SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended September 30, 1998
Commission File Number 1-8538
WESTBRIDGE CAPITAL CORP.
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(Exact name of Registrant as specified in its Charter)
DELAWARE 73-1165000
- -------------------------- --------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
110 West Seventh Street, Suite 300, Fort Worth, Texas 76102
- -------------------------------------------------------- ---------
(Address of Principal Executive Offices) (Zip Code)
817-878-3300
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(Registrant's Telephone Number, including Area Code)
Not Applicable
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(Former Name, Address and Former Fiscal Year, if changed since Last Report)
Indicate, by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO_____
Common Stock - Par Value $.10 7,035,809 Shares Outstanding at November 5, 1998
<PAGE>
2
Form 10-Q
WESTBRIDGE CAPITAL CORP.
This quarterly report, filed pursuant to Rule 13a-13 and 15d-13 of the General
Rules and Regulations under the Securities Exchange Act of 1934, consists of the
following information as specified in Form 10-Q:
<TABLE>
<CAPTION>
Page(s)
PART I - FINANCIAL INFORMATION
<S> <C>
Item 1 - Financial Statements
1. Consolidated Balance Sheets at September 30, 1998, December 31,
1997 and September 30, 1997. 3-4
2. Consolidated Statement of Operations for the Three and Nine
Months Ended September 30, 1998 and 1997. 5
3. Consolidated Statement of Cash Flows for the Three and Nine
Months Ended September 30, 1998 and 1997. 6-7
4. Notes to Consolidated Financial Statements. 8-10
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations 11-24
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 25
Item 3 - Defaults Upon Senior Securities 25
Item 6 - Exhibits and Reports on Form 8-K 26
</TABLE>
<PAGE>
WESTBRIDGE CAPITAL CORP.
CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1998 1997 1997
------------------ ------------------ ------------------
(unaudited) (audited) (unaudited)
------------------ ------------------ ------------------
<S> <C> <C> <C>
Investments:
Fixed Maturities:
Available-for-sale, at market value
(amortized cost $116,066, $122,840
and $130,407) $ 124,603 $ 128,749 $ 133,998
Equity securities, at market 2,620 4,770 5,573
Mortgage loans on real estate 324 389 398
Investment real estate - 566 816
Policy loans 280 284 277
Short-term investments and certificates
of deposit 9,072 12,654 2,853
------------------ ------------------ ------------------
Total Investments 136,899 147,412 143,915
Cash 1,540 1,030 6,060
Accrued investment income 2,203 2,453 2,588
Receivables from agents, net of allowance
for doubtful accounts 12,998 20,503 20,915
Deferred policy acquisition costs 13,509 19,165 84,771
Leasehold improvements and equipment, at
cost, net of accumulated depreciation and
amortization 1,653 1,141 1,327
Due from reinsurers 1,780 3,219 2,877
Commissions receivable 2,589 1,389 3,477
Deferred debt costs, net of accumulated
amortization 3,239 4,046 4,438
Other assets 2,682 2,498 6,756
------------------ ------------------ ------------------
Total Assets $ 179,092 $ 202,856 $ 277,124
================== ================== ==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
WESTBRIDGE CAPITAL CORP.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' (DEFICIT) EQUITY
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1998 1997 1997
------------------ ------------------ ------------------
(unaudited) (audited) (unaudited)
------------------ ------------------ ------------------
<S> <C> <C> <C>
Liabilities:
Policy liabilities and accruals:
Future policy benefits $ 54,120 $ 55,811 $ 55,985
Claims 45,522 51,784 53,090
------------------ ------------------ ------------------
99,642 107,595 109,075
Accounts payable and accruals 3,626 3,846 6,180
Commission advances payable 1,774 4,702 6,306
Accrued dividends and interest payable 10,840 4,972 2,907
Other liabilities 7,268 5,612 6,002
Deferred income taxes, net - - -
Notes payable 7,618 13,100 13,110
Senior subordinated notes, net of unamortized
discount, due 2002 19,523 19,447 19,422
Convertible subordinated notes, due 2004 70,000 70,000 70,000
------------------ ------------------ ------------------
Total Liabilities 220,291 229,274 233,002
------------------ ------------------ ------------------
Redeemable Series A Preferred Stock 11,935 19,000 19,000
------------------ ------------------ ------------------
Stockholders' (Deficit) Equity:
Common stock ($.10 par value, 30,000,000
shares authorized; 7,035,793, 6,195,439
and 6,224,039 shares issued) 703 620 622
Capital in excess of par value 37,641 30,843 31,098
Accumulated other comprehensive income,
net of tax 5,594 4,649 2,972
Retained deficit (97,072) (81,530) (9,400)
------------------ ------------------ ------------------
(53,134) (45,418) 25,292
Less - Aggregate of shares held in treasury and
investment by affiliate in Westbridge Capital Corp.
common stock (28,600 at September 30, 1997),
at cost - - (170)
------------------ ------------------ ------------------
Total Stockholders' (Deficit) Equity (53,134) (45,418) 25,122
------------------ ------------------ ------------------
Total Liabilities, Redeemable Preferred
Stock and Stockholders' (Deficit) Equity $ 179,092 $ 202,856 $ 277,124
================== ================== ==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
26
WESTBRIDGE CAPITAL CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ --------------------------------
1998 1997 1998 1997
------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Premiums:
First-year $ 4,289 $ 8,618 $ 15,979 $ 30,447
Renewal 28,989 31,832 89,989 91,845
------------- ------------- ------------- ---------------
33,278 40,450 105,968 122,292
Net investment income 2,929 3,207 9,287 7,963
Fee and service income 4,085 4,525 12,184 12,133
Net realized gain on investments 1,576 223 2,105 355
------------- ------------- ------------- ---------------
41,868 48,405 129,544 142,743
------------- ------------- ------------- ---------------
Benefits, claims and expenses:
Benefits and claims 23,696 52,544 77,544 109,026
Amortization of deferred policy
acquisition costs 1,448 9,292 3,396 22,622
Commissions 6,884 4,993 25,083 11,960
General and administrative expenses 6,833 8,667 20,733 23,935
Recognition of premium deficiency 4,948 - 4,948 -
Reorganization expense 1,606 - 3,706 3,100
Taxes, licenses and fees 1,234 1,533 3,965 4,615
Interest expense 1,882 2,096 6,186 5,022
------------- ------------- ------------- ---------------
48,531 79,125 145,561 180,280
------------- ------------- ------------- ---------------
Loss before income taxes (6,663) (30,720) (16,017) (37,537)
Provision for (benefit from) income taxes 244 (10,752) (995) (13,138)
------------- ------------- ------------- ---------------
Loss before extraordinary item (6,907) (19,968) (15,022) (24,399)
Extraordinary loss from early
extinguishment of debt, net of tax - - - (1,007)
------------- ------------- ------------- ---------------
Net loss $ (6,907) $ (19,968) $ (15,022) $ (25,406)
============= ============= ============= ===============
Preferred stock dividends 111 392 520 1,180
------------- ------------- ------------- ---------------
Loss applicable to common
stockholders $ (7,018) $ (20,360) $ (15,542) $ (26,586)
============= ============= ============= ===============
Earnings per common share:
Basic:
Loss before extraordinary item $ (1.01) $ (3.29) $ (2.39) $ (4.18)
Extraordinary item - - - (.16)
------------- ------------- ------------- ---------------
Net loss $ (1.01) $ (3.29) $ (2.39) $ (4.34)
============= ============= ============= ===============
Diluted:
Loss before extraordinary item $ (1.01) $ (3.29) $ (2.39) $ (4.18)
Extraordinary item - - - (.16)
------------- ------------- ------------- ---------------
Net loss $ (1.01) $ (3.29) $ (2.39) $ (4.34)
============= ============= ============= ===============
Weighted average shares outstanding:
Basic 6,938 6,189 6,507 6,125
============= ============= ============= ===============
Diluted 6,938 6,189 6,507 6,125
============= ============= ============= ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
WESTBRIDGE CAPITAL CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -----------------------------
1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Loss applicable to common stockholders $ (7,018) $ (20,360) $ (15,542) $ (26,586)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Recognition of premium deficiency 4,948 - 4,948 -
Amortization of deferred policy acquisition costs 1,448 9,292 3,396 22,622
Depreciation expense 121 119 336 356
Decrease (increase) in receivables from agents 2,353 718 7,505 (2,604)
Addition to deferred policy acquisition costs (1,425) (6,586) (2,688) (23,522)
Decrease (increase) in due from reinsurers 129 1,154 1,439 (1,421)
(Increase) decrease in commissions receivable (372) 2,079 (1,200) (71)
Decrease (increase) in deferred debt costs 171 70 807 (1,622)
Decrease (increase) in other assets 333 (1,991) (184) (2,318)
(Decrease) increase in policy liabilities and (4,562) 22,080 (7,953) 15,685
accruals
Increase (decrease) in accounts payable and accruals 520 68 (220) 4,373
(Decrease) increase in commission advances payable (1,603) (2,911) (2,928) 1,938
Increase in accrued dividends and interest payable 1,763 1,302 5,868 2,218
Increase (decrease) in other liabilities 115 (2,328) 1,656 4,302
Decrease in deferred income taxes, net - (8,735) - (10,299)
Other, net 15 291 (298) (503)
------------- ------------ ------------ ------------
Net Cash Used For Operating Activities (3,064) (5,738) (5,058) (17,452)
------------- ------------ ------------ ------------
Cash Flows From Investing Activities:
Proceeds from investments sold:
Fixed maturities, called or matured 1,538 6,144 6,664 8,905
Fixed maturities, sold 671 2,814 12,014 15,822
Short-term investments, sold or matured 2,833 - 4,138 9,740
Other investments, sold or matured 1,015 14 1,646 367
Cost of investments acquired (2,135) (13,258) (12,564) (73,558)
Additions to leasehold improvements and equipment,
net of retirements (85) (175) (848) (372)
------------- ------------ ------------ ------------
Net Cash Provided By (Used For) Investing Activities 3,837 (4,461) 11,050 (39,096)
------------- ------------ ------------ ------------
Cash Flows From Financing Activities:
Issuance of notes payable 1,256 6,019 4,230 15,102
Repayment of notes payable (2,690) (3,273) (9,712) (23,202)
Issuance of convertible notes - - - 70,000
Issuance of common stock - 51 - 140
Repurchase and cancellation of common stock - (299) - (445)
------------- ------------ ------------ ------------
Net Cash (Used For) Provided By Financing Activities (1,434) 2,498 (5,482) 61,595
------------- ------------ ------------ ------------
Decrease (increase) In Cash During Period (661) (7,701) 510 5,047
Cash at Beginning Of Period 2,201 13,761 1,030 1,013
------------- ------------ ------------ ------------
Cash at End Of Period $ 1,540 $ 6,060 $ 1,540 $ 6,060
============= ============ ============ ============
Supplemental Disclosures Of Cash Flow Information:
Cash paid during the periods for:
Interest $ 137 $ 880 $ 664 $ 3,001
Income taxes $ 300 $ 70 $ 793 $ 118
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
WESTBRIDGE CAPITAL CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
During the three months ended September 30, 1998, one thousand three hundred and
twenty-five (1,325) shares of the Company's Series A Convertible Redeemable
Exchangeable Preferred Stock ("Series A Preferred Stock") were converted into
shares of Westbridge's common stock, par value $.10 per share ("Common Stock").
The converted shares of Series A Preferred Stock had an aggregate liquidation
preference of $1,325,000 and were converted into 157,551 shares of Common Stock.
During the nine months ended September 30, 1998, seven thousand and sixty-five
(7,065) shares of the Company's Series A Preferred Stock were converted into
shares of Westbridge's Common Stock. The converted shares of Series A Preferred
Stock had an aggregate liquidation preference of $7,065,000 and were converted
into 840,071 shares of Common Stock
The accompanying notes are an integral part of these financial statements.
<PAGE>
WESTBRIDGE CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - FINANCIAL STATEMENTS
General. The accompanying unaudited consolidated financial statements for
Westbridge Capital Corp. ("Westbridge" and, together with its consolidated
subsidiaries, the "Company") have been prepared in accordance with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X and do not include
all of the information and footnotes required by generally accepted accounting
principles ("GAAP") for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Certain reclassifications
have been made to 1997 amounts in order to conform to 1998 financial statement
presentation.
Operating results for the nine months ended September 30, 1998 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998. These financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997, the
Company's Quarterly Reports on Form 10-Q for the three months ended March 31,
1998 and June 30, 1998, and the Company's periodic filings on Form 8-K during
1998.
Recognition of Premium Deficiency. During the nine months ended September 30,
1998, the Company continued to experience adverse loss ratios and declining
persistency on its old Medical Expense and Medicare Supplement products,
although the loss ratios for the third quarter of 1998 reflected an improvement
over the first and second quarters of 1998. As a result of these factors, the
Company undertook a revaluation of the recoverability of Deferred Policy
Acquisition Costs ("DPAC") in the third quarter. Based on the results of this
review, the Company determined that a premium deficiency existed and recorded a
non-cash charge to expense of approximately $5.0 million for the quarter and
nine months ended September 30, 1998. This adjustment had no impact on the
Company's cash position or on the statutory capital and surplus of the Insurance
Subsidiaries (as defined herein) as of September 30, 1998.
Generally accepted accounting principles require the immediate recognition of a
premium deficiency by charging the unamortized DPAC to expense. A premium
deficiency occurs when the projected present value of future premiums associated
with these policies will not be adequate to cover the projected present value of
future payments for benefits and related amortization of DPAC. The combination
of adverse claim loss ratios and declining policy persistency during the nine
months ended September 30, 1998 affected the future profit margins available to
absorb amortization of DPAC.
NOTE 2 - COMMITMENTS AND CONTINGENCIES
In the normal course of business operations, National Foundation Life Insurance
Company ("NFL"), National Financial Insurance Company ("NFIC"), American
Insurance Company of Texas ("AICT"), and Freedom Life Insurance Company of
America ("FLICA"), Westbridge's primary insurance subsidiaries ("Insurance
Subsidiaries"), are routinely involved in various claims disputes and other
business related disputes. In the opinion of management, the disposition of
these matters will have no material adverse effect on the Company's consolidated
financial position.
NOTE 3 - RECENT DEVELOPMENTS
On September 16, 1998 (the "Petition Date"), the Company commenced a
reorganization case (the "Chapter 11 Case") by filing a voluntary petition for
relief under Chapter 11, Title 11 of the United States Code in the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"). In
addition, on September 16, 1998, the Company filed a disclosure statement (as
amended, the "Disclosure Statement") and a proposed plan of reorganization (as
amended, the "Plan") with the Bankruptcy Court. The Disclosure Statement and the
Plan were subsequently amended on October 28, 1998. The filing of the Disclosure
Statement and Plan culminated months of negotiations between the Company and an
ad hoc committee (the "Ad Hoc Committee") of holders of its 11% Senior
Subordinated Notes (the "Senior Notes") and 7-1/2% Convertible Subordinated
Notes (the "Convertible Notes"). On October 30, 1998, the Company's Disclosure
Statement was approved by entry of an order by the Bankruptcy Court. The Company
will be distributing its Disclosure Statement and Plan, along with ballots to
vote to accept or reject the Plan and certain other materials approved by the
Bankruptcy Court, to the holders of allowed claims and equity security
interests. A summary of the key terms of the Plan is provided in "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Recent Developments" contained in this Report.
NOTE 4 - EARNINGS PER SHARE
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share," ("SFAS
128") that revises the standards for computing earnings per share previously
found in APB Opinion No. 15, "Earnings Per Share." SFAS 128 established two
measures of earnings per share: "basic earnings per share" and "diluted earnings
per share." Basic earnings per share is computed by dividing income available to
common shareholders by the weighted average number of common shares outstanding
during the period. Diluted earnings per share reflect the potential dilution
that could occur if securities or other contracts to issue common stock were
converted or exercised. SFAS 128 requires dual presentation of basic and diluted
earnings per share on the face of the income statement for all entities with
potential dilutive securities outstanding. Diluted weighted average shares
exclude all convertible securities for loss periods.
The Company adopted SFAS 128 for the year ended December 31, 1997 and has
restated the earnings per share computations for the three and nine months ended
September 30, 1997 to conform to this pronouncement.
NOTE 5 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
On January 1, 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income," ("SFAS 130"). This pronouncement requires comprehensive income (loss)
and its components to be reported either in a separate financial statement,
combined and included with the statement of income or included in a statement of
changes in stockholders' equity. Comprehensive income (loss) equals the total of
net income (loss) and all other non-owner changes in equity. For the Company,
comprehensive income (loss) will equal its reported consolidated net income
(loss) plus the change in the unrealized appreciation (depreciation) of
marketable securities from the previously reported period. Currently, this
accumulated other comprehensive income, net of tax, is reported in the Company's
Consolidated Balance Sheets as a separate component of stockholders' equity.
Comprehensive income (loss) is as follows, in thousands:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------- -------------------------------
1998 1997 1998 1997
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Loss applicable to common shareholders $ (7,018) $ (20,360) $ (15,542) $ (26,586)
Other comprehensive income (loss):
Unrealized holding gains arising during
period, net of tax 1,120 210 2,193 2,146
Less: reclassification adjustment for
gains included in net income, net
of tax (1,024) (145) (1,248) (231)
------------- -------------- ------------- --------------
Comprehensive loss, net of tax $ (6,922) $ (20,295) $ (14,597) $ (24,671)
============= ============== ============= ==============
</TABLE>
Also in June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information," ("SFAS 131"). This pronouncement, also
effective for calendar year 1998 financial statements, requires companies to
report segment information consistent with the way executive management of an
entity disaggregates its operations internally to assess performance and make
decisions regarding resource allocations. Among the information to be disclosed,
SFAS 131 requires an entity to report a measure of segment profit or loss,
certain specific revenue and expense items and segment assets. SFAS 131 also
requires reconciliations of total segment revenues, total segment profit or loss
and total segment assets to the corresponding amounts shown in the entity's
consolidated financial statements. The adoption of SFAS 131 in 1998 will not
change the number or designation of the reportable segments currently disclosed
in the Company's Consolidated Financial Statements.
In December 1997, the Accounting Standards Executive Committee issued Statement
of Position ("SOP") 97-3, "Accounting by Insurance and Other Enterprises for
Insurance-Related Assessments," which provides guidance on accounting for
insurance-related assessments. The Company is required to adopt SOP 97-3
effective January 1, 1999. Previously issued financial statements should not be
restated unless the SOP is adopted prior to the effective date and during an
interim period. The adoption of SOP 97-3 is not expected to have a material
impact on the Company's results of operations, liquidity or financial position.
<PAGE>
WESTBRIDGE CAPITAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RECENT DEVELOPMENTS
Voluntary Petition for Relief Under Chapter 11 of the U.S. Bankruptcy
On September 16, 1998 (the "Petition Date"), the Company commenced a
reorganization case (the "Chapter 11 Case") by filing a voluntary petition for
relief under Chapter 11, Title 11 of the United States Code in the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"). In
addition, on September 16, 1998, the Company filed a disclosure statement (as
amended, the "Disclosure Statement") and a proposed plan of reorganization (as
amended, the "Plan") with the Bankruptcy Court. The Disclosure Statement and the
Plan were subsequently amended on October 28, 1998. The filing of the Disclosure
Statement and Plan culminated months of negotiations between the Company and an
ad hoc committee (the "Ad Hoc Committee") of holders of its 11% Senior
Subordinated Notes (the "Senior Notes") and 7-1/2% Convertible Subordinated
Notes (the "Convertible Notes"). On October 30, 1998, the Company's Disclosure
Statement was approved by entry of an order by the Bankruptcy Court. The Company
will be distributing its Disclosure Statement and Plan, along with ballots to
vote to accept or reject the Plan and certain other materials approved by the
Bankruptcy Court, to the holders of allowed claims and equity security
interests.
Key Terms of the Plan. The following summary of the Plan omits certain
information set forth in the Plan. Any statements contained herein concerning
the Plan are not necessarily complete, and in each such instance reference is
made to the Plan, a copy of which is filed as an exhibit to this Report. Each
such statement is qualified in its entirety by such reference. On October 30,
1998, the Bankruptcy Court determined that the Disclosure Statement contains
adequate information to permit a creditor or equity security holder to make an
informed decision about the Plan. The Plan will now be presented to Westbridge's
impaired creditors and equity security holders for acceptance or rejection.
Westbridge's Plan provides for the recapitalization of existing debt and equity
interests in Westbridge and the issuance of new equity securities and warrants.
Key terms of the Plan include the following:
* Realignment and deleveraging of Westbridge's current capital structure.
* The distribution of new convertible preferred stock to Credit Suisse First
Boston ("CSFB") in exchange for its Senior Notes.
* Cash payment in full of the Senior Notes held by creditors other than CSFB.
* The distribution of new common stock and warrants to (a) Westbridge's
general unsecured creditors, (b) holders of Westbridge's Convertible Notes,
(c) holders of Westbridge's Series A Preferred Stock, and (d) holders of
Westbridge's old common stock.
* The settlement of a putative class action brought on behalf of certain
purchasers and sellers of Westbridge's Convertible Notes and old common
stock during the period October 31, 1996 through October 31, 1997, which is
currently pending in the United States District Court for the Northern
District of Texas.
* A Stock Option Program for management to purchase, in the aggregate, up to
10% of the shares of new common stock of the Company on a fully diluted
basis, thereby providing incentives to return the Company to profitability
and to maximize stakeholder value.
* A Marketing Agent Stock Option Program for the Company's marketing agents
to purchase, in the aggregate, up to 3% of the shares of new common stock
of the Company on a fully diluted basis, thereby providing incentives to
generate future sales of the Company's new insurance products.
In order to provide Westbridge with sufficient funds to make the cash
distributions which are expected to be paid to the holders of its Senior Notes
under the Company's Plan, the Company has entered into a Stock Purchase
Agreement with CSFB, a significant noteholder, pursuant to which CSFB has
agreed, subject to the conditions contained therein, to purchase all of the
shares of the new convertible preferred stock which are not otherwise
distributed under the Plan. Under the terms of the Plan, it is expected that
CSFB will become the largest shareholder of reorganized Westbridge.
Emergence from the Chapter 11 Case. In order for the Company to reorganize and
emerge from Chapter 11 protection, the Bankruptcy Court must confirm a plan of
reorganization. The Company will be distributing its Disclosure Statement and
Plan, along with ballots to vote to accept or reject the Plan and certain other
materials approved by the Bankruptcy Court, to the holders of all classes of
impaired creditors and equity security interests. The Bankruptcy Court has
scheduled a hearing to confirm the Plan on December 17, 1998. Among other
things, to confirm a plan the Bankruptcy Court is generally required to find
that (a) each impaired class of creditors and equity security holders will,
pursuant to the Plan, receive at least as much as the class would have received
in liquidation of the Company, (b) each impaired class of creditors and equity
security holders has accepted the Plan by the requisite vote, and (c)
confirmation of the Plan is not likely to be followed by the liquidation or need
for further financial restructuring of the Company. If any impaired class of
creditors and equity security holders does not accept a plan and assuming that
all other requirements of the Bankruptcy Code are met, the plan proponents may
invoke the so-called "cram-down" provisions of the Bankruptcy Code, whereby the
Bankruptcy Court may confirm a plan notwithstanding the non-acceptance of the
plan by an impaired class of creditors and equity security holders if, among
other things, the plan is fair and equitable and does not discriminate unfairly
with respect to each impaired class of claims or interests that has not accepted
the plan. The Official Creditors' Committee has expressed support for the Plan.
The effectiveness of the Plan is subject to various conditions precedent.
Determination of Premium Deficiency
During the nine months ended September 30, 1998, the Company continued to
experience adverse loss ratios and declining persistency on its old Medical
Expense and Medicare Supplement products, although the loss ratios for the third
quarter of 1998 reflected an improvement over the first and second quarters of
1998. As a result of these factors, the Company undertook a revaluation of the
recoverability of Deferred Policy Acquisition Costs ("DPAC") in the third
quarter. Based on the results of this review, the Company determined that a
premium deficiency existed and recorded a non-cash charge to expense of
approximately $5.0 million for the quarter and nine months ended September 30,
1998. This adjustment had no impact on the Company's cash position or on the
statutory capital and surplus of the Insurance Subsidiaries as of September 30,
1998.
Generally accepted accounting principles require the immediate recognition of a
premium deficiency by charging the unamortized DPAC to expense. A premium
deficiency occurs when the projected present value of future premiums associated
with these policies will not be adequate to cover the projected present value of
future payments for benefits and related amortization of DPAC. The combination
of adverse claim loss ratios and declining policy persistency during the nine
months ended September 30, 1998 affected the future profit margins available to
absorb amortization of DPAC.
The Insurance Subsidiaries will continue to incur operating losses on these old
lines of business until such time as the necessary rate increases can be fully
implemented. There can be no assurance that the full extent of such rate
increase requests will be approved or that the impact of these rate increases
will result in profitability on such old lines.
FORWARD-LOOKING STATEMENTS:
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. The preceding statements and certain other
statements contained in the Notes to the Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations are forward-looking statements. These forward-looking statements are
based on the intent, belief or current expectations of the Company and members
of its senior management team with respect to the timing of, completion of and
scope of the current restructuring, proposed reorganization plan, and strategic
business plan as well as the assumptions upon which such statements are based.
While the Company believes that its expectations are based on reasonable
assumptions within the bounds of its knowledge of its business and operations,
prospective investors are cautioned that any such forward-looking statements are
not guarantees of future performance, and involve risks and uncertainties, and
that actual results may differ materially from those contemplated by such
forward-looking statements. Important factors known to management that could
cause actual results to differ materially from those contemplated by the
forward-looking statements in this Report include, but are not limited to, the
effect of economic and market conditions, further adverse developments with
respect to the Company's liquidity position or operations of the Company's
various businesses, actions that may be taken by insurance regulatory
authorities, unexpected developments which may occur in the Chapter 11 case,
adverse developments in the timing or results of the Company's current strategic
business plan (including the time line to emerge from Chapter 11), the
difficulty in controlling health care costs and integrating new operations, the
ability of the Company to realize anticipated general and administrative expense
savings and overhead reductions presently contemplated, the ability of the
Company to return the Company's operations to profitability, the level and
nature of any restructuring charges, and the possible negative effects of
prospective health care reform. Additional factors that would cause actual
results to differ materially from those contemplated within this report can also
be found in the Company's reports to the Securities and Exchange Commission
("SEC") on Form 8-K during 1998, Form 10-Q for the quarters ended June 30, 1998
and March 31, 1998, and the Company's Form 10-K for the year ended December 31,
1997. Subsequent written or oral statements attributable to the Company or
persons acting on its behalf are expressly qualified in their entirety by the
cautionary statements in this Quarterly Report and those in the Company's
reports previously filed with the SEC. Copies of these filings may be obtained
by contacting the Company or the SEC.
BUSINESS OVERVIEW
The Company derives its revenue primarily from premiums from its insurance
products and, to a significantly lesser extent, from fee and service income,
income earned on invested assets, and gains on the sales or redemptions of
invested assets. The Company's primary expenses include benefits and claims in
connection with its insurance products, amortization of DPAC, commissions paid
on policy renewals, general and administrative expenses associated with policy
and claims administration, taxes, licenses and fees and interest on its
indebtedness under the Credit Agreement. In addition to the foregoing expenses
and prior to the filing of the Chapter 11 Case, Westbridge was obligated to pay
interest on its Senior Notes and Convertible Notes, and dividends on its Series
A Preferred Stock if, and when, declared by the Board of Directors.
Fee and service income is generated from (i) commissions received by the Company
for sales of unaffiliated managed care products underwritten primarily by HMOs
and other managed care organizations, (ii) telemarketing services, and (iii)
printing services.
Benefits and claims are comprised of (i) claims paid, (ii) changes in claim
reserves for claims incurred (whether or not reported), and (iii) changes in
policy benefit reserves based on actuarial assumptions of future benefit
obligations not yet incurred on policies in force.
Under generally accepted accounting principles, a DPAC asset is established to
properly match the costs of writing new business against the expected future
revenues or gross profits from the policies. These costs, which are capitalized
and amortized, consist of first-year commissions in excess of renewal
commissions and certain home office expenses related to selling, policy issue,
and underwriting. The DPAC for accident and health policies and traditional life
policies are amortized over future premium revenues of the business to which the
costs are related. The rate of amortization depends on the expected pattern of
future premium revenues for the block of policies. The scheduled amortization
for a block of policies is established when the policies are issued. However,
the actual amortization of DPAC will reflect the actual persistency and
profitability of the business. For example, if actual policy terminations are
higher than expected or if future losses are anticipated, DPAC could be
amortized more rapidly than originally scheduled or written-off, which would
reduce earnings in the applicable period. See "Results of Operations -
Amortization of DPAC". Also included in DPAC is the cost of insurance purchased
relating to acquired blocks of business.
Acquisitions. Since 1992, the Company has from time to time acquired seasoned
blocks of business to supplement its revenue. These acquisitions included blocks
of insurance policies from American Integrity Insurance Company ("AII"), Life
and Health Insurance Company of America ("LHI"), Dixie National Life Insurance
Company ("DNL"), NFIC, AICT and FLICA.
Premiums. The following table shows the premiums, in thousands, received by the
Company as a result of internal sales and acquisitions. Certain
reclassifications have been made to 1997 amounts in order to conform to 1998
presentation.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -- -------------- ------------- -- --------------
1998 1997 1998 1997
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Company-Issued Policies:
First-year premiums $ 4,183 $ 8,569 $ 15,623 $ 29,860
Renewal premiums 19,426 20,964 59,879 57,759
------------- -------------- ------------- --------------
Total Company-issued policy premiums 23,609 29,533 75,502 87,619
------------- -------------- ------------- --------------
Acquired Policies:
AII 1,522 1,772 4,656 5,464
LHI 329 377 1,021 1,171
DNL 635 706 2,013 2,140
NFIC and AICT 4,608 5,026 14,306 15,935
FLICA and others 2,575 3,036 8,470 9,963
------------- -------------- ------------- --------------
Total acquired policy premiums 9,669 10,917 30,466 34,673
------------- -------------- ------------- --------------
Total Premiums $ 33,278 $ 40,450 $ 105,968 $ 122,292
============= ============== ============= ==============
</TABLE>
Generally, as a result of acquisitions of policies in force and the transfer of
assets and liabilities relating thereto, the Company receives higher revenues in
the form of premiums and net investment income and experiences higher expenses
in the form of benefits and claims, amortization of DPAC, commissions and
general and administrative expenses. The Company expects that premiums, net
investment income, net realized gains on investments, benefits and claims,
amortization of DPAC, commissions and general and administrative expenses
attributable to these acquired policies will continue to decline over time as
the acquired policies lapse.
YEAR 2000 ISSUES
The Company has initiated an enterprise-wide program designed to determine
whether all of its Information Technology ("I/T"), such as computer systems and
related software applications, and non-I/T systems, such as facsimile machines
and copy machines, will function properly as the millennium (the "Year 2000")
approaches. The Year 2000 problem is pervasive and complex as virtually every
computer operation will be affected in some way by the rollover of the two-digit
year value to 00. The issue is whether computer systems will properly recognize
date-sensitive information when the year changes to 2000. Systems that do not
properly recognize such information could generate erroneous data or cause a
system to fail.
The Company is highly reliant upon computer systems and software, as are many of
the Company's principal businesses with which it interacts. The Company's
ability to service its policyholders and agents is dependent upon accurate and
timely transaction reporting. Transaction reporting in turn is dependent upon
the Company's highly complex interdependent computer hardware, software,
telecommunications and desktop applications, and the information obtained from
its critical business partners.
The Company's overall Year 2000 remediation effort has focused on preparing the
computer systems, infrastructure and facilities for the Year 2000. The following
phases encompass the Year 2000 plan: (i) assessment of all business critical
systems, including I/T and non-I/T systems, (ii) remediation or upgrading of
business critical systems, (iii) testing of remediated and updated systems, (iv)
implementation of remediated and updated systems, and (v) contingency planning.
The Company has engaged certain outside vendors and dedicated certain employees
on a full time basis to help in the full array of its Year 2000 efforts. This
includes system assessment and monitoring advice, actual code remediation,
communication and consultation with critical business partners and testing
resources.
Under the Company's enterprise-wide remediation program, the most effective I/T
systems solution will be to purchase a new, more modern, Year 2000 compliant
system. This replacement effort is well underway, on schedule, and targeted for
implementation in the third quarter of 1999.
The cost of the I/T systems replacement will be capitalized as an asset and
amortized over the expected useful life of the system. The cost to remediate the
existing I/T systems will be charged to operating expense as incurred.
The Company has also completed the assessment of its non-I/T systems and is
currently remediating and upgrading those systems. This component of the
enterprise-wide remediation program is on schedule and is targeted for
completion in the fourth quarter of 1999. The non-I/T systems have been
prioritized to remediate critical systems early in 1999 and non-critical systems
later in the year.
Another significant component of the Company's enterprise-wide remediation
effort is to determine whether critical business partners and vendors are Year
2000 compliant. The assessment and testing of the Year 2000 readiness of these
critical business partners and vendors have been integrated with the Company's
I/T and non-I/T Year 2000 system strategies. As a part of this process, the
Company has written letters and corresponded with its outside vendors and
critical business partners to determine whether they are also prepared for the
Year 2000.
The Company's contingency plan is to make the existing I/T systems, which are to
be replaced, Year 2000 compliant. This effort is currently in the remediation
and testing phases of the project and is scheduled to be completed during the
second quarter of 1999. The Company's contingency plan has identified and
prioritized the Year 2000 exposures within the existing I/T systems. By
remediating these I/T exposures on a priority basis, the Company is working to
limit its Year 2000 contingency risk to lower priority I/T exposures in the
event that the Company's most reasonably likely worst case Year 2000 scenario
were to occur.
The most reasonably likely worst case Year 2000 scenario would be that certain
functions within the Company's existing I/T systems would incorrectly process
policy information such as policy paid-to dates, premium billings, commissions
and claims. Under this scenario, the Company anticipates these issues would be
both isolated and temporary.
The Company expects to incur internal staff costs as well as consulting and
other expenses of approximately $4.0 to $5.0 million related to computer
systems, infrastructure, and facilities enhancements necessary to prepare for
the Year 2000. For the nine months ending September 30, 1998, the Company has
incurred approximately $0.3 million in expenses associated with this effort.
The Company expects its Year 2000 program to be completed in a timely manner;
however, the Year 2000 computer problem creates risk for the Company from
unforeseen problems in its own computer systems and from third parties with whom
the Company deals on financial transactions. Such potential, unforeseen problems
in the Company's and/or third parties' computer systems could have a material
impact on the Company's ability to conduct its business.
RESULTS OF OPERATIONS
Three Months and Nine Months Ended September 30, 1998 Compared With Same Periods
Ended September 30, 1997
Premiums
Three months ended September 30, 1998. Premiums decreased $7.2 million, or
17.8%, from $40.5 million to $33.3 million as a result of declining persistency
of inforce policies and a reduction in the Company's marketing results. This
decrease resulted from a decrease in first-year premiums from Company-issued
policies of $4.4 million, or 51.2%, a decrease in renewal premiums from
Company-issued policies of $1.5 million, or 7.2%, and a decrease in renewal
premiums from acquired policies of $1.3 million, or 11.9%.
The decrease in first-year premiums from Company-issued policies was
attributable to a decrease in Medical Expense premiums of $2.6 million, or
41.9%, a decrease in Medicare Supplement premiums of $1.5 million, or 88.2%, and
a decrease in Specified Disease and other premiums of $0.3 million, or 42.9%.
The decrease in renewal premiums from Company-issued policies was attributable
to a decrease in Medicare Supplement premiums of $1.3 million, or 18.1%, a
decrease in Medical Expense premiums of $0.4 million, or 3.9%, a decrease in
other premiums of $0.2 million, and was offset by an increase in Specified
Disease premiums of $0.4 million, or 12.5%.
The decrease in renewal premiums from acquired policies was attributable to a
decrease of $0.5 million, or 18.5%, from the policies acquired from FLICA, a
decrease of $0.3 million, or 6.0%, from the policies acquired in the NFIC and
AICT acquisition, and a decrease of $0.5 million, or 20.0%, from the policies
acquired from AII and other acquisitions.
Nine months ended September 30, 1998. Premiums decreased $16.3 million, or
13.3%, from $122.3 million to $106.0 million as a result of declining
persistency of inforce policies and a reduction in the Company's marketing
results. This decrease resulted from a decrease in first-year premiums from
Company-issued policies of $14.3 million, or 47.8%, a decrease in renewal
premiums from acquired policies of $3.9 million, or 11.5%, and a decrease in
first-year premiums from acquired policies of $0.2 million, or 33.3%, and was
offset by an increase in renewal premiums from Company-issued policies of $2.1
million, or 3.6%.
The decrease in first-year premiums from Company-issued policies was
attributable to a decrease in Medical Expense premiums of $7.8 million, or
37.5%, a decrease in Medicare Supplement premiums of $6.2 million, or 81.6%, and
a decrease in other premiums of $0.4 million, and was offset by an increase in
Specified Disease premiums of $0.1 million, or 9.1%.
The decrease in renewal premiums from acquired policies was attributable to a
decrease of $1.6 million, or 10.1%, from the policies acquired in the NFIC and
AICT acquisition, a decrease of $1.2 million, or 14.0%, from the policies
acquired from FLICA, and a decrease of $1.1 million, or 11.6%, from the policies
acquired from AII and other acquisitions.
The decrease in first-year premiums from acquired policies was attributable to a
decrease of $0.2 million, or 40.0%, from the policies acquired from FLICA.
The increase in renewal premiums from Company-issued policies was attributable
to an increase in Medical Expense premiums of $2.5 million, or 9.1%, and an
increase in Specified Disease premiums of $0.6 million, or 6.4%, and was offset
by a decrease in Medicare Supplement premiums of $1.0 million, or 5.0%.
Net Investment Income. Net investment income decreased $0.3 million, or 9.4%,
from $3.2 million to $2.9 million for the three months ended September 30, 1998.
The decrease in net investment income is due to a lower average investment base
during the three months ended September 30, 1998 as compared to the same period
a year ago. Net investment income increased $1.3 million, or 16.3%, from $8.0
million to $9.3 million for the nine months ended September 30, 1998. The
increase was attributable to a higher average investment base resulting from the
net proceeds received from the Company's sale of its Convertible Notes during
the second quarter of 1997 and from higher average portfolio yields.
Fee and Service Income. Fee and service income decreased $0.4 million, or 8.9%,
from $4.5 million to $4.1 million for the three months ended September 30, 1998.
The Company's sales of unaffiliated managed care products were lower in the
third quarter of 1998 than in the same period in the prior year. Fee and service
income increased $0.1 million, or 0.8%, from $12.1 million to $12.2 million for
the nine months ended September 30, 1998. This increase was primarily
attributable to commissions earned during the first quarter of 1998 on
unaffiliated managed care product sales.
Benefits and Claims. During the nine months ended September 30, 1998, the
Insurance Subsidiaries continued to experience adverse loss ratios and declining
persistency on certain old Medical Expense and Medicare Supplement products. The
Insurance Subsidiaries have developed new insurance products with stricter
underwriting procedures and lower agent commissions. In addition, the Insurance
Subsidiaries are implementing rate increases to the extent approved by state
regulatory authorities or offering higher deductible benefit options on certain
old lines of business in order to mitigate the effect of adverse claims
experience on such old lines. The Insurance Subsidiaries have also implemented a
policyholder retention program designed to mitigate the impact of declining
persistency on such old lines receiving rate increases. However, the Company
expects that the Insurance Subsidiaries will continue to incur operating losses
on these old lines of business until such time as the necessary rate increases
can be fully implemented. There can be no assurance that the full extent of such
rate increase requests will be approved or that the impact of these rate
increases will result in profitability on such old lines.
Three months ended September 30, 1998. Benefits and claims expense decreased
$28.9 million, or 54.9%, from $52.6 million to $23.7 million. This decrease was
attributable to a decrease in benefits and claims expense from Company-issued
and acquired policies of $23.5 million and $5.4 million, or 57.0% and 47.4%,
respectively.
The decrease in benefits and claims expense from Company-issued policies was
primarily attributable to a decrease in Medical Expense claims of $16.2 million,
or 59.6%, and a decrease in Medicare Supplement claims of $5.8 million, or
53.7%, and a decrease in Specified Disease and other claims of $1.5 million, or
48.4%.
The decrease in benefits and claims expense from acquired policies was primarily
attributable to a decrease of $3.3 million, or 52.4%, from the policies acquired
in the NFIC and AICT acquisition, a decrease of $1.0 million, or 76.9%, from the
policies acquired from LHI and DNL, a decrease of $0.4 million, or 28.6% from
the policies acquired from AII, and a decrease of $0.7 million, or 29.1%, from
the policies acquired from FLICA.
Nine months ended September 30, 1998. Benefits and claims expense decreased
$31.6 million, or 29.0%, from $109.1 million to $77.5 million. This decrease was
attributable to a decrease in benefits and claims expense from Company-issued
policies of $22.4 million, or 28.2%, and a decrease from acquired policies of
$9.2 million, or 31.1%.
The decrease in benefits and claims expense from Company-issued policies was
primarily attributable to a decrease in Medical Expense claims of $13.1 million,
or 27.3%, a decrease in Medicare Supplement claims of $8.7 million, or 34.5%,
and a decrease in Specified Disease claims of $0.6 million, or 9.8%.
The decrease in benefits and claims expense from acquired policies was primarily
attributable to a decrease of $6.3 million, or 37.5%, from the policies acquired
in the NFIC and AICT acquisition, a decrease of $1.5 million, or 28.8%, from the
policies acquired from FLICA, a decrease of $0.8 million, or 20.0%, from the
policies acquired from AII, and a decrease of $0.6 million, or 16.7%, from the
policies acquired from LHI and DNL.
Amortization of DPAC. The Company recognized a $5.0 million non-cash charge of
DPAC during the third quarter of 1998 (see "Recent Developments - Recognition of
Premium Deficiency") and recognized a $65.0 million non-cash charge of DPAC
during the fourth quarter of 1997. As a result, the Company is currently
recording commission expense on such old lines of business that would ordinarily
be deferred and amortized as a component of DPAC. For comparative purposes,
current period DPAC amortization is lower than prior periods and commission
expense is higher than prior periods.
Three months ended September 30, 1998. Amortization of DPAC decreased $7.9
million, or 84.9%, from $9.3 million to $1.4 million. This variance was
attributable to decreases of $5.4 million and $3.3 million, from Company-issued
Medical Expense products and Medicare Supplement products, respectively, and was
offset by increases of $0.6 million and $0.2 million in acquired policies and
Specified Disease products, respectively.
Nine months ended September 30, 1998. Amortization of DPAC decreased $19.2
million, or 85.0%, from $22.6 million to $3.4 million. This variance was
attributable to decreases of $13.1 million, $6.1 million and $0.2 million, from
Company-issued Medical Expense products, Company-issued Medicare Supplement
products, and acquired policies, respectively, and was offset by an increase of
$0.2 million from Specified Disease and other products.
Commissions
Three months ended September 30, 1998. Commissions increased $2.2 million, or
46.8%, from $4.7 million to $6.9 million. This variance was attributable to a
decrease in the commissions that would ordinarily be deferred and amortized as a
component of DPAC and an increase in the amounts that are being expensed as
commissions on a current basis. The increase was attributable to an increase in
commissions of $1.6 million on Company-issued policies and $0.6 million, or
26.1%, on sales of unaffiliated insurance products.
Nine months ended September 30, 1998. Commissions increased $13.2 million, or
110.9%, from $11.9 million to $25.1 million. This variance was attributable to a
decrease in the commissions that would ordinarily be deferred and amortized as a
component of DPAC and an increase in the amounts that are being expensed as
commissions on a current basis. The increase was attributable to an increase in
commissions of $12.2 million on Company-issued policies and $1.3 million, or
17.3%, on sales of unaffiliated insurance products, and was offset by a decrease
in commissions on sales of acquired policies of $0.3 million, or 8.1%.
General and Administrative Expenses. For the three months ending September 30,
1998, general and administrative expenses decreased $1.9 million, or 21.8%, from
$8.7 million to $6.8 million. For the nine months ending September 30, 1998,
general and administrative expenses decreased $3.2 million, or 13.4%, from $23.9
million to $20.7 million. These decreases were primarily attributable to
corporate overhead reduction initiatives that were implemented beginning in the
fourth quarter of 1997.
Recognition of Premium Deficiency. For the quarter ended September 30, 1998, the
Company recorded a non-cash charge to expense of approximately $5.0 million.
This adjustment has no impact on the Company's cash position at September 30,
1998 and does not impact the statutory capital and surplus of the Insurance
Subsidiaries. See "Recent Developments - Recognition of Premium Deficiency".
Reorganization Expense. The Company is responsible for paying the fees of
certain professional advisors in connection with the Chapter 11 Case. During the
three and nine months ended September 30, 1998, the Company incurred
approximately $1.6 million and $3.7 million, respectively, in expenses related
to these efforts. During the nine months ended September 30, 1997, the Company
incurred approximately $3.1 million in reorganization expenses related to an
internal reorganization of management.
Taxes, Licenses and Fees. Taxes, licenses and fees decreased $0.3 million, or
20.0% from $1.5 million to $1.2 million for the three months ended September 30,
1998. Taxes, licenses and fees decreased $0.6 million, or 13.0%, from $4.6
million to $4.0 million for the nine months ended September 30, 1998. These
decreases are attributable to the declining premium base for which premium taxes
are levied.
Interest Expense. Commensurate with the filing of the Chapter 11 Case, interest
on the Company's Convertible Notes ceases to accumulate. Accordingly,
pre-petition accrued interest totaled approximately $7.3 million on such
Convertible Notes as of September 30, 1998.
Under the terms of the Plan, interest on the Senior Notes continues to accrue
post-petition at the rate of 11% per annum. Accordingly, pre-petition accrued
interest totaled approximately $2.1 million and post-petition accrued interest
totaled approximately $0.1 million on such Senior Notes as of September 30,
1998.
Interest expense decreased $0.2 million, or 9.5%, from $2.1 million to $1.9
million for the three months ended September 30, 1998 due to the stay of
interest on the Convertible Notes as of the Petition Date. Interest expense
increased $1.2 million, or 24.0%, from $5.0 million to $6.2 million for the nine
months ended September 30, 1998 due to the accrued but unpaid interest expense
related to the issuance of $70.0 million aggregate principal of the Company's
Convertible Notes in the second quarter of 1997.
Provision for (benefit from) Income Taxes. During 1997, the benefit from income
taxes was calculated by applying the 35% statutory federal tax rate to the
Company's pre-tax income for the three and nine months ended September 30, 1997.
The change in the benefit from income taxes during 1998 is directly attributable
to the net loss recorded by the Company for the three and nine months ended
September 30, 1998. As a result, net operating loss carryforwards ("NOLs") were
generated that will be available for offset against taxable income generated in
future reporting periods. The Company has determined that it is more likely than
not that it will be unable to utilize all of these NOLs prior to the related
expiration dates. In this connection, the Company has recorded a valuation
allowance that significantly reduces its benefit from income taxes for the
current year from the amount that would have been derived by applying the 35%
statutory federal tax rate to the Company's pre-tax loss for the three and nine
months ended September 30, 1998.
Extraordinary Item. During the second quarter ended June 30, 1997, the Company
recognized an extraordinary loss on the early extinguishment of debt in the
amount of $1.0 million, net of taxes. This extraordinary charge was related to
the termination and recapture of a block of reinsured insurance policies and the
recognition of unamortized financing fees associated with the prepayment and
refinancing of the Company's revolving credit facility.
Preferred Stock Dividends. Commensurate with the filing of the Chapter 11 Case,
dividends on the Company's Series A Preferred Stock cease to accumulate.
Accordingly, the Company has recorded approximately $1.3 million of pre-petition
accrued dividends on such Series A Preferred Stock as of September 30, 1998.
During the three months ended September 30, 1998, one thousand three hundred
twenty-five (1,325) shares of the Company's Series A Preferred Stock were
converted into 157,551 shares of the Company's Common Stock. As a result of this
conversion of shares, the Company was no longer required to hold an accrual for
the unpaid, cumulative preferred stock dividends associated with the converted
shares.
The Company's charge for preferred stock dividends for the three months ended
September 30, 1998 represents the accumulated preferred dividends on 11,935
shares of Series A Preferred Stock from July 1, 1998 through the Petition Date
reduced by the accrual of dividends from October 31, 1997 to June 30, 1998 that
was foregone as a result of the share conversion during the quarter.
FINANCIAL CONDITION
Liquidity, Capital Resources and Statutory Capital and Surplus
Westbridge
Westbridge is an insurance holding company, the principal assets of which
consist of the capital stock of its operating subsidiaries and invested assets.
Accordingly, Westbridge's sources of funds are comprised of dividends from its
operating subsidiaries, advances and management fees from non-insurance company
subsidiaries, and tax contributions under a tax sharing agreement among
Westbridge and its subsidiaries. In addition, for the nine months ended
September 30, 1998, Westbridge made capital contributions totaling approximately
$5.5 million to its Insurance Subsidiaries. As of September 30, 1998, Westbridge
had approximately $10.5 million in unrestricted cash and invested assets.
Dividends paid by the Insurance Subsidiaries are determined by and subject to
the regulations of the insurance laws and practices of the insurance departments
of their respective state of domicile. NFL, a Delaware domestic company, may not
declare or pay dividends from any source other than earned surplus without the
Delaware Insurance Commissioner's approval. The Delaware Insurance Code defines
earned surplus as the amount equal to the unassigned funds as set forth in NFL's
most recent statutory annual statement including surplus arising from unrealized
gains or revaluation of assets. Delaware life insurance companies may generally
pay ordinary dividends or make distributions of cash or other property within
any twelve month period with a fair market value equal to or less than the
greater of 10% of surplus as regards policyholders as of the preceding December
31 or the net gain from operations for the twelve month period ending on the
preceding December 31. During 1998, NFL is precluded from paying dividends
without the prior approval of the Delaware Insurance Commissioner as its earned
surplus is negative. Further, NFL has agreed to obtain prior approval for any
future dividends.
NFIC and AICT, Texas domestic companies, may make dividend payments from surplus
profits or earned surplus arising from its business. The Texas Insurance Code
defines earned surplus as unassigned surplus not including any unrealized gains.
Texas life insurance companies may generally pay ordinary dividends or make
distributions of cash or other property within any twelve month period with a
fair market value equal to or less than the greater of 10% of surplus as regards
policyholders as of the preceding December 31 or the net gain from operations
for the twelve month period ending on the preceding December 31. Any dividend
exceeding the applicable threshold is considered extraordinary and requires
prior approval of the Texas Insurance Commissioner. NFIC's and AICT's earned
surplus is negative, and as such, each company is precluded from paying
dividends during 1998 without the prior approval of the Texas Insurance
Commissioner.
FLICA, a Mississippi domestic company, may make dividend payments only from its
actual net surplus computed as required by law in its statutory annual
statement. Mississippi life insurance companies may generally pay ordinary
dividends or make distributions of cash or other property within any twelve
month period with a fair market value not exceeding the lesser of 10% of surplus
as regards policyholders as of the preceding December 31 or the net gain from
operations for the twelve month period ending on the preceding December 31. Any
dividend exceeding the applicable threshold amount requires prior approval of
the Mississippi Insurance Commissioner. FLICA is precluded from paying dividends
to NFL during 1998 without the prior approval of the Mississippi Insurance
Commissioner as it recorded a net loss from operations for the year ended
December 31, 1997.
Generally, all states require insurance companies to maintain capital and
surplus that is reasonable in relation to their existing liabilities and
adequate to their financial needs. Delaware, Texas and Mississippi also maintain
discretionary powers relative to the declaration and payment of dividends based
upon an insurance company's financial position. In light of the statutory losses
incurred by the Insurance Subsidiaries during 1997 and for the nine months ended
September 30, 1998, Westbridge does not expect to receive any dividends from its
Insurance Subsidiaries for the foreseeable future.
After a long and careful review of Westbridge's existing business and prospects
as an ongoing business, Westbridge, in consultation with its legal and financial
advisors and the Ad Hoc Committee and its legal and financial advisors,
concluded that recoveries to creditors and equity security holders will be
maximized by Westbridge's continued operation as a going concern under the terms
of the Plan. To achieve that higher value, the Plan contemplates (i) the
distribution of cash to the holders of the Senior Notes and the sale of new
convertible preferred stock to CSFB and, at their option, holders of the
Convertible Note claims as of May 20, 1998 to fund such distributions, (ii) the
issuance of new convertible preferred stock to CSFB as a holder of Senior Note
claims, (iii) the issuance of new common stock to the holders of unsecured
claims, including, but not limited to, the holders of Convertible Note claims,
(iv) the issuance of new common stock and new warrants to the holders of old
Series A Preferred Stock and old common stock, (v) the cancellation of old
common stock, old warrants, old Series A Preferred Stock, old restricted common
stock and old incentive stock options, (vi) the settlement of the Putative Class
Action lawsuit, and (vii) the continuation of the Credit Agreement unabated.
In order for the Company to reorganize and emerge from Chapter 11 protection,
the Bankruptcy Court must confirm a plan of reorganization. The Company will be
distributing its Disclosure Statement and Plan, along with ballots to vote to
accept or reject the Plan and certain other materials approved by the Bankruptcy
Court, to the holders of all classes of impaired creditors and equity security
interests. The Bankruptcy Court has scheduled a hearing to confirm the Plan on
December 17, 1998. Among other things, to confirm a plan the Bankruptcy Court is
generally required to find that (a) each impaired class of creditors and equity
security holders will, pursuant to the Plan, receive at least as much as the
class would have received in liquidation of the Company, (b) each impaired class
of creditors and equity security holders has accepted the Plan by the requisite
vote and (c) confirmation of the Plan is not likely to be followed by the
liquidation or need for further financial restructuring of the Company. If any
impaired class of creditors and equity security holders does not accept a plan
and assuming that all other requirements of the Bankruptcy Code are met, the
plan proponents may invoke the so-called "cram-down" provisions of the
Bankruptcy Code, whereby the Bankruptcy Court may confirm a plan notwithstanding
the non-acceptance of the plan by an impaired class of creditors and equity
security holders if, among other things, the plan is fair and equitable and does
not discriminate unfairly with respect to each impaired class of claims or
interests that has not accepted the plan. The Official Creditors' Committee has
expressed support for the Plan. The effectiveness of the Plan is subject to
various conditions precedent.
During the pendency of the Chapter 11 Case, Westbridge's primary obligations
will consist of reorganization expenses and the funding of the ongoing statutory
capital requirements of its Insurance Subsidiaries. Assuming Westbridge emerges
from the Bankruptcy Court protection as described above, its primary obligations
will consist of supporting the ongoing statutory capital requirements of its
Insurance Subsidiaries.
Insurance Subsidiaries
The primary sources of cash for the Insurance Subsidiaries are premiums and
income on invested assets. Additional cash is periodically provided by capital
contributions from Westbridge and from the sale of short-term investments and
could, if necessary, be provided through the sale of long-term investments and
blocks of business. The Insurance Subsidiaries' primary uses for cash are
benefits and claims, commissions, general and administrative expenses, and
taxes, licenses and fees.
During the nine months ended September 30, 1998, the Insurance Subsidiaries
continued to experience adverse loss ratios and declining persistency on certain
old Medical Expense and Medicare Supplement products. The Insurance Subsidiaries
have developed new insurance products with stricter underwriting procedures and
lower agent commissions. In addition, the Insurance Subsidiaries are
implementing rate increases to the extent approved by state regulatory
authorities or offering higher deductible benefit options on certain old lines
of business in order to mitigate the effect of adverse claims experience on such
old lines. The Insurance Subsidiaries have also implemented a policyholder
retention program designed to mitigate the impact of declining persistency on
such old lines receiving rate increases. However, the Company expects that the
Insurance Subsidiaries will continue to incur operating losses on these old
lines of business until such time as the necessary rate increases can be fully
implemented. There can be no assurance that the full extent of such rate
increase requests will be approved or that the impact of these rate increases
will result in profitability on such old lines.
For the nine months ended September 30, 1998, the Insurance Subsidiaries
received capital contributions totaling approximately $5.5 million from
Westbridge. To the extent that the Insurance Subsidiaries experience further
statutory operating losses, additional capital may be required.
In the ordinary course of business, the Company advances commissions on policies
written by its general agencies and their agents. The Company is reimbursed for
these advances from the commissions earned over the respective policy's life. In
the event that policies lapse prior to the time the Company has been fully
reimbursed, the general agency or the individual agents, as the case may be, are
responsible for reimbursing the Company for the outstanding balance of the
commission advance. For the nine months ended September 30, 1998 and 1997, the
Company has recorded a provision for uncollectible commission advances totaling
$0.7 million and $2.5 million, respectively.
The Company finances the majority of its obligations to make commission advances
through Westbridge Funding Corporation ("WFC"), an indirect wholly-owned
subsidiary of Westbridge. On June 6, 1997, WFC entered into a Credit Agreement
(the "Credit Agreement") with LaSalle National Bank ("LaSalle"). This Credit
Agreement provides WFC with a three-year, $20.0 million revolving loan facility
(the "Receivables Financing"), the proceeds of which are used to purchase agent
advance receivables from the Insurance Subsidiaries and certain affiliated
marketing companies. WFC's obligations under the Credit Agreement are secured by
liens upon substantially all of WFC's assets. In connection with this commission
advancing program, at September 30, 1998, the Company's receivables from
subagents totaled approximately $9.8 million and approximately $7.6 million was
outstanding under the Credit Agreement. The Credit Agreement terminates on June
5, 2000, at which time the outstanding principal and interest thereunder will be
due and payable. WFC is current with respect to its principal and interest
payments under this Credit Agreement.
WFC's obligations under the Credit Agreement have been guaranteed by Westbridge
under the Guaranty Agreement, and Westbridge has pledged all of the issued and
outstanding shares of the capital stock of WFC, NFL and NFIC as collateral for
that guaranty. Westbridge's obligations under the Guaranty Agreement would
continue following confirmation of the Plan. LaSalle has agreed to waive certain
events of default occasioned by the Chapter 11 Case; however, certain events of
default under the Credit Agreement are continuing.
The Company also receives commission advances from an unaffiliated managed care
organization and in turn advances commissions to its general agencies and their
agents. At September 30, 1998, the Company's receivables from its subagents
related to these advances totaled approximately $3.2 million, and the Company
owed approximately $1.8 million to an unaffiliated managed care organization.
Consolidated
The Company's consolidated net cash used for operations totaled $5.1 million and
$17.5 million for the nine months ended September 30, 1998 and 1997,
respectively. The variance in the amount of net cash used for operations between
1998 and 1997 was primarily the result of (a) amounts remitted to reinsurers
during 1997 terminating certain reinsurance arrangements, and (b) the reduction
in the Company's marketing results for its underwritten products, which resulted
in a decrease in net cash used for operations related to the funding of agents'
debit balances.
Net cash provided by (used for) investing activities for the nine months ended
September 30, 1998 and 1997 totaled $11.1 million and $(39.1) million,
respectively. The increase in net cash provided by investing activities between
1998 and 1997 was primarily related to funding the Company's operating
activities for the same period. Further, the significant cash outflow to acquire
investments in 1997 was related to the investment of the net proceeds from the
issuance of the Company's Convertible Notes.
Net cash (used for) provided by financing activities totaled $(5.5) million and
$61.6 million for the nine months ended September 30, 1998 and 1997,
respectively. Cash flows for financing activities for the nine months ended
September 30, 1998 were related to the net borrowings and repayments associated
with the Company's Receivables Financing program. The Company's net financing
cash outflows declined as a result of the reduction in the Company's marketing
results for its underwritten products, which in turn resulted in a decrease in
cash flows used to finance agents' debit balances. Cash flows provided by
financing activities for the nine months ended September 30, 1997, included
approximately $70.0 million in cash inflows resulting from the issuance of the
Company's Convertible Notes that was offset, in part, by cash payments of $7.0
million to retire a note payable associated with a recaptured reinsurance
agreement, $1.0 million to retire a note with a related party, and $0.1 million
in net borrowings and repayments associated with the Company's Receivables
Financing program.
The Company had no significant high-yield, unrated or less than investment grade
fixed maturity securities in its investment portfolio as of September 30, 1998,
and it is the Company's policy not to exceed more than 5% of total assets in
such securities. Changes in interest rates may affect the market value of the
Company's investment portfolio. The Company's principal objective with respect
to the management of its investment portfolio is to meet its future policyholder
benefit obligations. In the event the Company was forced to liquidate
investments prior to maturity, investment yields could be compromised.
Inflation will affect claim costs on the Company's Medicare Supplement and
Medical Expense products. Costs associated with a hospital stay and the amounts
reimbursed by the Medicare program are each determined, in part, based on the
rate of inflation. If hospital and other medical costs that are reimbursed by
the Medicare program increase, claim costs on the Medicare Supplement products
will increase. Similarly, as the hospital and other medical costs increase,
claim costs on the Medical Expense products will increase. The Company has
somewhat mitigated its exposure to inflation by incorporating certain
limitations on the maximum benefits which may be paid under its policies and by
filing for premium rate increases as necessary.
In December 1992, the NAIC adopted the Risk-Based Capital for Life and/or Health
Insurers Model Act ("the Model Act"). The Model Act provides a tool for
insurance regulators to determine the levels of statutory capital and surplus an
insurer must maintain in relation to its insurance and investment risks and
whether there is a need for possible regulatory attention. The Model Act (or
similar legislation or regulation) has been adopted in states where the
Insurance Subsidiaries are domiciled.
The Model Act provides four levels of regulatory attention, varying with the
ratio of the insurance company's total adjusted capital (defined as the total of
its statutory capital and surplus, asset valuation reserve and certain other
adjustments) to its risk-based capital ("RBC"). If a company's total adjusted
capital is less than 100 percent but greater than or equal to 75 percent of its
RBC, or if a negative trend (as defined by the regulators) has occurred and
total adjusted capital is less than 125 percent of RBC (the "Company Action
Level"), the company must submit a comprehensive plan aimed at improving its
capital position to the regulatory authority proposing corrective actions. If a
company's total adjusted capital is less than 75 percent but greater than or
equal to 50 percent of its RBC (the "Regulatory Action Level"), the regulatory
authority will perform a special examination of the company and issue an order
specifying the corrective actions that must be followed. If a company's total
adjusted capital is less than 50 percent but greater than or equal to 35 percent
of its RBC (the "Authorized Control Level"), the regulatory authority may take
any action it deems necessary, including placing the company under regulatory
control. If a company's total adjusted capital is less than 35 percent of its
RBC (the "Mandatory Control Level"), the regulatory authority must place the
company under its control. The NAIC's requirements are effective on a state by
state basis if, and when, they are adopted by the regulators in the respective
states. The Insurance Departments of the States of Delaware and Mississippi have
each adopted the NAIC's Model Act. At September 30, 1998, total adjusted capital
for NFL, a Delaware domiciled company, and FLICA, a Mississippi domiciled
company, exceeded the respective Company Action Levels.
The Texas Department of Insurance ("TDI") has adopted its own RBC requirements,
the stated purpose of which is to require a minimum level of capital and surplus
to absorb the financial, underwriting and investment risks assumed by an
insurer. Texas' RBC requirements differ from those adopted by the NAIC in two
principal respects: (i) they use different elements to determine minimum RBC
levels in their calculation formulas and (ii) they do not stipulate "Action
Levels" (like those adopted by the NAIC) where corrective actions are required.
However, the Commissioner of the TDI does have the power to take similar
corrective actions if a company does not maintain the required minimum level of
statutory capital and surplus. NFIC and AICT are domiciled in Texas and must
comply with Texas RBC requirements. At September 30, 1998, AICT's RBC exceeded
the minimum level prescribed by the TDI; however, NFIC's RBC was below the
minimum level prescribed by the TDI.
As a result of the statutory losses sustained by the Insurance Subsidiaries
during 1997, material transactions are subject to approval by the department of
insurance in each domiciliary state.
<PAGE>
PART II
Item 1 - Legal Proceedings (See Part I - Note 2 to the Consolidated Financial
Statements).
On December 17, 1997, a purported class action complaint, naming the
Company, two current directors of the Company, one former director of
the Company and two underwriters of the Company's Convertible Notes as
defendants, was filed in the United States District Court for the
Northern District of Texas on behalf of persons who purchased
securities of the Company during the period October 31, 1996 through
October 31, 1997. The complaint alleges that the Company materially
overstated its earnings due to the Company's establishment of
inadequate reserves for pending insurance claims. The plaintiff seeks
unspecified money damages and certain costs and expenses. On April 30,
1998, the defendants filed separate motions to dismiss the complaint.
On June 15, 1998, the plaintiff filed a motion for leave to file an
amended complaint, which plaintiff asked the court to accept as a
response to the defendants' motions to dismiss.
In October 1998, a preliminary settlement agreement was reached by and
among the parties to the complaint. The settlement is subject to
certain conditions, including the certification of the class described
in the amended complaint and approval of the District Court and the
Bankruptcy Court. The settlement will not involve an admission of
liability by any party and is not binding until the parties execute
formal settlement documents. In the event that a final settlement
agreement is not reached, the Company intends to continue to defend
this action vigorously.
Item 3 - Defaults Upon Senior Securities
As described in "Management's Discussion and Analysis of Operating
Results and Financial Condition Recent Developments" on September 16,
1998, Westbridge filed a petition for relief under Chapter 11 of the
United States Bankruptcy Code with the Bankruptcy Court. Also on
September 16, 1998, Westbridge filed its Disclosure Statement and Plan,
and on October 28, 1998 filed its proposed first amended plan, which
sets forth the manner in which claims against and equity interests in
Westbridge will be treated. On October 30, 1998, the Company's
Disclosure Statement was approved by entry of an order by the
Bankruptcy Court. The Company will be distributing its Disclosure
Statement and Plan, along with ballots to vote to accept or reject the
Plan and certain other materials approved by the Bankruptcy Court, to
the holders of allowed claims and equity security interests.
(a) Debt Securities
Effective November 3, 1997, Westbridge suspended the scheduled
interest payments on its Senior Notes and its Convertible Notes.
The failure to make the scheduled interest payments resulted in an
event of default under the Indentures relating to such Notes and
also resulted in an event of default under the Credit Agreement
with LaSalle. LaSalle has agreed to waive certain events of
default occasioned by the Chapter 11 Case; however, certain events
of default under the Credit Agreement are continuing. In
connection with the Company's debt securities, which are comprised
of the Senior Notes, Convertible Notes and Credit Agreement, the
Plan contemplates (i) the distribution of cash to the holders of
the Senior Notes and the sale of new convertible preferred stock
to CSFB and, at their option, holders of the Convertible Note
claims as of May 20, 1998 to fund such distributions, (ii) the
issuance of new convertible preferred stock to CSFB as a holder of
Senior Note claims, (iii) the issuance of new common stock to the
holders of unsecured claims, including, but not limited to, the
holders of Convertible Note claims, and (iv) the continuation of
the Credit Agreement unabated.
(b) Series A Preferred Stock
Effective October 31, 1997, Westbridge suspended payment of the
scheduled dividends on its Series A Preferred Stock. In connection
with the Company's equity interest holders, including the holders
of its old Series A Preferred Stock, the Plan contemplates (i) the
issuance of new common stock and new warrants to the holders of
old Series A Preferred Stock and old common stock, and (ii) the
cancellation of old common stock, old warrants, old Series A
Preferred Stock, old restricted common stock and old incentive
stock options.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.32First Amended Plan of Reorganization
Exhibit 27 Financial Data Schedule, (included in electronic
filing only).
(b) Reports on Form 8-K
Reports on Form 8-K dated September 21, 1998 in response to Item
3, Bankruptcy or Receivership, to report the filing of the
petition for relief under Chapter 11 of Title 11 of the United
States Bankruptcy Court in the District of Delaware. In
conjunction with this filing, the Company also submitted the
proposed plan of reorganization which was pre-negotiated with
certain creditors of the Company, a proposed disclosure statement
and a number of first day motions; Item 5, Other Events, to report
the Company entered into employment agreements with Patrick J.
Mitchell, who was elected Chairman of the Board and Chief
Executive Officer of the Company and retains his positions as
President, Chief Operating Officer, and Chief Financial Officer;
and Patrick H. O'Neill, the Company's Executive Vice President,
General Counsel and Secretary; and Item 7, Financial Statements
and Exhibits, to provide the required exhibits related to the
pre-arranged plan of reorganization under Chapter 11 of Title 11
of the United States Code.
<PAGE>
Form 10-Q
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.
WESTBRIDGE CAPITAL CORP.
/s/ Patrick J. Mitchell
Patrick J. Mitchell
Chairman and Chief Executive Officer
(On Behalf of the Registrant and as
Principal Financial and Accounting Officer)
Dated at Fort Worth, Texas
November 10, 1998
<PAGE>
27
EXHIBIT 10.32
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
In re: ) Chapter 11
)
WESTBRIDGE CAPITAL CORP., ) Case No. 98-2105 (MFW)
) )
Debtor. )
)
)
FIRST AMENDED PLAN OF REORGANIZATION OF WESTBRIDGE CAPITAL CORP.
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
Alan W. Kornberg
Andrew N. Rosenberg
W. Andrew P. Logan III
1285 Avenue of the Americas
New York, New York 10019-6064
(212) 373-3000
-and-
YOUNG CONAWAY STARGATT & TAYLOR, LLP
James L. Patton, Jr.
1110 N. Market Street
P.O. Box 391
Rodney Square North, 11th Floor
Wilmington, Delaware 19801
(302) 571-6600
Attorneys for Westbridge Capital Corp.
Dated: Wilmington, Delaware
October 30, 1998
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page #
<S> <C>
I. DEFINITIONS AND CONSTRUCTION OF TERMS...................................................... 1
A. Definitions............................................................................ 1
B. Interpretation, Application of Definitions and Rules of Construction. ................. 18
II. CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS.............................................. 19
Introduction............................................................................... 19
1. Unclassified Claims (not entitled to vote on the Plan).............................. 19
2. Unimpaired Classes Of Claims (deemed to have accepted the Plan
and, therefore, not entitled to vote on the Plan.................................... 19
3. Impaired Classes of Claims and Interests (entitled to vote on the Plan)............. 20
4. Impaired Classes Of Claims And Equity Interests (deemed to have rejected the
Plan and, therefore, not entitled to vote on the Plan).............................. 21
III. TREATMENT OF ADMINISTRATIVEEXPENSE CLAIMS AND PRIORITY TAX CLAIMS.......................... 21
1. Administrative Claims............................................................... 21
2. Professional Compensation And Reimbursement Claims.................................. 21
3. Priority Tax Claims................................................................. 22
IV. TREATMENT OF CLAIMS ANDEQUITY INTERESTS.................................................... 22
1. Class 1 - Priority Non-Tax Claims................................................... 22
2. Class 2 - LaSalle Claim............................................................. 23
3. Class 3 - Convenience Claims........................................................ 23
4. Class 4 - Secured Claims............................................................ 24
5. Class 5 - Intercompany Claims....................................................... 24
6. Class 6 - Securities Litigation Claims.............................................. 24
7. Class 7 - Unsecured 11% Note Claims................................................. 25
8. Class 8 - Other Unsecured Claims.................................................... 25
9. Class 9 - Old Preferred Stock Interests............................................. 27
10.Class 10 - Old Common Stock Interests and Old Restricted Common Stock Interests..... 27
11.Class 11 - Unvested Old Restricted Common Stock Interests........................... 27
12.Class 12 - Old Warrant Interests.................................................... 28
13.Class 13 - Old Option Interests..................................................... 28
V. PROVISIONS REGARDING CORPORATE GOVERNANCE AND MANAGEMENTOF REORGANIZED WESTBRIDGE.......... 28
A. Directors and Officers of Reorganized Westbridge....................................... 28
1. The Initial Board of Directors...................................................... 28
2. Management of Reorganized Westbridge................................................ 28
3. Officers............................................................................ 29
B. Corporate Action....................................................................... 29
1. Amended Westbridge Certificate of Incorporation and Amended
Westbridge By-Laws.................................................................. 29
C. Securities to Be Issued Pursuant to the Plan........................................... 29
1. New Common Stock.................................................................... 29
2. New Convertible Preferred Stock..................................................... 29
3. The New Warrants.................................................................... 30
4. Securities Laws Matters............................................................. 30
D. Retention and Incentive Bonus Program.................................................. 30
E. Marketing Agent Stock Options.......................................................... 30
F. Officer and Director Stock Options..................................................... 31
VI. PROVISIONS REGARDING VOTING AND DISTRIBUTIONS UNDER THE PLAN AND TREATMENT OF DISPUTED,
CONTINGENT AND UNLIQUIDATED ADMINISTRATIVE CLAIMS, CLAIMS AND EQUITY INTERESTS............. 31
A. Voting of Claims and Equity Interests.................................................. 31
B. Nonconsensual Confirmation............................................................. 31
C. Distributions.......................................................................... 31
1. Method of Distribution Under the Plan............................................... 31
2. Disputed General Unsecured Claims................................................... 33
3. Surplus Distributions to Holders of Allowed Unsecured Claims........................ 34
4. Objections To And Resolution Of Administrative Claims and Claims;
Administrative and Priority Claims Reserve.......................................... 34
5. Hart-Scott-Rodino Act Filing Requirements........................................... 35
6. Allocation of Consideration......................................................... 35
7. Cancellation and Surrender of Existing Securities and Agreements.................... 36
8. Trustee Fees........................................................................ 36
VII. IMPLEMENTATION AND EFFECT OF CONFIRMATION OF THIS PLAN..................................... 37
A. Registration Rights Agreement.......................................................... 37
B. Continued Corporate Existence and Vesting of Assets in Reorganized Westbridge.......... 37
C. Termination of Subordination Rights.................................................... 37
D. Discharge of Westbridge................................................................ 38
E. Injunction............................................................................. 38
F. Preservation/Waiver of Causes of Action................................................ 38
1. Preservation of Rights.............................................................. 39
2. Waiver of Causes of Action.......................................................... 39
G. Votes Solicited in Good Faith.......................................................... 39
H. Administrative Claims Incurred after the Confirmation Date............................. 40
I. Westbridge's Limited Release........................................................... 40
J. Exculpation, Release and Injunction of Released Parties................................ 40
1. Exculpation......................................................................... 40
2. Injunction.......................................................................... 41
K. Release of Officers and Directors; Waiver of Claims.................................... 41
1. Waiver of Claims; Covenant Not To Sue............................................... 41
2. Limited Releases.................................................................... 42
3. Limitation of Governmental Releases................................................. 43
L. Term of Bankruptcy Injunction or Stays................................................. 43
M. Preservation of Insurance.............................................................. 43
N. Officers' and Directors' Indemnification Rights........................................ 43
O. The Securities Litigation Settlement Fund.............................................. 43
1. Payment of Securities Litigation Settlement Payment................................. 43
2. Administration...................................................................... 44
3. Allocation of Assets................................................................ 44
VIII. RETENTION OF JURISDICTION.................................................................. 44
IX. MISCELLANEOUS PROVISIONS................................................................... 45
A. Payment of Statutory Fees.............................................................. 45
B. Dissolution of Creditors Committee..................................................... 45
C. Modification of the Plan............................................................... 45
D. Governing Law.......................................................................... 46
E. Filing or Execution of Additional Documents............................................ 46
F. Withholding and Reporting Requirements................................................. 46
G. Exemption From Transfer Taxes.......................................................... 46
H. Waiver of Federal Rule of Civil Procedure 62(a)........................................ 46
I. Headings............................................................................... 46
J. Exhibits/Schedules..................................................................... 47
K. Notices................................................................................ 47
L. Plan Supplement........................................................................ 47
M. Conflict............................................................................... 48
X. EXECUTORY CONTRACTS AND UNEXPIRED LEASES................................................... 48
XI. BENEFIT PLANS.............................................................................. 48
XII. EFFECTIVENESS OF THE PLAN.................................................................. 49
A. Confirmation of the Plan............................................................... 49
B. Effectiveness of the Plan.............................................................. 49
1. Conditions Precedent to Effectiveness............................................... 49
2. Waiver of Conditions................................................................ 50
3. Effect of Failure of Conditions..................................................... 50
4. Vacatur of Confirmation Order....................................................... 50
5. Survival of the Final Settlement Agreement.......................................... 51
XIII. NEW CONVERTIBLE PREFERRED STOCK PURCHASE................................................... 51
A. Stock Purchase Agreement............................................................... 51
B. Purchase Right. ...................................................................... 51
1. Eligibility......................................................................... 51
</TABLE>
<PAGE>
Westbridge Capital Corp. proposes the following plan of reorganization under
section 1121(a) of the Bankruptcy Code.
I.
DEFINITIONS AND CONSTRUCTION OF TERMS
A. Definitions. Unless otherwise defined herein, or the context
otherwise requires, the following terms shall have the respective meanings set
forth below:
Ad-Hoc Committee means the unofficial committee that was formed by
certain holders of the 11% Notes and 7 1/2% Convertible
Notes prior to the Petition Date.
Administrative means any right to payment constituting a cost or expense of
Claim administration of the Chapter 11 Case of a kind specified
under section 503(b) and entitled to priority under section
507(a)(1) of the Bankruptcy Code, including, without
limitation, any actual and necessary costs and expenses of
preserving the estate of the Debtor, any actual and
necessary costs and expenses of operating the business of
the Debtor, any indebtedness or obligations incurred or
assumed by the Debtor in Possession in connection with the
conduct of its business, including, without limitation, for
the acquisition or lease of property or an interest in
property or the rendition of services, all compensation and
reimbursement of expenses to the extent Allowed by the Court
under section 330 or 503 of the Bankruptcy Code, and any
fees or charges assessed against the estate of the Debtor
under section 1930 of chapter 123 of title 28 of the United
States Code.
Administrative and has the meaning assigned to such term in Section
Priority Claims VI.C.4(b)(i) of the Plan.
Reserve
Agent-Options has the meaning assigned to such term in Section V.E of the
Plan.
Allowed Claim means, with reference to any Claim or Equity Interest, (a)
or Allowed Interest any Claim against or Equity Interest in the Debtor which has
been listed by the Debtor in its Schedules, as such
Schedules may be amended by the Debtor from time to time in
accordance with Bankruptcy Rule 1009, as liquidated in
amount and not disputed or contingent and with respect to
which no contrary proof of claim or interest has been filed,
(b) any Claim or Equity Interest specifically Allowed under
this Plan, (c) any Claim or Equity Interest which is not
Disputed or (d) any Claim or Equity Interest the amount or
existence of which, if Disputed, (i) has been determined by
a Final Order of a court of competent jurisdiction other
than the Court, or (ii) has been Allowed by Final Order of
the Court; provided, however, that any Claims or Equity
Interests allowed solely for the purpose of voting to accept
the Plan pursuant to an order of the Court shall not be
considered "Allowed Claims" or "Allowed Equity Interests"
hereunder.
Amended Guarantee means that certain Amended and Restated Guaranty, dated as
Agreement of the Effective Date, by Reorganized Westbridge, in favor
of LaSalle, which shall be in substantially the form
contained in the Plan Supplement.
Amended Westbridge means the Amended and Restated By-Laws of Reorganized
By-Laws Westbridge, which shall be in substantially the form
contained in the Plan Supplement.
Amended Westbridge means the amended and restated Certificate of Incorporation
Certificate of of Westbridge, which shall be in substantially the form
Incorporation contained in the Plan Supplement.
Ballots means each of the ballot forms distributed with the
Disclosure Statement to each holder of an Impaired Claim or
Equity Interest (other than to holders of Impaired Claims or
Equity Interests deemed to have rejected the Plan or
otherwise not entitled to vote on the Plan) upon which is to
be indicated, among other things, acceptance or rejection of
the Plan.
Bankruptcy Code means title 11 of the United States Code, 11 U.S.C. ss.ss.
101 et seq., as in effect on the date hereof.
Bankruptcy Rules means the Federal Rules of Bankruptcy Procedure as
promulgated by the United States Supreme Court under section
2075 of title 28 of the United States Code, and local rules
of the Court, as the context may require.
Bonus Program has the meaning assigned to such term in Section V.D of the
Plan.
Business Day means any day on which commercial banks are open for
business, and not authorized to close, in the City of New
York, New York except any day designated as a legal holiday
by Bankruptcy Rule 9006(a).
Cash means legal tender of the United States of America and
equivalents thereof.
Causes of Action means all claims, choses in action and causes of action
(including those assertable derivatively), now owned or
hereafter acquired by Westbridge, and the Cash and non-Cash
proceeds thereof, whether arising under the Bankruptcy Code
or other Federal, state or foreign law, including, without
limitation, any causes of action arising under sections 510,
544, 547, 548, 549, 550, 551 or any other section of the
Bankruptcy Code.
Chapter 11 Case means the chapter 11 case commenced by the Debtor.
Claims Agreement means the Memorandum of Understanding, dated October 26,
1998, a copy of which is attached hereto as Exhibit F.
Confirmation Date means the date on which the Confirmation Order is entered by
the Court.
Confirmation means the hearing to consider confirmation of the Plan
Hearing pursuant to section 1128 of the Bankruptcy Code.
Confirmation Order means the order entered by the Court confirming the Plan
pursuant to section 1129 of the Bankruptcy Code.
Convenience Claim means a Claim that would otherwise be classified as a Class
7 Unsecured Claim, other than a Claim arising out of or in
connection with the ownership of the 7 1/2% Convertible
Notes, that is (a) $2,000 or less or (b) more than $2,000 if
the holder has elected, on a timely cast Ballot, to accept
$2,000 in Cash in full satisfaction, discharge, and release
of such Claim.
Court means, (a) the United States Bankruptcy Court for the
District of Delaware, having jurisdiction over the Chapter
11 Case; (b) to the extent there is no reference pursuant to
section 157 of title 28 of the United States Code, the
United States District Court for the District of Delaware;
and (c) any other court having jurisdiction over the Chapter
11 Case.
Credit Agreement means that certain Credit Agreement dated as of June 6, 1997
between Westbridge Funding Corp. and LaSalle, as amended.
Creditors Committee means the Official Committee of Unsecured Creditors
appointed by the United States Trustee in the Chapter 11
Case on October 2, 1998, as constituted from time to time.
CSFB means Credit Suisse First Boston Corporation.
CSFB 11% Note means any 11% Note Claims held by CSFB as of the Petition
Claims Date.
Debtor means Westbridge Capital Corp., a Delaware corporation,
also referred to herein as "Westbridge."
Debtor means the Debtor in its capacity as debtor in possession in
in Possession the Chapter 11 Case pursuant to sections 1107(a) and 1108 of
the Bankruptcy Code.
Disclosure means the written disclosure statement that relates to
Statement this Plan, as approved by the Court pursuant to
section 1125 of the Bankruptcy Code, as such disclosure
statement may be amended, modified or supplemented from
time to time.
Disputed means any Claim, or Equity Interest, or any portion thereof,
that is not an Allowed Claim or Allowed Interest, including,
but not limited to, Claims or Interests (a)(i) that have not
been Scheduled by the Debtor or (ii) have been Scheduled at
zero or as contingent, unliquidated or disputed, (b) that
are the subject of a proof of claim that differs in nature,
amount or priority from the Debtor's Schedules, and (c) the
allowance or disallowance of which is not yet the subject of
a Final Order.
District Court means the United States District Court for the Northern
District of Texas, which court has jurisdiction over the
Putative Class Action.
District Court means any order or orders entered by the District Court
Order approving the Securities Litigation Settlement and Final
Settlement Agreement.
Effective Date means the first Business Day on which all of the conditions
specified in Section XII.B.1 of the Plan have been satisfied
or waived in accordance with Section XII.B.2 of the Plan;
provided, however, that if a stay of the Confirmation Order
is in effect on such date, the Effective Date will be the
first Business Day after such stay is no longer in effect.
11% Note Claims means the unsecured Claims of the 11% Noteholders arising
under or as a result of the 11% Notes, except that any such
Claims held by CSFB as of the Petition Date shall be deemed
to be CSFB 11% Note Claims.
11% Noteholders means holders of the 11% Notes.
11% Notes means the 11% Senior Subordinated Notes, due 2002, of
Westbridge, issued and outstanding under the 11% Note
Indenture.
11% Note Indenture means that certain Indenture, dated as of February 15, 1995,
between Westbridge, as issuer, and Bank One Trust Company,
N.A. (successor by merger to Liberty Bank and Trust Company
of Oklahoma City, N.A.), as Trustee, pursuant to which the
11% Notes were issued, together with any amendment or
supplement thereto.
Eligible Holder has the meaning assigned to such term in Section XIII.B.1 of
the Plan.
Equity Interest means any share of preferred stock or common stock or other
or Interest instrument evidencing an ownership interest in the Debtor,
whether or not transferable, and any option, warrant, or
right, contractual or otherwise, to acquire any such
interest.
Exercise has the meaning assigned to such term in Section XIII.B.1(c)
Instructions of the Plan.
Exercise Notice means the form of exercise notice which will provide for the
exercise of the Purchase Rights pursuant to Section XIII of
the Plan.
Exercise Price has the meaning assigned to such term in Section XIII.B.1(b)
of the Plan.
Exercise Period means the period commencing on the thirtieth day prior to
the Confirmation Date and concluding on the first day after
the Confirmation Date, or, if either of such dates is not a
Business Day, the next following Business Day.
Exercising Holder has the meaning assigned to such term in Section XIII.B.1(c)
of the Plan.
Face Amount means (a) when used in reference to a Disputed Claim, the
full stated amount claimed by the holder of such Claim in
any proof of claim timely filed with the Court or otherwise
deemed timely filed by any Final Order of the Court or other
applicable bankruptcy law, and (b) when used in reference to
an Allowed Claim, the allowed amount of such Claim.
Final Order means an order or judgment of the Court, or other court of
competent jurisdiction, as entered on the docket in the
Chapter 11 Case, the operation or effect of which has not
been stayed, reversed or amended, and as to which order or
judgment (or any revision, modification, or amendment
thereof) the time to appeal or seek review or rehearing has
expired and as to which no appeal or petition for review or
rehearing was filed or, if filed, remains pending.
Final Settlement means the definitive Settlement Agreement to be executed by
Agreement the parties to the Claims Agreement implementing the terms
of the Claims Agreement and Securities Litigation
Settlement.
General Unsecured means any Unsecured Claim (including any Underwriter Claims)
Claim other than a 11% Note Claim, CSFB 11% Note Claim or 7 1/2%
Convertible Note Claim.
Government has the meaning assigned to such term in Section VII.K.3 of
the Plan.
Guaranty Agreement means that certain Guaranty Agreement dated as of June 6,
1997 by Westbridge in favor of LaSalle.
HSR Act means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
Impaired means, when used with reference to a Claim or Interest, a
Claim or Interest that is impaired within the meaning of
section 1124 of the Bankruptcy Code.
Indemnification means the $250,000 fund (less any withdrawals therefrom)
Escrow held in that certain escrow account at the Bank of New York
(Account No. 382345), which amount is equal to the
deductible under the National Union Policy and which funds
are to be released to cover expenses, including attorney's
fees, actually and reasonably incurred by certain officers
and directors of the Debtor in connection with the defense
or settlement of any action, suit or cause of action
relating to their service as officers or directors of the
Debtor.
Initial means the Effective Date or as soon thereafter as
Distribution Date practicable; provided, however, that the Initial
Distribution Date for the Allowed 11% Note Claims and
Allowed CSFB 11% Note Claims shall be the Effective Date.
Initial Holder means, (i) any person or entity who will initially hold
shares of New Convertible Preferred Stock and/or New Common
Stock on the Effective Date, (ii) any investment fund for
which any person thereof acts as manager, (iii) any
partnership or other entity for which any person thereof
acts directly or indirectly as a general partner, managing
member or controlling stockholder, and (iv) any person
otherwise affiliated with any of the foregoing individuals
or entities.
Initial Group means the aggregate number of shares of New Common Stock to
8-A Distribution be distributed on the Initial Distribution Date to all
Amount holders of Allowed Group 8-A Claims which shall be computed
as follows: (a) a fraction, (i) the numerator of which is
the Allowed Amount of Group 8-A Claims and (ii) the
denominator of which is the Allowed Amount of Group 8-A
Claims and the Allowed Amount of Group 8-B Claims times (b)
the number of shares of New Common Stock which is equal to
94% of all issued and outstanding New Common Stock on the
Effective Date.
Initial Group means the aggregate number of shares of New Common Stock to
8-B Distribution be distributed on the Initial Distribution Date to all
Amount holders of Allowed Group 8-B Claims which shall be computed
as follows: (a) a fraction, (i) the numerator of which is
the Allowed Amount of Group 8-B Claims and (ii) the
denominator of which is the Allowed Amount of Group 8-A
Claims and the Allowed Amount of Group 8-B Claims times (b)
the number of shares of New Common Stock which is equal to
94% of all issued and outstanding New Common Stock on the
Effective Date less (c) the Subordination Redistribution
Amount.
Intercompany Claim means any Claim held by a Subsidiary of the Debtor against
the Debtor, including, without limitation, (a) any account
reflecting intercompany book entries by such Subsidiary with
respect to the Debtor, (b) any Claim not reflected in book
entries that is held by such Subsidiary, and (c) any
derivative Claim asserted or assertable by or on behalf of
such Subsidiary against the Debtor.
LaSalle means LaSalle National Bank.
LaSalle Claim means all Claims against the Debtor of LaSalle (i) under the
LaSalle Credit Agreement and Guaranty and (ii) in respect of
the Debtor's reimbursement obligations to LaSalle in
connection with the LaSalle Letter of Credit.
LaSalle Credit means the "Pledged Collateral" as defined in the Pledge
Agreement Agreement dated as of June 6, 1997 between Westbridge and
Collateral LaSalle, as amended.
LaSalle Letter of means that certain Irrevocable Standby Letter of Credit No.
Credit 9200102116 issued by LaSalle in favor of National Financial
Insurance Company.
LaSalle Letter of means the trust account established at LaSalle (Account No.
Credit Collateral 15799300) in which certain bonds are held as collateral for
the Debtor's reimbursement obligations to LaSalle in
connection with the LaSalle Letter of Credit.
Management means those certain employment agreements, each dated as of
Employment September 15, 1998, between the Debtor and Patrick J.
Agreements Mitchell and Patrick H. O'Neill, respectively.
National Union means that certain Directors, Officers and Corporate
Policy Liability Insurance Policy (Policy No. 484-86-18) issued by
National Union Fire Insurance Company of Pittsburgh, PA to
Westbridge providing for coverage therein described with a
$5,000,000 limit on liability, together with any similar
policies of insurance coverage provided from time to time
to, or for the benefit of, the Debtor and its officers and
directors prior to the Petition Date.
New Common Stock means the common stock of Reorganized Westbridge, par value
$.01 per share, to be authorized and issued by Reorganized
Westbridge on the Effective Date pursuant to the Plan.
New Convertible means the convertible preferred stock of Reorganized
Preferred Stock Westbridge to be authorized and issued by Reorganized
Westbridge on the Effective Date pursuant to the Plan, on
the terms and subject to the conditions described in Exhibit
A hereto, and which shall be in substantially the form
contained in the Plan Supplement.
New Warrants means the warrants to purchase in the aggregate 7% of all
issued and outstanding shares of New Common Stock, on the
terms and subject to the conditions described in Exhibit B
hereto, and which shall be in substantially the form
contained in the Plan Supplement.
Notice of has the meaning assigned to such term in Section XIII.B.1(c)
Acceptance of the Plan.
Officer and has the meaning assigned to such term in Section V.F of the
Director Stock Plan.
Options
Old Common Stock means the common stock, par value $.10 per share, issued by
Westbridge and outstanding on the Petition Date.
Old Options means any options, calls, subscriptions or similar rights or
other agreements or commitments, contractual or otherwise,
other than Old Warrants, obligating Westbridge to issue,
transfer or sell any shares of Old Common Stock.
Old Preferred Stock means all shares of Westbridge's Series A Cumulative
Convertible Redeemable Exchangeable Preferred Stock
outstanding on the Petition Date.
Old Restricted means all shares of Old Common Stock granted pursuant to the
Common Stock Restricted Stock Plan dated as of April 19, 1996, other than
Unvested Old Restricted Common Stock.
Old Warrants means any warrants obligating Westbridge to issue, transfer
or sell any shares of Old Common Stock.
Payment Date has the meaning assigned to such term in Section XIII.B.1(e)
of the Plan.
Petition Date means September 16, 1998, the date on which the Debtor filed
its petition for relief commencing the Chapter 11 Case.
Plan means this Plan as it may be amended or modified, from time
to time, together with all addenda, exhibits, schedules, or
other attachments, if any.
Plan Supplement means the forms of documents specified in Section IX.L of
the Plan.
Pro Rata means, at any time, the proportion that (x) with respect to
Claims, the Face Amount of a Claim in a particular Class
bears to the aggregate Face Amount of all Claims (including
Disputed Claims) in such Class and (y) with respect to
Interests, the number of shares or other equity interests
held by a particular holder in a particular Class bears to
the aggregate number of all shares and other equity
interests in a particular Class, unless in each case the
Plan provides otherwise.
Pro Rata Percentage has the meaning assigned to such term in Section XIII.B.1(a)
of the Plan.
Priority Non-Tax means Claims entitled to priority under the Plan pursuant to
Claim section 507(a) of the Bankruptcy Code, other than
Administrative Claims and Priority Tax Claims which are
unclassified under the Plan, including, without limitation,
certain allowed employee compensation and benefit claims of
Westbridge's employees incurred within ninety (90) and one
hundred eighty (180) days, respectively, prior to the
Petition Date.
Priority Tax Claim means any unsecured Claim held by a governmental unit
entitled to a priority in right of payment under section
507(a)(8) of the Bankruptcy Code.
Purchase Right has the meaning assigned to such term in Section XIII.B of
the Plan.
Putative Class means the putative class action civil lawsuit pending in the
Action District Court , styled James C. Karabedian, et al. v.
Westbridge Capital Corp., Martin E. Kantor, James W.
Thigpen, Patrick J. Mitchell, Forum Capital Markets L.P.,
and Raymond James & Associates, Inc., Civ. Action No. 3:97
CV 3087-T.
Quarter means the period beginning on the Effective Date and ending
on the immediately succeeding March 31, June 30, September
30, or December 31, and each three-month period thereafter,
as the context may require.
Record Date means the record date for purposes of making distributions
under the Plan on account of Allowed Claims and Allowed
Interests, which date shall be the fifth (5th) Business Day
preceding the Confirmation Date.
Registration means a registration rights agreement by Reorganized
Rights Agreement Westbridge in favor of certain Initial Holders, which shall
be in substantially the form contained in the Plan
Supplement.
Released Parties has the meaning assigned to such term in Section VII.J.1 of
the Plan.
Reorganized means Westbridge, or any successor thereto by merger,
Westbridge consolidation, or otherwise, on and after the Effective
Date.
Reserve has the meaning assigned to such term in Section VI.C.2(a)
of the Plan.
Schedules means the schedules of assets and liabilities, statements of
financial affairs, and lists of holders of Claims and Equity
Interests filed with the Court by Westbridge, including any
amendments or supplements thereto.
Scheduled means, with respect to any Claim or Interest, the status and
amount, if any, of such Claim or Interest as set forth in
the Schedules.
Secured Claim means a Claim that is secured by a security interest in or
lien upon property, or the proceeds of the sale of such
property, in which the Debtor has an interest, to the extent
of the value as of the Effective Date, or such later date as
is established by the Court, of such interest or lien
determined by a Final Order of the Court pursuant to section
506 of the Bankruptcy Code or as otherwise agreed upon in
writing by the Debtor and the holder of such Claim.
Securities means a Claim arising from the purchase or sale of shares of
Litigation Claim Old Common Stock of Westbridge or 11% Notes or 7-1/2%
Convertible Notes at any time between October 31, 1996 and
October 31, 1997, but excluding (i) all Class 7, 8 and 10
Claims and Interests and (ii) any Claims which are excluded
from the Securities Litigation Settlement pursuant to the
District Court Order or Final Settlement Agreement.
Securities means a holder of a Securities Litigation Claim.
Litigation Claimant
Securities means the settlement of the Putative Class Action described
Litigation in the Claims Agreement.
Settlement
Securities has the meaning set forth in Section VII.O.1 of the Plan.
Litigation
Settlement Fund
Stock Purchase means that certain Stock Purchase Agreement, dated as of
Agreement September 15, 1998, between the Debtor and CSFB, pursuant to
which CSFB has agreed, subject to the terms and conditions
contained therein, to purchase all of the New Convertible
Preferred Stock (other than the New Convertible Preferred
Stock distributed to holders of Allowed Class 7 Claims in
Group 7-B or acquired by holders of Allowed Class 8 Claims
in Group 8-B who exercise the Purchase Right), a copy of
which Stock Purchase Agreement is attached to the Plan as
Exhibit C. -
Subordination has the meaning assigned to such term in Section VII.C of
Related Rights the Plan.
Subordination means the value of that portion of Group 8-B's allocation of
Redistribution New Common Stock equal to the difference between (x) the
Amount value of the Cash and New Convertible Preferred Stock to be
distributed to holders of Allowed Class 7 Claims under the
Plan and (y) the value of the Cash and New Convertible
Preferred Stock which holders of Allowed Claims in Class 7
would be entitled to receive under the Plan without giving
effect to the Claims of the holders of Allowed Claims in
Class 7 against holders of Allowed Claims in Group 8-B
arising from the contractual subordination, "make whole,"
default interest, post-petition interest, and other similar
provisions set forth in the 11% Note Indenture and the 7
1/2% Convertible Note Indenture.
Subsequent means the twentieth day after the end of the Quarter
Distribution Date following the Quarter in which the Initial Distribution Date
occurs and the twentieth day after the end of each such
subsequent Quarter.
Subsidiary means a corporation, partnership or other entity of which
shares of stock or other ownership interests having ordinary
voting power (other than stock or such other ownership
interests having such power only by reason of the happening
of a contingency) to elect a majority of the board of
directors or other managers of such corporation, partnership
or other entity are at the time owned, or the management of
which is otherwise controlled, directly or indirectly
through one or more intermediaries, or both, by the Debtor.
Surplus has the meaning assigned to such term in Section VI.C.3 of
Distributions the Plan.
7 1/2% Convertible means the unsecured Claims of the 7 1/2% Convertible
Note Claims Noteholders arising under or as a result of the 7 1/2%
Convertible Notes.
7 1/2% Convertible means holders of the 7 1/2% Convertible Notes.
Noteholders
7 1/2% Convertible means the 7 1/2% Convertible Subordinated Notes, due 2004,
Notes of Westbridge issued and outstanding under the 7 1/2%
Convertible Note Indenture.
7 1/2% Convertible
Note Indenture means that certain Indenture, dated as of April 24, 1997,
between Westbridge, as issuer, and First Union National
Bank, as Trustee, pursuant to which the 7 1/2% Convertible
Notes were issued, together with any amendments or
supplements thereto.
Trustee means, (i) with respect to the 11% Note Indenture, Bank One
Trust Company, N.A., in its capacity as trustee under such
indenture and (ii) with respect to the 7 1/2% Convertible
Note Indenture, First Union National Bank, in its capacity
as trustee under such indenture.
Underwriter means Forum Capital Markets, L.P. or Raymond James &
Associates, Inc.
Underwriter Claim means a Claim asserted by an Underwriter for reimbursement,
contribution or indemnification (including pursuant to any
indemnification agreement) on account of or relating to a
Claim for damages or rescission arising out of the purchase
or sale of 7 1/2% Convertible Notes or 11%, to the extent
that such Claims arise in connection with the Putative Class
Action and the Final Settlement Agreement.
Unsecured Claim means any Claim that is not a Secured Claim, Administrative
Claim, Convenience Claim, Priority Tax Claim or Priority
Non-Tax Claim.
Unvested Old means all shares of Old Restricted Common Stock which were
Restricted Common not vested as of the Petition Date under the Restricted
Stock Stock Plan dated as of April 19, 1996 (including all shares
which have vested but have not yet been issued).
Westbridge means Westbridge Capital Corp., a Delaware corporation, also
referred to herein as the "Debtor".
<PAGE>
B. Interpretation, Application of Definitions and Rules of
Construction. Wherever from the context it appears appropriate, each term stated
in either the singular or the plural shall include both the singular and plural,
and pronouns stated in the masculine, feminine or neuter gender shall include
the masculine, feminine and neuter, such meanings to be applicable to both the
singular and plural forms of the terms defined. Capitalized terms in the Plan
that are not defined herein shall have the same meaning assigned to such terms
by the Bankruptcy Code or Bankruptcy Rules, as the case may be. The words
"herein," "hereof," and "hereunder" and other words of similar import refer to
the Plan as a whole and not to any particular section or subsection in the Plan
unless expressly provided otherwise. All gender references shall be deemed to
refer to both genders. The words "includes" and "including" are not limiting and
mean that the things specifically identified are set forth for purposes of
illustration, clarity or specificity and do not in any respect qualify,
characterize or limit the generality of the class within which such things are
included. Captions and headings to articles, sections and exhibits are inserted
for convenience of reference only, are not a part of this Plan, and shall not be
used to interpret this Plan. The rules of construction set forth in section 102
of the Bankruptcy Code shall apply to this Plan. In computing any period of time
prescribed or allowed by this Plan, the provisions of Bankruptcy Rule 9006(a)
shall apply.
II.
CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS
Introduction. All Claims and Equity Interests, except Administrative
Claims and Priority Tax Claims, are placed in the Classes set forth below. In
accordance with section 1123(a)(1) of the Bankruptcy Code, Administrative Claims
and Priority Tax Claims, as described below, have not been classified.
A Claim or Equity Interest is placed in a particular Class only to
the extent that the Claim or Equity Interest falls within the description of
that Class, and is classified in other Classes to the extent that any portion of
the Claim or Equity Interest falls within the description of such other Classes.
A Claim is also placed in a particular Class for the purpose of receiving
distributions pursuant to the Plan only to the extent that such Claim is an
Allowed Claim in that Class and such Claim has not been paid, released, or
otherwise settled prior to the Effective Date.
1. Unclassified Claims (not entitled to vote on the Plan)
(a) Administrative Claims.
(b) Priority Tax Claims.
2. Unimpaired Classes Of Claims (deemed to have accepted the Plan
and, therefore, not entitled to vote on the Plan)
(a) Class 1: Priority Non-Tax Claims.
Class 1 consists of all Priority Non-Tax Claims.
(b) Class 2: LaSalle Claims.
Class 2 consists of the LaSalle Claims.
(c) Class 3: Convenience Claims.
Class 3 consists of all Convenience Claims.
<PAGE>
(d) Class 4: Secured Claims.
Class 4 consists of all Secured Claims.
(e) Class 5: Intercompany Claims.
Class 5 consists of all Intercompany Claims.
(f) Class 6: Securities Litigation Claims.
Class 6 consists of all Securities Litigation Claims.
3. Impaired Classes of Claims and Interests (entitled to
vote on the Plan)
(a) Class 7: 11% Note Claims.
Class 7 consists of all 11% Note Claims. Class 7 Claims have been
divided into separate groups described below. Together, all of the
groups of 11% Note Claims constitute a single Class of Claims for
voting purposes under the Plan and the Bankruptcy Code.
(i) Group 7-A: Group 7-A consists of all 11%
Note Claims other than CSFB 11% Note Claims.
(ii) Group 7-B: Group 7-B consists of all CSFB
11% Note Claims.
(b) Class 8: Unsecured Claims.
Class 8 consists of all Unsecured Claims (other than 11% Note
Claims and CSFB 11% Note Claims). Class 8 Unsecured Claims have been
divided into separate groups described below. Together, all of the
groups of Unsecured Claims (other than 11% Note Claims and CSFB 11%
Note Claims) constitute a single Class of Claims for voting purposes
under the Plan and the Bankruptcy Code.
(i) Group 8-A: Group 8-A consists of all
General Unsecured Claims.
(ii) Group 8-B: Group 8-B consists of all 7 1/2%
Convertible Note Claims.
(c) Class 9: Old Preferred Stock Interests.
Class 9 consists of all Old Preferred Stock Interests.
<PAGE>
(d) Class 10: Old Common Stock Interests and Old
Restricted Common Stock Interests.
Class 10 consists of all Old Common Stock Interests and Old
Restricted Common Stock Interests.
4. Impaired Classes Of Claims And Equity Interests (deemed to have
rejected the Plan and, therefore, not entitled to vote on the Plan)
(a) Class 11: Unvested Old Restricted Common Stock
Interests.
Class 11 consists of all Unvested Old Restricted
Common Stock Interests.
(b) Class 12: Old Warrant Interests.
Class 12 consists of all Old Warrant Interests.
(c) Class 13: Old Option Interests.
Class 13 consists of all Old Option Interests.
III.
TREATMENT OF ADMINISTRATIVE
EXPENSE CLAIMS AND PRIORITY TAX CLAIMS
1. Administrative Claims
<PAGE>
Except to the extent that any entity entitled to payment of any Allowed
Administrative Claim agrees to a different treatment, each holder of an Allowed
Administrative Claim shall receive Cash in an amount equal to such Allowed
Administrative Claim on the later of the Effective Date and the date such
Administrative Claim becomes an Allowed Administrative Claim, or as soon
thereafter as is practicable; provided, however, that Allowed Administrative
Claims representing liabilities incurred in the ordinary course of business by
the Debtor in Possession or liabilities arising under loans or advances to or
other obligations incurred by the Debtor in Possession (to the extent authorized
and approved by the Court if such authorization and approval was required under
the Bankruptcy Code) shall be paid in full and performed by Reorganized
Westbridge in the ordinary course of business in accordance with the terms and
subject to the conditions of any agreements governing, instruments evidencing,
or other documents relating to, such transactions.
2. Professional Compensation And Reimbursement Claims
All entities seeking an award by the Court of compensation for services
rendered or reimbursement of expenses incurred through and including the
Confirmation Date under sections 503(b)(2), 503(b)(3), 503(b)(4) or 503(b)(5) of
the Bankruptcy Code (a) shall file their respective final applications for
allowances of compensation for services rendered and reimbursement of expenses
incurred through the Confirmation Date by the date that is 60 days after the
Effective Date or such other date as may be fixed by the Court and (b) if
granted, such an award by the Court shall be paid in full in such amounts as are
Allowed by the Court (i) on the date such Administrative Claim becomes an
Allowed Administrative Claim, or as soon thereafter as is practicable or (ii)
upon such other terms as may be mutually agreed upon between such holder of an
Administrative Claim and the Debtor in Possession or, on and after the Effective
Date, Reorganized Westbridge.
3. Priority Tax Claims
Except to the extent that a holder of an Allowed Priority Tax Claim has
been paid by the Debtor prior to the Effective Date or agrees to a different
treatment, each holder of an Allowed Priority Tax Claim shall receive, at the
sole option of Reorganized Westbridge, (a) Cash in an amount equal to such
Allowed Priority Tax Claim on the later of the Effective Date and the date such
Priority Tax Claim becomes an Allowed Priority Tax Claim, or as soon thereafter
as is practicable, or (b) equal annual Cash payments in an aggregate amount
equal to such Allowed Priority Tax Claim, together with interest at a fixed
annual rate equal to 8-1/4%, over a period through the sixth anniversary of the
date of assessment of such Allowed Priority Tax Claim, or upon such other terms
determined by the Court to provide the holder of such Allowed Priority Tax Claim
deferred Cash payments having a value, as of the Effective Date, equal to such
Allowed Priority Tax Claim. Each holder of a Priority Tax Claim which is not
payable on or before the Effective Date will survive confirmation of the Plan,
remain unaffected thereby, and be paid as and when due, except to the extent
that a holder of such Claim agrees to a different treatment.
<PAGE>
IV.
TREATMENT OF CLAIMS AND
EQUITY INTERESTS
1. Class 1 - Priority Non-Tax Claims
(a) Distributions. Each Allowed Claim in Class 1 shall be paid in full
in Cash on the Effective Date (if not before) except to the extent that any
holder of such an Allowed Claim agrees to a different treatment.
(b) Impairment and Voting. Class 1 shall be unimpaired under the Plan.
Holders of Allowed Claims in Class 1 are presumed to accept the Plan and are not
entitled to vote to accept or reject the Plan.
2. Class 2 - LaSalle Claim
(a) Distributions. On or about the Effective Date, Reorganized Westbridge
shall execute and deliver to LaSalle the Amended Guarantee Agreement. The
Debtor's reimbursement obligations to LaSalle in respect of the LaSalle Letter
of Credit and LaSalle's Lien on the LaSalle Letter of Credit Collateral and
LaSalle Credit Agreement Collateral are hereby ratified and affirmed and shall
not be affected by the Plan. Accordingly, the LaSalle Claim shall be unimpaired
under section 1124 of the Bankruptcy Code, except to the extent that the holder
of such Claim agrees to a different treatment, and shall not be affected by the
Plan or the Chapter 11 Case.
(b) Impairment and Voting. Class 2 shall be unimpaired under the Plan. The
holder of Allowed Claims in Class 2 is presumed to accept the Plan and is not
entitled to vote to accept or reject the Plan.
3. Class 3 - Convenience Claims
(a) Distributions. Each holder of an Allowed Convenience Claim shall
receive Cash in an amount equal to 100% of such Allowed Convenience Claim on the
later of the Effective Date and the date such Convenience Claim becomes an
Allowed Convenience Claim, or as soon thereafter as is practicable.
(b) Impairment and Voting. Class 3 shall be unimpaired under the Plan. The
holders of Allowed Claims in Class 3 are presumed to accept the Plan and are not
entitled to vote to accept or reject the Plan.
<PAGE>
(c) Election to be Treated as a Convenience Claim. By checking the
appropriate box on a timely cast Ballot, the holder of an Allowed General
Unsecured Claim in an amount greater than $2,000 may elect to reduce the amount
of such holder's Allowed General Unsecured Claim to $2,000 and to receive a
distribution upon such Allowed Class 3 Convenience Claim in the amount of $2,000
as described above. Such an election shall constitute a waiver of the right to
collect, and a release of, the amount of the Allowed General Unsecured Claim in
excess of $2,000, and the holder of such Allowed Class 3 Convenience Claim shall
be deemed to have released the Debtor and its estate, and its property from any
and all liability for such excess amount. The holder of an Allowed General
Unsecured Claim which timely elects to reduce the amount of its Allowed Claim
shall be deemed to be the holder of an Allowed Class 3 Convenience Claim for
classification, voting and all other purposes under the Plan.
4. Class 4 - Secured Claims
(a) Distributions.
Except to the extent that a holder of an Allowed Secured Claim agrees to a
different treatment, at the sole option of the Debtor, (i) each Allowed Secured
Claim shall be reinstated and rendered unimpaired in accordance with section
1124(2) of the Bankruptcy Code, notwithstanding any contractual provision or
applicable nonbankruptcy law that entitles the holder of an Allowed Secured
Claim to demand or receive payment of such Allowed Secured Claim prior to the
stated maturity of such Allowed Secured Claim from and after the occurrence of a
default, (ii) each holder of an Allowed Secured Claim shall receive Cash in an
amount equal to such Allowed Secured Claim, including any interest on such
Allowed Secured Claim required to be paid pursuant to section 506(b) of the
Bankruptcy Code, on the later of the Effective Date and the date such Allowed
Secured Claim becomes an Allowed Secured Claim, or as soon thereafter as is
practicable, or (iii) each holder of an Allowed Secured Claim shall receive the
collateral securing its Allowed Secured Claim and any interest on such Allowed
Secured Claim required to be paid pursuant to section 506(b) of the Bankruptcy
Code, in full and complete satisfaction of such Allowed Secured Claim on the
later of the Effective Date and the date such Allowed Secured Claim becomes an
Allowed Secured Claim, or as soon thereafter as is practicable.
(b) Impairment and Voting. Class 4 shall be unimpaired under the Plan. The
holders of Allowed Claims in Class 4 are presumed to accept the Plan and are not
entitled to vote to accept or reject the Plan.
5. Class 5 - Intercompany Claims
(a) Distributions. Intercompany Claims shall be unimpaired under section
1124 of the Bankruptcy Code, and shall not be affected by the Plan or the
Chapter 11 Case.
(b) Impairment and Voting. Class 5 shall be unimpaired under the Plan. The
holders of Allowed Claims in Class 5 are presumed to accept the Plan and are not
entitled to vote to accept or reject the Plan.
<PAGE>
6. Class 6 - Securities Litigation Claims
(a) Distributions. Each holder of a Class 6 Claim shall receive in respect
thereof all rights and distributions to which such holder is entitled as a
Securities Litigation Claimant pursuant to the Claims Agreement, the District
Court Order and the Final Settlement Agreement. A holder of a Class 6 Claim that
is provided for by this Section IV.6(a) shall not be entitled to receive any
additional payments or distributions by reason of Claims for the same loss or
damages filed against the Debtor.
(b) Impairment and Voting. Class 6 shall be unimpaired under the Plan. The
holders of Claims in Class 6 are presumed to accept the Plan and are not
entitled to vote to accept or reject the Plan.
7. Class 7 - Unsecured 11% Note Claims
-----------------------------------
(a) Distributions.
(i) Group 7-A. On the Initial Distribution Date or as
soon thereafter as is practicable, each holder of an Allowed 11% Note
Claim as of the Record Date shall receive Cash in an amount equal to
such Allowed 11% Note Claim as calculated in accordance with clause
(iii) below.
(ii) Group 7-B. On the Initial Distribution Date or
as soon thereafter as is practicable, each holder of an Allowed CSFB
11% Note Claim as of the Record Date shall receive New Convertible
Preferred Stock with a liquidation preference equal to such Allowed
CSFB 11% Note Claim.
(iii) Allowance of Group 7-A and Group 7-B Claims.
On, and subject to the occurrence of, the Effective Date, the CSFB
11% Note Claims and the 11% Note Claims shall be deemed Allowed 11%
Note Claims and Allowed CSFB 11% Note Claims in Class 7 in the
aggregate amount of $22,114,445 as of the Petition Date (consisting
of Allowed 11% Note Claims in the aggregate amount of $14,421,935.31
and Allowed CSFB 11% Note Claims in the aggregate amount of
$7,692,509.69), plus simple interest accruing at the rate per annum
of eleven percent (11%) on the principal amount of the Allowed CSFB
11% Note Claims and Allowed 11% Note Claims from and after the
Petition Date to but not including the Effective Date.
(b) Impairment and Voting. Class 7 is impaired under the Plan. The holders
of Allowed Claims in Class 7 are entitled to vote to accept or reject the Plan.
<PAGE>
8. Class 8 - Other Unsecured Claims
(a) Distributions.
(i) Group 8-A.
(1) On the Initial Distribution Date or as soon thereafter as is
practicable, each holder of an Allowed General Unsecured Claim as of the
Record Date shall receive its Pro Rata share of the Initial Group 8-A
Distribution Amount less the number of shares of New Common Stock in the
Reserve.
(2) On each Subsequent Distribution Date, each holder of an Allowed
General Unsecured Claim as of the Record Date shall receive a Pro Rata
share of the New Common Stock in the Surplus Distribution being made on
such Subsequent Distribution Date.
(ii) Allowance of Underwriter Claims. On, and subject
to the occurrence of, the Effective Date, the Underwriter
Claims shall be deemed Allowed General Unsecured Claims in
Group 8-A in an aggregate amount not to exceed $250,000.
(ii) Group 8-B.
(1) On the Initial Distribution Date or as soon thereafter as is
practicable, each holder of an Allowed 7 1/2% Convertible Note Claim as of
the Record Date shall receive its Pro Rata share of the Initial Group 8-B
Distribution Amount less the number of shares of New Common Stock in the
Reserve.
(2) On each Subsequent Distribution Date, each holder of an Allowed 7
1/2% Note Claim as of the Record Date shall receive its Pro Rata Share of
New Common Stock in the Surplus Distribution being made on such Subsequent
Distribution Date.
(3) On, and subject to the occurrence of, the Effective Date, the 7
1/2% Convertible Note Claims shall be deemed Allowed Unsecured Claims in
Group 8-B in the aggregate amount of $77,260,416.
(4) As set forth in Section XIII, holders of Allowed 7 1/2%
Convertible Note Claims as of May 20, 1998, who remain holders of such 7
1/2% Convertible Notes as of October 22, 1998, shall be entitled to
participate, at their option, in the purchase of New Convertible Preferred
Stock.
<PAGE>
(b) Impairment and Voting. Class 8 is impaired under the Plan. The holders
of Allowed Claims in Class 8 are entitled to vote to accept or reject the Plan.
9. Class 9 - Old Preferred Stock Interests
(a) Distributions. On the Initial Distribution Date or as soon thereafter
as is practicable, each holder of an Allowed Class 9 Old Preferred Stock
Interest shall receive its Pro Rata share of (i) New Common Stock representing
4% of all issued and outstanding shares of New Common Stock on the Effective
Date and (ii) New Warrants to purchase up to 2% of all issued and outstanding
shares of New Common Stock on a fully-diluted basis.
(b) Impairment and Voting. Class 9 is impaired under the Plan. The holders
of Allowed Class 9 Old Preferred Stock Interests are entitled to vote to accept
or reject the Plan.
10. Class 10 - Old Common Stock Interests and Old Restricted
Common Stock Interests
(a) Distributions. On the Initial Distribution Date or as soon thereafter
as is practicable, each holder of an Allowed Class 10 Old Common Stock Interest
and an Allowed Class 10 Old Restricted Common Stock Interest shall receive its
Pro Rata share of (i) New Common Stock representing 2% of all issued and
outstanding shares of New Common Stock on the Effective Date and (ii) New
Warrants to purchase up to 5% of all issued and outstanding shares of New Common
Stock on a fully-diluted basis.
(b) Impairment of Voting. Class 10 is impaired under the Plan. The holders
of Allowed Class 10 Old Common Stock Interests and Allowed Class 10 Old
Restricted Common Stock Interests are entitled to vote to accept or reject the
Plan.
11. Class 11 - Unvested Old Restricted Common Stock Interests
---------------------------------------------------------
(a) Distributions. On the Effective Date, the Unvested Old Restricted
Common Stock shall be canceled and the holders of Unvested Old Restricted Stock
shall not be entitled to, and shall not, receive or retain any property or
interest in property on account of such Unvested Old Restricted Common Stock.
(b) Impairment and Voting. Class 11 is impaired under the Plan. The holders
of Allowed Class 11 Interests are deemed to have rejected the Plan, and,
therefore, are not entitled to vote to accept or reject the Plan.
<PAGE>
12. Class 12 - Old Warrant Interests
(a) Distributions. On the Effective Date, the Old Warrants shall be
canceled and the holders of Old Warrants shall not be entitled to, and shall
not, receive or retain any property or interest in property on account of such
Old Warrants.
(b) Impairment and Voting. Class 12 is impaired under the Plan. The holders
of Allowed Class 12 Interests are deemed to have rejected the Plan, and,
therefore, are not entitled to vote to accept or reject the Plan.
13. Class 13 - Old Option Interests
(a) Distributions. On the Effective Date, the Old Options shall be canceled
and the holders of Old Options shall not be entitled to, and shall not, receive
or retain any property or interest in property on account of such Old Options.
(b) Impairment and Voting. Class 13 is impaired under the Plan. The holders
of Allowed Class 13 Interests are deemed to have rejected the Plan, and,
therefore, are not entitled to vote to accept or reject the Plan.
V.
PROVISIONS REGARDING CORPORATE
GOVERNANCE AND MANAGEMENT
OF REORGANIZED WESTBRIDGE
A. Directors and Officers of Reorganized Westbridge
1. The Initial Board of Directors
The initial board of directors of Reorganized Westbridge shall
consist of seven (7) members, four of whom shall be selected by CSFB or its
designee, one of whom shall be selected by the Creditors Committee and two of
whom shall be selected by Westbridge or Reorganized Westbridge, whose names
shall be disclosed on or before the date of the Confirmation Hearing.
2. Management of Reorganized Westbridge
On the Effective Date, the Board of Directors of Reorganized
Westbridge set forth in Section V.A.1 hereof, who shall be appointed pursuant to
the Confirmation Order, shall take office and be deemed appointed on the
Effective Date.
3. Officers
The officers of the Debtor immediately prior to the Effective
Date shall serve as the initial officers of Reorganized Westbridge on and after
the Effective Date. Such officers shall serve in accordance with any employment
agreement with Reorganized Westbridge and applicable nonbankruptcy law.
B. Corporate Action
1. Amended Westbridge Certificate of Incorporation and Amended
Westbridge By-Laws. The adoption of the Amended Westbridge Certificate of
Incorporation and Amended Westbridge By-Laws shall be deemed to have occurred
and be effective as of the Effective Date without any further action by the
directors or stockholders of Westbridge or Reorganized Westbridge. The Amended
Westbridge Certificate of Incorporation shall, among other things, contain
appropriate provisions consistent with the Plan (i) governing the authorization
of the New Convertible Preferred Stock and the New Common Stock, (ii)
prohibiting the issuance of nonvoting equity securities as required by section
1123(a)(6) of the Bankruptcy Code, and (iii) implementing such other matters as
Reorganized Westbridge, CSFB and the Creditors Committee believe are necessary
and appropriate to effectuate the terms and conditions of the Plan. The Amended
Westbridge Certificate of Incorporation shall not include any "super-majority"
voting provisions. On or prior to the Effective Date, Reorganized Westbridge
shall file with the Secretary of State of the State of Delaware, in accordance
with sections 103 and 303 of the Delaware General Corporation Law, the Amended
Westbridge Certificate of Incorporation and such certificate shall be the
certificate of incorporation for Reorganized Westbridge.
C. Securities to Be Issued Pursuant to the Plan
1. New Common Stock
On the Effective Date, the issuance of 30,000,000 shares of New
Common Stock is hereby authorized without further act or action under applicable
law, regulation, rule or order. The Debtor shall issue and distribute 6,500,000
of such authorized shares to the holders of Allowed Claims or Allowed Interests
in Classes 8, 9 and 10 in accordance with this Plan. Each share of New Common
Stock will entitle its holder to one vote. Holders of New Common Stock will have
the right to participate proportionately in any dividends distributed by
Reorganized Westbridge.
2. New Convertible Preferred Stock
<PAGE>
On the Effective Date, the issuance of 40,000 shares of New
Convertible Preferred Stock is hereby authorized without further act or action
under applicable law, regulation, rule or order. The Debtor shall issue and
distribute 22,750 (such number to increase if the Effective Date occurs after
December 31, 1998) of such authorized shares in the aggregate to CSFB (under the
Stock Purchase Agreement and as a holder of the CSFB 11% Note Claims) and
holders of 7 1/2% Convertible Notes who exercise the Purchase Rights in
accordance with this Plan. The complete terms of the New Convertible Preferred
Stock will be as set forth in the Certificate of Designation included in the
Plan Supplement.
3. The New Warrants
On the Effective Date, the issuance of New Warrants to purchase
up to 7% of New Common Stock on a fully diluted basis is hereby authorized
without further act or action under applicable law, regulation, rule or order.
The New Warrants will entitle the holders thereof to receive the right to
purchase, pro rata, 7% of all issued and outstanding shares of New Common Stock
on a fully-diluted basis. The New Warrants will have an initial exercise price
based on an enterprise valuation of $95 million, will be subject to customary
anti-dilution provisions and will expire on the fifth anniversary of the
Effective Date.
4. Securities Laws Matters
(a) Registration Rights Agreement. Each Initial Holder receiving a
distribution of New Convertible Preferred Stock or New Common Stock representing
more than 10% of the aggregate New Convertible Preferred Stock or New Common
Stock issued on the Effective Date shall be entitled to become a party to the
Registration Rights Agreement.
(b) Public Market. Westbridge and Reorganized Westbridge shall make all
reasonable efforts necessary to ensure an active and fully-valued public market
for the trading of the New Common Stock.
D. Retention and Incentive Bonus Program
If not theretofore adopted by the Debtor, on the Effective Date,
Reorganized Westbridge or Westbridge will have implemented the retention and
incentive bonus program (the "Bonus Program") in substantially the form
contained in the Plan Supplement.
E. Marketing Agent Stock Options
If not theretofore adopted by the Debtor, on the Effective Date,
Reorganized Westbridge will adopt a stock option plan which permits Reorganized
Westbridge to grant to its marketing agents options to acquire up to 3% of all
issued and outstanding shares of New Common Stock on a fully diluted basis (the
"Agent Options"), which stock option plan shall be in substantially the form
contained in the Plan Supplement.
<PAGE>
F. Officer and Director Stock Options
If not theretofore adopted by the Debtor, on the Effective Date,
Reorganized Westbridge will adopt a stock option plan which permits Reorganized
Westbridge to grant to its officers and directors options to acquire up to 10%
of all issued and outstanding shares of New Common Stock on a fully diluted
basis (the "Officer and Director Stock Options"), which stock option plan shall
be in substantially the form contained in the Plan Supplement.
VI.
PROVISIONS REGARDING VOTING AND
DISTRIBUTIONS UNDER THE PLAN AND TREATMENT
OF DISPUTED, CONTINGENT AND UNLIQUIDATED
ADMINISTRATIVE CLAIMS, CLAIMS AND EQUITY INTERESTS
A. Voting of Claims and Equity Interests. Each holder of an Allowed
Claim or an Allowed Equity Interest in an Impaired Class of Claims or Equity
Interests shall be entitled to vote separately to accept or reject the Plan as
provided in such order as may be entered by the Court establishing certain
procedures with respect to the solicitation and tabulation of votes to accept or
reject the Plan, or any other order or orders of the Court.
B. Nonconsensual Confirmation. If any Impaired Class of Claims or
Equity Interests entitled to vote shall not accept the Plan by the requisite
statutory majorities provided in sections 1126(c) or 1126(d) of the Bankruptcy
Code, as applicable, the Debtor reserves the right to have the Court confirm the
Plan under section 1129(b) of the Bankruptcy Code.
C. Distributions.
1. Method of Distribution Under the Plan
(a) Date and Delivery of Distribution. Distributions under the Plan shall
be made by Reorganized Westbridge or its designee to the holders of Allowed
Administrative Claims, Allowed Claims or Allowed Equity Interests at the
addresses set forth on the Schedules, unless such addresses are superseded by
proofs of claim or transfers of claims filed pursuant to Bankruptcy Rule 3001
(or at the last known addresses of such holders if Westbridge or Reorganized
Westbridge has been notified in writing of a change of address).
<PAGE>
(b) Distribution of Cash. Any payment of Cash by Reorganized Westbridge
pursuant to the Plan shall be made at the option and in the sole discretion of
Reorganized Westbridge, by (i) a check drawn on, or (ii) wire transfer from, a
domestic bank selected by Reorganized Westbridge.
(c) Distribution of Unclaimed Property. Any distribution of Cash under the
Plan which is unclaimed after the later to occur of (a) five years after
distribution or (b) six months after the date on which such claimant's Claim is
allowed shall be transferred to Reorganized Westbridge notwithstanding state or
other escheat or similar laws to the contrary. Distributions under the Plan
consisting of New Common Stock or New Warrants that are unclaimed for a period
of five years after distribution shall be added to the Reserve and entitlement
by the holder of a Claim or Interest to such distribution shall be extinguished
and forever barred. The Debtor shall file with the Court a list of holders of
unclaimed distributions of Cash, New Common Stock and New Warrants on the third,
fourth and fifth anniversaries of the Effective Date.
(d) Saturdays, Sundays, or Legal Holidays. If any payment or act under the
Plan is required to be made or performed on a date that is not a Business Day,
then the making of such payment or the performance of such act may be completed
on the next succeeding Business Day, and shall be deemed to have been completed
as of the required date.
(e) Fractional Shares. No fractional shares of New Common Stock or New
Convertible Preferred Stock shall be distributed. When any distribution on
account of an Allowed Claim or Allowed Interest pursuant to the Plan would
otherwise result in the issuance of a number of shares of New Common Stock or
New Convertible Preferred Stock that is not a whole number, the actual
distribution of shares of New Common Stock or New Convertible Preferred Stock
shall be rounded as follows: (i) fractions of one-half or greater shall be
rounded to the next higher whole number and (ii) fractions of less than one-half
shall be rounded to the next lower whole number.
(f) Distributions to Holders as of the Record Date. As at the close of
business on the Record Date, the claims register (for Claims) and transfer
ledger (for Equity Interests) shall be closed, and there shall be no further
changes in the record holders of any Claims or Equity Interests. The Debtor and
Reorganized Westbridge shall have no obligation to recognize any transfer of any
Claims or Equity Interests occurring after the Record Date. The Debtor and
Reorganized Westbridge shall instead be entitled to recognize and deal for
purposes under the Plan (except as to voting to accept or reject the Plan
pursuant to Section VI.A) with only those record holders stated on the claims
register (for Claims) and transfer ledgers (for Equity Interests) as of the
close of business on the Record Date.
<PAGE>
2. Disputed General Unsecured Claims
(a) Distributions Withheld For Disputed General Unsecured Claims.
(i) Establishment And Maintenance Of Reserve. On the
Initial Distribution Date and each Subsequent Distribution Date,
Reorganized Westbridge shall place into a reserve an amount of New
Common Stock equal to 100% of the distributions to which holders of
Disputed General Unsecured Claims would be entitled under the Plan as
of such date if such Disputed General Unsecured Claims were Allowed
General Unsecured Claims in their Disputed Claim Face Amounts (the
"Reserve"). Such amounts shall be determined by reference to the
aggregate Face Amount of all Disputed General Unsecured Claims that
have Face Amounts, plus an amount to be determined by the Court to be
reserved for any given Disputed General Unsecured Claims that do not
have Face Amounts.
(ii) Property Held in Reserve. Cash held in the
Reserve, if any (including dividends paid on New Common Stock held in
the Reserve, if any), shall be deposited in a segregated bank account
or accounts in the name of Reorganized Westbridge and designated as
held in trust for the benefit of holders of Allowed General Unsecured
Claims. Cash held in the Reserve shall not constitute property of
Reorganized Westbridge. Reorganized Westbridge shall invest the Cash
held in the Reserve in a manner consistent with the investment
guidelines to be agreed upon by the Debtor and the Creditors
Committee, which investment guidelines shall be included in the Plan
Supplement. Reorganized Westbridge shall pay, or cause to be paid,
out of the funds held in the Reserve, any tax imposed on the Reserve
by any governmental unit with respect to income generated by the
property held in the Reserve. The yield earned on such invested Cash
(net of applicable taxes) shall be distributed to each holder of an
Allowed Unsecured Claim on the last Subsequent Distribution Date
under the Plan, based upon each holder's Pro Rata share. New Common
Stock held in the Reserve shall be held in trust by Reorganized
Westbridge for the benefit of the potential claimants of such
securities and shall not constitute property of Reorganized
Westbridge.
<PAGE>
(iii) Distributions Upon Allowance Of Disputed
General Unsecured Claims. The holder of a Disputed General Unsecured
Claim that becomes an Allowed Claim subsequent to the Initial
Distribution Date shall receive a distribution of New Common Stock
from the Reserve on the next Subsequent Distribution Date that
follows the Quarter during which such Disputed General Unsecured
Claim becomes an Allowed Claim pursuant to a Final Order. Such
distributions shall be made in accordance with the Plan based upon
the distributions that would have been made to such holder under the
Plan if the Disputed General Unsecured Claim had been an Allowed
Claim on or prior to the Effective Date.
3. Surplus Distributions to Holders of Allowed Unsecured Claims.
The following consideration shall constitute surplus distributions (the "Surplus
Distributions") pursuant to the Plan: (i) pursuant to Section VI.C.1(c),
distributions under the Plan to holders of Allowed Unsecured Claims that are
unclaimed for a period of five years after distribution thereof; and (ii) to the
extent that a Disputed General Unsecured Claim is not Allowed or becomes an
Allowed Claim in an amount less than the Disputed Claim Face Amount, shares of
New Common Stock equal to the number of shares of New Common Stock held in the
Reserve on account of such excess. The Surplus Distributions shall be
distributed to the holders of Allowed Unsecured Claims pursuant to Section IV.8
of the Plan[^]; provided, however, that Reorganized Westbridge shall not be
under any obligation to make Surplus Distributions on a Subsequent Distribution
Date unless the New Common Stock to be distributed on a Subsequent Distribution
Date consists of 1,000 shares of New Common Stock or more, unless the
distribution is the final Subsequent Distribution Date under the Plan.
4. Objections To And Resolution Of Administrative Claims and
Claims; Administrative and Priority Claims Reserve.
(a) Objections To And Resolution of Administrative Claims and Claims.
Except as to applications for allowances of compensation and reimbursement of
expenses under sections 330 and 503 of the Bankruptcy Code, the Debtor,
Reorganized Westbridge, the Creditors Committee and CSFB shall have the
exclusive right to make and file objections to Administrative Claims and Claims
subsequent to the Confirmation Date. All objections shall be litigated to a
Final Order; provided, however, that Reorganized Westbridge, the Creditors
Committee and CSFB, jointly, shall have the authority to compromise, settle,
otherwise resolve or withdraw any objections, or otherwise settle or compromise
any Claim, without approval of the Court. Unless otherwise ordered by the Court,
the Debtor, Reorganized Westbridge, the Creditors Committee, or CSFB shall file
all objections to Administrative Claims and Claims that are the subject of
proofs of claims or requests for payment filed with the Court (other than
applications for allowances of compensation and reimbursement of expenses) and
serve such objections upon the holders of the Administrative Claim or Claim as
to which the objection is made as soon as is practicable, but in no event later
than 60 days after the Effective Date or such later date as may be approved by
the Court.
(b) Administrative and Priority Claims Reserve.
<PAGE>
(i) Establishment of Administrative and Priority
Claims Reserve. On the Effective Date, Reorganized Westbridge shall
place into reserve an amount of Cash equal to (i) the sum of the
aggregate Face Amount of all Disputed Administrative Claims, Disputed
Priority Tax Claims, and Disputed Priority Non-Tax Claims that have
Face Amounts, plus (ii) an amount to be determined by the Court to be
reserved for any Disputed Administrative Claims, Disputed Priority
Tax Claims and Disputed Priority Non-Tax Claims that do not have Face
Amounts (the "Administrative and Priority Claims Reserve").
(ii) Cash Held in Administrative and Priority Claims
Reserve. Cash held in the Administrative and Priority Claims Reserve
shall be deposited in a segregated bank account or accounts in the
name of Reorganized Westbridge and designated as held in trust for
the benefit of holders of Allowed Administrative Claims, Allowed
Priority Tax Claims and Allowed Priority Non-Tax Claims. Cash held in
the Administrative and Priority Claims Reserve shall not constitute
property of Reorganized Westbridge. Reorganized Westbridge shall
invest the Cash held in the Administrative and Priority Claims
Reserve in a manner consistent with investment guidelines to be
included in the Plan Supplement. Reorganized Westbridge shall pay, or
cause to be paid, out of the funds held in the Administrative and
Priority Claims Reserve, any tax imposed on the Administrative and
Priority Claims Reserve by any governmental unit with respect to
income generated by Cash held in the Administrative and Priority
Claims Reserve. Any Cash held in the Administrative and Priority
Claims Reserve after all Administrative and Priority Claims have been
Allowed or disallowed shall be transferred to and become the property
of Reorganized Westbridge.
5. Hart-Scott-Rodino Act Filing Requirements
Any person or entity who will receive a distribution of New
Convertible Preferred Stock and/or New Common Stock under the Plan who is
required to file a pre-merger notification and report pursuant to the HSR Act,
shall not receive such distribution until the notification and waiting periods
under the HSR Act applicable to such person or entity shall have expired or been
terminated.
6. Allocation of Consideration
The aggregate consideration to be distributed to the holders of
Allowed Claims in each Class under the Plan shall be treated as first satisfying
an amount equal to the stated principal amount of the Allowed Claim for such
holders and any remaining consideration as satisfying accrued, but unpaid,
interest and costs, if any, and attorneys' fees where applicable.
<PAGE>
7. Cancellation and Surrender of Existing Securities and Agreements.
As of the latest to occur of the Effective Date and the Initial
Distribution Date, the 11% Notes, the 7 1/2% Convertible Notes, the 11% Note
Indenture, the 7 1/2% Convertible Note Indenture, the Old Preferred Stock, the
Old Common Stock, the Old Restricted Stock, the Old Warrants and the Old Options
shall be deemed canceled and such agreements and securities, together with all
security interests, liens and instruments issued pursuant thereto, shall have no
further legal effect other than as evidence of any right to receive
distributions under the Plan; provided, however, that the 11% Note Indenture and
7 1/2% Convertible Note Indenture shall continue in effect solely for the
purposes of (i) allowing the applicable Trustee to make the distributions to be
made on account of such Claims under the Plan, and (ii) permitting such
applicable Trustee to maintain any rights or liens it may have for fees, costs
and expenses under the 11% Note Indenture and 7 1/2% Convertible Note Indenture.
Notwithstanding any other provision of the Plan, as a condition
precedent to receiving any distribution under the Plan, each holder of a
promissory note, share certificate, or other instrument or security evidencing a
Claim or Equity Interest must surrender such promissory note, share certificate,
or other instrument or security to Reorganized Westbridge or its designee or
must execute and deliver an affidavit of loss and furnish an indemnity or bond
in substance and amount reasonably satisfactory to Reorganized Westbridge.
Any holder of a Claim or Equity Interest that fails to surrender
such instrument or security or to provide the affidavit and indemnity or bond,
before the later to occur of (i) the second anniversary of the Effective Date
and (ii) six months following the date such holder's Claim becomes an Allowed
Claim or Interest, shall be deemed to have forfeited all rights, Claims, and/or
Equity Interests and may not receive or participate in any distribution under
the Plan.
8. Trustee Fees
On the Effective Date, each Trustee shall receive an amount of
Cash equal to the amount of reasonable fees and expenses of such Trustee
(including the reasonable fees and expenses of the respective counsel retained
by each Trustee), in accordance with and to the extent provided for in the 11%
Note Indenture or 7 1/2% Convertible Note Indenture, as applicable, whether
incurred prior or subsequent to the Petition Date, without application by or on
behalf of such Trustee or their respective counsel to the Court. Distributions
made to the holders of Allowed Claims pursuant to the Plan will not be reduced
on account of such payments to each Trustee.
<PAGE>
VII.
IMPLEMENTATION AND EFFECT OF CONFIRMATION OF THIS PLAN
A. Registration Rights Agreement
On or before the Effective Date, Reorganized Westbridge will
execute the Registration Rights Agreement without the requirement of any further
corporate action.
B. Continued Corporate Existence and Vesting of Assets in
Reorganized Westbridge.
Westbridge, as Reorganized Westbridge, shall continue to exist
after the Effective Date with all powers of a corporation under the laws of the
State of Delaware and without prejudice to any right to alter or terminate such
existence (whether by merger or otherwise) under such applicable state law.
Except as otherwise expressly provided in the Plan, on the Effective Date,
Reorganized Westbridge shall be vested with all of the property of the estate
free and clear of all claims, liens, encumbrances, charges and other interests
of creditors and equity security holders, provided that the security interests
securing the LaSalle Credit Agreement and LaSalle Letter of Credit shall not be
terminated or discharged; and Reorganized Westbridge may operate its businesses
free of any restrictions imposed by the Bankruptcy Code, the Bankruptcy Rules or
by the Court, subject only to the terms and conditions of the Plan.
C. Termination of Subordination Rights
All Claims of the 11% Noteholders and 7 1/2% Convertible
Noteholders against the Debtor and all rights and Claims between or among the
11% Noteholders and 7 1/2% Convertible Noteholders relating in any manner
whatsoever to claimed subordination rights, rights to post-petition and default
interest, or similar rights, if any (collectively, "Subordination-Related
Rights"), shall be deemed satisfied by the distributions under, described in,
contemplated by, and/or implemented by, this Plan to holders of such Claims and
such rights shall be deemed waived, released, discharged, and terminated as of
the latest to occur of the Effective Date and the Initial Distribution Date, and
all actions related to the enforcement of such Subordination-Related Rights
shall be permanently enjoined. Distributions under, described in, contemplated
by, and/or implemented by, this Plan shall not be subject to levy, garnishment,
attachment, or like legal process by any holder of a Claim, including, but not
limited to, holders of 11% Note Claims and 7 1/2% Convertible Note Claims, by
reason of any claimed Subordination-Related Rights or otherwise, so that each
holder of a Claim shall have and receive the complete benefit of the
distributions in the manner set forth and described in this Plan.
<PAGE>
D. Discharge of Westbridge.
The rights afforded herein and the treatment of all Claims and
Equity Interests herein shall be in exchange for and in complete satisfaction,
discharge, and release of all Claims and Equity Interests of any nature
whatsoever, including any interest accrued on such Claims from and after the
Petition Date, against the Debtor, the Debtor in Possession, or any of its
assets or properties, arising prior to the Effective Date. Except as otherwise
expressly specified in the Plan, the Confirmation Order shall act as of the
Effective Date as a discharge of all debts of, Claims against, liens on, and
Equity Interests in the Debtor, its assets and properties, arising at any time
before the entry of the Confirmation Order, regardless of whether a proof of
claim or interest with respect thereto was filed, whether the Claim or Equity
Interest is Allowed, or whether the holder thereof votes to accept the Plan or
is entitled to receive a distribution thereunder. After the Effective Date, any
holder of such discharged Claim or Equity Interest shall be precluded from
asserting against the Debtor, Reorganized Westbridge, or any of its assets or
properties, any other or further Claim or Equity Interest based on any document,
instrument, act, omission, transaction, or other activity of any kind or nature
that occurred before the entry of the Confirmation Order.
E. Injunction.
Except as otherwise expressly provided in the Plan, the
Confirmation Order, or a separate order of the Court, all entities who have
held, hold, or may hold Claims against or Equity Interests in the Debtor which
arose before or were held as of the Effective Date, are permanently enjoined, on
and after the Effective Date, from (a) commencing or continuing in any manner
any action or other proceeding of any kind against the Debtor with respect to
any such Claim or Equity Interest, (b) the enforcement, attachment, collection,
or recovery by any manner or means of any judgment, award, decree, or order
against the Debtor on account of any such Claim or Equity Interest, (c)
creating, perfecting, or enforcing any encumbrance of any kind against the
Debtor or against the property or interests in property of the Debtor on account
of any such Claim or Equity Interest and (d) asserting any right of setoff,
subrogation, or recoupment of any kind against any obligation due from the
Debtor or against the property or interests in property of the Debtor on account
of any such Claim or Equity Interest. Such injunction shall extend to successors
of the Debtor (including, without limitation, Reorganized Westbridge) and their
respective properties and interests in property.
F. Preservation/Waiver of Causes of Action.
<PAGE>
1. Preservation of Rights. Pursuant to the Plan, and sections
544, 547, 548, 549, 550, 551, 553 and 1123(b)(3)(B) of the Bankruptcy Code, the
Debtor and Reorganized Westbridge shall retain all rights and all Causes of
Action accruing to Westbridge, the estate, or Reorganized Westbridge, including,
without limitation, (i) the avoidance of any transfer of an interest of
Westbridge in property or any obligation incurred by Westbridge, or (ii) the
turnover of any property to the estate, and except as expressly noted in the
Plan or Confirmation Order, nothing contained in the Plan or the Confirmation
Order shall be deemed to be a waiver or relinquishment of any such rights or
Cause of Action. Nothing contained in the Plan or the Confirmation Order shall
be deemed to be a waiver or relinquishment of any Claim, Cause of Action, right
of setoff, or other legal or equitable defense which Westbridge had immediately
prior to the Petition Date which is not specifically waived or relinquished by
the Plan. Reorganized Westbridge shall have, retain, reserve and be entitled to
assert all such Claims, Causes of Action, rights of setoff and other legal or
equitable defenses which Westbridge had immediately prior to the Petition Date
as fully as if the Chapter 11 Case had not been commenced; and all of
Reorganized Westbridge's legal and equitable rights respecting any Claim which
is not specifically waived or relinquished by the Plan may be asserted after the
Effective Date to the same extent as if the Chapter 11 Case had not been
commenced.
2. Waiver of Causes of Action. The Debtor hereby waives any
rights or Causes of Action it may have against the holders of the 11% Notes, the
7 1/2% Convertible Notes, the members of the Ad Hoc Committee, and the Trustees
under each of the 11% Note Indenture and the 7 1/2% Convertible Note Indenture,
and each of their representatives and agents (including any professionals
retained by such persons or entities) whether known or unknown, foreseen or
unforeseen, existing or hereafter arising, in law, equity or otherwise, based in
whole or in part upon any omission, transaction, event or other occurrence
taking place prior to the Effective Date in any way relating to the 11% Notes,
the 7-1/2% Convertible Notes, the Chapter 11 Case or the Plan.
G. Votes Solicited in Good Faith.
Westbridge has, and upon confirmation of the Plan shall be deemed
to have, solicited acceptances of the Plan in good faith and in compliance with
the applicable provisions of the Bankruptcy Code. Westbridge (and each of its
affiliates, agents, directors, officers, employees, advisors, and attorneys)
have participated in good faith and in compliance with the applicable provisions
of the Bankruptcy Code in the offer, issuance, sale, and purchase of the
securities offered and sold under the Plan and therefore is not, and on account
of such offer, issuance, sale, solicitation, and/or purchase will not be, liable
at any time for the violation of any applicable law, rule, or regulation
governing the solicitation of acceptances or rejections of the Plan or the
offer, issuance, sale, or purchase of the securities offered and sold under the
Plan.
H. Administrative Claims Incurred after the Confirmation Date.
<PAGE>
Administrative Claims incurred by Reorganized Westbridge after
the date and time of the entry of the Confirmation Order, including (without
limitation) Claims for professionals' fees and expenses incurred after such
date, shall not be subject to application and may be paid by Reorganized
Westbridge in the ordinary course of business and without application for or
Court approval.
I. Westbridge's Limited Release.
On the Effective Date, Westbridge on behalf of itself, its
non-debtor Subsidiaries and the estate, shall be deemed to release
unconditionally all of their respective present and former officers and
directors, except those officers and directors set forth on Exhibit D to this
Plan, from any and all Claims, obligations, suits, judgments, damages, rights,
Causes of Action and liabilities whatsoever, whether known or unknown, foreseen
or unforeseen, existing or hereafter arising, in law, equity or otherwise, based
in whole or in part upon actions taken in their respective capacities described
above or any omission, transaction, event or other occurrence taking place on or
prior to the Effective Date in any way relating to Westbridge, the Chapter 11
Case or the Plan, except that (i) no individual shall be released from (x) any
act or omission that constitutes gross negligence or willful misconduct or (y)
any contractual obligation of any such person to the Debtor or its non-debtor
Subsidiaries, and (ii) Reorganized Westbridge shall not relinquish or waive the
right to assert any of the foregoing as a legal or equitable defense or right of
set-off or recoupment against any Claims of any such persons asserted against
Westbridge or its non-debtor Subsidiaries.
J. Exculpation, Release and Injunction of Released Parties.
<PAGE>
1. Exculpation. Westbridge and Reorganized Westbridge and all of
their respective present and former officers, directors, employees, advisors,
attorneys, financial advisors, accountants, and other professionals and each of
the Trustees, counsel to each of the respective Trustees, the Creditors
Committee members, counsel to the Creditors Committee, Ad Hoc Committee members,
counsel to the Ad Hoc Committee, financial advisors to the Creditors Committee
and Ad Hoc Committee and each of their representatives and agents (including any
professionals retained by such persons or entities) (the "Released Parties")
shall have no liability whatsoever to any holder or purported holder of an
Administrative Claim, Claim, or Equity Interest for any act or omission in
connection with, or arising out of, the Plan, the Disclosure Statement, the
negotiation of the Plan, the negotiation of the Stock Purchase Agreement and the
other documents included in the Plan Supplement, the pursuit of approval of the
Disclosure Statement or the solicitation of votes for confirmation of the Plan,
the Chapter 11 Case, the consummation of the Plan, the administration of the
Plan or the property to be distributed under the Plan, or any transaction
contemplated by the Plan or Disclosure Statement or in furtherance thereof
(including, without limitation, the various management, employee, director and
agent retention, incentive bonus and stock option plans, employment contracts,
programs and arrangements adopted in connection with the Plan or the Chapter 11
Case), except for willful misconduct or gross negligence as determined by a
Final Order, and, in all respects, shall be entitled to rely upon the advice of
counsel with respect to their duties and responsibilities under the Plan. This
exculpation shall be in addition to, and not in limitation of, all other
releases, indemnities, exculpations and any other applicable law or rules
protecting such Released Parties from liability.
2. Injunction. Pursuant to section 105 of the Bankruptcy Code, no holder or
purported holder of an Administrative Claim, Claim or Equity Interest shall be
permitted to commence or continue any action, employment of process, or an act
to collect, offset, or recover any Claim against a Released Party that accrued
on or prior to the Effective Date and has been released or waived pursuant to
Section VII.J.1.
K. Release of Officers and Directors; Waiver of Claims.
1. Waiver of Claims; Covenant Not To Sue.
(a) Effective as of the Confirmation Date, but subject to the occurrence of
the Effective Date, and except as otherwise expressly provided in this Plan or
the Confirmation Order, the Debtor and Debtor in Possession (x) shall be deemed
to have covenanted with each of the present and former officers and directors of
the Debtor, except those officers and directors set forth on Exhibit D to this
Plan, to waive and not to (1) sue or otherwise seek any recovery from such
officers and directors, or their respective property, whether for tort, fraud,
contract, violations of federal or state securities laws, or otherwise, based in
whole or in part upon any act or omission, transaction, event, or other
occurrence taking place on or before the Effective Date in any way relating to
the Debtor, the Chapter 11 Case, or the Plan or (2) assert against any of the
Debtor's present or former officers and directors, except those officers and
directors set forth on Exhibit D to this Plan, or their respective property, any
Claim, obligation, right, cause of action, or liability which the Debtor may be
entitled to assert in any case, whether for tort, fraud, contract, violations of
federal or state securities laws, or otherwise, whether known or unknown,
foreseen or unforeseen, existing or hereafter arising, based in whole or in part
upon any act or omission, transaction, or other occurrence taking place on or
before the Effective Date in any way relating to the Debtor, the Chapter 11
Case, or the Plan and (y) are permanently enjoined, on and after the Effective
Date, from commencing or continuing in any manner any action or other proceeding
of any kind with respect to such Claims, obligations, rights, causes of action,
or liabilities released or waived hereunder; except that (i) the foregoing
waivers and covenants shall not apply to (x) any act or omission of any
individual that constitutes gross negligence or willful misconduct or (y) any
contractual obligation of any individual to the Debtor or its non-debtor
Subsidiaries, and (ii) Reorganized Westbridge shall not relinquish or waive the
right to assert any Claims, obligations, rights, causes of action, or
liabilities, as a legal or equitable defense or recoupment against any Claims of
any such persons asserted against Westbridge or its non-debtor Subsidiaries.
<PAGE>
(b) Effective as of the Confirmation Date, but subject to the occurrence of
the Effective Date, and except as otherwise expressly provided in this Plan or
the Confirmation Order, all Persons who have held, hold, or may hold Claims
against or Equity Interests in the Debtor (x) shall be deemed to have covenanted
with each of the past and present officers and directors of the Debtor to waive
and not to (1) sue or otherwise seek any recovery from such officers and
directors, or their respective property, whether for tort, fraud, contract,
violations of federal or state securities laws, or otherwise, based in whole or
in part upon any act or omission, transaction, event, or other occurrence taking
place on or before the Effective Date in any way relating to the Debtor, the
Chapter 11 Case, or the Plan or (2) assert against any of such officers and
directors, or their respective property, any Claim, obligation, right, cause of
action, or liability which any such holder of a Claim against or Equity Interest
in the Debtor may be entitled to assert in any case, whether for tort, fraud,
contract, violations of federal or state securities laws, or otherwise, whether
known or unknown, foreseen or unforeseen, existing or hereafter arising, based
in whole or in part upon any act or omission, transaction, event, or other
occurrence taking place on or before the Effective Date in any way relating to
the Debtor, the Chapter 11 Case, or the Plan and (y) are permanently enjoined,
on and after the Effective Date, from commencing or continuing in any manner any
action or other proceeding of any kind with respect to such Claims, obligations,
rights, causes of action, or liabilities released or waived hereunder.
2. Limited Releases. Effective as of the Confirmation Date, but subject to
the occurrence of the Effective Date, and except as otherwise expressly provided
in the Plan or the Confirmation Order, each of the Debtor's past and present
officers and directors and their respective property shall be released from any
and all Claims, obligations, rights, causes of action, and liabilities which any
holder of a Claim against or Equity Interest in the Debtor may be entitled to
assert in any case, whether for tort, fraud, contract, violations of federal or
state securities laws, or otherwise, whether known or unknown, whether foreseen
or unforeseen, existing or hereafter arising, based in whole or in part upon any
act or omission, transaction, event or other occurrence taking place on or
before the Effective Date in any way relating to the Debtor, the Chapter 11
Case, or the Plan.
3. Limitation of Governmental Releases. Notwithstanding Sections VII.K.1.
and 2 of the Plan, the Plan shall not release, discharge, or exculpate any
non-debtor party from any debt owed to the United States Government and/or its
agencies, including the Pension Benefit Guaranty Corporation (the "Government"),
or from any liability arising under the Internal Revenue Code, the Employee
Retirement Income Security Act of 1974, as amended, or the environmental laws,
securities laws or criminal laws of the United States. In addition,
notwithstanding Sections VII.K.1 and 2 of the Plan, the Plan shall not enjoin or
prevent the Government from collecting any such liability from any such
non-debtor party.
<PAGE>
L. Term of Bankruptcy Injunction or Stays.
All injunctions or stays provided for in the Chapter 11 Case
under sections 105 or 362 of the Bankruptcy Code, or otherwise, and in existence
on the Confirmation Date, shall remain in full force and effect until the
Effective Date.
M. Preservation of Insurance.
The Debtor's discharge and release from all Claims as provided
herein, except as necessary to be consistent with this Plan, shall not diminish
or impair the enforceability of any insurance policy (including the National
Union Policy) that may cover Claims against the Debtor, Reorganized Westbridge
(including, without limitation, its past and present officers and directors) or
any other person or entity.
N. Officers' and Directors' Indemnification Rights.
Notwithstanding any other provisions of the Plan, the obligations
of the Debtor to indemnify its present and former directors, officers, and
employees against any obligations, liabilities, costs or expenses pursuant to
the articles of incorporation or by-laws of the Debtor, applicable state law,
specific agreement, or any combination of the foregoing, shall not survive the
Effective Date and shall be discharged, regardless of whether indemnification is
owed in connection with an event occurring prior to, upon, or subsequent to the
Petition Date; provided, however, that Reorganized Westbridge shall take all
such actions as are necessary or desirable to maintain in full force and effect
the National Union Policy until such time as it may expire by its terms and
directors and officers of the Debtor and its Subsidiaries covered by the
National Union Policy shall be entitled to make claims thereunder pursuant to
the terms thereof notwithstanding the provisions of this Section VII.N; provided
further, however, that the Indemnification Escrow shall be terminated on the
Effective Date and the Debtor shall retain the Cash contained in the
Indemnification Escrow free and clear of any Claims or other rights or interests
of any Person.
O. The Securities Litigation Settlement Fund.
1. Payment of Securities Litigation Settlement PaymentError! Bookmark not
defined.. Within five (5) days of the entry of the District Court Order by the
District Court (which date shall not be earlier than the Effective Date)
requiring the payment of such amount, the Debtor and National Union shall pay
the aggregate sum of $1,000,000 (the "Securities Litigation Settlement Fund")
pursuant to, and in accordance with the terms of, the Final Settlement Agreement
and the District Court Order; which payment shall be in full satisfaction and
discharge of the liabilities of the Debtor in respect of the Securities
Litigation Claims. The payment by the Debtor and National Union shall be
comprised of Cash paid by the Debtor and payments made by National Union under
the National Union Policy.
<PAGE>
2. Administration. The Securities Litigation Settlement Fund shall be held
in accordance with the Final Settlement Agreement, subject to the jurisdiction
of the District Court. No distribution shall be made from the Securities
Litigation Settlement Fund except pursuant to the Final Settlement Agreement and
an order of the District Court.
3. Allocation of Assets. The distribution of the Securities Litigation
Settlement Fund shall be made pursuant to the Final Settlement Agreement and the
District Court Order to be entered by the District Court prior to the Effective
Date, as the same may be amended, modified or supplemented from time to time by
the District Court in accordance with the terms of such District Court Order on
such notice as the District Court deems appropriate.
VIII.
RETENTION OF JURISDICTION
<PAGE>
The Court shall have exclusive jurisdiction of all matters
arising out of, and related to, the Chapter 11 Case and the Plan pursuant to,
and for the purposes of, section 105(a) and section 1142 of the Bankruptcy Code
and for, among other things, the following purposes: (1) to hear and determine
applications for the assumption or rejection of executory contracts or unexpired
leases pending on the date the Plan is confirmed, and the allowance of Claims
resulting therefrom; (2) to determine any other applications, adversary
proceedings, and contested matters pending on the Effective Date; (3) to ensure
that distributions to holders of Allowed Claims and Allowed Equity Interests are
accomplished as provided herein; (4) to resolve disputes as to the ownership of
any Claim or Equity Interest; (5) to hear and determine timely objections to
Administrative Claims and Claims; (6) to enter and implement such orders as may
be appropriate in the event the Confirmation Order is for any reason stayed,
revoked, modified or vacated; (7) to issue such orders in aid of execution of
the Plan, to the extent authorized by section 1142 of the Bankruptcy Code; (8)
to consider any modifications of the Plan, to cure any defect or omission, or to
reconcile any inconsistency in any order of the Court, including, without
limitation, the Confirmation Order; (9) to resolve disputes concerning nondebtor
releases, exculpations, and injunctions contained herein; (10) to hear and
determine all applications for compensation and reimbursement of expenses of
professionals under sections 330, 331, and 503(b) of the Bankruptcy Code; (11)
to hear and determine disputes arising in connection with the interpretation,
implementation, or enforcement of the Plan; (12) to hear and determine any issue
for which the Plan requires a Final Order of the Court; (13) to hear and
determine matters concerning state, local, and federal taxes in accordance with
sections 346, 505, and 1146 of the Bankruptcy Code; (14) to hear any other
matter not inconsistent with the Bankruptcy Code; (15) to hear and determine
disputes arising in connection with compensation and reimbursement of expenses
of professionals for services rendered during the period commencing on the
Confirmation Date through and including the Effective Date; (16) to hear and
determine disputes arising in connection with any fees and expenses of any
Trustee for services rendered through and including the Effective Date and (17)
to enter a final decree closing the Chapter 11 Case.
IX.
MISCELLANEOUS PROVISIONS
A. Payment of Statutory Fees.
All fees payable on or before the Effective Date pursuant to
section 1930 of title 28 of the United States Code, as determined by the Court
at the Confirmation Hearing, shall be paid on or before the Effective Date.
B. Dissolution of Creditors Committee.
The appointment of the Creditors Committee shall terminate on the
later of the sixtieth day following the Effective Date and the first date on
which there exists a Final Order with respect to the applications for final
allowances of compensation and reimbursement of expenses of the attorneys and
financial advisors to the Creditors Committee.
C. Modification of the Plan.
Westbridge reserves the right, in accordance with the Bankruptcy
Code, to amend or to modify the Plan, with the consent of the Creditors
Committee and CSFB prior to the entry of the Confirmation Order. After entry of
the Confirmation Order, Reorganized Westbridge or Westbridge may amend or modify
the Plan, or remedy any defect or omission or reconcile any inconsistency in the
Plan in such a manner as may be necessary to carry out the purpose and intent of
the Plan.
D. Governing Law.
Unless a rule of law or procedure is supplied by Federal law
(including the Bankruptcy Code and Bankruptcy Rules) or the Delaware General
Corporation Law, the laws of the State of New York (without reference to the
conflicts of laws provisions thereof) shall govern the construction and
implementation of the Plan and any agreements, documents, and instruments
executed in connection with the Plan.
E. Filing or Execution of Additional Documents.
<PAGE>
On or before the Effective Date, Westbridge or Reorganized
Westbridge, shall file with the Court or execute, as appropriate, such
agreements and other documents as may be necessary or appropriate to effectuate
and further evidence the terms and conditions of the Plan.
F. Withholding and Reporting Requirements.
In connection with the Plan and all instruments issued in
connection therewith and distributions thereon, Reorganized Westbridge shall
comply with all withholding and reporting requirements imposed by any federal,
state, local, or foreign taxing authority and all distributions hereunder shall
be subject to any such withholding and reporting requirements.
G. Exemption From Transfer Taxes.
Pursuant to section 1146(c) of the Bankruptcy Code, the issuance,
transfer or exchange of Equity Securities under the Plan, the making or
assignment of any lease or sublease or the making or delivery of any other
instrument whatsoever, in furtherance of or in connection with the Plan shall
not be subject to any stamp, real estate transfer, recording or other similar
tax.
H. Waiver of Federal Rule of Civil Procedure 62(a).
The Debtor may request that the Confirmation Order include (a) a finding
that Fed. R. Civ. P. 62(a) shall not apply to the Confirmation Order and (b)
authorization for the Debtor to consummate the Plan immediately after entry of
the Confirmation Order.
I. Headings.
Headings used in the Plan are for convenience and reference only
and shall not constitute a part of the Plan for any purpose.
J. Exhibits/Schedules.
All Exhibits and Schedules to the Plan are incorporated into and
constitute a part of the Plan as if set forth herein.
K. Notices.
All notices, requests, and demands hereunder to be effective
shall be in writing and unless otherwise expressly provided herein, shall be
deemed to have been duly given or made when actually delivered or, in the case
of notice by facsimile transmission, when received and telephonically confirmed,
addressed as follows:
<PAGE>
To the Debtor: Westbridge Capital Corp., 110 West Seventh Street, Fort
Worth, Texas 76102, attention: Patrick J. Mitchell, Tel.: (817) 878-3306/Fax:
(817) 878-3672, with a copy to Paul, Weiss, Rifkind, Wharton & Garrison, 1285
Avenue of the Americas, New York, New York 10019-6064, attention: Alan W.
Kornberg, Tel.: (212) 373-3000/Fax: (212) 757-3990.
To the Creditors Committee: Stroock & Stroock & Lavan LLP, 180 Maiden Lane,
New York, New York 10038, attention: Fred S. Hodara, Tel: (212) 806-5400/ Fax:
(212) 806-6006.
To CSFB: Cadwalader, Wickersham & Taft, 100 Maiden Lane, New York, New York
10038, attention: Michael J. Sage, Tel.: (212) 504-6000/Fax: (212) 504-6666.
L. Plan Supplement.
Forms of the documents relating to the Amended Westbridge
Certificate of Incorporation, the Amended Westbridge Bylaws, Amended Guarantee
Agreement, New Convertible Preferred Stock, New Warrants, Registration Rights
Agreement, investment guidelines referred to in Section VI.C.2(a)(ii), Agent
Options, Officers and Director Stock Options and the Bonus Program shall be
contained in the Plan Supplement and filed with the Clerk of the Court at least
10 days prior to the date of the Confirmation Hearing. Upon its filing with the
Court, the Plan Supplement may be inspected in the office of the Clerk of the
Court during normal court hours. Holders of Claims or Equity Interests may
obtain a copy of the Plan Supplement upon written request to the Debtor in
accordance with Section IX.K of the Plan.
M. Conflict.
The terms of this Plan shall govern in the event of any
inconsistency with the summaries of the Plan set forth in the Disclosure
Statement.
X.
EXECUTORY CONTRACTS AND UNEXPIRED LEASES
<PAGE>
Other than (i) executory contacts or unexpired leases which are
the subject of a motion to reject pending on the Confirmation Date, and (ii)
employment agreements, if any, terminated prior to or in connection with the
Plan (including, without limitation, those employment agreements set forth on
Exhibit E to this Plan), all of the executory contracts, unexpired leases and
employment agreements that exist between Westbridge and any person, are
specifically assumed as of the Effective Date pursuant to the Plan. All Claims
for damages arising from the rejection of executory contracts or unexpired
leases must be filed with the Court in accordance with the terms of the order
authorizing such rejection or, if not rejected by separate order, within thirty
(30) days from the entry of the Confirmation Order. Any Claims not filed within
such time will be forever barred from assertion against Westbridge, its estate
and Reorganized Westbridge. All Allowed Claims arising from the rejection of
executory contracts or unexpired leases shall be treated as Class 8 Claims in
Group 8-A or Class 3 Claims (Convenience Claims), as the case may be.
Reorganized Westbridge, except as otherwise agreed by the parties, will cure any
and all undisputed defaults within 60 days of the Effective Date under any
executory contract, unexpired lease or employment agreement assumed pursuant to
the Plan in accordance with section 365 of the Bankruptcy Code. All disputed
defaults that are required to be cured shall be cured either within 30 days of
the entry of a Final Order determining the amount, if any, of the Debtor's or
Reorganized Westbridge's liability with respect thereto, or as may otherwise be
agreed to by the parties.
XI.
BENEFIT PLANS
All employment and severance agreements and policies, and all
employee compensation and benefit plans, policies, and programs of the Debtor
applicable generally to its employees, including agreements and programs subject
to section 1114 of the Bankruptcy Code, as in effect on the Effective Date,
including, without limitation, all savings plans, retirement plans, health care
plans, disability plans, severance benefit plans, incentive plans, and life,
accidental death, and dismemberment insurance plans, shall be deemed to be, and
shall be treated as through they are, executory contracts that are assumed under
the Plan, but only to the extent that rights under such agreements and programs
are held by the Debtor or individuals who are Reorganized Westbridge employees
as of the Effective Date, and the Debtor's obligations under such agreements and
programs to individuals who are employees of the Debtor on the Effective Date
shall survive the Effective Date of this Plan, without prejudice to Reorganized
Westbridge's rights under applicable non-bankruptcy law to modify, amend, or
terminate the foregoing arrangements, except for (i) such executory contracts or
plans specifically rejected pursuant to the Plan (to the extent such rejection
does not violate section 1114 of the Bankruptcy Code) and (ii) such executory
contracts or plans as have previously been terminated (including, without
limitation, any employment agreements set forth on Exhibit E to this Plan), or
rejected, pursuant to a Final Order, or specifically waived by the beneficiaries
of such plans, contracts, or programs.
<PAGE>
XII.
EFFECTIVENESS OF THE PLAN
A. Confirmation of the Plan.
The Plan can be confirmed either under section 1129(a) of the
Bankruptcy Code or in a non-consensual manner under section 1129(b) of the
Bankruptcy Code so long as the conditions of Section XII.B.1 have been satisfied
or waived pursuant to Section XII.B.2.
B. Effectiveness of the Plan.
1. Conditions Precedent to Effectiveness
The Plan shall not become effective unless and until it has been
confirmed and the following conditions have been satisfied in full or waived
pursuant to Section XII.B.2: (1) the Confirmation Order in a form satisfactory
to the Debtor, CSFB and the Creditors Committee shall have become a Final Order;
(2) the Effective Date shall have occurred within six months following the
Petition Date; (3) the Amended Westbridge Certificate of Incorporation shall
have been properly filed with the Secretary of State of the State of Delaware;
(4) all authorizations, consents and regulatory approvals (including, without
limitation, any approvals required under the HSR Act or state insurance laws or
regulations relating to the change in ownership of Westbridge upon the Effective
Date) required (if any) for the Plan's effectiveness shall have been obtained;
(5) the aggregate amount of Class 8 Claims in Group 8-A does not exceed
$5,000,000; (6) each of the conditions to the Stock Purchase Agreement other
than the occurrence of the Effective Date shall have been satisfied or waived as
set forth therein; (7) the aggregate amount of Administrative Claims and
Priority Non-Tax Claims as of the Effective Date does not exceed $5,000,000; (8)
the Debtor, CSFB and the Creditors Committee shall each have approved the form
and substance of each of the Amended Westbridge Certificate of Incorporation,
the Amended Westbridge Guarantee, the Amended Westbridge By-Laws, the New Common
Stock, the New Convertible Preferred Stock, the New Warrants, the Registration
Rights Agreement, the Bonus Program, the Agent Options, the Management
Employment Agreements and the Officer and Director Stock Options; and (9) the
District Court shall have entered the District Court Order approving the Final
Settlement Agreement and any amendments thereof, which District Court Order
shall not materially modify or alter the Securities Litigation Settlement as
described in the Claims Agreement.
<PAGE>
2. Waiver of Conditions
Westbridge may waive any or all of the conditions set forth in
Section XII.B.1 above at any time, with the prior consent of the Creditors
Committee and CSFB, without leave of or order of the Court and without any
formal action.
3. Effect of Failure of Conditions
In the event that the Effective Date does not occur on or before
sixty (60) days after the Confirmation Date, upon notification submitted by
Westbridge to the Court: (a) the Confirmation Order shall be vacated, (b) no
distributions under the Plan shall be made, (c) Westbridge and all holders of
Claims and Equity Interests shall be restored to the status quo ante as of the
day immediately preceding the Confirmation Date as though the Confirmation Date
had never occurred, and (d) Westbridge's obligations with respect to the Claims
and Equity Interests shall remain unchanged and nothing contained in the Plan
shall constitute or be deemed a waiver or release of any Claims or Equity
Interests by or against Westbridge or any other person or to prejudice in any
manner the rights of Westbridge or any person in any further proceedings
involving Westbridge.
4. Vacatur of Confirmation Order
If an order denying confirmation of the Plan is entered, then the
Plan shall be null and void in all respects, and nothing contained in the Plan
shall (a) constitute a waiver or release of any Claims against or Equity
Interests in Westbridge; (b) prejudice in any manner the rights of the holder of
any Claim against, or Equity Interest in, Westbridge; (c) prejudice in any
manner any right, remedy or claim of Westbridge; or (d) be deemed an admission
against interest by Westbridge.
5. Survival of the Final Settlement Agreement. The Final
Settlement Agreement shall survive consummation of the Plan, except to the
extent that any provision of the Final Settlement Agreement is inconsistent with
the Plan, in which case the provisions of the Plan shall supersede such
inconsistent provision of the Final Settlement Agreement.
XIII.
NEW CONVERTIBLE PREFERRED STOCK PURCHASE
<PAGE>
A. Stock Purchase Agreement. As provided in the Stock Purchase
Agreement, CSFB has agreed to purchase all of the issued and authorized New
Convertible Preferred Stock not distributable to holders of Allowed CSFB 11%
Note Claims upon the terms and subject to the conditions set forth below and in
the Stock Purchase Agreement. The aggregate proceeds received by the Debtor from
the exercise of such Purchase Rights shall be distributed under the Plan to fund
distributions to holders of Allowed Class 7 Claims in Group 7-A.
B. Purchase Right. Under the Plan, each holder of a 7-1/2%
Convertible Note as of October 22, 1998 shall be issued the right (a "Purchase
Right"), on the terms and conditions hereinafter set forth, to purchase upon
exercise and satisfaction of other conditions its Pro Rata Percentage (as
defined below) of the New Convertible Preferred Stock not distributed to holders
of Allowed CSFB 11% Note Claims at a purchase price equal to the liquidation
preference of the New Convertible Preferred Common Stock. The aggregate proceeds
received by the Debtor from the exercise of such Purchase Rights shall be
distributed under the Plan to fund distributions to holders of Allowed Class 7
Claims in Group 7-A. The Debtor will issue an aggregate of 14,836,413 Purchase
Rights (which amount is equal to one Purchase Right for every one dollar of
liquidation preference of New Convertible Preferred Stock not distributed to
holders of Allowed CSFB 11% Note Claims).
1. Eligibility. In order to be eligible to exercise the Purchase Right, a
holder of a 7 1/2% Convertible Note must have been the record holder of such 7
1/2% Convertible Note as of May 20, 1998 and must continue to be the record
holder of such 7 1/2% Convertible Note as of October 22, 1998 (each such holder,
an "Eligible Holder"). The Purchase Right is nontransferable.
(a) Purchase Right Amount. The Purchase Right shall entitle each Eligible
Holder to purchase New Convertible Preferred Stock with a liquidation preference
equal to the product of (1) such holder's Pro Rata Percentage multiplied by (2)
the liquidation preference as of the Effective Date of the New Convertible
Preferred Stock not distributable to holders of Allowed CSFB 11% Note Claims
under Section IV.7(a)(ii) (i.e., each single Purchase Right shall entitle each
Eligible Holder to purchase New Convertible Preferred Stock with a liquidation
preference of one dollar). "Pro Rata Percentage" means, with respect to any
Eligible Holder, its Pro Rata share (based on its holdings as of May 20, 1998
less any 7 1/2% Convertible Notes sold by it between May 20, 1998 and October
22, 1998) of Class 8 Allowed Claims in Group 8-B.
(b) Exercise Price. The purchase price of the Purchase Right shall be equal
to the liquidation preference of the New Convertible Preferred Stock in respect
of which the Purchase Right is validly exercised (such amount, the "Exercise
Price").
<PAGE>
(c) Exercise Notice. In order to exercise the Purchase Right, each Eligible
Holder must complete the Exercise Notice and return a properly completed and
duly executed Exercise Notice to the Debtor no later than 5:00 p.m. on the last
day of the Exercise Period. The Exercise Notice will not be deemed to have been
timely delivered unless it is actually received by the Debtor prior to the last
day of the Exercise Period at its address as set forth in the instructions
accompanying the Exercise Notice (the "Exercise Instructions"). In order to
facilitate the exercise of the Purchase Right, the Debtor has mailed to each
Eligible Holder a form of Exercise Notice, together with the Exercise
Instructions, following the Court's approval of the Disclosure Statement.
Promptly following the last day of the Exercise Period, the Debtor shall give
written notice to each Eligible Holder whose Exercise Notice was properly
completed, duly executed and timely received (an "Exercising Holder") of the
acceptance of its Exercise Notice and notice of the date on which the Exercise
Price is required to be received by the Debtor from such Eligible Holder (such
notice, a "Notice of Acceptance").
(d) Determination of Validity. All questions as to eligibility of holders
entitled to participate in the Purchase Right, the conformity of any Exercise
Notice with the Exercise Instructions, the timeliness of the Debtor's receipt of
any Exercise Notice or the validity of any Exercise Notice shall be determined
by the Debtor in its sole discretion and its determination shall be final and
binding. In addition, the Debtor shall have the absolute right, in its sole
discretion, to reject any and all Exercise Notices determined by it not to be in
proper form or not to be in conformity with any of the Exercise Instructions. No
Exercise Notice shall be deemed to have validly delivered until all
irregularities with respect to it have been cured or waived. The Debtor shall
not be under any duty to give any holder notification of irregularities in the
Exercise Notice and shall not have any liability to any holder for any failure
to give such notice. The Debtor reserves the absolute right to waive any and all
irregularities in any Exercise Notice whether or not similar irregularities are
waived in the case of any other holder submitting an Exercise Notice. If any
Exercise Notice is signed by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, such person should so indicate when executing the
Exercise Notice and, unless waived by the Debtor, proper evidence satisfactory
to the Debtor, in its reasonable discretion, of such person's authority so to
act must be submitted. A beneficial owner of 7 1/2% Convertible Notes that are
held by or registered in the name of a broker, dealer, commercial bank, trust
company or other nominee or custodian is urged to contact such entity promptly
if such beneficial holder wishes to participate in the Purchase Right.
<PAGE>
(e) Payment. Payment of the Exercise Price shall be due on the date
specified in the Notice of Acceptance (such date, the "Payment Date"), which
date shall be no less than three Business Days prior to the Effective Date.
Payment of the Exercise Price must be made by wire transfer of immediately
available funds to the Debtor's account identified in the Acceptance Notice or
by certified check delivered to the Debtor's address identified in the
Acceptance Notice, in each case so as to be received by the Debtor no later than
5:00 p.m. on the Payment Date. Payment shall be held in escrow by the Debtor
until the Effective Date. On the Effective Date, all monies shall be released to
the Debtor from such escrow and each Exercising Holder shall receive the
applicable number of shares of New Convertible Preferred Stock on the Initial
Distribution Date. In the event that any Exercising Holder shall fail to deliver
the Exercise Price to the Debtor on or before the Payment Date, such Exercising
Holder shall be deemed to have irrevocably waived its right to participate in
the Purchase Right and the Debtor's acceptance of its Exercise Notice shall be
automatically rescinded without notice and of no further force or effect. In the
event the Court does not confirm the Plan or the Effective Date does not occur,
the offer contained herein also shall be automatically rescinded without notice
and of no further force and effect and any money received by the Debtor
hereunder shall promptly be returned to the applicable Exercising Holder.
Dated: Fort Worth, Texas
October 27, 1998
WESTBRIDGE CAPITAL CORP.
By:/s/ Patrick J. Mitchell
Name: Patrick J. Mitchell
Title: President
<PAGE>
EXHIBIT A TO PLAN
SUMMARY OF TERMS OF NEW
CONVERTIBLE PREFERRED STOCK
New Convertible 100% of the issued and authorized New Convertible Preferred
Preferred Stock: Stock of the Debtor will be distributed to holders of
Allowed CSFB 11% Note Claims or purchased under the Stock
Purchase Agreement or Purchase Rights. The aggregate
purchase price for the New Convertible Preferred Stock shall
equal the Allowed Amount of the 11% Note Claims as of the
Effective Date (excluding the CSFB 11% Note Claims).
Dividend: Annual cumulative dividend rate of 10.25% (the dividends
shall compound on an annual basis). Dividends will be paid
in additional shares of New Convertible Preferred Stock (the
"Dividend Stock"). The Dividend Stock shall have the same
terms as the New Convertible Preferred Stock.
Conversion: Initially convertible into 41.4% of the New Common Stock,
based on an Effective Date of December 31, 1998. The Allowed
Amount of the 11% Note Claims will increase after the
Petition Date as a result of the continued accrual of
interest during the pendency of the Chapter 11 Case. The
amount of New Convertible Preferred Stock which the Debtor
intends to issue to fund distributions to holders of the 11%
Note Claims is based on the Allowed Amount of the 11% Note
Claims assuming an Effective Date of December 31, 1998.
Consequently, the Debtor will need to issue additional New
Convertible Preferred Stock if the Effective Date does not
occur by December 31, 1998. If the issuance of additional
New Convertible Preferred Stock is required, such additional
New Convertible Preferred Stock will be convertible into
additional New Common Stock, thus increasing the percentage
of New Common Stock which the New Convertible Preferred
Stock may be initially converted to. Each issuance of
Dividend Stock after the Effective Date shall also cause an
increase in the percentage of New Common Stock into which
the New Convertible Preferred Stock will be convertible to.
Redemption: Reorganized Westbridge shall be required to redeem 100% of
the then outstanding New Convertible Preferred Stock on the
fifth anniversary of the Effective Date.
<PAGE>
EXHIBIT B TO PLAN
SUMMARY OF TERMS OF
NEW WARRANTS
WARRANTS: Warrants to purchase up to 7% of the issued and outstanding
New Common Stock, on a fully diluted basis.
EXERCISE PRICE: Based on Enterprise Valuation of $95 million.
TERM: The New Warrants shall expire on the fifth anniversary of
the Effective Date.
OTHER TERMS: Such other customary terms (including anti-dilution
provisions) as may be mutually agreeable to the Debtor, CSFB
and the Creditors Committee.
<PAGE>
EXHIBIT C TO PLAN
STOCK PURCHASE AGREEMENT
<PAGE>
STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of
September 16, 1998, by and between WESTBRIDGE CAPITAL CORP., a Delaware
corporation (the "Company"), and CREDIT SUISSE FIRST BOSTON CORPORATION, a
Massachusetts corporation (the "Purchaser").
WHEREAS, pursuant to the Company's plan of reorganization (as
amended from time to time, the "Pre-Negotiated Plan") in a case (the "Chapter 11
Case") being filed on the date hereof under chapter 11 of title 11 of the United
States Code (the "Bankruptcy Code"), the Company intends to issue purchase
rights (the "Purchase Rights") to the holders of its outstanding 7 1/2%
Convertible Subordinated Notes Due 2004 (the "Convertible Subordinated Notes")
entitling such holders to purchase newly issued shares (the "Preferred Shares")
of Series A Cumulative Convertible Redeemable Preferred Stock of the Company
(the "Convertible Preferred Stock"), the proceeds of which will be used by the
Company to fund distributions to certain of the holders of its outstanding 11%
Senior Subordinated Notes Due 2002 (the "Senior Subordinated Notes") in
accordance with the Pre-Negotiated Plan; and
WHEREAS, the Purchaser is the holder of approximately 55% of
the Convertible Subordinated Notes and desires to purchase from the Company its
pro rata share of the Preferred Shares, as well as any other Preferred Shares
which are not purchased by the other holders of the Convertible Subordinated
Notes in accordance with the Pre-Negotiated Plan, all on the terms and subject
to the conditions contained in this Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF PREFERRED SHARES; CLOSING
Purchase and Sale of Preferred Shares. On the terms and
subject to the conditions set forth in this Agreement, the Purchaser hereby
agrees to purchase from the Company, and the Company hereby agrees to sell to
the Purchaser, on the Closing Date (as defined herein) (i) such number of
Preferred Shares as Purchaser shall be entitled to purchase pursuant to the
Purchase Rights granted to Purchaser under the Pre-Negotiated Plan, and (ii)
such additional number of Preferred Shares as shall equal the aggregate number
of the remaining Preferred Shares which are not being purchased on such date
pursuant to the Pre-Negotiated Plan by the other holders of Convertible
Subordinated Notes pursuant to the Purchase Rights granted to such holders in
accordance with the Pre-Negotiated Plan. The purchase price for each Preferred
Share shall be the stated liquidation preference per Preferred Share as set
forth in the Certificate of Incorporation (as defined herein) (the "Share
Purchase Price"), payable in immediately available funds at the Closing as
provided in Section 1.04 hereof.
Time and Place of Closing. Subject to the satisfaction or
waiver on the Closing Date of the conditions set forth in Section 1.03 below,
the closing of the purchase and sale of Preferred Shares under this Agreement
(the "Closing") will take place on the effective date of the Pre-Negotiated Plan
(the "Closing Date") at 10:00 a.m. New York City time at the offices of Milbank,
Tweed, Hadley & McCloy, New York, New York or at such other time and location as
the parties may mutually establish.
Conditions to Closing.
(a) The obligation of the Purchaser to purchase the number of
Preferred Shares set forth in this Agreement to be purchased by it hereunder on
the Closing Date is subject to the fulfillment, at or before the Closing, of
each of the following conditions (all or any of which may be waived in whole or
in part by the Purchaser in its sole discretion):
(i) Each representation and warranty made by the Company in
this Agreement (other than those made as of a specified earlier date)
shall be true and correct in all material respects on and as of the
Closing Date as though such representation or warranty was made on and
as of the Closing Date, and any representation or warranty made as of a
specified date earlier than the Closing Date shall have been true and
correct in all material respects on and as of such earlier date, and
the Company shall have delivered to the Purchaser a certificate, dated
the Closing Date and executed in the name and on behalf of the Company
by its President or any Vice President, to such effect.
(ii) The Company shall have performed and complied with, in
all material respects, each agreement, covenant and obligation required
by this Agreement to be so performed or complied with by the Company at
or before the Closing Date, and the Company shall have delivered to the
Purchaser a certificate, dated the Closing Date and executed in the
name and on behalf of the Company by its President or any Vice
President, to such effect.
(iii) The Pre-Negotiated Plan shall have been confirmed and
shall have become effective in accordance with its terms, and the
material terms of the Pre-Negotiated Plan shall be substantially the
same as the material terms contained in the draft plan of
reorganization attached hereto as Appendix I (the "Draft Plan").
(iv) Between the date hereof and the Closing Date, there shall
not have occurred (x) any material adverse change in the operations or
business of the Company and its subsidiaries (taken as a whole), other
than the commencement of the Chapter 11 Case or (y) any event affecting
generally and materially adversely the industry in which the Company
and its subsidiaries (taken as a whole) conduct their business which
would materially and adversely affect the ability of the Company and
its subsidiaries (taken as a whole) to operate their business.
(v) The Registration Rights Agreement (as such term is defined
in the Pre-Negotiated Plan) shall have been executed and delivered by
the Company, and the material terms of the Registration Rights
Agreement shall be substantially the same as the material terms
contained in the registration rights agreement attached hereto as
Appendix II.
(b) The obligation of the Company to sell Preferred Shares to
the Purchaser hereunder is subject to the fulfillment, at or before the Closing,
of each of the following conditions (all or any of which may be waived in whole
or in part by the Purchaser in its sole discretion):
(i) Each representation and warranty made by the Purchaser in
this Agreement (other than those made as of a specified earlier date)
shall be true and correct in all material respects on and as of the
Closing Date as though such representation or warranty was made on and
as of the Closing Date, and any representation or warranty made as of a
specified date earlier than the Closing Date shall have been true and
correct in all material respects on and as of such earlier date, and
the Purchaser shall have delivered to the Company a certificate, dated
the Closing Date and executed in the name and on behalf of the
Purchaser by its President or any Vice President, to such effect.
(ii) The Purchaser shall have performed and complied with, in
all material respects, each agreement, covenant and obligation required
by this Agreement to be so performed or complied with by the Purchaser
on or before the Closing Date, and the Purchaser shall have delivered
to the Company a certificate, dated the Closing Date and executed in
the name and on behalf of the Purchaser by its President or any Vice
President, to such effect.
(iii) The Pre-Negotiated Plan shall have been confirmed and
shall have become effective in accordance with its terms, and the
material terms of the Pre-Negotiated Plan shall be substantially the
same as the material terms contained in the Draft Plan.
(iv) Between the date hereof and the Closing Date, there shall
not have occurred (x) any material adverse change in the operations or
business of the Company and its subsidiaries (taken as a whole), other
than the commencement of the Chapter 11 Case or (y) any event affecting
generally and materially adversely the industry in which the Company
and its subsidiaries (taken as a whole) conduct their business which
would materially and adversely affect the ability of the Company and
its subsidiaries (taken as a whole) to operate their business.
(v) The Registration Rights Agreement shall have been executed
and delivered by the Purchaser, and the material terms of the
Registration Rights Agreement shall be substantially the same as the
material terms contained in the registration rights agreement attached
hereto as Appendix II.
Issuance of and Payment for the Preferred Shares. At the
Closing, (i) the Company shall issue and deliver to the Purchaser a certificate
or certificates, registered in the name of the Purchaser, representing the
aggregate number of Preferred Shares being purchased by the Purchaser pursuant
to Section 1.01, and (ii) the Purchaser shall pay to the Company, by wire
transfer of immediately available funds to an account designated in writing by
the Company at least two Business Days prior to the Closing Date, an amount
equal to the Share Purchase Price multiplied by the aggregate number of
Preferred Shares being purchased by the Purchaser hereunder. SECTION 1.01
Restrictive Legend.
(a) In addition to any legend required by the General Corporation Law of the
State of Delaware, each certificate evidencing the Preferred Shares issued at
Closing, any shares of the Company's Common Stock issued upon conversion thereof
and any shares of capital stock of the Company issued with respect thereto (the
"Restricted Securities"), will bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
ANY SHARES OF THE COMPANY'S COMMON STOCK ISSUED UPON
CONVERSION THEREOF, OR APPLICABLE STATE SECURITIES LAWS AND,
ACCORDINGLY, SUCH SHARES MAY NOT BE TRANSFERRED, SOLD, OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SUCH LAWS, AND UNTIL A
SATISFACTORY CERTIFICATE HAS BEEN FURNISHED TO THE COMPANY AS
TO SUCH EXEMPTION."
(b) Following the Closing Date, upon delivery to the Company by a Holder of a
certificate, in form and substance reasonably satisfactory to the Company and
duly executed by an authorized officer of the Holder, to the effect that the
Restricted Securities have been transferred (i) pursuant to a registration
statement that has been declared effective by the Securities and Exchange
Commission (the "SEC") and was, at the time of such sale or other transfer,
effective under the Securities Act of 1933, as amended, and the rules and
regulations thereunder (the "Securities Act") or (ii) without registration
pursuant to a transaction which complies with the requirements of Rule 144, the
Company will, or will instruct its transfer agent to, issue upon surrender of
the certificates representing such Restricted Securities, one or more new
certificates evidencing the Restricted Securities so transferred, which new
certificates will not bear the legend set forth in paragraph (a) above. Other
than with respect to any sale or other transfer for which any such certificate
has been received by the Company or for which the Company has received a
reasonably satisfactory opinion of counsel to the effect that such sale or other
transfer is not required to be registered under the Securities Act or applicable
state securities laws, the Company or the Company's transfer agent at the
Company's instruction may refuse to transfer Restricted Securities on the
transfer books of the Company and any such transfer shall be null and void.
(c) The holder of certificates representing Restricted Securities bearing the
legend provided for in paragraph (a) shall also be entitled to receive
certificates not bearing such legend, upon furnishing the Company with a
reasonably satisfactory opinion of counsel to the effect that such legend may be
removed under the Securities Act and applicable state securities laws.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser as follows:
SECTION 2.01 Organization, Qualifications and Corporate Power.
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware. The
Company is duly licensed or qualified to do business as a foreign corporation in
each jurisdiction in which the nature of its business or the ownership of its
assets and/or properties makes such licensing or qualification necessary and
where the failure to so qualify would have a material adverse effect on the
business, properties, operations or condition (financial or other) of the
Company and its direct and indirect subsidiaries (the "Subsidiaries") taken as a
whole. The Company has full corporate power and authority to own and use its
assets and properties and to carry on its business as currently conducted.
(b) Each Subsidiary is a corporation duly incorporated (or
limited liability company duly organized), validly existing and in good standing
under the laws of the state of its incorporation (or organization) and is duly
licensed or qualified to do business as a foreign corporation (or limited
liability company) in each jurisdiction in which the nature of its business or
the ownership of its assets and properties make such licensing or qualification
necessary and where the failure to so qualify would have a material adverse
effect on the business, properties, operations or condition (financial or other)
of the Company and the Subsidiaries taken as a whole. Each Subsidiary has the
corporate power and authority to own and hold its assets and properties and to
carry on its business as currently conducted.
SECTION 2.02 Authorization of Agreements, Etc.
The Company has full corporate power and authority to execute, deliver and
perform this Agreement and to issue, sell and deliver the Preferred Shares. The
execution and delivery by the Company of this Agreement have been, and at or
prior to the Closing the performance by the Company of its obligations hereunder
and the issuance and sale by the Company of the Preferred Shares pursuant hereto
will have been, duly authorized by all requisite corporate action on the part of
the Company. This Agreement has been duly executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to the
effect of any bankruptcy, insolvency or other similar laws affecting creditors'
rights generally and general principles of equity.
SECTION 2.03 Non-Contravention; Approvals and Consents.
(a) The execution and delivery of this Agreement by the Company do not, and at
the Closing the performance by the Company of its obligations hereunder and the
consummation by the Company of the transactions contemplated hereby will not,
conflict with, result in a violation and breach of, constitute (with or without
notice or lapse of time or both) a default under, or result in the creation or
imposition of any lien upon any of the assets or properties of the Company or
any of its Subsidiaries under, (i) any of the terms, conditions or provisions of
any law, statute, rule, regulation or ordinance (together, "Laws"), or any
judgment, decree, order, writ, permit or license (together, "Orders") of any
court, tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States or any state, county, city or other
political subdivision (a "Governmental or Regulatory Authority") or other agency
of government, (ii) the certificate of incorporation or the by-laws of the
Company, or (iii) any provision of any indenture, agreement or other instrument
(a "Contract") by which the Company or any of its Subsidiaries or any of their
respective properties or assets are bound.
(b) Except for the consents, approvals, actions, filings and notices
contemplated in, and the effectiveness of, the Pre-Negotiated Plan, the filing
of the certificate of incorporation to be filed pursuant to the Pre-Negotiated
Plan (the "Certificate of Incorporation") with the Secretary of State of the
State of Delaware (which filing will be made prior to the Closing), and the
filing of a Current Report on Form 8-K with the Securities and Exchange
Commission and any reports or notices required to be filed with the New York
Stock Exchange (or any other stock exchange or similar entity), no consent,
approval or action of, filing with or notice to any Government or Regulatory
Authority or other public or private third party is necessary or required on the
part of the Company under any of the terms, conditions or provisions of any Law
or Order of any Governmental or Regulatory Authority or any Contract to which
the Company or any of its Subsidiaries is a party or by which the Company or any
of its Subsidiaries or any of their respective assets or properties is bound for
the execution and delivery of this Agreement by the Company, the performance by
the Company of its obligations hereunder or the consummation of the transactions
contemplated hereby, other than such consents, approvals, actions, filings and
notices which the failure to make or obtain, as the case may be, individually or
in the aggregate, could not be reasonably expected to have a material adverse
effect on the Company and its Subsidiaries taken as a whole or materially impair
the ability of the Company to consummate the transactions contemplated by this
Agreement.
SECTION 2.04 Capital Stock.
(a) At or prior to the Closing, the Preferred Shares shall
have been duly authorized by all necessary corporate
action on the part of the Company, and when issued and
paid for in accordance with this Agreement, will be
effective under the General Corporation Law of the
State of Delaware (the "DGCL") and the Certificate of
Incorporation to grant the preferences, limitations and
relative rights contemplated by the Certificate of
Incorporation to the holders thereof from time at the
Closing, and will be validly issued, fully paid and
nonassessable. The issuance, sale and delivery of the
Preferred Shares, will not be subject to any preemptive
rights or to any right of first refusal or other
similar right in favor of any person.
(b) At or prior to the Closing, the shares of Common Stock
issuable upon conversion of the Preferred Shares will
have been duly and validly reserved and will not be
subject to any preemptive rights or rights of first
refusal under the DGCL or otherwise created by the
Company, and when issued upon conversion of the
Preferred Shares in accordance with their terms, such
shares will be validly issued, fully paid and
nonassessable.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS TO THE COMPANY
The Purchaser hereby represents and warrants to the Company as
follows:
SECTION 3.01 Organization, Qualifications and Corporate Power.
The Purchaser is a corporation duly incorporated, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts. SECTION 3.02
Authorization of Agreements, Etc. The Purchaser has full corporate power and
authority to execute, deliver and perform this Agreement. The execution and
delivery by the Purchaser of this Agreement, and the performance by the
Purchaser of its obligations hereunder, have been duly authorized by all
requisite corporate action. This Agreement has been duly executed and delivered
by the Purchaser and constitutes the legal, valid and binding obligation of the
Purchaser, enforceable against the Purchaser in accordance with its terms,
subject to the effect of any bankruptcy, insolvency or other similar laws
affecting creditors' rights generally and general principles of equity.
SECTION 3.03 Non-Contravention; Approvals and Consents.
(a) The execution and delivery of this Agreement by the Purchaser do not, and
the performance by the Purchaser of its obligations hereunder and the
consummation of the transactions contemplated hereby will not, conflict with,
result in a violation and breach of, constitute (with or without notice or lapse
of time or both) a default under, or result in the creation or imposition of any
lien upon any of the assets or properties of the Company or any of its
Subsidiaries under, (i) any of the terms, conditions or provisions of any Law or
any Order of any Governmental or Regulatory Authority or other agency of
government, (ii) the certificate of incorporation or the by-laws of the
Purchaser, or (iii) any provision of any indenture, agreement or other
instrument (a "Contract") by which the Purchaser or any of its properties or
assets are bound.
(b) Except for any filing of a pre-merger notification report required under the
Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, and the rules
and regulations thereunder, the filing of such report, as may be required under
Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder, and any applicable filings with, or
approvals of, state insurance regulation authorities, no consent, approval or
action of, filing with or notice to any Government or Regulatory Authority or
other public or private third party is necessary or required on the part of the
Purchaser under any of the terms, conditions or provisions of any Law or Order
of any Governmental or Regulatory Authority or any Contract to which the
Purchaser or any of its Subsidiaries is a party or by which the Purchaser or any
of its Subsidiaries or any of their respective assets or properties is bound for
the execution and delivery of this Agreement by the Purchaser, the performance
by the Purchaser of its obligations hereunder or the consummation of the
transactions contemplated hereby, other than such consents, approvals, actions,
filings and notices which the failure to make or obtain, as the case may be,
individually or in the aggregate, could not be reasonably expected to have a
material adverse effect on the Purchaser and its subsidiaries taken as a whole
or materially impair the ability of the Purchaser to consummate the transactions
contemplated by this Agreement.
SECTION 3.04 Acquisition for Investment; Accredited Investor.
(a) The Preferred Shares to be acquired by the Purchaser
pursuant to this Agreement will be acquired by the Purchaser for its own account
for the purpose of investment, and not with a view to, or for sale in connection
with, any distribution thereof which would require registration under the
Securities Act. The Purchaser will refrain from transferring or otherwise
disposing of any of the Preferred Shares, or any interest therein, in such
manner as to cause the Company to be in violation of the registration
requirements of the Securities Act, or applicable state securities or blue sky
laws.
(b) The Purchaser is an "accredited investor" as defined in
Rule 501 of Regulation D under the Securities Act.
ARTICLE IV
COVENANTS
Each of the Company and the Purchaser covenants and agrees
with the other that, at all times from and after the date hereof until the
Closing, it will comply with all covenants and provisions of this Article IV,
except to the extent the other party may otherwise consent in writing.
SECTION 4.01 Regulatory and Other Approvals.
Each of the Company and the Purchaser will as promptly as practicable take all
commercially reasonable steps necessary or desirable and cooperate with each
other to obtain all consents, approvals or actions, make all filings and give
all notices required to consummate the transactions contemplated hereby.
SECTION 4.02 Notice and Cure.
Each of the Company and the Purchaser will promptly notify the other in writing
of, and contemporaneously will provide the other with true and complete copies
of any and all information or documents relating to, and will use all
commercially reasonable efforts to cure before the Closing, any event,
transaction or circumstance, occurring after the date of this Agreement that
causes or will cause any covenant or agreement of either such party under this
Agreement to be breached or that renders or will render untrue any
representation or warranty of either such party contained in this Agreement as
if the same were made on or as of the date of such event, transaction or
circumstance.
SECTION 4.03 Fulfillment of Conditions.
Each of the Company and the Purchaser will take all commercially reasonable
steps necessary or desirable and proceed diligently and in good faith to satisfy
each condition to the obligations of such party contained in this Agreement and
will not take or fail to take any action that could reasonably be expected to
result in the nonfulfillment of any such condition.
ARTICLE V
MISCELLANEOUS
SECTION 5.01 Non-Survival of Representations, Warranties, Covenants and
Agreements.
The representations, warranties, covenants and agreements contained in this
Agreement or any other instrument delivered pursuant to this Agreement shall not
survive the purchase of the Preferred Shares hereunder.
SECTION 5.02 Termination.
(a) This Agreement may be terminated, and the transactions contemplated
hereby may be abandoned:
(i) at any time before the Closing, by mutual written agreement of the Company
and Purchaser;
(ii) at any time before the Closing, by the Company or the Purchaser, upon
notification of the non-terminating party by the terminating party that the
satisfaction of any condition to the terminating party's obligations under this
Agreement becomes impossible or impracticable with the use of commercially
reasonable efforts if the failure of such condition to be satisfied is not
caused by a breach hereof by the terminating party; or (iii) automatically upon
any termination of that certain agreement between the Company and the Purchaser
attached hereto as Appendix III (the "Lock-up Agreement"), other than a
termination pursuant to the Agreement Termination Event specified in paragraph
(a) of the definition thereof contained in Section 4 of the Lock-up Agreement.
(b) If this Agreement is validly terminated pursuant to
paragraph (a), this Agreement will forthwith become null and void, and there
will be no liability or obligation on the part of the Company or the Purchaser
(or any of their respective officers, directors, employees, agents or other
representatives or Affiliates), except as provided in the next succeeding
sentence and except that the provisions with respect to expenses in Section 5.03
will continue to apply following any termination. Notwithstanding any other
provision in this Agreement to the contrary, upon termination of this Agreement
pursuant to Section 4.02(a), the Company will remain liable to the Purchaser for
any willful breach of this Agreement by the Company existing at the time of such
termination, and the Purchaser will remain liable to the Company for any willful
breach of this Agreement by the Purchaser existing at the time of such
termination, and the Company or the Purchaser may seek such remedies, including
damages and fees of attorneys, against the other with respect to any such breach
as are provided in this Agreement or as are otherwise available at law or in
equity
SECTION 5.03 Expenses, Etc.
Each party hereto will pay such party's own expenses in connection with the
transactions contemplated hereby, whether or not such transactions shall be
consummated.
SECTION 5.04 Notices.
Any notice or other communications required or permitted hereunder shall be
deemed to be sufficient if contained in a written instrument delivered in person
or duly sent by first class certified mail, postage prepaid, or by telecopy
addressed to such party at the address or telecopy number set forth below or
such other address or telecopy number as may hereafter be designated in writing
by the addressee to the addressor listing all parties:
If to the Company, to:
Westbridge Capital Corp.
110 West Seventh Street
Suite 300
Fort Worth, TX 76102
Attention: Patrick H. O'Neill, Esq.
General Counsel
Facsimile No.: 817-878-3672
with a copy to:
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Attention: Robert S. Reder, Esq.
Facsimile No. (212) 530-5219
If to the Purchaser, to:
Credit Suisse First Boston Corporation
11 Madison Avenue
New York, NY 10010-3629
Attention: David J. Matlin and Alex Lagetko
Facsimile No.: 212-325-8290
with a copy to:
Cadwalader, Wickershan & Taft
100 Maiden Lane
New York, NY 10038
Attention: Michael J. Sage, Esq.
Facsimile No.: 212-504-6666
or, in any case, at such other address or addresses as shall have been furnished
in writing by such party to the other parties hereto. All such notices,
requests, consents and other communications shall be deemed to have been
received (a) in the case of personal delivery, on the date of such delivery, (b)
in the case of mailing, on the fifth business day following the date of such
mailing, and (c) in the case of telecopy, when received.
SECTION 5.05 Parties in Interest.
All covenants and agreements contained in this Agreement by or on behalf of any
of the parties hereto shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether so expressed or not.
SECTION 5.06 Entire Agreement; Assignment.
This Agreement constitutes the entire agreement of the parties with respect to
the subject matter hereof and may not be amended or modified nor any provisions
waived except in a writing signed by the parties hereto. This Agreement may not
be assigned by any party without the prior written consent of the other and any
attempt to do so will be void, except that the Purchaser may assign any or all
of its rights, interests and obligations hereunder to a subsidiary or any other
third party, provided that any such subsidiary or third-party agrees in writing
to be bound by all of the terms, conditions and provisions contained herein, but
no such assignment shall relieve the Purchaser of its obligations hereunder,
except, that in connection with any assignment to a subsidiary or any other
third party which, in either case (i) is an entity, the commercial paper
obligations of which are rated at least A-1 by Standard & Poor's Corporation or
P-1 by Moody's Investors Service, Inc. (or a comparable rating by any other
nationally recognized statistical ratings organization) or (ii) on the date of
any such assignment, by wire transfer of immediately available funds, deposits
with an independent financial institution under an escrow arrangement reasonably
satisfactory to the Company an amount equal to the aggregate Share Purchase
Price payable pursuant to Section 1.04, the Purchaser shall be relieved of its
obligations under this Agreement upon the execution and delivery by such
subsidiary or other third party of written agreement to be bound by all of the
terms, conditions and provisions contained herein. Subject to the preceding
sentence, this Agreement is binding upon, inures to the benefit of and is
enforceable by the parties hereto and their respective successors and assigns.
SECTION 5.07 Counterparts.
This Agreement may be executed in any number of counterparts, and each such
counterpart hereof shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
SECTION 5.08 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 conflicts of law principles thereof.
Each party irrevocably submits to the exclusive jurisdiction of the court having
jurisdiction over the Chapter 11 Case in any action, suit or proceeding arising
out of or relating to this Agreement or any of the transactions contemplated
hereby, and agrees that any such action, suit or proceeding shall be brought
only in such court. Each party hereby irrevocably waives, to the fullest extent
permitted by law, any objection that it may now or hereafter have to the laying
of the venue of any such action, suit or proceeding brought in such a court and
any claim that any such action, suit or proceeding brought in such a court has
been brought in an inconvenient forum.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above written.
WESTBRIDGE CAPITAL CORP.
By: /s/Patrick J. Mitchell
Name: Patrick J. Mitchell
Title: President
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ Alex Lagetko
Name: Alex Lagetko
Title: Director
<PAGE>
APPENDIX I
(Included as Exhibit 10.32 to this Report)
<PAGE>
APPENDIX II
REGISTRATION RIGHTS AGREEMENT
<PAGE>
MTHM Draft
9/14/98
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement, dated as of __________, 1998, among
___________________, a Delaware corporation (the "Company"), the holders of
Common Stock and the holders of New Convertible Preferred Stock of the Company
listed on Schedule I hereto (the "Initial Holders").
W I T N E S S E T H:
WHEREAS, pursuant to Section ___ of the Plan of Reorganization of the
Company under Chapter 11 of the Bankruptcy Code dated __________, 1998, as the
same may have been amended or supplemented from time to time prior to the date
hereof (the "Plan"), as of the Effective Date (as defined in the Plan) the
Company is obligated to enter into a registration rights agreement substantially
in the form of Exhibit "B" thereto; and
WHEREAS, the parties hereto have agreed that the execution and delivery
by the Company and the Initial Holders of this Agreement will satisfy such
obligation under the Plan;
NOW, THEREFORE, in consideration of the premises and of the mutual
promises and agreements set forth herein, the parties hereby agree as follows:
1. Definitions.
(a) Capitalized terms used in this Agreement but not otherwise defined
herein shall have the meanings given to them in the Plan. Each reference herein
to an agreement, document or instrument shall mean that agreement, document or
instrument as from time to time amended, modified or supplemented in accordance
with its terms, including in each case all exhibits, annexes and schedules to
such agreement, document or instrument, all of which are incorporated by
reference to such agreement, document or instrument. The use herein of the word
"or" shall not be deemed exclusive.
(b) As used in this Exhibit, the following capitalized terms shall have
the meanings ascribed to them below:
"Common Stock" means the Common Stock, par value $.01 per share,
of the Company being issued and sold pursuant to the Plan.
"Effective Date" means the effective date as defined in the Plan.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute then in effect, and a
reference to a particular section thereof shall be deemed to include a
reference to the comparable section, if any, of any such similar
federal statute.
"Holder" means a registered holder of Registrable Securities who
is an Initial Holder .
"Person" means an individual, partnership, limited liability
company, joint venture, corporation, trust, unincorporated
organization or government or any department or agency thereof.
"Preferred Stock" means the Series A Cumulative Convertible
Redeemable Preferred Stock, par value $.01 per share, of the Company
being issued pursuant to the Plan.
"Prospectus" means the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement
with respect to the terms of the offering of any portion of the
Registrable Securities covered by such Registration Statement or any
other amendments and supplements to such prospectus, including without
limitation any preliminary prospectus, any pre-effective or
post-effective amendment and all material incorporated by reference in
any prospectus.
"Registrable Securities" means (i) the shares of Common Stock
issued to any Initial Holder pursuant to the Plan, (ii) the shares of
Preferred Stock issued to any Initial Holder pursuant to the Plan or
the Stock Purchase Agreement dated as of September __, 1998 between
the Company and Credit Suisse First Boston Corporation (the "Stock
Purchase Agreement"), (iii) any shares of Common Stock issued upon
conversion of shares of Preferred Stock issued to any Initial Holder
pursuant to the Plan or the Stock Purchase Agreement and (iv) any
securities issued or issuable in respect of or in exchange for any of
the shares of Common Stock or Preferred Stock referred to in clause
(i), (ii) or (iii) by way of a stock dividend or other distribution,
stock split, reverse stock split or other combination of shares,
recapitalization, reclassification, merger, consolidation or exchange
offer. As to any particular Registrable Securities, once issued such
securities shall cease to be Registrable Securities when (i) a
Registration Statement with respect to the sale of such securities
shall have become effective under the Securities Act and such
securities shall be eligible to be disposed of in accordance with such
Registration Statement, (ii) such securities shall (x) have been sold,
or (y) with respect to any Registrable Securities held by any Holder,
all Registrable Securities then owned by such Holder can be sold in
any three-month period, in either case pursuant to Rule 144 (or any
successor provision) under the Securities Act ("Rule 144"), (iii) such
securities shall have been otherwise transferred and new certificates
for such securities not bearing a legend restricting further transfer
shall have been delivered by the Company or (iv) such securities shall
have ceased to be outstanding. Shares of Common Stock available upon
the conversion of the Preferred Stock shall not constitute
"Registrable Securities" for purposes of this Agreement and shall not
be available for inclusion in a Registration Statement to be filed
pursuant to Section 2 or 5 hereof until such shares are actually
obtained upon conversion of the Preferred Stock.
"Registration Expenses" has the meaning set forth in Section 4
hereof.
"Registration Statement" means any registration statement of the
Company which covers Registrable Securities pursuant to the provisions
of this Registration Rights Agreement, all amendments and supplements
to such Registration Statement, including post-effective amendments,
and all exhibits and all material incorporated by reference in such
Registration Statement.
"SEC" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act or the
Exchange Act.
"Securities Act" means the Securities Act of 1933, as amended, or
any similar federal statute then in effect, and a reference to a
particular section thereof shall be deemed to include a reference to
the comparable section, if any, of any such similar federal statute.
2. Demand Registration.
(a) Requests for Registration. Subject to the provisions of paragraphs
(b), (c) and (d) of this Section 2, at any time during the period beginning on
the Effective Date and ending on the first date on which there are no
Registrable Securities (the "Demand Registration Period"), any Holder or group
of Holders holding at least 10% of any class of the aggregate Registrable
Securities still outstanding on a fully-diluted basis may make a written request
for registration under the Securities Act of all or any part of such Holder's or
Holders' Registrable Securities (a "Demand Registration"). Such request shall
specify the amount of Registrable Securities to be registered and the intended
method or methods of disposition. Within 10 days after receipt of such request,
the Company shall send written notice of such request to all Holders and shall,
subject to the provisions of paragraphs (b), (c) and (d) of this Section 2,
include in such Demand Registration all Registrable Securities with respect to
which the Company receives written requests (specifying the amount of
Registrable Securities to be registered and the intended method or methods of
disposition) for inclusion therein within 30 days after such notice is sent. The
Company shall file with the SEC a Registration Statement, registering all
Registrable Securities that any Holders have requested the Company to register,
for disposition in accordance with the intended method or methods set forth in
their notices to the Company, and the Company shall use good faith efforts to
make such filing within 30 days of such request. The Company shall use its best
efforts to cause such Registration Statement to be declared effective as soon as
practicable after filing and to remain effective until the earlier of (i) 90
days following the date on which it was declared effective and (ii) the date on
which all of the Registrable Securities covered thereby are disposed of in
accordance with the method or methods of disposition stated therein.
(b) Number of Registrations. The Holders shall be entitled to request
an aggregate of five (5) Demand Registrations during the Demand Registration
Period; provided, however, that the Company will not be obligated to comply with
any such request unless (i) such request is made by Persons holding at least 10%
of the aggregate amount of any class of Registrable Securities at the time
outstanding and (ii) the Company has not effected another Demand Registration in
accordance with the provisions of this Agreement within the previous six months.
(c) Suspension of Registration. The Company shall have the right to
delay the filing or effectiveness of a Registration Statement for any Demand
Registration and to require the Holders not to sell under any such Registration
Statement, during one or more periods aggregating not more than 60 days in each
twelve-month period during the Demand Registration Period in the event that (i)
the Company would, in accordance with the advice of its counsel, be required to
disclose in the Prospectus information not otherwise then required by law to be
publicly disclosed and (ii) in the judgment of the Company, there is a
reasonable likelihood that such disclosure, or any other action to be taken in
connection with the Prospectus, would materially and adversely affect any
existing or prospective material business situation, transaction or negotiation
or otherwise materially and adversely affect the Company.
(d) Offering by the Company. The Company may include in any Demand
Registration additional shares of capital stock to be sold for the Company's
account pursuant to such registration; provided, however, that if the managing
underwriter for a Demand Registration that involves an underwritten offering
shall advise the Company that, in its opinion, the inclusion of the amount and
kind of shares of capital stock to be sold for the Company's account would
adversely affect the success of the offering for the selling Holders, then the
number and kind of shares of capital stock to be sold for the Company's account
shall be reduced (and may be reduced to zero) in accordance with the managing
underwriter's recommendation.
(e) Suspension of Effectiveness. In the event that a Demand
Registration which has been declared or ordered effective in accordance with the
rules of the SEC is not kept effective for the period of time contemplated by
Section 2(a) (after taking into account any suspensions and extensions thereof),
then such Demand Registration shall not be counted as a Demand Registration for
purposes of Section 2(b).
3. Registration Procedures.
(a) The Company to Use Best Efforts. In connection with the Company's
Demand Registration obligations pursuant to Section 2 hereof, the Company shall
use its best efforts to effect such registrations to permit the sale of such
Registrable Securities in accordance with the intended method or methods of
disposition thereof, and pursuant thereto the Company shall use its best
efforts:
(i) to prepare and file with the SEC a Registration Statement
relating to each Demand Registration on any appropriate form under the
Securities Act, and to cause such Registration Statement to become
effective as soon as practicable and to remain continuously effective
for the time period required by the provisions of this Agreement to the
extent permitted under the Securities Act, provided that as far in
advance as practical before filing such Registration Statement or any
amendment thereto, the Company will furnish to the Holders copies of
reasonably complete drafts of all such documents proposed to be filed
(including exhibits), and the Holders shall have the opportunity to (i)
object to any information pertaining solely to the Holders that is
contained therein and the Company will make the corrections reasonably
requested by the Holders with respect to such information and (ii)
comment on any other information contained therein and the Company will
in good faith consider whether any changes or corrections are required,
in each case, prior to filing any such Registration Statement or
amendment;
(ii) to prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be
necessary to keep such Registration Statement effective for the
applicable period set forth in paragraph (a) of Section 2; and to cause
the related Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed in accordance with the
Securities Act and any rules and regulations promulgated thereunder;
and otherwise to comply with the provisions of the Securities Act as
may be necessary to facilitate the disposition of all Registrable
Securities covered by such Registration Statement during the applicable
period in accordance with the intended method or methods of disposition
by the selling Holders thereof set forth in such Registration Statement
or such Prospectus or Prospectus supplement;
(iii) to notify the selling Holders and the managing
underwriters, if any, promptly if at any time (A) any Prospectus,
Registration Statement or amendment or supplement thereto is filed, (B)
any Registration Statement, or any post-effective amendment thereto,
becomes effective, (C) the SEC requests any amendment or supplement to,
or any additional information in respect of, any Registration Statement
or Prospectus, (D) the SEC issues any stop order suspending the
effectiveness of a Registration Statement or initiates any proceedings
for that purpose, (E) the representations and warranties of the Company
contemplated by subclause (B) of clause (xii) of this paragraph (a)
cease to be true and correct, (F) the Company receives any notice that
the qualification of any Registrable Securities for sale in any
jurisdiction has been suspended or that any proceeding has been
initiated for the purpose of suspending such qualification, or (G) any
event occurs which requires that any changes be made in such
Registration Statement or any related Prospectus so that such
Registration Statement or Prospectus will not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading;
(iv) to make every reasonable effort to obtain the withdrawal
of any order suspending the effectiveness of a Registration Statement,
or the qualification of any Registrable Securities for sale in any
jurisdiction, at the earliest possible moment;
(v) to furnish to each selling Holder and each managing
underwriter, if any, one signed copy of the applicable Registration
Statement and any post-effective amendment thereto, including all
financial statements and schedules thereto, all documents incorporated
therein by reference and all exhibits thereto (including exhibits
incorporated by reference) as promptly as practicable after filing such
documents with the SEC;
(vi) to deliver to each selling Holder and each underwriter,
if any, as many copies of the Prospectus or Prospectuses (including
each preliminary Prospectus) and any amendment or supplement thereto as
such Persons may reasonably request; and to consent to the use of such
Prospectus or any amendment or supplement thereto by each such selling
Holder and underwriter, if any, in connection with the offering and
sale of the Registrable Securities covered by such Prospectus,
amendment or supplement;
(vii) prior to any public offering of Registrable Securities,
to register or qualify, or to cooperate with the selling Holders, the
underwriters, if any, and their respective counsel in connection with
the registration or qualification of such Registrable Securities, for
offer and sale under the securities or blue sky laws of such
jurisdictions as may be requested by the Holders of a majority of the
Registrable Securities included in such Registration Statement; to keep
each such registration or qualification effective during the period set
forth in paragraph (a) of Section 2 that the applicable Registration
Statement is required to be kept effective; and to do any and all other
acts or things necessary to enable the disposition in such
jurisdictions of the Registrable Securities covered by such
Registration Statement; provided, however, that the Company will not be
required to qualify generally to do business in any jurisdiction where
it is not then so qualified or to take any action which would subject
it to taxation or general service of process in any jurisdiction where
it is not then so subject;
(viii) to cooperate with the selling Holders and the
underwriters, if any, in the preparation and delivery of certificates
representing the Registrable Securities to be sold, such certificates
to be in such denominations and registered in such names as such
selling Holders or managing underwriters may request at least three
Business Days prior to any sale of Registrable Securities represented
by such certificates;
(ix) to cause the Registrable Securities covered by the
applicable 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 underwriters, if any, to
consummate the sale of such Registrable Securities in conformity with
federal law and the laws of the jurisdictions in which such Registrable
Securities shall be registered or qualified pursuant to clause (viii)
of this paragraph (a);
(x) upon the occurrence of any event described in subclause
(C) or (G) of clause (iii) of this paragraph (a), promptly to prepare
and file a supplement or post-effective amendment to the applicable
Registration Statement or Prospectus or any document incorporated
therein by reference, and any other required document, either in
accordance with the request of the SEC, or so that such Registration
Statement and Prospectus will not thereafter contain an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading, as the case
may be, and to cause such supplement or post-effective amendment to
become effective as soon as practicable;
(xi) to cause all Registrable Securities covered by such
Registration Statement to be listed or included on any securities
exchange (or on any quotation system operated by a national securities
association) on which such Registrable Securities are then listed or
included, if any; to enter into customary agreements with any such
securities exchange or system, including, if necessary, a listing
application and indemnification agreement in customary form; and to
provide a transfer agent for such Registrable Securities no later than
the effective date of such Registration Statement;
(xii) to take all other actions in connection therewith as are
reasonably necessary or desirable in order to expedite or facilitate
the disposition of the Registrable Securities included in such
Registration Statement and, in the case of an underwritten offering:
(A) to enter into an underwriting agreement in customary form for the
managing underwriters with respect to issuers of similar market
capitalization and reporting and financial histories; (B) to make
representations and warranties to each Holder participating in such
offering and to each of the underwriters, in such form, substance and
scope as are customarily made to the managing underwriters by issuers
of similar market capitalization and reporting and financial histories
and to confirm the same to the extent customary if and when requested;
(C) to obtain opinions of counsel to the Company (which may be the
Company's inside counsel) and updates thereof addressed to each Holder
participating in such offering and to each of the underwriters, such
opinions and updates to be in customary form to cover the matters
customarily covered in opinions obtained in underwritten offerings by
the managing underwriters for issuers of similar market capitalization
and reporting and financial histories; (D) to obtain "comfort" letters
and updates thereof from the Company's independent certified public
accountants addressed to each of the underwriters, such letters to be
in customary form and to cover matters of the type customarily covered
in "comfort" letters to the managing underwriters in connection with
underwritten offerings by them for issuers of similar market
capitalization and reporting and financial histories; (E) to provide,
in the underwriting agreement to be entered into in connection with
such offering, indemnification provisions and procedures no less
favorable than those set forth in Section 6 hereof with respect to all
parties to be indemnified pursuant to such Section 6; and (F) to
deliver such customary documents and certificates as may be reasonably
requested by Holders of a majority of the Registrable Securities
included in such Registration Statement and the managing underwriters
to evidence compliance with clause (B) of this paragraph (xii) and with
any customary conditions contained in the underwriting agreement
entered into by the Company in connection with such offering;
(xiii) in the case of any offering other than an underwritten
offering: (A) to make representations and warranties to each Holder
participating in such offering, in such form, substance and scope as
are customarily made in such offerings by issuers of similar market
capitalization and reporting and financial histories and to confirm the
same if and when requested, (B) to obtain "comfort" letters and updates
thereof from the Company's independent certified public accountants,
such letters to be in customary form and to cover the matters of the
type customarily covered in "comfort" letters in such offerings for
issuers of similar market capitalization and reporting and financial
histories, (C) to obtain an opinion of counsel to the Company (which
may be the Company's inside counsel) at the time of effectiveness of
such Registration Statement covering such offering and an update
thereof at the time of effectiveness of any post-effective amendment to
such Registration Statement (other than by reason of incorporation by
reference of documents filed with the SEC) addressed to each Holder of
any Registrable Securities covered by such Registration Statement,
covering matters customarily covered in opinions obtained in
underwritten offerings by issuers with similar market capitalization
and reporting and financial histories; and (D) to deliver a certificate
of a senior executive officer of the Company at the time of
effectiveness of such Registration Statement and, upon the request of
Holders of a majority of the Registrable Securities included in such
Registration Statement, updates thereof, such certificates to cover
matters customarily covered in officers' certificates delivered in
connection with underwritten offerings by issuers with similar market
capitalization and reporting and financial histories;
(xiv) to make available for inspection by representatives of
the Holders of Registrable Securities being sold pursuant to any Demand
Registration and of the underwriters, if any, participating in such
sale all financial and other records, pertinent corporate documents and
properties of the Company, and to cause the Company's officers,
directors and employees to supply all information reasonably requested
by any such representatives, in connection with such Demand
Registration; provided, however, that all information regarding such
records, documents and properties shall be subject to customary
confidentiality agreements to be entered into by such Persons with the
Company;
(xv) to comply with all applicable rules and regulations of
the SEC relating to such Registration Statement and the distribution of
the securities being offered or otherwise necessary in order to perform
the Company's obligations under this paragraph (a);
(xvi) to cooperate and assist in any filings required to be
made with the National Association of Securities Dealers, Inc. and in
the performance of any customary or required due diligence
investigation by any underwriter; and
(xvii) to take all other reasonable steps necessary and
appropriate to effect such registration in the manner contemplated by
the provisions of this Agreement.
(b) Holders' Obligation to Furnish Information. The Company may
require, as a condition precedent to the Company's obligations under this
Section 3, each Holder of Registrable Securities as to which any registration is
being effected to furnish to the Company such information regarding the
distribution of such securities as the Company may from time to time reasonably
request.
(c) Suspension of Sales Pending Amendment of Prospectus. Each Holder
agrees that, upon receipt of any notice from the Company of the happening of any
event of the kind described in subclause (C), (D), (E), (F) or (G) of clause
(iii) of paragraph (a) of this Section 3, such Holder will forthwith forego or
delay the disposition of any Registrable Securities covered by such Registration
Statement or Prospectus until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by clause (x) of such paragraph
(a), or until it is advised in writing by the Company that the use of the
applicable Prospectus may be resumed, and has received copies of any additional
or supplemental filings which are incorporated by reference in such Prospectus,
and, if so directed by the Company, such 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 any Prospectus covering such Registrable Securities.
If the Company shall have given any such notice during a period when a Demand
Registration is in effect, the 90-day period described in clause (i) of
paragraph (a) of Section 3 shall be extended by the number of days from and
including the date of the giving of such notice to and including the date when
each Holder of Registrable Securities covered by such Registration Statement
shall have received the copies of the supplemented or amended Prospectus
contemplated by clause (x) of such paragraph (a) or shall have been advised in
writing by the Company that the use of the applicable Prospectus may be resumed.
4. Registration Expenses.
All expenses incident to the Company's performance of or compliance
with its obligations under the provisions of this Agreement shall be borne by
the Company, including without limitation all (i) registration and filing fees,
(ii) fees and expenses of compliance with securities or blue sky laws, (iii)
printing expenses (including expenses of printing Prospectuses), (iv) messenger
and delivery expenses, (v) internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), (vi) fees and disbursements of its counsel and its
independent certified public accountants (including the expenses of any special
audit or "comfort" letters required by or incident to such performance or
compliance), (vii) securities acts liability insurance (if the Company elects to
obtain such insurance), (viii) reasonable fees and expenses of any special
experts retained by the Company in connection with any registration hereunder,
(ix) reasonable fees and expenses of other Persons retained by the Company, and
(x) reasonable fees and expenses of one counsel for the Holders of Registrable
Securities covered by each Registration Statement, with such counsel to be
selected by Holders of a majority of such Registrable Securities (all such
expenses being herein referred to as "Registration Expenses"); provided,
however, that Registration Expenses shall not include any underwriting
discounts, commissions, fees or expenses or transfer taxes attributable to the
sale of the Registrable Securities.
5. Piggyback Registration.
(a) Right to Include Registrable Securities. If at any time during the
Demand Registration Period the Company proposes to register any Registrable
Securities under the Securities Act, whether or not for sale for its own account
(other than a registration on Form S-4 or Form S-8, or any successor or similar
forms), in a manner that would permit registration of Registrable Securities of
the same class for sale to the public under the Securities Act, it will each
such time promptly give written notice to all Persons who hold of record any
Registrable Securities of the same class of its intention to do so and of the
intended method of disposition of the shares being registered, of the
registration form of the SEC that has been selected by the Company and of rights
of Holders under this Section 5 (the "Section 5 Notice"). The Company will use
its best efforts to include in the proposed registration (and, if such
registration involves an underwritten offering, in the underwriting) all
Registrable Securities of the same class that the Company is requested in
writing, within 15 days after the Section 5 Notice is given, to register by the
Holders thereof; provided, however, that (i) if, at any time after giving
written notice of its intention to register any Registrable Securities and prior
to the effective date of the registration statement filed in connection with
such registration, the Company shall determine for any reason not to register
such Registrable Securities, the Company may, at its election, give written
notice of such determination to all Persons who hold of record any Registrable
Securities of the same class and, thereupon, shall be relieved of its obligation
to register any Registrable Securities of the same class in connection with such
abandoned registration, without prejudice, however, to the rights of Holders
under Section 2 hereof and (ii) in case of a determination by the Company to
delay registration of its Registrable Securities, the Company shall be permitted
to delay the registration of such Registrable Securities of the same class for
the same period as the delay in registering such Registrable Securities. No
registration effected under this Section 5 shall relieve the Company of its
obligations to effect registrations upon request under Section 2 and,
notwithstanding anything to the contrary in Section 2, no Holder shall have the
right to require the Company to register any Registrable Securities pursuant to
Section 2 until the later of (A) the completion of the distribution of the
securities offered and registered pursuant to the Section 5 Notice and (B) 90
days after the date each registration statement described in the first sentence
of this paragraph (a) is declared effective.
(b) Expenses. The Company shall pay all Registration Expenses in
connection with each registration of Registrable Securities of the same class
requested pursuant to this Section 5; provided, however, that each Holder shall
pay all underwriting discounts, commissions, fees or expenses or transfer taxes,
if any, relating to the sale or disposition of such Holder's Registrable
Securities of the same class pursuant to a Registration Statement effected
pursuant to this Section 5.
(c) Priority in Incidental Registration. If the managing underwriter
for a registration pursuant to this Section 5 that involves an underwritten
offering shall advise the Company that, in its opinion, the inclusion of the
amount of Registrable Securities of the same class to be sold for the account of
Holders would adversely affect the success of the offering for the Company, then
the number of Registrable Securities of the same class to be sold for the
account of such Holders shall be reduced (and may be reduced to zero) in
accordance with the managing underwriter's recommendation. In the event that the
number of Registrable Securities of the same class to be included in any
registration is reduced (but not to zero), the number of such Registrable
Securities of the same class included in such registration shall be allocated
pro rata among all requesting Holders, on the basis of the relative number of
shares of such Registrable Securities of the same class each such Holder has
requested to be included in such registration. If, as a result of the proration
provisions of this paragraph (c), any Holder shall not be entitled to include
all Registrable Securities of the same class in a registration pursuant to this
Section 5 that such Holder has requested be included, such Holder may elect to
withdraw its Registrable Securities of the same class from the registration;
provided, however, that such withdrawal election shall be irrevocable and, after
making a withdrawal election, a Holder shall no longer have any right to include
Registrable Securities of the same class in the registration as to which such
withdrawal election was made.
(d) Merger, Consolidation, etc. Notwithstanding anything in this
Section 5 to the contrary, Holders shall not have any right to include their
Registrable Securities in any distribution or registration of equity securities
by the Company, which is a result of a merger, consolidation, acquisition,
exchange offer, recapitalization, other reorganization, dividend reinvestment
plan, stock option plan or other employee benefit plan, or any similar
transaction having the same effect.
6. Indemnification.
(a) Indemnification by the Company. In the event of any registration of
any securities of the Company under the Securities Act pursuant to Section 2 or
5 hereof, the Company will, and hereby does, indemnify and hold harmless, to the
extent permitted by law, the seller of any Registrable Securities covered by any
Registration Statement filed to effect such registration, its directors and
officers or general and limited partners (and the directors and officers
thereof), each other Person who participates as an underwriter, if any, in the
offering or sale of such securities and each other Person, if any, who controls
such seller or any such underwriter within the meaning of the Securities Act,
against any and all losses, claims, damages or liabilities, joint or several,
and expenses (including any amounts paid in any settlement effected with the
Company's consent, which consent shall not be unreasonably withheld) to which
such seller or any such director, officer, general or limited partner,
underwriter or controlling Person may become subject under the Securities Act,
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement under which such securities were
registered under the Securities Act or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary Prospectus, together
with the documents incorporated by reference therein (as amended or supplemented
if the Company shall have filed with the SEC any amendment thereof or supplement
thereto), if used prior to the effective date of such Registration Statement, or
contained in the Prospectus, together with the documents incorporated by
reference therein (as amended or supplemented if the Company shall have filed
with the SEC any amendment thereof or supplement thereto), or the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading or (iii) any violation
by the Company of any federal, state or common law rule or regulation applicable
to the Company and relating to action required of or inaction by the Company in
connection with any such registration, and the Company will reimburse such
seller and each such director, officer, general or limited partner, underwriter
and controlling Person for any legal or any other expenses reasonably incurred
by any of them in connection with investigating or defending any such loss,
claim, liability, action or proceeding; provided, however, that the Company
shall not be liable to any such seller or any such director, officer, general or
limited partner, underwriter or controlling Person in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in such
Registration Statement or amendment thereof or supplement thereto or in any such
preliminary, final or summary Prospectus in reliance upon and in conformity with
written information furnished to the Company by or on behalf of any such seller
or any such director, officer, general or limited partner, underwriter or
controlling Person, for use in the preparation thereof; and provided further,
that the Company will not be liable to any Person who participates as an
underwriter in any underwritten offering or sale of Registrable Securities, or
to any Person who is a seller in any non-underwritten offering or sale of
Registrable Securities, or any other Person, if any, who controls such
underwriter or seller within the meaning of the Securities Act, under the
indemnity agreement in this paragraph (a) with respect to any preliminary
Prospectus or the final Prospectus (including any amended or supplemented
preliminary or final Prospectus), as the case may be, to the extent that any
such loss, claim, damage or liability of such underwriter, seller or controlling
Person results from the fact that such underwriter or seller sold Registrable
Securities to a person to whom there was not sent or given, at or prior to the
written confirmation of such sale, a copy of the final Prospectus or of the
final Prospectus as then amended or supplemented, whichever is most recent, if
the Company has previously furnished copies thereof to such underwriter or
seller and such final Prospectus, as then amended or supplemented, has corrected
any such misstatement or omission. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such seller or
any such director, officer, general or limited partner, underwriter or
controlling Person and shall survive the transfer of such securities by such
underwriter or seller.
(b) Indemnification by the Sellers. In consideration of the Company's
including any Registrable Securities in any Registration Statement filed in
accordance with Section 2 or 5 hereof, the prospective seller of such
Registrable Securities hereby agrees to indemnify and hold harmless (in the same
manner and to the same extent as set forth in paragraph (a) of this Section 6)
the Company and its directors and officers and each person controlling the
Company within the meaning of the Securities Act and all other prospective
sellers and their directors, officers, general and limited partners and
respective controlling Persons with respect to any statement or alleged
statement in or omission or alleged omission from such Registration Statement,
any preliminary, final or summary Prospectus contained therein, or any amendment
or supplement, but only to the extent such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company or its representatives by or on
behalf of such seller for use in the preparation of such Registration Statement,
preliminary, final or summary Prospectus or amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Company or any of the prospective sellers or any of
their respective directors, officers, general or limited partners or controlling
Persons and shall survive the transfer of such securities by such seller. Any
Holder's liability hereunder shall be limited to the amount of proceeds received
by such Holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified
party hereunder of written notice of the commencement of any action or
proceeding with respect to which a claim for indemnification may be made
pursuant to this Section 6, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action; provided, however, that the failure
of any indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding paragraphs of this
Section 6, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. If any such claim or action shall be
brought against an indemnified party, and it shall notify the indemnifying party
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; provided, however, that if, in any
indemnified party's reasonable judgment, a conflict of interest between such
indemnified party and the indemnifying party exists in respect of such claim,
then such indemnified party shall have the right to participate in the defense
of such claim and to employ one firm of attorneys at the indemnifying party's
expense to represent such indemnified party. Once the indemnifying party has
assumed the defense of any claim, no indemnified party will consent to entry of
any judgment or enter into any settlement without the indemnifying party's
consent to such judgment or settlement, which shall not be unreasonably
withheld.
(d) Other Indemnification. Indemnification similar to that specified in
the preceding paragraphs of this Section 6 (with appropriate modifications)
shall be given by the Company and each seller of Registrable Securities with
respect to any required registration or other qualification of securities under
any state securities and "blue sky" laws.
(e) Contribution. If the indemnification provided for in this Section 6
is unavailable or insufficient to hold harmless an indemnified party under
paragraph (a), (b) or (d) of this Section 6, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of the losses, claims, damages or liabilities referred to in such paragraph (a),
(b) or (d) in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and the indemnified party on the other
hand in connection with statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the indemnifying party or the indemnified party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statements or omission. The Company agrees, and
the Holders (in consideration of the Company's including any Registrable
Securities in any Registration Statement filed in accordance with Section 2 or 5
hereof) shall be deemed to have agreed, that it would not be just and equitable
if contributions pursuant to this paragraph (e) were to be determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the first sentence of this
paragraph (e). The amount paid by an indemnified party as a result of the
losses, claims, damages or liabilities referred to in the first sentence of this
paragraph (e) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any action or claim (which shall be limited as provided in paragraph (c) of this
Section 6 if the indemnifying party has assumed the defense of any such action
in accordance with the provisions thereof) which is the subject of this
paragraph (e). No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. Promptly after receipt by an indemnified party under this
paragraph (e) of notice of the commencement of any action against such party in
respect of which a claim for contribution may be made against an indemnifying
party under this paragraph (e), such indemnified party shall notify the
indemnifying party in writing of the commencement thereof if the notice
specified in paragraph (c) of this Section 6 has not been given with respect to
such action; provided, however, that the omission so to notify the indemnifying
party shall not relieve the indemnifying party from any liability which it may
have to any indemnified party otherwise under this paragraph (e), except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. Notwithstanding anything in this paragraph (e) to the contrary, no
indemnifying party (other than the Company) shall be required pursuant to this
paragraph (e) to contribute any amount in excess of the proceeds received by
such indemnifying party from the sale of Registrable Securities in the offering
to which the losses, claims, damages or liabilities of the indemnified parties
relate.
(f) Survival. The provisions of this Section 6 will survive
indefinitely, notwithstanding any transfer of the Registrable Securities by any
Holder.
7. Rules 144 and 144A.
The Company shall file the reports required to be filed by it under the
Securities Act and the Exchange Act and the rules and regulations promulgated
thereunder, and shall take such further action as any Holder may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Registrable Securities without registration under the Securities Act within
the limitations of the exemptions provided by Rule 144. Upon the request of any
Holder, the Company shall deliver to such Holder a written statement stating
whether it has complied with such information and requirements. Upon request,
the Company shall furnish to each Holder such information as shall be reasonably
required pursuant to Rule 144A(d)(4)(i) to permit such Holder to dispose of its
Registrable Securities in a transaction pursuant to Rule 144A.
8. Underwritten Registrations.
(a) Selection of Underwriters. If any of the Registrable Securities
covered by any Demand Registration are to be sold in an underwritten offering,
the underwriter or underwriters and managing underwriter or managing
underwriters that will administer the offering shall be selected by, and the
terms of any underwriting agreement and other underwriting arrangements shall be
approved by, the Company; provided, however, that such underwriters and managing
underwriters shall be subject to the approval of the Holders of a majority in
aggregate amount of Registrable Securities included in such offering, which
approval shall not be unreasonably withheld.
(b) Agreements of Selling Holders. No Holder shall sell any of its
Registrable Securities in any underwritten offering pursuant to a registration
hereunder unless such Holder (i) agrees to sell such Registrable Securities on
the basis provided in any underwriting agreement or other underwriting
arrangements approved by the Persons entitled hereunder to approve such
agreements or arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting agreements or other underwriting
arrangements.
9. Certain Company Representations, Warranties and Covenants.
(a) No Existing Agreements. The Company represents and warrants to the
Initial Holders that there is not in effect on the date hereof any agreement by
the Company (other than this Agreement) pursuant to which any holders of the
securities of the Company to be issued pursuant to the Plan have a right to
cause the Company to register or qualify such securities under the Securities
Act or any securities or blue sky laws of any jurisdiction.
(b) Future Agreements. Without the prior consent of each Holder that
holds Registrable Securities, the Company shall not hereafter agree with the
holders of any securities issued or to be issued by the Company to register or
qualify such securities under the Securities Act or any securities or blue sky
laws of any jurisdiction unless the rights so granted, if exercised, would not
materially conflict with, be materially inconsistent with or violate the
provisions of this Agreement.
(c) Transfers; Removal of Legend. Following the Closing Date, upon
delivery to the Company by a Holder of a certificate, in form and substance
reasonably satisfactory to the Company and duly executed by an authorized
officer of the Holder, to the effect that the Registrable Securities have been
transferred (i) pursuant to a registration statement that has been declared
effective by the SEC and was, at the time of such sale or other transfer,
effective under the Securities Act or (ii) without registration pursuant to a
transaction which complies with the requirements of Rule 144, the Company will,
or will instruct its transfer agent to, issue upon surrender of the certificates
representing such Registrable Securities, one or more new certificates
evidencing the Registrable Securities so transferred, which new certificates
will not bear a restrictive legend to the effect that the securities represented
by such certificates have not been registered under the Securities Act and
applicable state securities laws and may not be sold or otherwise transferred in
the absence of such registration or an exemption therefrom. Other than with
respect to any sale or other transfer for which any such certificate has been
received by the Company or for which the Company has received a reasonably
satisfactory opinion of counsel to the effect that such sale or other transfer
is not required to be registered under the Securities Act or applicable state
securities laws, the Company or the Company's transfer agent at the Company's
instruction may refuse to transfer Registrable Securities on the transfer books
of the Company and any such transfer shall be null and void. The holder of
certificates representing Registrable Securities bearing a restrictive legend
shall also be entitled to receive certificates not bearing such legend, upon
furnishing the Company with a reasonably satisfactory opinion of counsel to the
effect that such legend may be removed under the Securities Act and applicable
state securities laws.
10. Holdback Agreements.
(a) Restrictions on Public Sales by Holders. To the extent not
inconsistent with applicable law, each Holder that is timely notified in writing
by the managing underwriter or underwriters shall not effect any public sale or
distribution (including a sale pursuant to Rule 144) of any of their shares of
Common Stock if any other shares of Common Stock (or any securities of the
Company convertible into or exchangeable for or exercisable for shares of Common
Stock) are being registered by the Company for sale in an underwritten offering
(other than pursuant to an employee stock option, stock purchase, stock bonus or
similar plan, pursuant to a merger, an exchange offer or a transaction of the
type specified in Rule 145(a) under the Securities Act or pursuant to a "shelf"
registration), except as part of such registration, during the 10-day period
prior to the effective date of the applicable registration statement, or during
the period beginning on such effective date and ending on the later of (i) the
completion of the distribution of such securities pursuant to such offering and
(ii) 90 days after such effective date (or such shorter time period as the
managing underwriter or underwriters shall deem appropriate).
(b) Restrictions on Public Sales by the Company. The Company shall not
effect any public sale or distribution of any shares of Common Stock (other than
pursuant to an employee stock option, stock purchase, stock bonus or similar
plan, pursuant to a merger, exchange offer or a transaction of the type
specified in Rule 145(a) under the Securities Act or pursuant to a "shelf"
registration), or any securities of the Company convertible into or exchangeable
or exercisable for shares of Common Stock, except as part of such registration,
during the 10-day period prior to the effective date of a Demand Registration to
be effected as an underwritten offering, or during the period beginning on such
effective date and ending on the later of (i) the completion of the distribution
of such securities pursuant to such offering and (ii) 90 days after such
effective date (or such shorter time period as the managing underwriter or
underwriters shall deem appropriate).
11. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement may be
amended and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company shall
have obtained the written consent to such amendment, action or omission to act,
of the Holders of a majority of the Registrable Securities then outstanding.
Holders shall be bound from and after the date of the receipt of a written
notice from the Company setting forth such amendment or waiver by any consent
authorized by this paragraph (a), whether or not the certificates representing
such Registrable Securities shall have been marked to indicate such consent.
(b) Successors, Assigns and Transferees. The provisions of this
Agreement shall be binding upon and shall inure to the benefit of the Company,
the Holders and their respective successors, assigns and transferees.
(c) Integration. The provisions of this Agreement and the documents
referred to herein or delivered pursuant hereto that form a part hereof contain
the entire understanding of the Company and the Initial Holders with respect to
its subject matter. There are no restrictions, agreements, promises,
representations, warranties, covenants or undertakings with respect to the
subject matter hereof other than those expressly set forth herein. The
provisions of this Agreement supersede all prior agreements and understandings
between the Company and the Initial Holders with respect to its subject matter.
(d) Notices. All notices and other communications provided for
hereunder shall be in writing and shall be sent by first class mail, telex,
telecopier or hand delivery:
if to the Company, to:
----------------------
110 West Seventh Street
Suite #300
Fort Worth, Texas 76102
Attention: General Counsel
Telecopier: (817) 878-3672
with a copy to:
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Attention: Robert S. Reder, Esq.
Telecopier: (212) 530-5219
If to any Holder, to the address of such Holder as shown in the stock
record books of the Company.
All such notices and communications shall be deemed to have been given
or made (i) when delivered by hand, (ii) five Business Days after being
deposited in the mail, postage prepaid, (iii) when telexed answer-back received
or (iv) when telecopied, receipt acknowledged.
(e) Descriptive Headings. The headings in this Agreement are for
convenience of reference only and shall not limit, expand or otherwise affect
the meaning of the provisions hereof.
(f) Severability. In the event that any one or more of the provisions,
paragraphs, subparagraphs, sentences, clauses, subclauses, phrases or words
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability thereof in every other respect and of the remaining
provisions, paragraphs, subparagraphs, sentences, clauses, subclauses, phrases
and words hereof shall not be in any way impaired, it being intended that all
rights, powers and privileges of the Company and the Holders hereunder shall be
enforceable to the fullest extent permitted by law.
(g) Governing Law. The provisions of this Agreement shall be governed
by and construed and enforced in accordance with the laws of the State of
Delaware, without regard to the principles of conflicts of laws thereof, as if
it were a contract between the Company and the Initial Holders made and to be
performed entirely within that State.
(h) Termination. The provisions of this Agreement shall terminate, and
thereby become null and void, at the end of the Demand Registration Period;
provided, however, that the provisions of Section 6 shall survive the
termination of the provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
--------------------------
By:_______________________
Name:
Title:
[INITIAL HOLDERS]
By:_______________________
Name:
Title:
<PAGE>
APPENDIX III
LOCK UP AGREEMENT
<PAGE>
AGREEMENT
This Agreement (the "Agreement"), dated as of September 15,
1998, by and among Westbridge Capital Corp., a Delaware corporation
("Westbridge"), and each of the undersigned holders (each, a "Consenting
Holder") of debt securities (each, a "Claim") issued by Westbridge under one of
the instruments listed on Schedule I (the "Existing Agreements").
WITNESSETH:
WHEREAS, Westbridge and an Ad Hoc Committee of Westbridge
Creditors (the "Committee") have engaged in good faith negotiations with the
objective of reaching an agreement with regard to restructuring the indebtedness
outstanding under the Existing Agreements;
WHEREAS, Westbridge and the Consenting Holders now desire to
implement a financial restructuring of Westbridge (the "Financial
Restructuring") on terms substantially in accordance with the draft plan of
reorganization attached hereto as Appendix I (the "Draft Plan").
WHEREAS, in order to implement the Financial Restructuring,
Westbridge has agreed, on the terms and conditions of this Agreement, to prepare
and file a disclosure statement (the "Disclosure Statement") and plan of
reorganization (the "Pre-Negotiated Plan") in a case (the "Chapter 11 Case")
filed under chapter 11 of title 11 of the United States Code (the "Bankruptcy
Code") and to use its best efforts to have such Disclosure Statement approved
and such Pre-Negotiated Plan confirmed by the Bankruptcy Court for the District
of Delaware (the "Bankruptcy Court"), in each case as expeditiously as possible
under the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure and the
local rules of the Bankruptcy Court (collectively, the "Rules"); and
WHEREAS, in order to expedite the implementation of the
Financial Restructuring, each of the Consenting Holders is prepared to commit,
on the terms and subject to the conditions of this Agreement to vote to accept
the Pre-Negotiated Plan and to perform its other obligations hereunder.
NOW THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Westbridge and each Consenting Holder hereby agree as follows:
1. Forbearance. So long as no "Agreement Termination
Event" or "Westbridge Termination Event" (each as defined in Section 4 of this
Agreement) shall have occurred and be continuing, each of the Consenting Holders
hereby agrees to forbear from the exercise of any rights or remedies it may have
under the Existing Agreements, applicable law or otherwise with respect to any
default arising under the Existing Agreements during the period commencing on
the date hereof and ending on the date on which this Agreement is terminated in
accordance with its terms.
<PAGE>
2. Voting: Restriction on Transfer. Each of the Consenting Holders
represents that, as of the date hereof, it is the beneficial owner of, and/or
the investment adviser or manager for the beneficial owners (with the power to
vote and dispose of such Claims on behalf of such beneficial owners) of, the
Claims set forth on Schedule 2 hereto (for each such Consenting Holder, the
"Relevant Claims"). Each of the Consenting Holders agrees that, subject to the
conditions that (i) the Disclosure Statement shall have been approved by the
Bankruptcy Court; (ii) the Disclosure Statement as so approved is not materially
inconsistent with the draft disclosure statement provided by Westbridge to the
Consenting Holders on or about September 14, 1998 (the "Draft Disclosure
Statement"); (iii) the material terms of the Pre-Negotiated Plan are the terms
set forth in the Draft Plan; (iv) the material terms of each of the employment
agreements between Westbridge and each of Patrick J. Mitchell and Patrick H.
O'Neill, respectively, and each of the Definitive Agreements (as defined below)
and any amendment thereto shall be reasonably satisfactory to it; and (v) the
material terms of any amendment to the Settlement Agreement and Mutual Release,
dated as of September 15, 1998, among Westbridge, Martin E. Kantor and National
Life Insurance Company entered into after such date shall be reasonably
satisfactory to it; it shall (a) timely vote its Relevant Claims (and, so long
as no Agreement Termination Event or Westbridge Termination Event shall have
occurred, not revoke or withdraw such vote) to accept the Pre-Negotiated Plan,
(b) not take any action directly or indirectly to delay, prevent or frustrate
confirmation of the Pre-Negotiated Plan, and (c) refrain from supporting
directly or indirectly any other proposed plan of reorganization or
recapitalization transaction for Westbridge; provided, however, that nothing
contained herein shall limit the ability of any Consenting Holder to consult
with Westbridge, or to appear and be heard, concerning any matter arising in the
Chapter 11 Case.
Each of the Consenting Holders hereby agrees that, so long as this
Agreement has not been terminated, it shall not sell, transfer or assign any of
the Relevant Claims or any option thereon or any right or interest (voting or
otherwise) therein, unless the transferee thereof agrees in writing to be bound
by all the terms of this Agreement by executing a counterpart signature page of
this Agreement and the transferor provides Westbridge with a copy thereof.
<PAGE>
3. Westbridge Agreements. Subject in each case to the proper
exercise by Westbridge of its fiduciary duties, Westbridge hereby agrees to use
its best efforts to obtain an order of the Bankruptcy Court approving the
Disclosure Statement (the "Disclosure Statement Order") and thereafter to take
all reasonable steps necessary and desirable to obtain an order of the
Bankruptcy Court confirming the Pre-Negotiated Plan (the "Confirmation Order")
and to consummate the Pre-Negotiated Plan, in each case, as expeditiously as
possible under the Bankruptcy Code and the Rules. Westbridge further agrees to
(a) consult with the Committee and Credit Suisse First Boston Corporation
("CSFB") or their respective representatives prior to taking any significant
action in connection with the Chapter 11 Case and (b) obtain the prior approval
of the Committee and CSFB or their respective representatives of the form and
substance of any material pleading, motion, order or agreement to be filed with
the Bankruptcy Court that relate to matters likely to (i) affect the form or
value of the consideration to be distributed under the Pre-Negotiated Plan or
(ii) substantially delay the effectiveness thereof, including, without
limitation, each of the Definitive Documents, the Pre-Negotiated Plan, the
Disclosure Statement, the Confirmation Order and the Disclosure Statement Order,
in each case subject to the need to respond immediately to matters which may
arise an emergency basis. In the event of any matter so arising on an emergency
basis, Westbridge shall notify the Committee and CSFB of any actions taken or
proposed to be taken with respect thereto as expeditiously as possible.
4. Termination of Agreement. Except as set forth in Section 14
hereof, this Agreement shall terminate automatically upon the occurrence of any
"Westbridge Termination Event" or any "Agreement Termination Event" (as
hereinafter defined), unless the occurrence of such Agreement Termination Event
is waived in writing by Consenting Holders holding or managing at least
fifty-one percent (51%) of the Relevant Claims; provided, that no such waiver
shall extend the time for performance of any of Westbridge's obligations under
Section 3 hereof to a date after January 15, 1999 without the consent of all of
the Consenting Holders. If any Agreement Termination Event occurs (and has not
been waived) or any Westbridge Termination Event occurs at the time when
permission of the Bankruptcy Court shall be required for a Consenting Holder to
change or withdraw (or cause to be changed or withdrawn) its votes to accept the
Pre-Negotiated Plan, Westbridge shall not, subject to its fiduciary duties as a
debtor in possession, oppose any attempt by such Consenting Holder to change or
withdraw (or cause to be changed or withdrawn) such votes at such time. Upon the
occurrence of an Agreement Termination Event or a Westbridge Termination Event,
each of the Consenting Holders shall have all rights and remedies available to
it under the Existing Agreements, applicable law or otherwise with respect to
any default under the Existing Agreements that may have occurred at any time
prior to such event and which default is still continuing.
An "Agreement Termination Event" shall mean any of the following:
(a) The Effective Date (as defined therein) of the Pre-Negotiated
Plan shall have occurred;
(b) The Chapter 11 Case to implement the Financial
Restructuring through confirmation of the Pre-Negotiated Plan shall not have
been commenced by September 30, 1998;
(c) The Disclosure Statement or a version thereof which is not
materially inconsistent with the Draft Plan shall not have been
approved by the Bankruptcy Court by November 30, 1998;
(d) The Pre-Negotiated Plan or a version thereof which is not
materially inconsistent with the Draft Plan shall not have been
confirmed by the Bankruptcy Court and substantially consummated in
accordance with its terms by January 30, 1999;
<PAGE>
(e) Westbridge breaches any material provision of this Agreement,
including, but not limited to, ceasing to use its best efforts to
obtain approval of the Disclosure Statement and/or confirmation and
consummation of the Pre-Negotiated Plan;
(f) (i) A material adverse change in the operations or business
of Westbridge and its subsidiaries (taken as a whole) shall have
occurred since the date hereof other than commencement of the Chapter
11 Case or (ii) any event affecting generally and materially adversely
the industry in which Westbridge and its subsidiaries (taken as a
whole) conduct their business which would materially and adversely
affect the ability of Westbridge and its subsidiaries (taken as a
whole) to operate their business;
(g) Westbridge shall have received a bona fide written plan
proposal from a credible third party, which proposal shall not be
subject to material conditions that would materially delay the
effectiveness of the Pre-Negotiated Plan, and which proposal shall
include, among others, the following terms: (i) each holder of an 11%
Note Claim shall receive cash in an amount equal to the Allowed amount
of such Claim; (ii) each holder of a Credit Suisse 11% Note Claim
shall receive Cash in an amount equal to the Allowed amount of such
Claim; and (iii) taking into account all other elements of such
proposal, each other holder of an Allowed Claim against or Equity
interest in Westbridge shall receive distributions of a value equal to
or greater than those at the high end of the range provided for by the
Pre-Negotiated Plan as described in the Draft Disclosure Statement; or
(h) Any of the conditions set forth in clauses (i) through (v) of
Section 2 hereof shall not have been satisfied by Westbridge.
In addition, Westbridge shall have the right to terminate this
Agreement by the giving of written notice thereof to each of the Consenting
Holders, upon the receipt by Westbridge of binding commitments reasonably
satisfactory to the Consenting Holders in all material respects for new debt
and/or equity financing from one or more creditworthy entities in amounts
sufficient to repay all amounts outstanding under the Existing Agreements in
full and in cash (a "Westbridge Termination Event"). Upon the occurrence of any
Agreement Termination Event, unless such Agreement Termination Event is waived
in accordance with the terms hereof, or upon the occurrence of a Westbridge
Termination Event, this Agreement shall terminate and no party hereto shall have
any continuing liability or obligation to any other party hereunder, except as
otherwise provided in Section 13; provided, that, no such termination shall
relieve any party from liability for its breach or non-performance of its
obligations hereunder prior to the date of such termination.
<PAGE>
5. Good Faith Negotiation of Financial Restructuring Documents.
Westbridge and each Consenting Holder which is a member of the Committee hereby
further covenants and agrees to negotiate the definitive documents (the
"Definitive Agreements") relating to the Financial Restructuring, including,
without limitation, the form of the New Common Stock, New Convertible Preferred
Stock, New Warrants, Employee and Director Stock Options and Agent Options (as
defined in the Financial Restructuring), in good faith.
6. Representations and Warranties. Westbridge, on the one hand, and
each of the Consenting Holders on the other, represents and warrants to each
other that the following statements are true, correct and complete as of the
date hereof.
(a) Power and Authority. It has all requisite corporate or
other power and authority to enter into this Agreement and to carry out the
transactions contemplated by, and perform its respective obligations under,
this Agreement;
(b) Authorization. The execution and delivery of this
Agreement and the performance of its obligations hereunder have been duly
authorized by all necessary corporate or other action on its part;
(c) No Conflicts. The execution, delivery and performance
by it of this Agreement do not and shall not (i) violate any provision of
law, rule or regulation applicable to it or any of its subsidiaries or its
Certificate of Incorporation, bylaws or other organizational documents or
those of any of its subsidiaries or (ii) conflict with, result in a breach
of or constitute (with due notice or lapse of time or both) a default under
any material contractual obligation to which it or any of its subsidiaries
is a party or under its certificate of incorporation, by-laws or other
organizational documents;
(d) Governmental Consents. The execution, delivery and
performance by it of this Agreement do not and shall not require any
registration or filing with, consent or approval of, or notice to, or other
action to, with or by, any Federal, state or other governmental authority or
regulatory body, except such filings and approvals as may be required under
applicable state insurance laws and regulations, such filings as may be
necessary and/or required for disclosure by the Securities and Exchange
Commission and in connection with the commencement of the Chapter 11 Case,
the approval of the Disclosure Statement and confirmation of the
Pre-Negotiated Plan; and
(e) Binding Obligation. This Agreement is the legally
valid and binding obligation of it, enforceable against it in accordance
with its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
limiting creditor's rights generally or by equitable principles relating to
enforceability.
<PAGE>
7. Further Acquisition of Securities. This Agreement shall in no
way be construed to preclude the Consenting Holders from acquiring additional
Claims. However, any such additional Claims so acquired shall automatically be
deemed to be Relevant Claims and to be subject to the terms of this Agreement.
The Consenting Holders shall in each case promptly advise Westbridge of the
acquisition of any such additional Claims and Westbridge shall prepare and
circulate to the relevant Consenting Holder a revised and restated version of
Schedule 2 hereto with respect to such Consenting Holder.
8. Effectiveness; Amendments; Consenting Holders. This Agreement
shall not become effective and binding on the parties hereto unless and until
counterpart signature pages hereto shall have been executed and delivered by
Westbridge and Consenting Holders holding Claims which constitute in the
aggregate at least a majority of the principal amount of the indebtedness
outstanding under each of the Existing Agreements. Once effective, this
Agreement may not be modified (except as provided in Section 4), amended or
supplemented as to any Consenting Holder except in writing signed by Westbridge
and such Consenting Holder.
9. Disclosure of Individual Holdings. Unless required by applicable
law or regulation, Westbridge shall not disclose any Consenting Holder's
holdings of Relevant Claims, without the prior written consent of such
Consenting Holder, and if such announcement or disclosure is so required by law
or regulation, Westbridge shall afford the Consenting Holders a reasonable
opportunity to review and comment upon any such announcement or disclosure prior
to Westbridge's making such announcement or disclosure. The foregoing shall not
prohibit Westbridge from disclosing the approximate aggregate holdings of Claims
by the Consenting Holders as a group.
10. Impact of Appointment to Creditors Committee. Notwithstanding
anything herein to the contrary, in the event that any Consenting Holder is
appointed to and serves on an official committee of creditors in the Chapter 11
Case, the terms of this Agreement shall not be construed so as to limit such
Consenting Holder's exercise (in its sole discretion) of its fiduciary duties to
any person arising from its service on such committee, and any such exercise (in
the sole discretion of such Consenting Holder) of such fiduciary duties shall
not be deemed to constitute a breach of the terms of this Agreement (but the
fact of such service on such committee shall not otherwise affect the continuing
validity or enforceability of this Agreement). So long as no Agreement
Termination Event or Westbridge Termination Event shall have occurred and this
Agreement remains in effect, the foregoing shall not modify or limit the
obligations of the Consenting Holders to vote their Relevant Claims and to take
the other actions set forth in Section 2 hereof.
<PAGE>
11. Governing Law; Jurisdiction. This Agreement shall be governed
by and construed in accordance with the internal laws of the State of Delaware,
without regard to any conflicts of law provision which would require the
application of the law of any other jurisdiction. By its execution and delivery
of this Agreement, each of the parties hereto hereby irrevocably and
unconditionally agrees for itself that any legal action, suit or proceeding
against it with respect to any matter under or arising out of or in connection
with this Agreement or for recognition or enforcement of any judgment rendered
in any such action, suit or proceeding, may be brought in any federal court of
competent jurisdiction in the District of Delaware. By execution and delivery of
this Agreement, each of the parties hereto hereby irrevocably accepts and
submits itself to the nonexclusive jurisdiction of such courts, generally and
unconditionally, with respect to any such action, suit or proceeding.
Notwithstanding the foregoing consent to Delaware jurisdiction, upon the
commencement of the Chapter 11 Case, each of the parties hereto hereby agrees
that the Bankruptcy Court shall have exclusive jurisdiction of all matters
arising out of or in connection with this Agreement.
12. Specific Performance. It is understood and agreed by each of
the parties hereto that money damages would not be a sufficient remedy for any
breach of this Agreement by any party (other than a breach by Westbridge of
Section 13 hereof) and each nonbreaching party shall be entitled to specific
performance and injunctive or other equitable relief as a remedy of any such
breach.
13. Fees and Expenses. Westbridge shall reimburse each Consenting
Holder which is a member of the Committee for all of its out of pocket costs and
expenses incurred through the Commencement Date in respect of the fees and
expenses of the Committee's financial and legal advisors in accordance with
Westbridge's respective agreements with such firms (the "Expenses"). In
addition, in the event any party brings an action against any other party based
upon a breach by such other party of its obligations hereunder, the prevailing
party shall be entitled to all reasonable expenses incurred, including
reasonable attorneys', accountants' and financial advisers' fees in connection
with such action.
14. Survival. Notwithstanding the sale of the Relevant Claims in
accordance with Section 2 hereof or the termination of the Consenting Holders'
obligations hereunder in accordance with Section 4 hereof, Westbridge's
obligations and agreements set forth in Sections 9 and 13 (with respect to
Expenses incurred through the date of such termination) hereof shall survive
such termination and shall continue in full force and effect for the benefit of
the Consenting Holders in accordance with the terms hereof.
15. Headings. The headings of the sections, paragraphs and
subsections of this Agreement. are inserted for convenience only and shall not
affect the interpretation hereof.
16. Successors and Assigns. This Agreement is intended to bind and
inure to the benefit of the parties and their respective successors, assigns,
heirs, executors, administrators and representatives. The agreements,
representations and obligations of the Consenting Holders under this Agreement
are, in all respects, several and not joint.
17. Prior Negotiations. This Agreement and Appendix 1 supersede all
prior negotiations with respect to the subject matter hereof.
18. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same Agreement.
<PAGE>
19. No Third-Party Beneficiaries. Unless expressly stated herein,
this Agreement shall be solely for the benefit of the parties hereto and no
other person or entity shall be a third-party beneficiary hereof.
20. Consideration. It is hereby acknowledged by the parties hereto
that no consideration shall be due or paid to the Consenting Holders for their
agreement to vote to accept the Pre-Negotiated Plan in accordance with the terms
and conditions of this Agreement other than Westbridge's agreement to commence
the Chapter 11 Case, to use its best efforts to obtain approval of the
Disclosure Statement and to take all steps necessary and desirable to confirm
and consummate the Pre-Negotiated Plan in accordance with the terms and
conditions of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered by its duly authorized officer as of the
date first above written.
WESTBRIDGE CAPITAL CORP.
By: /s/ Patrick J. Mitchell
Name: Patrick J. Mitchell
Title: President
111 Seventh Street, Suite 306
Fort Worth, Texas 76102
Telephone: (817) 878-3300
Facsimile: (817) 878-3672
CONSENTING HOLDER
[Fill in the name of entity below);
--------------------------------
By: /s/ Alex Lagetko
Name: Alex Lagetko
Title: Director
Credit Suisse First Boston Corporation
11 Madison Avenue, 4th Floor
New York, New York 10010
Telephone: (212) 325-3810
Facsimile: (212) 325-8290
<PAGE>
EXHIBIT D TO PLAN
LIST OF OFFICERS AND DIRECTORS
Stephen D. Davidson
Dennis A. Weverka
James W. Thigpen
Michael D. Norris
Margaret A. Megless
<PAGE>
EXHIBIT E TO PLAN
LIST OF EMPLOYMENT AGREEMENTS
* Employment Contract between Westbridge Capital Corp. and Stephen D.
Davidson
* Employment Contract between Westbridge Capital Corp. and Michael D.
Norris
* Employment Contract between Westbridge Capital Corp. and Dennis A.
Weverka
* Employment Contract between Westbridge Capital Corp and Margie A.
Megless
* Employment Agreement, dated as of April 1, 1996, by and among
Westbridge Capital Corp., National Foundation Life Insurance Company
and James W. Thigpen
* Employment Agreement, dated as of April 1, 1996, by and among
Westbridge Capital Corp., National Foundation Life Insurance Company
and Martin E. Kantor
<PAGE>
EXHIBIT F TO PLAN
CLAIMS AGREEMENT
<PAGE>
MEMORANDUM OF UNDERSTANDING
Re: Karabedian, et al, v. Westbridge Capital Corp., et al.
Civil Action No. 3 97 CV 3087-L, United States District
Court, Northern District of Texas, Dallas Division
1. Rabin & Peckel LLP, on behalf of their co-plaintiffs' attorneys
representing plaintiffs ("Plaintiffs"), Milbank, Tweed, Hadley & McCloy, on
behalf of defendants Westbridge Capital Corp., Martin E. Kantor and Patrick J.
Mitchell (together with defendant James W. Thigpen, the "Westbridge
Defendants"), A.I. Management and Professional Liability Claim Adjusters, on
behalf of National Union Fire Insurance Company of Pittsburgh, Pennsylvania (the
Westbridge Defendants' insurer ("National Union")), and Haynes and Boone, LLP,
on behalf of defendants Forum Capital Markets L.P. and Raymond James &
Associates, Inc. (the "Underwriter Defendants") (the Westbridge Defendants and
the Underwriter Defendants collectively, the "Defendants"), enter into this
Memorandum of Understanding to set forth the basic terms of settlement between
Plaintiffs and the Defendants which were agreed to by telephone on August 27,
1998 and October 23, 1998.
2. Westbridge Capital Corp. and National Union together agree to pay to
Plaintiffs a total of $1 million and the Underwriter Defendants agree to pay to
Plaintiffs $100,000 in complete settlement of the claims asserted in this
action. Funding of the settlement shall not occur before November 15, 1998, with
the sole exception of $50,000 to be paid by National Union into the "Notice
Account" to pay for notice to the class.
3. Plaintiffs agree to accept payment of $1,100,000 in complete
settlement of the claims asserted in this action.
4. Plaintiffs shall enter into a stipulation of dismissal with
prejudice and give to the Defendants a release or releases of all claims
asserted in the amended complaint or which could have been asserted in the
amended complaint arising out of the transactions described.
5. The Westbridge Defendants and the Underwriter Defendants shall give
to each other mutual releases of all claims arising out of said transactions or
this action.
6. The Defendants shall cooperate with Plaintiffs to provide two
employees to be selected by Plaintiffs for depositions and any and all
non-privileged documents requested by Plaintiffs for examination and copying in
order to permit Plaintiffs to confirm that the terms of this settlement are
fair.
7. The settlement is subject to an agreed number of opt-outs in
number and amount.
8. This settlement is subject to the certification of the class
described in the amended complaint
and approval of the District Court and the Bankruptcy Court in which Westbridge
Capital Corp. has filed a case for relief under chapter 11 of the Bankruptcy
Code. Plaintiffs shall support any motion in the Bankruptcy Court for approval
of this settlement or confirmation of any chapter 11 plan which incorporates its
terms.
9. National Union shall have the right to terminate this Memorandum of
Understanding at any point in time up to the filing with the District Court of a
Stipulation of Settlement in the Karabedian case in the event there are, in
National Union's determination, material changes to the terms of the release of
the directors and officers of Westbridge provided for in the Plan of
Reorganization of Westbridge filed with the Bankruptcy Court. In the event:
(a) this Memorandum of Understanding is terminated by National
Union; or
(b) settlement of the Karabedian case is not reached in accordance
with the terms of this Memorandum of Understanding
then this Memorandum of Understanding shall be of no further force or effect and
the parties shall revert to their respective positions immediately prior to the
execution of this Memorandum of Understanding.
10. Neither the negotiation, nor the terms, conditions and other
provisions nor the performance of this Memorandum of Understanding shall be:
(a) deemed or construed in any manner whatsoever to be an
admission of liability by any party to this Memorandum of
Understanding; or
(b) used by any party to this Memorandum of Understanding for any
purpose other than the enforcement of the provision hereof;
provided, however, that nothing in this paragraph shall affect the
viability of the provisions set forth herein.
11. The terms of this Memorandum of Understanding shall be reduced
to writing in formal settlement documents and shall not be binding until the
formal settlement documents are executed.
12. This Memorandum of Understanding may be executed in
counterparts.
Dated: October 26, 1998
/s/ Brian P. Murray
RABIN & PECKEL LLP
Attorneys for Plaintiffs
/s/ Russell E. Brooks
MILBANK, TWEED, HADLEY & McCLOY
Attorneys for Westbridge Capital Corp.,
Martin E. Kantor and Patrick J. Mitchell
/s/ Michael E. Adler
A.I. MANAGEMENT AND PROFESSIONAL
LIABILITY CLAIM ADJUSTERS
/s/ Noel M. Hensley
HAYNES AND BOONE, LLP
Attorneys for Forum Capital Markets L.P. and
Raymond James & Associates, Inc.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<DEBT-HELD-FOR-SALE> 124,603
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 2,620
<MORTGAGE> 324
<REAL-ESTATE> 0
<TOTAL-INVEST> 136,899
<CASH> 1,540
<RECOVER-REINSURE> 1,780
<DEFERRED-ACQUISITION> 13,509
<TOTAL-ASSETS> 179,092
<POLICY-LOSSES> 99,642
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 97,141
11,935
0
<COMMON> 703
<OTHER-SE> (53,837)
<TOTAL-LIABILITY-AND-EQUITY> 179,092
105,968
<INVESTMENT-INCOME> 9,287
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<OTHER-INCOME> 12,184
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<UNDERWRITING-AMORTIZATION> 8,344
<UNDERWRITING-OTHER> 20,733
<INCOME-PRETAX> (16,017)
<INCOME-TAX> (995)
<INCOME-CONTINUING> (15,022)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,542)
<EPS-PRIMARY> (2.39)
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<RESERVE-OPEN> 0
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