by the Company and the other parties thereto for the ratable benefit of
the holders of the Notes and the Convertible Notes granting a security interest
in the collateral covered thereby, which security interest shall not be
subordinate in priority to any other Liens except those expressly set forth in
the Collateral Documents. The Notes are entitled to the benefits of and subject
to the limitations contained in the Agreement and the Related Agreements, and
the Holder of any Note may enforce such rights in accordance with the terms
hereof and thereof, as applicable.
ARTICLE TWELVE -
REDEMPTION AND REPURCHASE OF NOTES
Section 12.1 Optional Rights to Redeem Notes.
(a) Except as provided in paragraph (b) below, the Notes
are not redeemable at the Company's option prior to June 15, 2004. Thereafter,
the Notes may be redeemed, in whole but not in part, at the option of the
Company at the Redemption Prices specified below (expressed as percentages of
the principal amount thereof), in each case, together with accrued and unpaid
interest, if any, thereon to the Redemption Date, if redeemed during the
12-month period beginning on June 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Redemption Rate
---- ---------------
<S> <C>
2004 106%
2005 100%
</TABLE>
Notwithstanding the foregoing, the Notes may be redeemed at
the Company's option prior to June 15, 2004, in whole but not in part, at a
Redemption Price equal to 100% of the principal amount thereof, together with
accrued and unpaid interest, if any, thereon to the Redemption Date, if the
Closing Price of the Common Stock equals or exceeds $5.00 per share
70
<PAGE> 77
(subject to adjustment as provided herein, the "Redemption Trading Price") for
thirty five (35) consecutive Trading Days after the Issue Date and prior to June
15, 2004 provided that no Notes may be redeemed prior to the mandatory
conversion of the Notes provided for in Article Fourteen.
In case outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Redemption Trading Price in
effect at the opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately reduced, and conversely,
in case outstanding shares of Common Stock shall be combined into a smaller
number of shares of Common Stock, the Redemption Trading Price in effect at the
opening of business on the day following the day upon which such combination
becomes effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately after the opening
of business on the day following the day upon which such subdivision or
combination becomes effective.
(b) Notwithstanding any provision hereof to the contrary,
if it any time the total outstanding principal amount of the Notes shall be less
than 10% of the aggregate principal amount Outstanding on the Issue Date, the
Company may, at its option, redeem all or any part of the Notes then Outstanding
at a Redemption Price equal to the applicable amount set forth in Section
12.1(a) hereof of the principal amount of the Notes then Outstanding, together
with accrued and unpaid interest, if any, thereon to the Redemption Date.
Section 12.2 Notice of Optional Redemption.
At least 30 days but not more than 90 days before a Redemption
Date, the Company shall mail or cause to be mailed a notice of optional
redemption by first-class mail to each Holder of Notes to be redeemed at such
Holder's address as it appears on the Note Register.
The notice shall identify the Notes to be redeemed and shall
state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) that Notes called for redemption must be presented
and surrendered to the Company to collect the Redemption Price;
(d) that the Notes called for redemption may be converted
at any time before the close of business on the fifth Business Day immediately
preceding the Redemption Date;
(e) that, unless the Company defaults in making the
redemption payment, the only remaining right of the Holder shall be to receive
payment of the Redemption Price upon presentation and surrender to the Company
of the Notes; and
(f) that interest on Notes called for redemption ceases
to accrue on and after the Redemption Date.
71
<PAGE> 78
Section 12.3 Effect of Notice of Optional Redemption.
Once notice of optional redemption is mailed, Notes called for
redemption become due and payable on the Redemption Date and at the Redemption
Price. Upon presentation and surrender to the Company, Notes called for
redemption shall be paid at the Redemption Price, plus accrued interest up to
but not including the Redemption Date.
Section 12.4 Right to Require Repurchase.
In the event that a Repurchase Event (as hereinafter defined)
shall occur, then each Holder shall have the right, at the Holder's option, to
require the Company to repurchase, and upon the exercise of such right the
Company shall repurchase, all of such Holder's Notes, or any portion of the
principal amount thereof that is an integral multiple of $1,000 (provided that
no single Note may be repurchased in part unless the portion of the principal
amount of such Note to be Outstanding after such repurchase is equal to $1,000
or an integral multiple of $1,000), on the date (the "Repurchase Date") that is
60 days after the date of the Company Notice (as defined in Section 12.5) for
cash at a purchase price equal to 101% of the aggregate principal amount of such
Notes in the event that the Repurchase Event is the event specified in clause
(i) of the definition such term and 112% of the aggregate principal amount of
such Notes in the event that the Repurchase Event is an event specified in
clause (ii) or clause (iii) of the definition of such term (the "Repurchase
Price"), plus interest accrued and unpaid to, but excluding, the Repurchase
Date.
Whenever in this Note there is a reference, in any context, to
the principal of any Note as of any time, such reference shall be deemed to
include reference to the Repurchase Price payable in respect of such Note to the
extent that such Repurchase Price is, was or would be so payable at such time,
and express mention of the Repurchase Price in any provision of this Note shall
not be construed as excluding the Repurchase Price in those provisions of this
Note when such express mention is not made.
72
<PAGE> 79
Section 12.5 Notices; Method of Exercising Purchase
Right, Etc.
(a) Unless the Company shall have theretofore called for
redemption all of the Notes then Outstanding pursuant to Article Twelve, on or
before the fifth day after the occurrence of a Repurchase Event, the Company
shall give to all Holders of Notes notice (the "Company Notice") of the
occurrence of the Repurchase Event and of the repurchase right set forth herein
arising as a result thereof.
Each notice of a repurchase right shall state:
(i) the Repurchase Event and the Repurchase
Date,
(ii) the date by which the repurchase right must
be exercised,
(iii) the Repurchase Price,
(iv) a description of the procedure which a
Holder must follow to exercise a repurchase right,
(v) that on the Repurchase Date the Repurchase
Price will become due and payable upon each such Note
designated by the Holder to be repurchased, and that interest
thereon shall cease to accrue on and after said date, and
(vi) the place where such Notes are to be
surrendered for payment of the Repurchase Price and accrued
interest, if any.
No failure of the Company to give the foregoing notices or
defect therein shall limit any Holder's right to exercise a repurchase right or
affect the validity of the proceedings for the repurchase of Notes.
If any of the foregoing provisions or other provisions of this
Article are inconsistent with applicable law, such law shall govern.
(b) To exercise a repurchase right, a Holder shall
deliver to the Company on or before the 30th day after the date of the Company
Notice (i) written notice of the Holder's exercise of such right, which notice
shall set forth the name of the Holder, the principal amount of the Notes to be
repurchased (and, if any Note is to be repurchased in part, the portion of the
principal amount thereof to be repurchased and the name of the Person in which
the portion thereof to remain Outstanding after such repurchase is to be
registered) and a statement that an election to exercise the repurchase right is
being made thereby, and (ii) the Notes with respect to which the repurchase
right is being exercised.
(c) In the event a repurchase right shall be exercised in
accordance with the terms hereof, the Company shall pay or cause to be paid the
Repurchase Price in cash to the Holder on the Repurchase Date, together with
accrued and unpaid interest to, but excluding, the
73
<PAGE> 80
Repurchase Date payable with respect to the Notes as to which the repurchase
right has been exercised.
(d) If any Note (or portion thereof) surrendered for
repurchase shall not be so paid on the Repurchase Date, the principal amount of
such Note (or portion thereof, as the case may be) shall, until paid, bear
interest from the Repurchase Date at the rate per annum then currently in
effect, and each Note shall remain convertible into Common Stock until the
principal of such Note (or portion thereof, as the case may be) shall have been
paid or duly provided for.
(e) Any Note which is to be repurchased only in part
shall be surrendered to the Company (with, if the Company so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company duly executed by, the Holder thereof or his attorney duly authorized in
writing), and the Company shall execute and deliver to the Holder of such Note
without service charge, a new Note or Notes, containing identical terms and
conditions, each in an authorized denomination in aggregate principal amount
equal to and in exchange for the portion of the principal of the Note so
surrendered that was not repurchased.
(f) Any Holder that has delivered to the Company its
written notice exercising its right to require the Company to repurchase its
Notes upon a Repurchase Event shall have the right to withdraw such notice at
any time prior to the close of business on the Repurchase Date by delivery of a
written notice of withdrawal to the Company prior to the close of business on
such date.
Section 12.6 Repurchase Event.
A "Repurchase Event" shall be deemed to occur (i) upon the
occurrence of a Change in Control, (ii) in the event that the Company fails to
obtain either of the Stockholder Approvals on or before March 9, 2000 or (iii)
in the event that the Notes are not mandatorily converted into shares of Common
Stock in accordance with Article Fourteen on or before March 9, 2000, provided
that the date set forth in clauses (ii) and (iii) may be extended to March 31,
2000 with the consent of the registered holders of a majority of the aggregate
principal amount of the Notes and the Convertible Notes, considered as a single
class, at the time Outstanding.
Section 12.7 Certain Definitions.
For purposes of this Article Twelve,
(a) the term "beneficial owner" shall be determined in
accordance with Rule 13d-3 promulgated by the Commission pursuant to the
Exchange Act;
(b) the term "Person" shall include any syndicate or
group which would be deemed to be a "Person" under Section 13(d)(3) of the
Exchange Act;
(c) the term "controlled" shall mean ownership or control
of more than 50% of the voting power of an entity; and
74
<PAGE> 81
(d) the term "Change in Control" shall mean the
occurrence of any of the following events after the Issue Date:
(i) any Person, other than the Company, any
Subsidiary of the Company or any entity controlled by the
foregoing, or any employee benefit plan of the Company or any
such Subsidiary, becomes the beneficial owner, directly or
indirectly, through a purchase or other acquisition
transaction or series of transactions (other than a merger or
consolidation involving the Company), of shares of capital
stock of the Company entitling such Person to exercise in
excess of 50% of the total voting power of all shares of
Capital Stock of the Company entitled to vote generally in the
election of directors, provided that a Change in Control shall
not be deemed to have occurred pursuant to this paragraph (a)
as a result of issuances of capital stock by the Company upon
the exercise of rights or warrants, or upon conversion of
convertible securities, which are issued and outstanding on
the Issue Date to the holders of such rights, warrants or
convertible securities on the date of issuance of the Notes;
(ii) there occurs any consolidation of the
Company with, or merger of the Company into, any other Person,
any merger of another Person into the Company, or any sale or
transfer of the assets of the Company as, or substantially as,
an entirety to another Person (other than (i) any such
transaction pursuant to which the holders of the Common Stock
immediately prior to such transaction have, directly or
indirectly, shares of capital stock of the continuing or
surviving corporation immediately after such transaction which
entitle such holders to exercise in excess of 50% of the total
voting power of all shares of capital stock of the continuing
or surviving corporation entitled to vote generally in the
election of directors and (ii) any merger (1) which does not
result in any reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock or (2)
which is effected solely to change the jurisdiction of
incorporation of the Company and results in a
reclassification, conversion or exchange of outstanding shares
of Common Stock solely into shares of Common Stock and
separate series of Common Stock carrying substantially the
same relative rights as the Common Stock); or
(iii) individuals who constituted the Board of
Directors of the Company at the beginning of any one-year
period (together with any other director whose election by the
Board of Directors of the Company or whose nomination for
election by the stockholders of the Company was approved by a
vote of at least a majority of the directors then in office
either who were directors at the beginning of such period or
whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the
directors then in office.
75
<PAGE> 82
Section 12.8 Consolidation, Merger, Etc.
In the case of any reclassification, change, consolidation,
merger, combination, sale or conveyance, in which the Common Stock is changed or
exchanged as a result into the right to receive shares of stock and other
securities or property or assets (including cash) which includes shares of
Common Stock or common stock of another Person that are, or upon issuance will
be, traded on a United States national securities exchange or approved for
trading on an established automated over-the-counter trading market in the
United States and such shares constitute at the time such change or exchange
becomes effective in excess of 50% of the aggregate fair market value of such
shares of stock and other securities, property and assets (including cash) (as
determined in good faith by the Board of Directors of the Company, which
determination shall be conclusive and binding), then the Person formed by such
consolidation or resulting from such merger or combination or which acquires the
properties or assets (including cash) of the Company, as the case may be, shall
execute and deliver to the Holders, at their last address reflected in the Note
Register, an amendment to the Notes, in form and substance satisfactory to the
registered holders of not less than a majority in aggregate principal amount of
the Notes and the Convertible Notes, considered as a single class, at the time
Outstanding, and to the Trustee, modifying the provisions of the Notes relating
to the right of Holders to cause the Company to repurchase the Notes following a
Repurchase Event, including without limitation the applicable provisions of this
Article Twelve and the definitions of Common Stock and Change in Control, as
appropriate, and such other related definitions set forth herein as determined
in good faith by the Board of Directors of the Company (which determination
shall be conclusive and binding), to make such provisions apply to the common
stock and the issuer thereof if different from the Company and the Common Stock
(in lieu of the Company and the Common Stock).
ARTICLE THIRTEEN -
DEFEASANCE AND COVENANT DEFEASANCE
Section 13.1 Option to Effect Legal Defeasance or
Covenant Defeasance.
The Company may, at the option of its Board of Directors
evidenced by a Board Resolution, at any time, elect to have either Section 13.2
or 13.3 be applied to all Notes then Outstanding upon compliance with the
conditions set forth below in this Article.
Section 13.2 Legal Defeasance and Discharge.
Upon the Company's exercise under Section 13.1 of the option
applicable to this Section, the Company shall, subject to the satisfaction of
the conditions set forth in Section 13.4, be deemed to have been discharged from
its obligations with respect to all Notes then Outstanding on the date the
conditions set forth below are satisfied (hereinafter, "LEGAL DEFEASANCE"). For
this purpose, Legal Defeasance means that the Company shall be deemed to have
paid and discharged the entire Indebtedness represented by the Notes then
Outstanding, which shall thereafter be deemed to be Outstanding only for the
purposes of Section 13.5 and the
76
<PAGE> 83
other Sections of this Indenture referred to in (a) and (b) below, and the
Company shall be deemed to have satisfied all its other obligations under the
Notes and this Indenture (and the Trustee, on demand of and at the expense of
the Company, shall execute proper instruments acknowledging the same), except
for the following provisions which shall survive until otherwise terminated or
discharged hereunder: (a) the rights of Holders of Notes then Outstanding to
receive solely from the trust fund described in Section 13.4, and as more fully
set forth in such Section, payments in respect of the principal of, premium, if
any, and interest on such Notes as and when such payments are due, (b) the
Company's obligations with respect to such Notes under Articles One, Two, Three
and Four and Section 9.3, (c) the rights, powers, trusts, duties and immunities
of the Trustee hereunder and the Company's obligations in connection therewith
and (d) this Article. Subject to compliance with this Article, the Company may
exercise its option under this Section notwithstanding the prior exercise of its
option under Section 13.3.
Section 13.3 Covenant Defeasance.
Upon the Company's exercise under Section 13.1 of the option
applicable to this Section, the Company shall, subject to the satisfaction of
the conditions set forth in Section 13.4, be released from its obligations under
the covenants contained in Article Nine with respect to the Notes on and after
the date the conditions set forth below are satisfied (hereinafter, "COVENANT
DEFEASANCE"), and the Notes shall thereafter be deemed not Outstanding for the
purposes of any direction, waiver, consent or declaration or act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed Outstanding for all other purposes hereunder (it being
understood that such Notes shall not be deemed Outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that. with respect to the
Notes then Outstanding and the Subsidiary Guarantees, the Company may omit to
comply with and shall have no liability, in respect of any term, condition or
limitation set forth in any such covenant, whether directly or indirectly, by
reason of any reference elsewhere herein to any such covenant or by reason of
any reference in any such covenant to any other provision herein or in any other
document and such omission to comply shall not constitute a Default or an Event
of Default under Section 5.1, but, except as specified above, the remainder of
this Indenture and such Notes shall be unaffected thereby. In addition, upon any
such Covenant Defeasance, the events specified in paragraphs (f), (g) (with
respect to Subsidiaries only) and (h) shall not constitute Defaults.
Section 13.4 Conditions to Legal or Covenant Defeasance.
The following shall be the conditions precedent to the
effectiveness of any Legal Defeasance or Covenant Defeasance:
(a) the Company shall (i) irrevocably deposit with the
Trustee, in trust, for the benefit of the Holders, unencumbered cash in United
States dollars, unencumbered U.S. Government Obligations, or a combination
thereof, in such amounts as will be sufficient, in a written opinion of a
nationally recognized firm of independent public accountants delivered to the
Trustee, to pay the principal of, premium, if any, and interest on the Notes
then Outstanding on the stated date for payment thereof or on the applicable
Redemption Date, as the case may be,
77
<PAGE> 84
and the Company must specify whether the Notes are being defeased to maturity or
to a particular Redemption Date, and (ii) irrevocably instruct the Trustee to
apply such cash and U.S. Government Obligations to such payments with respect to
the Notes;
(b) in the case of an election under Section 13.2, the
Company shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the Notes
then Outstanding will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 13.3 hereof,
the Company shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that the Holders
of the Notes then Outstanding will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Covenant Defeasance has not
occurred;
(d) no Default or Event of Default shall have occurred
and be continuing on (i) the date of such deposit (other than a Default or Event
of Default resulting from the Incurrence of Indebtedness all or a portion of the
proceeds of which will be used to defease the Notes pursuant to this Article
concurrently with such Incurrence) and (ii) insofar as Section 5.1(g) hereof is
concerned, at any time during the period ending on the 91st day after the date
of deposit (such condition not being satisfied until such 91st day);
(e) such Legal Defeasance or Covenant Defeasance shall
not result in a breach or violation of, or constitute a default under, any
material agreement or instrument (other than this Indenture) to which the
Company or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries is bound;
(f) the Obligors shall have delivered to the Trustee an
Opinion of Counsel to the effect that on the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(g) the Obligors shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the Company with
the intent of preferring the Holders over any other creditors of the Obligors or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Obligors; and
(h) the Obligors shall have delivered to the Trustee
Officers' Certificates and an Opinion of Counsel, each stating that all
conditions precedent provided for or relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
78
<PAGE> 85
Section 13.5 Deposited Money and U.S. Government
Obligations to be Held in Trust; Other
Miscellaneous Provisions.
Subject to Section 13.6, all money and U.S. Government
Obligations (including the proceeds thereof) deposited with the Trustee (or
other qualifying trustee, collectively for purposes of this Section, the
"TRUSTEE") pursuant to Section 13.4 in respect of the Notes then Outstanding
shall be held in trust and applied by the Trustee, in accordance with the
provisions of the Notes and this Indenture, to the payment, either directly or
through any Paying Agent (excluding any Obligor acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the cash or U.S.
Government Obligations deposited pursuant to Section 13.4 or the principal and
interest received in respect thereof.
Anything in this Article to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or U.S. Government Obligations held by it as provided
in Section 13.4 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
13.4), are in excess of the amount thereof that would then be required to be
deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
Section 13.6 Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of, premium,
if any, or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as a
creditor, look only to the Company for payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such trust money, and all liability
of the Company as trustee thereof, shall thereupon cease; provided, however,
that the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once, in The
New York Times and The Wall Street Journal (national edition), notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such notification or publication, any
unclaimed balance of such money then remaining will be repaid to the Company.
Section 13.7 Reinstatement.
If the Trustee or Paying Agent is unable to apply any United
States Dollars or U.S. Government Obligations in accordance with Section 13.2 or
13.3, as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or
79
<PAGE> 86
otherwise prohibiting such application, then the Obligors' obligations under
this Indenture and the Notes shall be revived and reinstated as though no
deposit had occurred pursuant to Section 13.2 or 13.3 until such time as the
Trustee or Paying Agent is permitted to apply all such money, in accordance with
Section 13.2 or 13.3, as the case may be: provided, however, that, if the
Company makes any payment of principal of, premium, if any, or interest on any
Note following the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the money held by the Trustee or Paying Agent.
Section 13.8 Defeasance of Convertible Notes
Notwithstanding any provision of this Indenture to the
contrary, the Company may not effect legal defeasance or covenant defeasance of
the Notes unless it adequately provides for the same for all Outstanding
Convertible Notes by means which are satisfactory to the holders of a majority
of the aggregate principal amount of the Outstanding Convertible Notes.
ARTICLE FOURTEEN -
CONVERSION
Section 14.1 Mandatory Conversion upon Stockholder
Approval
Immediately upon approval by the stockholders of the Company
on or prior to March 9, 2000 (or before such other time as may be consented to
pursuant to the provisions herein) of the conversion of $6,428,000 of the
aggregate principal amount of the Notes issued pursuant to the Agreement into a
maximum of 6,428,000 shares of Common Stock, the QIB Convertible Global Note
will automatically convert into the right to receive ________ shares of Common
Stock (the "QIB SHARES") and the Non-QIB Global Note will automatically convert
into the right to receive ____________ shares of Common Stock (the "NON-QIB
SHARES"). A Holder is not entitled to any rights of a holder of Common Stock
until such Holder's Notes have converted to Common Stock, and only to the extent
such Notes are deemed to have been converted to Common Stock under this Article
Fourteen.
Section 14.2 Issuance of Common Stock on Conversion;
No Adjustment for Interest or Dividends
Promptly following the automatic conversion of the aforesaid
amount of the Notes issued pursuant to this Indenture, the Company shall issue
and shall deliver to the Trustee certificates for the number of full shares of
Common Stock issuable to the Holders upon the conversion of each Holder's Note
in accordance with the provisions of this Article Fourteen and a check or cash
in respect of any fractional interest in respect of a share of Common Stock
arising upon such conversion, as provided in Section 14.3.
80
<PAGE> 87
Each conversion shall be deemed to have been effected as to
any such Note on the date on which the requirement set forth in Section 14.1
shall have been satisfied, and the Person in whose name any certificate or
certificates for shares of Common Stock shall be issuable upon such conversion
shall be deemed to have become on said date the Holder of record of the shares
represented thereby and the Holder of a principal amount of Notes which has been
proportionately reduced to reflect such conversion.. Section 14.3 Disbursement
of Shares.
(a) Upon conversion of the QIB Convertible Global Note
and the Non-QIB Convertible Global Note in accordance with Section 14.1, each
Holder shall be entitled to receive such Holder's pro-rata portion of the QIB
Shares or the Non-QIB Shares (the "PRO-RATA PORTION"), as the case may be, with
any fractional share rounded down to the nearest whole share. A Holder's
Pro-Rata Portion shall be calculated as follows:
(i) in the case of a QIB, (X) the principal
amount of Notes owned by such QIB divided by (Y) the total
Outstanding principal amount of the QIB Notes; and
(ii) in the case of a Non-QIB, (X) the principal
amount of Notes owned by such Non-QIB divided by (Y) the total
Outstanding principal amount of the Non-QIB Notes.
(b) Within two Business Days after stockholder approval
is obtained, the Company shall deposit with the Trustee for distribution to the
Holders, the number of shares of Common Stock equal to the sum of the QIB shares
and the Non-QIB shares (as adjusted to account for fractional shares as set
forth in (a) above, the "CONVERSION SHARES").
(c) Upon receipt of the Conversion Shares, the Trustee
shall distribute the Conversion Shares to the Holders in accordance with the
Holders' Pro-Rata Portions as determined pursuant to Section 14.3(a) above.
Section 14.4 Taxes on Shares Issued.
The issue of stock certificates on conversions of Notes shall
be made without charge to the converting Holder for any tax in respect of the
issue thereof. The Company shall not, however, be required to pay any tax which
may be payable in respect of any transfer involved in the issue and delivery of
stock in any name other than that of the Holder of any Note converted, and the
Company shall not be required to issue or deliver any such stock certificate
unless and until the Person or Persons requesting the issue thereof shall have
paid to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
81
<PAGE> 88
Section 14.5 Reservation of Shares to Be Fully Paid;
Compliance with Governmental Requirements;
Listing of Common Stock.
The Company shall reserve, free from preemptive rights, out of
its authorized but unissued shares or shares held in treasury, sufficient shares
of Common Stock to provide for the conversion of the Notes.
The Company covenants that all shares of Common Stock which
may be issued upon conversion of Notes will upon issue be fully paid and
non-assessable by the Company and free from all taxes and Liens with respect to
the issue thereof.
The Company covenants that it will in good faith and as
expeditiously as possible comply with its obligations under the Registration
Rights Agreement.
The Company further covenants that so long as the Common Stock
shall be listed or quoted on the New York Stock Exchange, the Nasdaq Stock
Market (National Market) or any other national securities exchange the Company
will, if permitted by the rules of such exchange, list and keep listed so long
as the Common Stock shall be so listed on such market or exchange, all Common
Stock issuable upon conversion of the Notes.
ARTICLE FIFTEEN -
MISCELLANEOUS
Section 15.1 No Recourse Against Others.
A director, officer, employee, stockholder or incorporator, as
such, of any Obligor shall not have any liability for any obligations of such
Obligor under the Notes or this Indenture or for any claim based on, in respect
of or by reason of such obligations or their creation. Each Holder by accepting
a Note waives and releases all such liability.
Section 15.2 Execution in Counterparts.
This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
Section 15.3 Waiver of Trial by Jury.
EACH OF THE PARTIES TO THIS INDENTURE WAIVES THE RIGHT TO A
TRIAL BY JURY IN ANY ACTION UNDER THIS INDENTURE, THE NOTES OR ANY SUBSIDIARY
GUARANTEE OR ANY ACTION ARISING OUT OF THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY, REGARDLESS OF WHICH PARTY INITIATES SUCH ACTION OR ACTIONS.
* * * * *
82
<PAGE> 89
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
ALTIVA FINANCIAL CORPORATION
By: /s/ Edward B. Meyercord
-----------------------------------
Name: Edward B. "Champ" Meyercord
Title: Chief Executive Officer
Address: 1000 Parkwood Circle
6th Floor
Atlanta, Georgia 30339
Attest:
By: /s/ J. Richard Walker
-------------------------------
Title: Executive Vice President
and Chief Financial
Officer
UNITED STATES TRUST COMPANY OF NEW
YORK, as Trustee
By: /s/ Gerard F. Gainey
-----------------------------------
Name: Gerard F. Gainey
Title: Executive Vice President
Attest:
By: /s/ Margaret M. Ciesmelewski
-------------------------------
Title: Assistant Vice President
83
<PAGE> 1
EXHIBIT 10.1
AMENDED AND RESTATED
SECURED CONVERTIBLE SENIOR NOTE
PURCHASE AGREEMENT
BETWEEN
ALTIVA FINANCIAL CORPORATION
AND
VALUE PARTNERS, LTD
DATED FOR REFERENCES PURPOSES ONLY
AS OF FEBRUARY 29, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Article I. Definitions.....................................................................................1
Section 1.1 Definitions............................................................................1
Article II. Purchase and Sale of Notes......................................................................7
Section 2.1 Purchase and Sale of Notes.............................................................7
Section 2.2 Closing................................................................................7
Article III. Representations and Warranties..................................................................7
Section 3.1 Representations and Warranties of the Company..........................................7
Section 3.2 Representations and Warranties of the Purchaser.......................................18
Article IV. Conditions Precedent to Closing................................................................20
Section 4.1 Conditions to Obligations of the Parties..............................................20
Section 4.2 Conditions to Obligations of the Purchaser............................................20
Section 4.3 Conditions to Obligations of the Company..............................................22
Article V. Covenants......................................................................................23
Section 5.1 Shareholder Meeting...................................................................23
Section 5.2 Applications..........................................................................24
Section 5.3 Investigation and Confidentiality.....................................................25
Section 5.4 Press Releases........................................................................26
Section 5.5 No Solicitation.......................................................................26
Section 5.6 Rule 144 and Rule 144A Reporting......................................................26
Section 5.7 Stay, Extension and Usury Laws........................................................27
Article VI. Miscellaneous..................................................................................27
Section 6.1 Survival of Provisions................................................................27
Section 6.2 Termination...........................................................................27
Section 6.3 Waiver; Amendments....................................................................28
Section 6.4 Communications........................................................................28
Section 6.5 Costs, Expenses and Taxes.............................................................28
Section 6.6 Execution in Counterparts; FAX Execution..............................................29
Section 6.7 Binding Effect; Assignment............................................................29
Section 6.8 Governing Law.........................................................................30
Section 6.9 Usury.................................................................................30
</TABLE>
ii
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 6.10 Severability of Provisions............................................................30
Section 6.11 Construction..........................................................................30
Section 6.12 Integration...........................................................................31
Section 6.13 Participation Interests...............................................................31
Section 6.14 No Third Party Beneficiaries..........................................................32
Section 6.15 Representation by Counsel.............................................................32
Section 6.16 Waiver of Claims......................................................................32
Section 6.17 Texas Language........................................................................32
Section 6.18 Power of Attorney.....................................................................32
Article VII Indemnification................................................................................33
Section 7.1 Indemnification.......................................................................33
Section 7.2 Set Off...............................................................................33
Exhibit A Name and Address of the Purchaser
Exhibit B Form of Amended and Restated Note
Exhibit C Form of Amended and Restated Pledge and Security Agreement
Exhibit D Form of Amended and Restated Registration Rights Agreement
Exhibit E Form of Intercreditor and Collateral Sharing Agreement
Exhibit F Form of Indenture relating to the Exchange Notes
Exhibit G Matters to be covered by Opinion of Counsel to the Company
</TABLE>
iii
<PAGE> 4
AMENDED AND RESTATED
SECURED CONVERTIBLE SENIOR NOTE
PURCHASE AGREEMENT
Amended and Restated Secured Convertible Senior Note Purchase
Agreement, dated for reference purposes only as of February 29, 2000 (the
"Agreement"), between Altiva Financial Corporation (the "Company"), a Delaware
corporation, and Value Partners, Ltd. (the "Purchaser"), a Texas Limited
partnership.
WITNESSETH:
WHEREAS, the Company and the Purchaser have entered into a Secured
Convertible Note Purchase Agreement, dated as of August 31, 1999, as amended by
Amendment No. 1 to the Secured Convertible Note Purchase Agreement, dated as of
December 13, 1999, Amendment No. 2 to the Secured Convertible Note Purchase
Agreement, dated as of December 30, 1999, Amendment No. 3 to the Secured
Convertible Note Purchase Agreement, dated as of February 2, 2000, and Amendment
No. 4 to the Secured Convertible Note Purchase Agreement, dated as of February
11, 2000 (collectively, the "Existing Agreement"), pursuant to which the
Purchaser acquired an aggregate of $7,000,000, $250,000, $1,750,000, $700,000
and $300,000 principal amount of 12% Secured Convertible Notes due 2006
(collectively the "Existing Notes"), respectively; and
WHEREAS, the Company and the Purchaser desire to amend and restate the
Existing Agreement to increase the aggregate principal amount of 12% Secured
Convertible Notes due 2006 to be issued and sold by the Company to the Purchaser
from $10,000,000 to $14,000,000, to amend and restate such Notes and to
otherwise amend the agreements of the parties; and
WHEREAS, the parties deem it in their best interest to set forth their
mutual agreements herein;
NOW, THEREFORE, in consideration of any extension of credit and/or
other financial accommodation at any time made by the Purchaser to or for the
benefit of the Company, and of the promises set forth herein, the parties hereto
amend and restate the Existing Agreement in its entirety and agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. As used in this Agreement, and unless
the context requires a different meaning, the following terms have the meanings
indicated:
<PAGE> 5
"Affiliate" means, with respect to any Person, any Person that,
directly or indirectly, controls, is controlled by or is under common control
with such Person. For the purposes of this definition, "control" (including,
with correlative meanings, the terms "controlled by" and "under common control
with") shall mean the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"Agreement" means this Amended and Restated Secured Convertible Senior
Note Purchase Agreement, as amended, supplemented or modified from time to time.
"Business Day" means any day except a Saturday, Sunday or other day on
which banking institutions in the city of Atlanta, Georgia are authorized by law
to close.
"Capital Stock" of any Person means any and all shares or other equity
interest of such Person.
"Closing" has the meaning set forth in Section 2.2.
"Closing Date" has the meaning set forth in Section 2.2.
"Code" means the Internal Revenue Code of 1986, as amended (or any
successor statute in effect from time to time), and the rules and regulations
promulgated thereunder.
"Commission" means the Securities and Exchange Commission and any
successor thereto.
"Common Stock" means the Common Stock, par value $.01 per share, of the
Company.
"Company" means Altiva Financial Corporation, a Delaware corporation,
together with its successors.
"Company Financial Statements" has the meaning set forth in Section
3.1(i)(i) hereof.
"Environmental Claim" means any written notice from any governmental
authority or third party alleging potential liability (including without
limitation potential liability for investigating costs, cleanup costs,
governmental response costs, natural resource damages, property damages,
personal injuries or penalties) arising out of, based on, or resulting from the
presence, or release into the environment of any Materials of Environmental
Concern.
"Environmental Laws" means any law, statute, rule or regulation of any
governmental, judicial, legislative, executive, administrative or regulatory
authority of the United States, or of any state, local or foreign government or
any subdivision thereof or of any governmental body or other regulatory or
administrative agency or commission, domestic or foreign (a "Law"), relating to
pollution or protection of the environment (including ambient air, surface
water, groundwater,
2
<PAGE> 6
land surface or subsurface strata), including without limitation the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, the Resource Conservation and Recovery Act of 1976, as amended, and
other Laws relating to (i) emissions, discharges or releases of pollutants,
contaminants, chemicals, or industrial toxic or hazardous substances or wastes
(collectively known as "Polluting Substances") or (ii) the handling, storage,
disposal, reclamation, recycling or transportation of Polluting Substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended (or any successor statute in effect from time to time).
"Exchange" shall mean the exchange by the holders of the Subordinated
Notes of such Subordinated Notes for senior notes of the Company in the maximum
aggregate principal amount of $19,228,000, of which $6,428,000 shall be
mandatorily convertible into 6,428,000 shares of Common Stock which have
substantially the same terms as the Notes (except regarding convertibility into
shares of Common Stock) and which generally are secured on a pari passu basis by
the same collateral as the Notes pursuant to the Exchange Note Security
Agreements (as amended, supplemented or otherwise modified from time to time,
the "Exchange Notes"), as provided in the Exchange Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
and in effect from time to time (or any successor statute in effect from time to
time), and the rules and regulations of the Commission promulgated thereunder.
"Exchange Agreement" means the Exchange Agreement between the Company
and the holders of not less than 92% of the aggregate principal amount of the
outstanding Subordinated Notes providing for the Exchange and related matters.
"Exchange Note Indenture" means the Indenture entered into by the
Company and U.S. Trust Company of Texas, N.A., as trustee for the holders of the
Exchange Notes, as amended, supplemented or otherwise modified from time to
time.
"Exchange Note Letter of Transmittal" means the Letter of Transmittal
between the Company and the holders of not less than 92% of the aggregate
principal amount of the outstanding Subordinated Notes providing for the
Exchange and related matters.
"Exchange Note Registration Rights Agreement" means the Registration
Rights Agreement entered into by the Company and the holders of the Exchange
Notes, as amended, supplemented or otherwise modified from time to time.
"Exchange Note Related Agreements" means the Exchange Notes, the
Exchange Note Indenture, the Exchange Note Security Agreements, the Escrow
Agreement, the Exchange Note Letter of Transmittal, the Exchange Note
Registration Rights Agreement and the Intercreditor Agreement.
"Exchange Note Securities" means (i) the Exchange Notes and (ii) the
Common Stock issuable upon mandatory conversion of the Exchange Notes.
3
<PAGE> 7
"Exchange Note Security Agreements" means (i) the Pledge and Security
Agreement pursuant to which holders of Exchange Notes which constitute
"qualified institutional buyers" for purposes of Rule 144A under the Securities
Act ("QIBs") obtain a security interest in the collateral pledged by the Company
pursuant to the Security Agreement to secure the Notes and (ii) the Pledge and
Security Agreement pursuant to which Persons who or which do not constitute QIBs
obtain a first lien security interest in the capital stock of MCI.
"Exchange Notes" has the meaning set forth in the definition of the
term "Exchange."
"Existing Agreement " has the meaning set forth in the first WHEREAS
recital to this Agreement.
"Existing Notes" has the meaning set forth in the first WHEREAS recital
to this Agreement.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of this Agreement, consistently
applied.
"Governmental Entity" means any federal or state court, administrative
agency or commission or other governmental authority or instrumentality.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (or any successor statute in effect from time to time), and the
rules and regulations of the Federal Trade Commission promulgated thereunder.
"Indebtedness Instrument" mean any note, mortgage, indenture, chattel
mortgage, deed of trust, loan agreement, hypothecation agreement, pledge
agreement, security agreement, financing statement or other document, instrument
or agreement evidencing or securing the payment of or otherwise relating to the
borrowing of monies. Indebtedness Instruments shall include, but not be limited
to, the Existing Notes, the Notes, the Exchange Notes and the Subordinated
Notes.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
encumbrance, charge or security interest of any kind in respect of such asset.
"Intercreditor Agreement" has the meaning set forth in Section 4.2(i).
"Material Adverse Effect" means any effect that (i) is material and
adverse to the financial condition, results of operations, business or prospects
of the Company and its Subsidiaries taken as a whole or (ii) materially impairs
the ability of the Company to perform its
4
<PAGE> 8
obligations under this Agreement, any Related Agreement, the Exchange Agreement
or any Exchange Note Related Agreement.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products and any other
materials regulated under Environmental Laws.
"MCI" means The Money Centre, Inc., a North Carolina corporation,
together with its successors.
"NASD" means National Association of Securities Dealers, Inc.
"Notes" means $14,000,000 aggregate principal amount of Amended and
Restated 12% Secured Convertible Senior Notes due 2006 to be issued and sold by
the Company and purchased by the Purchaser pursuant to this Agreement,
substantially in the form of Exhibit B hereto, as amended, supplemented or
otherwise modified from time to time, which shall supersede in their entirety
the Existing Notes.
"Participation Agreement" means the Amended and Restated Participation
Agreement between the Purchaser and T. Rowe Price, as amended, supplemented or
otherwise modified from time to time.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or a political subdivision or an agency or instrumentality thereof.
"Preferred Stock" means the Preferred Stock, par value $.01 per share,
of the Company.
"Previously Disclosed" means disclosed in a letter dated the date
hereof delivered from the Company to the Purchaser or from the Purchaser to the
Company, as applicable, specifically referring to the appropriate section of
this Agreement and describing in reasonable detail the matters contained
therein.
"Purchase Price" has the meaning set forth in Section 2.1 hereof.
"Purchaser" means Value Partners, Ltd and its successors and assigns.
"Real Estate Owned" means the consolidated properties of the Company
acquired by foreclosure on a loan or deed-in-lieu thereof or otherwise included
in the Company's real estate owned for purposes of reporting asset quality of
the Company in its reports filed with the Commission under the Exchange Act.
"Registration Rights Agreement" means the Amended and Restated
Registration Rights Agreement by and among the Company and the Purchaser,
substantially in the form of Exhibit D hereto, as amended, supplemented or
otherwise modified from time to time.
5
<PAGE> 9
"Related Agreements" means the Notes, the Security Agreement, the
Registration Rights Agreement and the Intercreditor Agreement.
"Securities" means (i) the Notes and (ii) the Common Stock issuable
upon conversion of the Notes.
"Securities Act" means the Securities Act of 1933, as amended (or any
successor statute thereto as in effect from time to time), and the rules and
regulations of the Commission promulgated thereunder.
"Securities Documents" shall mean all reports, offering circulars,
proxy statements, registration statements and all similar documents filed, or
required to be filed, pursuant to the Securities Laws.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939, as amended; and the rules and
regulations of the Commission promulgated thereunder.
"Security Agreement" means the Amended and Restated Pledge and Security
Agreement by and among the Company and the Purchaser, in its own right and as
agent for the holders of the Notes, substantially in the form of Exhibit C
hereto, as amended, supplemented or otherwise modified from time to time.
"State" means each of the states of the United States, the District of
Columbia and the Commonwealth of Puerto Rico.
"Stock Equivalents" means, with respect to any Person, options,
warrants, calls, contracts or other rights entered into or issued by such Person
which confer upon the holder thereof the right (whether or not contingent) to
acquire any Capital Stock, voting securities or securities convertible into or
exchangeable for Capital Stock or voting securities of such Person.
"Stock Option Plan" means the 1999 Stock Incentive Plan of the Company.
"Subordinated Notes" means the 12 1/2% Subordinated Notes due 2001
issued by the Company.
"Subsidiary" means with respect to any Person, (i) any corporation,
association, limited liability company or other business entity of which more
than 50% of the total voting power of shares of capital stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more Subsidiaries of such
Person (or a combination thereof) and (ii) any partnership (a) the sole general
partner or managing general partner of which is such Person
6
<PAGE> 10
or a Subsidiary of such Person or (b) the only general partners of which are
such Person or one or more Subsidiaries of such Person (or any combination
thereof).
"Taxes" means all taxes, charges, fees, levies or other governmental
assessments, including, without limitation, all net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license,
withholding, payroll, employment, excise, estimated, severance, stamp,
occupation, property or other taxes, customs, dues, fees, assessments or charges
of any kind whatsoever, together with any interest and any penalties, additions
to tax or additional amounts imposed by any taxing authority (domestic or
foreign).
"Tax Returns" means all foreign, federal, State and local returns
relating to Taxes.
"T. Rowe Price" means T. Rowe Price Recovery Fund, II, L.P. and its
successors and assigns.
ARTICLE II
PURCHASE AND SALE OF NOTES
SECTION 2.1 PURCHASE AND SALE OF NOTES. Subject to the terms and
conditions herein set forth, the Company agrees that it will issue and sell to
the Purchaser and the Purchaser agrees that it will purchase from the Company
the principal amount of Notes set forth opposite such Purchaser's name on
Exhibit A hereto at a price equal to $4,000,000 (the "Purchase Price", which is
equal to the difference between the $10,000,000 aggregate principal amount of
Existing Notes purchased by the Purchaser from the Company pursuant to the
Existing Agreement and the $14,000,000 principal amount of the Notes).
SECTION 2.2 CLOSING. Subject to the satisfaction or waiver of all of
the conditions to the parties' obligations hereunder specified in Article IV of
this Agreement, the purchase and sale of the Notes will take place at a closing
(the "Closing") to be held at the offices of Venable, Baetjer and Howard, LLP,
in Baltimore, Maryland, at such time and on such day as the parties hereto
mutually agree upon. The date on which the Closing is to occur is referred to
herein as the "Closing Date."
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as
Previously Disclosed, the Company represents and warrants to each of the
Purchasers as follows:
7
<PAGE> 11
(a) Capital Structure. The authorized capital stock of the Company
consists of 400,000,000 shares of Common Stock and 5,000,000 shares of Preferred
Stock. As of February 24, 2000, there were (i) 4,026,122 shares of Common Stock
issued and outstanding and no shares of Common Stock were held as treasury
shares and (ii) 56,905 shares of Series A Convertible Preferred Stock were
issued and outstanding and no shares of Preferred Stock were held as treasury
shares. All outstanding shares of Capital Stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable and none of
the outstanding shares of Capital Stock of the Company has been issued in
violation of the preemptive rights of any Person. Except as contemplated by this
Agreement or as Previously Disclosed, there are no Stock Equivalents authorized,
issued or outstanding with respect to the Capital Stock of the Company as of the
date hereof. The Company has Previously Disclosed each option to purchase Common
Stock which is outstanding as of the date hereof, including the exercise price
and term thereof, as well as the relevant terms of any other Stock Equivalents
which are outstanding as of the date hereof.
(b) Organization, Standing and Authority of the Company. The
Company is a corporation duly organized and validly existing under the laws of
Delaware with full corporate power and authority to own or lease all of its
properties and assets and to carry on its business as now conducted and is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which its ownership or leasing of property or the conduct of its
business requires such licensing or qualification and where the failure to be so
licensed, qualified or in good standing would have a Material Adverse Effect.
The Company has heretofore delivered true and complete copies of the Certificate
of Incorporation and Bylaws of the Company as in effect as of the date hereof to
each Purchaser which has requested the same.
(c) Ownership of Subsidiaries. The Company does not own or have
the right to acquire, directly or indirectly, any outstanding Capital Stock or
other voting securities or ownership interests of any corporation, bank, savings
association, partnership, joint venture or other organization. The outstanding
shares of Capital Stock of each Subsidiary of the Company have been duly
authorized and validly issued, are fully paid and nonassessable, and are
directly owned by the Company free and clear of all Liens. No Stock Equivalents
are authorized, issued or outstanding with respect to the Capital Stock of any
Subsidiary of the Company and there are no agreements, understandings or
commitments relating to the right of the Company to vote or to dispose of such
Capital Stock.
(d) Organization, Standing and Authority of Subsidiaries. Each
Subsidiary of the Company (i) is duly organized and validly existing under the
laws of the jurisdiction in which it is organized, (ii) has full corporate power
and authority to own or lease all of its properties and assets and to carry on
its business as now conducted and (iii) is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which its ownership or
leasing of property or the conduct of its business requires such qualification,
except where the failure to be so licensed, qualified or in good standing would
not have a Material Adverse Effect. The Company has heretofore delivered true
and complete copies of the articles of incorporation and bylaws or equivalent
documents of each Subsidiary of the Company as in effect as of the date hereof
to each Purchaser which has requested the same.
8
<PAGE> 12
(e) Authority; Due Execution. The Company has full corporate power
and authority to perform its respective obligations under this Agreement and
each of the Related Agreements, and the execution, delivery and performance by
the Company of this Agreement and each Related Agreement have been duly
authorized by all necessary corporate action on the part of the Company. This
Agreement has been duly executed and delivered by the Company and constitutes,
and each of the Related Agreements, when duly executed and delivered by the
Company, will constitute, a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except (i) rights
to indemnity and contribution under the Registration Rights Agreement may be
limited by applicable law, (ii) enforceability may be limited by bankruptcy,
insolvency, moratorium and similar laws affecting creditors' rights generally
and (iii) rights of acceleration and the availability of equitable remedies may
be limited by equitable principles of general applicability.
(f) No Conflict. Neither the execution and delivery of this
Agreement and each of the Related Agreements, nor consummation of the
transactions contemplated hereby and thereby, nor compliance by the Company with
any of the provisions hereof or thereof, (i) does or will conflict with or
result in a breach of any provisions of the Certificate of Incorporation or
Bylaws of the Company or the equivalent documents of any Subsidiary of the
Company, (ii) violate, conflict with or result in a breach of any term,
condition or provision of, or constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or give
rise to any right of termination, cancellation or acceleration with respect to,
or result in the creation of any Lien upon any property or asset of the Company
or a Subsidiary of the Company pursuant to, any material note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which the Company or a Subsidiary of the Company is a party, or by
which any of their respective properties or assets may be bound or affected, or
(iii) subject to the compliance referred to in clauses (i) and (ii) of the
succeeding sentence, violate any order, writ, injunction, decree, statute, rule
or regulation applicable to the Company or a Subsidiary of the Company. Except
for (i) compliance with applicable federal and State securities laws in
connection with this Agreement and the performance by the Company of its
obligations under the Registration Rights Agreement and (ii) any required
compliance by the Company with applicable federal and State securities laws
and/or the HSR Act in connection with the issuance of shares of Common Stock
upon conversion of the Notes in accordance with their terms, no consent,
approval, order or other authorization of any Governmental Entity or of any
third party is required by or on behalf of the Company or a Subsidiary of the
Company in connection with the execution, delivery and performance of this
Agreement and each of the Related Agreements. The representations and warranties
contained in this Section 3.1(f), insofar as they relate to federal and State
securities laws requirements, are made in reliance on the representations and
warranties of the Purchaser contained in Section 3.2 of this Agreement.
(g) Status of Securities. The Securities have been authorized by
all necessary corporate action on the part of the Company. When delivered to the
Purchaser at the Closing against payment therefor as provided herein, the Notes
will be duly authorized and validly issued and will not be issued in violation
of the preemptive rights of any Person. Subject to the approvals and compliance
referred to in the second sentence of Section 3.1(f) hereof, shares of Common
Stock issued by the Company upon conversion of the Notes in accordance with
their terms will be duly authorized,
9
<PAGE> 13
validly issued and non-assessable at the time of issuance and will not be
issued in violation of the preemptive rights of any Person. The representations
and warranties contained in this Section 3.1(g), insofar as they relate to
federal and State securities laws requirements, are made in reliance on the
representations and warranties of the Purchaser contained in Section 3.2 of this
Agreement.
(h) Securities Reports. The Company has filed all Securities
Documents required to be filed by it under the Securities Laws on a timely basis
or has received a valid extension of such time of filing, and all such
Securities Documents complied in all material respects with the requirements of
the Securities Laws and did not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, at the time and in light of the
circumstances under which they were made, not misleading.
(i) Financial Statements.
(i) The Company has previously delivered to the Purchaser
(i) statements of financial condition of the Company as of August 31, 1999 and
1998 and statements of operations, changes in stockholders' equity and cash
flows of the Company for each of the years ended August 31, 1999, 1998 and 1997,
accompanied by the related audit report of Deloitte & Touche LLP, (ii) an
unaudited statement of financial condition as of November 30, 1999 and unaudited
statements of operations, changes in stockholders' equity and cash flows of the
Company for the three months ended November 30, 1999 and 1998 and (iii) an
unaudited statement of financial condition as of December 31, 1999 and an
unaudited statement of operations for the three months ended December 31, 1999.
The foregoing financial statements, as well as the financial statements of the
Company to be delivered to the holders of Notes after the Closing pursuant to
the terms of the Notes (collectively the "Company Financial Statements"), fairly
present or will fairly present, as the case may be, in all material respects the
consolidated financial condition of the Company as of the respective dates set
forth therein, and the consolidated results of operations, changes in
shareholders' equity and cash flows of the Company for the respective periods or
as of the respective dates set forth therein in accordance with GAAP.
(ii) Each of the Company Financial Statements has been or
will be, as the case may be, prepared in accordance with GAAP consistently
applied during the periods involved, except as stated therein. The books and
records of the Company and its Subsidiaries are being maintained in material
compliance with applicable legal and accounting requirements, and such books and
records accurately reflect in all material respects all dealings and
transactions in respect of the business, assets, liabilities and affairs of the
Company and its Subsidiaries.
(iii) Except to the extent (x) reflected, disclosed or
provided for in the Securities Documents filed by the Company prior to the date
hereof and (y) of liabilities incurred since August 31, 1999 in the ordinary
course of business, neither the Company nor any Subsidiary of the Company has
any liabilities, whether absolute, accrued, contingent or otherwise, which has
had or could reasonably be expected to have a Material Adverse Effect.
10
<PAGE> 14
(j) Material Adverse Change. Since August 31, 1999, (i) the
Company and the Subsidiaries of the Company have conducted their respective
businesses in the ordinary and usual course (excluding the incurrence of
expenses in connection with this Agreement and the Exchange Agreement and the
transactions contemplated hereby and thereby) and (ii) no event has occurred or
circumstance arisen that, individually or in the aggregate, has had or could
reasonably be expected to have a Material Adverse Effect.
(k) Environmental Matters.
(i) The Company is in compliance with all Environmental
Laws, except for any violations of any Environmental Law which, individually or
in the aggregate, has not had and could not reasonably be expected to have a
Material Adverse Effect. The Company has not received any communication alleging
that the Company or any Company Subsidiary is not in such compliance and, to the
knowledge of the Company, there are no present circumstances that would prevent
or interfere with the continuation of such compliance.
(ii) None of the properties owned, leased or operated by
the Company or the any Company Subsidiary has been or is in violation of or
liable under any Environmental Law, except for any such violations or
liabilities which, individually or in the aggregate, has not had and could not
reasonably be expected to have a Material Adverse Effect.
(iii) To the knowledge of the Company, there are no past or
present actions, activities, circumstances, conditions, events or incidents that
could reasonably form the basis of any Environmental Claim or other claim or
action or governmental investigation that could result in the imposition of any
liability arising under any Environmental Law against the Company or any of its
Subsidiaries or against any Person whose liability for any Environmental Claim
the Company or any Subsidiary of the Company has or may have retained or assumed
either contractually or by operation of law, except such as, individually or in
the aggregate, have not had and could not reasonably be expected to have a
Material Adverse Effect.
(l) Tax Matters.
(i) The Company and its Subsidiaries have timely filed
all Tax Returns required by applicable law to be filed by them (including,
without limitation, estimated tax returns, income tax returns, information
returns and withholding and employment tax returns) and have paid, or where
payment is not required to have been made, have set up an adequate reserve or
accrual for the payment of, all Taxes required to be paid in respect of the
periods covered by such Tax Returns, except in all cases where the failure to do
so, individually or in the aggregate, has not had and could not reasonably be
expected to have a Material Adverse Effect. As of the date hereof, there is no
audit examination, assessed deficiency, deficiency litigation or refund
litigation with respect to any Taxes of the Company or any Subsidiary of the
Company. All Taxes due with respect to completed and settled examinations or
concluded litigation relating to the Company have been paid in full or
11
<PAGE> 15
adequate provision has been made for any such Taxes on the Company's
consolidated statement of financial condition in accordance with GAAP. The
Company has not executed an extension or waiver of any statute of limitations on
the assessment or collection of any Tax that is currently in effect.
(ii) Neither the Company nor any Subsidiary of the Company
(i) is a party to any agreement providing for the allocation or sharing of
taxes, (ii) is required to include in income any adjustment pursuant to Section
481(a) of the Code by reason of a voluntary change in accounting method
initiated by the Company or a Subsidiary of the Company (nor does the Company
have any knowledge that the Internal Revenue Service has proposed any such
adjustment or change of accounting method) or (iii) has filed a consent pursuant
to Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply.
(iii) There has been no "ownership change," as defined
under Section 382 of the Code and regulations thereunder, of the Company since
August 31, 1998, and issuance of the Notes pursuant to this Agreement (assuming
no conversion of such Notes) and consummation of the Exchange (including
conversion of the Exchange Notes) pursuant to the Exchange Agreement and the
Exchange Notes will not result in such an ownership change of the Company.
(m) ERISA. The Company is in compliance in all material respects
with all presently applicable provisions of ERISA; to the knowledge of the
Company, no "reportable event" (as defined in ERISA) has occurred with respect
to any "pension plan" (as defined in ERISA) for which the Company would have any
material liability; the Company has not incurred and does not expect to incur
liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 (whether or not waived)
or 4971 of the Code; and each "pension plan" for which the Company would have
any liability that is intended to be qualified under Section 401(a) of the Code
is so qualified in all material respects and to the knowledge of the Company
nothing has occurred, whether by action or by failure to act, which would cause
the loss of such qualification.
(n) Litigation. There are no actions, suits, investigations or
legal proceedings instituted, pending or, to the knowledge of the Company,
threatened against the Company or any Subsidiary of the Company or against any
asset, interest or right of the Company or any Subsidiary of the Company, or
against any director, officer or employee of any of them that in any such case,
if decided adversely, could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect. Neither the Company nor any Subsidiary
of the Company is a party to any order, judgment or decree which has had or
could reasonably be expected to have a Material Adverse Effect.
(o) Compliance with Laws. The Company and each Subsidiary of the
Company has all permits, licenses, certificates of authority, orders and
approvals of, and has made all filings, applications and registrations with,
federal, State, local and foreign governmental or regulatory bodies that are
necessary in order to permit it to carry on its business as it is presently
being
12
<PAGE> 16
conducted and the absence of which could reasonably be expected to have a
Material Adverse Effect; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect; and to the best knowledge of
the Company, no suspension or cancellation of any of the same is threatened.
(p) No Default or Violation. Neither the Company nor any
Subsidiary of the Company currently is in violation of its Certificate of
Incorporation or Bylaws or equivalent documents, or of any applicable federal,
State or local law or ordinance or any order, rule or regulation of any
Governmental Entity (including, without limitation, all securities, safety,
health, environmental, zoning, anti-discrimination, antitrust, and wage and hour
laws, ordinances, orders, rules and regulations), or in default with respect to
any order, writ, injunction or decree of any court, or in default under any
order, license, regulation or demand of any Governmental Entity, any of which
violations or defaults could, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, and neither the Company nor any
Subsidiary of the Company has received any notice or communication from any
Governmental Entity asserting that the Company or any Company Subsidiary is in
violation of any of the foregoing which could reasonably be expected to have a
Material Adverse Effect. Neither the Company nor any Subsidiary of the Company
is subject to any regulatory or supervisory cease and desist order, agreement,
written directive, memorandum of understanding or written commitment, and none
of them has received any written communication requesting that they enter into
any of the foregoing.
(q) Certain Fees. No fees or commissions will be payable by the
Company to brokers, finders, investment bankers or banks pursuant to any
agreement entered into by the Company with respect to the offer and sale of the
Notes or the Exchange Notes or any of the other transactions contemplated
hereby, by any Related Agreement or by the Stock Purchase Agreement.
(r) Patents, Trademarks, Etc. The Company and each of its
Subsidiaries owns or possesses all legal rights to use all proprietary rights,
including without limitation all trademarks, trade names, service marks and
copyrights, that are material to the conduct of their existing businesses.
Neither the Company nor any of its Subsidiaries is bound by or a party to any
options, licenses or agreements of any kind with respect to any trademarks,
service marks or trade names which it claims to own. Neither the Company nor any
of its Subsidiaries has received any communications alleging that any of them
has violated or would violate any of the patents, trademarks, service marks,
trade names, copyrights or trade secrets or other proprietary rights of any
other Person.
(s) Loan Matters
(i) Each loan agreement, note or borrowing arrangement,
including without limitation portions of outstanding lines of credit and loan
commitments on the books and records of the Company and its Subsidiaries
(collectively, "Loans") that was made by the Company and to the knowledge of the
Company that was made by any third party was made, and has been serviced in all
material respects in accordance with, the Company's underwriting standards and
the relevant
13
<PAGE> 17
Loan documentation in the ordinary course of business, is evidenced in all
material respects by appropriate and sufficient documentation and, to the best
knowledge of the Company, constitutes the legal, valid and binding obligation of
the obligor named therein, subject to bankruptcy, insolvency, fraudulent
conveyance and other laws of general applicability relating to or affecting
creditor's rights and to general equity principles.
(ii) None of the agreements pursuant to which the Company
or any Subsidiary has sold Loans or pools of Loans or participations in Loans or
pools of Loans contain any obligation to repurchase such Loans or interests
therein on account of a payment default by the obligor on any such Loans.
Neither the Company nor any of its Subsidiaries is in default under any such
agreement or has received any notice alleging default.
(iii) To the knowledge of the Company, all brokers and
other third parties who originate or have originated Loans have all required
licenses and approvals from all jurisdictions requiring licenses and approvals
and have complied with and are not in violation of any applicable law,
regulation, order, rule, policy or guidelines of any Governmental Entity.
(iv) The practices of the Company and its Subsidiaries
with respect to compensation paid to mortgage brokers comply with the policy
statement issued by the Department of Housing and Urban Development in March
1999.
(t) Certain Assets. The Company has Previously Disclosed a true
and correct listing of the following assets of the Company and its Subsidiaries
as of November 30, 1999: (i) all non-performing Loans, securities or other
assets (i.e., all assets on which the Company has ceased recognizing interest
under GAAP or as to which any payments of principal or interest are past due 90
or more days as of such date), (ii) all Loans, securities or other assets as to
which any payments of principal or interest are past due 60 or more days, (iii)
all Loans, securities or other assets not included in the foregoing which have
been classified special mention, substandard, doubtful or loss, or otherwise
classified adversely, by management of the Company or regulatory examiners, and
(iv) each parcel of Real Estate Owned (excepting such parcels as may have been
disposed of in the ordinary course of business subsequent to such date),
including an identification of the amount of reserves which have been
established with respect to each such parcel and its net carrying value.
(u) Year 2000 Compliance. All computer hardware and software
owned, used or licensed by the Company or any of its Subsidiaries, including but
not limited to system and application programs, files, databases and computer
services, the failure or disfunctionality of which would individually or in the
aggregate have a Material Adverse Effect is Year 2000 Complaint. "Year 2000
Complaint" means that such hardware and software will (i) correctly process date
data from at least January 1, 1900 through December 31, 2000 without error or
interruption due to date, (ii) maintain functionality with respect to the input,
storing, processing or output of records or data containing dates falling on or
after January 1, 2000, and (iii) be interoperable with other Year 2000 compliant
hardware or software owned, used or licensed by the Company or any of its
Subsidiaries which may
14
<PAGE> 18
deliver records to, receive records from or otherwise interact with such
hardware or software in the course of processing records or data.
(v) Labor Matters. Neither the Company nor any of its Subsidiaries
is a party to or is bound by any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor organization, nor
is the Company or any of its Subsidiaries the subject of a proceeding naming the
Company or any Subsidiary of the Company as a defendant asserting that the
Company or any such Subsidiary has committed an unfair labor practice (within
the meaning of the National Labor Relations Act) or seeking to compel the
Company or any such Subsidiary to bargain with any labor organization as to
wages or conditions of employment, nor is there any strike or other material
labor dispute or disputes involving it or any of its Subsidiaries pending, or to
the Company's knowledge, threatened, nor the Company aware of any activity
involving its or any of its Subsidiaries' employees seeking to certify a
collective bargaining unit or engaging in other organizational activity.
(w) Insurance. The Company believes that it and each Subsidiary of
the Company is insured, and during each of the past three calendar years has
been insured, for reasonable amounts with financially sound and reputable
insurance companies against such risks as companies engaged in a similar
business would, in accordance with good business practice, customarily be
insured and has maintained all insurance required by applicable laws and
regulations. All of the policies and bonds maintained by the Company and its
Subsidiaries are in full force and effect and all claims thereunder have been
filed in a due and timely manner and, to the Company's knowledge, no such claim
has been denied.
(x) Properties. All real and personal property owned by the
Company or a Subsidiary of the Company or presently used by any of them in its
respective business is in an adequate condition (ordinary wear and tear
excepted) and is sufficient to carry on its business in the ordinary course of
business consistent with its past practices. The Company has good and marketable
title free and clear of all Liens (other than equities of redemption under
applicable foreclosure laws) to all of the material properties and assets, real
and personal, reflected on the consolidated statement of financial condition of
the Company as of August 31, 1999 included in the Company Financial Statements
or acquired after such date, other than properties sold by the Company in the
ordinary course of business, except (i) Liens for current taxes not yet due or
payable, (ii) pledges to secure deposits and other liens incurred in the
ordinary course of its banking business, (iii) such imperfections of title,
easements and encumbrances, if any, as are not material in character, amount or
extent and (iv) as reflected on the consolidated statement of financial
condition of the Company as of May 31, 1999 included in the Company Financial
Statements. All real and personal property which is material to the Company's
business and leased or licensed by the Company or a Subsidiary of the Company is
held pursuant to leases or licenses which are valid and enforceable in
accordance with their respective terms.
(y) Investment Company Act of 1940. The Company is not, and will
not become upon consummation of the transactions contemplated hereby and by the
Related Agreements, an
15
<PAGE> 19
"investment company" or an entity "controlled" by an "investment company," as
such terms are defined in the Investment Company Act of 1940, as amended.
(z) Private Offering. Neither the Company nor any Person acting on
its behalf has taken or will take any action which might subject the offering,
issuance or sale of the Notes to the registration requirements of the Securities
Act or comparable provisions of any applicable State securities laws.
(aa) Exercise of Warrants; Stockholder Approval. After taking into
account the 600,000 shares of Common Stock issued by the Company in connection
with the acquisition of MCI but without regard to the shares of Common Stock
issuable upon conversion of the Notes, an aggregate of 11,027 shares of Common
Stock may be issued by the Company upon conversion of the Notes without
compliance with the stockholder approval requirements of the NASD. The
affirmative vote of the holders of a majority of the shares of Company Common
Stock present in person or by proxy at a duly called meeting of the stockholders
of the Company at which a quorum, consisting of the holders of a majority of the
outstanding shares of Company Common Stock present in person or by proxy, is
present is the only vote of the stockholders of the Company necessary to approve
(i) the conversion features of the Notes in their entirety and (ii) the
consummation of the Exchange pursuant to the Exchange Agreement.
(bb) Indebtedness Defaults. As of the date hereof and the Closing
Date, the Company is not in default under any Indebtedness Instrument (which has
not been waived).
(cc) Solvency. The Company (i) is now generally paying its debts as
they mature, (ii) owns property which, at a fair valuation, is greater than the
sum of its indebtedness and (iii) has capital sufficient to carry on its
business in the ordinary course consistent with past practice.
(dd) Exchange Agreement and Related Agreements.
(i) The Company has heretofore delivered to the Purchaser a true
and correct copy of the Exchange Agreement and the Exchange Note Related
Agreements.
(ii) The Company has full corporate power and authority to perform
its obligations under the Exchange Agreement and the Exchange Note Related
Agreements, and the execution, delivery and performance by the Company of the
Exchange Agreement and the Exchange Note Related Agreements have been duly
authorized by all necessary corporate action on the part of the Company, except
for the approval of the shareholders of the Company of the issuance of Common
Stock upon conversion of the Exchange Notes pursuant to the requirements of the
NASD. The Subordinated Note Agreement and the Exchange Note Related Agreements
have been duly executed and delivered by the Company and constitute valid and
binding obligations of the Company, enforceable against the Company in
accordance with its terms, except (i) rights to indemnity and contribution under
the Exchange Note Registration Rights Agreement may be limited by applicable
law, (ii) enforceability may be limited by bankruptcy, insolvency, moratorium
and similar laws affecting creditors' rights
16
<PAGE> 20
generally and (iii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability.
(iii) Neither the execution and delivery of any of the Exchange
Agreement and the Exchange Note Related Agreements, nor consummation of the
transactions contemplated thereby, nor compliance by the Company with any of the
provisions thereof, (i) does or will conflict with or result in a breach of any
provisions of the Certificate of Incorporation or Bylaws of the Company or the
equivalent documents of any Subsidiary of the Company, (ii) violate, conflict
with or result in a breach of any term, condition or provision of, or constitute
a default (or any event which, with notice or lapse of time, or both, would
constitute a default) under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
Lien upon any property or asset of the Company or a Subsidiary of the Company
pursuant to, any material note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which the Company
or a Company Subsidiary is a party, or by which any of their respective
properties or assets may be bound or affected, or (iii) subject to the
compliance referred to in the succeeding sentence, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company or a
Subsidiary of the Company. Except for the approval of the shareholders of the
Company of the issuance of Common Stock upon conversion of the Exchange Notes
pursuant to the requirements of the NASD and actions by the Commission in
connection with the performance by the Company of its obligations under the
Exchange Note Registration Rights Agreement relating to such shares of Common
Stock, no consent, approval, order or other authorization of any Governmental
Entity or of any third party is required by or on behalf of the Company or a
Subsidiary of the Company in connection with the execution, delivery and
performance of the Exchange Agreement and the Exchange Related Agreements.
(iv) Except for the approval of the shareholders of the Company of
the issuance of Common Stock upon conversion of the Exchange Notes pursuant to
the requirements of the NASD, the Exchange Securities have been authorized by
all necessary corporate action on the part of the Company. When issued pursuant
to the terms of the Exchange Agreement, the Exchange Securities will be duly
authorized and validly issued and will not be issued in violation of the
preemptive rights of any Person. The Exchange Notes and, assuming receipt of the
shareholder approval referred to in the first sentence of this paragraph (iv),
the shares of Common Stock issued by the Company upon conversion of the Exchange
Notes, will be duly authorized, validly issued and non-assessable at the time of
issuance and will not be issued in violation of the preemptive rights of any
Person.
(ee) Disclosure. None of the representations and warranties of the
Company or any of the information or documents which have been Previously
Disclosed to the Purchaser pursuant hereto are false or misleading in any
material respect or contain any untrue statement of a material fact, or omit to
state any material fact required to be stated or necessary to make any such
information or document, at the time and in light of the circumstances, not
misleading. Copies of all documents referred to in this Section 3.1 are true,
correct and complete copies thereof and include all amendments, supplements and
modifications thereto and all waivers thereunder.
17
<PAGE> 21
SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
(a) Investment Intent. The Purchaser represents and warrants to
the Company that the Securities to be acquired by it hereunder are being
acquired for its own account for investment and with no intention of
distributing or reselling such Securities or any part thereof or interest
therein in any transaction which would be in violation of federal or State
securities laws, without prejudice, however, to the Purchaser's right, subject
to the provisions of this Agreement and the Registration Rights Agreement, at
all times to sell participation interests in the Notes in accordance with
Section 6.13 hereof and/or to sell or otherwise dispose of all or any part of
such Securities under an effective registration statement under the Securities
Act and other applicable State securities laws or under an exemption from such
registration, and subject, nevertheless, to the disposition of the Purchaser's
property being at all times within its control.
(b) Transfer Restrictions. If the Purchaser should decide to
dispose of any of the Securities, such Purchaser understands and agrees that it
may do so only as set forth below: (i) to the Company, (ii) to any Person
reasonably believed by such Purchaser to be a "qualified institutional buyer"
("QIB") (as defined in Rule 144A under the Securities Act) in compliance with
Rule 144A under the Securities Act, (iii) pursuant to an exemption from
registration set forth in Rule 144 under the Securities Act, (iv) to any Person
who is reasonably believed by such Purchaser to be an "accredited investor" (as
defined in Rule 501(a) under the Securities Act) and that, prior to such
transfer, furnishes to the Purchaser and the Company a signed letter confirming
its status as an accredited investor and agreeing to the restrictions on
transfer of the Securities set forth in this Agreement, (v) to any Affiliate of
such Purchaser pursuant to an applicable exemption under the Securities Act or
(vi) pursuant to an effective registration statement under the Securities Act,
provided that, notwithstanding the foregoing, so long as certain of the
collateral for the Notes may be held only by a QIB, as reasonably determined by
the Company, the Notes may be offered, sold or otherwise disposed of only
pursuant to clauses (i) or (ii) above. In connection with any transfer of any
Securities other than (i) any transfer pursuant to an effective registration
statement under the Securities Act or (ii) any transfer by a QIB pursuant to
clause (ii) above, the Company may require that the transferor of any such
Securities provide to the Company an opinion of counsel experienced in the area
of United States securities laws selected by the transferor (which may include
in-house counsel of a transferor), which counsel shall be, and the form and
substance of which opinion shall be, reasonably satisfactory to the Company, to
the effect that such transfer does not require registration of such Securities
under the Securities Act or any State securities laws. In connection with any
transfer pursuant to clause (ii) above, the Company may request reasonable
certification as to the status of the transferor's transferee as a QIB. The
Purchaser agrees to the imprinting, so long as appropriate, (i) on the Notes of
the legends set forth on the form of Note included as Exhibit B hereto and (ii)
on certificates representing the Common Stock issuable upon conversion of the
Notes of legends which are substantially similar to such legends. The Notes and
certificates evidencing the Common Stock issuable upon conversion of the Notes
also shall bear any other legends required by applicable federal or State
securities laws, which legends may be removed when, in the opinion of counsel to
the Company experienced in the applicable securities laws, the same are no
longer required under the applicable requirements of such securities laws. The
Company agrees
18
<PAGE> 22
that it will provide the Purchaser, upon request, with a substitute document
evidencing the Securities not bearing such legend at such time as such legend is
no longer applicable.
(c) Stop Transfer Instructions. The Purchaser agrees that the
Company shall be entitled to make a notation on its records and give
instructions to any transfer agent of the Securities in order to implement the
restrictions on transfer set forth in Section 3.2(b) of this Agreement.
(d) Accredited Investor, etc. The Purchaser represents and
warrants to, and covenants and agrees with, the Company that at the time it was
offered the Notes, it was, and at the date hereof, it is, a "qualified
institutional buyer" as defined in Rule 144A under the Securities Act, and has
such knowledge, sophistication and experience in business and financial matters
so as to be capable of evaluating the merits and risks of the prospective
investment in the Notes, and has so evaluated the merits and risks of such
investment, is able to bear the economic risk of such investment and, at the
present time, is able to afford a complete loss of such investment.
(e) Due Execution. The Purchaser represents and warrants to the
Company that this Agreement has been, and each Related Agreement to which it
will become a party will be, duly executed and delivered by it or on its behalf
and constitutes, or will constitute, as applicable, a valid and binding
obligation of such Purchaser, enforceable against the Purchaser in accordance
with its terms, except that (i) rights to indemnity and contribution under the
Registration Rights Agreement may be limited by applicable law, (ii)
enforceability may be limited by bankruptcy, insolvency, moratorium and similar
laws affecting creditors' rights generally and (iii) rights of acceleration and
the availability of equitable remedies may be limited by equitable principles of
general applicability.
(f) No Conflict. The Purchaser represents and warrants to the
Company that neither the execution and delivery of this Agreement and each of
the Related Agreements to which the Purchaser is or will become a party, nor
consummation of the transactions contemplated hereby and thereby, nor compliance
by the Purchaser with any of the provisions hereof or thereof, (i) does or will
conflict with or result in a breach of any provisions of the articles of
incorporation or bylaws or equivalent documents of the Purchaser, (ii) violate,
conflict with or result in a breach of any term, condition or provision of, or
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
Lien upon my property or asset of the Purchaser pursuant to any material note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which the Purchaser is a party, or by which any of
its properties or assets may be bound or affected, or (iii), subject to the
compliance referred to in clause (i) and (ii) of the succeeding sentence,
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Purchaser. Except for (i) compliance with applicable federal
and State securities laws in connection with the performance by the Purchaser of
its obligations under the Registration Rights Agreement and (ii) any required
compliance by the Purchaser with applicable federal and State securities laws
and the HSR Act in connection with the issuance of shares of Common Stock upon
conversion of the Notes in
19
<PAGE> 23
accordance with their terms, the Purchaser represents and warrants to the
Company that no consent, approval, order or other authorization of
20
<PAGE> 24
any Governmental Entity or of any third party is legally required by or on
behalf of the Purchaser in connection with the execution, delivery and
performance of this Agreement and each Related Agreement to which it will become
a party.
(g) Access to Information. The Purchaser acknowledges that prior
to the date hereof it has been afforded (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Notes and the merits and risks of investing in the Notes and
(ii) access to information about the Company and the Company's financial
condition, results of operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment in the Notes.
(h) Reliance. The Purchaser understands and acknowledges that (i)
the Notes are being offered and sold without registration under the Securities
Act in a transaction that is exempt from the registration provisions of the
Securities Act and (ii) such exemption depends in part on, and that the Company
will rely upon, the accuracy and truthfulness of the foregoing representations
and warranties of such Purchaser, and such Purchaser hereby consents to such
reliance.
ARTICLE IV
CONDITIONS PRECEDENT TO THE CLOSING
SECTION 4.1 CONDITIONS TO OBLIGATIONS OF THE PARTIES. The respective
obligations of each of the parties hereto to fulfill their obligations under
Section 2.1 hereof at the Closing shall be subject to the satisfaction or waiver
prior to the Closing of the following conditions:
(a) All requirements prescribed by law which are necessary to the
consummation of the transactions contemplated by this Agreement shall have been
satisfied.
(b) No party hereto shall be subject to any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(c) No statute, rule or regulation shall have been enacted,
entered, promulgated, interpreted, applied or enforced by any Governmental
Entity which prohibits, restricts or makes illegal consummation of any of the
transactions contemplated by this Agreement.
(d) The Company shall have entered into binding and enforceable
Exchange Agreements with the holders of not less than 92% principal amount of
Subordinated Notes.
SECTION 4.2 CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER. The
obligations of the Purchaser to fulfill its obligations under Section 2.1 hereof
shall be subject to the satisfaction or waiver prior to the Closing of the
following conditions:
21
<PAGE> 25
(a) Each of the representations and warranties of the Company
contained in this Agreement shall be true and correct in all material respects
as of the date of this Agreement and as of the Closing Date as if made on the
Closing Date (or on the date when made in the case of any representation or
warranty which specifically relates to an earlier date); the Company shall have
performed, in all material respects, each of its covenants and agreements
contained in this Agreement to be performed prior to the Closing; and the
Purchaser shall have received a certificate signed by the Chief Executive
Officer and the Chief Financial Officer of the Company, dated the Closing Date,
to the foregoing effect.
(b) The Company shall have delivered to the Purchaser a duly
executed Note, registered in the name of the Purchaser, sufficient to evidence
the Note to be issued and sold by the Company and purchased by the Purchaser, as
set forth on Exhibit A hereto, against payment therefor to the Company in an
amount equal to the Purchase Price (net of the amount of costs as of the Closing
Date which are reimbursable by the Company pursuant to Section 6.5 hereof, which
shall be deemed a partial payment for the Note purchased by the Purchaser in
that sum) and surrender of the Existing Notes.
(c) The Purchaser shall have received (i) a counterpart to this
Agreement, duly executed and delivered by the Company, and (ii) a counterpart of
each Related Agreement (other than the Notes), substantially in the form
attached hereto as an exhibit, which shall have been duly executed and delivered
by the Company and the other party or parties thereto (other than the
Purchaser).
(d) The Purchaser shall have received, in form and substance
reasonably satisfactory to it, opinions, addressed to the Purchaser and dated
the Closing Date, of King & Spalding and Venable, Baetjer and Howard, LLP
special counsel to the Company, with respect to the indicated matters set forth
in Exhibit G hereto.
(e) No party to this Agreement (other than the Purchaser) shall be
in material breach of this Agreement unless such breach shall have been waived
in writing by each of the other parties to this Agreement.
(f) The Company shall have obtained in writing all consents of
third parties necessary to permit the consummation of the transactions
contemplated by this Agreement and the Related Agreements, as Previously
Disclosed pursuant to Section 3.1(f) hereof, and no such consent shall contain
any term or condition that the Purchaser reasonably deems to be materially
disadvantageous to the Company or the Purchaser.
(g) Each of City National Bank of West Virginia and Sovereign
Bancorp, Inc. shall have waived any adjustments to the terms of the stock
options issued to them pursuant to the Stock Option Agreement, dated May 29,
1998, between the Company and each such entity, that may be required pursuant to
Section 7 of such Stock Option Agreements as a result of (i) the issuance of the
Notes or the conversion thereof to shares of Common Stock in accordance with
their terms and (ii) consummation of the Exchange pursuant to the Exchange
Agreement, in each case in form and
22
<PAGE> 26
substance reasonably satisfactory to the Purchaser, and Sovereign Bank shall
have waived the same pursuant to the Participation Agreement, dated June 29,
1998, between it and the Company.
(h) The Purchaser and T. Rowe Price shall have entered into the
Participation Agreement, pursuant to which T. Rowe Price shall have agreed to
purchase on the Closing Date a $5.5 million participation interest in the Notes
issued to the Purchaser pursuant to this Agreement and T. Rowe Price shall have
delivered to the Purchaser on the Closing Date a dollar amount equal to $2.0
million such participation interest (which amount is net of $3.5 million
previously delivered to the Purchaser by T. Rowe Price for participation
interests in the Existing Notes).
(i) The Company, the Purchaser, and United States Trust Company of
New York, as collateral agent for the holders of the Notes and the Exchange
Notes, shall have entered into an Intercreditor and Collateral Sharing Agreement
substantially in the form of Exhibit E hereto (the "Intercreditor Agreement"),
and the Company and United States Trust Company of New York, N.A., as trustee,
shall have entered into the Indenture relating to the Exchange Notes in the form
of Exhibit F hereto.
(j) The Purchaser shall have received such other certificates,
opinions, documents and instruments related to the transactions contemplated
hereby and the Exchange as may have been reasonably required by it and are
customary for transactions of this type, and all corporate and other
proceedings, and all documents, instruments and other legal matters in
connection with the transactions contemplated by this Agreement, shall be
reasonably satisfactory in form and substance to it and its counsel.
SECTION 4.3 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company to fulfill its obligations under Section 2.1 hereof
shall be subject to the satisfaction or waiver prior to the Closing of the
following conditions:
(a) Each of the representations and warranties of the Purchaser
contained in this Agreement shall be true and correct in all material respects
as of the date of this Agreement and as of the Closing Date as if made on the
Closing Date (or on the date when made in the case of any representation and
warranty which specifically relates to an earlier date), and the Company shall
have received a certificate signed by a duly authorized representative of each
Purchaser to the foregoing effect.
(b) The Purchaser shall have delivered to the Company the Existing
Notes and a dollar amount equal to the Purchase Price (net of the amount of
costs as of the Closing Date which are reimbursable by the Company pursuant to
Section 6.5 hereof), such amount to be payable (i) by wire transfer of
immediately available funds to an account with a bank designated by the Company,
by notice to the Purchaser to be provided no later than two Business Days prior
to the Closing Date, or (ii) a federal (same day) funds check payable to the
order of the Company.
23
<PAGE> 27
(c) The Company shall have received (i) a counterpart to this
Agreement, duly executed and delivered by the Purchaser, and (ii) a counterpart
of each Related Agreement (other than the Notes), substantially in the form
attached hereto as an exhibit, which shall have been duly executed and delivered
by the Purchaser.
(d) No party to this Agreement (other than the Company) shall be
in material breach of this Agreement unless such breach shall have been waived
in writing by each of the other parties to this Agreement.
(e) The Company shall have obtained in writing all consents of
third parties necessary to permit the consummation of the transactions
contemplated by this Agreement and the Related Agreements (other than the
consents referred to in Section 4.2(g) hereof) and no such consent shall contain
any term or condition that the Company reasonably deems to be materially
disadvantageous to the Company.
(f) The Company shall have received such other certificates,
opinions, documents and instruments related to the transactions contemplated
hereby as may have been reasonably required by the Company and are customary for
transactions of this type, and all corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement, shall be reasonably satisfactory in
form and substance to the Company and its counsel.
ARTICLE V
COVENANTS
SECTION 5.1 SHAREHOLDER MEETING. The Company shall (i) take all action
necessary (including without limitation the preparation, filing and
dissemination of requisite proxy materials) to have its shareholders approve in
accordance with and to the extent required by the applicable requirements of the
NASD, separate proposals for the issuance of the number of shares of Common
Stock issuable (i) upon full conversion of the Notes and (ii) upon mandatory
conversion of the applicable portion of the Exchange Notes (the "Stockholder
Approvals") at the first annual meeting of the shareholders of the Company held
after the date hereof or at a special meeting of shareholders which is called
for the purpose prior to the holding of such annual meeting of shareholders,
which annual meeting or special meeting shall in no event be held later than
March 9, 2000, (ii) recommend that its shareholders approve each of such
proposals and use its reasonable best efforts to obtain, as promptly as
practicable, such approvals and (iii) reasonably cooperate and consult with the
Purchaser with respect to the foregoing matters, including without limitation
giving the Purchaser the right to review in advance the proxy statement (in
preliminary and definitive form) to be sent to the shareholders of the Company
to solicit the Stockholder Approvals.
24
<PAGE> 28
SECTION 5.2. APPLICATIONS.
(a) Notwithstanding any other provision hereof to the contrary,
the right of a holder, whether on its own behalf or on behalf of a holder of a
participation interest in the Notes, to convert the principal amount of any
Note, or any portion thereof, and the obligation of the Company to issue any
shares of Common Stock upon the exercise of such conversion right, are subject
to the condition that, if upon receipt by the Company of written notice of
conversion from any holder, whether on its behalf or on behalf of a holder of
participation interest in the Notes, outside counsel advises the Company in
writing (a copy of which shall be provided to the converting holder) that in its
opinion the Company, such holder and/or any participant on behalf of whom such
holder is attempting to exercise conversion rights are required under applicable
law to make a filing under the HSR Act in connection with such conversion and
issuance of shares of Common Stock, no shares of Common Stock shall be issued to
such holder until all applicable filings under the HSR Act are made by the
Company and, if required under the HSR Act, by such holder and any other person
or persons and all applicable waiting periods under the HSR Act have expired or
been terminated. As soon as practicable after the receipt from any holder of the
Notes, whether on its behalf or on behalf of a holder of a participation
interest in the Notes (collectively the "Notice Giver"), of notice of an intent
to convert an amount of Notes sufficient to require a filing under the HSR Act,
but in any event no later than the tenth Business Day after receipt of such
notice, the Company will (i) prepare and file with the Antitrust Division of the
U.S. Department of Justice (the "DOJ") and the Federal Trade Commission (the
"FTC") the Notification and Report Form (accompanied by all documentary
attachments contemplated thereby) required by the HSR Act, (ii) upon the request
of any Notice Giver, request early termination of the waiting period imposed by
the HSR Act, (iii) coordinate and cooperate with the Notice Giver in responding
to formal and informal requests for additional information and documentary
material from the DOJ and the FTC in connection with such filing, (iv) use its
reasonable best efforts to take, or cause to be taken, all reasonable action and
to do, or cause to be done, all things reasonably necessary and appropriate to
permit the issuance to the Notice Giver of the shares of Common Stock issuable
upon the conversion of the Notes with respect to which any filing is required
under the HSR Act and (v) reimburse the holders of the Notes for the entire
amount of any filing fee or any other costs and expenses incurred by holders of
the Notes in connection therewith (including legal fees) or as required to be
paid under the HSR Act. The Notice Giver agrees to provide to the Company all
reasonable cooperation in connection with the making of such filings under the
HSR Act; provided, however, that neither the Company nor any such Notice Giver
shall be required in connection with any such filing to enter into any
agreement, or take or refrain from taking any action, as a condition to
obtaining any approval required under the HSR Act if, in the judgment of such
party, such condition could have a material adverse effect on such party or its
business. In the event that despite their reasonable efforts, the Company and
such Notice Giver do not receive all approvals required under the HSR Act in
connection with such conversion, such holder's notice of conversion shall be
deemed to be rescinded and the Company shall not be obligated to take any
further action with respect to the conversion of such Note pursuant to such
notice of exercise.
25
<PAGE> 29
(b) In the event that any other approval, consent or non-objection
need be obtained by the Company from, or a notice or other filing need be filed
by the Company with, any Governmental Entity in connection with (i) the
execution, delivery and performance of this Agreement or any Related Agreement
by the Company or (ii) the Company's issuance of Common Stock upon conversion of
the Notes, the Company shall take all actions reasonably necessary to obtain any
such approval, consent or non-objection or file such notice or other filing as
promptly as practicable, and the Purchaser agrees to cooperate with the Company
in obtaining or filing the same. The Company shall provide copies of any notice,
application or other document required to be filed pursuant to this Section 5.2
(excluding any confidential information) to the holder(s) seeking to convert a
Note or Notes into Common Stock for review not less than three Business Days
prior to the making of such filing and shall keep such holder apprised of the
status of such filing and the consideration thereof by the relevant Governmental
Entity.
SECTION 5.3 INVESTIGATION AND CONFIDENTIALITY.
(a) The Company shall permit the Purchaser and its representatives
reasonable access during normal business hours to its properties and personnel,
and shall disclose and make available to the Purchaser all books, papers and
records relating to the assets, stock ownership, properties, operations,
obligations and liabilities of the Company and its Subsidiaries, including, but
not limited to, all books of account (including the general ledger), tax
records, minute books of meetings of boards of directors (and any committees
thereof) and shareholders, organizational documents, bylaws, material contracts
and agreements, filings with any regulatory authority, accountants' work papers,
litigation files, loan files, plans affecting employees, and any other business
activities or prospects in which the Purchaser may have a reasonable interest in
connection with an investment in the Securities, provided that such access shall
be reasonably related to the transactions contemplated hereby and not unduly
interfere with normal operations, and provided further that in the event that
any of the foregoing are in the control of any third party, the Company shall
use its reasonable best efforts to cause such third party to provide access to
such materials to the Purchaser who shall request the same. In the event that
the Company is prohibited by law from providing any of the access referred to in
the preceding sentence to the Purchaser, it shall use its reasonable best
efforts to obtain promptly waivers thereof so as to permit such access. The
Company shall make the directors, officers, employees and agents and authorized
representatives (including counsel and independent public accountants) of the
Company and its Subsidiaries available to confer with the Purchaser and its
representatives, provided that such access shall be reasonably related to the
transactions contemplated hereby and not unduly interfere with normal
operations.
(b) All information furnished to the Purchaser by the Company
previously in connection with the transactions contemplated by this Agreement or
pursuant hereto shall be treated as the sole property of the Company and the
Purchaser covenants, severally and not jointly and as to itself only, that it
shall use its best efforts to keep confidential all such information and shall
not directly or indirectly use such information for any purpose other than in
connection with the transactions contemplated hereby. The obligation to keep
such
26
<PAGE> 30
information confidential shall continue for five years from the date hereof
but shall not apply to (i) any information which the Purchaser can
27
<PAGE> 31
establish by convincing evidence (x) was already in its possession prior to the
disclosure thereof by the Company; (y) was then generally known to the public;
or (z) became known to the public through no fault of the Purchaser; or (ii)
disclosures pursuant to a legal requirement or in accordance with an order of a
court of competent jurisdiction, provided that the Purchaser shall use its
reasonable best efforts to give the Company prior notice thereof as promptly as
practicable but in any event not less than five Business Days prior to such
disclosure and shall limit such disclosure to the minimum amount required by
such legal requirement or court order.
(c) No investigation by or on behalf of the Purchaser shall in any
way affect the representations, warranties, covenants or agreements of the
Company set forth herein.
SECTION 5.4 PRESS RELEASES. The Company and the Purchaser shall agree
with each other as to the form and substance of any press release related to
this Agreement or the transactions contemplated hereby, and consult with each
other as to the form and substance of other public disclosures which may relate
to the transactions contemplated by this Agreement, provided, however, that
nothing contained herein shall prohibit any party, following prior notification
to such other parties, from making any disclosure which it determines in good
faith is required by law or regulation. For purposes of the foregoing, the
Company may treat a law firm designated from time to time by the Purchaser as
the authorized representative of the Purchaser.
SECTION 5.5 NO SOLICITATION. Prior to consummation of the transactions
contemplated by this Agreement and the Exchange pursuant to the Exchange
Agreement, neither the Company nor any of the directors, officers, employees,
representatives or agents of the Company shall solicit or encourage inquiries or
proposals with respect to, furnish any information relating to, or participate
in any negotiations or discussions concerning, any acquisition, lease or
purchase of all or a substantial portion of the assets of, or any equity
interest in, the Company, or any business combination with the Company, other
than as contemplated by this Agreement and the Exchange Agreement. The Company
will immediately notify the Purchaser orally and in writing if any such
inquiries or proposals are received by, or such information is requested from,
or any such negotiations or discussions are sought to be initiated with, the
Company.
SECTION 5.6 RULE 144 AND RULE 144A REPORTING. With a view to making
available to holders of Securities the benefits of certain rules and regulations
of the Commission which may permit the sale of the Securities to the public
without registration, the Company agrees at all times to:
(a) make and keep public information available, as those terms are
understood and defined in Rules 144 and 144A under the Securities Act (or any
successors thereto); and
(b) use its reasonable best efforts to file with the Commission in
a timely manner all Securities Documents required to be filed by the Company
under the Securities Laws.
28
<PAGE> 32
SECTION 5.7 STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay, extension or usury law or other
law which would prohibit or forgive the Company from paying all or any portion
of the principal of, premium, if any, or interest on the Notes, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of its obligations under the Notes, and the Company
(to the extent it may lawfully do so) hereby expressly waives all benefits or
advantages of any such law.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 SURVIVAL OF PROVISIONS. The representations, warranties,
covenants and agreements of the Company and the Purchaser made herein shall
remain operative and in full force and effect regardless of (i) any
investigation made by or on behalf of the Purchaser or the Company, as the case
may be, (ii) acceptance of any of the Securities and payment by the Purchaser
therefor and retirement thereof, (iii) the transfer of any Securities or
interest therein by the Purchaser or (iv) any termination of this Agreement.
SECTION 6.2 TERMINATION. This Agreement may be terminated:
(a) by mutual agreement of the Company and the Purchaser;
(b) by the Company by written notice to the Purchaser if any of
the conditions specified in Sections 4.1 and 4.3 of this Agreement has not been
met or waived by it pursuant to the terms of this Agreement by 5:00 p.m.,
Eastern Time, on February 29, 2000, provided, however, that the right to
terminate this Agreement pursuant to this Section 6.2(b) shall not be available
to the Company to the extent that any action by the Company or failure by the
Company to fulfill any obligation under this Agreement has been a cause of, or
resulted in, the failure of any one or more of the conditions specified in
Sections 4.1 and 4.3 of this Agreement not being fulfilled by such date; or
(c) by the Purchaser by written notice to the Company if any of
the conditions specified in Sections 4.1 and 4.2 of this Agreement has not been
met or waived by such Purchaser pursuant to the terms of this Agreement by 5:00
p.m., Eastern Time, on February 29, 2000, provided, however, that the right to
terminate this Agreement pursuant to this Section 6.2(c) shall not be available
to the Purchaser to the extent that any action by such Purchaser or failure by
such Purchaser to fulfill any obligation under this Agreement has been a cause
of, or resulted in, the failure of any one or more of the conditions specified
in Sections 4.1 and 4.2 of this Agreement not being fulfilled by such date.
29
<PAGE> 33
SECTION 6.3 WAIVER; AMENDMENTS.
No failure or delay on the part of the Company or the Purchaser in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to the Company or
the Purchaser at law or in equity. No waiver of or consent to any departure by
the Company or the Purchaser from any provision of this Agreement shall be
effective unless signed in writing by the party entitled to the benefit thereof.
Except as otherwise provided herein, no amendment, modification or termination
of any provision of this Agreement shall be effective unless signed in writing
by or on behalf of the Company and the Purchaser. Any amendment, supplement or
modification of or to any of this Agreement, any waiver of any provision of this
Agreement, and any consent to any departure from the terms of any provision of
this Agreement, shall be effective only in the specific instance and for the
specific purpose for which made or given. Except where notice is specifically
required by this Agreement, no notice to or demand on any party hereto in any
case shall entitle another party hereto to any other or further notice or
demand in similar or other circumstances.
SECTION 6.4 COMMUNICATIONS. All notices, demands and other
communications provided for or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, telex, telecopier, or air courier
guaranteeing overnight delivery:
(i) if to the Purchaser, initially at the address set forth
below its name on Exhibit A hereto, and thereafter at such other
address, notice of which is given in accordance with this Section 6.4,
with a copy to T. Rowe Price at T. Rowe Price Recovery Fund, II, L.P.,
100 E. Pratt Street, Baltimore, Maryland 21202; and
(ii) if to the Company, initially at 1000 Parkwood Circle,
Suite 600, Atlanta, Georgia 30339, Attention: Chief Financial Officer;
and thereafter at such other address notice of which is given in
accordance with this Section 6.4.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being sent by certified mail, return receipt requested, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next Business Day if timely delivered to an air courier guaranteeing
overnight delivery.
SECTION 6.5 COSTS, EXPENSES AND TAXES. The Company agrees to (i) pay
all costs and expenses incurred by it in connection with the negotiation,
preparation, typing, reproduction, execution, delivery and performance of this
Agreement, the Related Agreements, the Exchange Agreement and the Exchange Note
Related Agreements and any amendment or supplement or modification hereof or
thereof (except to the extent otherwise provided in the Registration Rights
Agreement or the Exchange Note Registration Rights Agreement), including without
limitation,
30
<PAGE> 34
attorneys fees and expenses and all reasonable costs and expenses incurred by it
in connection with the Company's administration of the foregoing agreements, and
(ii) reimburse the expenses of the Purchaser and T. Rowe Price incurred in
connection with the transactions provided for herein (through a deduction of the
Purchase Price), including reasonable fees and expenses payable to counsel to
the Purchaser and T. Rowe Price in connection with the negotiation, preparation,
typing, reproduction, execution and delivery of this Agreement, the Related
Agreements, the Exchange Agreement and the Exchange Note Related Agreements,
provided that such fees and expenses of counsel in this clause (ii) shall not
exceed $288,000 (such amount being exclusive of amounts paid by the Company in
connection with the negotiation, preparation and execution of the Existing
Agreement, exclusive of all amendments thereto). The Company shall pay all
reasonable costs and expenses (including, without limitation, attorneys' fees
and expenses), if any, incurred by the Purchaser in connection with any waiver,
amendment or modification of any provision of this Agreement or any Related
Agreement with respect to an obligation of, or requested by, the Company. In
addition, the Company shall pay any and all stamp, transfer and other similar
taxes payable in connection with the execution and delivery of this Agreement or
the original issuance of any of the Securities, and shall save and hold the
Purchaser harmless from and against any and all liabilities with respect to or
resulting from any delay in paying, or omission to pay, such taxes.
SECTION 6.6 EXECUTION IN COUNTERPARTS; FAX EXECUTION.
(a) This Agreement may be executed in any number of counterparts
and by different parties hereto on separate counterparts, each of which
counterparts, when so executed and delivered, shall be deemed to be an original
and all of which counterparts, taken together, shall constitute but one and the
same Agreement.
(b) For purposes of negotiating and finalizing this Agreement or
any Related Agreement (including any subsequent amendments thereto), any signed
document transmitted by facsimile machine ("FAX") shall be treated in all manner
and respects as an original document. The signature of any party by FAX shall be
considered for these purposes as an original signature. Any such FAX document
shall be considered to have the same binding legal effect as an original
document. Each of the undersigned parties hereby agrees that it will not raise
the use of the FAX or the fact that any signature or document was transmitted or
communicated through the use of a FAX as a defense to the formation of this
Agreement or any Related Agreement.
SECTION 6.7 BINDING EFFECT; ASSIGNMENT. Prior to the Closing, the
rights and obligations of any Purchaser under this Agreement may not be assigned
to any other Person except with the prior written consent of the Company, and
after the Closing the rights and obligations of the Purchaser may be assigned by
such Purchaser to any Person purchasing Securities from the Purchaser
contemporaneously with such assignment (provided the rights so assigned shall
apply to the Securities so purchased), subject to the provisions of Section
3.2(b). The rights and obligations of the Company under this Agreement may not
be assigned by the Company without the consent of the Purchaser. Except as
expressly provided in this Agreement, this Agreement shall not be construed so
as to confer any right or benefit upon any Person other
31
<PAGE> 35
than the parties to this Agreement, and their respective successors and
permitted assigns. This Agreement shall be binding upon the Company and the
Purchaser and their respective permitted successors and assigns.
SECTION 6.8 GOVERNING LAW. THE PARTIES HERETO ACKNOWLEDGE THAT THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND THE NOTES BEAR A REASONABLE
RELATION TO THE STATE OF MARYLAND IN THAT, INTERALIA, T. ROWE PRICE HAS ITS
PRINCIPAL PLACE OF BUSINESS IN THE STATE OF MARYLAND, PART OF THE NEGOTIATIONS
RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY HAS OCCURRED IN THE STATE OF
MARYLAND AND THE CLOSING WILL OCCUR IN SUCH STATE. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
MARYLAND, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
SECTION 6.9. USURY.
All agreements between the Company and the holders of the Notes,
whether now existing or hereafter arising and whether written or oral, are
hereby limited so that in no contingency, whether by reason of acceleration of
the maturity of the Notes or otherwise, shall the interest contracted for,
charged, received, paid or agreed to be paid to the Noteholders exceed the
maximum amount permissible under the laws of the State of Maryland (hereinafter
the "Applicable Law"). If, from any circumstance whatsoever, interest would
otherwise be payable to the holders of the Notes in excess of the maximum amount
permissible under the Applicable Law, the interest payable to the holders of the
Notes shall be reduced to the maximum amount permissible under the Applicable
Law, and if from any circumstance the holders of the Notes shall ever receive
anything of value deemed interest by the Applicable Law in excess of the maximum
amount permissible under the Applicable Law, an amount equal to the excessive
interest shall be applied to the reduction of the principal of the Notes and not
to the payment of interest, or if such excessive amount of interest exceeds the
unpaid principal amount of the Notes, such excess shall be refunded to the
Company. All interest paid or agreed to be paid to the holders of the Notes
shall, to the extent permitted by the Applicable Law, be amortized, prorated,
allocated and spread throughout the full term of the Notes (including any
renewal or extension) until payment in full of the principal so that the
interest on the Notes for such full term shall not exceed the maximum amount
permissible under the Applicable Law. The Purchaser expressly disavows any
intent to contract for, charge or receive interest in an amount which exceeds
the maximum amount permissible under the Applicable Law. This paragraph as well
as similar paragraphs set forth in the Notes and the Collateral Documents shall
control all agreements between the Company and the holders of the Notes.
SECTION 6.10 SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability only without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
32
<PAGE> 36
SECTION 6.11 CONSTRUCTION. The Article and Section headings and Table
of Contents used or contained in this Agreement are for convenience of reference
only and shall not affect the construction of this Agreement. Section and other
references in this Agreement are to this Agreement unless otherwise specified.
In this Agreement, (i) the phrase "to the knowledge of the
33
<PAGE> 37
Company" or words of such import shall mean all knowledge, including actual
knowledge and knowledge of matters which a reasonable person in such position
knew or should have known, of the respective directors and officers of the
Company; (ii) use of a particular gender shall be considered to represent the
masculine, feminine or neuter gender as appropriate; and (iii) the terms
"hereof," "herein," "hereunder" and similar terms refer to this Agreement as a
whole and not to any particular provision. The Company represents and warrants
to the Purchaser that the WHEREAS recitals to this Agreement are true and
accurate and agrees that such recitals constitute an integral part of this
Agreement.
SECTION 6.12 INTEGRATION. This Agreement (including documents delivered
pursuant hereto) and the Related Agreements constitute the entire agreement
among the parties with respect to the subject matter thereof and supersede all
prior agreements between the parties with respect to such subject matter
(including without limitation the Existing Agreement and the Existing Notes) and
there are no promises or undertakings with respect thereto not expressly set
forth or referred to herein or therein.
SECTION 6.13 PARTICIPATION INTERESTS. The Company acknowledges and
agrees that immediately following the consummation of the transactions
contemplated hereby the Purchaser will sell an undivided participation interest
in the Note or Notes acquired by it in the principal amount of $5.5 million to
T. Rowe Price pursuant to the Participation Agreement, and that the Purchaser or
any other registered holder of a Note shall have the right to sell additional
participation interests to T. Rowe Price and/or any other third party
(individually a "Participant" and collectively the "Participants") on such terms
as it may determine in its sole discretion. The Company acknowledges that the
original intent of the parties hereto and T. Rowe Price was for T. Rowe Price to
be a party to this Agreement and an acquirer of a Note or Notes, that the
Purchaser entered into this Agreement on the condition that T. Rowe Price be
permitted to purchase a participation interest in such amount and that the
transaction was restructured to provide for T. Rowe Price's acquisition of a
participation interest in the Notes in such amount solely because the Company is
not eligible under the terms of certain of the mortgage-related securities
included in the collateral subject to the Security Agreement to pledge an
interest in such collateral directly to T. Rowe Price. Accordingly, the Company
covenants and agrees that (i) the Purchaser or any other registered holder of a
Note shall be entitled to obtain on behalf of an applicable Participant the
benefits of this Agreement and each Related Agreement and (ii) the Company shall
take such action as may be necessary or advisable in order to enable the
Purchaser or any other registered holder of a Note to do the same and shall not
at any time insist upon, plead or in any manner whatsoever claim that a
Participant is not indirectly entitled to a right or benefit available to a
registered holder of a Note under this Agreement or any Related Agreement
because it is a Participant and not such a registered holder. Without in any way
limiting the foregoing, the Company acknowledges and agrees that its obligations
under the Registration Rights Agreement are for the benefit of both the holders
of the Notes and Participants and that any shares of Common Stock acquired by a
Participant upon conversion of a Note or Notes in which such Participant holds a
participation interest shall be subject to the terms of the Registration Rights
Agreement until such shares are no longer "Transfer Restricted Securities," as
such term is defined therein.
34
<PAGE> 38
SECTION 6.14. NO THIRD PARTY BENEFICIARIES. Except as otherwise
provided in Section 6.13 hereof, this Agreement is solely for the benefit of the
Purchaser and its successors and assigns and any subsequent registered holder of
a Note and nothing contained herein shall be deemed to confer upon any other
Person any right to insist on or to enforce the performance or observance of any
of the obligations contained herein. All conditions to the obligations of the
Purchaser to purchase Notes hereunder are imposed solely and exclusively for the
benefit of the Purchaser and its successors and assigns and no other Person
shall have standing to require satisfaction of such conditions in accordance
with their terms and no other Person shall under any circumstances be deemed to
be a beneficiary of such conditions.
SECTION 6.15. REPRESENTATION BY COUNSEL. The Company hereby represents
that it has been represented by competent counsel of its choice in the
negotiation and execution of this Agreement and the Related Agreements; that it
has read and fully understands the terms hereof and thereof; that the Company
and its counsel have been afforded an opportunity to review, negotiate and
modify the terms of this Agreement and the Related Agreements and that it
intends to be bound by the terms hereof and thereof.
SECTION 6.16. WAIVER OF CLAIMS. The Company hereby acknowledges, agrees
and affirms that it possesses no claims, defenses, offsets, recoupment or
counterclaims of any kind or nature against or with respect to the enforcement
of this Agreement or any Related Agreement (collectively, the "Claims"), nor
does the Company now have knowledge of any facts that would or might give rise
to any Claims. If facts now exist which would or could give rise to any Claim
against or with respect to the enforcement of this Agreement or any Related
Agreement, the Company hereby unconditionally, irrevocably and unequivocally
waives and fully releases any and all such Claims as if such Claims were the
subject of a lawsuit, adjudicated to final judgment from which no appeal could
be taken and therein dismissed with prejudice.
SECTION 6.17. TEXAS LANGUAGE.
(a) THIS AGREEMENT, TOGETHER WITH THE RELATED AGREEMENTS,
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES THERETO WITH RESPECT TO THE
MATTERS COVERED THEREBY AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
(b) THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES
HERETO.
SECTION 6.18 POWER OF ATTORNEY. The Purchaser, as well as each
subsequent holder of a Note, hereby appoints United States Trust Company of New
York, collateral agent for the holders of the Notes and the Exchange Notes, as
its attorney-in-fact for the purpose of executing on its behalf any of the
Related Agreements, and any amendments, supplements or other modifications
thereto,
35
<PAGE> 39
as well as financing statements related to the Security Agreement, which
appointment is irrevocable and coupled with an interest.
ARTICLE VII
INDEMNIFICATION; SET OFF
SECTION 7.1. INDEMNIFICATION. The Company hereby agrees to reimburse
and indemnify each holder of a Note and its respective agents, employees and
assigns (collectively, the "Indemnified Parties") from and against any and all
losses, liabilities, claims, damages, expenses, obligations, penalties, actions,
judgments, suits, costs or disbursements of any kind or nature whatsoever
(including, without limitation, the fees and disbursements of counsel for such
Indemnified Party in connection with any investigative, administrative or
judicial proceeding commenced or threatened, whether or not such Indemnified
Party shall be designated a party thereto) that may at any time be imposed on,
asserted against or incurred by such Indemnified Party as a result of, or
arising out of, or in any way related to or by reason of, this Agreement or any
Related Agreement, any transaction from time to time contemplated hereby or
thereby, or any transaction financed in whole or in part or directly or
indirectly with the proceeds of any Note (and without in any way limiting the
generality of the foregoing, including any exercise by a holder of a Note of any
of its rights or remedies under this Agreement or any Related Agreement), but
excluding any such losses, liabilities, claims, damages, expenses, obligations,
penalties, actions, judgments, suits, costs or disbursements resulting solely
from the gross negligence or willful misconduct of such Indemnified Party, as
finally determined by a court of competent jurisdiction. If and to the extent
that the foregoing obligations of the Company under this Section 7.1, or any
other indemnification obligation of the Company hereunder or under any Related
Agreement, are unenforceable for any reason, the Company hereby agrees to make
the maximum contribution to the payment and satisfaction of such obligations
which is permissible under applicable law.
SECTION 7.2. SET-OFF. The Company hereby agrees that if any obligation
or liability of the Company under this Agreement or any Related Agreement shall
be due and payable (by acceleration or otherwise) after the occurrence of an
Event of Default and during the continuation thereof, a holder of a Note shall
have the right, without notice to the Company, to set-off against and to
appropriate and apply to such obligation or liability of the Company any
obligation of any nature owing to the Company, including but not limited to all
deposits (whether time or demand, general or special, provisionally credited or
finally credited, whether or not evidenced by a certificate of deposit) now or
hereafter maintained by the Company with a Purchaser. Such right shall be
absolute and unconditional in all circumstances and, without limitation, shall
exist whether or not a holder of Note or any other Person shall have given
notice or made any demand to the Company or any other Person, whether such
obligation owed to the Company is contingent, absolute, matured or unmatured (it
being agreed that a holder of a Note may deem such obligation to be then due and
payable at the time of such setoff), and regardless of the existence or adequacy
of any collateral, guaranty or any other security, right or remedy available to
a Purchaser or any other Person. The rights provided by this Section 7.2 are in
36
<PAGE> 40
addition to any other rights of set-off and all other rights and remedies which
a holder of a Note may otherwise have under this Agreement, any Related
37
<PAGE> 41
Agreement, at law or in equity or otherwise, and nothing in this Agreement or
any Related Agreement shall be deemed a waiver or prohibition of or restriction
on the rights of set-off or any other rights of any such Person.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
ALTIVA FINANCIAL CORPORATION
By: /s/ Edward B. Meyercord
-------------------------------------------
Name: Edward B. Meyercord
Title: Chairman and Chief Executive Officer
VALUE PARTNERS, LTD
By: EWING & PARTNERS,
General Partner
By: /s/ Timothy G. Ewing
-------------------------------------------
Name: Timothy G. Ewing
Title: Managing Partner
38
<PAGE> 42
EXHIBIT A
- ----------------------------------------- ------------------------------------
Name and Address of Purchaser Principal Amount of Notes
Value Partners, LTD $14,000,000
4514 Cole Avenue - Suite 808
Dallas, Texas 75205
Attn: Mr. Timothy Ewing
W (214) 522-2100
FAX (214) 522-2176
2
<PAGE> 1
EXHIBIT 10.2
THIS AGREEMENT IS SUBJECT TO THE TERMS AND CONDITIONS OF THE INTERCREDITOR AND
COLLATERAL AGREEMENT DATED FEBRUARY 29, 2000 (REFERRED TO HEREIN AS THE
COLLATERAL SHARING AGREEMENT), AS THE SAME MAY BE AMENDED, MODIFIED OR OTHERWISE
SUPPLEMENTED FROM TIME TO TIME, BY AND AMONG ALTIVA FINANCIAL CORPORATION, VALUE
PARTNERS, LTD., AS ORIGINAL PURCHASER OF CERTAIN CONVERTIBLE NOTES ISSUED BY
ALTIVA AND THE HOLDERS FROM TIME TO TIME OF THE OBLIGATIONS ARISING UNDER THE
EXCHANGE AGREEMENT, AS DEFINED HEREIN.
AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT
This AMENDED AND RESTATED PLEDGE and SECURITY AGREEMENT, dated as of
February 29, 2000 for reference purposes only (as amended, supplemented or
otherwise modified from time to time, this "Pledge Agreement"), is entered into
between ALTIVA FINANCIAL CORPORATION, a Delaware corporation (the "Borrower"),
having its principal place of business at 1000 Parkwood Circle, Suite 600,
Atlanta, Georgia 30339 and VALUE PARTNERS, LTD., a Texas limited partnership,
having its principal place of business at 4514 Cole Avenue, Suite 808, Dallas,
Texas 75205, as the initial purchaser (the "Initial Purchaser") of the Notes, as
defined herein, issued pursuant to the Purchase Agreement, as defined herein,
and any subsequent registered owners of the Notes sold, assigned or otherwise
transferred in accordance with the Purchase Agreement and the Notes (who are
referred to collectively as the "Noteholders"). All Exhibits attached hereto are
by this reference incorporated herein.
W I T N E S S E T H
WHEREAS, on August 31, 1999, the Borrower and the Initial Purchaser
entered into that certain Secured Convertible Note Purchase Agreement (the
"First Purchase Agreement"), which First Purchase Agreement is incorporated
herein by reference, which provided for the loan by the Noteholders of
$7,000,000.00 in the aggregate to be evidenced by the issuance by the Borrower
of 12% Secured Convertible Notes due 2006 (the "First Notes") to the Initial
Purchaser in the aggregate principal amount of $7,000,000.00; and
WHEREAS, concurrently with the execution and delivery of the First
Purchase Agreement, the Borrower issued the First Notes to the Initial
Purchaser; and
WHEREAS, in order to induce the Initial Purchaser to purchase the First
Notes, on August 31, 1999 the Borrower entered into that certain Pledge and
Security Agreement (the "First Pledge Agreement") pursuant to which the Borrower
granted to the Initial Purchaser as agent for the account of the Noteholders
(the "Agent") (a) a first priority lien and security interest in certain
Collateral, as defined therein, and (b) a subordinated lien and security
interest in certain collateral at that time pledged to and subject to the
security interest of Greenwich Capital Financial Products, Inc., a Delaware
corporation pursuant to that certain Pledge and
PAGE 1
<PAGE> 2
Security Agreement, dated April 17, 1997, which subordinated lien became a first
priority lien and security interest on such date or dates of the Borrower's
satisfaction of its indebtedness and obligations to Greenwich secured by such
collateral; and
WHEREAS, in order to induce the Initial Purchaser to purchase the
Notes, the Borrower has agreed to grant to the Noteholders a first priority lien
and security interest in the Textron Collateral, as defined herein, pledged by
the Borrower to Textron Financial Corporation ("Textron") pursuant to the
Textron Documents, as defined herein, and to deliver to the Collateral Agent on
behalf of the Noteholders the Textron Collateral, together with appropriate
endorsements in blank, within ten (10) Business Days of the date the security
interest of Textron in the Textron Collateral is extinguished; and
WHEREAS, on December 13, 1999 the Borrower and the Initial Purchaser
entered into that certain Amendment #1 to the First Purchase Agreement (the
"Second Purchase Agreement"), which Second Purchase Agreement is incorporated
herein by reference, pursuant to which the parties agreed to increase the
principal amount of 12% Secured Convertible Notes by $250,000.00; and
WHEREAS, in order to induce the Initial Purchaser to purchase the note
in the principal sum of $250,000.00 issued pursuant to the Second Purchase
Agreement (the "Second Note"), the Borrower and the Initial Purchaser entered
into that certain Amendment #1 to Pledge and Security Agreement, dated December
13, 1999 (the "Second Pledge Agreement"), pursuant to which the First Pledge
Agreement was affirmed, amended, modified, confirmed, extended, renewed and
increased to provide that the Second Note was subject to the pledge of
Collateral granted to secure repayment of the First Note pursuant to the terms
of the First Pledge Agreement; and
WHEREAS, concurrently with the execution and delivery of the Second
Purchase Agreement and the Second Pledge Agreement, the Borrower issued the
Second Note to the Initial Purchaser; and
WHEREAS, on or about December 31, 1999, the Borrower and the Initial
Purchaser entered into that certain Amendment #2 to the First Purchase Agreement
(the "Third Purchase Agreement"), pursuant to which the parties agreed to
increase the principal amount of 12% Secured Convertible Notes by $1,750,000.00,
of which $750,000.00 was funded on December 31, 1999 and $1,000,000.00 on
January 5, 2000; and
WHEREAS, to induce the Initial Purchaser to purchase the note in the
principal sum of $1,750,000.00 (the "Third Note") issued pursuant to the Third
Purchase Agreement, the Borrower and Initial Purchaser entered into that certain
Amended and Restated Pledge and Security Agreement, dated for reference purposes
only as of December 31, 1999 (the "Third Pledge Agreement"), pursuant to which
the liens and rights granted in the First Pledge Agreement and the Second Pledge
Agreement were affirmed, amended, modified, confirmed, extended, increased and
renewed; and
PAGE 2
<PAGE> 3
WHEREAS, concurrently with the execution and delivery of the Third
Purchase Agreement and the Third Pledge Agreement, the Borrower issued the Third
Note to the Initial Purchaser; and
WHEREAS, in addition to the Collateral pledged to secure repayment in
the First Pledge Agreement and the Second Pledge Agreement, the Borrower in the
Third Pledge Agreement granted a first lien and security interest in the Pledged
Shares, as defined herein, up to $2,000,000.00 aggregate principal amount of
Notes purchased by the Initial Purchaser on or after December 30, 1999,
consisting of the Third Note and an additional note or notes in the principal
amount of $250,000.00, if issued; and
WHEREAS, on February 2, 2000, the Borrower and the Initial Purchaser
entered into Amendment #3 to the First Purchase Agreement (the "Fourth Purchase
Agreement"), which Fourth Purchase Agreement is incorporated herein by
reference, pursuant to which the parties agreed to increase the principal amount
of 12% Secured Convertible Notes by $700,000.00; and
WHEREAS, to induce the Initial Purchaser to purchase the note in the
principal amount of $700,000.00 (the "Fourth Note") issued pursuant to the
Fourth Purchase Agreement, the Borrower and the Initial Purchaser entered into
Amendment #1 to the Amended and Restated Pledge and Security Agreement, dated
for reference purposes only as of February 2, 2000 (the "Fourth Pledge
Agreement"), pursuant to which the liens and rights granted in the First, Second
and Third Pledge Agreements were affirmed, amended, modified, confirmed,
increased and renewed, including an increase in the first lien and security
interest in the Pledged Shares to $2,450,000.00 as additional security for the
Third Note and Fourth Note; and
WHEREAS, concurrently with the execution and delivery of the Fourth
Purchase Agreement and the Fourth Pledge Agreement, the Borrower issued the
Fourth Note to the Initial Purchaser; and
WHEREAS, on February 11, 2000, the Borrower and the Initial Purchaser
entered into Amendment #4 to the First Purchase Agreement (the "Fifth Purchase
Agreement," and together with the First, Second, Third and Fourth Purchase
Agreements, the "Prior Purchase Agreements"), which Fifth Purchase Agreement is
incorporated herein by reference, pursuant to which the parties agreed to
increase the principal amount of 12% Secured Convertible Notes by $300,000.00;
and
WHEREAS, to induce the Initial Purchaser to purchase the note in the
principal amount of $300,000.00 (the "Fifth Note," and together with the First,
Second, Third and Fourth Notes, the "Prior Notes") issued pursuant to the Fifth
Purchase Agreement, the Borrower and the Initial Purchaser entered into
Amendment #2 to the Amended and Restated Pledge and Security Agreement, dated
for reference purposes only as of February 11, 2000 (the "Fifth Pledge
Agreement"), pursuant to which the liens and rights granted in the First,
Second, Third and Fourth Pledge Agreements (together with the Fifth Pledge
Agreement, the "Prior Pledge Agreements") were affirmed, amended, modified,
confirmed, increased and renewed, including
PAGE 3
<PAGE> 4
an increase in the first lien and security interest in the Pledged Shares to
$2,750,000.00 as additional security for the Third Note, the Fourth Note and the
Fifth Note; and
WHEREAS, concurrently with the execution and delivery of the Fifth
Purchase Agreement and the Fifth Pledge Agreement, the Borrower issued the Fifth
Note to the Initial Purchaser; and
WHEREAS, on or about February 29, 2000, the Borrower and the Initial
Purchaser entered into that certain Amended and Restated Secured Convertible
Senior Note Purchase Agreement, (as amended, supplemented or otherwise modified
from time to time the "Purchase Agreement"), which Purchase Agreement is
incorporated herein by reference, which provides for the purchase by the Initial
Purchaser of an Amended and Restated Note in the aggregate principal amount of
$14,000,000.00 (the "Sixth Note"), in return for the surrender of the First
Note, the Second Note, the Third Note, the Fourth Note and the Fifth Note, which
had an aggregate principal amount of $1,000,000.00, and the payment of
$4,000,000.00 by the Initial Purchaser to the Company; and
WHEREAS, to induce the Initial Purchaser to purchase the Sixth Note,
the Borrower has agreed to enter into this Pledge Agreement, dated for reference
purposes only as of February 29, 2000, pursuant to which the liens and rights
granted in the First Pledge Agreement, the Second Pledge Agreement, the Third
Pledge Agreement, the Fourth Pledge Agreement and the Fifth Pledge Agreement are
affirmed, amended, modified, confirmed, extended, reinstated, increased and
renewed as set forth herein; and
WHEREAS, pursuant to the Fifth Pledge Agreement, the first lien and
security interest in the Pledged Shares was limited to up to $2,750,000.00
aggregate principal amount of Notes purchased by the Noteholders on or after
December 30, 1999, which limitation is removed herein and the Pledged Shares
shall be collateral as to all Notes; and
WHEREAS, concurrently with the execution and delivery of the Purchase
Agreement and this Pledge Agreement, the Borrower issued the Sixth Note to the
Initial Purchaser; and
WHEREAS, pursuant to this Pledge Agreement, all rights and interests of
the Agent granted pursuant to the Prior Pledge Agreements are assigned to the
Noteholders; and
WHEREAS, on November 26, 1996 and in October 1997, the Borrower
collectively issued $80,000,000.00 principal amount of 12 1/2% Senior
Subordinated Notes Due 2001 to certain holders thereof, which notes subsequently
were exchanged for $ 45,100,000.00 principal amount of 12 1/2% Subordinated
Notes due 2001 (the "Existing Subordinated Notes") and 42,500 shares of
Borrower's Series A Preferred Stock, par value $.01; and
WHEREAS, as a condition to the Purchase Agreement, the Borrower shall
enter into an Exchange Agreement (the "Exchange Agreement"), with the holders of
not less than ninety-two percent (92%) of the Existing Subordinated Notes,
pursuant to which notes exchanged for the
PAGE 4
<PAGE> 5
Existing Subordinated Notes shall be granted certain liens on the Collateral, as
set forth herein; and
WHEREAS, the Borrower, the Initial Purchaser, and the Collateral Agent,
as agent for the Noteholders, the holders of the Replacement QIB Notes (as
defined herein) and the holders of the Replacement Non-QIB Notes (as defined
herein) have entered into the Collateral Sharing Agreement to set forth the
interests of the respective parties thereto in the Collateral; and
NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Borrower and the Noteholders hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used herein, the following terms shall have
the following meanings:
"Accounts" shall have such meaning as such term is defined in Article 9
of the UCC, and shall include, without limitation, each of the following,
whether now owned or hereafter acquired by the Borrower: (a) all accounts
receivable, contract rights, book debts, notes, drafts and other obligations or
indebtedness owing the Borrower (including, without limitation, any such
obligation that might be characterized as an account, contract right, or general
intangible under the UCC in effect in any jurisdiction) and all monies due to or
to become due to the Borrower under all contracts for the sale, lease, or
exchange of goods or other property (whether or not earned by performance on the
part of the Borrower), in each case whether now in existence or hereafter
arising or acquired, including, without limitation, the right to receive the
proceeds thereof; (b) all rights of the Borrower to receive any payment of money
or other form of consideration; (c) all security pledged, assigned or granted to
or held by the Borrower to secure any of the foregoing; and (d) all guaranties
of, or indemnifications with respect to, any of the foregoing.
"Additional Collateral" means property acceptable to the registered
holders of not less than a majority in aggregate principal amount of the
Majority QIB Holders, then outstanding in writing, in their sole and absolute
discretion.
"Agent" shall have the meaning specified in the third recital paragraph
hereof.
"Borrower" shall have the meaning specified in the introductory
paragraph hereof.
"Business Day" means any day other than Saturday, Sunday or other day
on which banking institutions in Atlanta, Georgia or New York, New York are
authorized or required by law or executive order to be closed.
PAGE 5
<PAGE> 6
"Certificates" means any security, chattel paper, certificated security
or instrument, as from time to time amended, modified or supplemented, including
the following: any Residual Interest Instrument, any Interest Only Instrument,
the Senior Trust Certificate, the Pledged Shares and a Certificated Security as
defined in Section 8-102 of the UCC.
"Clearing Corporation" shall have the meaning given such term in
Section 8-102(a)(5) of the UCC.
"Collateral" shall have the meaning specified in Section 2.1.
"Collateral Agent" means United States Trust Company of New York, in
its capacity as agent of the Noteholders for the purposes set forth in Section
2.2 hereof and as set forth in the Collateral Sharing Agreement, and any
successors and assigns thereof under the Collateral Sharing Agreement.
"Collateral Sharing Agreement" shall mean that certain Intercreditor
and Collateral Sharing Agreement in the form attached hereto as Exhibit "A" and
by this reference incorporated herein.
"Default" has the meaning set forth in Article I of the Notes.
"Delivery" means a delivery of Collateral to the Noteholders or the
Collateral Agent (as the case may be) in accordance with this Pledge Agreement,
including Section 2.2 hereof.
"Event of Default" has the meaning set forth in Section 5.1 of the
Notes.
"Exchange Notes" means the Replacement QIB Notes and the Replacement
Non-QIB Notes.
"Exchange Pledge Agreements" means that certain Pledge and Security
Agreement dated as of the date hereof pursuant to which the holders of the
Replacement QIB Notes are granted a first lien in all Collateral (other than the
Pledged Shares, in which a second lien is granted ) and that certain Pledge and
Security Agreement dated as of the date hereof pursuant to which the holders of
the Replacement Non-QIB Notes are granted a first lien in the Pledged Shares,
each as governed by the Collateral Sharing Agreement.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time, consistently applied.
"Governmental Authority" means any nation, government, state, or any
political subdivision thereof, or any court, stock exchange, entity or agency
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Grantor Trust Right" means all rights of the Borrower, including the
right to payments to the Borrower, in the Sale Agreement executed in relation to
Mego Mortgage Home Loan Trust
PAGE 6
<PAGE> 7
1996-3, including, without limitation, the rights set forth in Section
4.05(b)(xvii) of such Sale Agreement.
"Indebtedness" has the meaning set forth in Section 2 of the Notes.
"Indenture" means the Indenture, dated as of February 29, 2000, between
the Borrower and United States Trust Company of New York, as Trustee, together
with any amendment, modifications, supplements or restatements thereof.
"Interest Only Instrument(s)" shall, as to that particular Certificate,
have the meaning ascribed to the term "Class S Certificate", "Class IS
Certificate, "Class IIS Certificate" or a similar phrase describing an interest
only security in the respective Sale Agreement arising from the Securitization
pursuant to which such security is issued, which security represents the
undivided interest of the Borrower in all or a portion of the interest payments
due on certain loans securitized in that Securitization.
"Loan Documents" means, collectively, the Purchase Agreement, the
Notes, this Pledge Agreement, the Collateral Sharing Agreement, the Registration
Rights Agreement and any other documents evidencing or relating to the Notes or
the Collateral, the Additional Collateral or any such security which may now or
hereafter be given as further security for or in connection with the Notes.
"Majority Holders" means the registered holders of not less than fifty
percent (50%) in aggregate principal amount of the Notes then outstanding
(except to the extent that a beneficial owner is treated as a registered holder
pursuant to Section 14.16 hereof).
"Majority QIB Holders" means the registered holders of not less than
fifty percent (50%) in aggregate principal amount of the Notes and Replacement
QIB Notes, considered as a single class, then outstanding (except to the extent
that beneficial owners are treated as registered holders pursuant to Section
14.16 hereof).
"Noteholders" has the meaning specified in the introductory paragraph
of this Pledge Agreement.
"Notes" means the 12% Secured Convertible Senior Notes due 2006 issued
by the Borrower pursuant to the Purchase Agreement and the terms of such 12%
Secured Convertible Senior Notes due 2006, as such notes may be amended,
supplemented or otherwise modified from time to time.
"Outstanding" or "outstanding" has the meaning given to it in the
Indenture.
"Person" means any individual, partnership, corporation, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization, or governmental entity (or any department, agency
or political subdivision thereof), or any other entity.
PAGE 7
<PAGE> 8
"Pledge Agreement" shall have the meaning specified in the first
paragraph hereof.
"Pledged Shares" shall mean any and all shares of stock or other
evidence of equity or ownership interest of the Borrower in The Money Centre,
Inc. (either as record owner or beneficially), including but not limited to
those shares set forth on Exhibit "D" attached hereto and by this reference
incorporated herein, including any such interests which may be acquired after
the date hereof and the certificates or stock representing all such items. This
shall include all of the issued and outstanding shares of capital stock of The
Money Centre, Inc. in existence until expiration of the Pledge Agreement.
"Prior Loan Documents" means the Prior Notes, the Prior Pledge
Agreements and the Prior Purchase Agreements.
"Prior Notes" has the meaning specified in the sixteenth recital
paragraph hereof.
"Prior Pledge Agreements" has the meaning specified in the sixteenth
recital paragraph hereof.
"Prior Purchase Agreements" has the meaning specified in the fifteenth
recital paragraph hereof.
"Purchase Agreement" has the meaning specified in the eighteenth
recital paragraph hereof.
"Quarter" means any fiscal quarter ended on the last day of the months
of February, May, August and November.
"Registration Rights Agreement" shall have the meaning set forth in the
Purchase Agreement.
"Replacement QIB Notes" means those notes issued to those holders of
Existing Subordinated Notes pursuant to the Exchange Agreement which holders are
Qualified Institutional Buyers within the meaning of Rule 144A of the Securities
Act.
"Replacement Non-QIB Notes" means those notes issued to those holders
of Existing Subordinated Notes pursuant to the Exchange Agreement which holders
are not Qualified Institutional Buyers within the meaning of Rule 144A of the
Securities Act.
"Residual Interest Instrument(s)" shall, as to that particular
Certificate, have the meaning ascribed to the term "Class R Certificate",
"Residual Interest Instrument", "Residual Certificate", "Residual Instrument" or
a similar phrase describing a certificated residual interest in the Sale
Agreement arising from the Securitization pursuant to which such security is
issued, which security represents the undivided residual interest of the holder,
including in all or a portion of the interest and principal payments due on
certain loans securitized in that Securitization.
PAGE 8
<PAGE> 9
Neither the Grantor Trust Right nor the Senior Trust Certificate are Residual
Interest Instruments.
"Sale Agreement" means the respective Pooling and Servicing Agreement,
Sale and Servicing Agreement or similar agreement, together with related
agreements, including trust agreements and indentures, which create and grant
rights in Certificates and the Grantor Trust Right, entered into or otherwise
issued in relation to a particular Securitization.
"Securities Act" means the Securities Act of 1933, as now in effect and
as hereafter amended from time to time.
"Securitization" means the respective securitization as set forth on
Exhibit "E" hereto and by this reference incorporated herein.
"Senior Trust Certificate" means that certain 125 Home Loan Owner Trust
1998-1, Senior Trust Certificate.
"Textron" shall have the meaning specified in the fourth recital
paragraph hereof.
"Textron Collateral" means those Certificates and all other rights
presently pledged to Textron as described in Exhibit "F" attached hereto and by
this reference incorporated herein.
"Textron Documents" means that certain Credit Agreement dated as of
October 27, 1997 by and between Textron, as agent, and the Borrower, that
certain note as of the same date issued to the lenders under such Credit
Agreement and all related documents, including that certain Security Agreement
dated as of October 27, 1997, financing statements and transfer powers, all as
amended, supplemented or otherwise modified.
"UCC" means the Uniform Commercial Code as in effect in the State of
Maryland; provided, that if by mandatory provisions of law, the perfection or
effect of perfection or non-perfection of the security interest in any
Collateral to which this Pledge Agreement relates is governed by the Uniform
Commercial Code as in effect on or after the date hereof in any other
jurisdiction, UCC means the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such perfection
or the effect of perfection or non-perfection.
"Uncertificated Security" shall have the meaning given such term in
Section 8-102(a)(18) of the UCC.
ARTICLE II
PLEDGE AND DELIVERY OF COLLATERAL
MANAGEMENT OF COLLATERAL
2.1 Security. Subject to the rights of the holders of the Exchange
Notes set forth in the Exchange Pledge Agreements as governed by the Collateral
Sharing Agreement, as security
PAGE 9
<PAGE> 10
for the payment (whether at the stated maturity, by acceleration or otherwise)
of all obligations, liabilities and indebtedness of the Borrower to the
Noteholders, whether now or hereafter owing or existing, arising under or
relating to this Pledge Agreement, the Notes and the other Loan Documents, and
for the payment, performance and discharge of all other obligations or
undertakings now or hereafter made for the benefit of the Noteholders under this
Pledge Agreement, the Notes, the other Loan Documents or under any other
agreement, promissory note or undertaking now existing or hereafter entered into
by the Borrower with or to the Noteholders pursuant to the terms hereof,
including any guaranty or surety obligations of the Borrower owed to the
Noteholders arising under or relating to this Pledge Agreement, the Notes and
the other Loan Documents, the Borrower hereby pledges, assigns, transfers and
delivers to the Noteholders, and grants to the Noteholders (and which as to
Collateral pledged pursuant to the Prior Pledge Agreements shall also constitute
a confirmation, extension, renewal and affirmation of such liens), a continuing
first priority lien and security interest (except as noted below or, in the case
of Additional Collateral, as otherwise agreed by the Majority QIB Holders in
accepting the same) in all of the Borrower's rights, title and interest in, to
and under: (a) the Certificates representing the Collateral; (b) the Grantor
Trust Right, subject to the Securitizations; (c) the Pledged Shares and
Certificates; (d) any other property of the Borrower held by the Noteholders,
the Replacement QIB Noteholders, the Replacement Non-QIB Noteholders or the
Collateral Agent on behalf of the Noteholders arising under or relating to the
Loan Documents, from time to time, or securing any other obligation of the
Borrower to the Noteholders or any of their respective affiliates; (e)
Additional Collateral; and (f) all proceeds, payments, income, products and
profits derived from or related to the above-described property (all of the
foregoing are collectively referred to herein as the "Collateral"). The
agreements and related documents evidencing the Grantor Trust Right and the
Certificates, as well as related documents comprising such Collateral are set
forth on Exhibit "C" and Exhibit "D" attached hereto and by this reference
incorporated herein. The Pledged Shares described in Exhibit "D" and the
Residual Interest Instruments, Senior Trust Certificate and Interest Only
Instruments described on Exhibit "C" and Exhibit "F" (attached hereto and by
this reference incorporated herein) are Certificates, all of which are
Collateral.
The Collateral shall include all rights of the Borrower related to the
Collateral, the Additional Collateral and any other Collateral pledged pursuant
to the terms hereof, including the following:
(a) Cash Proceeds. All rights to receive the payment of money in
respect of the Collateral, including the Certificates and Grantor Trust Right.
(b) Chattel Paper, Instruments, etc. All chattel paper, securities,
uncertificated securities, instruments, non-negotiable instruments, negotiable
instruments, investment property, general intangibles, documents (as those terms
are defined in the UCC), Accounts and Certificates evidencing or with respect to
any of the Collateral.
(c) Deposit Accounts. All rights to payments under the Collateral,
including payments due to the holders of Certificates and the Grantor Trust
Right from the accounts of the trustee (or other Person) into which funds to be
payable under Certificates and the Grantor Trust
PAGE 10
<PAGE> 11
Right are deposited or held under a Securitization, and all money, cash and cash
equivalents of the Borrower, in each case arising from payments with respect to
any of the Collateral, including the Certificates and the Grantor Trust Right or
other Collateral.
(d) Collateral. All collateral granted by third party obligors to, or
held by, the Borrower with respect to the Collateral, including the Certificates
and the Grantor Trust Right.
(e) Books and Records. All books and records, including books of
account and ledgers of every kind and nature, all electronically recorded data
(including all computer programs, disks, tapes, electronic data processing media
and software used in connection with maintaining the Borrower's books and
records), all files and correspondence and all receptacles and containers for
the foregoing, all with respect to the Collateral, including Certificates and
the Grantor Trust Right.
(f) Cash. All cash and other property held under this Pledge Agreement.
(g) Miscellaneous. All right, title, interest in, to and under the
clean-up call provisions, including as contained in Section 9.01 of each of the
Sale Agreement with respect to the subject Securitization, and all proceeds,
payments and income derived from or relating thereto.
(h) Proceeds and Products. All proceeds and products of the Collateral,
to the extent not included in the foregoing, including;
(i) all distributions arising from and pursuant to
the designated trust agreements or other Securitization
agreements (including Sales Agreements) with respect to the
Collateral,
(ii) all other proceeds of insurance and guarantees,
if any, with respect to the Collateral provided by MBIA
Insurance Corporation, the Federal Housing Administration or
any other Person providing coverage for loss or diminution in
value of the Collateral;
(iii) all other proceeds from the liquidation or
other recovery (if any) of loans relating to the Collateral;
(iv) all "proceeds", as that term is defined in
Section 9-306 of the UCC;
(v) all cash, securities, dividends, increases,
distributions and profits received therefrom or in connection
therewith, including distributions or payments in partial or
complete liquidation or redemption, or as a result of
reclassifications, readjustments, reorganizations or changes
in the capital structure of the issuer thereof and any other
property at any time and from time to time received,
receivable or otherwise distributed or delivered to the
Noteholders or the
PAGE 11
<PAGE> 12
Collateral Agent on behalf of the Noteholders, and all rights
and privileges pertaining thereto;
(vi) all additional shares of stock of any issuer of
any Certificate from time to time acquired by the Borrower in
any manner, and all dividends, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of
such shares;
(vii) all securities hereafter delivered to the
Noteholders or the Collateral Agent in substitution for, or in
addition to, any of the foregoing, all certificates
representing or evidencing such securities, and all cash,
securities, instruments, documents, dividends, increases,
distributions and profits received therefrom, and any other
property at any time and from time to time received by,
receivable by or otherwise distributed or delivered to the
Noteholders or the Collateral Agent in respect of or in
exchange for any or all of the property described;
(viii) all subscriptions, warrants, options and any
other rights issued now or hereafter by the issuer of the
Certificates or any other person whatsoever upon or in
connection with the Certificates and any part of the
Collateral; and
(ix) all products and proceeds of the foregoing and
all general intangibles and contract rights related thereto,
including without limitation, all revenues, distributions,
dividends, property, registration rights, contract rights and
other rights and interests that Borrower is, or may hereafter
become, entitled to receive on account of any collateral
described above.
Borrower shall forthwith deliver to the Collateral Agent on behalf of the
Noteholders all subscriptions, warrants, options and all such other rights, and
upon delivery to the Collateral Agent, the Collateral Agent shall hold, on
behalf of the Noteholders, such subscriptions, warrants, options and other
rights as Collateral pledged to secure the obligations of Borrower, provided,
however, that if the registered holders of not less than fifty percent (50%) in
aggregate principal amount of the Exchange Notes and the Notes, considered as a
single class, then outstanding, to whom such Collateral is pledged determine, in
their sole discretion, that the value of any such subscriptions, warrants,
options or other rights shall terminate, expire or be materially reduced in
value by holding the same as Collateral, such Persons shall have the right (but
not the obligation), in their sole discretion, to direct the Collateral Agent to
sell or exercise the same; and if exercised, then the monies disbursed by the
Collateral Agent in connection therewith shall become part of the Collateral and
all of the stock, securities, evidences of indebtedness and other items so
acquired shall become part of the Collateral;
The Borrower will pay all filing, recording, search and other expenses
reasonably incurred by the Collateral Agent and each Noteholder with respect to
perfection of the Noteholders' security interest under this Pledge Agreement and
the confirmation of the priority of the Noteholders' security interest in the
Collateral.
PAGE 12
<PAGE> 13
2.2 Delivery of Collateral.
(a) Delivery of Collateral to the Collateral Agent on behalf of the
Noteholders under this Pledge Agreement shall be made in the following manner:
(i) in the case of cash, including proceeds on the Collateral and cash which
constitutes Additional Collateral, by wire transfer or other method acceptable
to the Collateral Agent of immediately available funds; (ii) in the case of a
Certificate (or similar property perfected by possession), by the physical
delivery thereof evidencing such Collateral to the Collateral Agent or its
designee, either, at the election of the Majority QIB Holders (A) registered in
the name of a Noteholder as designated by the Majority QIB Holders (which shall
be Value Partners, Ltd. unless otherwise consented to by the Majority Holders),
and (B) in all other instances, in suitable form for delivery and transfer,
accompanied by duly executed instruments of transfer or assignment in blank or
such other documentation as may be necessary to effect transfer to the
Noteholders, whereupon, at the election of the Majority QIB Holders, the
Collateral Agent may take such steps as it deems necessary to effect the
recordation or re-registration of such Collateral in the name designated by the
Majority QIB Holders (which shall be in the name of Value Partners, Ltd. so long
as it is a Replacement QIB Noteholder or Noteholder, unless otherwise consented
to by Value Partners, Ltd. ); (iii) with respect to an Uncertificated Security
by registration in the name designated by the Majority Holders, whenever
possible, and in all other instances (other than an Uncertificated Security
credited on the books of a Clearing Corporation), the Borrower shall cause the
issuer of such Uncertificated Security to duly authorize and execute, and
deliver to the Collateral Agent, an agreement for the benefit of the Noteholders
substantially in the form of Exhibit "G" hereto (appropriately completed to the
satisfaction of the Collateral Agent and with such modifications, if any, as
shall be satisfactory to the Collateral Agent) pursuant to which such issuer
agrees to comply with any and all instructions originated by the Collateral
Agent or Majority Holders without further consent by the registered owner and
not to comply with instructions regarding such Uncertificated Security
originated by any other Person other than a court of competent jurisdiction
(Exhibit "G" shall be executed as to the Grantor Trust Right, even if not an
Uncertificated Security); (iv) with respect to a certificated security or
Uncertificated Security (as those terms are defined in the UCC) credited on the
books of a Clearing Corporation (including a Federal Reserve Bank, Participants
Trust Company or The Depository Trust Company), the Borrower shall promptly
notify the Collateral Agent thereof and shall promptly take all actions (x)
required (i) to comply with the applicable rules of such Clearing Corporation
and (ii) to perfect the security interest of the Noteholders under applicable
law (including, in any event, under Sections 9-115 (4)(a) and (b), 9-115 (1)(e)
and 8-106(d) of the UCC) and (y) as the Collateral Agent deems necessary or
desirable to effect the foregoing; and (v) in the case of any other Collateral
(such Collateral to be subject to the written approval of the Collateral Agent,
which approval may be withheld in the sole discretion of the Collateral Agent),
in such manner as the Collateral Agent shall agree to in writing. Except as
otherwise provided herein or, in the case of Additional Collateral, as otherwise
agreed by the Collateral Agent in accepting the same, all Collateral shall be
delivered free and clear of all liens and security interests other than the lien
and security interest created in favor of the Noteholders under this Pledge
Agreement and as provided in the Exchange Pledge Agreements and the Collateral
Sharing Agreement. Collateral delivered pursuant to the Prior Pledge Agreements
shall be retained by Value Partners, Ltd. and transferred to the Collateral
Agent at such time a the Collateral Agreement becomes effective. Current
possession of the Collateral by the Noteholders shall be deemed uninterrupted.
PAGE 13
<PAGE> 14
(b) In addition to the actions required to be taken pursuant to
preceding Section 2.2(a), the Borrower shall take the following additional
actions with respect to the Collateral:
(i) with respect to all Collateral of such Borrower whereby or
with respect to which the Noteholders may obtain "control" thereof within the
meaning of Section 8-106 of the UCC (or under any other provision of the UCC as
the same may be amended or supplemented from time to time, or under the laws of
any relevant State other than the State of Maryland), the Borrower shall take
all actions as may be requested from time to time by the Majority Holders so
that "control" of such Collateral is obtained and at all times held by the
Majority Holders; and
(ii) Borrower shall from time to time cause appropriate
financing statements (on Form UCC-1 or other appropriate form) under the Uniform
Commercial Code as in effect in the various relevant states, covering all
Collateral hereunder (with the form of such financing statements to be
satisfactory to the respective Noteholder), to be filed in the relevant filing
offices so that at all times the Noteholders have a security interest in all
Collateral which is perfected by the filing of such financing statements (in
each case to the maximum extent perfection by filing may be obtained under the
laws of the relevant states, including, without limitation, Section 9-115(4)(b)
of the UCC).
(c) Pursuant to the Collateral Sharing Agreement, the Collateral Agent
is appointed agent of the Noteholders for the purpose of retaining physical
possession of the Collateral which may be perfected by possession and as to all
other actions permitted in the Collateral Sharing Agreement, including
enforcement of rights and remedies of the Noteholders.
2.3 Assignment. In the First, Second, Third, Fourth and Fifth Pledge
Agreements, Value Partners, Ltd. was named as agent on behalf of the
Noteholders. Because there is presently only one Noteholder (Value Partners,
Ltd.) and because a Collateral Agent has been appointed for certain purposes,
all rights granted to the Agent in the Prior Pledge Agreements are granted to
the Noteholders. Certain of those rights and duties are assigned or assumed by
the Collateral Agent, as set forth herein or in the Collateral Sharing
Agreement. Rights granted the Collateral Agent herein are also deemed granted to
the Noteholders.
2.4 Notice, Registration and Consents.
On or prior to the date a Certificate, the Grantor Trust Right or any
other property becomes or is to become Collateral, the Borrower shall:
(a) obtain all requisite consents necessary to provide to the
Noteholders the rights granted in this Pledge Agreement, including the grant and
perfection of the Noteholders of a security interest in such Collateral and, in
the case of registered or certificated Collateral, to (at the sole discretion of
the Majority QIB Holders) deliver the Certificates with duly endorsed powers in
blank or deliver the Certificates or, in the discretion of the Majority QIB
Holders, cause the registration thereof (on the books of the Securitization
trustee, certificate transfer agent and registrar or similar Person) in the name
of Value Partners, Ltd. (or such other person as
PAGE 14
<PAGE> 15
consented to by Value Partners, Ltd. and if Value Partners, Ltd. is no longer a
Noteholder or Replacement QIB Noteholder, in the name as designated by the
Majority QIB Noteholders) on behalf of the Noteholders as provided in Section
2.2(a); and
(b) provide all requisite notices necessary to provide to the
Noteholders the rights granted in this Pledge Agreement, including the grant and
perfection of the Noteholders' security interest in such Collateral, including
the notice set forth in Exhibit "G" attached hereto and by this reference
incorporated herein.
Notices and consents shall include notices to and consents of the
indenture trustee and the certificate transfer agent and registrar of any
Securitization.
2.5 Reserved.
2.6 Shared Collateral and Textron Collateral.
(a) Pursuant to the Collateral Sharing Agreement, (i) the lien granted
the holders of the Replacement QIB Notes by the Borrower under the Exchange
Pledge Agreement relating to such notes is pari passu with the lien in the
Collateral granted the Noteholders; which pari passu lien shall constitute a
first lien and security interest on all Collateral except the Pledged Shares and
a subordinated lien on the Pledged Shares, subject only to the first lien
thereon granted to the holders of the Replacement Non-QIB Notes in the Exchange
Pledge Agreement relating to such notes, and (ii) the holders of the Replacement
Non-QIB Notes are granted a first lien and security interest in the Pledged
Shares, with any recovery of proceeds from such Pledged Shares not to exceed
such sums as necessary to permit a pro-rata recovery of value equal to that of
the Noteholders and the holders of the Replacement QIB Notes.
(b) On the date Textron's security interest in the Textron Collateral
is terminated in accordance with the terms of the Textron Documents, the Textron
Collateral shall be deemed Collateral as if it were set forth in Section 2.1 and
included on Exhibit "C". Other than the prompt delivery of such Textron
Collateral (and delivery of appropriate endorsements in blank and all
certificates and documents required by the Securitization trustee) to the
Collateral Agent on behalf of the Noteholders for purposes of registration in
the name of Value Partners, Ltd. (or the designee of the Majority Holders) on
behalf of the Noteholders, the Borrower represents and warrants that no further
action on the part of the Borrower is required to obtain an effective perfected
pledge of the Textron Collateral. Commencing at such time the Noteholders shall
have a first priority lien and security interest therein pursuant to this Pledge
Agreement (subject to the pari passu lien of the holders of the Replacement QIB
Notes) and the Borrower shall within ten (10) Business Days after the expiration
of Textron's security interest deliver to the Collateral Agent and register in
the name of Value Partners, Ltd. (including in compliance with Section 2.2)
those items on Exhibit "F" hereto, together with any other such documents
necessary to perfect the Noteholders' first priority lien and security interest
therein and to grant control to the Noteholders under Article 8 with no further
action necessary to obtain such a grant.
PAGE 15
<PAGE> 16
2.7 Reserved.
2.8 Held in Trust. Any sums collected or received and any property
recovered or possessed by the Borrower in connection with the Collateral, which,
under the terms of this Pledge Agreement, should have been delivered to the
Collateral Agent or the Noteholders, shall be received and held by the Borrower
in trust for and on the Noteholders' behalf, shall be segregated from the other
assets and funds of the Borrower, and shall be delivered to or the Collateral
Agent for the benefit of the Noteholders.
ARTICLE III
FURTHER ASSURANCES
Subject to the terms of the Textron Documents and the Collateral
Sharing Agreement, the Borrower will, from time to time, at its expense,
execute, deliver, file, register, and record (in such manner and form as the
Majority Holders or Collateral Agent may require) any statement, assignment,
stock powers, instrument, document, agreement, or other paper and take any other
action (including, without limitation, any filings of financing or continuation
statements under the UCC) that the Majority Holders or Collateral Agent may from
time to time determine to be necessary or desirable in order to create,
preserve, upgrade in rank (to the extent required hereby), perfect, confirm, or
validate the lien and first or other priority security interests granted the
Noteholders, or to enable the Noteholders to obtain the full benefits of this
Pledge Agreement (including control, as that term is used in Articles 8 and 9 of
the UCC), and to enable the Noteholders to exercise and enforce any of its
rights, powers, and remedies hereunder with respect to any of the Collateral.
At the request of the Majority Holders or the Collateral Agent, the
Borrower will use its reasonable best efforts to obtain the consent or
acknowledgement of any Person that is necessary or desirable to effect the
pledge hereunder of any right, title, claims, and benefits now owned or
hereafter acquired by the Borrower.
To the extent permitted by law, the Borrower hereby authorizes the
Collateral Agent and each Noteholder to execute and file financing statements or
continuation statements without the Borrower's signature appearing thereon. The
Borrower agrees that a carbon, photographic, or other reproduction of this
Pledge Agreement or of a financing statement is sufficient as a financing
statement. The Borrower shall pay the costs of, or incidental to, any financing
or continuation statements concerning the Collateral. In the event that any
re-recording or refiling thereof (or filing of any statements of continuation or
assignment of any financing statement) is required to protect and preserve such
security interest, the Borrower, at its own cost and expense, shall cause the
same to be re-recorded and/or refiled at the time and in the manner requested by
the Collateral Agent or Majority Holders.
The Borrower hereby authorizes the Noteholders and the Collateral Agent
to file or refile any financing statements, continuation statements, and/or
amended statements with respect to the security interests granted or to be
granted pursuant to this Pledge Agreement which, at any time, may be required or
appropriate, although the same may have been executed only by the Collateral
Agent or the Noteholders, and to execute such statements on behalf of the
Borrower.
PAGE 16
<PAGE> 17
In addition, in the event and to the extent that any of the Collateral
consists of or is represented by Certificates, including instruments or other
evidences of ownership such as would require physical possession of the same in
order to perfect the security interests therein, subject to the terms of the
Collateral Sharing Agreement and the Textron Documents, the Borrower will
promptly, at its expense, deliver the same to the Collateral Agent, with any
necessary endorsements thereon. Upon the Majority Holders' request, subject to
the terms of the Collateral Sharing Agreement and the Textron Documents, the
Borrower shall promptly deliver any documents related to any of the Collateral
and provide the Noteholders all information each may reasonably request
concerning the Collateral. The Borrower will take all steps requested by the
Collateral Agent or Majority Holders to perfect a security interest in the
Additional Collateral, including delivery of physical possession, the granting
of control, the execution and delivery of assignments and/or endorsements, the
registration thereof in the name or names designated by the Majority QIB
Holders, and the execution of financing statements. The Borrower hereby
irrevocably designates each Noteholder and the Collateral Agent for the account
of the Noteholders as agent and attorney-in-fact for the Borrower for the
aforesaid purposes.
ARTICLE IV
COVENANTS
4.1 No Liens. Subject to the terms of the Textron Documents, the
Exchange Pledge Agreements and the Collateral Sharing Agreement, the Borrower
shall not, without the prior written consent of the holders of the majority in
aggregate principal amount of the Notes and the Exchange Notes, acting as a
single class, at the time outstanding, in any manner, transfer, assign or
further encumber or permit the encumbrance of the Borrower's interest in the
Collateral. If the Collateral, or any part thereof, is sold or otherwise
disposed of in violation of these provisions, the security interest of the
Noteholders shall continue in such Collateral or any part thereof
notwithstanding such sale or other disposition, and the Borrower will deliver
any proceeds thereof to the Collateral Agent.
4.2 Loan Documents. The Borrower shall at all times during the term of
this Pledge Agreement comply with all of the affirmative covenants, negative
covenants and other terms and provisions contained in the Loan Documents.
4.3 Consents. On the date Collateral is pledged, the Borrower shall
have obtained all consents of the respective issuer of any Collateral and of any
third party necessary for an effective pledge thereof, including the consent of
any Governmental Authority.
4.4 Textron Collateral. Subject to the terms of the Exchange Pledge
Agreement relating to the Replacement QIB Notes and the Collateral Sharing
Agreement, the Borrower shall take all action which is necessary or advisable in
order for the Noteholders to obtain, and the Noteholders shall receive, a first
priority lien and security interest in the Textron Collateral not less than ten
(10) Business Days following the date the lien of Textron in the Textron
Collateral terminates.
PAGE 17
<PAGE> 18
4.5 Reserved.
4.6 Taxes. All payments due the Noteholders under the Loan Documents
shall be made without set-off or counterclaim and free and clear of any
deductions, including deductions for taxes, unless the Borrower is required by
law to make such deductions. If (a) any Noteholder shall be subject to any tax
with respect to any such payment (other than income or franchise taxes), or (b)
the Borrower shall be required to withhold or deduct any tax on any such
payment, then such Noteholder may claim compensation from the Borrower under
Section 4.7. Whenever taxes must be withheld by the Borrower with respect to any
such payments, the Borrower shall promptly furnish to the Noteholders official
receipts (to the extent that the relevant governmental authority delivers such
receipts) evidencing payment of any such taxes so withheld. If the Borrower
fails to pay any such taxes when due or fails to remit to the Noteholders the
required receipts evidencing payment of any such taxes so withheld or deducted,
the Borrower shall indemnify the affected Noteholder for any incremental taxes
and interest or penalties that may become payable by such Noteholder as a result
of any such failure.
4.7 Compensation Claims. Within fifteen (15) days after the receipt by
the Borrower of a certificate from the a Noteholder setting forth why such
Noteholder is claiming compensation under Section 4.6 and computations (in
reasonable detail) of the amount thereof, the Borrower shall pay to such
Noteholder such additional amounts as such Noteholder sets forth in such
certificate as sufficient fully to compensate it on account of the foregoing
provisions of Section 4.6, together with interest on such amount from the 15th
day after receipt of such certificate until payment in full thereof at the
applicable interest rate on the Notes which is then in effect. The reasonable
determination of such Noteholder of the amount to be paid to it and the basis
for computation thereof hereunder shall, in the absence of manifest error, be
conclusive. In determining such amount, such Noteholder may use any reasonable
averaging and attribution methods.
4.8 Other Information. The Borrower shall use its best efforts to, and
cause the trustee or servicing agent for a Securitization to, enable each
Noteholder's authorized officers and representatives, during normal business
hours upon reasonable notice and at reasonable intervals, to examine documents,
bank statements and other records and to make copies and notes therefrom for the
purpose of ascertaining the financial condition of the Borrower and its
subsidiaries and the condition of the Collateral, provided, however, that any
such examination shall be at the Borrower's expense, including all reasonable
and necessary travel expenses, but excluding salaries for the officers and
representatives conducting such examination.
4.9 Books and Records. The Borrower shall at all times keep its records
concerning the Collateral at its chief executive office and principal place of
business (which shall be one and the same) as set forth in this Pledge
Agreement, or so long as the Borrower shall have taken all steps reasonably
necessary to perfect the Noteholders' security interest in the Collateral with
respect to such new address, at such other address as the Borrower may specify
by notice actually received by the Collateral Agent and the Noteholders not less
than (10) Business Days prior to such change of address.
PAGE 18
<PAGE> 19
4.10 Insurance Policies. The Borrower grants to the Collateral Agent on
behalf of the Noteholders full power and authority as its attorney-in-fact,
effective upon notice to the Borrower after the occurrence and during the
continuance of an Event of Default, to adjust and settle any insurance policy
owned by the Borrower insuring against loss to the Collateral, to endorse any
drafts thereon and to sign receipts for any payments thereunder. Any amounts
that the Collateral Agent on behalf of the Noteholders receives under any such
policy (including return of unearned premiums) insuring against loss to the
Collateral shall be delivered to the Collateral Agent to be held as Collateral.
4.11 Performance of Securitization Obligations. The Borrower shall
perform all servicing and other obligations required to be performed by it under
the Securitization agreements or any other agreement relating to the Collateral
and the Textron Collateral.
4.12 Protection of the Collateral. All Collateral shall be free and
clear of any liens and restrictions on the transfer hereof, except as
specifically permitted or granted herein. The Borrower shall defend the title to
the Collateral against all claims and demands which could have an effect on the
Noteholders' rights or privileges hereunder. Except as set forth in the
Securitization documents, the Collateral Sharing Agreement, the Exchange Pledge
Agreements and the Textron Documents, the Borrower shall keep the respective
Collateral free and clear of all liens, claims, security interests, restrictions
of transfer, charges, encumbrances, taxes and assessments, and shall pay all
taxes, assessments and fees relating to the Collateral. The Borrower will
exclude from contracts to which it becomes a party after the date hereof
provisions that would prevent the Borrower from creating and maintaining in
favor of the Noteholders a security interest in the Collateral as pledged
hereby. The Borrower shall not modify, amend or waive any terms or conditions of
the Collateral or the Textron Collateral (including the waiver of a default), or
any rights or interest therein, without the prior written consent of the
registered holders of not less than fifty percent (50%) in aggregate principal
amount of the Exchange Notes and the Notes, considered as a single class, then
outstanding that have a security interest in such Collateral. The Borrower will
not sell, assign, transfer or otherwise dispose of any of the Collateral. The
Borrower will not take any action or suffer to exist any conditions that could
have an adverse effect on the Noteholders' rights (including, without
limitation, the security interest in the Collateral) granted hereunder, subject
to the Textron Documents.
4.13 Applicable Law. The Borrower will not use any of the
Collateral in violation of any applicable law.
4.14 Reserved.
4.15 Records. The Borrower shall allow each Noteholder to inspect all
records of the Borrower relating to the Collateral or to the Notes, and to make
and take away copies of such records.
4.16 Notice of Change. The Borrower shall promptly notify the
Noteholders of any change in any fact or circumstances warranted or represented
by the Borrower in this Pledge
PAGE 19
<PAGE> 20
Agreement or in any other writing furnished by the Borrower to the Noteholders
in connection with the Collateral or the obligations.
4.17 Notice of Claims. The Borrower shall promptly notify the
Noteholders of any claim, action or proceeding affecting title to the
Collateral, or any part thereof, or the security interest herein, and, at the
request of the Majority Noteholders, appear in and defend, at the Borrower's
expense, any such action or proceeding.
4.18 Rule 144. The Borrower will cooperate fully with the Noteholders
and the Collateral Agent with respect to any sale by the Collateral Agent of any
of the Collateral, including full and complete compliance with all requirements
of Rule 144 under the Securities Act and will give to the Collateral Agent all
information and will do all things necessary, including the execution of all
documents, forms, instruments, and other items, to comply with Rule 144 and any
and all other rules, regulations or laws of the United States or the appropriate
state necessary for the complete and unrestricted sale and/or transfer of the
Collateral and will exercise its best efforts to have the issuer of such
collateral, upon the request of the Collateral Agent, publicly disseminate all
information required to satisfy Rule 144(c).
4.19 Merger. The Borrower shall not vote for, or consent to, any
amendment of the articles of incorporation or charter of any issuer of
Collateral that might materially adversely affect the value of the Collateral or
permit the issuer thereof to merge or consolidate with or into any other
corporation, firm or entity.
4.20 Dividends and Other Distributions. Unless and until an Event of
Default shall have occurred and be continuing, all ordinary cash dividends shall
be paid to the Borrower. The Collateral Agent on behalf of the Noteholders shall
be entitled to receive directly, and to retain as part of the Collateral:
(i) all other or additional stock, instruments or other
securities or property (including, but not limited to, cash dividends
other than as set forth above) paid or distributed by way of dividend
or otherwise in respect of the Collateral;
(ii) all other or additional stock, instruments or other
securities or property (including, but not limited to, cash) paid or
distributed in respect of the Collateral by way of stock-split,
spin-off, split-up, reclassification, combination of shares or similar
rearrangement;
(iii) all other or additional stock, instruments or other
securities or property (including, but not limited to, cash) which may
be paid in respect of the Collateral by reason of any consolidation,
merger, exchange of stock, conveyance of assets, liquidation or similar
corporate reorganization; and
(iv) all other property (other than cash) paid or distributed
by way of dividend or distribution in respect of the Collateral.
All dividends, distributions or other payments which are received by
the Borrower contrary to the provisions of this Section 4.20 or Section 5 shall
be received in trust for the benefit of the Noteholders, shall be segregated
from other property or funds of the Borrower and
PAGE 20
<PAGE> 21
shall be forthwith paid over to the Noteholders as Collateral in the same form
as so received (with any necessary endorsement).
Except as expressly provided for in this Agreement, all payments
received by the Collateral Agent with respect to the Collateral, shall, at the
Collateral Agent's option, be deposited in a special interest bearing account at
a bank (which may be, but need not be, a trust account or escrow account
maintained at the Collateral Agent) to be designated by the Collateral Agent in
the name of the Noteholders and the holders of the Replacement QIB Notes and the
Replacement Non-QIB Notes, as applicable, styled "Collateral Account". Funds in
said account are hereby assigned to the Collateral Agent on behalf of the
Noteholders and shall be impressed with a lien to secure the Notes, and shall be
applied by the Collateral Agent as provided for herein. Nothing herein shall
restrict the right of the Collateral Agent to exercise rights regarding the
distribution of proceeds as provided in Section 9-207 of the applicable UCC (or
a similar provision).
ARTICLE V
REMEDIES
5.1 Remedies. If an Event of Default shall have occurred and be
continuing, then the Collateral Agent may, without limitation, to the fullest
extent permitted by applicable law, but subject to the Collateral Sharing
Agreement and the Textron Documents, exercise any or all of the following
rights:
(a) Proceed to exercise any rights or remedies the Noteholders may have
hereunder or under the Notes or any other Loan Documents or otherwise;
(b) Pursue, consecutively or cumulatively, any rights or remedies the
Noteholders may have at law, equity or otherwise, including all rights and
remedies available to secured parties under the applicable UCC provisions;
(c) Cancel or otherwise terminate any additional obligations to fund
without prior notice to the Borrower (and the Borrower will be liable to the
Noteholders for any resulting loss, costs and expenses), and the Collateral
Agent (or Noteholders) may: (i) set off any obligation to the Borrower hereunder
or thereunder against any obligation of the Borrower to the Noteholders
hereunder or thereunder; and (ii) realize upon property securing any obligation
to Noteholders hereunder or thereunder;
(d) Require the Borrower to, upon the Collateral Agent's request,
assemble the Collateral and otherwise make it available to the Collateral Agent.
The Collateral Agent may have a receiver appointed for all or any portion of the
Borrower's assets or business which constitutes the Collateral in order to
manage, protect, preserve, sell and otherwise dispose of all or any portion of
the Collateral in accordance with the terms of the Loan Documents, to continue
the operations of the Borrower and to collect all revenues and profits therefrom
to be applied to the payment of the Notes, including the compensation and
expenses of such receiver. Any Noteholder may offset and apply toward the
payment of the Notes (and/or toward the curing of any Event of Default) any
indebtedness from that Noteholder to the Borrower, including any
PAGE 21
<PAGE> 22
indebtedness represented by deposits in any account maintained with any
Noteholder, regardless of the adequacy of any security for the Notes. The
Noteholders shall have no duty to determine the adequacy of any such security in
connection with any such offset;
(e) To the extent specified in written notice from the Collateral Agent
to the Borrower take any of the following actions (for the sole benefit of the
Noteholders but at the Borrower's expense):
(i) To ask for, demand, take, collect, sue for and receive all
payments in respect of any Collateral which the Borrower could otherwise ask
for, demand, take, collect, sue for and receive for its own use;
(ii) To extend the time of payment of any Collateral and to make
any allowance or other adjustment with respect thereto;
(iii) To settle, compromise, prosecute or defend any action or
proceeding with respect to any Collateral and to enforce all rights and remedies
thereunder which the Borrower could otherwise enforce;
(iv) To enforce the payment of any Collateral, either in the name
of the Borrower or in its own name, and to endorse the name of the Borrower on
all checks, drafts, money orders and other instruments tendered to or received
in payment of indebtedness to the Noteholders;
(v) To notify the third party payor with respect to any
Collateral of the existence of the security interest created hereby and to cause
all payments in respect thereof thereafter to be made directly to the Collateral
Agent, provided, however, that whether or not the Collateral Agent shall have so
notified such payor, the Borrower will at its expense render all reasonable
assistance to the Collateral Agent in collecting such items and in enforcing
claims thereon;
(vi) To sell, transfer, assign or otherwise deal in or with any
Collateral or the proceeds thereof, as fully as the Borrower otherwise could do;
(vii) To receive all amounts payable in respect of the
Collateral otherwise payable under Section 4.20 to the Borrower;
(viii) To vote all or any part of the Collateral (whether or not
transferred into the name of the Collateral Agent or the Noteholders) and give
all consents, waivers and ratifications in respect of the Collateral and
otherwise act with respect thereto as though it were the outright owner thereof
(the Borrower hereby irrevocably constituting and appointing the Collateral
Agent the proxy and attorney in fact of the Borrower, with full power of
substitution to do so); and
(ix) To transfer all or any part of the Collateral into the
Collateral Agent's name or the name of its nominee or nominees;
PAGE 22
<PAGE> 23
(f) All or any part of the Collateral may be sold for cash or other
value, and the proceeds thereof applied against any amounts owed to the
Noteholders by the Borrower, in any number of lots at public or private sale in
a commercially reasonable manner, without demand, advertisement or notice,
provided, however, that the Collateral Agent shall give the Borrower 10 days'
prior written notice by first class mail, postage prepaid, to the Borrower's
address as set forth in Section 14.3 of the time and place and proposed terms of
any public sale, or the time after which a private sale may be made, which
notice each of the Borrower and the Collateral Agent agrees to be reasonable. At
any sale or sales of Collateral, the Collateral Agent or the Noteholders or any
of their officers acting on their behalf, or their assigns, may bid for and
purchase all or any part of the property and rights so sold, may use all or any
portion of the indebtedness owed to the Noteholders as payment for the property
or rights so purchased, and upon compliance with the terms of such sale may hold
and dispose of such property and rights without further accountability to the
Borrower, except for the proceeds of such sale or sales pursuant to Article X.
The Borrower acknowledges that any such sale will be made by the Collateral
Agent or the Noteholders on an "as is" basis with disclaimers of all warranties,
whether express or implied. The Borrower will execute and deliver or cause to be
executed and delivered such instruments, documents, assignments, waivers,
certificates and affidavits, will supply or cause to be supplied such further
information and will take such further action, as the Collateral Agent or the
Majority Holders shall reasonably request in connection with any such sale. The
Collateral Agent and the Noteholders shall not be obligated to make such sale of
Collateral regardless of whether such notice of sale has theretofore been given.
Each purchaser at any such sale shall hold the property so sold absolutely free
from any claim or right on the part of the Borrower. In lieu of selling the
Collateral, the Noteholders may credit the current market value of the
Collateral, as determined in a commercially reasonable manner, all free from any
right of redemption, against any amounts owed by the Borrower to the
Noteholders; provided, however, that the Borrower shall remain liable for any
deficiency and shall pay interest on such deficiency as prescribed in the Notes
(the Borrower agreeing that, to the extent that applicable law requires the
giving of notice by the Collateral Agent to the Borrower of any such
disposition, the minimum time required by such law (or if no minimum time is
specified, one Business Day) shall constitute reasonable notice). Neither the
Collateral Agent nor any Noteholder shall be liable for failure to collect or
realize upon any or all of the Collateral or for any delay in so doing nor shall
any of them be under any obligation to take action whatsoever with regard
thereto;
(g) If, at any time when the Collateral Agent shall determine to
exercise its rights hereunder to sell all or a part of the securities included
in the Collateral, the securities in question shall not be effectively
registered under applicable law, the Collateral Agent may, in its sole
discretion, sell such securities by private or other sale not requiring such
registration in such manner and in such circumstances as the Collateral Agent
may deem necessary or advisable in order that such sale may be effected in
accordance with applicable securities laws without such registration and the
related delays, uncertainty and expense. Without limiting the generality of the
foregoing, in any event the Collateral Agent may in its sole discretion; (a)
approach and negotiate with a single purchaser or one or more possible
purchasers to effect such sale; (b) restrict such sale to one or more purchaser
each of whom will represent and agree that such purchaser is purchasing for its
own account, for investment and not with a view to the
PAGE 23
<PAGE> 24
distribution or sale of such securities; and (c) cause to be placed on
certificates representing the securities in question a legend to the effect that
such securities have not been registered under applicable law and may not be
disposed of in violation of the provisions thereof. The Borrower agrees that
such manner of disposition is commercially reasonable, that it will, upon the
Collateral Agent's request, give any such purchaser access to such information
regarding the issuer of the securities in question as the Collateral Agent may
reasonably request and that the Collateral Agent shall not incur any
responsibility for selling all or a part of the securities included in the
Collateral at any private or other sale not requiring such registration,
notwithstanding the possibility that a substantially higher price might be
realized if the sale were deferred until after registration under applicable law
or until made in compliance with certain other rules or exemptions from the
registration provisions under applicable law. The Borrower acknowledges that no
adequate remedy at law exists for breach by it of this provision and that such
breach would not be adequately compensable in damages and therefore agrees that
this provision may be specifically enforced; and/or
(h) Transfer or assign the Loan Documents to any Person without the
prior written consent of the Borrower.
5.2 Cost and Expenses on Default. If an Event of Default shall have
occurred, the Collateral Agent and Noteholders shall be entitled to collect, in
addition to principal, interest and delinquency charges hereunder, all costs of
collection, including without limitation, reasonable attorneys' fees and
disbursements, incurred in connection with the protection or realization of
Collateral or in connection with any of such collection efforts, whether or not
suit on the Notes or any foreclosure proceeding is filed, and all such costs and
expenses shall be payable on demand and until paid shall also be secured by the
Collateral and other Loan Documents and by all other collateral held by the
Collateral Agent or Noteholders as security for the Borrower's obligations to
the Noteholders.
5.3 Marshaling. Neither the Collateral Agent nor any Noteholder shall
be required to make any demand upon, or pursue or exhaust any of its rights or
remedies against, the Borrower or any guarantor, pledgor or any other Person
with respect to the payment of the Notes or to pursue or exhaust any of its
rights or remedies with respect to any Collateral therefore or any direct or
indirect guarantee thereof or insurance with respect thereto. Neither the
Collateral Agent nor the Noteholders shall be required to marshal the Collateral
or any guarantee of the Notes or to resort to the Collateral or any such
guarantee in any particular order, and all of its rights hereunder or under any
other Loan Document shall be cumulative. To the extent it may lawfully do so,
the Borrower absolutely and irrevocably waives and relinquishes the benefit and
advantage of, and covenants not to assert against the Collateral Agent or the
other Noteholders, any valuation, stay, appraisement, extension, redemption or
similar laws now or hereafter existing which, but for this provision, might be
applicable to the sale of any Collateral made under the judgment, order or
decree of any court, or privately under the power of sale conferred by this
Pledge Agreement, or otherwise. Without limiting the generality of the
foregoing, the Borrower: (a) agrees that it will not invoke or utilize any law
which might prevent, cause a delay in or otherwise impede the enforcement of the
rights of the Collateral Agent or the Noteholders in the Collateral; (b) waives
all such laws; and (c) agrees that it will not invoke or raise as a
PAGE 24
<PAGE> 25
defense to any enforcement by the Collateral Agent or any Noteholder of any
rights and remedies relating to the Collateral or the Notes, any legal or
contractual requirement with which the Collateral Agent or any Noteholder may
have in good faith failed to comply. In addition, the Borrower waives any right
to prior notice (except to the extent expressly required by the other provisions
of this Pledge Agreement) or judicial hearing in connection with foreclosure on
or disposition of any Collateral, including any such right which the Borrower
would otherwise have under the Constitution of the United States of America, any
state or territory thereof or any other jurisdiction. The Borrower hereby waives
and releases to the fullest extent permitted by law any right or equity of
redemption with respect to the Collateral, whether before or after sale
hereunder.
5.4 Any action or decision to be made by the Noteholders hereunder or
direction provided to the Collateral Agent hereunder may be by the Majority QIB
Holders. All rights in this Section granted to the Collateral Agent are deemed
are also granted to the Noteholders. So long as the Collateral Agent is
authorized and capable of exercising such rights under the Collateral Sharing
Agreement, it shall be permitted to do so.
ARTICLE VI
CONTINUING SECURITY INTEREST
The Borrower shall not assign or otherwise transfer this Pledge
Agreement or any interest herein without the Majority Holders' prior written
consent. This Pledge Agreement shall create a continuing security interest in
the Collateral and shall: (a) remain in full force and effect until the final
payment in full of all amounts payable under the Notes and the other Loan
Documents; (b) bind the Borrower, its successors and permitted assigns; and (c)
inure to the benefit of the Noteholders and their successors, transferees and
assigns.
Subject to the requirements of Sections 3.2 of the Purchase Agreement,
upon transfer of Notes, each Noteholder may transfer its interest in the Loan
Documents to any of its successors or assigns, by notice to the Borrower, and
such other person or entity shall thereupon be vested with all the benefits in
respect thereof granted to such Noteholder herein or otherwise; provided that
such successor or assign has agreed in a writing, which shall be delivered to
the Borrower, to assume all of the obligations of the respective Noteholder
under the Loan Documents.
ARTICLE VII
REPRESENTATIONS, WARRANTIES
AND ADDITIONAL COVENANTS OF BORROWER
7.1 Representations and Warranties. The Borrower represents and
warrants to the Noteholders continuously throughout the term of the Notes, that:
(a) The Collateral is owned by the Borrower free and clear of all
liens, claims or encumbrances, except for those granted Noteholders herein
(except as provided in the Collateral Sharing Agreement and the Exchange Pledge
Agreements, and as to the Textron Collateral, the security interest of Textron,
and as to the Certificates and the Grantor Trust Right, subject to the
PAGE 25
<PAGE> 26
applicable Securitization). Except as disclosed in this Pledge Agreement, none
of the Collateral is subject to any option to purchase or similar rights of any
Person;
(b) All Collateral (other than cash, the Grantor Trust Right or
Additional Collateral consented to in writing) shall be evidenced by
certificates or instruments, which certificates or instruments shall, pursuant
to Section 2.2, be endorsed in blank or be registered in the name as designated
by the Majority Holders (initially Value Partners, Ltd.) and delivered to the
Collateral Agent with any related assignment forms, duly completed by the
Borrower, required by the Securitization agreements (or as to the Textron
Collateral, shall be subject to the Textron Documents until such registration
and delivery as provided herein). The Borrower will, promptly upon the receipt
thereof, deliver to the Collateral Agent any certificate or similar instrument
representing any of such Collateral, together with appropriate, duly executed
assignment forms, in accordance with the terms hereof. The Borrower will take
all steps necessary to register the pledge to the Collateral Agent or
Noteholders, as requested by the Majority Holders (or ownership if requested by
the Majority Holders in writing) on the books of the issuer, purchaser, trustee
or custodian, as the case may be, with respect to all Collateral that is not
evidenced by certificates or other instruments in accordance with the terms
hereof;
(c) The Borrower has obtained any and all permits, licenses, approval
and consents of any Governmental Authority and any third party as may be
required to own, purchase, pledge, sell or otherwise dispose of the Collateral
and to conduct or to transact its business or own, lease or operate its
properties and is in material compliance with all applicable requirements of
law;
(d) Subject to the Exchange Pledge Agreements, the lien of Textron as
provided in the Textron Documents, and the Collateral Sharing Agreement, the
lien created by this Pledge Agreement constitutes a first priority perfected and
enforceable security interest in the Collateral in favor of the Noteholders; on
each occasion which the Borrower makes a Delivery of Collateral to the
Collateral Agent, the Borrower will be the sole record and beneficial owner of
that Collateral (until registration thereof as provided in Section 2.2) and
will, subject to the terms of this Pledge Agreement, have the right to receive
all payments (subject to the terms of any sales and servicing or pooling and
servicing agreement, indenture or any similar agreement pursuant to which the
Certificates were issued or to which the Grantor Trust Right or any other right
or interest arose) on the Collateral, in each case free and clear of all liens
and security interests other than the lien of this Pledge Agreement, and those
liens set forth above in this paragraph;
(e) Except for financing statements contemplated or permitted by this
Pledge Agreement, the Exchange Pledge Agreements or the Collateral Sharing
Agreement, there are no financing statements or other actions required under the
UCC or similar law of any state or jurisdiction required in connection with the
grants of security interests to the Noteholders set forth in this Pledge
Agreement;
(f) No representation or warranty made by or on behalf of Borrower
contained in any Loan Document and no information (written or oral),
certificate, financial statement or report furnished or to be furnished by or on
behalf of the Borrower thereunder or in connection with the transactions
contemplated thereby, contains or will contain an untrue statement of a material
fact,
PAGE 26
<PAGE> 27
or, omits or will omit to state any material fact (including without limitation,
whether, to the best knowledge of Borrower, Borrower or any of its respective
officers or directors (past or present) is (or during the last five (5) years
has been) under civil or criminal investigation by a Governmental Authority or
is under indictment by any Governmental Authority) necessary to make the
statements herein or therein contained, in light of the circumstances in which
made, not misleading;
(g) The Borrower does not have any reason to believe that it will not
be able to perform in all material respects all covenants and agreements to be
performed by it under this Pledge Agreement and each of the other Loan
Documents;
(h) Each of the representations and warranties of the Borrower
contained in the other Loan Documents is true and correct;
(i) The right of Borrower to receive a residual cash payment pursuant
to Section 4.05(b)(xvii) of the sale Agreement arising from the Mego Mortgage
Home Loan Trust 1996-3 is non-certificated and is evidenced only by the Sale
Agreement arising from that Securitization;
(j) Any Residual Interest Instrument pledged as Collateral shall
represent the right of the holder thereof to receive one hundred percent (100%)
of the residual interest in the interest and principal payments due on the
underlying loans securitized in that Securitization, except as follows: (a)
Class R Certificate R-0001, 1996-3 represents the right to receive one hundred
percent (100%) of the residual interests in Group 1 Loans, as that term is
defined in the Sale Agreement for that Securitization; and (b) Residual Interest
Instrument No. 1 1997-1 and Residual Certificate No. 1, 1997-2 each represent
the right to receive ninety-nine percent (99%) of the residual interest in the
respective Securitization;
(k) Except as disclosed on Schedule I hereto, there is no circumstance
presently in existence which prohibits the receipt of payment of obligations due
pursuant to the terms of the Certificates and the Grantor Trust Right pledged as
Collateral;
(l) To the best of Borrower's knowledge, all of the Collateral has been
duly and validly authorized, issued, is fully paid and non-assessable and is
subject to no options to purchase or similar rights;
(m) Each Pledged Share is validly authorized, issued, is fully paid and
non assessable and is subject to no option to purchase or similar rights;
(n) The execution, delivery and consummation of this Pledge Agreement
will not violate the charter or bylaws of the Borrower or the issuer of any
Collateral or any law, regulation, mortgage, indenture, contract, instrument,
judgment or decree applicable to or binding on the Borrower or the issuer of any
Collateral;
(o) The Pledged Shares constitute and shall at all times constitute one
hundred percent of the issued and outstanding voting and nonvoting stock of The
Money Centre;
PAGE 27
<PAGE> 28
(p) The Borrower has held the Pledged Shares, free and clear of all
liens, encumbrances and debt, and borne the full economic risk thereof since the
time of acquisition thereof on August 31, 1999 and at no time during said period
did the Borrower hold any short position in the Pledged Shares or option to sell
such shares, and at no time during such period did any other party hold a short
position in the Pledged Shares or an option to sell such shares;
(q) Other than as provided in the Collateral Sharing Agreement and the
Exchange Pledge Agreements, the pledge, collateral assignment to the Noteholders
and delivery to and continuous possession by the Collateral Agent of the
Collateral consisting of certificated securities pursuant to this Pledge
Agreement creates a valid and perfected first priority security interest in such
securities and the proceeds thereof, subject to no prior lien or encumbrance or
to any agreement purporting to grant to any third party a lien or encumbrance on
the property or assets of the Borrower which would include the Collateral and
the Noteholders are entitled to all the rights, priorities and benefits afforded
by the UCC or other relevant law as enacted in any relevant jurisdiction to
perfect security interests in respect of such Collateral; and
(r) "Control" (as defined in Section 8-106 of the UCC) has been
obtained by the Noteholders over all Collateral consisting of securities with
respect to which such "control" may be obtained pursuant to Section 8-106 of the
UCC.
ARTICLE VIII
THE AGENT MAY PERFORM
The Borrower hereby appoints any officer, general partner or agent of
the Collateral Agent and/or the Noteholders as the Borrower's true and lawful
attorney-in-fact with full authority in the place and stead of the Borrower and
in the name of the Collateral Agent or the Noteholders (as the case may be) or
otherwise, from time to time in the Collateral Agent's or the Majority Holders'
discretion, to take any action and to execute any agreements, documents and
instruments which the Collateral Agent or the Majority Holders may deem
necessary or advisable to accomplish the purpose of this Pledge Agreement. The
powers conferred on the Collateral Agent or the Noteholders (as the case may be)
hereunder are solely to protect the Noteholders' interest in the Collateral and
shall not impose any duty upon the Collateral Agent or the Noteholders to
exercise any such powers. All authorization and agencies herein contained with
respect to the Collateral are irrevocable and powers coupled with an interest.
ARTICLE IX
CUSTODY OF COLLATERAL
Except as provided by applicable law that cannot be waived, neither the
Noteholders nor the Collateral Agent will have any duty as to the custody and
protection of the Collateral, the collection of any part thereof or of any
income thereon or the preservation or exercise of any rights pertaining thereto,
including rights against prior parties, except for the use of reasonable care in
the custody and physical preservation of any Collateral in its possession.
Neither the Noteholders nor the Collateral Agent will be liable or responsible
for any loss or damage to any
PAGE 28
<PAGE> 29
Collateral, or for any diminution in the value thereof, by reason of the act or
omission of any agent selected by the Collateral Agent or the Noteholders acting
in good faith.
ARTICLE X
APPLICATION OF COLLATERAL AND PROCEEDS
Subject to the Collateral Sharing Agreement, the proceeds of any sale
of, or other realization upon, all or any part of the Collateral shall be
applied in the order set forth in Section 5.3 of the Notes.
ARTICLE XI
SECURITY INTEREST ABSOLUTE
All rights of the Noteholders hereunder and the interest and all
obligations of the Borrower hereunder shall be absolute and unconditional
irrespective of:
(a) except as expressly provided in Section 14.9, any lack of
validity or enforceability of the Loan Documents or any other agreement or
instrument relating to the Loan Documents;
(b) any change in the time, manner or place of payment of, or
in any other term of, the Loan Documents, or any renewal or extension of the
Loan Documents or any other amendment or waiver of or any consent to any
departure from this Pledge Agreement or any other agreement or instrument;
(c) any sale, exchange, release or nonperfection of any of the
Collateral, or any release of any guarantor or any person liable in any manner
for the collection of the Notes, or any amendment or waiver of or consent to or
departure from any guaranty or the Loan Documents; or
(d) any other circumstance that might otherwise constitute a
defense available to, or a discharge of, the Borrower in respect of any of the
Loan Documents.
ARTICLE XII
REMEDIES CUMULATIVE
Each right, power and remedy of the Collateral Agent and the
Noteholders provided for in this Pledge Agreement or any other Loan Document, 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 such right, power or
remedy. The exercise or beginning of the exercise by the Collateral Agent or the
Noteholders of any one or more of the rights, powers or remedies provided for in
this Pledge Agreement or any other Loan Document or now or hereafter existing at
law or in equity or by statute or otherwise shall not preclude the simultaneous
or later exercise by the Collateral Agent of all such other rights, powers or
remedies, and no failure or delay on the part of the Collateral Agent to
exercise any such right, power or remedy shall operate as a waiver thereof.
PAGE 29
<PAGE> 30
Unless otherwise required by the Loan Documents, no notice to or demand on the
Borrower in any case shall entitle the Borrower to any other or further notice
or demand in similar other circumstances or constitute waiver of any of the
rights of the Collateral Agent to any other or further action in any
circumstances without demand or notice. The obligations of the Borrower under
the Loan Documents are with full recourse to the Borrower and the Borrower shall
remain liable for any deficiency upon the exercise of remedies by Collateral
Agent.
ARTICLE XIII
REFERENCES IN PLEDGE AGREEMENT AND
CONFIRMATION OF LIENS
13.1 References in Pledge Agreement. All references in this Pledge
Agreement to the Notes, the Loan Documents and this Pledge Agreement shall
henceforth include references to the Notes, the Loan Documents and this Pledge
Agreement as such documents are amended, modified, extended, renewed, restated,
reinstated and increased hereby, and as such documents may, from time to time,
be further amended, modified, extended, renewed, restated, reinstated and/or
increased.
13.2 Confirmation of Liens. The Borrower hereby modifies, confirms,
extends, renews and affirms to the Noteholders the security interests, liens and
rights of any and all security for the Notes, including without limitation, the
liens, security interests and rights set forth in the Prior Loan Documents and
the Loan Documents, to secure repayment of the Notes. The Borrower confirms that
the liens, security interests and rights of the Noteholders under the Prior Loan
Documents and the Loan Documents are valid and subsisting liens, security
interests and rights against the property described therein. The Borrower
confirms that this modification shall in no manner affect or impair any of the
liens, security interests or rights securing payment of the Notes and other
obligations as set forth in the Prior Loan Documents and that none of those
liens, security interests and rights shall in any manner be waived, the purpose
of this instrument being in part to carry forward, renew and extend all those
liens, security interests and rights. The Noteholders shall have the right to
exercise all of their rights and remedies under the Loan Documents and under
applicable law upon the occurrence of any Default or Event of Default under any
of the Loan Documents and under any and all existing or future amendment,
restatement or modification to any of the Loan Documents or the terms hereof. To
the extent not provided in this Pledge Agreement, this Pledge Agreement,
including Section 2.1, shall be deemed amended to include as an obligation,
repayment of which is secured thereby, all future advances by the Noteholders to
the Borrower whether under the Loan Documents, as they may be modified, amended,
extended, restated, reinstated, renewed and/or increased from time to time, or
under other separate documents, agreements or instruments. The parties do not
intend this Pledge Agreement to constitute a novation of any Prior Pledge
Agreement.
13.3 Representations, Warranties, Covenants and Agreements of the
Borrower.
The Borrower further represents, warrants and covenants and agrees with
the Noteholders as follows:
PAGE 30
<PAGE> 31
(a) the information set forth in the recitals of this Pledge Agreement
are true and correct in all respects and that such recitals shall be deemed a
part of this Pledge Agreement for all purposes;
(b) Except to the extent set forth in the Collateral Sharing Agreement
and the Exchange Pledge Agreements, Borrower has not pledged, transferred,
conveyed, or assigned any interest in the Collateral except to the Noteholders
pursuant to the Loan Documents.
13.4 Continued Effect.
All terms, provisions and conditions of the Loan Documents (including
all documents executed in connection herewith) shall be enforceable and binding
in accordance with their respective terms.
13.5 Waiver of Defaults.
All defaults of the Collateral Agent on behalf of the Noteholders, if
any, under the Prior Loan Documents are hereby waived.
ARTICLE XIV
RESERVED
ARTICLE XV
MISCELLANEOUS
14.1 Successors and Assigns; No Third-Party Beneficiaries. This Pledge
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective permitted successors and assigns. Except as expressly set
forth herein and in the Collateral Sharing Agreement, this Pledge Agreement
shall not confer any rights, obligations, remedies or liabilities upon any
Person other than the parties hereto and their permitted successors and assigns.
14.2 GOVERNING LAW. THE PARTIES HERETO ACKNOWLEDGE THAT THE
TRANSACTIONS CONTEMPLATED BY THIS PLEDGE AGREEMENT AND THE NOTES BEAR A
REASONABLE RELATION TO THE STATE OF MARYLAND IN THAT, INTER ALIA, AN INTENDED
PARTICIPANT IN THE NOTES HAS ITS PRINCIPAL PLACE OF BUSINESS IN THE STATE OF
MARYLAND, PART OF THE NEGOTIATIONS RELATING TO THE TRANSACTIONS CONTEMPLATED
HEREBY HAS OCCURRED IN THE STATE OF MARYLAND AND THE CLOSING WILL OCCUR IN SUCH
STATE. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF MARYLAND, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT
OF LAWS THEREOF.
14.3 Notices. All notices, requests, demands, claims and other
communications under this Pledge Agreement shall be in writing (unless otherwise
specified herein) and shall be
PAGE 31
<PAGE> 32
deemed duly given if (and then two (2) Business Days after) it is sent by
registered or certified mail, return receipt requested, postage prepaid, and
addressed to the intended recipient as set forth below:
If to Borrower:
Altiva Financial Corporation
Sixth Floor
1000 Parkwood Circle
Atlanta, Georgia 30339
Attention: Office of the Chief Executive Officer
Telephone: (770) 952-6700
Facsimile: (770) 937-7576
With a Copy to:
King & Spalding
191 Peachtree Street
48th Floor
Atlanta, Georgia 30303
Attention: Walter Driver, Esq.
Telephone: (404) 572-4600
Facsimile: (404) 572-5149
If to the Initial Noteholder:
Value Partners, Ltd.
4514 Cole Avenue
Suite 808
Dallas, Texas 75205
Attention: Timothy G. Ewing
Telephone: (214) 522-2100
Facsimile: (214) 522-2176
With a copy to:
Bergman, Stein & Bird, L.L.P.
4514 Travis Street
Suite 300
Dallas, Texas 75205
Attention: Jack R. Bird
Telephone: (214) 528-2444
Facsimile: (214) 599-0602
And
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
12th Floor
PAGE 32
<PAGE> 33
Washington, DC 20005
Attention: Gerard L. Hawkins
Telephone: (202) 347-0300
Facsimile: (202) 347-2172
If to the Collateral Agent:
Haynes & Boone, L.L.P.
201 Main Street, Suite 2200
Fort Worth, Texas 76102
Attention: William Greenhill
Telephone: (817) 347-6602
Facsimile: (817) 347-6650
And
United States Trust Company of New York
2001 Ross Avenue
Suite 2700
Dallas, Texas 75201
Attention: John C. Stohlmann
Telephone: (214) 754-1254
Facsimile: (214) 754-1303
Any party may send any notice, request, demand, claim or other
communications hereunder to the intended recipient at the address set forth
above using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the intended
recipient. Any party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other party notice in the manner herein set forth.
14.4 Amendments; Waivers. Subject to the Collateral Sharing Agreement
and except to the extent a different percentage is authorized, this Pledge
Agreement may not be amended, modified or supplemented except in writing signed
by each of the parties hereto (or the successors and assigns thereof) or the
parties constituting the necessary percentage of Noteholders authorized to take
such actions. Each party may, by written notice to the other, extend the time
for or waive the performance of any of the obligations of such other hereunder.
The waiver by any party hereto of a breach of this Pledge Agreement shall not
operate or be construed as a waiver of any other or subsequent breach. No delay,
omission or act by a party shall be deemed a waiver of such party's rights,
powers or remedies. No course of dealing between the parties hereto shall
operate a waiver of any provision hereof.
PAGE 33
<PAGE> 34
14.5 Payment of Expenses; Indemnity. The Borrower shall:
(a) pay or reimburse the Noteholders and the Collateral Agent on demand
for all of its reasonable out-of-pocket costs and expenses incurred in
connection with the development, preparation and execution of any amendment,
modification or supplement to, or any waiver under, any Loan Document and any
other document prepared in connection therewith, and the consummation of the
transactions contemplated thereby, including, without limitation, the reasonable
fees and disbursements of counsel to the Collateral Agent and the Noteholders;
(b) pay on demand all reasonable costs and expenses of the Noteholders
and the Collateral Agent, including, without limitation, the reasonable fees and
disbursements of counsel to the Noteholders and the Collateral Agent, in
connection with the occurrence or continuance of an Event of Default and the
enforcement, collection, protection or preservation (whether through
negotiation, legal proceedings or otherwise) of this Pledge Agreement or any
other Loan Document, the Collateral, and any obligation or any rights, remedy,
power or privilege of the Noteholders and the Collateral Agent hereunder or
thereunder;
(c) pay and hold the Noteholders and Collateral Agent harmless from and
against any and all present and future stamp, excise, recording or other similar
taxes or fees payable in connection with the execution, delivery, recording and
filing of any Loan Document and hold the Noteholders harmless from and against
any and all liabilities with respect to or resulting from any delay or omission
to pay such taxes or fees; and
(d) indemnify and hold harmless the Noteholders and Collateral Agent
and their respective directors, officers, partners, employees and agents from
and against, any and all liabilities, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements, including, without
limitation, the reasonable fees and disbursement of counsel to the Noteholders
and Collateral Agent and such other parties, incurred by any of them in
connection with, arising out of or in any way relating to any investigation,
claim, litigation or other proceeding, pending or threatened (whether or not any
of them is designated a party thereto), in connection with, arising out of or in
any way related to this Pledge Agreement or any other Loan Document or any of
the transactions contemplated herein or therein or any use of the proceeds of
the Notes by the Borrower; provided that the Noteholders and Collateral Agent
shall not be entitled to any indemnification for any of the foregoing resulting
from their gross negligence or willful misconduct as determined by a court of
competent jurisdiction.
If, and to the extent that, the indemnity obligations of the Borrower
hereunder may be unenforceable for any reason, the Borrower hereby agrees to
make the maximum contributions to the payment and satisfaction of each of such
indemnity obligations which is permissible under applicable law.
14.6 Limited Liability. No recourse under any Loan Document shall be
had against, and no personal liability shall attach to, any officer, employee,
director, partner, affiliate, shareholder or agent of any party hereto, as such,
by the enforcement of any assessment or by any legal or equitable proceeding, by
virtue of any statute or otherwise in respect of any of the Loan Documents, it
being expressly agreed and understood that each Loan Document is solely a
PAGE 34
<PAGE> 35
corporate or limited liability entity obligation of each party hereto, and that
any and all personal liability, either at common law or in equity, or by statute
or constitution, of every such officer, employee, director, partner, affiliate,
shareholder or agent for breaches by any party hereto of any obligation under
any Loan Document is hereby expressly waived as a condition of and in
consideration for the execution and delivery of this Pledge Agreement.
14.7 Counterparts. This Pledge Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
14.8 Severability; Interpretation. Any term or provision of this Pledge
Agreement that is invalid, illegal or unenforceable in any situation in any
jurisdiction shall not affect the validity, legality or enforceability of the
remaining terms and provisions hereof or the validity, legality or
enforceability of the offending term or provision in any other situation or in
any other jurisdiction.
14.9 Usury. All agreements between Borrower and the Noteholders,
whether now existing or hereafter arising and whether written or oral, are
hereby limited so that in no contingency, whether by reason of demand or
acceleration of the Maturity Date, as that term is defined in the Notes, or
otherwise, shall the interest contracted for, charged, received, paid or agreed
to be paid to the Noteholders exceed the maximum amount permissible under the
laws of the State of Maryland (hereinafter the "Applicable Law"). If, from any
circumstance whatsoever, interest would otherwise be payable to the Noteholders
in excess of the maximum amount permissible under the Applicable Law, the
interest payable to the Noteholders shall be reduced to the maximum amount
permissible under the Applicable Law, and if from any circumstance the
Noteholders shall ever receive anything of value deemed interest by the
Applicable Law in excess of the maximum amount permissible under the Applicable
Law, an amount equal to the excessive interest shall be applied to the reduction
of the principal of the Notes and not to the payment of interest, or if such
excessive amount of interest exceeds the unpaid balance of principal of the
Notes, such excess shall be refunded to the Borrower. All interest paid or
agreed to be paid to the Noteholders shall, to the extent permitted by the
Applicable Law, be amortized, pro-rated, allocated and spread throughout the
full period (including any renewal or extension) until payment in full of the
principal so that the interest on the Notes for such full period shall not
exceed the maximum amount permissible under the Applicable Law. The Noteholders
expressly disavow any intent to contract for, charge or receive interest in an
amount which exceeds the maximum amount permissible under the Applicable Law.
This paragraph as well as a similar paragraph as set forth in the Notes shall
control all agreements between Borrower and the Noteholders.
14.10 Time is of the Essence; No Waiver; Cumulative Remedies. Time and
exactitude of each of the terms, obligations, covenants and conditions of this
Pledge Agreement are hereby declared to be of the essence.
14.11 Binding Effect. This Pledge Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and
PAGE 35
<PAGE> 36
assigns. Subject to Article VI, a Noteholder may assign its interest in this
Pledge Agreement, and if assigned, the assignee shall be entitled, upon
notifying the Borrower, to the payment and performance of the obligations
arising under the Loan Documents and agreements of the Borrower hereunder and to
all of the rights and remedies of such Noteholder hereunder, and the Borrower
will assert no claims or defenses the Borrower may have against the Noteholders
against the assignee. The gender and number used in this Pledge Agreement are
used for reference term only and shall apply with the same effect whether the
parties are masculine, feminine, neuter, singular or plural.
14.12 Multiple Counterparts. This Pledge Agreement may be executed in
separate or multiple counterparts by the parties, and all of such counterparts
shall be considered as one and the same instrument notwithstanding the fact that
various counterparts are signed by only one or more of the parties, and all of
such Pledge Agreements shall be deemed but one and the same Pledge Agreement.
14.13 Headings. The captions and Section headings in this Pledge
Agreement are for convenience of reference only, and shall not limit or
otherwise affect the meaning or interpretation of any provision hereof.
14.14 Secured Party. This Pledge Agreement shall constitute a security
agreement, and the Noteholders shall have all of the rights in the Collateral of
a secured party, including under Articles 8 and 9 of the UCC.
14.15 Chief Executive Office; Records. The Chief Executive Office of
the Borrower is located at the address specified in the introduction. The
Borrower's state of incorporation is Delaware. The Borrower will not move its
Chief Executive Office or change its state of incorporation except to such new
location as such Borrower may establish in accordance with the last sentence in
this Section 14.15. The Borrower shall not establish a new location for such
office or change it state of incorporation until (i) it shall have given to the
Noteholders and the Collateral Agent not less than 30 days' prior written notice
of its intention so to do, clearly describing such new location and providing
such other information in connection therewith as the Noteholders and the
Collateral Agent may reasonably request and (ii) with respect to such new
location or state of incorporation, it shall have taken all action satisfactory
to the Noteholders and the Collateral Agent to maintain the security interest of
the Noteholders in the Collateral intended to be granted hereby at all times
fully perfected and in full force and effect.
14.16 Beneficial Owners. References herein to registered holders of
Notes and Exchange Notes shall be deemed to include beneficial owners of Notes
and Exchange Notes to the extent provided in the Notes and in the Indenture
relating to the Exchange Notes, respectively.
14.17 Unless and until the Exchange, as defined in the Exchange
Agreement, has been consummated with respect to not less than 92% aggregate
principal amount of Old Notes (as defined in the Exchange Agreement), (a) all
rights granted the Collateral Agent, including the right to possess the
Collateral and to enforce remedies, belong solely to the Noteholders and (b)
PAGE 36
<PAGE> 37
all references to the holders of Exchange Notes shall be inapplicable and all
rights granted such holders shall belong to the Noteholders.
PAGE 37
<PAGE> 38
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed as of the date first above written.
VALUE PARTNERS, LTD.
By: EWING & PARTNERS,
General Partner
By: /s/ TIMOTHY G. EWING
----------------------------------------
Name: Timothy G. Ewing
Title: Managing Partner
Address:
4514 Cole Avenue, Suite 808
Dallas, Texas 75205
ALTIVA FINANCIAL CORPORATION
By: /s/ EDWARD B. MEYERCORD
----------------------------------------
Name: Edward. B Meyercord
Title: Chief Executive Officer
Address:
1000 Parkwood Circle, Sixth Floor
Atlanta, Georgia 30339
PAGE 38
<PAGE> 1
EXHIBIT 10.3
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
Amended and Restated Registration Rights Agreement (the "Agreement"),
dated as of February 29, 2000, by and among Altiva Financial Corporation, a
Delaware corporation (the "Company"), and Holders (as defined herein) of the
Company's Amended and Restated 12% Secured Convertible Senior Notes due 2006
(the "Notes").
WHEREAS, the Company has issued to Holders $14,000,000 principal amount
of the Notes; and
WHEREAS, based on the conversion exercise price in effect on the date
hereof, the Notes are convertible, subject to certain conditions, into 7,865,168
shares of the common stock of the Company, par value $0.01 (the "Common Stock")
(such shares, subject to adjustment in accordance with the terms of the Notes,
including an adjustment resulting in a reduction in the conversion exercise
price to be $0.98 upon mandatory conversion of $6,428,000 principal amount of
12% Secured Convertible Senior Notes due 2006 issued by the Company in exchange
for 12 1/2% Subordinated Notes due 2001 previously issued by the Company, are
herein after referred to as the "Securities"); and
WHEREAS, the Company and the Holders have entered into a Registration
Rights Agreement, dated as of August 31, 1999, as amended by Amendment No. 1 to
the Registration Rights Agreement, dated as of December 13, 1999, Amendment No.
2 to the Registration Rights Agreement, dated as of December 30, 1999, Amendment
No. 3 to the Registration Agreement, dated as of February 2, 2000, and Amendment
No. 4 to the Registration Rights Agreement, dated as of February 11, 2000
(collectively, the "Existing Agreement"); and
WHEREAS, the Company and the Holders desire to amend and restate the
Existing Agreement to reflect that the aggregate principal amount of Notes
issued and sold by the Company to the Purchaser has increased from $10,000,000
to $14,000,000, that the number of shares of Common Stock that the Notes are
convertible into has increased from 2,000,000 shares to 7,865,168 shares and to
otherwise amend the agreements of the parties; and
WHEREAS, as an inducement to Holders to purchase the Notes, the Company
agreed to register the Securities into which the Notes are convertible;
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged by
all parties hereto, the
<PAGE> 2
parties, intending to be legally obligated, hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
"Act": The Securities Act of 1933, as amended.
"Broker-Dealer": Any broker or dealer registered as such under the
Exchange Act.
"Closing Date": The date of this Agreement.
"Commission" or "SEC": The United States Securities and Exchange
Commission.
"DTC": The Depository Trust Company.
"Effectiveness Target Date": As defined in Section 3 hereof.
"Exchange Act": The Securities Exchange Act of 1934, as amended.
"Holders": As defined in Section 2(b) hereof.
"Indemnified Holder": As defined in Section 7(a) hereof
"NASD": National Association of Securities Dealers, Inc.
"Person": An individual, partnership, corporation, trust or
unincorporated organization, or a government or an agency, authority or
political subdivision thereof.
"Prospectus": The prospectus included in a Resale Registration
Statement, as amended or supplemented, including post-effective amendments,
thereto.
"Registration Default": As defined in Section 4 hereof.
"Resale Registration Statement": As defined in Section 3 hereof.
"Securities": As defined in the preamble hereto.
"Transfer Restricted Securities": Each Security, until the earliest to
occur of (a) the date on which such Security has been effectively registered
under the Act and disposed of in accordance with a Resale Registration Statement
or other applicable registration statement and (b) the date on which such
Security is distributed to the public pursuant to Rule 144 under the
<PAGE> 3
Act or may be sold to the public without compliance with such rule.
"Underwritten Registration" or "Underwritten Offering": An offering in
which securities of the Company are sold to an underwriter for reoffering to the
public pursuant to an effective registration statement filed with the
Commission.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(A) TRANSFER RESTRICTED SECURITIES. The Transfer Restricted
Securities are subject to the terms of this Agreement and may be sold in
accordance with the provisions hereof.
(B) HOLDERS OF TRANSFER RESTRICTED SECURITIES. A Person is deemed
to be a holder of Transfer Restricted Securities (each, a "Holder") whenever
such Person owns (i) Notes, directly or indirectly through a participation
interest therein, or (ii) Securities prior to (A) the resale of Securities in
accordance with the terms hereof or (B) the time that such Securities are no
longer considered to be Transfer Restricted Securities.
SECTION 3. RESALE REGISTRATION STATEMENT
(A) REGISTRATION. The Company shall cause to be filed with the
Commission promptly after the Closing Date, but in no event later than April 15,
2000, one or more registration statements on Form S-1, S-2 or S-3, or other
applicable form (each a "Resale Registration Statement"), and use its reasonable
best efforts to cause such Resale Registration Statement to be declared
effective by the Commission promptly, but in no event later than June 15, 2000
(the "Effectiveness Target Date"). In connection with the foregoing, the Company
shall (A) file all pre-effective amendments to such Resale Registration
Statement as may be necessary in order to cause such Resale Registration
Statement to become effective, (B) if applicable, file a post-effective
amendment to such Resale Registration Statement pursuant to Rule 430A under the
Securities Act and (C) cause all necessary filings in connection with the
registration and qualification of the Securities to be made under the state
securities and Blue Sky laws of such jurisdictions as are necessary. Subject to
the provisions of Section 5(c) hereof, the Company shall use its reasonable best
efforts to keep such Resale Registration Statement continuously effective,
supplemented and amended to the extent necessary to ensure that it is available
for resales of Securities by the Holders of Transfer Restricted Securities
entitled to the benefit of this Section 3(a), and to ensure that it conforms
with the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, and all state
securities or Blue Sky laws until the earlier of (i) the sale of all Securities
in accordance with a Resale Registration Statement or (ii) the date on which all
Transfer Restricted Securities may be sold without restriction pursuant to Rule
144 under the Act.
(B) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH
THE SHELF REGISTRATION Statement. No Holder of Transfer Restricted Securities
may include any of its Transfer Restricted Securities in any Resale Registration
Statement pursuant to this Agreement
3
<PAGE> 4
unless and until such Holder furnishes to the Company in writing, within twenty
(20) business days after receipt of a request therefor, such information as the
Company may reasonably request for use in connection with any Resale
Registration Statement or Prospectus or preliminary Prospectus included therein.
No Holder of Transfer Restricted Securities shall be entitled to Liquidated
Damages pursuant to Section 4 hereof unless and until such Holder shall have
used its reasonable best efforts to provide all such reasonably requested
information. Each Holder as to which any Resale Registration Statement is being
effected agrees to promptly furnish to the Company any and all information
required to be disclosed in order to make the information previously furnished
to the Company by such Holder not materially misleading.
SECTION 4. LIQUIDATED DAMAGES
The parties hereto agree and acknowledge that under the terms of the
Existing Agreement the Holders of the Notes are entitled to payment of an
aggregate of $6,595 as liquidated damages (the "Old Liquidated Damages"). If (a)
the Company shall not have filed the Resale Registration Statement with the
Commission on or prior to April 15, 2000, (b) the Resale Registration Statement
shall not have been declared effective by the SEC by the Effectiveness Target
Date or (c) the Resale Registration Statement is filed and declared effective
but shall thereafter cease to be effective or fail to be usable for its intended
purpose without being succeeded within ten (10) business days by a
post-effective amendment that cures such failure and that is itself declared
effective within thirty (30) business days (each such event referred to in
clauses (a) through (c), a "Registration Default"), additional cash interest
("New Liquidated Damages") shall accrue to each Holder of the Notes commencing
upon the occurrence of such Registration Default in an amount equal to $0.05 per
week per $1,000 principal amount of the Notes held by such Holder during the
ninety (90) day period following the occurrence of such Registration Default.
The amount of New Liquidated Damages will increase by an additional $0.05 per
week per $1,000 principal amount of the Notes with respect to each subsequent
90-day period until all Registration Defaults have been cured, up to a maximum
amount of New Liquidated Damages for all Registration Defaults of $0.50 per week
per $1,000 principal amount of Notes. The Old Liquidated Damages and the new
Liquidated Damages are (collectively referred to as "Liquidated Damages"). All
accrued Liquidated Damages shall be paid to Holders by the Company in the same
manner as interest is paid pursuant to the Notes. Following the cure of all
Registration Defaults relating to any particular Transfer Restricted Securities,
the accrual of New Liquidated Damages with respect to such Transfer Restricted
Securities will cease.
All obligations of the Company set forth in the preceding paragraph
that are outstanding with respect to any Transfer Restricted Security at the
time such Security ceases to be a Transfer Restricted Security shall survive
until such time as all such obligations with respect to such Security shall have
been satisfied in full.
SECTION 5. REGISTRATION PROCEDURES
(A) RESALE REGISTRATION STATEMENT. In connection with each Resale
Registration Statement, the Company shall comply with all the provisions of
Section 5(b) below and shall file
4
<PAGE> 5
and use its reasonable best efforts to effect such registration to permit the
sale of the Transfer Restricted Securities in accordance with the terms of this
Agreement.
(B) GENERAL PROVISIONS. In connection with any Resale Registration
Statement and any Prospectus required by this Agreement to permit the sale or
resale of Transfer Restricted Securities (including, without limitation, any
Registration Statement and the related Prospectus required to permit resales of
the Securities by Broker-Dealers), the Company shall:
(i) use its reasonable best efforts to keep such Resale
Registration Statement continuously effective and provide all requisite
financial statements during the period specified in Section 3 of this
Agreement, and upon the occurrence of any event that would cause any
such Resale Registration Statement or the Prospectus contained therein
(A) to contain a material misstatement or omission or (B) not to be
effective and usable for resale of Transfer Restricted Securities
during the period required by this Agreement, the Company shall file
promptly, and as appropriate, an amendment or supplement to such Resale
Registration Statement, in the case of clause (A), correcting any such
misstatement or omission, and, in the case of either clause (A) or (B),
use its reasonable best efforts to cause such amendment to be declared
effective and such Resale Registration Statement and the related
Prospectus to become usable for their intended purpose(s) as soon as
practicable thereafter;
(ii) prepare and file with the Commission such amendments
and post-effective amendments to the Resale Registration Statement as
may be necessary to keep the Resale Registration Statement effective
for the applicable period set forth in Section 3 hereof or such shorter
period as will terminate when all Transfer Restricted Securities
covered by such Resale Registration Statement cease to be Transfer
Restricted Securities; cause the Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 under the Act in a timely manner; and reasonably
assist Holders in complying with the provisions of the Act with respect
to the disposition of all Securities covered by such Resale
Registration Statement during the applicable period in accordance with
the intended method or methods of distribution by the sellers thereof
set forth in such Resale Registration Statement or supplement to the
Prospectus;
(iii) advise the underwriter(s), if any, and selling
Holders promptly and, if requested by such Persons in writing, to
confirm such advice in writing, (A) when the Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and,
with respect to any Resale Registration Statement or any post-effective
amendment thereto, when the same has become effective, (B) of any
request by the Commission for amendments to the Resale Registration
Statement or amendments or supplements to the Prospectus or for
additional information relating thereto, (C) of the issuance by the
Commission of any stop order or other order or action suspending the
effectiveness of the Resale Registration Statement under the Act or of
the suspension by any state securities or Blue Sky commission of the
exemption, qualification or registration of the Transfer
5
<PAGE> 6
Restricted Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding purposes, or (D)
of the existence of any fact or the happening of any event that makes
any statement of a material fact made in the Resale Registration
Statement, the Prospectus, any amendment or supplement thereto, or any
document incorporated by reference therein untrue, or that requires the
making of any additions to or changes in the Resale Registration
Statement or the Prospectus in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
If at any time the Commission shall issue any stop order or other order
or take other action suspending the effectiveness of the Resale
Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the exemption,
qualification or registration of the Transfer Restricted Securities
under state securities or Blue Sky laws, the Company shall use its
reasonable best efforts to obtain the withdrawal or lifting of such
order at the earliest possible time;
(iv) furnish to each of the selling Holders and each of
the underwriter(s), if any, before filing with the Commission, copies
of any Resale Registration Statement or any Prospectus included therein
or any amendments or supplements to any such Resale Registration
Statement or Prospectus (including all documents incorporated by
reference after the initial filing of such Resale Registration
Statement), which documents will be subject to the review of such
Holders and underwriter(s), if any, for a period of at least five (5)
business days, and the Company will not file any such Resale
Registration Statement or Prospectus or any amendment or supplement to
any such Resale Registration Statement or Prospectus (including all
such documents incorporated by reference) to which a selling Holder of
Transfer Restricted Securities covered by such Resale Registration
Statement or the underwriter(s), if any, shall reasonably object within
five (5) business days after the receipt thereof. A selling Holder or
underwriter, if any, shall be deemed to have reasonably objected to
such filing if such Resale Registration Statement, amendment,
Prospectus or supplement, as applicable, as proposed to be filed,
contains a material misstatement or omission;
(v) make available at reasonable times and upon
reasonable notice for inspection by the selling Holders, any
underwriter participating in any disposition pursuant to such Resale
Registration Statement and any attorney or accountant retained by such
selling Holders or any of the underwriter(s), all financial and other
records, pertinent corporate documents and properties of the Company
and cause the Company's' officers, directors and employees to supply
all information reasonably requested by any such Holder, underwriter,
attorney or accountant in connection with such Resale Registration
Statement subsequent to the filing thereof and prior to its
effectiveness;
(vi) if requested by any selling Holders or the
underwriter(s), if any, promptly incorporate in any Resale Registration
Statement or Prospectus, pursuant to a supplement or post-effective
amendment, if necessary, such information as such selling Holders and
underwriter(s), if any, may reasonably request to have included
therein, provided such information is usual and customary in such a
document, including, without limitation,
6
<PAGE> 7
information relating to the "Plan of Distribution" of the Transfer
Restricted Securities, information with respect to the Transfer
Restricted Securities being sold to such underwriter(s) and any other
terms of the offering of the Transfer Restricted Securities to be sold
in such offering, and make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after the
Company is notified of the matters to be incorporated in such
Prospectus supplement or post-effective amendment;
(vii) furnish to each selling Holder and each of the
underwriter(s), if any, without charge, one copy of the Resale
Registration Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by reference
therein and all exhibits;
(viii) deliver to each selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the
Prospectus (including each preliminary Prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; and the
Company hereby consents to the use of the Prospectus and any amendment
or supplement thereto (other than in those states or jurisdictions in
which the Company has not complied with or satisfied the requirements
of the relevant securities or Blue Sky laws) by each of the selling
Holders and each of the underwriter(s), if any, in connection with the
offering and the sale of the Transfer Restricted Securities covered by
the Prospectus or any amendment or supplement thereto;
(ix) enter into such agreements (including an underwriting
agreement), and make such representations and warranties and take all
such other actions in connection therewith in order to expedite or
facilitate the disposition of the Transfer Restricted Securities
pursuant to any Resale Registration Statement contemplated by this
Agreement, all to the extent customary in offerings of the type
contemplated hereby and as may be reasonably requested by any Holder of
Transfer Restricted Securities or underwriter in connection with any
sale or resale pursuant to any Resale Registration Statement
contemplated by this Agreement; and if the registration is an
Underwritten Registration, the Company shall:
(A) furnish to each selling Holder and each
underwriter, if any, in such substance and scope as they may
request and as are customarily made by issuers to underwriters
in primary underwritten offerings, upon the date of the
effectiveness of the Resale Resale Registration Statement:
(1) a certificate, dated the date of
effectiveness of the Resale Resale Registration
Statement, signed by (i) the President or any Vice
President and (ii) a principal financial or
accounting officer of the Company, confirming, as of
the date thereof, that the representations and
warranties of the Company in the underwriting
agreement, if applicable, are true and correct in all
material respects as of such date and such other
matters as such parties may reasonably request;
7
<PAGE> 8
(2) an opinion, dated the date of
effectiveness of the Resale Resale Registration
Statement, of counsel for the Company to the effect
that the shares covered by the Resale Resale
Registration Statement shall be validly issued and
non-assessable, and such opinion shall include a
statement to the effect that such counsel has
participated in conferences with officers and other
representatives of the Company, representatives of
the independent public accountants for the Company,
the underwriters' representatives and the
underwriters' counsel in connection with the
preparation of such Resale Registration Statement and
the related Prospectus and have considered the
matters required to be stated therein and the
statements contained therein, although such counsel
has not independently verified the accuracy,
completeness or fairness of such statements; and that
such counsel advises that, on the basis of the
foregoing, no facts came to such counsel's attention
that caused such counsel to believe that the
applicable Resale Registration Statement, at the time
such Resale Registration Statement or any
post-effective amendment thereto became effective,
contained an untrue statement of a material fact or
omitted to state a material fact required to be
stated therein or necessary to make the statements
therein not misleading, or that the Prospectus
contained in such Resale Registration Statement, as
of its date, contained an untrue statement of a
material fact or omitted to state a material fact
necessary in order to make the statements therein, in
light of the circumstances under which they were
made, not misleading. Without limiting the foregoing,
such counsel may state further that such counsel
assumes no responsibility for, and has not
independently verified, the accuracy, completeness or
fairness of the financial statements, notes and
schedules and other financial data included in any
Resale Registration Statement contemplated by this
Agreement or the related Prospectus; and
(3) a customary comfort letter, dated
as of the date of effectiveness of the Resale
Registration Statement, from the Company's
independent public accountants, in the customary form
and covering matters of the type customarily covered
in comfort letters by underwriters in connection with
primary underwritten offerings;
(B) set forth in full or incorporate by
reference in the Underwriting Agreement, if any, the
indemnification provisions and procedures of Section 7 hereof
with respect to all parties to be indemnified pursuant to said
Section; and
(C) deliver such other documents and
certificates as may be reasonably requested by such parties to
evidence compliance with clause (A) above and with any
customary conditions contained in the underwriting agreement
or other agreement entered into by the Company pursuant to
this clause (ix), if any.
8
<PAGE> 9
If at any time the representations of the Company contemplated in
clause (A)(1) above cease to be true and correct, the Company shall so advise
the underwriter(s), if any, and each selling Holder promptly and, if requested
by such Persons, shall confirm such advice in writing;
(x) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, the underwriter(s), if any, and
their respective counsel in connection with the registration and qualification
of the Transfer Restricted Securities under the securities or Blue Sky laws of
such jurisdictions as the selling Holders or underwriter(s) may reasonably
request and do any and all other acts or things necessary or advisable to enable
the disposition in such jurisdictions of the Transfer Restricted Securities
covered by the Resale Registration Statement; provided that the Company shall
not be required to register or qualify as a foreign corporation where it is not
now so qualified or to take any action that would subject it to the service of
process in suits or to taxation, other than as to matters and transactions
relating to the Resale Registration Statement, in any jurisdiction where it is
not now so subject;
(xi) cooperate with the selling Holders and the underwriter(s), if
any, to facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and enable such Securities to be in such denominations and
registered in such names as the Holders or the underwriter(s), if any, may
reasonably request at least two (2) business days prior to any sale of Transfer
Restricted Securities made by such underwriter(s) or selling Holders;
(xii) use its reasonable best efforts to cause the Transfer
Restricted Securities covered by the Resale Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to enable the seller or sellers thereof or the
underwriter(s), if any, to consummate the disposition of such Transfer
Restricted Securities, subject to the provisions contained in paragraph (x)
above;
(xiii) if any fact or event contemplated by paragraph (b)(iii)(D)
above shall exist or have occurred, prepare a supplement or post-effective
amendment to the Resale Registration Statement or related Prospectus or any
document incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of Transfer Restricted
Securities, the Prospectus will not contain an untrue statement of a material
fact or omit to state any material fact necessary to make the statements therein
not misleading;
(xiv) provide a CUSP number for all Transfer Restricted Securities
not later than the effective date of the Resale Registration Statement;
(xv) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter that is required to be retained in accordance with the rules and
regulations of the NASD, and use its reasonable best efforts to cause such
filings to become effective and approved by such governmental agencies or
9
<PAGE> 10
authorities as may be necessary to enable the Holders selling Transfer
Restricted Securities to consummate the disposition of such Transfer Restricted
Securities;
(xvi) otherwise comply with all applicable rules and regulations of
the Commission, and make generally available to its security holders, as soon as
practicable, a consolidated earnings statement meeting the requirements of Rule
158 under the Act (which need not be audited) for the twelve-month period (A)
commencing at the end of any fiscal quarter in which Transfer Restricted
Securities are sold to underwriters in a firm commitment or best efforts
Underwritten Offering or (B) if not sold to underwriters in such an offering,
beginning with the first month of the Company's first fiscal quarter commencing
after the effective date of the Resale Registration Statement;
(xvi) cause all shares of Transfer Restricted Securities covered by
the Resale Registration Statement to be listed on each securities exchange or
market, if applicable, on which similar securities issued by the Company are
then listed; and
(xvii) provide promptly to each Holder upon request each document
filed with the Commission pursuant to the requirements of Section 13 or Section
15 of the Exchange Act.
(C) BLACKOUT. Each Holder agrees by acquisition of a Transfer
Restricted Security that, upon receipt of any notice from the Company of the
existence of any fact of the kind described in Section 5(b)(iii)(D) hereof, such
Holder will forthwith discontinue disposition of Transfer Restricted Securities
pursuant to the Resale Registration Statement until such Holder's receipt of the
copies of the supplemented or amended Prospectus as contemplated by section
5(b)(xiii) hereof, or until it is advised in writing (the "Advice") by the
Company that the use of the Prospectus may be resumed, and has received copies
of any additional or supplemental filings that are incorporated by reference in
the Prospectus. If so directed by the Company, each Holder will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such Transfer
Restricted Securities that was current immediately prior to the time of receipt
of such notice. In the event the Company shall give any such notice, the time
period regarding the effectiveness of such Resale Registration Statement or any
post-effective amendment thereto set forth in Section 3 shall be extended by the
number of days during the period from and including the date of the giving of
such notice pursuant to Section 5(b)(iii)(D) hereof to and including the date
when each selling Holder covered by such Resale Registration Statement shall
have received the copies of the supplemented or amended Prospectus as
contemplated by section 5(b)(xiii) hereof or shall have received the Advice,
provided that, notwithstanding the foregoing, such time period may be extended
in any given calendar year only one time for a maximum of (30) business days.
SECTION 6. REGISTRATION EXPENSES
All expenses incident to the Company's performance of or compliance
with this Agreement will be borne by the Company, regardless whether a Resale
Registration Statement becomes effective, including without limitation: (i) all
registration and filing fees and expenses
10
<PAGE> 11
(including filings made by any Holder with the NASD (and, if applicable, the
fees and expenses of any "qualified independent underwriter" and its counsel
that may be required by the NASD)); (ii) all fees and expenses of compliance
with federal securities, foreign securities and state Blue Sky or securities
laws; (iii) all expenses of printing (including the printing of Prospectuses and
new certificates representing Securities), messenger and delivery services and
telephone expenses incurred by the Company; (iv) all fees and disbursements of
counsel for the Company; (v) all application and filing fees in connection with
listing the Securities on a national securities exchange or automated quotation
system pursuant to the requirements hereof; and (vi) all fees and disbursements
of independent certified public accountants of the Company (including the
expenses of any special audit and comfort letters required by or incident to
such performance).
The Company will, in any event, bear its internal expense (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit, all
trustee and rating agency fees and charges and the fees and expenses of any
person, including special experts, retained by the Company.
Each Holder shall pay all expenses of its counsel, underwriting
discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of such Holder's Transfer Restricted Securities pursuant to a Resale
Registration Statement.
11
<PAGE> 12
SECTION 7. INDEMNIFICATION
(a) The Company shall indemnify and hold harmless (i) each Holder,
(ii) each person, if any, who controls (within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act) any Holder (any of the persons referred
to in this clause (ii) being hereinafter referred to as a "Controlling Person")
and (iii) the respective officers, directors, partners, employees,
representatives and agents of any Holder or any Controlling Person (any person
referred to in clause (i), (ii) or (iii) may hereinafter be referred to as an
"Indemnified Holder"), to the fullest extent lawful, from and against any and
all losses, claims, damages, liabilities, judgments, actions and expenses, joint
or several (including without limitation, reimbursement of all reasonable costs
of investigating, preparing, pursuing or defending any claim or action,
investigation or proceeding by any governmental agency or body, commenced or
threatened, including the reasonable fees and charges of counsel directly or
indirectly caused by, related to, based upon, arising out of or in connection
with any untrue statement or alleged untrue statement of a material fact
contained in (A) any Resale Registration Statement or Prospectus (or any
amendment or supplement thereto) or (B) any state securities or Blue Sky
application or other document prepared or executed by the Company (or based upon
any information furnished by the Company) for the purpose of qualifying any of
the Securities under the securities or Blue Sky laws of any state or other
jurisdiction (any such application, document or information hereinafter is
referred to as a "Blue Sky Application") or any omission or alleged omission to
state in any Resale Registration Statement or Prospectus (or any amendment or
supplement thereto) or in any Blue Sky Application a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, except insofar as such
losses, claims, damages, liabilities or expenses are caused by an untrue
statement or omission or alleged untrue statement or omission that is made in
reliance upon and in conformity with information relating to any of the Holders
furnished in writing to the Company by any of the Holders or counsel or agents
of Holders expressly for use therein. The foregoing indemnification is in
addition to any liability which the Company may otherwise have to any
Indemnified Holder.
(b) Each Holder agrees, severally and not jointly, to indemnify
and hold harmless (i) the Company, (ii) each person who controls (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Company
and (iii) the respective officers, directors, partners, employees,
representatives and agents of the Company and any such controlling person to the
same extent as the foregoing indemnity from the Company to each of the
Indemnified Holders, but only with respect to claims and actions based on
information relating to such Holder furnished in writing by such Holder
expressly for use in any Resale Registration Statement. The foregoing
indemnification is in addition to any liability which any Holder may otherwise
have to any of the foregoing indemnified persons.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 7, notify the indemnifying party in
writing of the claim or the commencement of that action; provided,
12
<PAGE> 13
however, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have under this Section 7 except to the extent
it has been materially prejudiced by such failure and, provided further, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have to an indemnified party otherwise than under this
Section 7 (except to the extent so provided in any such other obligation). If
any such claim or action shall be brought against an indemnified party, and it
shall have notified the indemnifying thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such action, the indemnifying party shall not be liable to the
indemnified party under this Section 7 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation, provided, however, that
the indemnified party shall have the right to employ separate counsel to
represent jointly the indemnified party and those other Indemnified Holders and
their respective officers, employees and controlling persons who may be subject
to liability arising out of any claim in respect of which indemnity may be
sought by Indemnified Holders against the indemnifying party under this Section
7, but the fees and expenses of such counsel shall be at the expense of such
indemnified party unless, (i) the employment thereof has been specifically
authorized by the indemnifying party in writing, (ii) such indemnified party
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party and in the reasonable judgment of such
counsel it is advisable for such indemnified party to employ separate counsel or
(iii) the indemnifying party has failed to assume the defense of such action and
employ counsel reasonably satisfactory to the indemnified party, in which case,
if such indemnified party notifies the indemnifying party in writing that it
elects to employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party. In no event shall the indemnifying parties
be liable for the fees and expenses of more than one counsel (in addition to
local counsel). Each indemnified party, as a condition of the indemnity
agreements contained in this Section 7, shall use its reasonable best efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall (i) without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding or (ii) be liable for any
settlement of any such action, compromise of any action or any judgment with
respect to any action effected without its written consent, but if settled with
its written consent or if there be a final judgment of the plaintiff in any such
action, the indemnifying party agrees to indemnify and hold harmless any
indemnified party, to the extent set forth herein, from and against any loss or
liability by reason of such settlement or judgment.
13
<PAGE> 14
(d) If the indemnification provided for in this Section 7 shall
for any reason be unavailable to (except for a reason expressly provided herein)
or insufficient to hold harmless an indemnified party under Section 7(a) or 7(b)
in respect of any loss, claim, damage or liability, or any action in respect
thereof, referred to therein, then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, in such proportion as shall be appropriate to reflect
the relative fault of the Company on the one hand and the Holders on the other
hand with respect to the statements or omissions which resulted in such loss,
claim, damage or liability, or action in respect thereof, as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to whether the untrue or alleged statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Holders, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and the Holders agree that it would not
be just and equitable if contributions pursuant to this Section 7(d) were to be
determined by pro rata allocation (even if the Holders were treated as one
entity for such purpose) or by any other method of allocation which does not
take into account the equitable considerations referred to herein. The amount
paid or payable by an indemnified party as a result of the loss, claim, damage
or liability, or action in respect thereof, referred to above in this Section
7(d) shall be deemed to include, for purposes of this Section 7(d), any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7(d), no Indemnified Holder shall be required to
contribute any amount in excess of the amount by which proceeds received by such
Indemnified Holder from an offering of the Securities exceeds the amount of any
damages which such Indemnified Holder has otherwise paid or become liable to pay
by reason of any untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
Section 11(f) of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. The Indemnified Holders'
obligations to contribute as provided in this Section 7(d) are several and not
joint.
SECTION 8. RULE 144 AND RULE 144A
The Company hereby agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding, to use its reasonable best efforts to
make and keep public information available as is required by Rules 144 and 144A
under the Act to permit sales of Transfer Restricted Securities pursuant to such
rules, including, without limitation, complying with the requirements of Rule
144A(d)(4), and to furnish to each Holder promptly upon request a written
statement by the Company as to its compliance with the reporting requirements of
Rule 144 and Rule 144A under the Act.
SECTION 9. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in
14
<PAGE> 15
any underwriting arrangements provided by the Persons entitled hereunder to
approve such arrangements and (b) completes and executes all reasonable
questionnaires, powers of attorney, indemnities, underwriting agreements,
lock-up letters and other documents required under the terms of such
underwriting arrangements.
SECTION 10. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the Resale
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority of the
Transfer Restricted Securities included in such offering; provided, that such
investment bankers and managers must be reasonably satisfactory to the Company.
SECTION 11. MISCELLANEOUS
(A) REMEDIES. The Company agrees that monetary damages (including
the Liquidated Damages contemplated hereby) would not be adequate compensation
for any loss incurred by reason of a breach by it of the provisions of this
Agreement and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(B) NO INCONSISTENT AGREEMENTS. The Company will not on or after
the date of this Agreement enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof. The rights granted
to the Holders hereunder do not in any way breach or conflict with and are not
inconsistent with the rights granted to the holders of the Company's securities
under any agreement in effect on the date hereof.
(C) AMENDMENTS AND WAIVERS. The provisions of this Agreement may
not be amended, modified or supplemented, and waivers or consents to or
departures from the provisions hereof may not be given unless the Company has
obtained the written consent of Holders of a majority of the outstanding
Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof that relates exclusively to the
rights of Holders whose Transfer Restricted Securities are being resold pursuant
to the Resale Registration Statement and that does not affect directly or
indirectly the rights of other Holders whose Transfer Restricted Securities are
not reselling pursuant to such Resale Registration Statement may be given by the
Holders of a majority of the outstanding Transfer Restricted Securities being
resold pursuant to such Resale Registration Statement.
(D) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class or
certified mail, telex, telecopier or reliable overnight delivery service:
15
<PAGE> 16
(i) if to a Holder, initially at the address set forth
below its name on the signature page hereto, and thereafter at such
other address notice of which is given in accordance with this Section
11(d); and
(ii) if to the Company:
Altiva Financial Corporation
Sixth Floor
1000 Parkwood Circle
Atlanta, Georgia 30339
Telecopier No.: (770) 937-9576
Attention: Edward B. Meyercord
With a copy to:
King & Spalding
191 Peachtree Street
Atlanta, GA 30303
Telecopier No.: (404) 572-5100
Attention: John D. Capers, Jr., Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five (5) business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next business day, if sent via a reliable overnight delivery service.
(E) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities.
(F) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, by the parties hereto, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement.
(G) HEADINGS. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(H) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND, WITHOUT REGARD
TO THE CONFLICT OF LAW RULES THEREOF.
(I) SEVERABILITY. In the event that any one or more of the
provisions contained herein or the application thereof, in any circumstances, is
held invalid, illegal or unenforceable, the
16
<PAGE> 17
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be affected
or impaired thereby.
(J) ENTIRE AGREEMENT. This Agreement is intended by the parties as
a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter hereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the Transfer Restricted Securities. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
ALTIVA FINANCIAL CORPORATION
By: /s/ EDWARD B. MEYERCORD
-------------------------------------------------
Name: Edward B. Meyercord
Title: Chairman and Chief Executive Officer
VALUE PARTNERS, LTD
By: EWING & PARTNERS,
General Partner
By: /s/ TIMOTHY G. EWING
-------------------------------------------------
Name: Timothy Ewing
Title: Managing Partner
Address:
4514 Cole Avenue - Suite 808
Dallas, Texas 75205
17
<PAGE> 18
T. ROWE PRICE RECOVERY FUND II, L.P.
By: T. Rowe Price Recovery Fund II Associates, L.L.C.,
General Partner
By:
--------------------------------------------------
Name: Hubert M. Stiles, Jr.
Title: President
Address:
100 E. Pratt Street
Baltimore, Maryland 21202
18
<PAGE> 1
EXHIBIT 10.4
EXCHANGE AGREEMENT
BY AND AMONG
ALTIVA FINANCIAL CORPORATION
AND
HOLDERS OF THE OUTSTANDING
12 1/2% SUBORDINATED NOTES DUE 2001 OF
ALTIVA FINANCIAL CORPORATION
MARCH 17, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS.......................................................1
Section 1.1 Definitions................................................1
ARTICLE II EXCHANGE OF NOTES................................................7
Section 2.1 Exchange of Notes..........................................7
Section 2.2 Expiration Date............................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES..................................8
Section 3.1 Representations and Warranties of the Company..............8
ARTICLE IV CONDITIONS PRECEDENT TO THE CLOSING.............................18
Section 4.1 Conditions to Obligations of the Parties..................18
Section 4.2 Conditions to the Obligations of the Holders..............19
Section 4.3 Conditions to the Obligations of the Company..............20
ARTICLE V COVENANTS........................................................21
Section 5.1 Rule 144 and Rule 144A Reporting..........................21
Section 5.2 Stay, Extension and Usury Laws............................21
ARTICLE VI MISCELLANEOUS...................................................21
Section 6.1 Survival of Provisions....................................21
Section 6.2 Termination...............................................21
Section 6.3 Waiver; Amendments........................................22
Section 6.4 Communications............................................22
Section 6.5 Costs, Expenses and Taxes.................................23
Section 6.6 Execution in Counterparts; FAX Execution..................23
Section 6.7 Binding Effect; Assignment................................24
Section 6.8 Governing Law.............................................24
Section 6.9. Usury.....................................................24
Section 6.10 Severability of Provisions................................25
Section 6.11 Construction..............................................25
Section 6.12 Integration...............................................25
Section 6.13 No Third Party Beneficiaries..............................25
Section 6.14 Representation by Counsel.................................26
Section 6.15 Waiver of Claims..........................................26
Section 6.16 Power of Attorney.........................................26
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VII INDEMNIFICATION; SET OFF.........................................26
Section 7.1 Indemnification.............................................26
Section 7.2 Set-Off.....................................................27
</TABLE>
<TABLE>
<S> <C>
Exhibit A Name and Address of the Holders
Exhibit B Form of New Exchange Notes
Exhibit C Form of QIB Pledge and Security Agreement
Exhibit D Form of non-QIB Pledge and Security Agreement
Exhibit E Form of Registration Rights Agreement
Exhibit F Form of Intercreditor and Collateral Sharing
Agreement
Exhibit G Matters to be covered by Opinion of Counsel to the
Company
</TABLE>
<PAGE> 4
EXCHANGE AGREEMENT
Exchange Agreement, dated as of March 17, 2000 (the "Agreement"), by
and among Altiva Financial Corporation (the "Company"), a Delaware corporation,
and the Holders of the outstanding 12 1/2% Subordinated Notes due 2001 of the
Company.
WITNESSETH:
WHEREAS, the Company is seeking to refinance certain existing
indebtedness evidenced by its outstanding 12 1/2% Subordinated Notes due 2001
(the "Old Notes");
WHEREAS, certain holders of the such outstanding Old Notes have agreed
to exchange such notes for new 12% Secured Senior Notes due 2006 in the
principal amount and on the terms described in this Agreement; and
WHEREAS, the parties deem it in their best interest to set forth their
mutual agreements herein;
NOW, THEREFORE, in consideration of any extension of credit and/or
other financial accommodation at any time made by the Holders to or for the
benefit of the Company, and of the promises set forth herein, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. As used in this Agreement, and unless
the context requires a different meaning, the following terms have the meanings
indicated:
"Agreement" means this Exchange Agreement, as amended, supplemented or
modified from time to time.
"Applicable Law" is defined in Section 6.9 hereof.
"Business Day" means any day except a Saturday, Sunday or other day on
which banking institutions in the city of Atlanta, Georgia are authorized by
law to close.
"Capital Stock" of any Person means any and all shares or other equity
interest of such Person.
"Claims" is defined in Section 6.15 hereof.
<PAGE> 5
"Closing" means the closing of the Exchange.
"Closing Date" means the date on which the Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended (or any
successor statute in effect from time to time), and the rules and regulations
promulgated thereunder.
"Commission" means the Securities and Exchange Commission and any
successor thereto.
"Common Stock" means the Common Stock, par value $.01 per share, of
the Company.
"Company" means Altiva Financial Corporation, a Delaware corporation,
together with its successors.
"Company Financial Statements" has the meaning set forth in Section
3.1(i)(i) hereof.
"Convertible Value Note Agreement" means that certain Amended and
Restated Secured Convertible Senior Note Purchase Agreement, dated for
reference purposes only as of February 29, 2000, by and among the Company and
Value Partners.
"Corporate Trust Office" means with respect to the Trustee: 2001 Ross
Avenue, Suite 2700, Dallas, Texas, or such other office as the Trustee or
successor shall designate from time to time.
"Environmental Claim" means any written notice from any governmental
authority or third party alleging potential liability (including without
limitation potential liability for investigating costs, cleanup costs,
governmental response costs, natural resource damages, property damages,
personal injuries or penalties) arising out of, based on, or resulting from the
presence, or release into the environment of any Materials of Environmental
Concern.
"Environmental Laws" means any law, statute, rule or regulation of any
governmental, judicial, legislative, executive, administrative or regulatory
authority of the United States, or of any state, local or foreign government or
any subdivision thereof or of any governmental body or other regulatory or
administrative agency or commission, domestic or foreign (a "Law"), relating to
pollution or protection of the environment (including ambient air, surface
water, groundwater, land surface or subsurface strata), including without
limitation the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, the Resource Conservation and Recovery Act of 1976, as
amended, and other Laws relating to (i) emissions, discharges or releases of
pollutants, contaminants, chemicals, or industrial toxic or hazardous
-2-
<PAGE> 6
substances or wastes (collectively known as "Polluting Substances") or (ii) the
handling, storage, disposal, reclamation, recycling or transportation of
Polluting Substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended (or any successor statute in effect from time to time).
"Exchange" shall mean the exchange by the Holders of the Old Notes for
a maximum aggregate of $19,382,000 of New Exchange Notes.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
and in effect from time to time (or any successor statute in effect from time
to time), and the rules and regulations of the Commission promulgated
thereunder.
"Expiration Date" is defined in Section 2.2 hereof.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of this Agreement, consistently
applied.
"Governmental Entity" means any federal or state court, administrative
agency or commission or other governmental authority or instrumentality.
"Holders" means the holders of the outstanding Old Notes who have
executed the Agreement.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (or any successor statute in effect from time to time), and
the rules and regulations of the Federal Trade Commission promulgated
thereunder.
"Indenture" means the Indenture entered into by the Company and U.S.
Trust Company of Texas, N.A., as trustee for the holders of the New Exchange
Notes, as amended, supplemented or otherwise modified from time to time.
"Indebtedness Instrument" mean any note, mortgage, indenture, chattel
mortgage, deed of trust, loan agreement, hypothecation agreement, pledge
agreement, security agreement, financing statement or other document,
instrument or agreement evidencing or securing the payment of or otherwise
relating to the borrowing of monies. Indebtedness Instruments shall include,
but not
-3-
<PAGE> 7
be limited to, the Old Notes which are not part of the Exchange, the New
Exchange Notes and the Value Notes.
"Intercreditor Agreement" means that certain Intercreditor and
Collateral Agency Agreement by and between Value Partners and U.S. Trust
Company of Texas, N.A., as collateral agent for the holders of the Exchange
Notes, substantially in the form of Exhibit F hereof.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
encumbrance, charge or security interest of any kind in respect of such asset.
"Loans" is defined in Section 3.1(s)(i) hereof.
"Material Adverse Effect" means any effect that (i) is material and
adverse to the financial condition, results of operations, business or
prospects of the Company and its Subsidiaries taken as a whole or (ii)
materially impairs the ability of the Company to perform its obligations under
this Agreement, any Related Agreement, the Value Notes or the Value Related
Agreements.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products and any other
materials regulated under Environmental Laws.
"MCI" means The Money Centre, Inc., a North Carolina corporation,
together with its successors.
"NASD" means National Association of Securities Dealers, Inc.
"New Exchange Notes" means (i) up to $6,428,000 principal amount of
notes being issued pursuant to the Indenture which shall initially consist of
the QIB Convertible Global Note and the Non-QIB Convertible Global Note and
(ii) up to $12,800,000 principal amount of notes being issued pursuant to the
Indenture which shall consist of the QIB Permanent Global Note and the Non-QIB
Permanent Global Note. The New Exchange Notes shall have substantially the same
terms as the Value Notes (except for the provisions regarding convertibility
into shares of Common Stock) and shall be secured as set forth in the Security
Agreements and the Intercreditor Agreement.
"Non-QIB Convertible Global Note" shall have the meaning given in the
Indenture.
"Non-QIB Permanent Global Note" shall have the meaning given in the
Indenture.
"Non-QIB Security Agreement" means that certain Pledge Agreement by
and among the Company and the Trustee for the benefit of the Holders who do not
qualify as QIBs, substantially
-4-
<PAGE> 8
in the form of Exhibit D hereto, as amended, supplemented or otherwise modified
from time to time.
"Old Notes" has the meaning set forth of the Recitals to this
Agreement.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or a political subdivision or an agency or instrumentality thereof.
"Preferred Stock" means the Preferred Stock, par value $.01 per share,
of the Company.
"Previously Disclosed" means disclosed in a letter dated the date
hereof delivered from the Company to the Trustee, specifically referring to the
appropriate section of this Agreement and describing in reasonable detail the
matters contained therein.
"QIB" means a qualified institutional buyer as such term is defined in
the Securities Act.
"QIB Convertible Global Note" shall have the meaning given in the
Indenture.
"QIB Permanent Global Note" shall have the meaning given in the
Indenture.
"QIB Security Agreement" means the Pledge and Security Agreement by
and among the Company and the Trustee for the benefit of the Holders who do not
qualify as QIBs, substantially in the form of Exhibit D hereto, as amended,
supplemented or otherwise modified from time to time.
"Real Estate Owned" means the consolidated properties of the Company
acquired by foreclosure on a loan or deed-in-lieu thereof or otherwise included
in the Company's real estate owned for purposes of reporting asset quality of
the Company in its reports filed with the Commission under the Exchange Act.
"Registration Rights Agreement" means the Registration Rights
Agreement by and among the Company and the Trustee on behalf of the Holders,
substantially in the form of Exhibit F hereto, as amended, supplemented or
otherwise modified from time to time.
"Related Agreements" means the Indenture, the New Exchange Notes, the
Security Agreements, the Registration Rights Agreement and the Intercreditor
Agreement.
"Securities" means (i) the New Exchange Notes and (ii) the Common
Stock issuable upon conversion of the New Exchange Notes.
-5-
<PAGE> 9
"Securities Act" means the Securities Act of 1933, as amended (or any
successor statute thereto as in effect from time to time), and the rules and
regulations of the Commission promulgated thereunder.
"Securities Documents" shall mean all reports, offering circulars,
proxy statements, registration statements and all similar documents filed, or
required to be filed, pursuant to the Securities Laws.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of
1940, as amended; the Trust Indenture Act of 1939, as amended; and the rules
and regulations of the Commission promulgated thereunder.
"Security Agreements" means the QIB Security Agreement and the Non-QIB
Security Agreement.
"State" means each of the states of the United States, the District of
Columbia and the Commonwealth of Puerto Rico.
"Stock Equivalents" means, with respect to any Person, options,
warrants, calls, contracts or other rights entered into or issued by such
Person which confer upon the holder thereof the right (whether or not
contingent) to acquire any Capital Stock, voting securities or securities
convertible into or exchangeable for Capital Stock or voting securities of such
Person.
"Stock Option Plan" means the 1999 Stock Incentive Plan of the Company.
"Subsidiary" means with respect to any Person, (i) any corporation,
association, limited liability company or other business entity of which more
than 50% of the total voting power of shares of Capital Stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more Subsidiaries of such
Person (or a combination thereof) and (ii) any partnership (a) the sole general
partner or managing general partner of which is such Person or a Subsidiary of
such Person or (b) the only general partners of which are such Person or one or
more Subsidiaries of such Person (or any combination thereof).
"Taxes" means all taxes, charges, fees, levies or other governmental
assessments, including, without limitation, all net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license,
withholding, payroll, employment, excise, estimated, severance, stamp,
occupation, property or other taxes, customs, dues, fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority
(domestic or foreign).
-6-
<PAGE> 10
"Tax Returns" means all foreign, federal, State and local returns
relating to Taxes.
"Trustee" shall mean the Trustee under the Indenture.
"Value Notes" means the 12% Secured Convertible Senior Notes due 2006
of the Company in the original principal amount of $14,000,000 being issued and
sold by the Company and purchased by Value Partners, as amended, supplemented
or otherwise modified from time to time.
"Value Partners" means Value Partners, Ltd., a Texas limited
partnership.
"Value Related Documents" means the Value Notes, the Amended and
Restated Pledge and Security Agreement by and among the Company and Value
Partners, the amended and restated registration rights agreement to which Value
Partners and the Company are party, the Convertible Value Note Agreement and
the Intercreditor Agreement.
ARTICLE II
EXCHANGE OF NOTES
SECTION 2.1 EXCHANGE OF NOTES. Subject to the terms and
conditions herein set forth, on the Expiration Date (as hereinafter defined),
each Holder who has executed this Agreement shall exchange, the outstanding Old
Notes held by such Holder for New Exchange Notes, which the Company agrees to
issue in consideration for the tendering of the Old Notes owned by such Holder,
in a principal amount equal to the product of (i) the outstanding principal,
interest and other amount of the Old Notes being tendered by such Holder;
multiplied by (ii) 0.4. If the tendering Holder is a QIB, then the principal
amount of the New Exchange Notes issued to such tendering Holder shall consist
of an interest in the QIB Permanent Global Note. If the tendering Holder is not
a QIB, then the principal amount of the New Exchange Notes issued to such
tendering Holder shall consist of an interest in the Non-QIB Permanent Global
Note. In addition, each Holder who has executed this Agreement shall receive in
partial exchange for the outstanding Old Notes held by such Holder for New
Exchange Notes, Common Stock which the Company agrees to issue in partial
consideration for the tendering of the Old Notes owned by such Holder, in a
principal amount equal to the product of (i) 6,428,000, multiplied by (ii) the
quotient of (X) the outstanding principal, interest and other amount of the Old
Notes being tendered by such Holder; divided by (Y) $32,385,000.
SECTION 2.2 EXPIRATION DATE. The Expiration Date shall be 5:00
p.m. New York City Time on March 17, 2000 (the "Expiration Date"). In the event
of such an extension, the "Expiration Date" shall refer to such extended date.
The Company may, in its discretion, accept
-7-
<PAGE> 11
tenders of Old Notes after the Expiration Date or the Closing Date provided
that the Closing has occurred.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as Previously Disclosed, the Company represents and warrants to each of
the Holders as follows:
(a) Capital Structure. The authorized Capital Stock of the
Company consists of 400,000,000 shares of Common Stock and 5,000,000 shares of
Preferred Stock. As of March 7, 2000, there are (i) 4,026,123 shares of Common
Stock issued and outstanding and no shares of Common Stock are held as treasury
shares and (ii) 56,905 shares of Series A Convertible Preferred Stock are
issued and outstanding and no shares of Preferred Stock are held as treasury
shares. All outstanding shares of Capital Stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable and none of
the outstanding shares of Capital Stock of the Company has been issued in
violation of the preemptive rights of any Person. Except as contemplated by
this Agreement or as Previously Disclosed, there are no Stock Equivalents
authorized, issued or outstanding with respect to the Capital Stock of the
Company as of the date hereof. The Company has Previously Disclosed each option
to purchase Common Stock which is outstanding as of the date hereof, including
the exercise price and term thereof, as well as the relevant terms of any other
Stock Equivalents which are outstanding as of the date hereof.
(b) Organization, Standing and Authority of the Company. The
Company is a corporation duly organized and validly existing under the laws of
Delaware with full corporate power and authority to own or lease all of its
properties and assets and to carry on its business as now conducted and is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which its ownership or leasing of property or the conduct of
its business requires such licensing or qualification and where the failure to
be so licensed, qualified or in good standing would have a Material Adverse
Effect.
(c) Ownership of Subsidiaries. The Company does not own or have
the right to acquire, directly or indirectly, any outstanding Capital Stock or
other voting securities or ownership interests of any corporation, bank,
savings association, partnership, joint venture or other organization, except
as set forth in Schedule 3.1(c). The outstanding shares of Capital Stock of
each Subsidiary of the Company have been duly authorized and validly issued,
are fully paid and nonassessable, and are directly owned by the Company free
and clear of all Liens. No Stock Equivalents are authorized, issued or
outstanding with respect to the Capital Stock of any Subsidiary of the Company
and there are no agreements, understandings or commitments relating to the
right of the Company to vote or to dispose of such Capital Stock.
-8-
<PAGE> 12
(d) Organization, Standing and Authority of Subsidiaries. Each
Subsidiary of the Company (i) is duly organized and validly existing under the
laws of the jurisdiction in which it is organized, (ii) has full corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as now conducted and (iii) is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which its
ownership or leasing of property or the conduct of its business requires such
qualification, except where the failure to be so licensed, qualified or in good
standing would not have a Material Adverse Effect. The Company has heretofore
delivered true and complete copies of the articles of incorporation and bylaws
or equivalent documents of each Subsidiary of the Company as in effect as of
the date hereof to each Holders which has requested the same.
(e) Authority; Due Execution. The Company has full corporate
power and authority to perform its respective obligations under this Agreement
and each of the Related Agreements, and the execution, delivery and performance
by the Company of this Agreement and each Related Agreement have been duly
authorized by all necessary corporate action on the part of the Company. This
Agreement has been duly executed and delivered by the Company and constitutes,
and each of the Related Agreements, when duly executed and delivered by the
Company, will constitute, a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except (i) rights
to indemnity and contribution under the Registration Rights Agreement may be
limited by applicable law, (ii) enforceability may be limited by bankruptcy,
insolvency, moratorium and similar laws affecting creditors' rights generally
and (iii) rights of acceleration and the availability of equitable remedies may
be limited by equitable principles of general applicability.
(f) No Conflict. Neither the execution and delivery of this
Agreement and each of the Related Agreements, nor consummation of the
transactions contemplated hereby and thereby, nor compliance by the Company
with any of the provisions hereof or thereof, (i) does or will conflict with or
result in a breach of any provisions of the Certificate of Incorporation or
Bylaws of the Company or the equivalent documents of any Subsidiary of the
Company, (ii) violate, conflict with or result in a breach of any term,
condition or provision of, or constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or give
rise to any right of termination, cancellation or acceleration with respect to,
or result in the creation of any Lien upon any property or asset of the Company
or a Subsidiary of the Company pursuant to, any material note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which the Company or a Subsidiary of the Company is a party, or
by which any of their respective properties or assets may be bound or affected,
or (iii) subject to the compliance referred to in clauses (i) and (ii) of the
succeeding sentence, violate any order, writ, injunction, decree, statute, rule
or regulation applicable to the Company or a Subsidiary of the Company. Except
for (i) compliance with applicable federal and State securities laws in
connection with this Agreement and the performance by the Company of its
-9-
<PAGE> 13
obligations under the Registration Rights Agreement and (ii) any required
compliance by the Company with applicable federal and State securities laws
and/or the HSR Act in connection with the issuance of shares of Common Stock
upon conversion of the New Exchange Notes in accordance with their terms, no
consent, approval, order or other authorization of any Governmental Entity or
of any third party is required by or on behalf of the Company or a Subsidiary
of the Company in connection with the execution, delivery and performance of
this Agreement and each of the Related Agreements. The representations and
warranties contained in this Section 3.1(f), insofar as they relate to federal
and State securities laws requirements, are made in reliance on the Investor
Representation Letters received by the Company.
(g) Status of Securities. The Securities have been authorized by
all necessary corporate action on the part of the Company. When delivered to
the Holders at the Closing against the exchange therefor as provided herein,
the Securities will be duly authorized and validly issued and will not be
issued in violation of the preemptive rights of any Person. Subject to the
approvals and compliance referred to in the second sentence of Section 3.1(f)
hereof, shares of Common Stock issued by the Company upon conversion of the New
Exchange Notes in accordance with their terms will be duly authorized, validly
issued and non-assessable at the time of issuance and will not be issued in
violation of the preemptive rights of any Person.
(h) Securities Reports. The Company has filed all Securities
Documents required to be filed by it under the Securities Laws on a timely
basis or has received a valid extension of such time of filing, and all such
Securities Documents complied in all material respects with the requirements of
the Securities Laws and did not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, at the time and in light of the
circumstances under which they were made, not misleading.
(i) Financial Statements.
(i) The Company has previously delivered to
representatives of the Holders (i) statements of financial condition of the
Company as of August 31, 1999 and 1998 and statements of operations, changes in
stockholders' equity and cash flows of the Company for each of the years ended
August 31, 1999, 1998 and 1997, accompanied by the related audit report of
Deloitte & Touche LLP, (ii) an unaudited statement of financial condition as of
November 30, 1999 and unaudited statements of operations, changes in
stockholders' equity and cash flows of the Company for the three months ended
November 30, 1999 and 1998 and (iii) an unaudited statement of financial
condition as of December 31, 1999 and an unaudited statement of operations for
the three months ended December 31, 1999. The foregoing financial statements,
as well as the financial statements of the Company to be delivered to the
holders of New Exchange Notes after the Closing pursuant to the terms of the
New Exchange Notes (collectively the "Company Financial Statements"), fairly
present or will fairly present, as the case may be, in
-10-
<PAGE> 14
all material respects the consolidated financial condition of the Company as of
the respective dates set forth therein, and the consolidated results of
operations, changes in shareholders' equity and cash flows of the Company for
the respective periods or as of the respective dates set forth therein in
accordance with GAAP.
(ii) Each of the Company Financial Statements has been or
will be, as the case may be, prepared in accordance with GAAP consistently
applied during the periods involved, except as stated therein. The books and
records of the Company and its Subsidiaries are being maintained in material
compliance with applicable legal and accounting requirements, and such books
and records accurately reflect in all material respects all dealings and
transactions in respect of the business, assets, liabilities and affairs of the
Company and its Subsidiaries.
(iii) Except to the extent (x) reflected, disclosed or
provided for in the Securities Documents filed by the Company prior to the date
hereof and (y) of liabilities incurred since August 31, 1999 in the ordinary
course of business, neither the Company nor any Subsidiary of the Company has
any liabilities, whether absolute, accrued, contingent or otherwise, which has
had or could reasonably be expected to have a Material Adverse Effect.
(j) Material Adverse Change. Since August 31, 1999, (i) the
Company and the Subsidiaries of the Company have conducted their respective
businesses in the ordinary and usual course (excluding the incurrence of
expenses in connection with this Agreement and the Subordinated Note Agreement
and the transactions contemplated hereby and thereby) and (ii) no event has
occurred or circumstance arisen that, individually or in the aggregate, has had
or could reasonably be expected to have a Material Adverse Effect.
(k) Environmental Matters.
(i) The Company is in compliance with all Environmental
Laws, except for any violations of any Environmental Law which, individually or
in the aggregate, has not had and could not reasonably be expected to have a
Material Adverse Effect. The Company has not received any communication
alleging that the Company or any Company Subsidiary is not in such compliance
and, to the knowledge of the Company, there are no present circumstances that
would prevent or interfere with the continuation of such compliance.
(ii) None of the properties owned, leased or operated by
the Company or the any Company Subsidiary has been or is in violation of or
liable under any Environmental Law, except for any such violations or
liabilities which, individually or in the aggregate, has not had and could not
reasonably be expected to have a Material Adverse Effect.
(iii) To the knowledge of the Company, there are no past
or present actions, activities, circumstances, conditions, events or incidents
that could reasonably form the basis of
-11-
<PAGE> 15
any Environmental Claim or other claim or action or governmental investigation
that could result in the imposition of any liability arising under any
Environmental Law against the Company or any of its Subsidiaries or against any
Person whose liability for any Environmental Claim the Company or any
Subsidiary of the Company has or may have retained or assumed either
contractually or by operation of law, except such as, individually or in the
aggregate, have not had and could not reasonably be expected to have a Material
Adverse Effect.
(l) Tax Matters.
(i) The Company and its Subsidiaries have timely filed
all Tax Returns required by applicable law to be filed by them (including,
without limitation, estimated tax returns, income tax returns, information
returns and withholding and employment tax returns) and have paid, or where
payment is not required to have been made, have set up an adequate reserve or
accrual for the payment of, all Taxes required to be paid in respect of the
periods covered by such Tax Returns, except in all cases where the failure to
do so, individually or in the aggregate, has not had and could not reasonably
be expected to have a Material Adverse Effect. As of the date hereof, there is
no audit examination, assessed deficiency, deficiency litigation or refund
litigation with respect to any Taxes of the Company or any Subsidiary of the
Company. All Taxes due with respect to completed and settled examinations or
concluded litigation relating to the Company have been paid in full or adequate
provision has been made for any such Taxes on the Company's consolidated
statement of financial condition in accordance with GAAP. The Company has not
executed an extension or waiver of any statute of limitations on the assessment
or collection of any Tax that is currently in effect.
(ii) Neither the Company nor any Subsidiary of the
Company (i) is a party to any agreement providing for the allocation or sharing
of taxes, (ii) is required to include in income any adjustment pursuant to
Section 481(a) of the Code by reason of a voluntary change in accounting method
initiated by the Company or a Subsidiary of the Company (nor does the Company
have any knowledge that the Internal Revenue Service has proposed any such
adjustment or change of accounting method) or (iii) has filed a consent
pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply.
(iii) There has been no "ownership change," as defined
under Section 382 of the Code and regulations thereunder, of the Company since
August 31, 1998, and consummation of the Exchange (including a later conversion
of a portion of the New Exchange Notes into Common Stock) will not result in
such an ownership change of the Company.
(m) ERISA. The Company is in compliance in all material respects
with all presently applicable provisions of ERISA; to the knowledge of the
Company, no "reportable event" (as defined in ERISA) has occurred with respect
to any "pension plan" (as defined in ERISA) for which the Company would have
any material liability; the Company has not incurred and does
-12-
<PAGE> 16
not expect to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (ii) Sections 412
(whether or not waived) or 4971 of the Code; and each "pension plan" for which
the Company would have any liability that is intended to be qualified under
Section 401(a) of the Code is so qualified in all material respects and to the
knowledge of the Company nothing has occurred, whether by action or by failure
to act, which would cause the loss of such qualification.
(n) Litigation. There are no actions, suits, investigations or
legal proceedings instituted, pending or, to the knowledge of the Company,
threatened against the Company or any Subsidiary of the Company or against any
asset, interest or right of the Company or any Subsidiary of the Company, or
against any director, officer or employee of any of them that in any such case,
if decided adversely, could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect. Neither the Company nor any
Subsidiary of the Company is a party to any order, judgment or decree which has
had or could reasonably be expected to have a Material Adverse Effect.
(o) Compliance with Laws. The Company and each of its
Subsidiaries has all permits, licenses, certificates of authority, orders and
approvals of, and has made all filings, applications and registrations with,
federal, State, local and foreign governmental or regulatory bodies that are
necessary in order to permit it to carry on its business as it is presently
being conducted and the absence of which could reasonably be expected to have a
Material Adverse Effect; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect; and to the best knowledge of
the Company, no suspension or cancellation of any of the same is threatened.
(p) No Default or Violation. Neither the Company nor any
Subsidiaries of the Company currently is in violation of its Certificate of
Incorporation or Bylaws or equivalent documents, or of any applicable federal,
State or local law or ordinance or any order, rule or regulation of any
Governmental Entity (including, without limitation, all securities, safety,
health, environmental, zoning, anti-discrimination, antitrust, and wage and
hour laws, ordinances, orders, rules and regulations), or in default with
respect to any order, writ, injunction or decree of any court, or in default
under any order, license, regulation or demand of any Governmental Entity, any
of which violations or defaults could, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, and neither the
Company nor any Subsidiary of the Company has received any notice or
communication from any Governmental Entity asserting that the Company or any
Subsidiary of the Company is in violation of any of the foregoing which could
reasonably be expected to have a Material Adverse Effect. Neither the Company
nor any Subsidiary of the Company is subject to any regulatory or supervisory
cease and desist order, agreement, written directive, memorandum of
understanding or written commitment, and none of them has received any written
communication requesting that they enter into any of the foregoing.
-13-
<PAGE> 17
(q) Certain Fees. No fees or commissions will be payable by the
Company to brokers, finders, investment bankers or banks pursuant to any
agreement entered into by the Company with respect to the exchange, offer and
sale of the New Exchange Notes, the Value Notes or any of the other
transactions contemplated hereby, by any Related Agreement.
(r) Patents, Trademarks, Etc. The Company and each of its
Subsidiaries owns or possesses all legal rights to use all proprietary rights,
including without limitation all trademarks, trade names, service marks and
copyrights, that are material to the conduct of their existing businesses.
Neither the Company nor any of its Subsidiaries is bound by or a party to any
options, licenses or agreements of any kind with respect to any trademarks,
service marks or trade names which it claims to own. Neither the Company nor
any of its Subsidiaries has received any communications alleging that any of
them has violated or would violate any of the patents, trademarks, service
marks, trade names, copyrights or trade secrets or other proprietary rights of
any other Person.
(s) Loan Matters
(i) Each loan agreement, note or borrowing arrangement,
including without limitation portions of outstanding lines of credit and loan
commitments on the books and records of the Company and its Subsidiaries
(collectively, "Loans") that was made by the Company and to the knowledge of
the Company that was made by any third party was made, and has been serviced in
all material respects in accordance with, the Company's underwriting standards
and the relevant Loan documentation in the ordinary course of business, is
evidenced in all material respects by appropriate and sufficient documentation
and, to the best knowledge of the Company, constitutes the legal, valid and
binding obligation of the obligor named therein, subject to bankruptcy,
insolvency, fraudulent conveyance and other laws of general applicability
relating to or affecting creditor's rights and to general equity principles.
(ii) None of the agreements pursuant to which the Company
or any Subsidiary has sold Loans or pools of Loans or participations in Loans
or pools of Loans contain any obligation to repurchase such Loans or interests
therein on account of a payment default by the obligor on any such Loans.
Neither the Company nor any of its Subsidiaries is in default under any such
agreement or has received any notice alleging default.
(iii) To the knowledge of the Company, all brokers and
other third parties who originate or have originated Loans have all required
licenses and approvals from all jurisdictions requiring licenses and approvals
and have complied with and are not in violation of any applicable law,
regulation, order, rule, policy or guidelines of any Governmental Entity.
-14-
<PAGE> 18
(iv) The practices of the Company and its Subsidiaries
with respect to compensation paid to mortgage brokers comply with the policy
statement issued by the Department of Housing and Urban Development in March
1999.
(t) Certain Assets. The Company has Previously Disclosed a true
and correct listing of the following assets of the Company and its Subsidiaries
as of November 30, 1999: (i) all non-performing Loans, securities or other
assets (i.e., all assets on which the Company has ceased recognizing interest
under GAAP or as to which any payments of principal or interest are past due 90
or more days as of such date), (ii) all Loans, securities or other assets as to
which any payments of principal or interest are past due 60 or more days, (iii)
all Loans, securities or other assets not included in the foregoing which have
been classified special mention, substandard, doubtful or loss, or otherwise
classified adversely, by management of the Company or regulatory examiners, and
(iv) each parcel of Real Estate Owned (excepting such parcels as may have been
disposed of in the ordinary course of business subsequent to such date),
including an identification of the amount of reserves which have been
established with respect to each such parcel and its net carrying value.
(u) Year 2000 Compliance. All computer hardware and software
owned, used or licensed by the Company or any of its Subsidiaries, including
but not limited to system and application programs, files, databases and
computer services, the failure or disfunctionality of which would individually
or in the aggregate have a Material Adverse Effect is Year 2000 Complaint.
"Year 2000 Complaint" means that such hardware and software will (i) correctly
process date data from at least January 1, 1900 through December 31, 2000
without error or interruption due to date, (ii) maintain functionality with
respect to the input, storing, processing or output of records or data
containing dates falling on or after January 1, 2000, and (iii) be
interoperable with other Year 2000 compliant hardware or software owned, used
or licensed by the Company or any of its Subsidiaries which may deliver records
to, receive records from or otherwise interact with such hardware or software
in the course of processing records or data.
(v) Labor Matters. Neither the Company nor any of its
Subsidiaries is a party to or is bound by any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor
organization, nor is the Company or any of its Subsidiaries the subject of a
proceeding naming the Company or any Subsidiary as a defendant asserting that
the Company or any such Subsidiary has committed an unfair labor practice
(within the meaning of the National Labor Relations Act) or seeking to compel
the Company or any such Subsidiary to bargain with any labor organization as to
wages or conditions of employment, nor is there any strike or other material
labor dispute or disputes involving it or any of its Subsidiaries pending, or
to the Company's knowledge, threatened, nor the Company aware of any activity
involving its or any of its Subsidiaries' employees seeking to certify a
collective bargaining unit or engaging in other organizational activity.
-15-
<PAGE> 19
(w) Insurance. The Company believes that it and each Subsidiary
of the Company is insured, and during each of the past three calendar years has
been insured, for reasonable amounts with financially sound and reputable
insurance companies against such risks as companies engaged in a similar
business would, in accordance with good business practice, customarily be
insured and has maintained all insurance required by applicable laws and
regulations. All of the policies and bonds maintained by the Company and its
Subsidiaries are in full force and effect and all claims thereunder have been
filed in a due and timely manner and, to the Company's knowledge, no such claim
has been denied.
(x) Properties. All real and personal property owned by the
Company or a Subsidiary of the Company or presently used by any of them in its
respective business is in an adequate condition (ordinary wear and tear
excepted) and is sufficient to carry on its business in the ordinary course of
business consistent with its past practices. The Company has good and
marketable title free and clear of all Liens (other than equities of redemption
under applicable foreclosure laws) to all of the material properties and
assets, real and personal, reflected on the consolidated statement of financial
condition of the Company as of August 31, 1999 included in the Company
Financial Statements or acquired after such date, other than properties sold by
the Company in the ordinary course of business, except (i) Liens for current
taxes not yet due or payable, (ii) pledges to secure deposits and other liens
incurred in the ordinary course of its banking business, (iii) such
imperfections of title, easements and encumbrances, if any, as are not material
in character, amount or extent and (iv) as reflected on the consolidated
statement of financial condition of the Company as of May 31, 1999 included in
the Company Financial Statements. All real and personal property which is
material to the Company's business and leased or licensed by the Company or a
Subsidiary of the Company is held pursuant to leases or licenses which are
valid and enforceable in accordance with their respective terms.
(y) Investment Company Act of 1940. The Company is not, and will
not become upon consummation of the transactions contemplated hereby and by the
Related Agreements, an "investment company" or an entity "controlled" by an
"investment company," as such terms are defined in the Investment Company Act
of 1940, as amended.
(z) Private Offering. Neither the Company nor any Person acting
on its behalf has taken or will take any action which might subject the
offering, issuance and exchange of the New Exchange Notes to the registration
requirements of the Securities Act or comparable provisions of any applicable
State securities laws.
(aa) Indebtedness Defaults. As of the date hereof and the Closing
Date, the Company is not in default under any Indebtedness Instrument (which
has not been waived).
-16-
<PAGE> 20
(bb) Solvency. The Company (i) is now generally paying its debts
as they mature, (ii) owns property which, at a fair valuation, is greater than
the sum of its indebtedness and (iii) has capital sufficient to carry on its
business in the ordinary course consistent with past practice.
(cc) Value Notes and Value Related Agreements.
(i) The Company has full corporate power and authority to perform
its obligations under the Value Related Agreements and the execution, delivery
and performance by the Company of the Value Related Documents have been duly
authorized by all necessary corporate action on the part of the Company, except
for the approval of the shareholders of the Company of the issuance of Common
Stock upon conversion of the Value Notes pursuant to the requirements of the
NASD. The Value Related Agreements have been duly executed and delivered by the
Company and constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with its terms, except (i) rights
to indemnity and contribution under the registration rights agreement for the
Value Note may be limited by applicable law, (ii) enforceability may be limited
by bankruptcy, insolvency, moratorium and similar laws affecting creditors'
rights generally and (iii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability.
(ii) Neither the execution and delivery of any of the Value
Related Agreements, nor the consummation of the transactions contemplated
thereby, nor compliance by the Company with any of the provisions thereof, (a)
does or will conflict with or result in a breach of any provisions of the
Certificate of Incorporation or Bylaws of the Company or the equivalent
documents of any Subsidiary of the Company, (b) violate, conflict with or
result in a breach of any term, condition or provision of, or constitute a
default (or any event which, with notice or lapse of time, or both, would
constitute a default) under or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
Lien upon any property or asset of the Company or a Subsidiary of the Company
pursuant to, any material note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which the
Company or a Subsidiary of the Company is a party, or by which any of their
respective properties or assets may be bound or affected, or (c) subject to the
compliance referred to in the succeeding sentence, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company or a
Subsidiary of the Company. Except for the approval of the shareholders of the
Company of the issuance of Common Stock upon conversion of the Value Notes
pursuant to the requirements of the NASD and actions by the Commission in
connection with the performance by the Company of its obligations under the
registration rights agreement for the Value Notes related to such shares of
Common Stock, no consent, approval, order or other authorization of any
Governmental Entity or of any third party is required by or on behalf of the
Company or a Subsidiary of the Company in connection with the execution,
delivery and performance of the Value Related Agreements.
-17-
<PAGE> 21
(iii) The securities being issued to Value Partners have been
authorized by all necessary corporate action on the part of the Company. When
issued pursuant to the terms of the Convertible Value Purchase Agreement, the
securities being issued to Value Partners will be duly authorized and validly
issued and will not be issued in violation of the preemptive rights of any
Person. The Value Notes and shares of Common Stock issued by the Company upon
conversion of the Value Notes, will be duly authorized, validly issued and
non-assessable at the time of issuance and will not be issued in violation of
the preemptive rights of any Person.
(dd) Disclosure. None of the representations and warranties of the
Company or any of the information or documents which have been Previously
Disclosed to the Holders pursuant hereto are false or misleading in any
material respect or contain any untrue statement of a material fact, or omit to
state any material fact required to be stated or necessary to make any such
information or document, at the time and in light of the circumstances, not
misleading. Copies of all documents referred to in this Section 3.1 are true,
correct and complete copies thereof and include all amendments, supplements and
modifications thereto and all waivers thereunder.
ARTICLE IV
CONDITIONS PRECEDENT TO THE CLOSING
SECTION 4.1 CONDITIONS TO OBLIGATIONS OF THE PARTIES. The
respective obligations of each of the parties hereto to fulfill their
obligations under Section 2.1 hereof at the Closing shall be subject to the
satisfaction or waiver prior to the Closing of the following conditions:
(a) All requirements prescribed by law which are necessary to the
consummation of the transactions contemplated by this Agreement shall have been
satisfied, including the entry of an effectiveness order by the Commission with
respect to the Form T-3 filed by the Company as to the issuance of the New
Exchange Notes.
(b) No party hereto shall be subject to any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(c) No statute, rule or regulation shall have been enacted,
entered, promulgated, interpreted, applied or enforced by any Governmental
Entity which prohibits, restricts or makes illegal consummation of any of the
transactions contemplated by this Agreement.
(d) The Company shall have consummated the sale of $14,000,000
principal amount of Value Notes to Value Partners.
-18-
<PAGE> 22
(e) The holders of not less than 92% principal amount of the Old
Notes shall have been entered into this Agreement.
SECTION 4.2 CONDITIONS TO THE OBLIGATIONS OF THE HOLDERS. The
obligations of the Holders to fulfill its obligations under Section 2.1 hereof
shall be subject to the satisfaction or waiver prior to the Closing of the
following conditions:
(a) Each of the representations and warranties of the Company
contained in this Agreement shall be true and correct in all material respects
as of the date of this Agreement and as of the Closing Date as if made on the
Closing Date (or on the date when made in the case of any representation or
warranty which specifically relates to an earlier date); the Company shall have
performed, in all material respects, each of its covenants and agreements
contained in this Agreement to be performed prior to the Closing; and the
Holders shall have received a certificate signed by the Chief Executive Officer
and the Chief Financial Officer of the Company, dated the Closing Date, to the
foregoing effect.
(b) The Company and the Trustee shall have executed the
Indenture.
(c) The Company shall have delivered to the Trustee for the
benefit of the Holders, opinions, addressed to the Holders and dated the
Closing Date, of King & Spalding and Franzen & Salzano special counsel to the
Company, with respect to the indicated matters set forth in Exhibit G hereto.
(e) No party to this Agreement (other than the Holders) shall be
in material breach of this Agreement unless such breach shall have been waived
in writing by each of the other parties to this Agreement.
(f) The Company shall have obtained in writing all consents of
third parties necessary to permit the consummation of the transactions
contemplated by this Agreement and the Related Agreements, as Previously
Disclosed pursuant to Section 3.1(f) hereof, and no such consent shall contain
any term or condition that the Holders reasonably deems to be materially
disadvantageous to the Company or the Holders.
(g) Each of City National Bank of West Virginia and Sovereign
Bancorp, Inc. shall have waived any adjustments to the terms of the stock
options issued to them pursuant to the Stock Option Agreement, dated May 29,
1998, between the Company and each such entity, that may be required pursuant
to Section 7 of such Stock Option Agreements as a result of (i) the issuance of
the New Exchange Notes or the conversion of a portion thereof to shares of
Common Stock in accordance with their terms and (ii) consummation of the
Exchange pursuant to this Agreement, in each case in form and substance
reasonably satisfactory to the Holders, and
-19-
<PAGE> 23
Sovereign Bank shall have waived the same pursuant to the Participation
Agreement, dated June 29, 1998, between it and the Company.
(i) The Company, the Trustee (in its capacity as Collateral Agent
for the Notes and the Convertible Notes) and the holders of the Value Notes
shall have entered into the Intercreditor Agreement.
SECTION 4.3 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company to fulfill its obligations under Section 2.1 hereof
shall be subject to the satisfaction or waiver prior to the Closing of the
following conditions:
(a) The Company shall have received from each Holder a Letter of
Representations.
(b) The Holders shall have delivered to the Old Notes to the
Exchange Agent.
(c) The Company shall have received (i) a counterpart to this
Agreement, duly executed and delivered by each Holders, and (ii) a counterpart
of each Related Agreement (other than the New Exchange Notes), substantially in
the form attached hereto as an exhibit, which shall have been duly executed and
delivered by the Holders.
(d) No party to this Agreement (other than the Company) shall be
in material breach of this Agreement unless such breach shall have been waived
in writing by each of the other parties to this Agreement.
(e) The Company shall have obtained in writing all consents of
third parties necessary to permit the consummation of the transactions
contemplated by this Agreement and the Related Agreements (other than the
consents referred to in Section 4.2(g) hereof) and no such consent shall
contain any term or condition that the Company reasonably deems to be
materially disadvantageous to the Company.
(f) The Company shall have received such other certificates,
opinions, documents and instruments related to the transactions contemplated
hereby as may have been reasonably required by the Company and are customary
for transactions of this type, and all corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement, shall be reasonably satisfactory
in form and substance to the Company and its counsel.
-20-
<PAGE> 24
ARTICLE V
COVENANTS
SECTION 5.1 RULE 144 AND RULE 144A REPORTING. With a view to
making available to holders of Securities the benefits of certain rules and
regulations of the Commission which may permit the sale of the Securities to
the public without registration, the Company agrees at all times to:
(a) make and keep public information available, as those terms
are understood and defined in Rules 144 and 144A under the Securities Act (or
any successors thereto); and
(b) use its reasonable best efforts to file with the Commission
in a timely manner all Securities Documents required to be filed by the Company
under the Securities Laws.
SECTION 5.2 STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay, extension or usury law or other
law which would prohibit or forgive the Company from paying all or any portion
of the principal of, premium, if any, or interest on the New Exchange Notes,
wherever enacted, now or at any time hereafter in force, or which may affect
the covenants or the performance of its obligations under the New Exchange
Notes, and the Company (to the extent it may lawfully do so) hereby expressly
waives all benefits or advantages of any such law.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 SURVIVAL OF PROVISIONS. The representations,
warranties, covenants and agreements of the Company and the Holders made herein
shall remain operative and in full force and effect regardless of (i) any
investigation made by or on behalf of the Holders or the Company, as the case
may be, (ii) acceptance of any of the Securities and payment by the Holders
therefor and retirement thereof, (iii) the transfer of any Securities or
interest therein by the Holders or (iv) any termination of this Agreement.
SECTION 6.2 TERMINATION. This Agreement may be terminated:
(a) by mutual agreement of the Company and the Holders;
(b) by the Company by written notice to the Holders if any of the
conditions specified in Sections 4.1 and 4.3 of this Agreement has not been met
or waived by it pursuant to the terms
-21-
<PAGE> 25
of this Agreement by 5:00 p.m., Eastern Time, on the Expiration Date, provided,
however, that the right to terminate this Agreement pursuant to this Section
6.2(b) shall not be available to the Company to the extent that any action by
the Company or failure by the Company to fulfill any obligation under this
Agreement has been a cause of, or resulted in, the failure of any one or more
of the conditions specified in Sections 4.1 and 4.3 of this Agreement not being
fulfilled by such date; or
(c) by the Trustee as agent for the Holders by written notice to
the Company if any of the conditions specified in Sections 4.1 and 4.2 of this
Agreement has not been met or waived by the Trustee pursuant to the terms of
this Agreement by the Expiration Date, provided, however, that the right to
terminate this Agreement pursuant to this Section 6.2(c) shall not be available
to the extent that any action by the Holders or failure by such Holders to
fulfill any obligation under this Agreement has been a cause of, or resulted
in, the failure of any one or more of the conditions specified in Sections 4.1
and 4.2 of this Agreement not being fulfilled by such date.
SECTION 6.3 WAIVER; AMENDMENTS.
No failure or delay on the part of the Company or the Holders in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to the Company or
the Holders at law or in equity. No waiver of or consent to any departure by
the Company or the Holders from any provision of this Agreement shall be
effective unless signed in writing by the party entitled to the benefit
thereof. Except as otherwise provided herein, no amendment, modification or
termination of any provision of this Agreement shall be effective unless signed
in writing by or on behalf of the Company and the Holders. Any amendment,
supplement or modification of or to any of this Agreement, any waiver of any
provision of this Agreement, and any consent to any departure from the terms of
any provision of this Agreement, shall be effective only in the specific
instance and for the specific purpose for which made or given. Except where
notice is specifically required by this Agreement, no notice to or demand on
any party hereto in any case shall entitle another party hereto to any other or
further notice or demand in similar or other circumstances.
SECTION 6.4 COMMUNICATIONS. All notices, demands and other
communications provided for or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, telex, telecopier, or air courier
guaranteeing overnight delivery:
(i) if to the Holders, by delivery in care of the
Trustee , Compliance Officer, Office of the General Counsel, 114 West
47th Street, New York, New York 10036-1531 Facsimile No. (212)
852-1306; and
-22-
<PAGE> 26
(ii) if to the Company, initially at 1000 Parkwood
Circle, Suite 600, Atlanta, Georgia 30339, Attention: Chief Financial
Officer; and thereafter at such other address notice of which is given
in accordance with this Section 6.4.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being sent by certified mail, return receipt requested, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied;
and on the next Business Day if timely delivered to an air courier guaranteeing
overnight delivery.
SECTION 6.5 COSTS, EXPENSES AND TAXES. The Company agrees to pay
(i) all costs and expenses incurred by it in connection with the negotiation,
preparation, typing, reproduction, execution, delivery and performance of this
Agreement and the Related Agreements and any amendment or supplement or
modification hereof or thereof (except to the extent otherwise provided in the
Registration Rights Agreement), including without limitation, attorneys fees
and expenses and all reasonable costs and expenses incurred by it in connection
with the Company's administration of this Agreement and any Related Agreement,
and (ii) the expenses of the Holders incurred in connection with the
transactions provided for herein, including reasonable fees and expenses
payable to counsel to the Holders in connection with the negotiation,
preparation, typing, reproduction, execution and delivery of this Agreement and
the Related Agreements, provided that such fees and expenses of counsel in this
clause (ii) shall not exceed $40,000. The Company shall pay all reasonable
costs and expenses (including, without limitation, attorneys' fees and
expenses), if any, incurred by the Holders in connection with any waiver,
amendment or modification of any provision of this Agreement or any Related
Agreement with respect to an obligation of, or requested by, the Company. In
addition, the Company shall pay any and all stamp, transfer and other similar
taxes payable in connection with the execution and delivery of this Agreement
or the original issuance of any of the Securities, and shall save and hold the
Holders harmless from and against any and all liabilities with respect to or
resulting from any delay in paying, or omission to pay, such taxes.
SECTION 6.6 EXECUTION IN COUNTERPARTS; FAX EXECUTION.
(a) This Agreement may be executed in any number of counterparts
and by different parties hereto on separate counterparts, each of which
counterparts, when so executed and delivered, shall be deemed to be an original
and all of which counterparts, taken together, shall constitute but one and the
same Agreement.
(b) For purposes of negotiating and finalizing this Agreement or
any Related Agreement (including any subsequent amendments thereto), any signed
document transmitted by facsimile machine ("FAX") shall be treated in all
manner and respects as an original document.
-23-
<PAGE> 27
The signature of any party by FAX shall be considered for these purposes as an
original signature. Any such FAX document shall be considered to have the same
binding legal effect as an original document. Each of the undersigned parties
hereby agrees that it will not raise the use of the FAX or the fact that any
signature or document was transmitted or communicated through the use of a FAX
as a defense to the formation of this Agreement or any Related Agreement.
SECTION 6.7 BINDING EFFECT; ASSIGNMENT. Prior to the Closing,
the rights and obligations of any Holders under this Agreement may not be
assigned to any other Person except with the prior written consent of the
Company, and after the Closing the rights and obligations of the Holders may be
assigned by such Holders to any Person purchasing Securities from the Holders
contemporaneously with such assignment (provided the rights so assigned shall
apply to the Securities so purchased). Any subsequent purchaser of New Exchange
Notes from a Holder shall be required to complete an Investor Representation
Letter stating that such purchaser is qualified to hold the New Exchange Notes
purchased. The rights and obligations of the Company under this Agreement may
not be assigned by the Company without the consent of the Holders. Except as
expressly provided in this Agreement, this Agreement shall not be construed so
as to confer any right or benefit upon any Person other than the parties to
this Agreement, and their respective successors and permitted assigns. This
Agreement shall be binding upon the Company and the Holders and their
respective permitted successors and assigns.
SECTION 6.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
SECTION 6.9 USURY.
All agreements between the Company and the holders of the New Exchange
Notes, whether now existing or hereafter arising and whether written or oral,
are hereby limited so that in no contingency, whether by reason of acceleration
of the maturity of the New Exchange Notes or otherwise, shall the interest
contracted for, charged, received, paid or agreed to be paid to the Holders
exceed the maximum amount permissible under the laws of the State of Minnesota
(hereinafter the "Applicable Law"). If, from any circumstance whatsoever,
interest would otherwise be payable to the holders of the New Exchange Notes in
excess of the maximum amount permissible under the Applicable Law, the interest
payable to the holders of the New Exchange Notes shall be reduced to the
maximum amount permissible under the Applicable Law, and if from any
circumstance the holders of the New Exchange Notes shall ever receive anything
of value deemed interest by the Applicable Law in excess of the maximum amount
permissible under the Applicable Law, an amount equal to the excessive interest
shall be applied to the reduction of the principal of the New Exchange Notes
and not to the payment of interest, or if such excessive amount of interest
exceeds the unpaid principal amount of the New Exchange Notes, such excess
shall be refunded to the Company. All interest paid or agreed to be
-24-
<PAGE> 28
paid to the holders of the New Exchange Notes shall, to the extent permitted by
the Applicable Law, be amortized, prorated, allocated and spread throughout the
full term of the New Exchange Notes (including any renewal or extension) until
payment in full of the principal so that the interest on the New Exchange Notes
for such full term shall not exceed the maximum amount permissible under the
Applicable Law. The Holders expressly disavows any intent to contract for,
charge or receive interest in an amount which exceeds the maximum amount
permissible under the Applicable Law. This paragraph as well as similar
paragraphs set forth in the New Exchange Notes and the Related Agreements shall
control all agreements between the Company and the holders of the New Exchange
Notes.
SECTION 6.10 SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability only without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 6.11 CONSTRUCTION. The Article and Section headings and
Table of Contents used or contained in this Agreement are for convenience of
reference only and shall not affect the construction of this Agreement. Section
and other references in this Agreement are to this Agreement unless otherwise
specified. In this Agreement, (i) the phrase "to the knowledge of the Company"
or words of such import shall mean all knowledge, including actual knowledge
and knowledge of matters which a reasonable person in such position knew or
should have known, of the respective directors and officers of the Company;
(ii) use of a particular gender shall be considered to represent the masculine,
feminine or neuter gender as appropriate; and (iii) the terms "hereof,"
"herein," "hereunder" and similar terms refer to this Agreement as a whole and
not to any particular provision. The Company represents and warrants to the
Holders that the WHEREAS recitals to this Agreement are true and accurate and
agrees that such recitals constitute an integral part of this Agreement.
SECTION 6.12 INTEGRATION. This Agreement (including documents
delivered pursuant hereto) and the Related Agreements constitute the entire
agreement among the parties with respect to the subject matter thereof and
supersede all prior agreements between the parties with respect to such subject
matter and there are no promises or undertakings with respect thereto not
expressly set forth or referred to herein or therein.
SECTION 6.13. NO THIRD PARTY BENEFICIARIES. This Agreement is
solely for the benefit of the Holders and its successors and assigns and any
subsequent registered holder of a New Exchange Note and nothing contained
herein shall be deemed to confer upon any other Person any right to insist on
or to enforce the performance or observance of any of the obligations contained
herein. All conditions to the obligations of the Holders to purchase New
Exchange Notes hereunder are imposed solely and exclusively for the benefit of
the Holders and its
-25-
<PAGE> 29
successors and assigns and no other Person shall have standing to require
satisfaction of such conditions in accordance with their terms and no other
Person shall under any circumstances be deemed to be a beneficiary of such
conditions.
SECTION 6.14. REPRESENTATION BY COUNSEL. The Company hereby
represents that it has been represented by competent counsel of its choice in
the negotiation and execution of this Agreement and the Related Agreements;
that it has read and fully understands the terms hereof and thereof; that the
Company and its counsel have been afforded an opportunity to review, negotiate
and modify the terms of this Agreement and the Related Agreements and that it
intends to be bound by the terms hereof and thereof.
SECTION 6.15. WAIVER OF CLAIMS. The Company hereby acknowledges,
agrees and affirms that it possesses no claims, defenses, offsets, recoupment
or counterclaims of any kind or nature against or with respect to the
enforcement of this Agreement or any Related Agreement (collectively, the
"Claims"), nor does the Company now have knowledge of any facts that would or
might give rise to any Claims. If facts now exist which would or could give
rise to any Claim against or with respect to the enforcement of this Agreement
or any Related Agreement, the Company hereby unconditionally, irrevocably and
unequivocally waives and fully releases any and all such Claims as if such
Claims were the subject of a lawsuit, adjudicated to final judgment from which
no appeal could be taken and therein dismissed with prejudice.
SECTION 6.16 POWER OF ATTORNEY. Each Holder executing this
Agreement hereby appoints the Trustee as the Holder's attorney-in-fact for the
purpose of carrying out the provisions of this Agreement and taking any action
and executing any instrument which the Trustee may deem necessary or advisable
to accomplish the purposes hereof now or in the future, including, but not
limited to, the Registration Rights Agreement, the Intercreditor Agreement, the
QIB Security Agreement or Non-QIB Security Agreement (as applicable) and
financing statements related to the collateral pledges under the Security
Agreements and any amendments, supplements or other related actions to any of
the foregoing which is consistent with the terms of this Agreement, which
appointment is irrevocable and coupled with an interest.
ARTICLE VII
INDEMNIFICATION; SET OFF
SECTION 7.1. INDEMNIFICATION. The Company hereby agrees to
reimburse and indemnify each holder of a New Exchange Note and its respective
agents, employees and assigns (collectively, the "Indemnified Parties") from
and against any and all losses, liabilities, claims, damages, expenses,
obligations, penalties, actions, judgments, suits, costs or disbursements of
any kind or nature whatsoever (including, without limitation, the fees and
disbursements of counsel for such Indemnified Party in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not such Indemnified Party shall be
<PAGE> 30
designated a party thereto) that may at any time be imposed on, asserted
against or incurred by such Indemnified Party as a result of, or arising out
of, or in any way related to or by reason of, this Agreement or any Related
Agreement, any transaction from time to time contemplated hereby or thereby, or
any transaction financed in whole or in part or directly or indirectly with the
proceeds of any New Exchange Note (and without in any way limiting the
generality of the foregoing, including any exercise by a holder of a Note of
any of its rights or remedies under this Agreement or any Related Agreement),
but excluding any such losses, liabilities, claims, damages, expenses,
obligations, penalties, actions, judgments, suits, costs or disbursements
resulting solely from the gross negligence or willful misconduct of such
Indemnified Party, as finally determined by a court of competent jurisdiction.
If and to the extent that the foregoing obligations of the Company under this
Section 7.1, or any other indemnification obligation of the Company hereunder
or under any Related Agreement, are unenforceable for any reason, the Company
hereby agrees to make the maximum contribution to the payment and satisfaction
of such obligations which is permissible under applicable law.
SECTION 7.2. SET-OFF. The Company hereby agrees that if any
obligation or liability of the Company under this Agreement or any Related
Agreement shall be due and payable (by acceleration or otherwise) after the
occurrence of an Event of Default and during the continuation thereof, a holder
of a New Exchange Note shall have the right, without notice to the Company, to
set-off against and to appropriate and apply to such obligation or liability of
the Company any obligation of any nature owing to the Company, including but
not limited to all deposits (whether time or demand, general or special,
provisionally credited or finally credited, whether or not evidenced by a
certificate of deposit) now or hereafter maintained by the Company with a
Holders. Such right shall be absolute and unconditional in all circumstances
and, without limitation, shall exist whether or not a holder of New Exchange
Note or any other Person shall have given notice or made any demand to the
Company or any other Person, whether such obligation owed to the Company is
contingent, absolute, matured or unmatured (it being agreed that a holder of a
New Exchange Note may deem such obligation to be then due and payable at the
time of such setoff), and regardless of the existence or adequacy of any
collateral, guaranty or any other security, right or remedy available to a
Holders or any other Person. The rights provided by this Section 7.2 are in
addition to any other rights of set-off and all other rights and remedies which
a holder of a Note may otherwise have under this Agreement, any Related
Agreement, at law or in equity or otherwise, and nothing in this Agreement or
any Related Agreement shall be deemed a waiver or prohibition of or restriction
on the rights of set-off or any other rights of any such Person.
<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
ALTIVA FINANCIAL CORPORATION
By: /s/ Edward B. Meyercord
-----------------------------------------------
Name: Edward B. Meyercord
Title: Chairman and Chief Executive Officer
<PAGE> 32
HOLDERS (BY UNITED STATES TRUST COMPANY OF NEW YORK AS ATTORNEY-IN-FACT)
Signature: /s/ Glenn E. Mitchell
----------------------------------------------------
Name (Print): Glenn E. Mitchell
Title: Vice President
<PAGE> 1
EXHIBIT 10.5
THIS AGREEMENT IS SUBJECT TO THE TERMS AND CONDITIONS OF THE INTERCREDITOR AND
COLLATERAL AND SHARING AGREEMENT DATED FEBRUARY 29, 2000 REFERRED TO HEREIN AS
THE COLLATERAL SHARING AGREEMENT, AS THE SAME MAY BE AMENDED, MODIFIED OR
OTHERWISE SUPPLEMENTED FROM TIME TO TIME, BY AND AMONG ALTIVA FINANCIAL
CORPORATION, VALUE PARTNERS, LTD., AS ORIGINAL PURCHASER OF CERTAIN CONVERTIBLE
NOTES ISSUED BY ALTIVA, AND UNITED STATES TRUST COMPANY OF NEW YORK, AS AGENT
FOR THE HOLDERS OF SUCH CONVERTIBLE NOTES AND THE HOLDERS OF THE NOTES ISSUED
PURSUANT TO THE EXCHANGE AGREEMENT, AS DEFINED HEREIN.
PLEDGE AND SECURITY AGREEMENT
This PLEDGE and SECURITY AGREEMENT, dated as of March 17, 2000 (as
amended, supplemented or otherwise modified from time to time, this "Pledge
Agreement"), is entered into by ALTIVA FINANCIAL CORPORATION, a Delaware
corporation (the "Borrower"), having its principal place of business at 1000
Parkwood Circle, Suite 600, Atlanta, Georgia 30339 and in favor of United
States Trust Company of New York, as Collateral Agent, and the Noteholders, as
defined herein. All Exhibits attached hereto are by this reference incorporated
herein.
W I T N E S S E T H
WHEREAS, on November 26, 1996 and in October 1997, the Borrower
collectively issued $80,000,000.00 principal amount of 12 1/2% Senior
Subordinated Notes Due 2001 to certain holders thereof, which notes were
exchanged for $45,100,000.00 principal amount of 12 1/2% Subordinated Notes due
2001 (the "Existing Subordinated Notes") and 42,500 shares of Borrower's Series
A Preferred Stock, par value $.01; and
WHEREAS, the Borrower has entered into an Exchange Agreement by and
between the Borrower and the Trustee on behalf of certain holders of 96.8% of
the Existing Subordinated Notes, who have exchanged their Existing Subordinated
notes pursuant to the Exchange Agreement. Only holders of an Existing
Subordinated Note who are a QIB (as defined herein) and who exchange an
Existing Subordinated Note for a Note (as hereinafter defined) are
beneficiaries of this Agreement; and
WHEREAS, because the Collateral issued pursuant to the Securitizations
may only be pledged to a QIB, in order to induce the holders of the Exchange
Notes to enter into the Exchange Agreement, (a) the Borrower and the holders of
the Replacement Non-QIB Notes have entered into, as of the date hereof, that
certain Stock Pledge Agreement, pursuant to which a first lien and security
interest has been granted in the Pledged Shares; and (b) the Borrower and the
holders of the Notes (all QIBs) have entered into this Pledge Agreement,
pursuant to which (i) a
PLEDGE AND SECURITY AGREEMENT PAGE 1
<PAGE> 2
first lien and security interest has been granted on all Collateral, other than
the Pledged Shares, (ii) a subordinated lien has been granted on the Pledged
Shares, and (iii) a first priority lien in the Textron Collateral, as defined
herein, pledged by the Borrower to Textron Financial Corporation ("Textron"),
pursuant to the Textron Documents, as defined herein, shall arise if and when
the security interest of Textron therein is extinguished; and
WHEREAS, on the date hereof, the Borrower and Value Partners, Ltd.
have entered into that certain Amended and Restated Secured Convertible Senior
Note Purchase Agreement (the "Convertible Note Agreement") (which Convertible
Note Agreement amends and restates that certain Note Purchase Agreement dated
August 31, 1999, as amended and/or restated December 13, 1999, December 31,
1999, February 2, 2000 and February 11, 2000) pursuant to which Value Partners,
Ltd. has been issued $14,000,000.00 in principal amount of 12% Secured Senior
Convertible Senior Notes due 2006 (the "Convertible Notes"); and
WHEREAS, the Borrower has granted (or affirmed and renewed prior
grants) to Value Partners as agent for the account of the lenders under the
Convertible Note Agreement a pari passu security interest in the Collateral
pledged to the holders of the Notes pursuant to this Agreement (including the
Textron Collateral); and
WHEREAS, the Borrower, the Value Partners, Ltd., and the Collateral
Agent, as agent for the holders of the Convertible Notes, the holders of the
Notes and the holders of the Replacement Non-QIB Notes have entered into the
Collateral Sharing Agreement (as defined below) to set forth the interests of
the respective parties thereto in the Collateral (as defined below); and
NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Borrower, and the holders of the Notes hereby agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used herein, the following terms shall have
the following meanings:
"Accounts" shall have such meaning as such term is defined in Article
9 of the UCC, and shall include, without limitation, each of the following,
whether now owned or hereafter acquired by the Borrower: (a) all accounts
receivable, contract rights, book debts, notes, drafts and other obligations or
indebtedness owing the Borrower (including, without limitation, any such
obligation that might be characterized as an account, contract right, or
general intangible under the UCC in effect in any jurisdiction) and all monies
due to or to become due to the Borrower under all contracts for the sale,
lease, or exchange of goods or other property (whether or not earned by
performance on the part of the Borrower), in each case whether now in existence
or hereafter arising or acquired, including, without limitation, the right to
receive the proceeds thereof; (b) all rights of the Borrower to receive any
payment of money or other form of
PLEDGE AND SECURITY AGREEMENT PAGE 2
<PAGE> 3
consideration; (c) all security pledged, assigned or granted to or held by the
Borrower to secure any of the foregoing; and (d) all guaranties of, or
indemnifications with respect to, any of the foregoing.
"Additional Collateral" means property acceptable to the registered
holders of not less than a majority in aggregate principal amount of the Notes
and the Exchange Notes, considered as a single class, then outstanding in
writing, in their sole and absolute discretion.
"Borrower" shall have the meaning specified in the introductory
paragraph hereof.
"Business Day" means any day other than Saturday, Sunday or other day
on which banking institutions in Atlanta, Georgia of New York, New York are
authorized or required by law or executive order to be closed.
"Certificates" means any security, chattel paper, certificated
security or instrument, as from time to time amended, modified or supplemented,
including the following: any Residual Interest Instrument, any Interest Only
Instrument, the Senior Trust Certificate, the Pledged Shares and a Certificated
Security as defined in Section 8-102 of the UCC.
"Clearing Corporation" shall have the meaning given such term in
Section 8-102(a)(5) of the UCC.
"Collateral" shall have the meaning specified in Section 2.1.
"Collateral Agent" means United States Trust Company of New York in
its capacity as agent of the Noteholders for the purposes set forth in Section
2.2 hereof and as set forth in the Collateral Sharing Agreement, and any
successors or assigns thereof under the Collateral Agreement.
"Collateral Sharing Agreement" shall mean that certain Intercreditor
and Collateral Sharing Agreement, in the form attached hereto as Exhibit "A"
and by this reference incorporated herein.
"Convertible Notes" has the meaning set forth in the fifth recital
paragraph hereof.
"Convertible Note Pledge Agreement" shall mean the Amended and
Restated Pledge and Security Agreement between the Borrower, Value Partners,
Ltd., as initial holder of the Convertible Notes, and any subsequent registered
owners of the Convertible Notes, together with any amendments, modifications,
supplements or restatements hereof.
"Default" has the meaning set forth in Section 1.1 of the Indenture.
"Delivery" means a delivery of Collateral to the Collateral Agent in
accordance with this Pledge Agreement, including Section 2.2 hereof.
PLEDGE AND SECURITY AGREEMENT PAGE 3
<PAGE> 4
"Event of Default" has the meaning set forth in Section 5.1 of the
Indenture.
"Exchange Agreement" means the Exchange Agreement, dated as of March
17, 2000, by and among the Borrower and the holders of Existing Subordinated
Notes who elect to enter into the Exchange Agreement, together with any
amendments, supplements, modifications and restatements thereof.
"Exchange Pledge Agreements" means this Pledge Agreement and that
certain Stock Pledge Agreement dated as of the date hereof pursuant to which
the holders of the Replacement Non-QIB Notes are granted a first lien in the
Pledged Shares, each as governed by the Collateral Sharing Agreement.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time, consistently applied.
"Governmental Authority" means any nation, government, state, or any
political subdivision thereof, or any court, stock exchange, entity or agency
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Grantor Trust Right" means all rights of the Borrower, including the
right to payments to the Borrower, in the Sale Agreement executed in relation
to Mego Mortgage Home Loan Trust 1996-3, including, without limitation, the
rights set forth in Section 4.05(b)(xvii) of such Sale Agreement.
"Indebtedness" has the meaning set forth in Section 1.1 of the
Indenture.
"Indenture" means the Indenture, dated as of February 29, 2000,
between the Borrower and United States Trust Company of New York, as Trustee,
together with any amendments, modifications, supplements or restatements
thereof.
"Interest Only Instrument(s)" shall, as to that particular
Certificate, have the meaning ascribed to the term "Class S Certificate",
"Class IS Certificate, "Class IIS Certificate" or a similar phrase describing
an interest only security in the respective Sale Agreement arising from the
Securitization pursuant to which such security is issued, which security
represents the undivided interest of the Borrower in all or a portion of the
interest payments due on certain loans securitized in that Securitization.
"Loan Documents" means, collectively, the Exchange Agreement, the
Notes, this Pledge Agreement, the Collateral Sharing Agreement, the
Registration Rights Agreements and any other documents evidencing or relating
to the Notes or the Collateral, the Additional Collateral or any such security
which may now or hereafter be given as further security for or in connection
with the Notes.
PLEDGE AND SECURITY AGREEMENT PAGE 4
<PAGE> 5
"Majority Holders" means the registered holder of not less than fifty
percent (50%) in aggregate principal amount of the Notes then outstanding
(except to the extent that a beneficial owner is treated as a registered holder
pursuant to Section 14.16 hereof).
"Majority QIB Holders" means the registered holders of not less than
fifty percent (50%) in aggregate principal amount of the Notes and Convertible
Notes, considered as a single class, then outstanding (except to the extent
that beneficial owners are treated as registered holders pursuant to Section
14.16 hereof).
"Noteholder" shall mean the holders of the Notes and any subsequent
registered holder of the Notes sold, assigned or otherwise transferred in
accordance with the Indenture.
"Notes" shall mean the notes issued pursuant to the Exchange Agreement
and the Indenture to those holders of Existing Subordinated Notes who are QIBs
and who exchanged their Existing Subordinated Notes pursuant to the Exchange
Agreement, together with any amendments, modifications, supplements or
restatements thereof.
"Outstanding" or "outstanding" has the meaning to it given in the
Indenture.
"Person" means any individual, partnership, corporation, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization, or governmental entity (or any department, agency
or political subdivision thereof), or any other entity.
"Pledge Agreement" shall have the meaning specified in the
introductory paragraph hereof, as amended, modified, extended, renewed and
increased from time to time.
"Pledged Shares" shall mean any and all shares of stock or other
evidence of equity or ownership interest of the Borrower in The Money Centre,
Inc. (either as record owner or beneficially), including but not limited to
those shares set forth on Exhibit "D" attached hereto and by this reference
incorporated herein, including any such interests which may be acquired after
the date hereof and the certificates or stock representing all such items. This
shall include all of the issued and outstanding shares of capital stock of The
Money Centre, Inc. in existence until expiration of the Pledge Agreement.
"QIBs" shall mean a Qualified Institutional Buyer under Rule 144A of
the Securities Act.
"Quarter" means any fiscal quarter ended on the last day of the months
of February, May, August and November.
"Registration Rights Agreement" shall have the meaning set forth in
the Exchange Agreement.
"Replacement Non-QIB Notes" means those notes issued pursuant to the
Exchange Agreement and the Indenture to those holders of Existing Subordinated
Notes who are not QIBs and who exchanged their existing Subordinated Notes
pursuant to the Exchange Agreement, together with any amendments,
modifications, supplements or restatements thereof.
PLEDGE AND SECURITY AGREEMENT PAGE 5
<PAGE> 6
"Replacement Non-QIB Pledge Agreement" means the Stock Pledge
Agreement between the Borrower and the Collateral Agent in favor of the Holders
of the Replacement Non-QIB Notes, together with any amendments, modifications,
supplements or reinstatements thereof.
"Residual Interest Instrument(s)" shall, as to that particular
Certificate, have the meaning ascribed to the term "Class R Certificate",
"Residual Interest Instrument", "Residual Certificate", "Residual Instrument"
or a similar phrase describing a certificated residual interest in the Sale
Agreement arising from the Securitization pursuant to which such security is
issued, which security represents the undivided residual interest of the
holder, including in all or a portion of the interest and principal payments
due on certain loans securitized in that Securitization. Neither the Grantor
Trust Right nor the Senior Trust Certificate are Residual Interest Instruments.
"Sale Agreement" means the respective Pooling and Servicing
Agreement, Sale and Servicing Agreement or similar agreement, together with
related agreements, including trust agreements and indentures, which create and
grant rights in Certificates and the Grantor Trust Right, entered into or
otherwise issued in relation to a particular Securitization.
"Securities Act" means the Securities Act of 1933, as now in effect
and as hereafter amended from time to time.
"Securitization" means the respective securitization as set forth on
Exhibit "E" hereto and by this reference incorporated herein.
"Senior Trust Certificate" means that certain 125 Home Loan Owner
Trust 1998-1, Senior Trust Certificate.
"Textron" shall have the meaning specified in the fourth recital
paragraph hereof.
"Textron Collateral" means those Certificates and all other rights
presently pledged to Textron as described in Exhibit "F" attached hereto and by
this reference incorporated herein.
"Textron Documents" means that certain Credit Agreement dated as of
October 27, 1997 by and between Textron, as agent, and the Borrower, that
certain note as of the same date issued to the lenders under such Credit
Agreement and all related documents, including that certain Security Agreement
dated as of October 27, 1997, financing statements and transfer powers, all as
amended, supplemented or otherwise modified.
"UCC" means the Uniform Commercial Code as in effect in the State of
New York; provided, that if by mandatory provisions of law, the perfection or
effect of perfection or non-perfection of the security interest in any
Collateral to which this Pledge Agreement relates is governed by the Uniform
Commercial Code as in effect on or after the date hereof in any other
jurisdiction, UCC means the Uniform Commercial Code as in effect in such other
jurisdiction for
PLEDGE AND SECURITY AGREEMENT PAGE 6
<PAGE> 7
purposes of the provisions hereof relating to such perfection or the effect of
perfection or non-perfection.
"Uncertificated Security" shall have the meaning given such term in
Section 8-102(a)(18) of the UCC.
ARTICLE II
PLEDGE AND DELIVERY OF COLLATERAL
MANAGEMENT OF COLLATERAL
2.1 Security. Subject to the rights of the holders of the
Convertible Notes set forth in the Convertible Note Pledge Agreement and to the
rights of the holders of the Replacement Non-QIB Noteholders in the Pledged
Shares set forth in the Replacement Non-QIB Note Pledge Agreement, all as
governed by the Collateral Sharing Agreement, as security for the payment
(whether at the stated maturity, by acceleration or otherwise) of all
obligations, liabilities and indebtedness of the Borrower to the Noteholders,
whether now or hereafter owing or existing, arising under or relating to this
Pledge Agreement, the Notes and the other Loan Documents, and for the payment,
performance and discharge of all other obligations or undertakings now or
hereafter made for the benefit of the Noteholders under this Pledge Agreement,
the Notes, the other Loan Documents or under any other agreement, promissory
note or undertaking now existing or hereafter entered into by the Borrower with
or to the Noteholders pursuant to the terms hereof, including any guaranty or
surety obligations of the Borrower owed to the Noteholders arising under or
relating to the Pledge Agreement, the Notes and the other Loan Documents, the
Borrower hereby pledges, assigns, transfers and delivers to the Noteholders a
continuing first priority lien and security interest (except as noted below or,
in the case of Additional Collateral, as otherwise agreed by the Majority QIB
Holders) in all of the Borrower's rights, title and interest in, to and under:
(a) the Certificates representing the Collateral; (b) the Grantor Trust Right,
subject to the Securitizations; (c) the Pledged Shares and Certificates; (d)
any other property of the Borrower held by the Collateral Agent, the
Replacement Non-QIB Noteholders or Value Partners, Ltd. on behalf of the
Noteholders arising under or relating to the Loan Documents, from time to time,
or securing any other obligation of the Borrower to the Noteholders or any of
their respective affiliates; (e) Additional Collateral; and (f) all proceeds,
payments, income, products and profits derived from or related to the
above-described property (all of the foregoing are collectively referred to
herein as the "Collateral"). The agreements and related documents evidencing
the Grantor Trust Right and the Certificates, as well as related documents
comprising such Collateral are set forth on Exhibit "C". The Pledged Shares are
described in Exhibit "D" and the Residual Interest Instruments, Senior Trust
Certificate and Interest Only Instruments described on Exhibit "C" and Exhibit
"F" are Certificates, all of which are Collateral.
The Collateral shall include all rights of the Borrower related to the
Collateral, the Additional Collateral and any other Collateral pledged pursuant
to the terms hereof, including the following:
PLEDGE AND SECURITY AGREEMENT PAGE 7
<PAGE> 8
(a) Cash Proceeds. All rights to receive the payment of money in
respect of the Collateral, including the Certificates and Grantor Trust Right.
(b) Chattel Paper, Instruments, etc. All chattel paper,
securities, uncertificated securities, instruments, non-negotiable instruments,
negotiable instruments, investment property, general intangibles, documents (as
those terms are defined in the UCC), Accounts and Certificates evidencing or
with respect to any of the Collateral.
(c) Deposit Accounts. All rights to payments under the
Collateral, including payments due to the holders of Certificates and the
Grantor Trust Right from the accounts of the trustee (or other Person) into
which funds to be payable under Certificates and the Grantor Trust Right are
deposited or held under a Securitization, and all money, cash and cash
equivalents of the Borrower, in each case arising from payments with respect to
any of the Collateral, including the Certificates and the Grantor Trust Right
or other Collateral.
(d) Collateral. All collateral granted by third party obligors
to, or held by, the Borrower with respect to the Collateral, including the
Certificates and the Grantor Trust Right.
(e) Books and Records. All books and records, including books of
account and ledgers of every kind and nature, all electronically recorded data
(including all computer programs, disks, tapes, electronic data processing
media and software used in connection with maintaining the Borrower's books and
records), all files and correspondence and all receptacles and containers for
the foregoing, all with respect to the Collateral, including Certificates and
the Grantor Trust Right.
(f) Cash. All cash and other property held under this Pledge
Agreement.
(g) Miscellaneous. All right, title, interest in, to and under
the clean-up call provisions, including as contained in Section 9.01 of each of
the Sale Agreement with respect to the subject Securitization, and all
proceeds, payments and income derived from or relating thereto.
(h) Proceeds and Products. All proceeds and products of the
Collateral, to the extent not included in the foregoing, including;
(i) all distributions arising from and pursuant to the
designated trust agreements or other Securitization agreements
(including Sales Agreements) with respect to the Collateral,
(ii) all other proceeds of insurance and guarantees, if
any, with respect to the Collateral provided by MBIA Insurance
Corporation, the Federal Housing Administration or any other Person
providing coverage for loss or diminution in value of the Collateral;
PLEDGE AND SECURITY AGREEMENT PAGE 8
<PAGE> 9
(iii) all other proceeds from the liquidation or other
recovery (if any) of loans relating to the Collateral;
(iv) all "proceeds", as that term is defined in Section
9-306 of the UCC;
(v) all cash, securities, dividends, increases,
distributions and profits received therefrom or in connection
therewith, including distributions or payments in partial or complete
liquidation or redemption, or as a result of reclassifications,
readjustments, reorganizations or changes in the capital structure of
the issuer thereof and any other property at any time and from time to
time received, receivable or otherwise distributed or delivered to the
Noteholders or the Collateral Agent on behalf of the Noteholders, and
all rights and privileges pertaining thereto;
(vi) all additional shares of stock of any issuer of any
Certificate from time to time acquired by the Borrower in any manner,
and all dividends, cash, instruments and other property from time to
time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such shares;
(vii) all securities hereafter delivered to Collateral
Agent in substitution for, or in addition to, any of the foregoing,
all certificates representing or evidencing such securities, and all
cash, securities, instruments, documents, dividends, increases,
distributions and profits received therefrom, and any other property
at any time and from time to time received by, receivable by or
otherwise distributed or delivered to the Collateral Agent in respect
of or in exchange for any or all of the property described;
(viii) all subscriptions, warrants, options and any other
rights issued now or hereafter by the issuer of the Certificates or
any other person whatsoever upon or in connection with the
Certificates and any part of the Collateral; and
(ix) all products and proceeds of the foregoing and all
general intangibles and contract rights related thereto, including
without limitation, all revenues, distributions, dividends, property,
registration rights, contract rights and other rights and interests
that Borrower is, or may hereafter become, entitled to receive on
account of any collateral described above.
Borrower shall forthwith deliver to the Collateral Agent on behalf of the
Noteholders all subscriptions, warrants, options and all such other rights, and
upon delivery to the Collateral Agent, the Collateral Agent shall hold, on
behalf of the Noteholders, such subscriptions, warrants, options and other
rights as Collateral pledged to secure the obligations of Borrower, provided,
however, that if the registered holders of not less than fifty percent (50%) in
aggregate principal amount of the Notes, Convertible Notes and Replacement
Non-QIB Notes, considered as a single class, then outstanding, to whom such
collateral is pledged determine, in their sole discretion, that the value of
any such subscriptions, warrants, options or other rights shall terminate,
expire or be materially reduced in value by holding the same as Collateral,
such
PLEDGE AND SECURITY AGREEMENT PAGE 9
<PAGE> 10
Persons shall have the right (but not the obligation), in their sole
discretion, to sell or exercise the same; and if exercised, then the monies
disbursed by the Collateral Agent in connection therewith shall become part of
the Collateral and all of the stock, securities, evidences of indebtedness and
other items so acquired shall become part of the Collateral;
The Borrower will pay all filing, recording, search and other expenses
reasonably incurred by the Collateral Agent or the Noteholders with respect to
perfection of the Noteholders' security interest under this Pledge Agreement
and the confirmation of the priority of the Noteholders' security interest in
the Collateral.
2.2 Delivery of Collateral.
(a) Delivery of Collateral to the Collateral Agent under this Pledge
Agreement shall be made in the following manner: (i) in the case of cash,
including proceeds on the Collateral and cash which constitutes Additional
Collateral, by wire transfer or other method acceptable to the Collateral Agent
of immediately available funds; (ii) in the case of a Certificate (or similar
property perfected by possession), by the physical delivery thereof evidencing
such Collateral to the Collateral Agent or its designee, and either, at the
election of the Majority QIB Holders (A) registered in the name of a Noteholder
or holder of Convertible Notes as designated by the Majority QIB Holders (which
shall be Value Partners, Ltd. unless otherwise consented to by Value Partners,
Ltd.), and (B) in all other instances, in suitable form for delivery and
transfer, accompanied by duly executed instruments of transfer or assignment in
blank or such other documentation as may be necessary to effect transfer to the
Noteholders and holder of Convertible Notes, whereupon, at the election of the
Majority QIB Holders, the Collateral Agent may take such steps as it deems
necessary to effect the recordation or re-registration of such Collateral in
the name designated by the Majority QIB Holders (which shall be in the name of
Value Partners, Ltd. so long as it is a Noteholder or holder of Convertible
Notes unless otherwise consented to by Value Partners, Ltd.) (iii) with respect
to an Uncertificated Security by registration in the name of Value Partners,
Ltd. on behalf of the Noteholders, whenever possible, and in all other
instances (other than an Uncertificated Security credited on the books of a
Clearing Corporation), the Borrower shall cause the issuer of such
Uncertificated Security to duly authorize and execute, and deliver to the
Noteholders, an agreement for the benefit of the Noteholders substantially in
the form of Exhibit "G" hereto (appropriately completed to the satisfaction of
the Collateral Agent and with such modifications, if any, as shall be
satisfactory to the Collateral Agent) pursuant to which such issuer agrees to
comply with any and all instructions originated by the Collateral Agent for the
account of the Noteholders without further consent by the registered owner and
not to comply with instructions regarding such Uncertificated Security
originated by any other Person other than a court of competent jurisdiction
(Exhibit "G" shall be executed as to the Grantor Trust Right, even if not an
Uncertificated Security): (iv) with respect to a certificated security (as
defined in the UCC) or Uncertificated Security credited on the books of a
Clearing Corporation (including a Federal Reserve Bank, Participants Trust
Company or The Depository Trust Company), the Borrower shall promptly notify
the Collateral Agent thereof and shall promptly take all actions (x) required
(i) to comply with the applicable rules of such Clearing Corporation and (ii)
to perfect the security interest of the Noteholders under applicable law
(including, in any event, under Sections
PLEDGE AND SECURITY AGREEMENT PAGE 10
<PAGE> 11
9-115 (4)(a) and (b), 9-115 (1)(e) and 8-106(d) of the UCC) and (y) as the
Collateral Agent deems necessary or desirable to effect the foregoing; and (v)
in the case of any other Collateral (such Collateral to be subject to the
written approval of the Collateral Agent, which approval may be withheld in the
sole discretion of the Collateral Agent), in such manner as the Collateral
Agent shall agree to in writing. Except as otherwise provided herein or, in the
case of Additional Collateral, as otherwise agreed by the Collateral Agent in
accepting the same, all Collateral shall be delivered free and clear of all
liens and security interests other than the lien and security interest created
in favor of the Noteholders under this Pledge Agreement and as provided in the
Convertible Note Pledge Agreement, the Replacement Non-QIB Pledge Agreement and
the Collateral Sharing Agreement.
(b) In addition to the actions required to be taken pursuant to
preceding Section 2.2(a), the Borrower shall take the following additional
actions with respect to the Collateral:
(i) with respect to all Collateral of such Borrower
whereby or with respect to which the Collateral Agent for the account of the
Noteholders may obtain "control" thereof within the meaning of Section 8-106 of
the UCC (or under any other provision of the UCC as the same may be amended or
supplemented from time to time, or under the laws of any relevant State other
than the State of Maryland), the Borrower shall take all actions as may be
requested from time to time by the Collateral Agent so that "control" of such
Collateral is obtained and at all times held by the Collateral Agent (other
than the Certificates registered in the name of Value Partners, Ltd., in which
case control need only be obtained by Value Partners, Ltd.); and
(ii) Borrower shall from time to time cause appropriate
financing statements (on Form UCC-1 or other appropriate form) under the
Uniform Commercial Code as in effect in the various relevant states, covering
all Collateral hereunder (with the form of such financing statements to be
satisfactory to the Noteholders), to be filed in the relevant filing offices so
that at all times the Noteholders have a security interest in all Collateral
which is perfected by the filing of such financing statements (in each case to
the maximum extent perfection by filing may be obtained under the laws of the
relevant states, including, without limitation, Section 9-115(4)(b) of the
UCC).
(c) Pursuant to the Collateral Sharing Agreement, the Collateral
Agent is appointed agent of the Noteholders, for the purpose of retaining
physical possession of the Collateral which may be perfected by possession and
as to all other actions permitted in the Collateral Sharing Agreement,
including enforcement of rights and remedies of the Noteholders.
2.3 Reserved.
2.4 Notice, Registration and Consents.
On or prior to the date a Certificate, the Grantor Trust Right or any
other property becomes or is to become Collateral, the Borrower shall:
PLEDGE AND SECURITY AGREEMENT PAGE 11
<PAGE> 12
(a) obtain all requisite consents necessary to provide to the
Noteholders the rights granted in this Pledge Agreement, including the grant
and perfection of the Noteholders of a security interest in such Collateral
and, in the case of registered or certificated Collateral, to (at the sole
discretion of the Majority QIB Holders) deliver the Certificates with duly
endorsed powers in blank or deliver the Certificates or, in the discretion of
the Majority QIB Holders, cause the registration thereof (on the books of the
Securitization trustee, certificate transfer agent and registrar or similar
Person) in the name of Value Partners, Ltd. (or such other person as consented
to by Value Partners, Ltd. and if Value Partners Ltd. is no longer a Noteholder
or Convertible Noteholder by the Majority QIB Holders) on behalf of the
Noteholders as provided in Section 2.2(a); and
(b) provide all requisite notices necessary to provide to the
Noteholders the rights granted in this Pledge Agreement, including the grant
and perfection of the Noteholders' security interest in such Collateral,
including the notice set forth in Exhibit "G" attached hereto and by this
reference incorporated herein.
Notices and consents shall include notices to and consents of the
indenture trustee and the certificate transfer agent and registrar of any
Securitization.
2.5 Reserved.
2.6 Shared Collateral and Textron Collateral.
(a) Pursuant to the Collateral Sharing Agreement; (i) the lien
granted the holders of the Notes by the Borrower under this Pledge Agreements
is pari passu with the lien in the Collateral granted Value Partners or any
successor thereto on behalf of the holders of Convertible Notes; which pari
passu lien shall constitute a first lien and security interest on all
Collateral except the Pledged Shares and a subordinated lien on the Pledged
Shares subject only to the first lien thereon granted to the holders of the
Replacement Non-QIB Notes in the Exchange Pledge Agreements, as set forth
below; and (ii) the holders of the Replacement Non-QIB Notes are granted a
first lien and security interest in the Pledged Shares, with any recovery of
proceeds from such Pledged Shares not to exceed such sums as necessary to
permit a pro-rata recovery of value equal to that of the holders of the
Convertible Notes and the holders of the Notes.
(b) Textron Collateral. On the date Textron's security interest
in the Textron Collateral is terminated in accordance with the terms of the
Textron Documents, the Textron Collateral shall be deemed Collateral as if it
were set forth in Section 2.1 and included on Exhibit "C". Other than the
prompt delivery of such Textron Collateral (and delivery of appropriate
endorsements in blank and all certificates and documents required by the
Securitization Trustee for transfer) to Value Partners, Ltd. as agent for the
Convertible Noteholders for purposes of registration in the name of Value
Partners, Ltd. and delivery to the Collateral Agent, the Borrower represents
and warrants that no further action on the part of the Borrower is required to
obtain an effective perfected pledge of the Textron Collateral. Commencing at
such time the Noteholders shall have a first priority lien and security
interest therein pursuant to this Pledge
PLEDGE AND SECURITY AGREEMENT PAGE 12
<PAGE> 13
Agreement (subject to the pari passu lien of the holders of the Convertible
Notes) and the Borrower shall within ten (10) Business Days after the
expiration of Textron's security interest deliver to the Collateral Agent and
register in the name of Value Partners, Ltd. (including in compliance with
Section 2.2) those items on Exhibit "F" hereto, together with any other such
documents necessary to perfect the Noteholders' first priority lien and
security interest therein.
2.7 Reserved
2.8 Held in Trust. Any sums collected or received and any
property recovered or possessed by the Borrower in connection with the
Collateral, which, under the terms of this Pledge Agreement, should have been
delivered to the Collateral Agent, shall be received and held by the Borrower
in trust for and on the Noteholders' behalf, shall be segregated from the other
assets and funds of the Borrower, and shall be delivered to the Collateral
Agent for the benefit of the Noteholders.
ARTICLE III
FURTHER ASSURANCES
Subject to the terms of the Textron Documents and the Collateral
Sharing Agreement, the Borrower will, from time to time, at its expense,
execute, deliver, file, register, and record (in such manner and form as the
Collateral Agent may require) any statement, assignment, stock powers,
instrument, document, agreement, or other paper and take any other action
(including, without limitation, any filings of financing or continuation
statements under the UCC) that the Majority Holders or Collateral Agent may
from time to time determine to be necessary or desirable in order to create,
preserve, upgrade in rank (to the extent required hereby), perfect, confirm, or
validate the lien and first or other priority security interests granted the
Noteholders, or to enable the Noteholders to obtain the full benefits of this
Pledge Agreement (including control, as that term is used in Articles 8 and 9
of the UCC), and to enable the Noteholders to exercise and enforce any of its
rights, powers, and remedies hereunder with respect to any of the Collateral.
At the request of the Majority Holders or the Collateral Agent, the
Borrower will use its reasonable best efforts to obtain the consent or
acknowledgement of any Person that is necessary or desirable to effect the
pledge hereunder of any right, title, claims, and benefits now owned or
hereafter acquired by the Borrower.
To the extent permitted by law, the Borrower hereby authorizes the
Collateral Agent and each Noteholder to execute and file financing statements
or continuation statements without the Borrower's signature appearing thereon.
The Borrower agrees that a carbon, photographic, or other reproduction of this
Pledge Agreement or of a financing statement is sufficient as a financing
statement. The Borrower shall pay the costs of, or incidental to, any financing
or continuation statements concerning the Collateral. In the event that any
re-recording or refiling thereof (or filing of any statements of continuation
or assignment of any financing statement) is required to protect and preserve
such security interest, the Borrower, at its own cost and expense,
PLEDGE AND SECURITY AGREEMENT PAGE 13
<PAGE> 14
shall cause the same to be re-recorded and/or refiled at the time and in the
manner requested by the Collateral Agent or Majority Holders.
The Borrower hereby authorizes the Noteholders and the Collateral
Agent to file or refile any financing statements, continuation statements,
and/or amended statements with respect to the security interests granted or to
be granted pursuant to this Pledge Agreement which, at any time, may be
required or appropriate, although the same may have been executed only by the
Collateral Agent or the Noteholders, and to execute such statements on behalf
of the Borrower.
In addition, in the event and to the extent that any of the Collateral
consists of or is represented by Certificates, including instruments or other
evidences of ownership such as would require physical possession of the same in
order to perfect the security interests therein, subject to the terms of the
Collateral Sharing Agreement and Textron Documents, the Borrower will promptly,
at its expense, deliver the same to the Collateral Agent, with any necessary
endorsements thereon. Upon the Majority Holders' request, subject to the terms
of the Collateral Sharing Agreement and the Textron Documents, the Borrower
shall promptly deliver any documents related to any of the Collateral and
provide the Noteholders all information it may reasonably request concerning
the Collateral. The Borrower will take all steps requested by the Collateral
Agent to perfect a security interest in the Additional Collateral, including
delivery of physical possession, the granting of control, the execution and
delivery of assignments and/or endorsements, the registration thereof in the
designated by the Majority QIB Holders as provided in Section 2.2, and the
execution of financing statements. The Borrower hereby irrevocably designates
Value Partners, Ltd. and the Collateral Agent for the account of the
Noteholders as agent and attorney-in-fact for the Borrower for the aforesaid
purposes.
ARTICLE IV
COVENANTS
4.1 No Liens. Subject to the terms of the Textron Documents, the
Convertible Note Pledge Agreement, the Replacement Non-QIB Note Pledge
Agreement and the Collateral Sharing Agreement, the Borrower shall not, without
the prior written consent of the Majority QIB Holders, in any manner, transfer,
assign or further encumber or permit the encumbrance of the Borrower's interest
in the Collateral. If the Collateral, or any part thereof, is sold or otherwise
disposed of in violation of these provisions, the security interest of the
Noteholders shall continue in such Collateral or any part thereof
notwithstanding such sale or other disposition, and the Borrower will deliver
any proceeds thereof to the Collateral Agent.
4.2 Loan Documents. The Borrower shall at all times during the
term of this Pledge Agreement comply with all of the affirmative covenants,
negative covenants and other terms and provisions contained in the Loan
Documents.
4.3 Consents. By the date Collateral is pledged, the Borrower
shall have obtained all consents of the respective issuer of any Collateral and
of any third party necessary for an effective pledge thereof, including the
consent of any Governmental Authority.
PLEDGE AND SECURITY AGREEMENT PAGE 14
<PAGE> 15
4.4 Textron Collateral. Subject to the terms of the Collateral
Sharing Agreement and the Convertible Note Pledge Agreement, the Borrower shall
take all action which is necessary or advisable in order for the Noteholders to
obtain, and the Noteholders shall receive, a first priority lien and security
interest in the Textron Collateral not less than ten (10) Business Days
following the date the lien of Textron in the Textron Collateral terminates.
4.5 Reserved.
4.6 Taxes. All payments due the Noteholders under the Loan
Documents shall be made without set-off or counterclaim and free and clear of
any deductions, including deductions for taxes, unless the Borrower is required
by law to make such deductions. If (a) any Noteholder shall be subject to any
tax with respect to any such payment (other than income or franchise taxes), or
(b) the Borrower shall be required to withhold or deduct any tax on any such
payment, then such Noteholder may claim compensation from the Borrower under
Section 4.7. Whenever taxes must be withheld by the Borrower with respect to
any such payments, the Borrower shall promptly furnish to the Noteholders
official receipts (to the extent that the relevant governmental authority
delivers such receipts) evidencing payment of any such taxes so withheld. If
the Borrower fails to pay any such taxes when due or fails to remit to the
Noteholders the required receipts evidencing payment of any such taxes so
withheld or deducted, the Borrower shall indemnify the affected Noteholder for
any incremental taxes and interest or penalties that may become payable by such
Noteholder as a result of any such failure.
4.7 Compensation Claims. Within fifteen (15) days after the
receipt by the Borrower of a certificate from any of the Noteholders setting
forth why such Noteholder is claiming compensation under Section 4.6 and
computations (in reasonable detail) of the amount thereof, the Borrower shall
pay to such Noteholder such additional amounts as such Noteholder sets forth in
such certificate as sufficient fully to compensate it on account of the
foregoing provisions of Section 4.6, together with interest on such amount from
the 15th day after receipt of such certificate until payment in full thereof at
the applicable interest rate on the Notes which is then in effect. The
reasonable determination of such Noteholder of the amount to be paid to it and
the basis for computation thereof hereunder shall, in the absence of manifest
error, be conclusive. In determining such amount, such Noteholder may use any
reasonable averaging and attribution methods.
4.8 Other Information. The Borrower shall use its best efforts
to, and cause the trustee or servicing agent for a Securitization to, enable
the Noteholders' authorized officers and representatives, during normal
business hours upon reasonable notice and at reasonable intervals, to examine
documents, bank statements and other records and to make copies and notes
therefrom for the purpose of ascertaining the financial condition of the
Borrower and its subsidiaries and the condition of the Collateral, provided,
however, that any such examination shall be at the Borrower's expense,
including all reasonable and necessary travel expenses, but excluding salaries
for the officers and representatives conducting such examination.
4.9 Books and Records. The Borrower shall at all times keep its
records concerning the Collateral at its chief executive office and principal
place of business (which shall be one and
PLEDGE AND SECURITY AGREEMENT PAGE 15
<PAGE> 16
the same) as set forth in this Pledge Agreement, or so long as the Borrower
shall have taken all steps reasonably necessary to perfect the Noteholders'
security interest in the Collateral with respect to such new address, at such
other address as the Borrower may specify by notice actually received by the
Noteholders and the Collateral Agent not less than (10) Business Days prior to
such change of address.
4.10 Insurance Policies. The Borrower grants to the Collateral
Agent on behalf of the Noteholders full power and authority as its
attorney-in-fact, effective upon notice to the Borrower after the occurrence
and during the continuance of an Event of Default, to adjust and settle any
insurance policy owned by the Borrower insuring against loss to the Collateral,
to endorse any drafts thereon and to sign receipts for any payments thereunder.
Any amounts that the Collateral Agent receives under any such policy (including
return of unearned premiums) insuring against loss to the Collateral shall be
delivered to the Collateral Agent on behalf of the Noteholders to be held as
Collateral.
4.11 Performance of Securitization Obligations. The Borrower shall
perform all servicing and other obligations required to be performed by it
under the Securitization agreements or any other agreement relating to the
Collateral and the Textron Collateral.
4.12 Protection of the Collateral. All Collateral shall be free
and clear of any liens and restrictions on the transfer hereof, except as
specifically permitted or granted herein. The Borrower shall defend the title
to the Collateral against all claims and demands which could have an effect on
the Noteholders' rights or privileges hereunder. Except as set forth in the
Securitization documents, the Convertible Note Pledge Agreement, the
Replacement Non-QIB Note Pledge Agreement, the Collateral Sharing Agreement and
the Textron Documents, the Borrower shall keep the respective Collateral free
and clear of all liens, claims, security interests, restrictions of transfer,
charges, encumbrances, taxes and assessments, and shall pay all taxes,
assessments and fees relating to the Collateral. The Borrower will exclude from
contracts to which it becomes a party after the date hereof, provisions that
would prevent the Borrower from creating and maintaining in favor of the
Noteholders a security interest in the Collateral as pledged hereby. The
Borrower shall not modify, amend or waive any terms or conditions of the
Collateral or the Textron Collateral (including the waiver of a default), or
any rights or interest therein, without the prior written consent of the
registered holders of not less than fifty percent (50%) in aggregate principal
amount of the Notes, the Convertible Notes and the Replacement Non-QIB Notes,
considered as a single class, then outstanding that have an interest in such
collateral. The Borrower will not sell, assign, transfer or otherwise dispose
of any of the Collateral. The Borrower will not take any action or suffer to
exist any conditions that could have an adverse effect on the Noteholders'
rights (including, without limitation, the security interest in the Collateral)
granted hereunder, subject to the Greenwich Documents and the Textron
Documents.
4.13 Applicable Law. The Borrower will not use any of the
Collateral in violation of any applicable law.
4.14 Reserved.
PLEDGE AND SECURITY AGREEMENT PAGE 16
<PAGE> 17
4.15 Records. The Borrower shall allow each Noteholder to inspect
all records of the Borrower relating to the Collateral or to the Notes, and to
make and take away copies of such records.
4.16 Notice of Change. The Borrower shall promptly notify the
Noteholders of any change in any fact or circumstances warranted or represented
by the Borrower in this Pledge Agreement or in any other writing furnished by
the Borrower to the Noteholders in connection with the Collateral or the
obligations.
4.17 Notice of Claims. The Borrower shall promptly notify the
Noteholders of any claim, action or proceeding affecting title to the
Collateral, or any part thereof, or the security interest herein, and, at the
request of the Majority Holders, appear in and defend, at the Borrower's
expense, any such action or proceeding.
4.18 Rule 144. The Borrower will cooperate fully with the
Noteholders and the Collateral Agent with respect to any sale by the Collateral
Agent of any of the Collateral, including full and complete compliance with all
requirements of Rule 144 under the Securities Act of 1933 and will give to the
Collateral Agent all information and will do all things necessary, including
the execution of all documents, forms, instruments, and other items, to comply
with Rule 144 and any and all other rules, regulations or laws of the United
States or the appropriate state necessary for the complete and unrestricted
sale and/or transfer of the Collateral and will exercise its best efforts to
have the issuer of such collateral, upon the request of the Collateral Agent,
publicly disseminate all information required to satisfy Rule 144(c).
4.19 Merger. The Borrower shall not vote for, or consent to, any
amendment of the articles of incorporation or charter of any issuer of
Collateral that might materially adversely affect the value of the Collateral
or permit the issuer thereof to merge or consolidate with or into any other
corporation, firm or entity.
4.20 Dividends and Other Distributions. Unless and until an Event
of Default shall have occurred and be continuing, all ordinary cash dividends
payable in respect of the Collateral shall be paid to the Borrower. The
Collateral Agent on behalf of the Noteholders shall be entitled to receive
directly, and to retain as part of the Collateral:
(i) all other or additional stock, instruments or other
securities or property (including, but not limited to, cash dividends
other than as set forth above) paid or distributed by way of dividend
or otherwise in respect of the Collateral;
(ii) all other or additional stock, instruments or other
securities or property (including, but not limited to, cash) paid or
distributed in respect of the Collateral by way of stock-split,
spin-off, split-up, reclassification, combination of shares or similar
rearrangement;
(iii) all other or additional stock, instrument or other
securities or property (including, but not limited to, cash) which may
be paid in respect of the Collateral by reason of any consolidation,
merger, exchange of stock, conveyance of assets, liquidation or
similar corporate reorganization; and
PLEDGE AND SECURITY AGREEMENT PAGE 17
<PAGE> 18
(iv) all other property (other than cash) paid or
distributed by way of dividend or distribution in respect of the
Collateral.
All dividends, distribution or other payments which are received by the
Borrower contrary to the provisions of this Section 4.20 or Section 5 shall be
received in trust for the benefit of the Pledgee, shall be segregated from
other property funds of the Pledgor and shall be forthwith paid over to the
Pledgee as Collateral in the same form as so received (with any necessary
endorsement).
Except as expressly provided for in this Agreement, all payments
received by the Collateral Agent with respect to the Collateral, shall, at the
Collateral Agent's option, be deposited in a special interest bearing account
at a bank (which may be, but need not be, a trust account or escrow account
maintained at the Collateral Agent) to be designated by the Collateral Agent in
the name of the Noteholders and the holders of the Convertible Notes and the
Replacement Non-QIB Notes, as applicable, styled "Collateral Account". Funds in
said account are hereby assigned to the Collateral Agent on behalf of the
Noteholders and shall be impressed with a lien to secure the Notes, and shall
be applied by the Collateral Agent as provided for herein. Nothing herein shall
restrict the right of the Collateral Agent to exercise rights regarding the
distribution of proceeds as provided in Section 9-207 of the applicable UCC (or
a similar provision).
ARTICLE V
REMEDIES
5.1 Remedies. If an Event of Default shall have occurred and be
continuing, then the Collateral Agent may, without limitation, to the fullest
extent permitted by applicable law, but subject to the Collateral Sharing
Agreement and the Textron Documents, exercise any or all of the following
rights:
(a) Proceed to exercise any rights or remedies the Noteholders
may have hereunder or under the Notes or any other Loan Documents or otherwise;
(b) Pursue, consecutively or cumulatively, any rights or remedies
the Noteholders may have at law, equity or otherwise, including all rights and
remedies available to secured parties under the applicable UCC provisions;
(c) Cancel or otherwise terminate any additional obligation to
fund with the Borrower without prior notice to the Borrower (and the Borrower
will be liable to the Noteholders for any resulting loss, costs and expenses),
and the Collateral Agent (or Noteholders) may: (i) set off any obligation to
the Borrower hereunder or thereunder against any obligation of the Borrower to
the Noteholders hereunder or thereunder; and (ii) realize upon property
securing any obligation to Noteholders hereunder or thereunder;
PLEDGE AND SECURITY AGREEMENT PAGE 18
<PAGE> 19
(d) Require the Borrower to, upon the Collateral Agent's request,
assemble the Collateral and otherwise make it available to the Collateral
Agent. The Collateral Agent may have a receiver appointed for all or any
portion of the Borrower's assets or business which constitutes the Collateral
in order to manage, protect, preserve, sell and otherwise dispose of all or any
portion of the Collateral in accordance with the terms of the Loan Documents,
to continue the operations of the Borrower and to collect all revenues and
profits therefrom to be applied to the payment of the Notes, including the
compensation and expenses of such receiver. The Collateral Agent may offset and
apply toward the payment of the Notes (and/or toward the curing of any Event of
Default) any indebtedness from any Noteholder to the Borrower, including any
indebtedness represented by deposits in any account maintained with any
Noteholder regardless of the adequacy of any security for the Notes. The
Collateral Agent shall have no duty to determine the adequacy of any such
security in connection with any such offset;
(e) To the extent specified in written notice from the Collateral
Agent to the Borrower take any of the following actions (for the sole benefit
of the Noteholders but at the Borrower's expense):
(i) To ask for, demand, take, collect, sue for and
receive all payments in respect of any Collateral which the Borrower could
otherwise ask for, demand, take, collect, sue for and receive for its own use;
(ii) To extend the time of payment of any Collateral and
to make any allowance or other adjustment with respect thereto;
(iii) To settle, compromise, prosecute or defend any
action or proceeding with respect to any Collateral and to enforce all rights
and remedies thereunder which the Borrower could otherwise enforce;
(iv) To enforce the payment of any Collateral, either in
the name of the Borrower or in its own name, and to endorse the name of the
Borrower on all checks, drafts, money orders and other instruments tendered to
or received in payment of indebtedness to the Noteholders;
(v) To notify the third party payor with respect to any
Collateral of the existence of the security interest created hereby and to
cause all payments in respect thereof thereafter to be made directly to the
Collateral Agent, provided, however, that whether or not the Collateral Agent
shall have so notified such payor, the Borrower will at its expense render all
reasonable assistance to the Collateral Agent in collecting such items and in
enforcing claims thereon;
(vi) To sell, transfer, assign or otherwise deal in or
with any Collateral or the proceeds thereof, as fully as the Borrower otherwise
could do;
(vii) To receive all amounts payable in respect of the
Collateral otherwise payable under Section 4.20 to the Borrower;
PLEDGE AND SECURITY AGREEMENT PAGE 19
<PAGE> 20
(viii) To vote all or any part of the Collateral (whether
or not transferred into the name of the Collateral Agent or the Noteholders)
and give all consents, waivers and ratifications in respect of the Collateral
and otherwise act with respect thereto as though it were the outright owner
thereof (the Borrower hereby irrevocably constituting and appointing the
Collateral Agent the proxy and attorney in fact of the Borrower, with full
power of substitution to do so); and
(ix) To transfer all or any part of the Collateral into
the Collateral Agent's name or the name of its nominee or nominees;
(f) All or any part of the Collateral may be sold for cash or
other value, and the proceeds thereof applied against any amounts owed to the
Noteholders by the Borrower, in any number of lots at public or private sale in
a commercially reasonable manner, without demand, advertisement or notice,
provided, however, that the Collateral Agent shall give the Borrower 10 days'
prior written notice by first class mail, postage prepaid, to the Borrower's
address as set forth in Section 14.3 of the time and place and proposed terms
of any public sale, or the time after which a private sale may be made, which
notice each of the Borrower and the Collateral Agent agrees to be reasonable.
At any sale or sales of Collateral, the Collateral Agent or the Noteholders or
any of their officers acting on their behalf, or their assigns, may bid for and
purchase all or any part of the property and rights so sold, may use all or any
portion of the indebtedness owed to the Noteholders as payment for the property
or rights so purchased, and upon compliance with the terms of such sale may
hold and dispose of such property and rights without further accountability to
the Borrower, except for the proceeds of such sale or sales pursuant to Article
X. The Borrower acknowledges that any such sale will be made by the Collateral
Agent or the Noteholders on an "as is" basis with disclaimers of all
warranties, whether express or implied. The Borrower will execute and deliver
or cause to be executed and delivered such instruments, documents, assignments,
waivers, certificates and affidavits, will supply or cause to be supplied such
further information and will take such further action, as the Collateral Agent
or the Noteholders shall reasonably request in connection with any such sale.
The Collateral Agent and the Noteholders shall not be obligated to make such
sale of Collateral regardless of whether such notice of sale has theretofore
been given. Each purchaser at any such sale shall hold the property so sold
absolutely free from any claim or right on the part of the Borrower. In lieu of
selling the Collateral, the Noteholders may credit the current market value of
the Collateral, as determined in a commercially reasonable manner, all free
from any right of redemption, against any amounts owed by the Borrower to the
Noteholders; provided, however, that the Borrower shall remain liable for any
deficiency and shall pay interest on such deficiency as prescribed in the Notes
(the Borrower agreeing that, to the extent that applicable law requires the
giving of notice by the Collateral Agent to the Borrower of any such
disposition, the minimum time required by such law (or if no minimum time is
specified, one Business Day) shall constitute reasonable notice). Neither the
Collateral Agent nor any Noteholder shall be liable for failure to collect or
realize upon any or all of the Collateral or for any delay in so doing nor
shall any of them be under any obligation to take action whatsoever with regard
thereto;
(g) If, at any time when the Collateral Agent shall determine to
exercise its rights hereunder to sell all or a part of the securities included
in the Collateral, the securities in question
PLEDGE AND SECURITY AGREEMENT PAGE 20
<PAGE> 21
shall not be effectively registered under applicable law, the Collateral Agent
may, in its sole discretion, sell such securities by private or other sale not
requiring such registration in such manner and in such circumstances as the
Collateral Agent may deem necessary or advisable in order that such sale may be
effected in accordance with applicable securities laws without such
registration and the related delays, uncertainty and expense. Without limiting
the generality of the foregoing, in any event the Collateral Agent may in its
sole discretion; (a) approach and negotiate with a single purchaser or one or
more possible purchasers to effect such sale; (b) restrict such sale to one or
more purchaser each of whom will represent and agree that such purchaser is
purchasing for its own account, for investment and not with a view to the
distribution or sale of such securities; and (c) cause to be placed on
certificates representing the securities in question a legend to the effect
that such securities have not been registered under applicable law and may not
be disposed of in violation of the provisions thereof. The Borrower agrees that
such manner of disposition is commercially reasonable, that it will, upon the
Collateral Agent's request, give any such purchaser access to such information
regarding the issuer of the securities in question as the Collateral Agent may
reasonably request and that the Collateral Agent shall not incur any
responsibility for selling all or a part of the securities included in the
Collateral at any private or other sale not requiring such registration,
notwithstanding the possibility that a substantially higher price might be
realized if the sale were deferred until after registration under applicable
law or until made in compliance with certain other rules or exemptions from the
registration provisions under applicable law. The Borrower acknowledges that no
adequate remedy at law exists for breach by it of this provision and that such
breach would not be adequately compensable in damages and therefore agrees that
this provision may be specifically enforced; and/or
(h) Transfer or assign the Loan Documents to any Person without
the prior written consent of the Borrower.
5.2 Cost and Expenses on Default. If an Event of Default shall
have occurred, the Collateral Agent and Noteholders shall be entitled to
collect, in addition to principal, interest and delinquency charges hereunder,
all costs of collection, including without limitation, reasonable attorneys'
fees and disbursements, incurred in connection with the protection or
realization of Collateral or in connection with any of the such collection
efforts, whether or not suit on the Notes or any foreclosure proceeding is
filed, and all such costs and expenses shall be payable on demand and until
paid shall also be secured by the Collateral and other Loan Documents and by
all other collateral held by the Collateral Agent as security for the
Borrower's obligations to the Noteholders.
5.3 Marshaling. Neither the Collateral Agent nor the other
Noteholders shall be required to make any demand upon, or pursue or exhaust any
of its rights or remedies against, the Borrower or any guarantor, pledgor or
any other Person with respect to the payment of the Notes or to pursue or
exhaust any of its rights or remedies with respect to any Collateral therefore
or any direct or indirect guarantee thereof or insurance with respect thereto.
Neither the Collateral Agent nor the Noteholders shall be required to marshal
the Collateral or any guarantee of the Notes or to resort to the Collateral or
any such guarantee in any particular order, and all of its rights hereunder or
under any other Loan Document shall be cumulative. To the
PLEDGE AND SECURITY AGREEMENT PAGE 21
<PAGE> 22
extent it may lawfully do so, the Borrower absolutely and irrevocably waives
and relinquishes the benefit and advantage of, and covenants not to assert
against the Collateral Agent or the other Noteholders, any valuation, stay,
appraisement, extension, redemption or similar laws now or hereafter existing
which, but for this provision, might be applicable to the sale of any
Collateral made under the judgment, order or decree of any court, or privately
under the power of sale conferred by this Pledge Agreement, or otherwise.
Without limiting the generality of the foregoing, the Borrower: (a) agrees that
it will not invoke or utilize any law which might prevent, cause a delay in or
otherwise impede the enforcement of the rights of the Collateral Agent or the
Noteholders in the Collateral; (b) waives all such laws; and (c) agrees that it
will not invoke or raise as a defense to any enforcement by the Collateral
Agent or the other Noteholders of any rights and remedies relating to the
Collateral or the Notes, any legal or contractual requirement with which the
Collateral Agent or the other Noteholders may have in good faith failed to
comply. In addition, the Borrower waives any right to prior notice (except to
the extent expressly required by the other provisions of this Pledge Agreement)
or judicial hearing in connection with foreclosure on or disposition of any
Collateral, including any such right which the Borrower would otherwise have
under the Constitution of the United States of America, any state or territory
thereof or any other jurisdiction. The Borrower hereby waives and releases to
the fullest extent permitted by law any right or equity of redemption with
respect to the Collateral, whether before or after sale hereunder.
5.4 Any action or decision to be made by the Noteholders
hereunder or direction provided to the Collateral Agent hereunder may be by the
Majority QIB Holders. All rights in this Section granted to the Collateral
Agent are deemed granted to the Noteholders. So long as the Collateral Agent is
authorized and capable of exercising such rights under the Collateral Sharing
Agreement, it shall be permitted to do so.
ARTICLE VI
CONTINUING SECURITY INTEREST
The Borrower shall not assign or otherwise transfer this Pledge
Agreement or any interest herein without the Majority Holders' prior written
consent. This Pledge Agreement shall create a continuing security interest in
the Collateral and shall: (a) remain in full force and effect until the final
payment in full of all amounts payable under the Notes and the other Loan
Documents; (b) bind the Borrower, its successors and permitted assigns; and (c)
inure to the benefit of the Noteholders and its successors, transferees and
assigns.
Subject to the requirements of Sections of the Indenture and
applicable transfer restrictions, upon transfer of Notes, each of the
respective Noteholders may transfer its interest in the Loan Documents to any
of its successors or assigns, by notice to the Borrower, and such other person
or entity shall thereupon be vested with all the benefits in respect thereof
granted to such Noteholder herein or otherwise; provided that such successor or
assign has agreed in a writing, which shall be delivered to the Borrower, to
assume all of the obligations of the respective Noteholder under the Loan
Documents.
PLEDGE AND SECURITY AGREEMENT PAGE 22
<PAGE> 23
ARTICLE VII
REPRESENTATIONS, WARRANTIES
AND ADDITIONAL COVENANTS OF BORROWER
7.1 Representations and Warranties. The Borrower represents and
warrants to the Noteholders continuously throughout the term of the Notes,
that:
(a) The Collateral is owned by the Borrower free and clear of all
liens, claims or encumbrances, except for those granted Noteholders herein
(except as provided in the Collateral Sharing Agreement, and as to the Textron
Collateral, the security interest of Textron, and as to the Certificates and
the Grantor Trust Right, subject to the applicable Securitization). Except as
disclosed in this Pledge Agreement, none of the Collateral is subject to any
option to purchase or similar rights of any Person;
(b) All Collateral (other than cash, the Grantor Trust Right or
Additional Collateral consented to in writing) shall be evidenced by
certificates or instruments, which certificates or instruments shall, pursuant
to Section 2.2, be registered and delivered as provided herein with any related
assignment forms, duly completed by the Borrower, required by the
Securitization agreements (or as to the Textron Collateral, shall be subject to
the Textron Documents until such registration and delivery as provided herein).
The Borrower will, promptly upon the receipt thereof, deliver to the Collateral
Agent any certificate or similar instrument representing any of such
Collateral, together with appropriate, duly executed assignment forms, in
accordance with the terms hereof. The Borrower will take all steps necessary to
register the pledge to the Collateral Agent or as designated by Value Partners,
Ltd. (or ownership if requested by Value Partners, Ltd. in writing) on the
books of the issuer, purchaser, trustee or custodian, as the case may be, with
respect to all Collateral that is not evidenced by certificates or other
instruments in accordance with the terms hereof;
(c) The Borrower has obtained any and all permits, licenses,
approval and consents of any Governmental Authority and any third party as may
be required to own, purchase, pledge, sell or otherwise dispose of the
Collateral and to conduct or to transact its business or own, lease or operate
its properties and is in material compliance with all applicable requirements
of law;
(d) Subject to the Convertible Note Pledge Agreement, the
Replacement Non-QIB Pledge Agreement, the Collateral Sharing Agreement and the
lien of Textron as provided in the Textron Documents, the lien of this Pledge
Agreement constitutes a first priority perfected and enforceable security
interest in the Collateral in favor of the Noteholders on each occasion which
the Borrower makes a Delivery of Collateral to the Collateral Agent, the
Borrower will be the sole record and beneficial owner of that Collateral (until
registration thereof as provided in Section 2.2) and will, subject to the terms
of this Pledge Agreement, have the right to receive all payments (subject to
the terms of any sales and servicing or pooling and servicing agreement,
indenture or any similar agreement pursuant to which the Certificates were
issued or to which the Grantor Trust Right or any other right or interest
arose) on the Collateral, in each case free and clear of all liens and security
interests other than the lien of this Pledge Agreement, and those liens set
forth above in this paragraph;
PLEDGE AND SECURITY AGREEMENT PAGE 23
<PAGE> 24
(e) Except for financing statements contemplated or permitted by
this Pledge Agreement, the Convertible Note Pledge Agreement, the Replacement
Non-QIB Pledge Agreement or the Collateral Sharing Agreement, there are no
financing statements or other actions required under the UCC or similar law of
any state or jurisdiction required in connection with the grants of security
interests to the Noteholders set forth in this Pledge Agreement;
(f) No representation or warranty made by or on behalf of
Borrower contained in any Loan Document and no information (written or oral),
certificate, financial statement or report furnished or to be furnished by or
on behalf of the Borrower thereunder or in connection with the transactions
contemplated thereby, contains or will contain an untrue statement of a
material fact, or, omits or will omit to state any material fact (including
without limitation, whether, to the best knowledge of Borrower, Borrower or any
of its respective officers or directors (past or present) is (or during the
last five (5) years has been) under civil or criminal investigation by a
Governmental Authority or is under indictment by any Governmental Authority)
necessary to make the statements herein or therein contained, in light of the
circumstances in which made, not misleading;
(g) The Borrower does not have any reason to believe that it will
not be able to perform in all material respects all covenants and agreements to
be performed by it under this Pledge Agreement and each of the other Loan
Documents;
(h) Each of the representations and warranties of the Borrower
contained in the other Loan Documents is true and correct;
(i) The right of Borrower to receive a residual cash payment
pursuant to Section 4.05(b)(xvii) of the sale Agreement arising from the Mego
Mortgage Home Loan Trust 1996-3 is non-certificated and is evidenced only by
the Sale Agreement arising from that Securitization;
(j) Any Residual Interest Instrument pledged as Collateral shall
represent the right of the holder thereof to receive one hundred percent (100%)
of the residual interest in the interest and principal payments due on the
underlying loans securitized in that Securitization, except as follows: (a)
Class R Certificate R-0001, 1996-3 represents the right to receive one hundred
percent (100%) of the residual interests in Group 1 Loans, as that term is
defined in the Sale Agreement for that Securitization; and (b) Residual
Interest Instrument No. 1 1997-1 and Residual Certificate No. 1, 1997-2 each
represent the right to receive ninety-nine percent (99%) of the residual
interest in the respective Securitization;
(k) Except as disclosed on Schedule II hereto, there is no
circumstance presently in existence which prohibits the receipt of payment of
obligations due pursuant to the terms of the Certificates and the Grantor Trust
Right pledged as Collateral;
(l) To the best of Borrower's knowledge, all of the Collateral
has been duly and validly authorized, issued, is fully paid and non-assessable
and is subject to no options to purchase or similar rights;
PLEDGE AND SECURITY AGREEMENT PAGE 24
<PAGE> 25
(m) Each Pledged Share is validly authorized, issued, is fully
paid and non assessable and is subject to no option to purchase or similar
rights;
(n) The execution, delivery and consummation of this Pledge
Agreement will not violate the charter or bylaws of the Borrower or the issuer
of any Collateral or any law, regulation, mortgage, indenture, contract,
instrument, judgment or decree applicable to or binding on the Borrower or the
issuer of any Collateral;
(o) The Pledged Shares constitute and shall at all times
constitute one hundred percent of the issued and outstanding voting and
nonvoting stock of The Money Centre;
(p) The Borrower has held the Pledged Shares, free and clear of
all liens, encumbrances and debt, and borne the full economic risk thereof
since the time of acquisition thereof on August 31, 1999 and at no time during
said period did the Borrower hold any short position in the Pledged Shares or
option to sell such shares, and at no time during such period did any other
party hold a short position in the Pledged Shares or an option to sell such
shares;
(q) Other than as provided in the Collateral Sharing Agreement
and the Convertible Pledge Agreement, the pledge, collateral assignment and
delivery to and continuous possession of the Collateral as provided herein
consisting of certificated securities pursuant to this Pledge Agreement creates
a valid and perfected first priority security interest in such securities and
the proceeds thereof, subject to no prior lien or encumbrance or to any
agreement purporting to grant to any third party a lien or encumbrance on the
property or assets of the Borrower which would include the Collateral and the
Noteholders are entitled to all the rights, priorities and benefits afforded by
the UCC or other relevant law as enacted in any relevant jurisdiction to
perfect security interests in respect of such Collateral; and
(r) "Control" (as defined in Section 8-106 of the UCC) has been
or will be obtained (a) by Value Partners, Ltd. over all Collateral consisting
of securities to be registered in its name and (b) as to Collateral not
registered in the name of Value Partners, Ltd., by the Noteholders and
Convertible Noteholders.
ARTICLE VIII
THE AGENT MAY PERFORM
The Borrower hereby appoints any officer, general partner or agent of
the Collateral Agent and/or the Noteholders as the Borrower's true and lawful
attorney-in-fact with full authority in the place and stead of the Borrower and
in the name of the Collateral Agent or the Noteholders (as the case may be) or
otherwise, from time to time in the Collateral Agent or the Majority Holders'
discretion, to take any action and to execute any agreements, documents and
instruments which the Collateral Agent or the Majority Holders may deem
necessary or advisable to accomplish the purpose of this Pledge Agreement. The
powers conferred on the Collateral Agent and the Majority Holders hereunder are
solely to protect the Noteholders' interest in the Collateral and shall not
impose any duty upon the Collateral Agent or the
PLEDGE AND SECURITY AGREEMENT PAGE 25
<PAGE> 26
Noteholders to exercise any such powers. All authorization and agencies herein
contained with respect to the Collateral are irrevocable and powers coupled
with an interest. All rights granted the Collateral Agent herein shall be
deemed granted the Noteholders.
ARTICLE IX
CUSTODY OF COLLATERAL
Except as provided by applicable law that cannot be waived, neither
the Noteholders nor the Collateral Agent will have any duty as to the custody
and protection of the Collateral, the collection of any part thereof or of any
income thereon or the preservation or exercise of any rights pertaining
thereto, including rights against prior parties, except for the use of
reasonable care in the custody and physical preservation of any Collateral in
its possession. Neither the Noteholders nor the Collateral Agent will be liable
or responsible for any loss or damage to any Collateral, or for any diminution
in the value thereof, by reason of the act or omission of any agent selected by
the Collateral Agent or the Noteholders acting in good faith.
ARTICLE X
APPLICATION OF COLLATERAL AND PROCEEDS
Subject to the Collateral Sharing Agreement, the proceeds of any sale
of, or other realization upon, all or any part of the Collateral shall be
applied in the order set forth in Section 5.3 of the Notes.
ARTICLE XI
SECURITY INTEREST ABSOLUTE
All rights of the Noteholders hereunder and the interest and all
obligations of the Borrower hereunder shall be absolute and unconditional
irrespective of:
(a) except as expressly provided in Section 14.9, any
lack of validity or enforceability of the Loan Documents or any other agreement
or instrument relating to the Loan Documents;
(b) any change in the time, manner or place of payment
of, or in any other term of, the Loan Documents, or any renewal or extension of
the Loan Documents or any other amendment or waiver of or any consent to any
departure from this Pledge Agreement or any other agreement or instrument;
(c) any sale, exchange, release or nonperfection of any
of the Collateral, or any release of any guarantor or any person liable in any
manner for the collection of the Notes, or any amendment or waiver of or
consent to or departure from any guaranty or the Loan Documents; or
(d) any other circumstance that might otherwise
constitute a defense available to, or a discharge of, the Borrower in respect
of any of the Loan Documents.
PLEDGE AND SECURITY AGREEMENT PAGE 26
<PAGE> 27
ARTICLE XII
REMEDIES CUMULATIVE
Each right, power and remedy of the Collateral Agent and the
Noteholders provided for in this Pledge Agreement or any other Loan Document,
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 such right,
power or remedy. The exercise or beginning of the exercise by the Collateral
Agent or the Noteholders of any one or more of the rights, powers or remedies
provided for in this Pledge Agreement or any other Loan Document or now or
hereafter existing at law or in equity or by statute or otherwise shall not
preclude the simultaneous or later exercise by the Collateral Agent of all such
other rights, powers or remedies, and no failure or delay on the part of the
Collateral Agent to exercise any such right, power or remedy shall operate as a
waiver thereof. Unless otherwise required by the Loan Documents, no notice to
or demand on the Borrower in any case shall entitle the Borrower to any other
or further notice or demand in similar other circumstances or constitute waiver
of any of the rights of the Collateral Agent to any other or further action in
any circumstances without demand or notice. The obligations of the Borrower
under the Loan Documents are with full recourse to the Borrower and the
Borrower shall remain liable for any deficiency upon the exercise of remedies
by Collateral Agent.
ARTICLE VIII
RESERVED
ARTICLE XIV
MISCELLANEOUS
14.1 Successors and Assigns; No Third-Party Beneficiaries. This
Pledge Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective permitted successors and assigns. Except as set
forth herein and in the Collateral Sharing Agreement, this Pledge Agreement
shall not confer any rights, obligations, remedies or liabilities upon any
Person other than the parties hereto and their permitted successors and
assigns.
14.2 GOVERNING LAW. THE PARTIES HERETO ACKNOWLEDGE THAT THE
TRANSACTIONS CONTEMPLATED BY THIS PLEDGE AGREEMENT AND THE NOTES BEAR A
REASONABLE RELATION TO THE STATE OF MINNESOTA IN THAT, INTER ALIA, AN INTENDED
PARTICIPANT IN THE NOTES HAS ITS PRINCIPAL PLACE OF BUSINESS IN THE STATE OF
NEW YORK, PART OF THE NEGOTIATIONS RELATING TO THE TRANSACTIONS CONTEMPLATED
HEREBY HAS OCCURRED IN THE STATE OF MARYLAND AND THE CLOSING WILL OCCUR IN SUCH
STATE. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT
OF LAWS THEREOF.
14.3 Notices. All notices, requests, demands, claims and other
communications under this Pledge Agreement shall be in writing (unless
otherwise specified herein) and shall be
PLEDGE AND SECURITY AGREEMENT PAGE 27
<PAGE> 28
deemed duly given if (and then two (2) Business Days after) it is sent by
registered or certified mail, return receipt requested, postage prepaid, and
addressed to the intended recipient as set forth below:
If to Borrower:
Altiva Financial Corporation
Sixth Floor
1000 Parkwood Circle
Atlanta, Georgia 30339
Attention: Office of the Chief Executive Officer
Telephone: (770) 952-6700
Facsimile: (770) 937-7576
With a Copy to:
King & Spalding
191 Peachtree Street
48th Floor
Atlanta, Georgia 30303
Attention: Walter Driver, Esq.
Telephone: (404) 572-4600
Facsimile: (404) 572-5149
If to the Collateral Agent:
U.S. Trust Company of Texas, N.A.
2001 Ross Avenue, Suite 2700
Dallas, Texas 75201
Attention: John C. Stohlmann
Telephone: (214) 754-1200
Facsimile: (214) 754-1303
With a copy to:
Haynes & Boone, L.L.P.
201 Main Street, Suite 2200
Fort Worth, Texas 76102
Attention: William Greenhill
Telephone: 817-347-6602
Facsimile: 817-347-6650
Value Partners, Ltd.
4514 Cole Avenue
Suite 808
Dallas, Texas 75205
Attention: Timothy G. Ewing
Telephone: (214) 522-2100
Facsimile: (214) 522-2176
PLEDGE AND SECURITY AGREEMENT PAGE 28
<PAGE> 29
Bergman, Stein & Bird, L.L.P.
4514 Travis Street
Suite 300
Dallas, Texas 75205
Attention: Jack R. Bird
Telephone: (214) 528-2444
Facsimile: (214) 599-0602
And
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
12th Floor
Washington, DC 20005
Attention: Gerard L. Hawkins
Telephone: (202) 347-0300
Facsimile: (202) 347-2172
Any party may send any notice, request, demand, claim or other
communications hereunder to the intended recipient at the address set forth
above using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the intended
recipient. Any party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be delivered by
giving the other party notice in the manner herein set forth.
14.4 Amendments; Waivers. Subject to the Collateral Sharing
Agreement and except to the extent a different percentage is authorized, this
Pledge Agreement may not be amended, modified or supplemented except in writing
signed by each of the parties hereto (or their successors and assigns). Each
party may, by written notice to the other, extend the time for or waive the
performance of any of the obligations of such other hereunder. The waiver by
any party hereto of a breach of this Pledge Agreement shall not operate or be
construed as a waiver of any other or subsequent breach. No delay, omission or
act by a party shall be deemed a waiver of such party's rights, powers or
remedies. No course of dealing between the parties hereto shall operate a
waiver of any provision hereof.
14.5 Payment of Expenses; Indemnity. The Borrower shall:
(a) pay or reimburse the Noteholders and the Collateral Agent on
demand for all of its reasonable out-of-pocket costs and expenses incurred in
connection with the development, preparation and execution of any amendment,
modification or supplement to, or any waiver under, any Loan Document and any
other document prepared in connection therewith, and the
PLEDGE AND SECURITY AGREEMENT PAGE 29
<PAGE> 30
consummation of the transactions contemplated thereby, including, without
limitation, the reasonable fees and disbursements of counsel to the Noteholders
and the Collateral Agent;
(b) pay on demand all reasonable costs and expenses of the
Noteholders and Collateral Agent, including, without limitation, the reasonable
fees and disbursements of counsel to Noteholders and the Collateral Agent, in
connection with the occurrence or continuance of an Event of Default and the
enforcement, collection, protection or preservation (whether through
negotiation, legal proceedings or otherwise) of this Pledge Agreement or any
other Loan Document, the Collateral, and any obligation or any rights, remedy,
power or privilege of the Noteholders and Collateral Agent hereunder or
thereunder;
(c) pay and hold the Noteholders and Collateral Agent harmless
from and against any and all present and future stamp, excise, recording or
other similar taxes or fees payable in connection with the execution, delivery,
recording and filing of any Loan Document and hold the Noteholders and
Collateral Agent harmless from and against any and all liabilities with respect
to or resulting from any delay or omission to pay such taxes or fees; and
(d) indemnify and hold harmless the Noteholders and Collateral
Agent and their respective directors, officers, partners, employees and agents
from and against, any and all liabilities, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements, including, without
limitation, the reasonable fees and disbursement of counsel to the Noteholders
and Collateral Agent and such other parties, incurred by any of them in
connection with, arising out of or in any way relating to any investigation,
claim, litigation or other proceeding, pending or threatened (whether or not
any of them is designated a party thereto), in connection with, arising out of
or in any way related to this Pledge Agreement or any other Loan Document or
any of the transactions contemplated herein or therein or any use of the
proceeds of the Notes by the Borrower; provided that the Noteholders and
Collateral Agent shall not be entitled to any indemnification for any of the
foregoing resulting from their gross negligence or willful misconduct as
determined by a court of competent jurisdiction.
If, and to the extent that, the indemnity obligations of the Borrower
hereunder may be unenforceable for any reason, the Borrower hereby agrees to
make the maximum contributions to the payment and satisfaction of each of such
indemnity obligations which is permissible under applicable law.
14.6 Limited Liability. No recourse under any Loan Document shall
be had against, and no personal liability shall attach to, any officer,
employee, director, partner, affiliate, shareholder or agent of any party
hereto, as such, by the enforcement of any assessment or by any legal or
equitable proceeding, by virtue of any statute or otherwise in respect of any
of the Loan Documents, it being expressly agreed and understood that each Loan
Document is solely a corporate or limited liability entity obligation of each
party hereto, and that any and all personal liability, either at common law or
in equity, or by statute or constitution, of every such officer, employee,
director, partner, affiliate, shareholder or agent for breaches by any party
hereto of any obligation under any Loan Document is hereby expressly waived as
a condition of and in consideration for the execution and delivery of this
Pledge Agreement.
PLEDGE AND SECURITY AGREEMENT PAGE 30
<PAGE> 31
14.7 Counterparts. This Pledge Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.
14.8 Severability; Interpretation. Any term or provision of this
Pledge Agreement that is invalid, illegal or unenforceable in any situation in
any jurisdiction shall not affect the validity, legality or enforceability of
the remaining terms and provisions hereof or the validity, legality or
enforceability of the offending term or provision in any other situation or in
any other jurisdiction.
14.9 Usury. All agreements between Borrower and the Noteholders on
behalf of the Noteholders, whether now existing or hereafter arising and
whether written or oral, are hereby limited so that in no contingency, whether
by reason of demand or acceleration of the maturity Date, as that term is
defined in the Notes, or otherwise, shall the interest contracted for, charged,
received, paid or agreed to be paid to the Noteholders exceed the maximum
amount permissible under the laws of the State of New York (hereinafter the
"Applicable Law"). If, from any circumstance whatsoever, interest would
otherwise be payable to Noteholders in excess of the maximum amount permissible
under the Applicable Law, the interest payable to Noteholders shall be reduced
to the maximum amount permissible under the Applicable Law, and if from any
circumstance Noteholders shall ever receive anything of value deemed interest
by the Applicable Law in excess of the maximum amount permissible under the
Applicable Law, an amount equal to the excessive interest shall be applied to
the reduction of the principal of the Notes and not to the payment of interest,
or if such excessive amount of interest exceeds the unpaid balance of principal
of the Notes, such excess shall be refunded to the Borrower. All interest paid
or agreed to be paid to the Noteholders shall, to the extent permitted by the
Applicable Law, be amortized, pro-rated, allocated and spread throughout the
full period (including any renewal or extension) until payment in full of the
principal so that the interest on the Notes for such full period shall not
exceed the maximum amount permissible under the Applicable Law. The Noteholders
expressly disavow any intent to contract for, charge or receive interest in an
amount which exceeds the maximum amount permissible under the Applicable Law.
This paragraph as well as a similar paragraph as set forth in the Notes shall
control all agreements between Borrower and the Noteholders. All protection
afforded the Noteholders shall be afforded the Collateral Agent.
14.10 Time is of the Essence; No Waiver; Cumulative Remedies. Time
and exactitude of each of the terms, obligations, covenants and conditions of
this Pledge Agreement are hereby declared to be of the essence.
14.11 Binding Effect. This Pledge Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and assigns. Subject to Article VI, the
Noteholders may assign this Pledge Agreement, and if assigned, the assignee
shall be entitled, upon notifying the Borrower, to the payment and performance
of the obligations arising under the Loan Documents and agreements of the
PLEDGE AND SECURITY AGREEMENT PAGE 31
<PAGE> 32
Borrower hereunder and to all of the rights and remedies of the Noteholders
hereunder, and the Borrower will assert no claims or defenses the Borrower may
have against the Noteholders against the assignee. The gender and number used
in this Pledge Agreement are used for reference term only and shall apply with
the same effect whether the parties are masculine, feminine, neuter, singular
or plural.
14.12 Multiple Counterparts. This Pledge Agreement may be executed
in separate or multiple counterparts by the parties, and all of such
counterparts shall be considered as one and the same instrument notwithstanding
the fact that various counterparts are signed by only one or more of the
parties, and all of such Pledge Agreements shall be deemed but one and the same
Pledge Agreement.
14.13 Headings. The captions and Section headings in this Pledge
Agreement are for convenience of reference only, and shall not limit or
otherwise affect the meaning or interpretation of any provision hereof.
14.14 Secured Party. This Pledge Agreement shall constitute a
security agreement, and the Noteholders shall have all of the rights in the
Collateral of a secured party, including under Articles 8 and 9 of the UCC.
14.15 Chief Executive Office; Records. The chief executive office
of the Borrower is located at the address specified in the introduction. The
Borrower's state of incorporation is Delaware. The Borrower will not move its
chief executive office or change its state of incorporation except to such new
location as such Borrower may establish in accordance with the last sentence in
this Section 14.15. The Borrower shall not establish a new location for such
office or change its state of incorporation until (i) it shall have given to
the Noteholders and the Collateral Agent not less than 30 days' prior written
notice of its intention so to do, clearly describing such new location and
providing such other information in connection therewith as the Noteholders and
the Collateral Agent may reasonably request and (ii) with respect to such new
location or state of incorporation, it shall have taken all action,
satisfactory to the Collateral Agent and the Noteholders, to maintain the
security interest of the Noteholders in the Collateral intended to be granted
hereby at all times fully perfected and in full force and effect.
14.16 Beneficial Owners. References herein to registered holders of
Notes, Replacement Non-QIB Notes and Convertible Notes shall be deemed to
include beneficial owners of Notes, Convertible Notes and Replacement Non-QIB
Notes to the extent provided in the Convertible Notes and in the Indenture
relating to the Notes and Replacement Non-QIB Notes, respectively.
PLEDGE AND SECURITY AGREEMENT PAGE 32
<PAGE> 33
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed as of the date first above written.
ALTIVA FINANCIAL CORPORATION
By: /s/ EDWARD B. MEYERCORD
-----------------------------------------
Name: Edward B. Meyercord
Title: Chief Executive Officer
Address:
1000 Parkwood Circle, Sixth Floor
Atlanta, Georgia 30339
Acknowledged:
UNITED STATES TRUST COMPANY OF NEW YORK
as Agent for the Noteholders
By: /s/ GLENN E. MITCHELL
------------------------------------------
Name: Glenn E. Mitchell
Title: Vice President
PLEDGE AND SECURITY AGREEMENT PAGE 33
<PAGE> 1
EXHIBIT 10.6
THIS AGREEMENT IS SUBJECT TO THE TERMS AND CONDITIONS OF THE INTERCREDITOR AND
COLLATERAL SHARING AGREEMENT DATED FEBRUARY 29, 2000 REFERRED TO HEREIN AS THE
COLLATERAL SHARING AGREEMENT, AS THE SAME MAY BE AMENDED, MODIFIED OR OTHERWISE
SUPPLEMENTED FROM TIME TO TIME, BY AND AMONG ALTIVA FINANCIAL CORPORATION, VALUE
PARTNERS, LTD., AS ORIGINAL PURCHASER OF CERTAIN VALUE NOTES ISSUED BY ALTIVA
AND UNITED STATES TRUST COMPANY OF NEW YORK AS COLLATERAL AGENT FOR THE HOLDERS
OF SUCH VALUE NOTES AND THE HOLDERS OF THE NOTES ISSUED PURSUANT TO THE EXCHANGE
AGREEMENT, AS DEFINED HEREIN.
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT ("Agreement") is entered into as of March 17,
2000, by and among Altiva Financial Corporation, a Delaware corporation (the
"Borrower") in favor of the Noteholders and the Collateral Agent, as agent of
the Noteholders, as defined herein.
W I T N E S S E T H:
1. The Borrower is the owner of one hundred percent of the issued and
outstanding capital stock of The Money Centre, Inc. ("Issuer"), a North Carolina
corporation, comprised of 50,000 shares of common stock (all such shares being
herein referred to as the "Pledged Shares").
2. The Borrower has entered into the Exchange Agreement by and among
the Borrower and the Collateral Agent on behalf of those holders of the Existing
Subordinated Notes which elected to enter into the Exchange Agreement. The
Exchange Agreement provides that the Borrower's 12% Secured Convertible Senior
Notes due 2006 are to be issued pursuant to the Indenture. Because certain of
the collateral to be pledged to secure repayment of those new notes can only be
pledged to QIBs (defined in Section 1 as the Replacement QIB Notes), this
Agreement is being entered into with the holders of such notes (defined in
Section 1 as the Notes) who are not QIBs, given that the collateral subject to
this Agreement can be pledged to non-QIBs. The principal amount of the Notes and
Replacement QIB Notes, collectively, will be sixty percent (60%) of the
principal amount of exchanged Existing Subordinated Notes. One third of the
Notes and Replacement QIB Notes shall be mandatorily convertible into common
stock of the Borrower in the event requisite shareholder approval of the
Borrower is obtained to permit the issuance of such stock. For purposes of
clarification, less than one hundred percent (100%) of holders of Existing
Subordinated Notes entered into the Exchange Agreement. Only holders of an
Existing Subordinated Note who exchange an Existing Subordinated Note for a Note
are beneficiaries of this Agreement.
3. Pursuant to the Purchase Agreement, Value Partners, Ltd. ("Value
Partners, Ltd.") has purchased $14,000,000.00 in the aggregate of the Borrower's
12% Secured Convertible Notes Due 2006 (the "Value Notes"). Value Partners is
presently the sole Value Noteholder.
4. To secure repayment of the Value Notes, the Borrower executed the
Value Pledge Agreement, pursuant to which the Borrower granted to the Value
Noteholders (i) a first priority lien and security interest in certain
collateral described therein which may only be pledged to QIBs, referred to
herein as the "QIB Collateral", and (ii) a subordinated lien in the Pledged
Collateral (as that term is defined herein), subject only to the security
interest granted the Noteholders herein.
STOCK PLEDGE AGREEMENT PAGE 1
<PAGE> 2
5. Repayment of the Replacement QIB Notes is secured, on a pari passu
basis with the Value Notes, by the collateral pledged to secure the repayment of
the Value Notes, including a Subordinated lien on the Pledge Collateral. To
evidence this pledge, the Borrower and Replacement QIB Noteholders executed the
Replacement QIB Pledge Agreement, subject only to the security interest granted
the Noteholders herein.
6. The Notes are secured by a first lien and security interest in the
Pledged Collateral pursuant to this Agreement. However, pursuant to the
Collateral Sharing Agreement (as defined below), upon the occurrence of a
Default or an Event of Default, the recovery of the Noteholders from the
proceeds relating to the liquidation of the Pledged Shares shall be adjusted so
that the Noteholders recover the same percentage of their outstanding
indebtedness as do the Replacement QIB Noteholders and the Value Noteholders.
Because the Noteholders are not QIBs, they cannot share in proceeds from the QIB
Collateral. Thus, in the event recovery from the Pledged Shares is inadequate to
permit a pro rata recovery in favor of the Noteholders, their recovery may be
less than that of the Value Noteholders and Replacement QIB Noteholders.
7. Because (i) the Replacement QIB Noteholders and the Value
Noteholders have a security interest in the QIB Collateral and a subordinate
lien in the Pledged Collateral and (ii) the Noteholders have a senior security
interest in the Pledged Shares, each holder has agreed that it is appropriate to
enter into the Collateral Sharing Agreement, both for purposes of the perfection
of the security interest of each in the collateral which may be perfected by
possession of the collateral (or the continuation of existing perfection) and to
permit the orderly liquidation of all collateral (including collateral perfected
by means other than possession) by the Collateral Agent in the event of an
occurrence a Default or an Event of Default under the Security Documents and the
orderly distribution of the proceeds of such liquidation by the Collateral
Agent.
8. The Borrower wishes to provide collateral security for the Secured
Indebtedness (as hereinafter defined) in the form of pledge of the Pledged
Shares.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, and the direct material benefits to be received by
Borrower by reason of the Exchange Agreement, the Indenture, the Purchase
Agreement and the Value Notes, which benefits are hereby expressly acknowledged
by Borrower, the parties hereto agree as follows:
SECTION 1. DEFINED TERMS. For the purposes of this Pledge Agreement,
the following terms shall have the respective meanings assigned to them in this
Section 1:
"Collateral Agent" means United States Trust Company of New York in its
capacity as collateral agent of the Noteholders for the purposes set forth in
Section 20 hereof.
"Collateral Sharing Agreement" means that certain Intercreditor and
Collateral Sharing Agreement dated February 29, 2000 among the Borrower, Value
Partners, Ltd. and the Collateral Agent as agent and attorney in fact for the
Replacement QIB Noteholders and the Noteholders.
"Event of Default" has the meaning set forth in Section 5.1 of the Indenture
and shall also occur in the event the liens granted hereby shall ever become
unenforceable, or cease to be perfected, first priority liens, as a result of
any action or omission of the Borrower.
STOCK PLEDGE AGREEMENT PAGE 2
<PAGE> 3
"Exchange Agreement" means the Exchange Agreement, dated as of March 17,
2000, by and among the Company and the holders of Existing Subordinated Notes
who agreed to exchange the Existing Subordinated Notes for Notes or Replacement
QIB Notes, as the case may be, together with any amendments, supplements,
modifications and restatements thereof.
"Existing Subordinated Notes" means those certain 12 1/2% Subordinated Notes
due 2001 issued by the Borrower on or about June 14, 1999.
"Indenture" means the Trust Indenture date as of February 29, 2000, between
the Borrower and United States Trust Company of New York, as Trustee, as amended
or supplemented.
"Issuer" means The Money Centre, Inc., a North Carolina corporation, and its
successors and assigns and any other issuer of Pledged Shares or Pledged
Collateral.
"Majority Holders" means the holders of not less than fifty percent (50%) in
aggregate principal amount of the Notes, Value Notes and Replacement QIB Notes
then outstanding, voting as a class.
"Noteholder", "Holder" or "holder" means the registered owner of a Note.
"Notes" shall mean the notes issued pursuant to the Exchange Agreement and
the Indenture to those holders of Existing Subordinated Notes who are not QIBs
who agreed to exchange such Existing Subordinated Notes pursuant to the Exchange
Agreement, together with any amendments, modifications, supplements or
restatements thereof.
"Outstanding" or "outstanding" has the meaning given to it in the Indenture.
"Persons" means any individual, partnership, corporation, limited liability
company, joint venture, association, joint stock company, trust, unincorporated
organization, or governmental entity (or any department, agency or political
subdivision thereof), or any other entity.
"Pledged Collateral" has the meaning assigned to it in Section 2 hereof.
"Pledged Shares" has the meaning assigned to it in the first recital hereof.
"Purchase Agreement" means that certain Amended and Restated Secured Senior
Convertible Note Purchase Agreement by and between the Borrower and Value
Partners, dated as of February 29, 2000, together with any amendments,
modifications, supplements or restatements thereof.
"QIBs" means a Qualified Institutional Buyer as defined in Rule 144A of the
Securities Act.
"Replacement QIB Notes" means those notes issued pursuant to the Indenture
to the holders of Existing Subordinated Notes, pursuant to the Exchange
Agreement, the holders of which are QIB's.
"Replacement QIB Noteholders" means the holders of the Replacement QIB
Notes.
"Replacement QIB Pledge Agreement" means that certain Pledge and Security
Agreement, dated as of March 17, 2000, by and between the Borrower and the
Collateral Agent, as agent for the Replacement QIB Noteholders, together with
any amendments, modifications, supplements or restatements thereof.
STOCK PLEDGE AGREEMENT PAGE 3
<PAGE> 4
"Secured Indebtedness" shall mean all indebtedness, obligations and
liabilities described or referred to in clauses (1) through (4) below,
inclusive:
(1) all of the loans, principal, interest, fees, expenses, obligations and
liabilities of Borrower to the Noteholders arising pursuant to or
represented by the Notes and any and all renewals and extensions of the
foregoing;
(2) all of the loans, principal, interest, fees, expenses, obligations and
liabilities of Borrower arising pursuant to or represented by the
Indenture and/or Exchange Agreement; and
(3) any and all indebtedness and obligations of Borrower to the Noteholders
arising pursuant to the terms of the Notes, this Pledge Agreement and
the other loan documents delivered in connection therewith or herewith,
including legal expenses and other expenses incurred in the
preparation, execution and by the enforcement of the Notes, this Pledge
Agreement and any of the other loan documents; and
(4) any and all renewals and extensions of the indebtedness and obligations
described in (l)-(3) above.
"Securities Act" means the Securities Act of 1933, as now in effect and as
hereafter amended from time to time.
"SEC" means the Securities and Exchange Commission.
"Security Documents" means the Value Pledge Agreement, the Replacement QIB
Pledge Agreement and this Agreement.
"Value Notes" has the meaning set forth in the third recital to this
Agreement.
"Value Noteholders" means the holders of the Value Notes.
"Value Pledge Agreement" means that certain Pledge and Security Agreement
dated August 31, 1999, by and between the Borrower and Value Partners, Ltd., as
amended by Amendment #1 to Pledge and Security Agreement dated December 13,
1999, that certain Amended and Restated Pledge and Security Agreement dated
December 31, 1999, and that certain Amended and Restated Pledge and Security
Agreement dated February 29, 2000, together with any amendments, supplements,
modifications or restatements thereof.
SECTION 2. PLEDGE. Subject to the Collateral Sharing Agreement, the Value
Pledge Agreement and the Replacement QIB Pledge Agreement, as collateral
security for the payment of the Secured Indebtedness, Borrower hereby pledges,
hypothecates, assigns, transfers, sets over and delivers unto the Noteholders,
and hereby grants the Noteholders a security interest in, the following:
(a) the Pledged Shares and the certificates representing the Pledged
Shares, and all cash, securities, dividends, increases, distributions
and profits received therefrom or in connection therewith, including
distributions or payments in partial or complete liquidation or
redemption, or as a result of reclassifications, readjustments,
reorganizations or changes in the capital structure of the issuer
thereof and any other property at any time and from time to time
received, receivable or otherwise distributed or delivered to
Noteholders, and all rights and privileges pertaining thereto;
STOCK PLEDGE AGREEMENT PAGE 4
<PAGE> 5
(b) all additional shares of stock of the Issuer from time to time acquired
by the Borrower in any manner, and all dividends, cash, instruments and
other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such shares;
(c) all securities hereafter delivered to the Collateral Agent on behalf of
the Noteholders in substitution for, or in addition to, any of the
foregoing, all certificates representing or evidencing such securities,
and all cash, securities, instruments, documents, dividends, increases,
distributions and profits received therefrom, and any other property at
any time and from time to time received by, receivable by or otherwise
distributed or delivered to the Collateral Agent on behalf of the
Noteholders in respect of or in exchange for any or all of the property
described;
(d) all subscriptions, warrants, options and any other rights issued now or
hereafter by the Issuer of the Pledged Shares or any other person
whatsoever upon or in connection with the Pledged Shares and any part
of the Pledged Collateral; and
(e) all products and proceeds of the foregoing and all general intangibles
and contract rights related thereto, including without limitation, all
revenues, distributions, dividends, property, registration rights,
contract rights and other rights and interests that Borrower is, or may
hereafter become, entitled to receive on account of any collateral
described in subsections 2(a) through (e);
(All such Pledged Shares, certificates, securities, instruments, documents,
dividends, increases, distributions, profits, intangibles, contract rights and
other property being herein collectively called the "Pledged Collateral").
Borrower shall forthwith deliver to the Collateral Agent, pursuant to the
Collateral Sharing Agreement, on behalf of the Noteholders, the Pledged
Collateral, all subscriptions, warrants, options and all such other rights, and
upon delivery to the Collateral Agent, on behalf of the Noteholders, the
Collateral Agent on behalf of the Noteholders shall hold such Pledged
Collateral, subscriptions, warrants, options and other rights as additional
collateral pledged to secure the Secured Indebtedness, provided, however, that
if the Majority Holders determine pursuant to the Collateral Sharing Agreement,
that the value of any such subscriptions, warrants, options or other rights
shall terminate, expire or be materially reduced in value by holding the same as
Pledged Collateral, the Collateral Agent, on behalf of the Noteholders, shall
have the right pursuant to the written direction of the Majority Holders (who
have the right, but not the obligation to so direct), to sell or exercise the
same and if exercised, then the monies disbursed by the Collateral Agent on
behalf of the Noteholders in connection therewith shall become part of the
Secured Indebtedness and all of the stock, securities, evidences of indebtedness
and other items so acquired shall become part of the Pledged Collateral;
To have and to hold the Pledged Collateral, together with all rights,
titles, interests, privileges and preferences appertaining to or incidental
thereto, unto each Noteholder, its successors and assigns, forever, subject,
however, to the terms, covenants and conditions hereafter set forth.
SECTION 3. COLLATERAL AGENT AS CUSTODIAN. Subject to the Collateral Sharing
Agreement, the Collateral Agent on behalf of the Noteholders shall have physical
possession of the certificates or instruments representing or evidencing the
Pledged Collateral. Borrower agrees that either (at the sole discretion of the
Collateral Agent acting on behalf of and at the written direction of the
Majority Holders) (a) all certificates representing Pledged Shares shall be
registered in the appropriate stock record books in the name of the Collateral
Agent on behalf of the Noteholders or a nominee or nominees of the Collateral
Agent on behalf of such Noteholders and, in either such case such registration
shall reflect that the Collateral Agent is acting as agent on behalf of
Noteholders, or (b) in lieu of presently registering the
STOCK PLEDGE AGREEMENT PAGE 5
<PAGE> 6
Pledged Collateral in the name of the Collateral Agent on behalf of the
Noteholders or its nominee as provided in clause (a) above, the Borrower will
deposit with the Collateral Agent or Noteholders, as directed, along with the
certificates or instruments representing or evidencing the Pledged Collateral,
duly executed stock powers in favor of the Collateral Agent or its nominee, as
agent for the Noteholders with signatures guaranteed by a member or member
organization of the New York Stock Exchange or by a commercial bank or trust
company acceptable to the transfer agent, and will, at its expense, make such
arrangements with an independent transfer agent, satisfactory to the Collateral
Agent on behalf of the Noteholders, as will require such transfer agent, solely
upon the Collateral Agent's written request, to register the Pledged Collateral
in the name of the Collateral Agent on behalf of the Noteholders or its nominee
as provided in clause (a) above and as may otherwise be satisfactory to the
Collateral Agent in accordance with the terms of the Collateral Sharing
Agreement. In addition, the Collateral Agent shall at all times, as agent for
the Noteholders have the right to exchange certificates or instruments
representing or evidencing the Pledged Collateral for certificates or
instruments of smaller or larger denominations for any purpose consistent with
its performance of this Agreement.
SECTION 4. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents
and warrants that, other than as permitted in the Collateral Sharing Agreement:
(a) the Borrower is the legal and equitable owner of the Pledged Collateral free
and clear of all liens, charges, pledges, encumbrances and security interests of
every kind and nature; (b) each Pledged Share has been validly authorized,
issued and is fully paid and nonassessable; (c) the Borrower has good right and
lawful authority to pledge the Pledged Collateral in the manner hereby done or
contemplated; (d) no consent or approval of any governmental body or regulatory
authority, or of any securities exchange, is necessary to effect the validity of
the rights created hereunder which have not been obtained; (e) except for any
financing statement which may have been filed by the Collateral Agent on behalf
of the Noteholders, no financing statement covering the Pledged Collateral or
any part thereof, has been filed with any filing officer; (f) no security
agreement covering the Pledged Collateral, or any part thereof, has been made
and no security interest, other than the one herein created, has attached or
been perfected in the Pledged Collateral or any part thereof; (g) the execution,
delivery and consummation of this Pledge Agreement will not violate the charter
or bylaws of Borrower or any law, regulation, mortgage, indenture, contract,
instrument, judgment or decree applicable to or binding on Borrower or the
Issuer; (h) the Pledged Shares constitute one hundred percent (100%) of the
issued and outstanding voting and nonvoting stock of the Issuer; (i) the
Borrower has held the Pledged Collateral, free and clear of all liens,
encumbrances and debt, and borne the full economic risk thereof since August 31,
1999 and at no time during such period did such Borrower hold any short position
in such securities or option to sell such securities, and at no time during such
period did any member of the Attribution Group (hereinafter defined) hold a
short position in any shares or Securities of the class of any security pledged
as Pledged Collateral hereunder or convertible into such class (hereinafter
referred to as "Class Securities") or an option to sell any such Class
Securities; and (j) the information contained in all forms or other statements
given to the Collateral Agent and/or the Noteholders by Borrower is true,
complete and accurate, and the Borrower will immediately notify the Collateral
Agent on behalf of the Noteholders of any change in such information. The
delivery at any time by Borrower to the Collateral Agent of additional Pledged
Collateral shall constitute a representation and warranty by Borrower that, with
respect to such Pledged Collateral, and each item thereof, the matters
heretofore warranted in clauses (a) through (j) immediately above are true and
correct at, and as if they were made at, the date of such delivery.
SECTION 5. COVENANTS.
(a) ADDITIONAL DOCUMENTS AND INFORMATION. Subject to the Collateral Sharing
Agreement, Borrower covenants and agrees to: (1) from time to time promptly
execute and deliver (including at or prior to
STOCK PLEDGE AGREEMENT PAGE 6
<PAGE> 7
closing) to the Collateral Agent on behalf of the Noteholders all such stock
powers, assignments, certificates, supplemental writings, financing statements
and other items and do all other acts or things as the Collateral Agent on
behalf of the Noteholders may request in order more fully to evidence and
perfect the interest of Noteholders in the Pledged Collateral and to grant the
Collateral Agent on behalf of the Noteholders control of the Pledged Collateral
as set forth in Section 8-106 of the UCC; (2) punctually and properly perform
all of Borrower's covenant and duties under any other security agreement, deed
of trust, collateral pledge agreement or contract of any kind now or hereafter
existing as security for or in connection with payment of the Secured
Indebtedness (to the extent liable thereon) in accordance with the terms hereof
and in accordance with the terms of the Notes; (3) promptly furnish the
Collateral Agent with any information or writings which the Collateral Agent may
reasonably request concerning the Pledged Collateral or the Issuer, including,
without limitation all material nonpublic information and, if applicable, a copy
of Issuer's Form 10-Q filed with the SEC for each fiscal quarter, a copy of the
annual report on Form 10-K, the annual report to stockholders of Issuer,
together with such other information as may be requested by the Collateral Agent
in order to comply, if necessary, with any SEC reporting requirements; (4) allow
the Collateral Agent to inspect all records of Borrower relating to the Pledged
Collateral or to the Secured Indebtedness, and to make and take away copies of
such records; (5) promptly notify the Collateral Agent of any change in any fact
or circumstances warranted or represented by Borrower in this Pledge Agreement
or in any other writing furnished by Borrower to the Collateral Agent in
connection with the Pledged Collateral or the Secured Indebtedness; (6) promptly
notify the Collateral Agent of any claim, action or proceeding affecting title
to the Pledged Collateral, or any part thereof, or the security interest herein,
and, at the request of the Collateral Agent, appear in and defend, at Borrower's
expense, any such action or proceeding; (7) on or before the execution hereof,
deliver all consents and other documents, including of the Issuer, necessary for
the transfer of the Pledged Collateral; and (8) promptly, after being requested
by the Collateral Agent, pay to the Collateral Agent the amount of all
reasonable expenses, including reasonable attorney's fees and other legal
expenses, incurred by the Collateral Agent in perfecting, maintaining and
enforcing the security interest.
(b) PROCEEDS. Subject to the terms of the Collateral Sharing Agreement,
should the Pledged Collateral, or any part thereof, ever be in any manner
converted by the Issuer into another type of property or any money or other
proceeds ever be paid or delivered to Borrower as a result of Borrower's rights
in the Pledged Collateral, then, in any such event, all such property, money and
other proceeds, except only ordinary cash dividends (unless and until payable to
the Noteholders pursuant to subsection 6(b) hereof), shall become part of the
Pledged Collateral, and shall be delivered to the Collateral Agent on behalf of
the Noteholders by Borrower.
(c) PERFORMANCE BY NOTEHOLDERS. Should any covenant, duty or agreement of
Borrower fail to be performed in accordance with its terms hereunder, the
Collateral Agent on behalf of the Noteholders may, but shall never be obligated
to, perform or attempt to perform such covenant, duty or agreement on behalf of
Borrower, and any amount expended by the Collateral Agent in such performance or
attempted performance shall become a part of the Secured Indebtedness, and, at
the request of the Collateral Agent, the Borrower agrees to pay such amount
promptly to the Collateral Agent at the Collateral Agent's office in Dallas,
Texas together with interest thereon at the rate provided in the Exchange
Agreement.
(d) RULE 144. Except as provided below, the Borrower hereby further
covenants and agrees that: (1) it or any person, party or entity with whom it
shall be deemed one "person" for purposes of Rule 144(a)(2) of the SEC ("Rule
144"), or any affiliate of such Borrower, person, party or entity (as the term
"affiliate" is defined in Rule 144(a)(l)) (the Borrower and all such persons,
parties, entities and affiliates being hereinafter collectively referred to as
the "Attribution Group") will not sell or allow the Attribution Group to sell
any Pledged Shares or Class Securities, whether or not such securities are
pledged
STOCK PLEDGE AGREEMENT PAGE 7
<PAGE> 8
hereunder, from the date hereof until the Secured Indebtedness has been paid in
full and in the event of any such sale consented to by the Collateral Agent, in
compliance with the Collateral Sharing Agreement, will furnish the Collateral
Agent with a copy of any Form 144 filed in respect of such sale; (2) it will
cooperate fully with the Collateral Agent with respect to any sale by the
Collateral Agent of any of the Pledged Collateral, including full and complete
compliance with all requirements of Rule 144 and will give to the Collateral
Agent all information and will do all things necessary, including the execution
of all documents, forms, instruments, and other items, to comply with Rule 144
and any and all other rules, regulations or laws of the United States or the
states thereof, including without limitation the State of North Carolina,
necessary for the complete and unrestricted sale and/or transfer of the Pledged
Collateral and will exercise its best efforts to have the Issuer, upon the
request of the Collateral Agent, publicly disseminate all information required
to satisfy Rule 144(c); (3) neither the Borrower nor the Attribution Group will
hold a short position in such securities from the date hereof until the Secured
Indebtedness is paid in full; and (4) the Borrower intends to cause to be paid
the Secured Indebtedness when due and the pledge to Noteholders of the Pledged
Collateral by the Borrower is a bona fide pledge and not intended by the
Borrower to result in the satisfaction of the indebtedness by the liquidation
and sale of the Pledged Collateral.
(e) COVENANT REGARDING REGISTRATION. If the Collateral Agent is instructed
as provided herein to exercise the Noteholders' right to sell any or all of the
Pledged Collateral pursuant to Section 7 on behalf of the Noteholders and if, in
the opinion of counsel for the Collateral Agent, it is necessary, or if the
Majority Holders otherwise instruct the Collateral Agent that it is advisable to
have the Pledged Collateral, or that portion thereof to be sold, registered
under the provisions of the Securities Act of 1933, as amended (the "Securities
Act"), the Borrower will, all at the Borrower's expense, cause the Issuer, or of
that portion thereof to be sold, to execute and deliver, and cause the directors
and officers of the Issuer to execute and deliver, all such instruments and
documents and cause such the Issuer's, directors, and officers to do or cause to
be done all such other acts and things as may be necessary or, in Collateral
Agent's opinion, advisable to register the Pledged Collateral, or that portion
thereof to be sold, under the provisions of the Securities Act and to cause the
registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering of
the Pledged Collateral, or that portion thereof to be sold and to make all
amendments thereto and/or to the related prospectus that, in the Collateral
Agent's opinion, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the SEC
applicable thereto. The Borrower agrees to cause the Issuer, or that portion
thereof to be sold, to comply with the provisions of the securities or "blue
sky" laws of any jurisdiction that the Collateral Agent shall designate and to
cause the Issuer to make available to its security holders, as soon as
practicable, an earnings statement (which need not be audited) that will satisfy
the provisions of Section 10(a) of the Securities Act.
(f) NEGATIVE COVENANTS. Other than as permitted in and subject to the
Collateral Sharing Agreement, the Replacement QIB Pledge Agreement and the Value
Pledge Agreement, Borrower covenants and agrees that, without the prior written
consent of the Majority Holders, Borrower will not: (1) sell, assign or transfer
any rights of Borrower in the Pledged Collateral; (2) grant any options or other
rights in the Pledged Collateral; (3) create any other security interest in,
mortgage, or otherwise encumber the Pledged Collateral, or any part thereof, or
permit the same to be or become subject to any lien, attachment, execution,
sequestration, other legal or equitable process, or any encumbrance of any kind
or character, except the security interest herein created; (4) vote for, or
consent to, any amendment of the articles of incorporation or charter of the
Issuer that might materially adversely affect the value of the Pledged
Collateral; or (5) permit the Issuer of the Pledged Shares to merge or
consolidate with or into any corporation or other person.
STOCK PLEDGE AGREEMENT PAGE 8
<PAGE> 9
SECTION 6. VOTING RIGHTS; DIVIDENDS, ETC., PRIOR TO DEFAULT
(a) RIGHTS PRIOR TO DEFAULT. Subject to the Collateral Sharing Agreement, as
long as no Event of Default, or event which with the giving of notice or lapse
of time or both would constitute an Event of Default shall have occurred after
the date hereof and be continuing, and the Collateral Agent shall not have given
written notice to Borrower of its intention to foreclose upon or otherwise
dispose of the Pledged Collateral or to exercise the Noteholders voting rights
(in conformance with the Collateral Pledged Agreement) pertaining to the Pledged
Collateral:
(1) the Borrower shall be entitled to exercise any and all voting and/or
consensual rights and powers relating or pertaining to the Pledged
Collateral or any part thereof for any purpose not inconsistent with
the terms of this Agreement; provided, however, that the Borrower shall
not exercise or refrain from exercising any such right or power if such
action would have a material adverse effect on the value of the Pledged
Collateral or any part thereof;
(2) the Borrower shall be entitled to receive, retain and expend or use in
its business any and all ordinary cash dividends payable on the Pledged
Collateral, but any and all stock and/or liquidating dividends,
distributions in property, returns of capital or other distributions
made on or in respect of the Pledged Collateral, whether resulting from
a subdivision, combination or reclassification of the outstanding
capital stock of the Issuer or received in exchange for Pledged
Collateral or any part thereof or as a result of any merger,
consolidation, acquisition or other exchange of assets to which the
Issuer may be a party or otherwise, and any and all cash and other
property received in exchange for the Pledged Collateral or received in
payment of the principal of or in redemption of the Pledged Collateral
(either at maturity, upon call for redemption or otherwise), shall be
and become part of the Pledged Collateral pledged hereunder and, if
received by the Borrower, shall be held in trust for the benefit of the
Noteholders and forthwith be delivered to the Collateral Agent on
behalf of the Noteholders (accompanied by proper instruments of
assignment and/or stock powers executed by the Borrower in accordance
with the Noteholders' instructions) to be held subject to the terms of
this Agreement; and
(3) the Collateral Agent shall, as agent for the Noteholders, execute and
deliver (or cause to be executed and delivered) to the Borrower all
such proxies, powers of attorney, dividend orders, and other
instruments as the Borrower may request for the purpose of enabling the
Borrower to exercise the voting and/or consensual rights and powers
which it is entitled to exercise pursuant to subsection (1) above
and/or to receive the dividends which it is authorized to receive and
retain pursuant to subsection (2) above.
(b) TERMINATION OF RIGHTS. Subject to the Collateral Sharing Agreement, upon
(1) the occurrence after the date hereof of an Event of Default or any event
which with the giving of notice or the lapse of time or both would constitute an
Event of Default, and (2) the giving of written notice by the Collateral Agent
on behalf of the Noteholders to Borrower of its intention to (A) foreclose upon
or otherwise dispose of the Pledge Collateral or (B) exercise the Noteholders'
voting rights pertaining to the Pledged Collateral, all rights of the Borrower
to exercise the voting and/or consensual rights and powers which it is entitled
to exercise pursuant to subsection 6(a)(l) hereof and/or to receive the
dividends which it is authorized to receive and retain pursuant to subsection
6(a)(2) hereof shall cease, at the option of the Collateral Agent on behalf of
the Noteholders, and all such rights shall thereupon become vested in the
Noteholders, to be exercised by the Collateral Agent, which Collateral Agent
shall have the sole and exclusive right and authority to exercise such voting
and/or consensual rights and powers and/or to receive and retain the dividends
which the Borrower would otherwise be authorized to retain pursuant to
STOCK PLEDGE AGREEMENT PAGE 9
<PAGE> 10
subsection 6(a)(2) hereof. Further, the Collateral Agent on behalf of the
Noteholders shall have the right upon the occurrence of an Event of Default, to
notify and direct the Issuer of the Pledged Collateral to thereafter make all
payments, distributions, dividends and any other distributions payable in
respect thereof directly to the Collateral Agent. The Issuer shall be fully
protected in relying on the written statement of the Collateral Agent that the
Noteholders hold a security interest which entitles the Collateral Agent to
receive such payments and distributions. Any and all money and other property
paid over to or received by the Collateral Agent pursuant to the provisions of
this subsection (b) shall be retained by the Collateral Agent as additional
Pledged Collateral hereunder and may be applied (and upon the Borrower's written
request all cash shall promptly be applied) in accordance with the provisions
hereof.
SECTION 7. RIGHTS AND REMEDIES OF NOTEHOLDERS UPON AND AFTER DEFAULT.
(a) REMEDIES. Subject to the terms of the Indenture, the Value Notes and the
Collateral Sharing Agreement, upon the occurrence of an Event of Default, in
addition to any and all other rights and remedies which the Noteholders may then
have hereunder, under other contracts or agreements between Borrower and
Noteholders, under applicable law, or otherwise, the Collateral Agent may, at
its option, after being notified by the Trustee of the occurrence of such an
Event of Default; (1) foreclose or otherwise enforce the Noteholders security
interest in all or any part of the Pledged Collateral by any available judicial
procedure; (2) after notification, if any, expressly provided for herein, sell
or otherwise dispose of, at the office of the Collateral Agent, or elsewhere, as
chosen by the Collateral Agent, all or any part of the Pledged Collateral, and
any such sale or other disposition may be as a unit or in parcels, by public or
private proceedings, and by way of one or more contracts, (it being agreed that
the sale of any part of the Pledged Collateral shall not exhaust the Collateral
Agent's power of sale (as exercised by the Collateral Agent), but sales may be
made from time to time until all of the Pledged Collateral has been sold or
until the Secured Indebtedness has been paid in full, provided, however that the
Collateral Agent shall have no obligation to sell the Pledged Collateral
piecemeal, it being specifically acknowledged that a sale of all of the Pledged
Collateral to one purchaser in a single transaction shall be conclusively
presumed to be commercially reasonable), and at any such sale it shall not be
necessary to exhibit the Pledged Collateral; (3) at its discretion, and if
consented to by the Majority Holders, retain the Pledged Collateral in
satisfaction of the Secured Indebtedness whenever the circumstances are such
that Noteholders are entitled to do so under the Code; (4) apply by appropriate
judicial proceedings for appointment of a receiver for the Pledged Collateral,
or any part thereof, and Borrower hereby consents to any such appointment; (5)
exercise the rights set forth in Section 7 hereof in accordance with the Code;
(6) purchase the Pledged Collateral at any public sale in accordance with the
Code; and (7) purchase the Pledged Collateral at any private sale in accordance
with the Code.
(b) SALE OF PLEDGED COLLATERAL. Subject to the Collateral Sharing Agreement,
the Collateral Agent is authorized, at any sale of the Pledged Collateral, if it
deems it advisable, to restrict the prospective bidders or purchasers to those
persons who will represent and agree that they are purchasing for their own
account, for investment, and not with a view to distribution or sale of any of
the Pledged Collateral. Upon any such sale, the Collateral Agent shall have the
right to deliver, assign, and transfer to the purchaser thereof the Pledged
Collateral so sold. Each purchaser at any such sale shall hold the property sold
absolutely, free from any claim or right of whatsoever kind, including any
equity or right of redemption, of Borrower which hereby specifically waives all
rights of redemption, stay, or appraisal which it has or may have under any rule
of law or statute now existing or hereafter adopted, and such waiver shall be
deemed to have been made after default. The Collateral Agent shall give Borrower
ten days' written notice of its intention to make any such public or private
sale or sale at broker's board or on a securities exchange. Such notice, in case
of sale at broker's board or on a securities exchange, shall state the board or
exchange at which such sale is to be made and the day on which the Pledged
Collateral, or that portion
STOCK PLEDGE AGREEMENT PAGE 10
<PAGE> 11
thereof so being sold, which will first be offered for sale at such board or
exchange. The Collateral Agent shall have no obligation to disclose or provide
any information concerning the Issuer to prospective purchasers of the Pledged
Collateral other than information in its possession at such time and Borrower
agrees and acknowledges that it shall be commercially reasonable for any notices
of any such sale, published or otherwise to specifically so state. At any such
sale the Pledged Collateral may be sold in one lot as an entirety or in separate
parcels, as the Collateral Agent may elect, and any such election shall be
presumed to be commercially reasonable. The Collateral Agent shall not be
obligated to make any such sale pursuant to any such notice. The Collateral
Agent may, without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at the time and
place fixed for the sale, and such sale may be made at any time or place to
which the same may be so adjourned. In case of any sale of all or any part of
the Pledged Collateral on credit or for future delivery, the Pledged Collateral
so sold may be retained by the Collateral Agent until the selling price is paid
by the purchaser thereof, but the Collateral Agent shall not incur any liability
in case of the failure of such purchaser to take and pay for the Pledged
Collateral so sold, and, in case of any such failure, such Pledged Collateral
may again be sold upon like notice. The Collateral Agent may also, at its
discretion, proceed by a suit or suits at law, or in equity to foreclose the
pledge and sell the Pledged Collateral, or any portion thereof, under a judgment
or decree of a court or courts of competent jurisdiction. If any consent,
approval or authorization of any state municipal or other governmental
department, agency or authority should be necessary to effectuate any salt or
other disposition of the Pledged Collateral, or any part disposition of the
Pledged Collateral, or any part thereof, Borrower will execute all such
applications and other instruments as may be required in connection with
securing any such consent, approval or authorization, and will otherwise use its
best efforts to secure the same.
(c) POSSIBLE RESTRICTIONS ON SALE OF PLEDGED COLLATERAL. Subject to the
Collateral Sharing Agreement, because of the Securities Act, as amended, or any
other applicable laws or regulations, there may be legal restrictions or
limitations affecting the Collateral Agent in any attempts to dispose of certain
portions of the Pledged Collateral in the enforcement of rights and remedies
granted the Noteholders hereunder. For these reasons the Collateral Agent is
hereby authorized by Borrower, but not obligated, in the event of any Event of
Default hereunder giving rise to the Collateral Agent's right on behalf of the
Noteholders to sell or otherwise dispose of the Pledged Collateral, and after
the giving of any notices required herein, to sell all or any part of the
Pledged Collateral at private sale, subject to an investment letter or in any
other manner which will not require the Pledged Collateral, or any part thereof,
to be registered in accordance with the Securities Act, as amended, or other
applicable rules and regulations promulgated thereunder, or any other law or
regulation at the best price reasonably obtainable by the Collateral Agent at
any such private sale or other disposition in the manner mentioned above and
Borrower specifically acknowledges that any such disposition shall be
commercially reasonable under the Code. The Collateral Agent is also hereby
authorized by Borrower, but not obligated, to take such actions, give such
notices, obtain such consents, and do such other things as Borrower may deem
required or appropriate in the event of a sale or disposition of any of the
Pledged Collateral. Borrower clearly understands that the Collateral Agent may
at its discretion approach a restricted number of potential purchasers and that
a sale under such circumstances may yield a lower price for the Pledged
Collateral, or any part or parts thereof, than would otherwise be obtainable if
same were registered and sold in the open market. Borrower agrees (1) in the
event the Collateral Agent shall, upon an Event of Default, sell the Pledged
Collateral, or any portion thereof, at such private sale or sales, the
Collateral Agent shall have the right to rely upon the advice and opinion of any
member firm of the National Security Exchange as to the best price reasonably
obtainable upon such private sale thereof, and (2) that such reliance shall be
conclusive evidence that the Collateral Agent handled such matter in a
commercially reasonable manner under the Code.
STOCK PLEDGE AGREEMENT PAGE 11
<PAGE> 12
(d) NOTIFICATION. Subject to the Collateral Sharing Agreement, reasonable
notification of the time and place of any public sale of the Pledged Collateral,
or reasonable notification of the time after which any private sale or other
intended disposition of the Pledged Collateral is to be made, shall be sent to
Borrower and to any other person entitled under the Code to notice; provided,
that if the Pledged Collateral threatens to decline quickly in value or is of a
type customarily sold on a recognized market, the Collateral Agent may sell or
otherwise dispose of the Pledged Collateral without notification, advertisement
or other notice of any kind. It is agreed that notice sent or given not less
than ten calendar days prior to the taking of the action to which the notice
relates is reasonable notification and notice for the purpose of this agreement.
(e) APPLICATION OF PROCEEDS. Subject to the Collateral Sharing Agreement,
upon the maturity of any instrument evidencing the Secured Indebtedness or any
part thereof, whether such maturity be by such terms of such instruments or
through the exercise of any power of acceleration, the Collateral Agent is
authorized and empowered to apply any and all funds realized from the sale of
the Pledged Collateral not previously credited against the Secured Indebtedness
first toward the payment of the costs, charges and expenses, if any, incurred in
the collection of such funds hereunder, and then toward the payment (in such
order as the Collateral Agent shall elect) of the Secured Indebtedness, and
shall pay any balance remaining as set forth in the Collateral Sharing
Agreement.
(f) NOTICES. In the event that any notice is required to be given to
Borrower with respect to any sale or liquidation of the Pledged Collateral or
any other action by the Collateral Agent, any notice addressed to Borrower at
such address as set forth pursuant to Section 1.5 of the Indenture, postage
prepaid, deposited in the United States mail ten (10) days prior to the date of
any such intended action shall be deemed to be a sufficient and commercially
reasonable notice. Nothing contained herein shall prevent the Collateral Agent
from giving notice in any other manner which is considered reasonable.
SECTION 8. AUTHORITY OF THE COLLATERAL AGENT. Subject to the Collateral
Sharing Agreement, the Collateral Agent shall have and be entitled to exercise
all such powers hereunder as are specifically delegated to the Collateral Agent
on behalf of the Noteholders by the terms hereof, together with such powers as
are reasonably incidental thereto. The Collateral Agent may execute any of its
duties hereunder by or through subagents or employees and shall be entitled to
retain counsel and to act in reliance upon the advice of such counsel concerning
all matters pertaining to said duties. The Collateral Agent and any director,
officer or employee of the Collateral Agent shall not be liable for any action
taken or omitted to be taken by them or any of them hereunder or in connection
herewith, except for their own gross negligence or willful misconduct; nor shall
the Collateral Agent be responsible for the validity, effectiveness or
sufficiency hereof or of any document or security furnished pursuant hereto or
in connection herewith. The Collateral Agent shall be entitled to rely on any
communication, instrument or document believed by it to be genuine and correct
and to have been signed or sent by the proper person or persons. The Borrower
hereby agrees to reimburse the Collateral Agent, on demand, for all reasonable
expenses incurred by it in connection with the administration and enforcement of
this Agreement and agrees to indemnify and hold the Collateral Agent harmless
from and against any and all liability incurred by it hereunder or in connection
herewith, unless such liability shall be due to willful misconduct or gross
negligence on the part of the Collateral Agent, other than the exercise of
reasonable care in the physical custody of the Pledged Collateral while held by
the Collateral Agent. The Collateral Agent shall have no responsibility for or
obligation or duty with respect to all or any part of the Pledged Collateral or
any matter or proceeding arising out of or relating thereto, including, without
limitation, any obligation or duty to collect any sums due in respect thereof or
to protect or preserve any rights against prior parties or any other rights
pertaining thereto, it being understood and agreed that Borrower shall be
responsible generally for the preservation of all rights in the Pledged
Collateral. Without limiting the generality of the
STOCK PLEDGE AGREEMENT PAGE 12
<PAGE> 13
foregoing, the Collateral Agent shall be conclusively deemed to have exercised
reasonable care in the custody of the Pledged Collateral if the Collateral Agent
takes such action, for purposes of preserving rights in the Pledged Collateral,
as the Borrower or Noteholders may reasonably request in writing, but no failure
or omission or delay by the Collateral Agent in complying with any such request
by Borrower or Noteholders, and no refusal by the Collateral Agent to comply
with any such request by Borrower or Noteholders shall be deemed to be a failure
to exercise reasonable care.
SECTION 9. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT. The Borrower hereby
appoints the Collateral Agent the Borrower's attorney-in-fact for the purpose of
carrying out the provisions of this Agreement and taking any action and
executing any instrument which the Collateral Agent may deem necessary or
advisable to accomplish the purposes hereof, which appointment is irrevocable
and coupled with an interest. Without limiting the generality of the foregoing,
the Collateral Agent shall have the right and power, except and to the extent
otherwise provided in subsection 6(a)(2), to receive, endorse and collect all
checks and other orders for the payment of money made payable to the Borrower
representing any dividend or other distribution payable or distributable in
respect of the Pledged Collateral or any part thereof and to give full discharge
for the same.
SECTION 10. CERTAIN RIGHTS BEFORE AND AFTER AN EVENT OF DEFAULT.
(a) THE COLLATERAL AGENT'S RESPONSIBILITY FOR PLEDGED COLLATERAL. The
Collateral Agent shall have no duty to fix or preserve rights against prior
parties to the Pledged Collateral, and shall never be liable for its failure to
use diligence to collect any amount payable with respect to the Pledged
Collateral, but shall be liable only to account to Borrower for what it may
actually collect or receive thereon. If the Pledged Collateral declines in
value, Borrower will, upon demand by the Collateral Agent, deliver to the
Collateral Agent on behalf of the Noteholders, to become part of the Pledged
Collateral, additional property satisfactory to the Collateral Agent.
(b) FEE FOR STATEMENTS. Except as otherwise provided by law, the Collateral
Agent may charge Borrower a reasonable fee for the Collateral Agent furnishing a
statement of account or list of Pledged Collateral.
(c) FINANCING STATEMENT. The Collateral Agent, on behalf of the Noteholders
shall have the right at any time to execute and file this agreement as a
financing statement, but the failure to do so shall not impair the validity or
enforceability of this Agreement.
(d) USURY. All agreements between Borrower and the Noteholders, whether now
existing or hereafter arising and whether written or oral, are hereby limited so
that in no contingency, whether by reason of demand or acceleration of the Final
Maturity Date, as that term is defined in the Notes, or otherwise, shall the
interest contracted for, charged, received, paid or agreed to be paid to
Noteholders exceed the maximum amount permissible under the laws of the State of
New York (hereinafter the "Applicable Law"). If, from any circumstance
whatsoever, interest would otherwise be payable to Noteholders in excess of the
maximum amount permissible under the Applicable Law, the interest payable to
Noteholders shall be reduced to the maximum amount permissible under the
Applicable Law, and if from any circumstance Noteholders shall ever receive
anything of value deemed interest by the Applicable Law in excess of the maximum
amount permissible under the Applicable Law, an amount equal to the excessive
interest shall be applied to the reduction of the principal hereof and not to
the payment of interest, or if such excessive amount of interest exceeds the
unpaid balance of principal hereof, such excess shall be refunded to Borrower.
All interest paid or agreed to be paid to Noteholders shall, to the extent
permitted by the Applicable Law, be amortized, prorated, allocated and
STOCK PLEDGE AGREEMENT PAGE 13
<PAGE> 14
spread throughout the full period (including any renewal or extension) until
payment in full of the principal so that the interest hereon for such full
period shall not exceed the maximum amount permissible under the Applicable Law.
The Noteholders expressly disavow any intent to contract for, charge or receive
interest in an amount which exceeds the maximum amount permissible under the
Applicable Law. This paragraph as well as similar paragraphs as set forth in the
Notes and the Exchange Agreement shall control all agreements between Borrower
and Noteholders. This paragraph shall inure to the benefit of the Collateral
Agent.
(e) DISCLOSURE. The Collateral Agent is granted the right to discuss
Borrower's affairs, finances and accounts with all parties to such degree as the
Collateral Agent deems necessary or advisable to protect the Noteholders'
security interests and/or the repayment of the Secured Indebtedness. The
Borrower covenants to do all things necessary or appropriate to permit the
Collateral Agent to fully exercise its rights under this paragraph.
(f) DEPOSIT OF PROCEEDS. Except as expressly prescribed above, all payments
received by the Collateral Agent with respect to the Pledged Collateral shall,
at the Collateral Agent's option, be deposited in a special interest bearing
account at a bank (which may be, but need not be, a trust account or escrow
account maintained at the Collateral Agent) to be designated by the Collateral
Agent in the name of the Noteholders styled "Collateral Account." Funds in said
account are hereby assigned to the Collateral Agent on behalf of the Noteholders
and shall be impressed with a lien to secure the Secured Indebtedness, and shall
be applied by the Collateral Agent as provided for above.
(g) PAYMENT OF EXPENSES. Subject to the terms of the Collateral Sharing
Agreement, at the Collateral Agent's option, the Collateral Agent may discharge
taxes, liens and interest, perform or cause to be performed, for and on behalf
of the Borrower, any actions and conditions, obligations or covenants which the
Borrower has filed or refused to perform and may pay for the repair, maintenance
or preservation of any of the Pledged Collateral, and all sums so expended,
including, but not limited to, attorneys' fees, court costs, agents' fee or
commissions, or any other costs or expenses, shall become part of the Secured
Indebtedness, shall bear interest from the date of payment at the highest legal
rate and shall be payable at the place designated for payment of the Secured
Indebtedness and shall be secured by this Agreement.
SECTION 11. CUMULATIVE RIGHTS AND REMEDIES. Subject to the terms of the
Collateral Sharing Agreement, all rights and remedies of Collateral Agent and
the Noteholders hereunder are cumulative of each other and of every other right
or remedy which Collateral Agent and the Noteholders may otherwise have at law
or in equity or under any other contract or other writing for the enforcement of
the security interest herein or the collection of the Secured Indebtedness, and
the exercise by the Collateral Agent on behalf of the Noteholders of one or more
rights or remedies shall not prejudice or impair the concurrent or subsequent
exercise of other rights or remedies. Should the Borrower have heretofore
executed or hereafter execute any other security agreement in favor of the
Noteholders in which a security interest is created as security for the debts of
another or others, in respect of which Borrower may not be personally liable,
the security interest therein created and all other rights, powers and
privileges vested in the Noteholders by the terms thereof shall exist
concurrently with the security interest created herein, and, in addition, all
property in which the Noteholders hold a security interest under any such other
security agreement shall also be part of the Pledged Collateral hereunder, and
all or any part of the proceeds of the sale or other disposition of such
property may, in the discretion of the Collateral Agent on behalf of the
Noteholders, be applied by it in accordance with the terms hereof, and of such
other security agreement, or agreements, or any of them.
STOCK PLEDGE AGREEMENT PAGE 14
<PAGE> 15
SECTION 12. ASSIGNABILITY OF RIGHTS, ETC. Subject to the terms of the
Collateral Sharing Agreement, the rights, powers and interest held by the
Collateral Agent and a Noteholder hereunder, together with the Pledged
Collateral, may be transferred and assigned by the Collateral Agent and such
Noteholder in whole or in part, at such time and upon such terms as it may deem
advisable.
SECTION 13. NO WAIVER. Should any part of the Secured Indebtedness be
payable in installments, the acceptance by the Collateral Agent or the
Noteholders at any time and from time to time of part payment of the aggregate
amount of all installments then matured shall not be deemed to be a waiver of
the default then existing. No waiver by the Collateral Agent or the Noteholders
of any default shall be deemed to be a waiver of any other subsequent default,
nor shall any such waiver by the Collateral Agent or the Noteholders be deemed
to be a continuing waiver. No delay or omission by the Collateral Agent on
behalf of the Noteholders in exercising any right or power hereunder, or under
any other writings executed by the Borrower as security for or in connection
with the Secured Indebtedness, shall impair any such right or power or be
construed as a waiver thereof or any acquiescence therein, nor shall any single
or partial exercise of any such right or power preclude other or further
exercise thereof, or the exercise of any other right or power of the Noteholders
hereunder or under such other writings. No action or omission of the Collateral
Agent or the Noteholders shall constitute a waiver by the Collateral Agent or
the Noteholders of any rights or remedies hereunder.
SECTION 14. SUBROGATION. Subject to the Collateral Sharing Agreement, if the
Secured Indebtedness, or any part thereof, be given in renewal or extension, or
applied toward the payment, of indebtedness secured by mortgage, pledge,
security agreement or other lien, Noteholders shall be, and are hereby
subrogated to all of the rights, titles, security interests and other liens
securing the indebtedness so renewed, extended or paid.
SECTION 15. SECURITY INTEREST ABSOLUTE. Subject to the terms of the
Collateral Sharing Agreement, all rights of the Collateral Agent and the
Noteholders hereunder and the interest and all obligations of the Borrower
hereunder shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Exchange Agreement or any
other agreement or instrument relating to the Exchange Agreement;
(b) any change in the time, manner or place of payment of, or in any other
term of, the Exchange Agreement, or any renewal or extension of the Exchange
Agreement or any other amendment or waiver of or any consent to any departure
from this Pledge Agreement or any other agreement or instrument;
(c) any sale, exchange, release or nonperfection of any of the Pledged
Collateral, or any release of any guarantor or any person liable in any manner
for the collection of the Notes, or any amendment or waiver of or consent to or
departure from any guaranty or the Exchange Agreement; or
(d) any other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Borrower in respect of the Exchange
Agreement.
SECTION 16. MARSHALING. The Collateral Agent on behalf of the Noteholders
shall not be required to make any demand upon, or pursue or exhaust any of its
rights or remedies against, the Borrower or any guarantor, Borrower or any other
person with respect to the payment of the Notes or to pursue or exhaust any of
its rights or remedies with respect to any Pledged Collateral therefore or any
direct or indirect guarantee thereof or insurance with respect thereto. The
Collateral Agent on behalf of the Noteholders shall not be required to marshal
the Pledged Collateral or any guarantee of the Notes or
STOCK PLEDGE AGREEMENT PAGE 15
<PAGE> 16
to resort to the Pledged Collateral or any such guarantee in any particular
order, and all of its rights hereunder or under any other related documents,
including the Exchange Agreement and the Notes, shall be cumulative. To the
extent it may lawfully do so, the Borrower absolutely and irrevocably waives and
relinquishes the benefit and advantage of, and covenants not to assert against
the Collateral Agent on behalf of the Noteholders, any valuation, stay,
appraisement, extension, redemption or similar laws now or hereafter existing
which, but for this provision, might be applicable to the sale of any Pledged
Collateral made under the judgment, order or decree of any court, or privately
under the power of sale conferred by this Pledge Agreement, or otherwise.
Without limiting the generality of the foregoing, the Borrower: (a) agrees that
it will not invoke or utilize any law which might prevent, cause a delay in or
otherwise impede the enforcement of the rights of the Collateral Agent on behalf
of the Noteholders in the Pledged Collateral; (b) waives all such laws; and (c)
agrees that it will not invoke or raise as a defense to any enforcement by the
Collateral Agent on behalf of the Noteholders of any rights and remedies
relating to the Pledged Collateral or the Notes, any legal or contractual
requirement with which Noteholders may have in good faith failed to comply. In
addition, Borrower waives any right to prior notice (except to the extent
expressly required by the other provisions of this Pledge Agreement) or judicial
hearing in connection with foreclosure on or disposition of any Pledged
Collateral, including any such right which Borrower would otherwise have under
the Constitution of the United States of America, any state or territory thereof
or any other jurisdiction. Borrower hereby waives and releases to the fullest
extent permitted by law any right or equity of redemption with respect to the
Collateral, whether before or after sale hereunder.
SECTION 17. CONTINUING SECURITY INTEREST. The Borrower shall not assign or
otherwise transfer this Pledge Agreement or any interest herein without the
Collateral Agent's prior written consent. This Pledge Agreement shall create a
continuing security interest in the Pledged Collateral and shall: (a) remain in
full force and effect until the final payment in full of all amounts payable
under the Notes and the other Secured Indebtedness; (b) bind the Borrower, its
successors and permitted assigns; and (c) inure to the benefit of the
Noteholders and their successors, transferees and assigns.
SECTION 18. BINDING EFFECT. This Agreement shall be binding on the Borrower
and the Borrower's successors and assigns and shall inure to the benefit of
Noteholders, their successors and assigns.
SECTION 19. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
SECTION 20. COLLATERAL AGENT. The Borrower hereby appoints the Collateral
Agent its agent for the purpose of retaining physical possession of the
Collateral, which may be held (in the discretion of the Collateral Agent) in the
name of the Borrower, endorsed or assigned in blank or in favor of the
Collateral Agent or its nominee and for purposes of exercising other rights and
remedies, as set forth in the Collateral Sharing Agreement. The Collateral Agent
(and not the Noteholders) shall exercise all rights and remedies granted the
Noteholders herein. All rights granted the Noteholders herein shall be subject
to and governed by the Collateral Sharing Agreement.
STOCK PLEDGE AGREEMENT PAGE 16
<PAGE> 17
EXECUTED in New York, New York, on the date first above stated.
ALTIVA FINANCIAL CORPORATION:
By: /s/ EDWARD B. MEYERCORD
-----------------------------------------
Name: Edward B. Meyercord
---------------------------------------
Title: Chief Executive Officer
--------------------------------------
Acknowledged:
UNITED STATES TRUST COMPANY OF
NEW YORK, as Collateral Agent for the
Noteholders
By: /s/ GLENN E. MITCHELL
-----------------------------------------
Name: Glenn E. Mitchell
---------------------------------------
Title: Vice President
--------------------------------------
STOCK PLEDGE AGREEMENT PAGE 17
<PAGE> 1
EXHIBIT 10.7
REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement (the "Agreement"), dated as of March 17,
2000, by and between Altiva Financial Corporation, a Delaware corporation (the
"Company") and United States Trust Company of New York for the benefit of the
holders of the Company's 12% Secured Convertible Senior Notes due 2006 (the "New
Notes").
WHEREAS, pursuant to an exchange offer pursuant to which the Company is
soliciting the tender of its outstanding 12 1/2% Subordinated Notes due 2001 in
exchange for the issuance of New Notes in a discounted principal amount (the
"Exchange Offer"), the Company will issue to the Holders, among other things, up
to $6,428,000 principal amount of New Notes (the "Convertible Notes") which are
convertible into shares of common stock of the Company, par value $.01 (the
"Common Stock"); and
WHEREAS, upon approval by the Company's stockholders, the Convertible
Notes will be convertible into shares of Common Stock at a rate of $1.00 of
principal amount of Convertible Notes for each share of Common Stock issued (the
Common Stock being issuable upon conversion of the Convertible Notes issued
pursuant to the Exchange Offer being referred to herein as the "Securities") ;
and
WHEREAS, as an inducement to Holders to purchase the New Notes, the
Company agreed to register the Securities into which the Convertible Notes are
convertible;
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged by
all parties hereto, the parties, intending to be legally obligated, hereby agree
as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
"Act": The Securities Act of 1933, as amended.
"Beneficial Owner Registry": As defined in the Indenture.
"Broker-Dealer": Any broker or dealer registered as such under the
Exchange Act.
"Closing Date": The date of this Agreement.
"Commission" or "SEC": The United States Securities and Exchange
Commission.
<PAGE> 2
"Convertible Notes": As defined in the preamble hereto.
"DTC": The Depository Trust Company.
"Effectiveness Target Date": As defined in Section 3 hereof.
"Exchange Act": The Securities Exchange Act of 1934, as amended.
"Holders ": As defined in Section 2(b) hereof.
"Indemnified Holder": As defined in Section 7(a) hereof
"Indenture": The Indenture dated as of February 29, 2000 by and between
the Company and United States Trust Company of New York, as Trustee.
"NASD": National Association of Securities Dealers, Inc.
"New Notes": As defined in the preamble hereto.
"Person": An individual, partnership, corporation, trust or
unincorporated organization, or a government or an agency, authority or
political subdivision thereof.
"Prospectus": The prospectus included in a Resale Registration
Statement, as amended or supplemented, including post-effective amendments,
thereto.
"Registration Default": As defined in Section 4 hereof.
"Resale Registration Statement": As defined in Section 3 hereof.
"Securities": As defined in the preamble hereto.
"Transfer Restricted Securities": Each Security, until the earliest to
occur of (a) the date on which such Security has been effectively registered
under the Act and disposed of in accordance with a Resale Registration Statement
or other applicable registration statement and (b) the date on which such
Security is distributed to the public pursuant to Rule 144 under the Act or may
be sold to the public without compliance with such rule.
"Underwritten Registration" or "Underwritten Offering": An offering in
which securities of the Company are sold to an underwriter for reoffering to the
public pursuant to an effective registration statement filed with the
Commission.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(A) TRANSFER RESTRICTED SECURITIES. The Transfer Restricted Securities
are subject to
2
<PAGE> 3
the terms of this Agreement and may be sold in accordance with
the provisions hereof.
(B) HOLDERS OF TRANSFER RESTRICTED SECURITIES. A Person is deemed to be
a holder of Transfer Restricted Securities (each, a "Holder") whenever such
Person owns (i) Convertible Notes, or (ii) Securities prior to (A) the resale of
Securities in accordance with the terms hereof or (B) the time that such
Securities are no longer considered to be Transfer Restricted Securities.
SECTION 3. RESALE REGISTRATION STATEMENT
(A) REGISTRATION. The Company shall cause to be filed with the
Commission promptly after the Closing Date, but in no event later than April 15,
2000, one or more registration statements on Form S-1, S-2 or S-3, or other
applicable form (each a "Resale Registration Statement"), and use its reasonable
best efforts to cause such Resale Registration Statement to be declared
effective by the Commission promptly, but in no event later than June 15, 2000
(the "Effectiveness Target Date"). In connection with the foregoing, the Company
shall (A) file all pre-effective amendments to such Resale Registration
Statement as may be necessary in order to cause such Resale Registration
Statement to become effective, (B) if applicable, file a post-effective
amendment to such Resale Registration Statement pursuant to Rule 430A under the
Securities Act and (C) cause all necessary filings in connection with the
registration and qualification of the Securities to be made under the state
securities and Blue Sky laws of such jurisdictions as are necessary. Subject to
the provisions of Section 5(c) hereof, the Company shall use its reasonable best
efforts to keep such Resale Registration Statement continuously effective,
supplemented and amended to the extent necessary to ensure that it is available
for resales of Securities by the Holders of Transfer Restricted Securities
entitled to the benefit of this Section 3(a), and to ensure that it conforms
with the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, and all state
securities or Blue Sky laws until the earlier of (i) the sale of all Securities
in accordance with a Resale Registration Statement or (ii) the date on which all
Transfer Restricted Securities may be sold without restriction pursuant to Rule
144 under the Act.
(B) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH THE
SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Resale Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within twenty (20) business days after receipt of a
request therefor, such information as the Company may reasonably request for use
in connection with any Resale Registration Statement or Prospectus or
preliminary Prospectus included therein. No Holder of Transfer Restricted
Securities shall be entitled to Liquidated Damages pursuant to Section 4 hereof
unless and until such Holder shall have used its reasonable best efforts to
provide all such reasonably requested information. Each Holder as to which any
Resale Registration Statement is being effected agrees to promptly furnish to
the Company any and all information required to be disclosed in order to make
the information previously furnished to the Company by such Holder not
materially misleading.
3
<PAGE> 4
SECTION 4. LIQUIDATED DAMAGES
If (a) the Company shall not have filed the Resale Registration
Statement with the Commission on or prior to April 15, 2000, (b) the Resale
Registration Statement shall not have been declared effective by the SEC by the
Effectiveness Target Date or (c) the Resale Registration Statement is filed and
declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded within ten (10) business
days by a post-effective amendment that cures such failure and that is itself
declared effective within thirty (30) business days (each such event referred to
in clauses (a) through (c), a "Registration Default"), additional cash interest
("Liquidated Damages") shall accrue to each Holder of the Convertible Notes
commencing upon the occurrence of such Registration Default in an amount equal
to $0.05 per week per $1,000 principal amount of the New Notes held by such
Holder during the ninety (90) day period following the occurrence of such
Registration Default. The amount of Liquidated Damages will increase by an
additional $0.05 per week per $1,000 principal amount of the New Notes with
respect to each subsequent 90-day period until all Registration Defaults have
been cured, up to a maximum amount of Liquidated Damages for all Registration
Defaults of $0.50 per week per $1,000 principal amount of New Notes. All accrued
Liquidated Damages shall be paid to Holders by the Company in the same manner as
interest is paid on the New Notes pursuant to the Indenture. Following the cure
of all Registration Defaults relating to any particular Transfer Restricted
Securities, the accrual of Liquidated Damages with respect to such Transfer
Restricted Securities will cease.
All obligations of the Company set forth in the preceding paragraph
that are outstanding with respect to any Transfer Restricted Security at the
time such Security ceases to be a Transfer Restricted Security shall survive
until such time as all such obligations with respect to such Security shall have
been satisfied in full.
SECTION 5. REGISTRATION PROCEDURES
(A) RESALE REGISTRATION STATEMENT. In connection with each Resale
Registration Statement, the Company shall comply with all the provisions of
Section 5(b) below and shall file and use its reasonable best efforts to effect
such registration to permit the sale of the Transfer Restricted Securities in
accordance with the terms of this Agreement.
(B) GENERAL PROVISIONS. In connection with any Resale Registration
Statement and any Prospectus required by this Agreement to permit the sale or
resale of Transfer Restricted Securities (including, without limitation, any
Registration Statement and the related Prospectus required to permit resales of
the Securities by Broker-Dealers), the Company shall:
(i) use its reasonable best efforts to keep such Resale
Registration Statement continuously effective and provide all requisite
financial statements during the period specified in Section 3 of this
Agreement, and upon the occurrence of any event that would cause any
such Resale Registration Statement or the Prospectus contained therein
(A) to contain a material misstatement or omission or (B) not to be
effective and usable
4
<PAGE> 5
for resale of Transfer Restricted Securities during the period required
by this Agreement, the Company shall file promptly, and as appropriate,
an amendment or supplement to such Resale Registration Statement, in
the case of clause (A), correcting any such misstatement or omission,
and, in the case of either clause (A) or (B), use its reasonable best
efforts to cause such amendment to be declared effective and such
Resale Registration Statement and the related Prospectus to become
usable for their intended purpose(s) as soon as practicable thereafter;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Resale Registration Statement as may
be necessary to keep the Resale Registration Statement effective for
the applicable period set forth in Section 3 hereof or such shorter
period as will terminate when all Transfer Restricted Securities
covered by such Resale Registration Statement cease to be Transfer
Restricted Securities; cause the Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 under the Act in a timely manner; and reasonably
assist Holders in complying with the provisions of the Act with respect
to the disposition of all Securities covered by such Resale
Registration Statement during the applicable period in accordance with
the intended method or methods of distribution by the sellers thereof
set forth in such Resale Registration Statement or supplement to the
Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons in writing, to confirm such
advice in writing, (A) when the Prospectus or any Prospectus supplement
or post-effective amendment has been filed, and, with respect to any
Resale Registration Statement or any post-effective amendment thereto,
when the same has become effective, (B) of any request by the
Commission for amendments to the Resale Registration Statement or
amendments or supplements to the Prospectus or for additional
information relating thereto, (C) of the issuance by the Commission of
any stop order or other order or action suspending the effectiveness of
the Resale Registration Statement under the Act or of the suspension by
any state securities or Blue Sky commission of the exemption,
qualification or registration of the Transfer Restricted Securities for
offering or sale in any jurisdiction, or the initiation of any
proceeding for any of the preceding purposes, or (D) of the existence
of any fact or the happening of any event that makes any statement of a
material fact made in the Resale Registration Statement, the
Prospectus, any amendment or supplement thereto, or any document
incorporated by reference therein untrue, or that requires the making
of any additions to or changes in the Resale Registration Statement or
the Prospectus in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. If at any
time the Commission shall issue any stop order or other order or take
other action suspending the effectiveness of the Resale Registration
Statement, or any state securities commission or other regulatory
authority shall issue an order suspending the exemption, qualification
or registration of the Transfer Restricted Securities under state
securities or Blue Sky laws, the Company shall use its reasonable best
efforts to obtain the withdrawal or lifting of such order at the
earliest possible time;
5
<PAGE> 6
(iv) furnish to each of the selling Holders and each of the
underwriter(s), if any, before filing with the Commission, copies of
any Resale Registration Statement or any Prospectus included therein or
any amendments or supplements to any such Resale Registration Statement
or Prospectus (including all documents incorporated by reference after
the initial filing of such Resale Registration Statement), which
documents will be subject to the review of such Holders and
underwriter(s), if any, for a period of at least five (5) business
days, and the Company will not file any such Resale Registration
Statement or Prospectus or any amendment or supplement to any such
Resale Registration Statement or Prospectus (including all such
documents incorporated by reference) to which a selling Holder of
Transfer Restricted Securities covered by such Resale Registration
Statement or the underwriter(s), if any, shall reasonably object within
five (5) business days after the receipt thereof. A selling Holder or
underwriter, if any, shall be deemed to have reasonably objected to
such filing if such Resale Registration Statement, amendment,
Prospectus or supplement, as applicable, as proposed to be filed,
contains a material misstatement or omission. For purposes of this
Section 5(b)(iv), all materials required to be delivered to a Holder
shall be deemed delivered on the date sent by overnight mail to the
address of such Holder on the Beneficial Owner Registry;
(v) make available at reasonable times and upon reasonable
notice for inspection by a representative of the selling Holders (who
shall have been appointed by the Holders of at least 25% of the New
Notes), any underwriter participating in any disposition pursuant to
such Resale Registration Statement and any attorney or accountant
retained by the Holders of at least 25% of the New Notes or any of the
underwriter(s), all financial and other records, pertinent corporate
documents and properties of the Company and cause the Company's
officers, directors and employees to supply all information reasonably
requested by any such representative, underwriter, attorney or
accountant in connection with such Resale Registration Statement
subsequent to the filing thereof and prior to its effectiveness;
(vi) if requested by any selling Holders or the
underwriter(s), if any, promptly incorporate in any Resale Registration
Statement or Prospectus, pursuant to a supplement or post-effective
amendment, if necessary, such information as such selling Holders and
underwriter(s), if any, may reasonably request to have included
therein, provided such information is usual and customary in such a
document, including, without limitation, information relating to the
"Plan of Distribution" of the Transfer Restricted Securities,
information with respect to the Transfer Restricted Securities being
sold to such underwriter(s) and any other terms of the offering of the
Transfer Restricted Securities to be sold in such offering, and make
all required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after the Company is notified of the
matters to be incorporated in such Prospectus supplement or
post-effective amendment;
(vii) furnish to each selling Holder and each of the
underwriter(s), if any, without charge, one copy of the Resale
Registration Statement, as first filed with the
6
<PAGE> 7
Commission, and of each amendment thereto, including all documents
incorporated by reference therein and all exhibits;
(viii) deliver to each selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the
Prospectus (including each preliminary Prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; and the
Company hereby consents to the use of the Prospectus and any amendment
or supplement thereto (other than in those states or jurisdictions in
which the Company has not complied with or satisfied the requirements
of the relevant securities or Blue Sky laws) by each of the selling
Holders and each of the underwriter(s), if any, in connection with the
offering and the sale of the Transfer Restricted Securities covered by
the Prospectus or any amendment or supplement thereto;
(ix) enter into such agreements (including an underwriting
agreement), and make such representations and warranties and take all
such other actions in connection therewith in order to expedite or
facilitate the disposition of the Transfer Restricted Securities
pursuant to any Resale Registration Statement contemplated by this
Agreement, all to the extent customary in offerings of the type
contemplated hereby and as may be reasonably requested by any Holder of
Transfer Restricted Securities or underwriter in connection with any
sale or resale pursuant to any Resale Registration Statement
contemplated by this Agreement; and if the registration is an
Underwritten Registration, the Company shall:
(A) furnish to each selling Holder and each
underwriter, if any, in such substance and scope as they may
request and as are customarily made by issuers to underwriters
in primary underwritten offerings, upon the date of the
effectiveness of the Resale Resale Registration Statement:
(1) a certificate, dated the date of
effectiveness of the Resale Resale Registration
Statement, signed by (i) the President or any Vice
President and (ii) a principal financial or
accounting officer of the Company, confirming, as of
the date thereof, that the representations and
warranties of the Company in the underwriting
agreement, if applicable, are true and correct in all
material respects as of such date and such other
matters as such parties may reasonably request;
(2) an opinion, dated the date of
effectiveness of the Resale Registration Statement,
of counsel for the Company to the effect that the
shares covered by the Resale Registration Statement
shall be validly issued and non-assessable, and such
opinion shall include a statement to the effect that
such counsel has participated in conferences with
officers and other representatives of the Company,
representatives of the independent public accountants
for the Company, the underwriters' representatives
and the underwriters' counsel in connection with the
7
<PAGE> 8
preparation of such Resale Registration Statement and
the related Prospectus and have considered the
matters required to be stated therein and the
statements contained therein, although such counsel
has not independently verified the accuracy,
completeness or fairness of such statements; and that
such counsel advises that, on the basis of the
foregoing, no facts came to such counsel's attention
that caused such counsel to believe that the
applicable Resale Registration Statement, at the time
such Resale Registration Statement or any
post-effective amendment thereto became effective,
contained an untrue statement of a material fact or
omitted to state a material fact required to be
stated therein or necessary to make the statements
therein not misleading, or that the Prospectus
contained in such Resale Registration Statement, as
of its date, contained an untrue statement of a
material fact or omitted to state a material fact
necessary in order to make the statements therein, in
light of the circumstances under which they were
made, not misleading. Without limiting the foregoing,
such counsel may state further that such counsel
assumes no responsibility for, and has not
independently verified, the accuracy, completeness or
fairness of the financial statements, notes and
schedules and other financial data included in any
Resale Registration Statement contemplated by this
Agreement or the related Prospectus; and
(3) a customary comfort letter, dated as of
the date of effectiveness of the Resale Registration
Statement, from the Company's independent public
accountants, in the customary form and covering
matters of the type customarily covered in comfort
letters by underwriters in connection with primary
underwritten offerings;
(B) set forth in full or incorporate by reference in
the Underwriting Agreement, if any, the indemnification
provisions and procedures of Section 7 hereof with respect to
all parties to be indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as
may be reasonably requested by such parties to evidence
compliance with clause (A) above and with any customary
conditions contained in the underwriting agreement or other
agreement entered into by the Company pursuant to this clause
(ix), if any.
If at any time the representations of the Company contemplated in
clause (A)(1) above cease to be true and correct, the Company shall so advise
the underwriter(s), if any, and each selling Holder promptly and, if requested
by such Persons, shall confirm such advice in writing;
(x) prior to any public offering of Transfer Restricted Securities,
cooperate with the selling Holders, the underwriter(s), if any, and their
respective counsel in connection with the registration and qualification of the
Transfer Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders or underwriter(s) may reasonably request
8
<PAGE> 9
and do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Transfer Restricted Securities covered
by the Resale Registration Statement; provided that the Company shall not be
required to register or qualify as a foreign corporation where it is not now so
qualified or to take any action that would subject it to the service of process
in suits or to taxation, other than as to matters and transactions relating to
the Resale Registration Statement, in any jurisdiction where it is not now so
subject;
(xi) cooperate with the selling Holders and the underwriter(s), if any,
to facilitate the timely preparation and delivery of certificates representing
Transfer Restricted Securities to be sold and not bearing any restrictive
legends; and enable such Securities to be in such denominations and registered
in such names as the Holders or the underwriter(s), if any, may reasonably
request at least two (2) business days prior to any sale of Transfer Restricted
Securities made by such underwriter(s) or selling Holders;
(xii) use its reasonable best efforts to cause the Transfer Restricted
Securities covered by the Resale Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the seller or sellers thereof or the underwriter(s), if any, to
consummate the disposition of such Transfer Restricted Securities, subject to
the provisions contained in paragraph (x) above;
(xiii) if any fact or event contemplated by paragraph (b)(iii)(D) above
shall exist or have occurred, prepare a supplement or post-effective amendment
to the Resale Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of Transfer Restricted Securities, the
Prospectus will not contain an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not misleading;
(xiv) provide a CUSIP number for all Transfer Restricted Securities not
later than the effective date of the Resale Registration Statement;
(xv) cooperate and assist in any filings required to be made with the
NASD and in the performance of any due diligence investigation by any
underwriter that is required to be retained in accordance with the rules and
regulations of the NASD, and use its reasonable best efforts to cause such
filings to become effective and approved by such governmental agencies or
authorities as may be necessary to enable the Holders selling Transfer
Restricted Securities to consummate the disposition of such Transfer Restricted
Securities;
(xvi) otherwise comply with all applicable rules and regulations of the
Commission, and make generally available to its security holders, as soon as
practicable, a consolidated earnings statement meeting the requirements of Rule
158 under the Act (which need not be audited) for the twelve-month period (A)
commencing at the end of any fiscal quarter in which Transfer Restricted
Securities are sold to underwriters in a firm commitment or best efforts
Underwritten Offering or (B) if not sold to underwriters in such an offering,
beginning with
9
<PAGE> 10
the first month of the Company's first fiscal quarter commencing after the
effective date of the Resale Registration Statement;
(xvi) cause all shares of Transfer Restricted Securities covered by the
Resale Registration Statement to be listed on each securities exchange or
market, if applicable, on which similar securities issued by the Company are
then listed; and
(xvii) provide promptly to each Holder upon request each document filed
with the Commission pursuant to the requirements of Section 13 or Section 15 of
the Exchange Act.
(C) BLACKOUT. Each Holder agrees by acquisition of a Transfer
Restricted Security that, upon receipt of any notice from the Company of the
existence of any fact of the kind described in Section 5(b)(iii)(D) hereof, such
Holder will forthwith discontinue disposition of Transfer Restricted Securities
pursuant to the Resale Registration Statement until such Holder's receipt of the
copies of the supplemented or amended Prospectus as contemplated by section
5(b)(xiii) hereof, or until it is advised in writing (the "Advice") by the
Company that the use of the Prospectus may be resumed, and has received copies
of any additional or supplemental filings that are incorporated by reference in
the Prospectus. If so directed by the Company, each Holder will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such Transfer
Restricted Securities that was current immediately prior to the time of receipt
of such notice. In the event the Company shall give any such notice, the time
period regarding the effectiveness of such Resale Registration Statement or any
post-effective amendment thereto set forth in Section 3 shall be extended by the
number of days during the period from and including the date of the giving of
such notice pursuant to Section 5(b)(iii)(D) hereof to and including the date
when each selling Holder covered by such Resale Registration Statement shall
have received the copies of the supplemented or amended Prospectus as
contemplated by section 5(b)(xiii) hereof or shall have received the Advice,
provided that, notwithstanding the foregoing, such time period may be extended
in any given calendar year only one time for a maximum of (30) business days.
SECTION 6. REGISTRATION EXPENSES
All expenses incident to the Company's performance of or compliance
with this Agreement will be borne by the Company, regardless whether a Resale
Registration Statement becomes effective, including without limitation: (i) all
registration and filing fees and expenses (including filings made by any Holder
with the NASD (and, if applicable, the fees and expenses of any "qualified
independent underwriter" and its counsel that may be required by the NASD));
(ii) all fees and expenses of compliance with federal securities, foreign
securities and state Blue Sky or securities laws; (iii) all expenses of printing
(including the printing of Prospectuses and new certificates representing
Securities), messenger and delivery services and telephone expenses incurred by
the Company; (iv) all fees and disbursements of counsel for the Company; (v) all
application and filing fees in connection with listing the Securities on a
national securities exchange or automated quotation system pursuant to the
requirements hereof; and (vi) all fees and disbursements of independent
certified public accountants of the Company (including the
10
<PAGE> 11
expenses of any special audit and comfort letters required by or incident to
such performance).
The Company will, in any event, bear its internal expense (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit, all
trustee and rating agency fees and charges and the fees and expenses of any
person, including special experts, retained by the Company.
Each Holder shall pay all expenses of its counsel, underwriting
discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of such Holder's Transfer Restricted Securities pursuant to a Resale
Registration Statement.
SECTION 7. INDEMNIFICATION
(a) The Company shall indemnify and hold harmless (i) each Holder, (ii)
each person, if any, who controls (within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act) any Holder (any of the persons referred to in
this clause (ii) being hereinafter referred to as a "Controlling Person") and
(iii) the respective officers, directors, partners, employees, representatives
and agents of any Holder or any Controlling Person (any person referred to in
clause (i), (ii) or (iii) may hereinafter be referred to as an "Indemnified
Holder"), to the fullest extent lawful, from and against any and all losses,
claims, damages, liabilities, judgments, actions and expenses, joint or several
(including without limitation, reimbursement of all reasonable costs of
investigating, preparing, pursuing or defending any claim or action,
investigation or proceeding by any governmental agency or body, commenced or
threatened, including the reasonable fees and charges of counsel directly or
indirectly caused by, related to, based upon, arising out of or in connection
with any untrue statement or alleged untrue statement of a material fact
contained in (A) any Resale Registration Statement or Prospectus (or any
amendment or supplement thereto) or (B) any state securities or Blue Sky
application or other document prepared or executed by the Company (or based upon
any information furnished by the Company) for the purpose of qualifying any of
the Securities under the securities or Blue Sky laws of any state or other
jurisdiction (any such application, document or information hereinafter is
referred to as a "Blue Sky Application") or any omission or alleged omission to
state in any Resale Registration Statement or Prospectus (or any amendment or
supplement thereto) or in any Blue Sky Application a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, except insofar as such
losses, claims, damages, liabilities or expenses are caused by an untrue
statement or omission or alleged untrue statement or omission that is made in
reliance upon and in conformity with information relating to any of the Holders
furnished in writing to the Company by any of the Holders or counsel or agents
of Holders expressly for use therein. The foregoing indemnification is in
addition to any liability which the Company may otherwise have to any
Indemnified Holder.
(b) Each Holder agrees, severally and not jointly, to indemnify and
hold harmless (i) the Company, (ii) each person who controls (within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act) the Company and
(iii) the respective officers, directors,
11
<PAGE> 12
partners, employees, representatives and agents of the Company and any such
controlling person to the same extent as the foregoing indemnity from the
Company to each of the Indemnified Holders, but only with respect to claims and
actions based on information relating to such Holder furnished in writing by
such Holder expressly for use in any Resale Registration Statement. The
foregoing indemnification is in addition to any liability which any Holder may
otherwise have to any of the foregoing indemnified persons.
(c) Promptly after receipt by an indemnified party under this Section 7
of notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under this Section 7, notify the indemnifying party in writing of the
claim or the commencement of that action; provided, however, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have under this Section 7 except to the extent it has been materially
prejudiced by such failure and, provided further, that the failure to notify the
indemnifying party shall not relieve it from any liability which it may have to
an indemnified party otherwise than under this Section 7 (except to the extent
so provided in any such other obligation). If any such claim or action shall be
brought against an indemnified party, and it shall have notified the
indemnifying thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it wishes, jointly with any other similarly
notified indemnifying party, to assume the defense thereof with counsel
reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such action, the indemnifying party shall not be liable to the
indemnified party under this Section 7 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation, provided, however, that
the indemnified party shall have the right to employ separate counsel to
represent jointly the indemnified party and those other Indemnified Holders and
their respective officers, employees and controlling persons who may be subject
to liability arising out of any claim in respect of which indemnity may be
sought by Indemnified Holders against the indemnifying party under this Section
7, but the fees and expenses of such counsel shall be at the expense of such
indemnified party unless, (i) the employment thereof has been specifically
authorized by the indemnifying party in writing, (ii) such indemnified party
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party and in the reasonable judgment of such
counsel it is advisable for such indemnified party to employ separate counsel or
(iii) the indemnifying party has failed to assume the defense of such action and
employ counsel reasonably satisfactory to the indemnified party, in which case,
if such indemnified party notifies the indemnifying party in writing that it
elects to employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party. In no event shall the indemnifying parties
be liable for the fees and expenses of more than one counsel (in addition to
local counsel). Each indemnified party, as a condition of the indemnity
agreements contained in this Section 7, shall use its reasonable best efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall (i) without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to
12
<PAGE> 13
any pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding or (ii) be liable for any settlement of any such action,
compromise of any action or any judgment with respect to any action effected
without its written consent, but if settled with its written consent or if there
be a final judgment of the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party, to the extent set
forth herein, from and against any loss or liability by reason of such
settlement or judgment.
(d) If the indemnification provided for in this Section 7 shall for any
reason be unavailable to (except for a reason expressly provided herein) or
insufficient to hold harmless an indemnified party under Section 7(a) or 7(b) in
respect of any loss, claim, damage or liability, or any action in respect
thereof, referred to therein, then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, in such proportion as shall be appropriate to reflect
the relative fault of the Company on the one hand and the Holders on the other
hand with respect to the statements or omissions which resulted in such loss,
claim, damage or liability, or action in respect thereof, as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to whether the untrue or alleged statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Holders, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and the Holders agree that it would not
be just and equitable if contributions pursuant to this Section 7(d) were to be
determined by pro rata allocation (even if the Holders were treated as one
entity for such purpose) or by any other method of allocation which does not
take into account the equitable considerations referred to herein. The amount
paid or payable by an indemnified party as a result of the loss, claim, damage
or liability, or action in respect thereof, referred to above in this Section
7(d) shall be deemed to include, for purposes of this Section 7(d), any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7(d), no Indemnified Holder shall be required to
contribute any amount in excess of the amount by which proceeds received by such
Indemnified Holder from an offering of the Securities exceeds the amount of any
damages which such Indemnified Holder has otherwise paid or become liable to pay
by reason of any untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
Section 11(f) of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. The Indemnified Holders'
obligations to contribute as provided in this Section 7(d) are several and not
joint.
SECTION 8. RULE 144 AND RULE 144A
The Company hereby agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding, to use its reasonable best efforts to
make and keep public
13
<PAGE> 14
information available as is required by Rules 144 and 144A under the Act to
permit sales of Transfer Restricted Securities pursuant to such rules,
including, without limitation, complying with the requirements of Rule
144A(d)(4), and to furnish to each Holder promptly upon request a written
statement by the Company as to its compliance with the reporting requirements of
Rule 144 and Rule 144A under the Act.
SECTION 9. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in any underwriting arrangements provided by
the Persons entitled hereunder to approve such arrangements and (b) completes
and executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under the
terms of such underwriting arrangements.
SECTION 10. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the Resale
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority of the
Transfer Restricted Securities included in such offering; provided, that such
investment bankers and managers must be reasonably satisfactory to the Company.
SECTION 11. MISCELLANEOUS
(A) REMEDIES. The Company agrees that monetary damages (including the
Liquidated Damages contemplated hereby) would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of this
Agreement and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(B) NO INCONSISTENT AGREEMENTS. The Company will not on or after the
date of this Agreement enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way breach or conflict with and are not
inconsistent with the rights granted to the holders of the Company's securities
under any agreement in effect on the date hereof.
14
<PAGE> 15
(C) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless the Company has obtained the
written consent of Holders of a majority of the outstanding Transfer Restricted
Securities. Notwithstanding the foregoing, a waiver or consent to departure from
the provisions hereof that relates exclusively to the rights of Holders whose
Transfer Restricted Securities are being resold pursuant to the Resale
Registration Statement and that does not affect directly or indirectly the
rights of other Holders whose Transfer Restricted Securities are not reselling
pursuant to such Resale Registration Statement may be given by the Holders of a
majority of the outstanding Transfer Restricted Securities being resold pursuant
to such Resale Registration Statement.
(D) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class or
certified mail, telex, telecopier or reliable overnight delivery service:
(i) if to a Holder, at the address of the Holder set forth in
the Beneficial Owner Registry; and
(ii) if to the Company:
Altiva Financial Corporation
Sixth Floor
1000 Parkwood Circle
Atlanta, Georgia 30339
Telecopier No.: (770) 937-9576
Attention: Edward B. Meyercord
With a copy to:
King & Spalding
191 Peachtree Street
Atlanta, GA 30303
Telecopier No.: (404) 572-5100
Attention: John D. Capers, Jr., Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five (5) business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next business day, if sent via a reliable overnight delivery service.
(E) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Securities.
15
<PAGE> 16
(F) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, by the parties hereto, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement.
(G) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(H) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(I) SEVERABILITY. In the event that any one or more of the provisions
contained herein or the application thereof, in any circumstances, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(J) ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter hereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein with respect to
the registration rights granted by the Company with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
16
<PAGE> 17
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
ALTIVA FINANCIAL CORPORATION
By: /s/ Edward B. Meyercord
------------------------------------------
Name: Edward B. Meyercord
Title: Chairman and Chief Executive Officer
UNITED STATES TRUST COMPANY OF NEW YORK
By: /s/ Glenn E. Mitchell
------------------------------------------
Name: Glenn E. Mitchell
Title: Vice President
17
<PAGE> 1
EXHIBIT 10.8
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT
This Intercreditor and Collateral Sharing Agreement (the "Agreement")
is dated as of February 29, 2000 and is entered into by and among ALTIVA
FINANCIAL CORPORATION, a Delaware corporation (the "Borrower"), Value Partners,
Ltd. ("Value Partners"), as the initial holder of the Convertible Notes, as
that term is defined below, the Replacement QIB Noteholders, the Replacement
Non-QIB Noteholders, as both such terms are defined below, and United States
Trust Company of New York (the "Collateral Agent"), in its capacity as
collateral agent for the Convertible Noteholders, the Replacement Non-QIB
Noteholders and the Replacement QIB Noteholders. Certain capitalized terms in
the Recitals below are defined in Section 1 hereof. Exhibits attached hereto
are by this reference incorporated herein.
RECITALS
1. Pursuant to the Purchase Agreement, Value Partners, Ltd. has
purchased $14,000,000.00 in the aggregate of 12% Secured Convertible Notes Due
2006 (the "Convertible Notes"). Value Partners is presently the sole Convertible
Noteholder.
2. To secure repayment of the Convertible Notes, the Borrower
executed the Convertible Pledge Agreement, a copy of which is attached hereto as
Exhibit "A", pursuant to which the Borrower granted to the Convertible
Noteholders a lien and security interest in all the Collateral (which is a first
priority lien except with respect to the Collateral consisting of Pledged
Shares) and a lien in the Pledged Shares, subject only to the security interest
granted the Replacement Non-QIB Noteholders as described in paragraph 5 of these
Recitals and elsewhere herein. A schedule of the Collateral being initially
delivered to the Collateral Agent is set forth on Exhibit "B".
3. The Borrower, the Replacement QIB Noteholders and the
Replacement Non-QIB Noteholders have entered into the Exchange Agreement,
pursuant to which the Replacement QIB Notes and the Replacement Non-QIB Notes
(collectively, the "Exchange Notes") were issued in accordance with the terms
thereof and the Indenture.
4. Repayment of the Replacement QIB Notes is secured, on a pari
passu basis with the Convertible Notes, by the Collateral pledged to the
Convertible Noteholders. To evidence this pledge, the Borrower and Replacement
QIB Noteholders executed the Replacement QIB Pledge Agreement, a copy of which
is attached as Exhibit "C".
5. The Replacement Non-QIB Notes are secured by a first lien and
security interest in the Pledged Shares pursuant to the Stock Pledge Agreement,
a copy of which is attached as
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT PAGE 1
<PAGE> 2
Exhibit "D". However, upon the occurrence of a Default or an Event of Default,
the recovery of the Replacement Non-QIB Noteholders from the proceeds relating
to the liquidation of the Pledged Shares shall be adjusted so that the
Replacement Non-QIB Noteholders recover the same percentage of their outstanding
indebtedness as do the Replacement QIB Noteholders and the Convertible
Noteholders. Because the Replacement Non-QIB Noteholders are not QIB's, they
cannot share in proceeds from the Collateral in which the Convertible
Noteholders and Replacement QIB Noteholders hold a first lien. Thus, in the
event recovery from the Pledged Shares is inadequate to permit a pro rata
recovery in favor of the Replacement Non-QIB Noteholders, their recovery may be
less than that of the Convertible Noteholders and Replacement QIB Noteholders.
6. Because each of the Replacement QIB Noteholders, Replacement
Non-QIB Noteholders and Convertible Noteholders has a security interest in the
Collateral as their interests may appear in the Security Documents and herein,
each such Noteholder has agreed that it is appropriate to enter into this
Agreement, both for purposes of the perfection of the security interest of each
Noteholder in the Collateral which may be perfected by possession of the
Collateral (or the continuation of existing perfection) and to permit the
orderly liquidation of all Collateral (including Collateral perfected by means
other than possession) by the Collateral Agent in the event of an occurrence a
Default or an Event of Default under the Security Documents and the orderly
distribution of the proceeds of such liquidation by the Collateral Agent.
NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Borrower, the Collateral Agent and the Noteholders hereby
agree as follows:
1. Defined Terms. As used herein, the following terms shall have
the following meanings:
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing; provided, however, for purposes of this definition, neither Value
Partners, T. Rowe Price Recovery Fund nor Lutheran Brotherhood High Yield Fund
shall be deemed to be Affiliates of the Borrower.
"Beneficial Owner" means with respect to any Notes which are
registered in book-entry with a securities depositary, the beneficial owners of
such Notes on the registry thereof
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT PAGE 2
<PAGE> 3
maintained by the Trustee pursuant to Section 3.6 of the Indenture or by the
Company pursuant to Section 2.3 of the Convertible Notes, as the case may be,
and means with respect to Notes which are not so registered in book-entry, the
Registered Owner of the Note or the beneficial owner of a Note registered in the
name of a nominee.
"Borrower" shall have the meaning specified in the introductory
paragraph hereof.
"Business Day" means any day other than Saturday, Sunday or other day
on which banking institutions in Atlanta, Georgia or Dallas, Texas or New York,
New York are authorized or required by law or executive order to be closed.
"Certificates" means any security, chattel paper, certificated
security or instrument, as from time to time amended, modified or supplemented,
including the following: any Residual Interest Instrument, any Interest Only
Instrument, the Senior Trust Certificate, the Pledged Shares and a Certificated
Security as defined in Section 8-102 of the UCC.
"Collateral" means the assets described collectively in Section 2.1 of
the Convertible Pledge Agreement, Section 2.1 of the Replacement QIB Pledge
Agreement and Section 2 of the Stock Pledge Agreement, as such documents are
amended, modified or restated.
"Collateral Agent" means United States Trust Company of New York, as
Collateral Agent.
"Convertible Notes" has the meaning specified in Recital paragraph 1.
"Convertible Noteholders" means the holders of the Convertible Notes
and their respective heirs, devisees, beneficiaries, legatees, personal
representatives, successors or assigns.
"Convertible Pledge Agreement" means that certain Amended and Restated
Pledge and Security Agreement, dated as of February 29, 2000, together with any
amendments, supplements modifications or restatements thereof.
"Default" has the meaning set forth in the Convertible Notes and/or the
Indenture.
"Delivery" means the delivery of the Certificates representing the
Collateral in accordance with the provisions of the terms hereof and the
Security Documents.
"Event of Default" means an Event of Default as defined in the
Convertible Notes and/or the Indenture.
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT PAGE 3
<PAGE> 4
"Exchange Pledge Agreements" means the Replacement QIB Pledge Agreement
and the Stock Pledge Agreement.
"Existing Subordinated Notes" means the outstanding 12 1/2%
Subordinated Notes Due 2001 issued by the Borrower.
"Grantor Trust Right" means all rights of the Borrower, including the
right to payments to the Borrower, in the Sale Agreement executed in relation to
Mego Mortgage Home Loan Trust 1996-3, including, without limitation, the rights
set forth in Section 4.05(b)(xvii) of such Sale Agreement.
"Indenture" means the Trust Indenture date as of February 29, 2000,
between the Borrower and United States Trust Company of New York, as Trustee, as
amended or supplemented.
"Interest Only Instrument(s)" shall, as to that particular Certificate,
have the meaning ascribed to the term "Class S Certificate", "Class IS
Certificate, "Class IIS Certificate" or a similar phrase describing an interest
only security in the respective Sale Agreement arising from the Securitization
pursuant to which such security is issued, which security represents the
undivided interest of the Borrower in all or a portion of the interest payments
due on certain loans securitized in that Securitization.
"Loan Documents" means collectively, the Indenture and the Convertible
Notes.
"Non-QIB Collateral" means the Collateral pledged to the Replacement
Non-QIB Noteholders pursuant to the Stock Pledge Agreement.
"Notes" means the Convertible Notes, the Replacement QIB Notes and the
Replacement Non-QIB Notes.
"Noteholders" means the Convertible Noteholders, the Replacement QIB
Noteholders and the Replacement Non-QIB Noteholders, together with any heirs,
devisees, beneficiaries, legatees, personal representatives, successors or
assigns of each.
"Obligations" means all obligations, liabilities and indebtedness of
the Borrower to the Noteholders arising under or related to the Exchange
Agreement, the Purchase Agreement, the Security Documents, the Notes, the
Indenture and any documents executed pursuant to the terms of any of the above
or in relation to any of the above and for the discharge of all other
obligations or undertakings now are hereafter made for the benefit of the
Noteholders thereunder.
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT PAGE 4
<PAGE> 5
"Officer's Certificate" means a certificate signed by the President or
a Vice President, and by the Secretary or Assistant Secretary of the Borrower
and delivered to the Collateral Agent.
"Outstanding" means with respect to the Replacement QIB Notes and
Replacement Non-QIB Notes, all such Notes that have been duly authenticated and
delivered by the Trustee under the Indenture on the date of determination,
except:
(a) Replacement QIB Notes and Replacement Non-QIB Notes
theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(b) Replacement QIB Notes and Replacement Non-QIB Notes
the payment or redemption of which the necessary amounts have
been deposited with the Trustee in trust for the Noteholders
thereof; provided that if such Notes are to be redeemed prior
to the maturity thereof, notice of such redemption shall have
been given or arrangements satisfactory to the Trustee have
been made therefor, or waiver of such notice satisfactory in
form to the Trustee has been filed with the Trustee; and
(c) Replacement QIB Notes and Replacement Non-QIB Notes
in lieu of which other such Notes have been authenticated
under the Indenture.
(d) Notes which are registered in the name of or
beneficially owned by the Borrower or any other obligor on the
Notes or by any Affiliate of the Borrower or any other obligor
on the Notes. The Collateral Agent shall not be required to
recognize the beneficial ownership of the Notes of a Person,
or whether the Notes are registered in the name of an
Affiliate of the Borrower or other obligor on the Notes,
unless it is given written notice thereof by the Borrower or
any Noteholder.
"Outstanding" with respect to the Convertible Notes means all such
Notes that have been executed and delivered by the Borrower pursuant to the
terms of the Purchase Agreement and the Convertible Notes, except such Notes
that have been canceled by the Borrower or delivered to the Borrower for
cancellation and such Notes in exchange or in lieu of which other such Notes
have been executed and delivered by the Borrower pursuant to the terms of the
Convertible Notes, and such Convertible Notes which are registered in the name
of or beneficially owned by the Borrower or any other obligor on the Notes or
by any Affiliate of the Borrower or any other obligor on the Notes. The
Collateral Agent shall not be required to recognize the beneficial ownership of
the Notes of a Person, or whether the Notes are registered in the name of an
Affiliate of the Borrower or other obligor on the Notes, unless it is given
written notice thereof
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT PAGE 5
<PAGE> 6
by the Borrower or any Noteholder.
"Person" means any individual, partnership, corporation, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization, or governmental entity (or any department, agency
or political subdivision thereof), or any other entity.
"Pledged Shares" means any and all shares of stock or other evidence
of equity or ownership interest of the Borrower in The Money Centre, Inc.
(either as record owner or beneficially), including but not limited to those
shares set forth on Exhibit "E" hereto, including any such interests which may
be acquired after the date hereof and the certificates or stock representing
all such items. This shall include all of the issued and outstanding shares of
capital stock of The Money Centre, Inc. in existence until termination of the
Security Documents.
"Purchase Agreement" means that certain Amended and Restated Secured
Senior Convertible Note Purchase Agreement by and between the Borrower and
Value Partners, Ltd., dated as of February 29, 2000, together with any
amendments, modifications, supplements or restatements thereof.
"QIB" means Qualified Institutional Buyer as that term is defined in
Rule 144A promulgated by the Securities and Exchange Commission under the
Securities Act, as such Rule or definition is now in effect or as amended from
time.
"QIB Collateral" shall mean that Collateral pledged to the Convertible
Noteholders and the Replacement QIB Noteholders, on a pari passu basis,
pursuant to the Convertible Pledge Agreement and the Replacement QIB Pledge
Agreement, respectively.
"QIB Notes" means the Convertible Notes and the Replacement QIB Notes.
"QIB Noteholders" means the holders of the QIB Notes.
"Registered Owner" means the person or persons in whose name or names
a particular Note is registered (i) with respect to the Replacement QIB Notes
and the Replacement Non-QIB Notes, on the register by maintained by the Trustee
for that purpose pursuant to Section 3.6 of the Indenture; and (ii) with
respect to the Convertible Notes, on the register maintained by the Company for
that purpose pursuant to Section 2.3 of the Convertible Notes.
"Replacement QIB Notes" means those notes issued pursuant to the
Indenture to the holders of Existing Subordinated Notes pursuant to the
Exchange Agreement which are QIB's.
"Replacement Non-QIB Notes" means those notes issued to those holders
of Existing
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT PAGE 6
<PAGE> 7
Subordinated Notes pursuant to the Exchange Agreement which are not QIB's.
"Replacement Non-QIB Noteholders" means those holders of Replacement
QIB Notes as set forth on Exhibit "F", attached hereto and by this reference
incorporated herein, together with any successors, heirs, devisees,
beneficiaries, legatees, personal representatives, successors or assigns.
"Replacement QIB Noteholders" means those holders of Replacement QIB
Notes as set forth on Exhibit "G", attached hereto and by this reference
incorporated herein, together with any successors, heirs, devisees,
beneficiaries, legatees, personal representatives, successors or assigns.
"Replacement QIB Pledge Agreement" means that certain Pledge and
Security Agreement dated as of March 9, 2000, by and between the Borrower and
the Replacement QIB Noteholders, together with any amendments, modifications,
supplements or restatements thereof.
"Requisite Percentage" means the record holders, voting as a single
class, representing in aggregate at least fifty percent (50%) of the sum at
such time of the aggregate principal amount of the Notes Outstanding, except to
the extent that a different percentage is otherwise expressly required in the
Convertible Notes and/or in the Indenture.
"Residual Interest Instrument(s)" shall, as to that particular
Certificate, have the meaning ascribed to the term "Class R Certificate",
"Residual Interest Instrument", "Residual Certificate", "Residual Instrument"
or a similar phrase describing a certificated residual interest in the Sale
Agreement arising from the Securitization pursuant to which such security is
issued, which security represents the undivided residual interest of the
holder, including in all or a portion of the interest and principal payments
due on certain loans securitized in that Securitization. Neither the Grantor
Trust Right nor the Senior Trust Certificate are Residual Interest Instruments.
"Responsible Officer" means an officer or officers of the Collateral
Agent assigned by the Collateral Agent to administer the matters pertaining to
it in this Agreement.
"Sale Agreement" means the respective Pooling and Servicing Agreement,
Sale and Servicing Agreement or similar agreement, together with related
agreements, including trust agreements and indentures, which create and grant
rights in Certificates and the Grantor Trust Right, entered into or otherwise
issued in relation to a particular Securitization.
"Securities Act" means the Securities Act of 1933, as now in effect
and as hereafter amended from time to time.
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT PAGE 7
<PAGE> 8
"Securitization" means the respective securitization as set forth on
Exhibit "H" hereto and by this reference incorporated herein.
"Security Documents" means the Convertible Pledge Agreement, the
Replacement QIB Pledge Agreement and the Stock Pledge Agreement.
"Senior Trust Certificate" means that certain 125 Home Loan Owner Trust
1998-1, Senior Trust Certificate.
"Stock Pledge Agreement" means that certain Stock Pledge Agreement
dated March 9, 2000 by and between the Borrower and the Replacement Non-QIB
Noteholders, together with any amendments, modifications, supplements or
restatements thereof.
"UCC" means the Uniform Commercial Code as in effect in the State of
Maryland; provided, that if by mandatory provisions of law, the perfection or
effect of perfection or non-perfection of the security interest in any
Collateral to which this Pledge Agreement relates is governed by the Uniform
Commercial Code as in effect on or after the date hereof in any other
jurisdiction, UCC means the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such perfection
or the effect of perfection or non-perfection.
"Trustee" means United States Trust Company of New York, as Trustee
under the Indenture, and any successor trustee under the Indenture.
"Value Partners" has the meaning assigned to such term in the preamble.
"Voting Action" has the meaning assigned to such term in Section 3(b)
hereof.
Section 2. Appointment of Agent; Delivery of Collateral.
(a) The Collateral Agent is appointed by the Noteholders, on their
behalf and on behalf of their respective successors and assigns, agent of the
Noteholders to possess, as agent and on behalf of the Noteholders, all of the
Collateral for which the security interests of the Noteholders of which may be
perfected by such Noteholders' possession or by filing and control thereof under
the UCC and to act as agent on behalf of the Noteholders (and if necessary, in
the name of a Noteholder or Noteholders) to exercise all rights and remedies on
the Noteholders behalf, as set forth in this Agreement and the Security
Documents, as to all Collateral, whether or not perfected by filing or
possession and control of the Collateral. Each Noteholder by accepting and
holding a Note confirms the appointment of the Collateral Agent as provided by
this
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT PAGE 8
<PAGE> 9
Agreement. The Borrower represents and warrants that the Grantor Trust Right is
the only existing Collateral which may not be perfected by possession. The
Borrower shall deliver to the Collateral Agent, promptly upon execution and
delivery hereof, executed counterparts of all Security Documents and all
amendments and supplements thereto. Value Partners, the initial Convertible
Noteholder, shall deliver to the Collateral Agent, promptly upon execution and
delivery thereof, all the Collateral which the Borrower has previously delivered
to it, and upon such delivery, the Collateral Agent shall be deemed to have
possession of such Collateral as agent on behalf of the existing and future
Convertible Noteholders and the other Noteholders as permitted Section
8.301(a)(2) of the UCC and as their respective interests may appear herein and
in the Security Documents. The Collateral Agent is further appointed as the
agent of each Noteholder to act on behalf of each Noteholder in the enforcement
of rights and remedies granted each in the Security Documents. This shall
include, but is not limited to, the declaration of a Default or Event of Default
and the sale or other disposition of all or a portion of the Collateral in
accordance with the terms hereof and the Security Documents. The Requisite
Percentage shall have the right to direct the transfer of possession of the
Collateral to another person who has agreed to possess the Collateral for the
benefit of all Noteholders. Such transfer shall be to Value Partners, Ltd. so
long as it is a Noteholder, unless it agrees to the contrary.
(b) Value Partners, as of the date of execution of this Agreement,
has possession and control of that Collateral set forth on Exhibit "B" which is
identified as currently in the possession thereof. Certain of that Collateral
was registered in the name of Value Partners for purposes of perfection and
shall remain registered in the name of Value Partners subsequent to delivery to
the Collateral Agent. Value Partners agrees that it will cooperate with the
Collateral Agent to ensure an orderly transfer of such Collateral to a purchaser
thereof upon any exercise of remedies (i.e., foreclosure and sale, etc.) by the
Collateral Agent on behalf of the Noteholders. Should Value Partners dispose of
all of its Notes, Value Partners shall deliver to the Collateral Agent
endorsements in blank as to each such Certificate registered in Value Partners'
name, together with any other document necessary under the applicable UCC to
ensure the continued perfection of the security interests of the remaining
Noteholders in such Certificates.
Section 3. Enforcement of Collateral by Collateral
Agent.
(a) The Collateral Agent, on behalf of and for
the benefit of the Noteholders, shall from time to time, upon being given
written instructions as provided herein and indemnified as provided herein, take
such action for the protection and enforcement of the rights of the Noteholders
under this Agreement and the Security Documents, as may be so instructed to do
as provided herein, provided that:
(i) unless and until the Collateral
Agent is notified in writing as provided in Subsection (ii)
hereof that an Event of Default shall have occurred
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT PAGE 9
<PAGE> 10
and be continuing or has actual knowledge thereof as provided
in clause (ii) of this Section 3(a), the Collateral Agent
shall not be obligated to take any action under this Agreement
or the Security Documents except for the performance of such
duties as are specifically set forth herein (but under all
circumstances shall be required to retain possession of
Collateral for purposes of perfection) and except as may be
instructed from time to time in writing by the Requisite
Percentage, and no implied covenants or obligations shall be
read into this Agreement against the Collateral Agent;
(ii) the Collateral Agent shall not be
deemed to have knowledge of the existence of any condition or
event which constitutes a Default or an Event of Default and
may act as if no such Default or Event of Default exists,
unless (A) notified in writing by any Noteholder or by the
Borrower, which notice shall expressly indicate that the
specified condition or event is a "Default" or "Event of
Default," as the case may be, or (B) a Responsible Officer of
the Collateral Agent has actual knowledge that a Default or
Event of Default has occurred and is continuing ("actual
knowledge" meaning the fact of knowing without a duty to
investigate); and
(iii) if and so long as a Default or
Event of Default shall have occurred and be continuing and the
Collateral Agent shall have been notified in writing thereof,
the Collateral Agent shall, subject to being indemnified as
provided herein, exercise such rights, powers and remedies
(whether vested in it by this Agreement or any Security
Document or by law or in equity or by statute or otherwise)
for the protection and enforcement of the Noteholders' rights
under this Agreement and the Security Documents as the
Collateral Agent may be directed in writing by the Requisite
Percentage. In exercising any rights or remedies hereunder,
the Collateral Agent shall use the same degree of care and
skill in such exercise as a ordinary collateral agent would
use under similar circumstances.
(b) Whenever any action is required or proposed
to be taken hereunder by the Collateral Agent at the direction, or subject to
the approval or consent, of the Requisite Percentage, including, without
limitation, the exercise of any of the rights or remedies of the Collateral
Agent on behalf of the Noteholders under the Security Documents or the approval
of any amendments to this Agreement or the Security Documents or the other
matters set forth in Sections 8 or 19 hereof (the "Voting Actions"), the
Collateral Agent shall promptly notify each Noteholder at its address on the
records of Noteholders maintained pursuant to Section 6 hereof of such required
or proposed action, shall collect written instructions from the Noteholders
regarding such required or proposed action and shall notify the Noteholders of
the results
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT PAGE 10
<PAGE> 11
thereof. If such Voting Action is approved by the Requisite Percentage, such
Voting Action shall constitute a "Direction Notice". A Direction Notice may also
be received by the Collateral Agent by written consent of the Requisite
Percentage and in such an event, the Collateral Agent shall not be obligated to
notify the remaining Noteholders as provided above or collect additional written
instructions, except that the Collateral Agent shall notify the remaining
Noteholders of the content of the Direction Notice that it has received from the
Requisite Percentage.
Whenever in this Agreement or under the Security Documents an
action or nonaction by the Collateral Agent is conditioned upon there not being
and continuing a Default or an Event of Default, the Collateral Agent may
conclusively presume that no such default has occurred unless it shall be
deemed to have knowledge of the existence thereof pursuant to subsection
(a)(ii) above.
(c) Notwithstanding any provisions to the
contrary contained in any Loan Document or Security Document, the Noteholders
and the Borrower agree that a Default or an Event of Default under a Loan
Document or Security Document shall be deemed to constitute a Default or Event
of Default in each Loan Document or Security Document. Further, notwithstanding
anything to the contrary contained in any Loan Document or Security Document,
each Noteholder acknowledges and agrees that the right and power to exercise
remedies as to the Collateral may be exercised only upon written direction of
the Requisite Percentage of the Noteholders, acting as a single class of
Noteholders, as set forth in the applicable section of the Indenture and
Convertible Notes, respectively. The Noteholders further agree that the right
and power to exercise remedies with respect to the Collateral is exclusively
vested in the Collateral Agent. Nothing contained in this Agreement, however,
shall be construed to permit the extension of the fixed maturity of a Note, or
the reduction of the rate or extension of the time of payment of interest
thereon, or a reduction of the principal amount thereof or premium, if any,
thereon, or a reduction of any amount payable on redemption thereof, or to
impair the right of any such holder to institute suit for the payment thereof,
or make the principal thereof or interest or premium, if any, thereon payable in
any coin or currency other than that provided therein, or change the obligation
of the Borrower to repurchase any Note upon the occurrence of a Repurchase Event
(as defined in the Convertible Notes and in the Indenture) in a manner adverse
to such holder, or impair the right to convert the Convertible Notes into Common
Stock in any material respect, without the written consent of the holder of a
Note affected thereby.
Section 4. Application of Moneys by Collateral Agent. All moneys
received by the Collateral Agent in respect of the Collateral or in connection
with, shall, promptly upon receipt, be applied as follows:
(a)
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT PAGE 11
<PAGE> 12
(i) Moneys, including proceeds or avails of any
sale or other disposition of the Collateral or any part
thereof pursuant to this Section 4 or otherwise collected by
the Collateral Agent from the QIB Collateral shall be paid to
and applied by the Collateral Agent in the following priority
and on a pari passu basis among the QIB Noteholders:
First: the reasonable fees, costs and expenses, including,
without limitation, those of the Collateral Agent (including,
without limitation, attorneys' fees and expenses), of the
sale and of any receiver of the QIB Collateral or any part
thereof appointed pursuant to a Security Document and all
other amounts due the Collateral Agent under Section 10
hereof;
Second: all amounts of principal, premium, if any, and
interest at the time due and payable on the QIB Notes at the
time Outstanding (subject to Section 5) (whether at stated
maturity or as an installment or by prepayment, declaration
or otherwise), including interest (to the extent permitted
under applicable law) on any overdue principal, premium, if
any, or interest on the QIB Notes at the rate provided
therefor in the respective QIB Notes; and in case such monies
shall be insufficient to pay in full the amounts so due and
unpaid on all the QIB Notes, then first, all amounts of
interest at the time due and payable on the QIB Notes, and
second, all amounts of principal and premium at the time due
and payable on the QIB Notes, and all such payments shall be
made pro-rata to the QIB Noteholders entitled thereto, with
each QIB Noteholder receiving that fraction of the total of
all such amounts paid to the QIB Noteholders as the aggregate
principal amount and interest of each such holder's QIB Notes
bears to the sum of the aggregate principal amounts and
interest of all QIB Notes at the time Outstanding;
Third: any Obligations secured by any Security Document and
at the time due and owing to a QIB Noteholder, other than the
amounts referred to in subdivisions First and Second,
inclusive, above; and in case such monies shall be
insufficient to pay in full the amounts so due and unpaid,
all such payments shall be made pro-rata to the Persons
entitled thereto, each Person receiving that fraction of the
total of all such amounts paid to all such Persons as the
amount due to such Person bears to the sum of the amounts due
to all such Persons; and
Fourth: the balance, if any, to the Borrower or as it may
direct in writing if all conditions to the termination of
this Agreement specified in Section 17 shall have been
fulfilled, but if any such condition shall not have been
fulfilled, to be held by
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT PAGE 12
<PAGE> 13
the Collateral Agent and thereafter applied to any other
payments required to be made in accordance with subdivisions
First through Third, inclusive, above.
(ii) Moneys, including proceeds or avails of any sale or
other disposition of the Non-QIB Collateral or any part
thereof pursuant to this Section 4 or otherwise collected by
the Collateral Agent from the Non-QIB Collateral shall be
paid to and applied by the Collateral Agent in the following
priority and, except as provided in Section 5 hereof, on a
pari passu basis among the Replacement Non-QIB Noteholders:
First: the reasonable fees, costs and expenses, including,
without limitation, those of the Collateral Agent (including,
without limitation, attorneys' fees and expenses), of the
sale and of any receiver of the Non-QIB Collateral or any
part thereof appointed pursuant to a Security Document and
all other amounts due the Collateral Agent under Section 10
hereof;
Second: all amounts of principal, premium, if any, and
interest at the time due and payable on the Notes at the time
Outstanding secured by such Non-QIB Collateral (subject to
Section 5) (whether at stated maturity or as an installment
or by prepayment, declaration or otherwise), including
interest (to the extent permitted under applicable law) on
any overdue principal, premium, if any, or interest on the
Replacement Non-QIB Notes at the rate provided therefor in
the respective Replacement Non-QIB Notes; and in case such
monies shall be insufficient to pay in full the amounts so
due and unpaid on all the Replacement Non-QIB Notes, then
first, all amounts of interest at the time due and payable on
the Replacement Non-QIB Notes, and second, all amounts of
principal and premium at the time due and payable on the
Replacement Non-QIB Notes, and all such payments shall be
made pro-rata to the Replacement Non-QIB Noteholders entitled
thereto, with each Replacement Non-QIB Noteholder receiving
that fraction of the total of all such amounts paid to the
Replacement Non-QIB Noteholders as the aggregate principal
amount and interest of each such holder's Replacement Non-QIB
Notes bears to the sum of the aggregate principal amounts and
interest of all Replacement Non-QIB Notes at the time
Outstanding;
Third: any Obligations secured by any Security Document and
at the time due and owing to any Replacement Non-QIB
Noteholder, other than the amounts referred to in
subdivisions First and Second, inclusive, above; and in case
such monies shall be insufficient to pay in full the amounts
so due and unpaid, all such payments shall be made pro-rata
to the Persons entitled thereto, each Person receiving that
fraction of the total of all such amounts paid to all such
Persons as
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT PAGE 13
<PAGE> 14
the amount due to such Person bears to the sum of the amounts
due to all such Persons; and
Fourth: the balance, if any, to the Borrower or as it may
direct in writing if all conditions to the termination of
this Agreement specified in Section 17 shall have been
fulfilled, but if any such condition shall not have been
fulfilled, to be held by the Collateral Agent and thereafter
applied to any other payments required to be made in
accordance with subdivisions First through Third, inclusive,
above.
(b) Pending application in accordance with subsections
(a) of this Section 4, all monies received by the Collateral Agent hereunder
shall be held in an interest-bearing segregated bank account, which may be an
account with the commercial banking department of the Collateral Agent (whether
or not a Default or an Event of Default shall have occurred and be continuing).
(c) Each Noteholder: (i) acknowledges the existence and
validity of the Obligations as evidenced by the Loan Documents and the Security
Documents of the Borrower to each of the other Noteholders, and (ii) agrees to
refrain from making or asserting any claim that any such Obligations or the
instruments governing the terms thereof are invalid or unenforceable in
accordance with its or their terms as a result of any claims under the
fraudulent transfer, preference or similar avoidance provisions of applicable
bankruptcy, insolvency or other laws affecting the rights of creditors
generally. The Collateral Agent and each Noteholder hereby further agree that
the liens and security interests granted to each Noteholder under the respective
Security Documents shall be treated, as among the Noteholders, as having equal
priority (with the liens of the QIB Noteholders being pari passu liens in the
QIB Collateral and the liens of the Replacement Non-QIB Noteholders limited to a
first lien on the Non-QIB Collateral) and shall at all times be shared by the
Noteholders as provided herein regardless of any claim or defense (including,
without limitation, any claims under the fraudulent transfer, preference or
similar avoidance provisions of applicable bankruptcy, insolvency or other laws
affecting the rights of creditors generally) or any additional rights to which
any Noteholder may be entitled or subject. For purposes of clarification, each
Noteholder shall be entitled to a pro rata recovery of net sums received by the
Collateral Agent (or by any Noteholder in preference of other Noteholders) from
the Collateral of any Noteholder, even if certain of the Noteholder's liens are
determined to be invalid, unenforceable, voidable or unperfected for any reason.
In such event, net sums (after deducting fees and expenses incurred by such
Noteholder in collecting such sums) recovered in the name of Noteholders whose
liens are valid and enforceable shall be adjusted so that all Noteholders
receive a pro rata recovery on their Notes. The preceding sentence shall be
subject to the following: in no event shall a Replacement Non-QIB Noteholder
receive proceeds from collateral pledged to a QIB Noteholder, even if the
inability to disburse such proceeds results in Replacement Non-QIB Noteholders
receiving a
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT PAGE 14
<PAGE> 15
lesser pro rata recovery than QIB Noteholders. A Noteholder who is a QIB
Noteholder as of the date QIB collateral was pledged to such QIB Noteholder
shall be treated for purposes of this Agreement as a QIB at all times, even in
the event such holder is no longer a QIB at a later date, and shall be entitled
to proceeds of the Collateral pledged to QIBs. Should any Noteholder be required
to pay or repay a preference, fraudulent transfer or similar payment as a result
of the Collateral, such sum shall be borne ratably by all Noteholders, but not
to exceed the value of collateral allocable to each Noteholder. Nothing herein
shall be construed as either a transfer of the liens held by one Noteholder to
other Noteholders or transfer of control over those liens. All decisions
regarding the resolution of claims, including actual or threatened litigation,
related to a particular Noteholders' liens, shall belong to the particular
Noteholders holding those liens.
(d) If any Noteholder exercises any right of set off or
similar right with respect to any assets (whether or not such assets constitute
Collateral) of the Borrower for payment of any Obligations (as opposed, for
example, to the use of such set off amounts for the payment of other obligations
owing to any Noteholder which are not related to the Obligations) at any time
that a Default or an Event of Default has occurred and is continuing, the
amounts so set off shall constitute Collateral for purposes of this Agreement,
and such Noteholder shall promptly cause such amounts to be delivered to or put
in the custody, possession or control of the Collateral Agent for disposition or
distribution in accordance this Agreement. Until such time as the provisions of
the immediately preceding sentence have been complied with, such Noteholder
shall be deemed to hold such Collateral in trust for the parties entitled
thereto hereunder.
Section 5. Recovery Pro Rata. To the extent the Replacement
Non-QIB Noteholders would otherwise receive a greater pro rata recovery under
Section 4 than the QIB Noteholders, proceeds from the Pledged Shares shall be
allocated such that all Noteholders receive the same pro rata recovery upon the
liquidation of all Collateral and the distribution of proceeds thereof in
accordance with Section 4. To the extent that any Noteholder receives a payment
required to be shared under Sections 4.3(c) or 5 hereof, the Noteholder who
received such payment shall pay the applicable payment or portion of such
payment to the Collateral Agent for redistribution to the appropriate
Noteholders promptly upon proper request therefore by the Collateral Agent or
any Noteholder.
Section 6. Noteholder Records. The Collateral Agent agrees that
the registries of record and beneficial owners of Replacement QIB Notes and
Replacement Non-QIB Notes maintained by the Trustee pursuant to Section 3.6 of
the Indenture and the registries of record and beneficial owners maintained by
the Company pursuant to Section 2.3 of the Convertible Notes, copies of each of
which shall be made available to the Collateral Agent by the Trustee and the
Company, respectively, and the procedures set forth in such sections of the
Indenture and the Convertible Notes, respectively, shall govern which
Noteholders are entitled to notices hereunder
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT PAGE 15
<PAGE> 16
and which Noteholders may give any consent, request, direction, approval, waiver
or other action required or permitted hereunder. The Collateral Agent may
conclusively presume that the Persons reflected on the registries maintained
pursuant to the Indenture and the Convertible Notes are the record and
beneficial owners of the Notes, unless it receives written notification to the
contrary from a Noteholder. Without limiting the foregoing, the Borrower agrees
to provide the Collateral Agent with such evidence that it may reasonably
request in order to permit it to communicate with the Noteholders as required or
permitted herein. The Borrower agrees to inform the Collateral Agent from time
to time upon request by means of an Officer's Certificate of the principal
amount of Notes that are Outstanding with respect to each of the Convertible
Notes, the Replacement Non-QIB Notes and the Replacement QIB Notes.
The Collateral Agent agrees to preserve the names and addresses of the
Noteholders as provided to it in accordance with this Section 6. The rights of
the Noteholders to communicate with other Noteholders with respect to their
rights under this Agreement, and the corresponding rights and privileges of the
Collateral Agent, shall be governed by the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). Each Noteholder agrees with the Borrower
and the Collateral Agent that neither the Borrower nor the Collateral Agent or
any agent of either of them shall be held accountable by reason of disclosure
of information as to names and addresses made pursuant to the Trust Indenture
Act.
Section 7. Notices Under Security Documents. The Collateral
Agent shall deliver, at the expense of the Borrower, to each Noteholder who has
requested such items, promptly upon receipt thereof, duplicates or copies of all
notices, requests and other instruments received by the Collateral Agent under
or pursuant to the Security Documents or this Agreement, to the extent that the
same are not required by such document or agreement to have been furnished
pursuant thereto directly to such holder.
Section 8. Amendments. Notwithstanding any provision to the
contrary in a Loan Document or the Security Documents, this Agreement and each
of the Security Documents may be amended, modified or supplemented, or a
provision thereof waived, upon the written consent of the Requisite Percentage,
except, any such action which results in a release or modification of any lien
or the continued perfection thereof, or which has a material adverse effect on
the existence or enforceability of such lien (as opposed to the value of the
Collateral or lien) must be consented to in writing by each Noteholder granted a
lien in such Collateral. The Collateral Agent shall not be required to enter
into any amendment, modification or supplement, which, in its judgment,
adversely effects its rights hereunder. The consent of the Borrower shall not be
necessary as to any amendment, modification, supplement or waiver which is
unrelated to a specific obligation of the Borrower in this Agreement. So long as
Value Partners, Ltd. is a Noteholder, no amendment may be entered into which
deprives Value Partners, Ltd. of control over the Collateral under Section 8-106
of the UCC (or any successor section), without Value
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT PAGE 16
<PAGE> 17
Partners, Ltd.'s written consent.
Section 9. Concerning the Collateral Agent.
(a) The Collateral Agent is hereby appointed as
collateral agent for, and hereby accepts such appointment for the benefit of the
Noteholders from time to time, but only upon the terms herein set forth,
including the following:
(i) notwithstanding anything herein contained to
the contrary and whether or not a Default or an Event of Default shall
have occurred and be continuing, the Collateral Agent shall not be
obligated to take any action hereunder or under the Security Documents
which might in its judgment involve it in any expense or liability
unless furnished with indemnity satisfactory to the Collateral Agent;
(ii) the Collateral Agent shall be under no
liability with respect to any action taken or omitted to be taken in
accordance with the direction of the Requisite Percentage relating to
the time, method, and place of conducting any proceeding for any remedy
available to the Collateral Agent acting on behalf of the Noteholders
hereunder, or exercising any remedy or power conferred upon the
Collateral Agent hereunder;
(iii) in making any payment or in taking any other
action hereunder in respect of any Note, the Collateral Agent may rely
upon the Officers' Certificate covering such Note delivered to it
pursuant to Section 6, unless a Responsible Offer of the Collateral
Agent shall have actual knowledge of any transfer of such Note or that
a Note has ceased to be Outstanding, and the Collateral Agent shall be
protected in making any payment in respect of any Note believed by the
Collateral Agent to be genuine;
(iv) whenever in the administration of its duties
hereunder or the Security Documents the Collateral Agent deems it
necessary for a matter to be proved or established prior to taking any
action hereunder, the Collateral Agent may request and the Borrower
shall, if requested, promptly provide certification regarding such
matter, upon which the Collateral Agent shall be protected in relying
in good faith.
(v) the Collateral Agent may act through agents,
attorneys or consultants and may rely on the advice and direction of
such agents, attorneys or consultants duly appointed by the Collateral
Agent and shall not be responsible for the misconduct or negligence of
any such agents or consultants appointed with due care hereunder;
(vi) the Collateral Agent shall not be liable for
any error of judgment
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT PAGE 17
<PAGE> 18
made in good faith unless it is proved that the Collateral Agent was
negligent in ascertaining the pertinent facts;
(vii) money held by the Collateral Agent need not
be segregated from other funds held by the Collateral Agent, except to
the extent required by law or the terms of this Agreement;
(vii) the Collateral Agent shall not be liable for
any action it takes or omits to take in good faith which it believes to
be authorized or within its rights or powers;
(ix) the Collateral Agent may consult with
counsel of its selection, and the advice or opinion of counsel with
respect to legal matters relating to this Agreement or any Security
Document shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or opinion of
such counsel;
(x) the Collateral Agent shall be under no
obligation to exercise any of the rights or powers given to it in this
Agreement at the request or direction of the persons designated herein
or in the Security Documents, unless such persons shall have given to
the Collateral Agent reasonable security or reasonable indemnity
against the costs, expenses and liabilities which might be incurred by
in it in compliance with such request or direction.
(b) The Collateral Agent shall not be responsible for any
recital herein or in the Notes or for insuring the Collateral or for the
validity or sufficiency of the Collateral, this Agreement or any Security
Document or of any supplements thereto or instruments of other assurance or for
the sufficiency of the security for the Notes intended to be secured by any
Security Document, or for the value of the Collateral or the title of the
Borrower to the Collateral. Except in regard to the filing of continuation
statements as provided herein, the Collateral Agent makes no representations
regarding and shall not be responsible for the creation or perfection of the
security interests of the Noteholders in the Collateral, but is only taking
possession of the Collateral on their behalf as provided herein. Except as
otherwise expressly provided herein, the Collateral Agent shall not be bound to
ascertain or inquire as to the performance or observance of any covenants,
conditions or agreements on the part of the Borrower under the Security
Documents but the Collateral Agent at the written direction of the Requisite
Percentage may require of the Borrower full performance of any such covenants.
(c) The Collateral Agent shall not be liable or
responsible for any losses incurred or suffered by the Borrower or any other
obligor or by any secured party, or any
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT PAGE 18
<PAGE> 19
decrease in the value of the Collateral, or from any other sale or disposition
of Collateral made in accordance with the terms hereof and the Security
Documents. In no event shall the Collateral Agent be liable for any taxes or any
other governmental charges imposed upon or in respect of the Collateral or upon
the income or other distributions thereon.
(d) The Collateral Agent shall be entitled to rely
exclusively upon, and shall have no duty or obligation to check, verify or
otherwise assess the accuracy of, the information or calculations provided to
the Collateral Agent by (i) the Borrower in any Officers' Certificate delivered
pursuant to Section 6, and (ii) the Noteholders as provided herein. Upon the
written request of the Noteholders owning at least 25% of the Notes Outstanding,
and upon receipt from the Borrower of indemnity or other assurances with respect
to the payment of the costs of the same, the Collateral Agent shall investigate
the accuracy of such information given to it in an Officer's Certificate.
(e) Except as specified in Section 12, paragraph (j) of
this Section, or in the next two following sentences, the Collateral Agent shall
have no responsibility for filing any Security Document or any financing or
continuation statement in any public office at any time or to otherwise perfect
or maintain the perfection of any security interest or lien granted to the
Noteholders hereunder, under any Security Document or to prepare and file any
filing, report or registration statement under any federal or state securities
or "blue sky" law or to record this Agreement. Promptly upon the filing of any
financing statement with respect to any Collateral, the Borrower will deliver to
the Collateral Agent an Officers' Certificate, setting forth the date, place of
filing and filing number of each such financing statement. The Collateral Agent
will make timely filings of continuation statements with respect to each
financing statement listed in any such Officers' Certificate.
(f) The Collateral Agent shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Collateral Agent, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit, and, if
the Collateral Agent shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and premises
of the Borrower, personally or by agent or attorney at the sole cost of the
Borrower and shall incur no liability or additional liability of any kind by
reason of such inquiry or investigation.
(g) The Collateral Agent undertakes to perform such
duties and only such duties as are specifically set forth in this Agreement, and
no implied covenants or obligations shall be read into this Agreement against
the Collateral Agent.
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT PAGE 19
<PAGE> 20
(h) In the absence of bad faith on its part, the
Collateral Agent may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon certificates or opinions
furnished to the Collateral Agent by the Borrower or the Noteholders and
conforming to the requirements of this Agreement; but in the case of any such
certificates or opinions which by any provision hereof are specifically required
to be furnished to the Collateral Agent, the Collateral Agent shall be under a
duty to examine the same to determine whether or not they conform to the
requirements of this Agreement (but need not confirm or investigate the accuracy
of mathematical calculations or other facts stated therein).
(i) The Borrower agrees to promptly deliver to the
Collateral Agent copies of any amendments, modifications or waivers to any
document related to the Notes. The Collateral Agent shall be entitled to
conclusively presume that those documents are in the form delivered to the
Collateral Agent on the date of the closing of the transactions contemplated
hereby until it has received written notice to the contrary by one of the
parties hereto (and in the event of conflicting notices from more than one party
hereto, as specified by the Requisite Percentage).
(j) In case there shall be pending proceedings relative
to the Borrower or any other obligor upon the Notes under Title 11 of the United
States Code or any other applicable Federal or state bankruptcy, insolvency or
other similar law, or in case a receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, sequestrator or similar official shall have been
appointed for or taken possession of the Borrower or its property or such other
obligor, or in case of any other comparable judicial proceedings relative to the
Borrower or other obligor upon the Notes, or to the creditors or property of the
Borrower or such other obligor, the Collateral Agent, irrespective of whether
the principal of the Notes shall then be due and payable as therein expressed or
by declaration or otherwise and irrespective of whether the Collateral Agent
shall have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such proceedings or otherwise, but
only upon being given a Direction Notice and upon being indemnified as provided
herein:
(i) to file all pleadings and papers necessary
to the exercise of duties of the Collateral Agent on behalf of the
Noteholders, including a motion or motions for relief from the
automatic stay and any document or pleading necessary to continue the
perfection of the Noteholders' interest in the Collateral; and
(ii) to collect and receive any moneys or other
property payable or deliverable on any such claims, and to distribute
all amounts received with respect to the claims of the Noteholders and
of the Collateral Agent on their behalf; and any trustee, receiver, or
liquidator, custodian or other similar official is hereby authorized by
each of the Noteholders to make payments to the Collateral Agent, and,
in the event that the Collateral Agent shall consent to the making of
payments directly to the Noteholders, to
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT PAGE 20
<PAGE> 21
pay to the Collateral Agent such amounts as shall be sufficient to
cover reasonable compensation to the Collateral Agent, each predecessor
Collateral Agent and their respective agents, attorneys and counsel,
and all other expenses and liabilities incurred, and all advances made,
by the Collateral Agent and each predecessor Collateral Agent, except
as a result of the negligence or bad faith of any such Agent.
Nothing herein contained shall be deemed to authorize the Collateral
Agent to authorize or consent to or vote for or accept or adopt on behalf of
the Noteholders any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any holder thereof, or to
authorize the Collateral Agent to vote in respect of the claim of any
Noteholder in any such proceeding.
All rights of action and of asserting claims under the Security
Documents may be enforced by the Collateral Agent without the possession of any
of the Notes or the production thereof in any trial or other proceedings
relative thereto, and any such action or proceedings instituted by the
Collateral Agent shall be brought as agent for the Noteholders.
In any proceedings brought by the Collateral Agent (and also any
proceedings involving the interpretation of any provision of this Agreement to
which the Collateral Agent shall be a party) the Collateral Agent shall be held
to represent all the holders of the Notes, and it shall not be necessary to
make any holders of the Notes parties to any such proceedings.
Section 10. Collateral Agent's Compensation, Expenses, etc. The
Borrower, from time to time upon request, will pay the Collateral Agent
compensation for its services hereunder and will pay or reimburse the
Collateral Agent on a current basis for all its reasonable expenses and
disbursements hereunder, including, without limitation, the reasonable fees and
disbursements of its counsel and of its agents not regularly in its employ
including independent consultants retained by the Collateral Agent in good
faith. The Collateral Agent shall have a first lien prior to Noteholders upon
all property and funds collected in order to secure the Collateral Agent's
compensation and indemnity rights hereunder. Notwithstanding the provisions of
any Security Document, the Borrower hereby indemnifies the Collateral Agent and
agrees to hold it harmless against any loss, expense, liability or obligation
arising out of or in connection with the acceptance and the performance of its
duties hereunder and under the Security Documents, including, without
limitation, the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers
or duties hereunder, and the payment, failure to pay or delay in payment of any
stamp or other taxes (including interest and penalties) in respect of the issue
and sale of the Notes, such indemnity and compensation to survive payment of
the Notes and the termination of this Agreement, and any resignation, removal
or replacement of the Collateral Agent, provided that such indemnity shall not
apply to actions or inactions by the Collateral Agent that constitute the
negligence, willful
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT PAGE 21
<PAGE> 22
misconduct or bad faith.
When the Collateral Agent incurs expenses or renders services in
connection with any bankruptcy proceeding involving the Borrower, the expenses
(including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable Federal or state bankruptcy, insolvency or
other similar law.
The provisions of this Section shall survive the termination of this
Agreement or the resignation and removal of the Collateral Agent.
Section 11. Resignation, Removal and Replacement of Collateral
Agent. The Collateral Agent or any successor Collateral Agent may resign at any
time by giving at least 30 days' prior written notice of resignation to the
Borrower and each Noteholder, such resignation to be effective on the later of
(a) the date specified in such notice and (b) the date on which a replacement
collateral agent is appointed to act as Collateral Agent hereunder and the
Collateral has been delivered to such new replacement collateral agent. The
Requisite Percentage may at any time remove the Collateral Agent for or without
cause by an instrument or instruments in writing delivered to the Collateral
Agent and the Borrower. In case the office of Collateral Agent shall become
vacant for any reason, the Requisite Percentage may appoint a successor
Collateral Agent (eligible as provided in Section 13) to fill such vacancy by an
instrument or instruments in writing delivered to such successor Collateral
Agent, the retiring Collateral Agent and the Borrower. Until a new Collateral
Agent shall be so appointed by the Requisite Percentage, the Collateral Agent
shall promptly deliver all Collateral to Value Partners, Ltd. or, if Value
Partners, Ltd. is no longer a Noteholder, to such other party as designated by
the Requisite Percentage, if such party has expressly agreed to hold such
Collateral for the benefit of all Noteholders. Any interim Collateral Agent so
appointed shall immediately and without any further action be superseded by a
successor Collateral Agent appointed by the Requisite Percentage in the manner
provided in this Section 11. If a successor or interim Collateral Agent does not
take office within 30 days after the retiring Collateral Agent resigns or is
removed, the retiring Collateral Agent or any Noteholder may petition any court
of competent jurisdiction for the appointment of a successor Collateral Agent.
Upon the appointment of any successor or interim Collateral Agent pursuant to
this Section 11, such successor or interim Collateral Agent shall immediately
and without any further action succeed to all the rights and obligations of the
retiring Collateral Agent hereunder and under the Security Documents as if
originally named herein and therein and the retiring Collateral Agent, at the
expense of the Borrower, upon being paid any compensation owed to it pursuant to
Section 10 hereof, shall duly assign, transfer and deliver to such successor or
interim Collateral Agent all the rights and moneys at the time held by the
retiring Collateral Agent under the Security Documents and hereunder and shall
execute and deliver such proper instruments as may be reasonably requested to
evidence such
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT PAGE 22
<PAGE> 23
assignment, transfer and delivery. Notwithstanding anything to the contrary in
this or any other document, under no circumstances shall the Borrower be
entitled to replace, terminate or name a replacement for the Collateral Agent.
The Collateral Agent is the agent of and representative of the Noteholders and
not the Borrower. Until the Collateral is delivered to a replacement collateral
agent, the existing Collateral Agent, even if otherwise unable or unqualified to
act as Collateral Agent, shall be deemed to possess the Collateral for the
benefit of the Noteholders.
Section 12. Successor Collateral Agent by Merger, Consolidation,
etc. Any corporation into which the Collateral Agent may be merged or with which
it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Collateral Agent is a party, or any state or national
bank or trust bank in any manner succeeding to all or substantially all of the
corporate trust business of the Collateral Agent, if eligible as provided in
Section 13, shall automatically succeed to all of the rights and duties of the
Collateral Agent hereunder and under the Security Documents without further
action on the part of any of the parties hereto. Such surviving or succeeding
corporation (if other than the Collateral Agent) shall (a) forthwith deliver to
each Noteholder and the Borrower written notice of such succession to the rights
and obligations of the Collateral Agent hereunder and under the Security
Documents and (b) execute, file and record all necessary filings, notices and
documents in each location a filing, notice, or document was filed and recorded
to perfect the lien and security interest granted to the Noteholders pursuant to
the Security Documents (all within any temporal parameters required to continue
the perfection (and priority thereof) of such liens and security interests) and
take all such other actions necessary to maintain a perfected lien and security
interest in the Collateral.
Section 13. Eligibility of Collateral Agent. The Collateral Agent
shall always be a state or national bank or trust company in good standing,
organized under the laws of the United States of America or one of the States
thereof or the District of Columbia having a capital, surplus and undivided
profits (as shown by its latest annual report of condition) aggregating at
least $100,000,000.00 and shall not be a Noteholder or any affiliate thereof,
if there be such a bank or trust company willing and able to accept such trust
upon reasonable and customary terms.
Section 14. Appointment of Separate or Co-Collateral Agent.
(a) The Collateral Agent may and, upon the request of the
Requisite Percentage, shall by an instrument in writing delivered to the
Borrower and to each Noteholder, appoint a bank or trust company or an
individual to act as separate collateral agent or co-collateral agent with
respect to the Notes in a jurisdiction where the Collateral Agent is
disqualified from acting or for any other purpose deemed by the Collateral Agent
or by such holders to be advantageous to their respective interests, such
separate collateral agent or co-collateral agent to exercise only such rights
and to have only such duties as shall be specified in the instrument of
appointment
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT PAGE 23
<PAGE> 24
and shall not be, or be an affiliate of, any Noteholder. The Borrower will pay
the reasonable compensation and expenses of any such separate collateral agent
or co-collateral agent and, if requested by the Collateral Agent, such separate
collateral agent or co-collateral agent or the Requisite Percentage, the
Borrower will enter into an amendment to this Agreement, satisfactory in
substance and form to the Collateral Agent, such separate collateral agent or
co-collateral agent and each such holder, confirming the rights and duties of
such separate collateral agent or co-collateral agent.
(b) Every separate collateral agent and co-collateral
agent shall, to the extent permitted by law, be appointed and act subject to the
following provisions and conditions:
(i) all rights, powers, duties and obligations
conferred or imposed upon the Collateral Agent shall be conferred or
imposed upon and exercised or performed by the Collateral Agent and
such separate collateral agent or co-collateral agent jointly (it being
understood that such separate collateral agent or co-collateral agent
shall not be authorized to act separately without the Collateral Agent
joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed
the Collateral Agent shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Collateral or any
portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate collateral agent or co-collateral
agent, but solely at the direction of the Collateral Agent;
(ii) no collateral agent hereunder shall be
liable by reason of any act or omission of any other collateral agent
hereunder; and
(iii) the Collateral Agent may at any time accept
the resignation of or remove any separate collateral agent or
co-collateral agent.
(c) Any notice, request or other writing given to the
Collateral Agent shall be deemed to have been given to each of the then separate
collateral agents and co-collateral agents, as effectively as if given to each
of them. Every instrument appointing any separate collateral agent or
co-collateral agent shall refer to this Agreement and the conditions of this
Section 14. Each separate collateral agent and co-collateral agent, upon its
acceptance of the trusts conferred, shall be vested with the estates or property
specified in its instrument of appointment, either jointly with the Collateral
Agent or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Collateral Agent. Every such instrument shall be filed with the
Collateral Agent.
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT PAGE 24
<PAGE> 25
(d) Any separate collateral agent or co-collateral agent
may at any time constitute the Collateral Agent its agent or attorney-in-fact
with full power and authority, to the extent not prohibited by law, to do any
lawful act under or in respect of this Agreement on its behalf and in its name.
If any separate collateral agent or co-collateral agent shall die, become
incapable of acting, resign or be removed, all of its estates, properties,
rights, remedies and trusts shall vest in and be exercised by the Collateral
Agent, to the extent permitted by law, without the appointment of a new or
successor Collateral Agent.
(e) Upon the request of the Requisite Percentage, the
Collateral Agent shall promptly remove any separate collateral agent or
co-collateral agent.
Section 15. Obligations Absolute. The obligations of the Borrower
under this Agreement and the Security Documents, to the fullest extent
permitted by applicable law, shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
suspended, discharged, terminated or otherwise affected by, any circumstance or
occurrence whatsoever, including, without limitation: (a) any renewal,
extension, amendment or modification of, or addition or supplement to, or
deletion from, this Agreement, the Purchase Agreement, the Convertible Notes,
the Indenture, the Exchange Agreement or the Security Documents, or any
assignment or transfer of any thereof; (b) any waiver, consent, extension,
indulgence or other action or inaction under or in respect of any such
instrument or any exercise or non-exercise of any right, remedy, power or
privilege under or in respect of any such instrument; (c) any furnishing of any
additional security to the Collateral Agent or any acceptance thereof or any
release of any security or guaranty by the Collateral Agent; (d) any limitation
on any party's liability or obligations under any such instrument or any
invalidity or unenforceability, in whole or in part, of any such instrument or
any term thereof, or (e) any bankruptcy, insolvency, reorganization,
composition, adjustment, dissolution, liquidation or other like proceeding
relating to the Borrower or any action taken with respect to this Agreement by
any trustee or receiver, or by any court, in any such proceeding; whether or
not the Borrower shall have notice or knowledge of any of the foregoing.
Section 16. Further Assurances.
(a) The Borrower at its expense will execute, acknowledge
and deliver all such agreements and instruments and take all such action as the
Collateral Agent or the Requisite Percentage from time to time may reasonably
request in order further to effectuate the purposes of this Agreement and to
carry out the terms hereof. The Borrower represents and warrants that its office
set forth in Section 18 is its principal place of business and the office at
which its records with respect to this Agreement and the Security Documents are
kept. The Borrower represents and warrants that its state of incorporation is
Delaware. In the event the Borrower proposes to change its name, the location of
its principal place of business, the location of such
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT PAGE 25
<PAGE> 26
office, or its state of incorporation the Borrower will, concurrently with the
delivery of written notice thereof, deliver to the Collateral Agent written
notice of such proposed change.
(b) Not more than 90 days nor less than 45 days prior to
each date on which the Borrower proposes to take any action contemplated by the
last sentence of Section 16(a), the Borrower shall, at its own cost and expense,
furnish to each Noteholder and the Collateral Agent an opinion of counsel either
(a) stating that, in the opinion of such counsel, such action has been taken
with respect to the recording, filing, re-recording and refiling of this
Agreement, any Security Document, any supplements and any other requisite
documents and with respect to the execution and filing of any financing
statements and continuation statements as are necessary to perfect, maintain and
protect the lien and security interest of the Collateral Agent, on behalf of the
Noteholders, with respect to the Security against all creditors of and
purchasers from the Borrower, as the case may be, to the extent that the same
may be done by filing or recording, and reciting the details of such action, or
(b) stating that, in the opinion of such counsel, no such action is necessary to
maintain such perfected lien and security interest. Such opinion of counsel
shall describe each recording, filing, re-recording and refiling of this
Agreement, or any Security Document, any supplements and any other requisite
statements and continuation statements that will, in the opinion of such
counsel, be required to perfect, maintain and protect the lien and security
interest of the Collateral Agent, on behalf of the Noteholders, with respect to
the Collateral against all creditors of and purchasers from the Borrower for a
period, specified in such opinion, continuing until a date not earlier than
fifteen months from the date of such opinion.
Section 17. Termination.
(a) Upon receipt by the Collateral Agent from the
Noteholders of evidence satisfactory to it of the indefeasible payment (or
prepayment) in full in cash of the principal of and premium, if any, and
interest on all of the Notes, in accordance with the terms thereof and the
indefeasible payment in full in cash of all other sums payable under the
Purchase Agreement, the Exchange Agreement and this Agreement (including,
without limitation, the reasonable compensation, expenses and disbursements of
the Collateral Agent), and upon expiration of any preference period under
Chapter 11 of Title 11 of the United States Code or other applicable law or upon
final resolution of any action brought against a Noteholder within such time
period, this Agreement shall terminate and the Collateral Agent, at the request
and expense of the Borrower, will execute and deliver to the Borrower a proper
instrument or instruments prepared by the Borrower acknowledging the
satisfaction and termination of the Security Documents and of this Agreement,
and will duly assign, transfer and deliver to the Borrower all of the rights and
moneys at the time held by the Collateral Agent under the Security Documents and
hereunder. Notwithstanding the satisfaction and termination of this Agreement or
the Security Documents, the obligation of the Borrower to the Collateral Agent
under Section 10 of this Agreement shall survive.
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT PAGE 26
<PAGE> 27
(b) Prior to executing the instruments referred to in
Section 17(a), the Collateral Agent shall be entitled to receive an opinion of
counsel, at the expense of the Borrower, stating that the conditions to
satisfaction and discharge have been complied with under this Agreement.
Section 18. Notices, etc. All notices, directions, instructions
and other communications under this Agreement shall be in writing and shall be
delivered by hand, by express courier service or by registered or certified
mail, return-receipt requested, postage prepaid, addressed:
(a) If to Borrower:
Altiva Financial Corporation
Sixth Floor
1000 Parkwood Circle
Atlanta, Georgia 30339
Attention: Office of the Chief Executive Officer
Telephone: (770) 952-6700
Facsimile: (770) 937-7576
With a Copy to:
King & Spalding
191 Peachtree Street
48th Floor
Atlanta, Georgia 30303
Attention: Walter Driver, Esq.
Telephone: (404) 572-4600
Facsimile: (404) 572-5149
(b) If to the Collateral Agent:
United States Trust Company of New York
2001 Ross Avenue, Suite 2700
Dallas, Texas 75201
Attention: Corporate Trust
Telephone: (214) 754-1200
Facsimile: (214) 754-1303
With Copy to:
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT PAGE 27
<PAGE> 28
Haynes and Boone, L.L.P.
201 Main Street, Suite 2200
Fort Worth, Texas 76102
Attention: William Greenhill
Telephone: (817) 347-6602
Facsimile: (817) 347-6650
(c) if to any Noteholder, at the address of such
Noteholder specified in the schedules to this Agreement or at such other address
as such Noteholder shall have furnished to the Borrower and the Collateral Agent
in writing.
Section 19. Treatment of Notices. The Company, the Collateral
Agent and each Noteholder acknowledge and agree that the Convertible Notes, the
Replacement QIB Notes and the Replacement Non-QIB Notes shall be considered as a
single class of pari passu indebtedness of the Borrower and that,
notwithstanding any contrary provision in the Purchase Agreement, the Exchange
Agreement or any of the Security Documents, whenever any provisions of the
Convertible Notes, the Indenture, the Replacement QIB Notes, the Replacement
Non-QIB Notes or any other Security Document refers to actions by the holders of
any such notes, whether upon a Default or an Event of Default, in connection
with any amendment, waiver or other modification of the same or otherwise, the
requisite percentage of holders which is required to effect any such action
shall be determined by reference to an aggregate amount of the Notes
Outstanding, provided that any amendment, waiver or modification of the
provisions of Article VII of the Convertible Notes or any other provision
thereof related to the convertibility of such notes may be made only with the
requisite percentage of the holders of the Convertible Notes, considered as a
separate class of securities for this purpose only.
Section 20. Jurisdiction.
Unless otherwise specified, this agreement shall be construed, and its
performance enforced, under the laws of the state of Maryland.
Section 21. Venue, Service of Process, and Jury Trial.
The Borrower, for itself and its successors and assigns, irrevocably
(a) submits to the nonexclusive jurisdiction of the state and federal courts in
the State of Maryland (b) waives, to the fullest extent lawful, any objection
that it may now or in the future have to the laying of venue of any litigation
arising out of or in connection with this Agreement brought in any such court,
(c) waives any claims that any litigation brought in any of the foregoing
courts has been brought in an inconvenient forum, (d) consents to the service
of process of any of those courts in any litigation by the mailing of copies of
that process by certified mail, return receipt requested,
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT PAGE 28
<PAGE> 29
postage prepaid, by hand delivery, or by delivery by a nationally-recognized
courier service, and service shall be deemed complete upon delivery of the legal
process at its address for purposes of this Agreement, (e) agrees that any legal
proceeding against any party to this Agreement arising out of or in connection
with the this Agreement may be brought in one of the foregoing courts, and (f)
waives to the fullest extent permitted by governmental requirement, its
respective rights to a jury trial of any claim or cause of action based upon or
arising out of this Agreement. The scope of each of the foregoing waivers is
intended to be all encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of the matters contemplated hereby,
including, without limitation, contract claims, tort claims, breach of duty
claims, and all other common law and statutory claims. The Borrower acknowledges
that these waivers are a material inducement to each Noteholder's agreement to
enter into a business relationship, that each Noteholder has already relied on
these waivers in entering into this Agreement, and that each Noteholder will
continue to rely on each of these waivers in related future dealings. The
Borrower further warrants and represents that it has reviewed these waivers with
its legal counsel, and that it knowingly and voluntarily agrees to each waiver
following consultation with legal counsel. The waivers in this paragraph are
irrevocable, meaning that they may not be modified either orally or in writing,
and these waivers apply to any future renewals, extensions, amendments,
modifications, or replacements in respect of this Agreement. In connection with
any litigation, this Agreement may be filed as a written consent to a trial by
the court.
Section 22. Counterparts.
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original and all of which, when taken together,
will be deemed to constitute one and the same.
Section 23. Section Headings.
The headings of sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation.
Section 24. Waiver.
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right,
power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege.
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT PAGE 29
<PAGE> 30
Section 25. Severability. (a) Wherever possible each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
(b) Likewise, if any provision of this Agreement shall be rejected
as an executory contract with respect to the Company by a bankruptcy court, the
remaining parties hereto agree that they shall remain bound to all terms and
provisions of this Agreement and that they shall perform all duties and
obligations required of each. The Borrower is executing this Agreement for
purposes of acknowledgement only, except as to specific obligations and duties
of the Borrower herein.
Exhibit A Convertible Pledge Agreement
Exhibit B Schedule of Collateral
Exhibit C Replacement QIB Pledge Agreement
Exhibit D Stock Pledge Agreement
Exhibit E Description Pledged Shares
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT PAGE 30
<PAGE> 31
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
UNITED STATES TRUST COMPANY OF NEW YORK,
As Collateral Agent for the Noteholders
By: /s/ Gerard F. Gainey
------------------------------------
Name: Gerard F. Gainey
Title: Senior Vice President
ALTIVA FINANCIAL CORPORATION
By: /s/ Edward B. Meyercord
------------------------------------
Name: Edward B. Meyercord
Title: Chief Executive Officer
UNITED STATES TRUST COMPANY OF NEW YORK,
Trustee, a Attorney-in-Fact for the
Replacement QIB Noteholders
By: /s/ Gerard F. Gainey
------------------------------------
Name: Gerard F. Gainey
Title: Senior Vice President
UNITED STATES TRUST COMPANY OF NEW
YORK, Trustee, a Attorney-in-Fact
for the Replacement Non-QIB
Noteholders
By: /s/ Gerard F. Gainey
------------------------------------
Name: Gerard F. Gainey
Title: Senior Vice President
VALUE PARTNERS, LTD.
By: /s/ Timothy G. Ewing
------------------------------------
Timothy G. Ewing
Managing Partner of Ewing & Partners
General Partner of Value Partners, Ltd.
INTERCREDITOR AND COLLATERAL SHARING AGREEMENT PAGE 31
<PAGE> 1
EXHIBIT 99.1
(ALTIVA LOGO)
Altiva Financial Corporation
1000 Parkwood Circle
6th Floor
Atlanta, GA 30339
<TABLE>
<S> <C>
AT THE COMPANY AT THE FINANCIAL RELATIONS BOARD
Champ Meyercord, Chairman & CEO Gen'l Info: Paula Schwartz (212) 661-8030
J. Richard Walker, EVP & CFO Analyst Info: Regina Lenihan (212) 661-8030
(800) 550-6346 Media Info: Paul Del Colle (212) 661-8030
</TABLE>
FOR IMMEDIATE RELEASE
March 3, 2000
ALTIVA FINANCIAL CORPORATION ANNOUNCES RAISING OF $4.0 MILLION
ATLANTA, GA, MARCH 3, 2000 -- Altiva Financial Corporation (NASDAQ Small Cap:
ATVA) announced today that it has received the balance ($4 million) of the $7
million associated with its recapitalization. The Company has also received a
subscription from over 92% of its old 12% subordinated debt holders who will
exchange their old notes in the principal amount of over $28 million for new
secured notes in the principal amount of approximately $17 million, a portion
of which will be converted into common stock, upon shareholder approval.
Champ Meyercord, Chairman and Chief Executive Officer of Altiva Financial said,
"With the additional funding received, we have improved our short-term cash
situation. Upon the completion of refinancing our subordinated debt, which we
expect to accomplish next week, we will have significantly strengthened
Altiva's balance sheet. Management can now focus on running the business to
drive production to profitable levels. Long-term improvement is dependent on
our ability to create and sustain consistent profitable performance."
The recapitalization referred to above is more specifically detailed as
follows: Altiva Financial Corporation sold $14,000,000 principal amount of 12%
Secured Convertible Senior Notes of the Company due 2006 (the "New Notes"). The
consideration received for such New Notes consisted of $4.0 million in cash and
the tendering to the Company of $10.0 million principal amount of previously
issued 12% Secured Convertible Notes due 2006. In addition, the Company
received a binding commitment from over 92% of the beneficial owners of its
currently outstanding 12% Subordinated Notes due 2001 (the "Subordinated
Notes") to exchange their Subordinated Notes (approximately $28,000,000) for
new 12% Secured Convertible Senior Notes due 2006 (the "Exchange Notes") in the
principal amount of approximately $17,000,000. Approximately one-third (1/3) of
the Exchange Notes will be mandatorily convertible into the company's common
stock at $1.00 per share upon shareholder approval, which is expected.
The Company also announced today that the Expiration Date for participating in
the offer to exchange outstanding Subordinated Notes for new Exchange Notes has
been extended to 5:00 p.m. Eastern Time on Friday, March 17, 2000; however, the
Company expects to consummate the exchange with respect to the holders of 92%
of the outstanding Subordinated Notes on Tuesday, March 7, 2000.
<PAGE> 2
Altiva Financial Corporation
Reports Results For The Fourth Quarter and Fiscal 1999
Page 2
Altiva Financial Corporation is a specialty financial services company that
originates, purchases, sells sub-prime home equity loans, conventional home
improvement loans, as well as debt consolidation loans and FHA Title I loans.
The Company is headquartered in Atlanta, Georgia and maintains 20 branch
offices nationwide.
To receive Altiva Financial's latest news release and other corporate
documents via FAX -- NO COST -- please dial 1-800-PRO-INFO.
Use Company Code ATVA
Or visit Altiva Financial's pages at WWW.FRBINC.COM.
This press release contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known risks, uncertainties or other factors, which may cause
actual results, performances or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. For more complete information
concerning factors, which could affect the Company's results, reference is made
to various disclosures in the Company's periodic reports, including reports on
Forms 10-K, 10-Q and 8-K, as well as other documents filed with the Securities
and Exchange Commission, including risks disclosed under the caption "Forward
looking Statements" contained in the Form 10K filed with the Securities and
Exchange Commission on December 1, 1999, as such form may be amended from time
to time.
# # #
<PAGE> 1
EXHIBIT 99.2
Altiva Financial Corporation
1000 Parkwood Circle
(ALTIVA FINANCIAL LOGO) 6th Floor
Atlanta, GA 30339
<TABLE>
<S> <C>
AT THE COMPANY AT THE FINANCIAL RELATIONS BOARD
Champ Meyercord, Chairman & CEO Gen'l Info: Paula Schwartz (212) 661-8030
J. Richard Walker, EVP & CFO Analyst Info: Regina Lenihan (212) 661-8030
(800) 550-6346 Media Info: Paul Del Colle (212) 661-8030
</TABLE>
FOR IMMEDIATE RELEASE
March 24, 2000
ALTIVA FINANCIAL CORPORATION ANNOUNCES
COMPLETION OF EXCHANGE OFFER
ATLANTA, GA, MARCH 24, 2000 -- Altiva Financial Corporation (NASDAQ Small Cap:
ATVA) announced today that it has completed its previously announced exchange
offer for its outstanding 12 1/2% Subordinated Notes due 2001. The holders of
over 96.5% of the Subordinated Notes, or approximately $28.5 million in
principal amount, participated in the exchange offer. The participants will
receive, in the aggregate, approximately $12.5 million principal amount of 12%
Secured Convertible Senior Notes due 2006 and 6.2 million shares of common
stock.
Champ Meyercord, Chairman and Chief Executive Officer of Altiva Financial
said, "We are delighted to have completed all the components of our
recapitalization. We will continue our focus on managing the business to drive
production to profitable levels, which continues to be the most critical
element to our long-term viability."
Altiva Financial Corporation is a specialty financial services company that
originates, purchases, sells sub-prime home equity loans, conventional home
improvement loans, as well as debt consolidation loans and FHA Title I loans.
The Company is headquartered in Atlanta, Georgia and maintains 20 branch
offices nationwide.
To receive Altiva Financial's latest news release and other corporate
documents via FAX -- NO COST -- please dial 1-800-PRO-INFO.
Use Company Code ATVA
Or visit Altiva Financial's pages at WWW.FRBINC.COM.
This press release contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known risks, uncertainties or other factors, which may cause
actual results, performances or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. For more complete information
concerning factors, which could affect the Company's results, reference is made
to various disclosures in the Company's periodic reports, including reports on
Forms 10-K, 10-Q and 8-K, as well as other documents filed with the Securities
and Exchange Commission, including risks disclosed under the caption "Forward
looking Statements" contained in the Form 10K filed with the Securities and
Exchange Commission on December 15, 1999, as such form may be amended from time
to time.
# # #
