<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D/A
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No.1)
Altiva Financial Corporation
(formerly Mego Mortgage Corporation)
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(Name of Issuer)
Common Stock, par value $.01 per share
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(Title of Class of Securities)
585165103
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(CUSIP Number)
Timothy G. Ewing
Value Partners, Ltd.
c/o Ewing & Partners
Suite 808
4514 Cole Avenue
Dallas, Texas 75205
(214) 522-2100
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(Name, Address, Telephone Number of Person Authorized to Receive
Notices and Communications)
August 31, 1999
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
Schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g) check the following box
[ ].
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<TABLE>
<S> <C> <C> <C>
1 NAMES OF REPORTING PERSONS
S.S. or I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (Not Required To Be Reported)
Value Partners, Ltd. 75-2291866
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(See Instructions) (b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS (See Instructions)
00*
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED [ ]
PURSUANT TO ITEM 2(d) OR 2(e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Texas
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NUMBER OF SHARES 7 SOLE VOTING POWER
BENEFICIALLY OWNED BY EACH
REPORTING PERSON WITH 1,474,550*
--------------------------------------------------
8 SHARED VOTING POWER
N/A
--------------------------------------------------
9 SOLE DISPOSITIVE POWER
1,474,550*
--------------------------------------------------
10 SHARED DISPOSITIVE POWER
N/A
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,474,550 *
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
(See Instructions)
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
28.7% *
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14 TYPE OF REPORTING PERSON*
PN
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</TABLE>
* But see Item 5.
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<TABLE>
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<S> <C> <C> <C>
1 NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (Not Required To Be Reported)
Ewing & Partners 75-2741747
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(See Instructions (b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS (See Instructions)
00
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED [ ]
PURSUANT TO ITEM 2(d) OR 2(e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Texas
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NUMBER OF SHARES 7 SOLE VOTING POWER
BENEFICIALLY OWNED BY EACH
REPORTING PERSON WITH N/A
--------------------------------------------------
8 SHARED VOTING POWER
N/A*
--------------------------------------------------
9 SOLE DISPOSITIVE POWER
N/A
--------------------------------------------------
10 SHARED DISPOSITIVE POWER
N/A*
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
N/A *
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
N/A*
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14 TYPE OF REPORTING PERSON
PN
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</TABLE>
*But see Item 5.
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<TABLE>
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<S> <C> <C> <C>
1 NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (SEE INSTRUCTIONS)
Timothy G. Ewing ###-##-####
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
PF
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED [ ]
PURSUANT TO ITEM 2(d) OR 2(e)
N/A
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
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NUMBER OF SHARES BENEFICIALLY 7 SOLE VOTING POWER
OWNED BY EACH REPORTING
PERSON WITH 920
--------------------------------------------------------
8 SHARED VOTING POWER
N/A*
--------------------------------------------------------
9 SOLE DISPOSITIVE POWER
920
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10 SHARED DISPOSITIVE POWER
N/A*
--------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
920*
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*[ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0%*
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14 TYPE OF REPORTING PERSON
IN
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</TABLE>
*But see Item 5.
<PAGE>
AMENDMENT NO. 1 TO SCHEDULE 13D
This Amendment No. 1 to Schedule 13D is filed by Value Partners, Ltd.,
a Texas limited partnership ("Value Partners"), Ewing & Partners, a Texas
general partnership (formerly known as Fisher Ewing Partners) ("Ewing &
Partners"), the General Partner of Value Partners, and Timothy G. Ewing
("Ewing"), the managing general partner of Value Partners, as an amendment to
the Statement on Schedule 13D relating to the shares of common stock, par value
$.01 per share (the "Common Stock") of Altiva Financial Corporation (the
"Company" or "Issuer") filed with the Securities and Exchange Commission (the
"Statement"). The Statement is hereby amended as follows:
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Item 3 of the Statement is hereby amended and restated in its entirety
to read as follows:
In connection with an exchange offer (the "Exchange Offer") by the
Company pursuant to which the Company offered to exchange shares of its Series A
Convertible Preferred Stock, par value $.01 per share (the "Preferred Stock"),
or new 12 1/2% Subordinated Notes Due 2001 (the "New Notes") of the Company or a
combination thereof for any and all outstanding 12 1/2% Senior Subordinated
Notes Due 2001 (the "Original Notes") of the Company, Value Partners exchanged
all $26,000,000 of its Original Notes for $4,000,000 in New Notes and 22,000
shares of Preferred Stock. The Exchange Offer was consummated on June 18, 1998
(the "Issuance Date"). Each share of Preferred Stock is convertible into 66.67
shares of Common Stock. The shares of Preferred Stock held by Value Partners may
be converted beginning 180 days after the Issuance Date, which is December 15,
1998 (the "Conversion Date"). Thus, pursuant to Rule 13d-3(d)(1) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), on October 17,
1998 Value Partners acquired beneficial ownership of the shares of Common Stock
that may be acquired upon conversion of its shares of Preferred Stock. As a
result, by virtue of its ownership of 22,000 shares of Preferred Stock, Value
Partners beneficially owns 1,466,674 shares of Common Stock, which is calculated
by multiplying 22,000 shares of Preferred Stock by 66.67 (the conversion rate of
the Preferred Stock). In addition, the shares of Preferred Stock held by Value
Partners are mandatorily convertible into shares of Common Stock at the above
conversion rate on the second anniversary of the Issuance Date.
Ewing purchased in the aggregate 920 shares of Common Stock in a series
of transactions in the open market on such dates, in such amounts, and at such
prices as listed on Schedule I to the initial Statement. The source of funds for
these purchases was the personal funds of Ewing.
Pursuant to a Secured Convertible Note Purchase Agreement, dated as of
August 31, 1999 (the "Agreement"), between Issuer and Value Partners, on August
31, 1999, Issuer issued and sold to Value Partners, and Value Partners purchased
from Issuer, $7,000,000 principal amount of 12% Secured Convertible Notes Due
2006 (the "Notes") for a purchase price equal to such principal
<PAGE>
amount, which Value Partners funded from its working capital. Concurrently with
such purchase, Value Partners sold a participation interest in $2,000,000
principal amount of the Notes to an unaffiliated third party.
The holder of any Note has the right, at the holder's option, at any
time before the maturity of the Notes on August 15, 2006, to convert the
principal amount of any such Note, or any portion of such principal amount which
is $1,000 or an integral multiple thereof, into that number of fully paid and
nonassessable shares of Common Stock obtained by dividing the principal amount
of the Note or portion thereof surrendered for conversion by $5.00 (subject to
adjustment as provided in the Notes, the "Conversion Price"). Notwithstanding
the foregoing, unless and until the issuance of Common Stock upon conversion of
the Notes in their entirety has been approved by the stockholders of Issuer
pursuant to the terms of the Agreement (the "Stockholder Approval"), the Notes
may be converted into a maximum of 11,027 shares of Common Stock (subject to
adjustment as provided in the Notes), which is equal to 19.99% of the number of
shares of Common Stock outstanding on the date of issuance of the Notes, less
the 600,000 shares of Common Stock issued by Issuer in connection with its
acquisition of The Money Centre, Inc. Such stockholder approval has not been
obtained to date.
In light of the foregoing, pursuant to Rule 13d-3(d)(1) under the
Exchange Act, Value Partners beneficially owns 7,876 shares of Common Stock
which currently may be acquired by it upon conversion of the applicable
principal amount of the Notes beneficially owned by it, which is calculated by
multiplying 11,027 by the quotient determined by dividing $5,000,000 (the
principal amount of Notes beneficially owned by Value Partners) and $7,000,000
(the total principal amount of Notes outstanding).
All share figures herein reflect a one-for-ten split of the Common
Stock effected by Issuer in 1999.
ITEM 4. PURPOSE OF TRANSACTION
Item 4 of the Statement is hereby amended and restated in its entirety
to read as follows:
Value Partners acquired the shares of Preferred Stock and the Notes
(and, beneficially, the underlying shares of Common Stock which may be acquired
upon conversion of such securities) and the New Notes solely for investment
purposes. As of the date hereof, Value Partners does not intend to convert its
shares of Preferred Stock or Notes into shares of Common Stock (subject to the
mandatory conversion feature of the Preferred Stock). Depending on its
evaluation of the Issuer, other investment opportunities, market conditions and
such other factors as it may deem material, Value Partners may seek to acquire
additional shares of Preferred Stock or Common Stock or New Notes or Notes in
the open market, in private transactions or otherwise, or may convert its shares
of Preferred Stock and/or Notes into shares of Common Stock to the extent which
it can do so in accordance with their terms, or may dispose of all or a portion
of such shares of Preferred Stock or Common Stock or New Notes or Notes owned by
it.
2
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Ewing has acquired the shares of Common Stock solely for investment
purposes. Depending on his evaluation of the Issuer, other investment
opportunities, market conditions and such other factors as he may deem material,
Ewing may seek to acquire additional shares of Common Stock in the open market,
in private transactions or otherwise, or may dispose of all or a portion of such
shares of Common Stock owned by him.
Value Partners and Issuer currently are engaged in discussions pursuant
to which Value Partners may provide additional financing to Issuer. As of the
date hereof, there are no agreements, arrangements or understandings in this
regard and there can be no assurance that any such financing will be provided by
Value Partners to Issuer.
Except as set forth above, none of Value Partners, Ewing & Partners,
EAM or Ewing has any plans or proposals of the type referred to in clauses (a)
through (j) of Item 4 of the instructions to Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
Item 5 of the Statement is hereby amended and restated in its entirety
to read as follows:
(a) The shares of Common Stock reflected as being beneficially owned by
Value Partners herein consist of the sum of (i) 1,466,674 shares of Common Stock
which Value Partners may acquire upon conversion of the 22,000 shares of
Preferred Stock owned by it and (ii) 7,876 shares of Common Stock which
currently may be acquired by Value Partners upon conversion of the applicable
principal amount of Notes beneficially owned by it, based on the Conversion
Price. Assuming conversion of such shares of Preferred Stock and the applicable
principal amount of Notes and that there are 3,656,666 shares of Common Stock
outstanding (as represented and warranted by Issuer to Value Partners in the
Agreement), Value Partners would beneficially own 28.7% of the outstanding
Common Stock.
In the event that the Stockholder Approval is obtained, Value Partners
would have the right to acquire an aggregate of 1,000,000 shares of Common Stock
upon conversion of the $5,000,000 principal amount of Notes beneficially owned
by it, based on the Conversion Price. In such event, Value Partners would
beneficially own 2,466,674 shares of Common Stock, consisting of the 1,466,674
shares and the 1,000,000 shares which may be acquired by it upon conversion of
the shares of Preferred Stock and the Notes beneficially owned by it,
respectively. Assuming conversion of such shares of Preferred Stock and Notes
and that there are 3,656,666 shares of Common Stock outstanding (as represented
and warranted by Issuer to Value Partners in the Agreement), Value Partners
would beneficially own 40.3% of the outstanding Common Stock.
In addition to the foregoing, as of the date hereof Timothy G. Ewing
owns 920 shares of Common Stock, which represent less than 1% of the outstanding
Common Stock.
3
<PAGE>
Ewing & Partners and Ewing are deemed to have beneficial ownership of
the shares of Common Stock beneficially owned by Value Partners.
(b) Value Partners has the sole power to vote and dispose of the 22,000
shares of Preferred Stock and the Notes (and the shares of Common Stock
underlying such securities which may be acquired by it upon conversion of such
securities) beneficially owned by it. Value Partners does not share the power to
vote or to direct the vote of, or the power to dispose or to direct the
disposition of, the Preferred Stock and the Notes (and the Common Stock
underlying such securities which may be acquired by it upon conversion of such
securities) beneficially owned by it. However, Ewing & Partners, as general
partner of Value Partners, may be deemed, for purposes of determining beneficial
ownership pursuant to Rule 13d-3, to have the shared power with Value Partners
to vote or direct the vote of, and the shared power with Value Partners to
dispose or direct the disposition of, the 22,000 shares of Preferred Stock and
the Notes (and the shares of Common Stock underlying such securities which may
be acquired by it upon conversion of such securities) beneficially owned by
Value Partners. Ewing, as managing general partner of Ewing & Partners, may be
deemed, for purposes of determining beneficial ownership pursuant to Rule 13d-3,
to have the shared power with Value Partners to vote or to direct the vote of,
and the shared power to dispose or to direct the disposition of, the 22,000
shares of Preferred Stock and the Notes (and the shares of Common Stock
underlying such securities which may be acquired by it upon conversion of such
securities) beneficially owned by Value Partners.
The filing of this statement on Schedule 13D shall not be construed as
an admission that Ewing or Ewing & Partners is for the purposes of Section 13(d)
or Section 13(g) of the Exchange Act the beneficial owner of any of the 22,000
shares of Preferred Stock or Notes or shares of Common Stock which may be
acquired by Value Partners upon conversion of such securities. Pursuant to Rule
13d-4, Ewing and Ewing & Partners disclaim all such beneficial ownership.
Ewing has the sole power to vote and dispose of the 920 shares of
Common Stock beneficially owned by him. Ewing does not share the power to vote
or to direct the vote of, or the power to dispose or to direct the disposition
of, the 920 shares of Common Stock owned by him.
(c) No other transactions in Preferred Stock or Common Stock were
effected by any of the Reporting Persons during the 60 days prior to October 17,
1998 or the date hereof.
(d) Ewing and Ewing & Partners may be deemed to have the power to
direct the receipt of dividends from, or the proceeds from the sale of, the
Preferred Stock and Notes (and the shares of Common Stock underlying such
securities which may be acquired by it upon conversion of such securities)
beneficially owned by Value Partners.
(e) Not applicable.
4
<PAGE>
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER
Item 6 of the Statement is hereby amended and restated in its entirety
to read as follows:
Value Partners, Ewing & Partners and Ewing have no contracts,
arrangements, understandings or relationships (legal or otherwise) between
themselves and any person with respect to any securities of the Issuer other
than those described below:
(a) Joint Filing Agreement, dated as of October 23, 1998, among
Value Partners, Ewing & Partners and Ewing, which was entered
into to enable more than one person to report on this Schedule
13D.
(b) Secured Convertible Note Purchase Agreement between Issuer and
Value Partners, dated as of August 31, 1999.
(c) 12% Secured Convertible Note Due 2006 issued and sold by
Issuer to, and purchased by, Value Partners.
(d) Pledge and Security Agreement, dated as of August 31, 1999,
between Issuer and Value Partners.
(e) Intercreditor and Collateral Subordination Agreement, dated as
of August 31,1999, among Issuer, Value Partners, Greenwich
Capital Markets, Inc. and Greenwich Capital Financial
Products, Inc.
(f) Registration Rights Agreement, dated as of August 31, 1999,
between Issuer and Value Partners.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Item 7 of the Statement is hereby amended and restated in its entirety
to read as follows:
The following are filed as exhibits to this Statement on Schedule 13D:
Exhibit 1 Joint Filing Agreement, dated as of October 23, 1998.*
Exhibit 2 Secured Convertible Note Purchase Agreement between
Issuer and Value Partners, dated as of August 31, 1999.
Exhibit 3 12% Secured Convertible Note Due 2006 issued and sold by
Issuer to, and purchased by, Value Partners.
5
<PAGE>
Exhibit 4 Pledge and Security Agreement, dated as of August 31, 1999,
between Issuer and Value Partners.
Exhibit 5 Intercreditor and Collateral Subordination Agreement, dated
as of August 31,1999, among Issuer, Value Partners,
Greenwich Capital Markets, Inc. and Greenwich Capital
Financial Products, Inc.
Exhibit 6 Registration Rights Agreement, dated as of August
31, 1999, between Issuer and Value Partners.
* Previously filed.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
6
<PAGE>
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
DATED: November 30, 1999
VALUE PARTNERS, LTD.
By: EWING & PARTNERS
as General Partner
By: /s/ Timothy G. Ewing
--------------------------
Timothy G. Ewing
as Managing Partner
EWING & PARTNERS
By: /s/ Timothy G. Ewing
--------------------------
Timothy G. Ewing
as Managing Partner
/s/ Timothy G. Ewing
--------------------------
Timothy G. Ewing
7
<PAGE>
EXHIBIT INDEX
Exhibit 1 Joint Filing Agreement, dated as of October 23, 1998.*
Exhibit 2 Secured Convertible Note Purchase Agreement between Issuer
and Value Partners, dated as of August 31, 1999.
Exhibit 3 12% Secured Convertible Note Due 2006 issued and sold by Issuer to,
and purchased by, Value Partners.
Exhibit 4 Pledge and Security Agreement, dated as of August 31, 1999,
between Issuer and Value Partners.
Exhibit 5 Intercreditor and Collateral Subordination Agreement, dated as of
August 31,1999, among Issuer, Value Partners, Greenwich Capital
Markets, Inc. and Greenwich Capital Financial Products, Inc.
Exhibit 6 Registration Rights Agreement, dated as of August 31, 1999,
between Issuer and Value Partners.
* Previously filed.
<PAGE>
Exhibit 2
SECURED CONVERTIBLE NOTE
PURCHASE AGREEMENT
by and among
ALTIVA FINANCIAL CORPORATION
and
VALUE PARTNERS, LTD
Dated as of August 31, 1999
THIS AGREEMENT IS SUBJECT TO THE TERMS AND CONDITIONS OF THE
INTERCREDITOR AND COLLATERAL SUBORDINATION AGREEMENT, DATED AUGUST 31, 1999 (THE
"SUBORDINATION AGREEMENT"), AS THE SAME MAY BE AMENDED, MODIFIED OR OTHERWISE
SUPPLEMENTED FROM TIME TO TIME, BY AND AMONG ALTIVA FINANCIAL CORPORATION, AS
BORROWER, GREENWICH CAPITAL MARKETS, INC. AND GREENWICH CAPITAL FINANCIAL
PRODUCTS, INC., PARTIES TO THE SENIOR AGREEMENTS REFERRED TO IN THE
SUBORDINATION AGREEMENT, AND THE HOLDERS FROM TIME TO TIME OF THE OBLIGATIONS
ARISING UNDER THE SUBORDINATION LOAN AGREEMENT REFERRED TO IN THE SUBORDINATION
AGREEMENT.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C> <C>
Article I. Definitions............................................................................1
Section 1.1 Definitions...................................................................1
Article II. Purchase and Sale of Notes.............................................................5
Section 2.1 Purchase and Sale of Notes....................................................5
Section 2.2 Closing.......................................................................5
Article III. Representations and Warranties.........................................................6
Section 3.1 Representations and Warranties of the Company.................................6
Section 3.2 Representations and Warranties of the Purchaser..............................14
Article IV. Conditions Precedent to Closing.......................................................17
Section 4.1 Conditions to Obligations of the Parties.....................................17
Section 4.2 Conditions to Obligations of the Purchaser...................................17
Section 4.3 Conditions to Obligations of the Company.....................................18
Article V. Covenants.............................................................................19
Section 5.1 Shareholder Meeting..........................................................19
Section 5.2 Applications.................................................................20
Section 5.3 Investigation and Confidentiality............................................21
Section 5.4 Press Releases...............................................................22
Section 5.5 No Solicitation..............................................................22
Section 5.6 Use of Proceeds..............................................................22
Section 5.7 Current Information..........................................................22
Section 5.8 Rule 144 and Rule 144A Reporting.............................................23
Section 5.9 Stay, Extension and Usury Laws...............................................23
Article VI. Miscellaneous.........................................................................23
Section 6.1 Survival of Provisions.......................................................23
Section 6.2 Termination..................................................................23
Section 6.3 Waiver; Amendments...........................................................24
Section 6.4 Communications...............................................................24
Section 6.5 Costs, Expenses and Taxes....................................................25
Section 6.6 Execution in Counterparts....................................................25
Section 6.7 Binding Effect; Assignment...................................................27
Section 6.8 Governing Law................................................................26
Section 6.9 Usury........................................................................26
</TABLE>
i
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<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Section 6.10 Severability of Provisions...................................................26
Section 6.11 Headings and Gender..........................................................26
Section 6.12 Integration..................................................................27
Section 6.13 Participation Interests......................................................27
Section 6.14 Knowledge Limitation.........................................................27
Exhibit A Name and Address of the Purchaser
Exhibit B Form of Note
Exhibit C Form of Pledge and Security Agreement
Exhibit D Form of Intercreditor and Collateral Subordination Agreement
Exhibit E Form of Registration Rights Agreement
Exhibit F Matters to be covered by Opinion of Counsel to the Company
</TABLE>
ii
<PAGE>
SECURED CONVERTIBLE NOTE
PURCHASE AGREEMENT
Secured Convertible Note Purchase Agreement, dated as of August 31,
1999 (the "Agreement"), by and among Altiva Financial Corporation, a Delaware
corporation, and the other party named on the signature page hereof.
In consideration of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. As used in this Agreement, and unless
the context requires a different meaning, the following terms have the meanings
indicated:
"Acquisition" means the Company's acquisition of all of the outstanding
capital stock of MCI pursuant to the Stock Purchase Agreement.
"Affiliate" means, with respect to any Person, any Person that,
directly or indirectly, controls, is controlled by or is under common control
with such Person. For the purposes of this definition, "control" (including,
with correlative meanings, the terms "controlled by" and "under common control
with") shall mean the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"Agreement" means this Secured Convertible Note Purchase Agreement, as
amended, supplemented or modified from time to time.
"Business Day" means any day except a Saturday, Sunday or other day on
which banking institutions in the city of Atlanta, Georgia are authorized by law
to close.
"Capital Securities" of any Person means Capital Stock of the Person
and Stock Equivalents of the Person.
"Capital Stock" of any Person means any and all shares or other equity
interest of such Person.
"Closing" has the meaning set forth in Section 2.2.
1
<PAGE>
"Closing Date" has the meaning set forth in Section 2.2.
"Code" means the Internal Revenue Code of 1986, as amended (or any
successor statute in effect from time to time), and the rules and regulations
promulgated thereunder.
"Commission" means the Securities and Exchange Commission and any
successor thereto.
"Common Stock" means the Common Stock, par value $.01 per share, of
the Company.
"Company" means Altiva Financial Corporation, a Delaware corporation,
together with its successors.
"Company Financial Statements" has the meaning set forth in Section
3.1(i)(i) hereof.
"Environmental Claim" means any written notice from any governmental
authority or third party alleging potential liability (including without
limitation potential liability for investigating costs, cleanup costs,
governmental response costs, natural resource damages, property damages,
personal injuries or penalties) arising out of, based on, or resulting from the
presence, or release into the environment of any Materials of Environmental
Concern.
"Environmental Laws" means any law, statute, rule or regulation of any
governmental, judicial, legislative, executive, administrative or regulatory
authority of the United States, or of any state, local or foreign government or
any subdivision thereof or of any governmental body or other regulatory or
administrative agency or commission, domestic or foreign (a "Law"), relating to
pollution or protection of the environment (including ambient air, surface
water, groundwater, land surface or subsurface strata), including without
limitation the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, the Resource Conservation and Recovery Act of 1976, as
amended, and other Laws relating to (i) emissions, discharges or releases of
pollutants, contaminants, chemicals, or industrial toxic or hazardous substances
or wastes (collectively known as "Polluting Substances") or (ii) the handling,
storage, disposal, reclamation, recycling or transportation of Polluting
Substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended (or any successor statute in effect from time to time).
"Escrow Agreement" has the meaning set forth in Article I of the
Security Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
and in effect from time to time (or any successor statute in effect from time to
time), and the rules and regulations of the Commission promulgated thereunder.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public
2
<PAGE>
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as have been
approved by a significant segment of the accounting profession, which are in
effect on the date of this Agreement.
"Governmental Entity" means any federal or state court, administrative
agency or commission or other governmental authority or instrumentality.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (or any successor statute in effect from time to time), and the
rules and regulations of the Federal Trade Commission promulgated thereunder.
"Intercreditor Agreement" means the Intercreditor and Collateral
Subordination Agreement among the Company, the Purchaser, Greenwich Capital
Markets, Inc. and Greenwich Capital Financial Products, Inc., substantially in
the form of Exhibit D hereto.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
encumbrance, charge or security interest of any kind in respect of such asset.
"Material Adverse Effect" means any effect that (i) is material and
adverse to the financial condition, results of operations, business or prospects
of the Company and its Subsidiaries taken as a whole or (ii) materially impairs
the ability of the Company to consummate the transactions contemplated by any of
this Agreement or any Related Agreement.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products and any other
materials regulated under Environmental Laws.
"MCI" means The Money Centre, Inc., a North Carolina corporation,
together with its successors.
"NASD" means National Association of Securities Dealers, Inc.
"Notes" means $7,000,000 principal amount of 12% Secured Convertible
Notes due 2006 to be issued and sold by the Company and purchased by the
Purchaser pursuant to this Agreement, substantially in the form of Exhibit B
hereto, as amended, supplemented or otherwise modified from time to time.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or a political subdivision or an agency or instrumentality thereof.
"Preferred Stock" means the Preferred Stock, par value $.01 per share,
of the Company.
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"Previously Disclosed" means disclosed in a letter dated the date
hereof delivered from the Company to the Purchaser or from the Purchaser to the
Company, as applicable, specifically referring to the appropriate section of
this Agreement and describing in reasonable detail the matters contained
therein.
"Purchaser" means the Person (other than the Company) listed on the
signature pages of this Agreement, and its permitted successors and assigns as
provided herein.
"Real Estate Owned" means the consolidated properties of the Company
acquired by foreclosure on a loan or deed-in-lieu thereof or otherwise included
in the Company's real estate owned for purposes of reporting asset quality of
the Company in its reports filed with the Commission under the Exchange Act.
"Registration Rights Agreement" means the Registration Rights Agreement
by and among the Company and the Purchaser, substantially in the form of Exhibit
E hereto, as amended, supplemented or otherwise modified from time to time.
"Related Agreements" means the Notes, the Security Agreement, the
Escrow Agreement, the Intercreditor Agreement and the Registration Rights
Agreement.
"Securities" means (i) the Notes and (ii) the Common Stock issuable
upon conversion of the Notes.
"Securities Act" means the Securities Act of 1933, as amended (or any
successor statute thereto as in effect from time to time), and the rules and
regulations of the Commission promulgated thereunder.
"Securities Documents" shall mean all reports, offering circulars,
proxy statements, registration statements and all similar documents filed, or
required to be filed, pursuant to the Securities Laws.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939, as amended; and the rules and
regulations of the Commission promulgated thereunder.
"Security Agreement" means the Pledge and Security Agreement by and
among the Company and the Purchaser, in its own right and as agent for the
holders of the Notes, substantially in the form of Exhibit C hereto, as amended,
supplemented or otherwise modified from time to time.
"State" means each of the states of the United States, the District of
Columbia and the Commonwealth of Puerto Rico.
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"Stock Equivalents" means, with respect to any Person, options,
warrants, calls, contracts or other rights entered into or issued by such Person
which confer upon the holder thereof the right (whether or not contingent) to
acquire any Capital Stock, voting securities or securities convertible into or
exchangeable for Capital Stock or voting securities of such Person.
"Stock Option Plan" means the 1999 Stock Incentive Plan of the Company.
"Stock Purchase Agreement" means the Stock Purchase Agreement, dated as
of July 7, 1999, by and among the Company and each of the stockholders of MCI,
as in effect as of the date hereof.
"Subsidiary" means with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of capital stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more Subsidiaries of such Person (or a combination thereof) and
(ii) any partnership (a) the sole general partner or managing general partner of
which is such Person or a Subsidiary of such Person or (b) the only general
partners of which are such Person or one or more Subsidiaries of such Person (or
any combination thereof).
"Taxes" means all taxes, charges, fees, levies or other governmental
assessments, including, without limitation, all net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license,
withholding, payroll, employment, excise, estimated, severance, stamp,
occupation, property or other taxes, customs, dues, fees, assessments or charges
of any kind whatsoever, together with any interest and any penalties, additions
to tax or additional amounts imposed by any taxing authority (domestic or
foreign).
"Tax Returns" means all foreign, federal, State and local returns
relating to Taxes.
"T. Rowe Price" means T. Rowe Price Recovery Fund, II, L.P.
ARTICLE II
PURCHASE AND SALE OF NOTES
SECTION 2.1 PURCHASE AND SALE OF NOTES. Subject to the terms and
conditions herein set forth, the Company agrees that it will issue and sell to
the Purchaser and the Purchaser agrees that it will purchase from the Company
the principal amount of Notes set forth opposite such Purchaser's name on
Exhibit A hereto at a price equal to such principal amount.
SECTION 2.2 CLOSING. Subject to the satisfaction or waiver of all
of the conditions to the parties' obligations hereunder specified in Article IV
of this Agreement, the purchase and sale of the Notes will take place at a
closing (the "Closing") to be held at the offices of Venable, Baetjer and
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Howard, LLP, in Baltimore, Maryland, at such time and on such day as the parties
hereto mutually agree upon. The date on which the Closing is to occur is
referred to herein as the "Closing Date."
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except
as Previously Disclosed, the Company represents and warrants to each of the
Purchasers as follows:
(a) CAPITAL STRUCTURE. The authorized capital stock of the Company
consists of 400,000,000 shares of Common Stock and 5,000,000 shares of Preferred
Stock. As of the date hereof, there are (i) 3,656,666 shares of Common Stock
issued and outstanding and no shares of Common Stock are held as treasury shares
and (ii) 62,500 shares of Series A Convertible Preferred Stock are issued and
outstanding and no shares of Preferred Stock are held as treasury shares. All
outstanding shares of Capital Stock of the Company have been duly authorized and
validly issued and are fully paid and nonassessable and none of the outstanding
shares of Capital Stock of the Company has been issued in violation of the
preemptive rights of any Person. Except as contemplated by this Agreement or as
Previously Disclosed, there are no Stock Equivalents authorized, issued or
outstanding with respect to the Capital Stock of the Company as of the date
hereof.
(b) ORGANIZATION, STANDING AND AUTHORITY OF THE COMPANY. The Company is
a corporation duly organized and validly existing under the laws of Delaware
with full corporate power and authority to own or lease all of its properties
and assets and to carry on its business as now conducted and is duly licensed or
qualified to do business and is in good standing in each jurisdiction in which
its ownership or leasing of property or the conduct of its business requires
such licensing or qualification and where the failure to be so licensed,
qualified or in good standing would have a Material Adverse Effect. The Company
has heretofore delivered true and complete copies of the Certificate of
Incorporation and Bylaws of the Company as in effect as of the date hereof to
each Purchaser which has requested the same.
(c) OWNERSHIP OF SUBSIDIARIES. The Company does not own or have the
right to acquire, directly or indirectly, any outstanding Capital Stock or other
voting securities or ownership interests of any corporation, bank, savings
association, partnership, joint venture or other organization. The outstanding
shares of Capital Stock of each Subsidiary of the Company have been duly
authorized and validly issued, are fully paid and nonassessable, and are
directly owned by the Company free and clear of all Liens. No Stock Equivalents
are authorized, issued or outstanding with respect to the Capital Stock of any
Subsidiary of the Company and there are no agreements, understandings or
commitments relating to the right of the Company to vote or to dispose of such
Capital Stock.
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(d) ORGANIZATION, STANDING AND AUTHORITY OF SUBSIDIARIES. Each
Subsidiary of the Company (i) is duly organized and validly existing under the
laws of the jurisdiction in which it is organized, (ii) has full corporate power
and authority to own or lease all of its properties and assets and to carry on
its business as now conducted and (iii) is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which its ownership or
leasing of property or the conduct of its business requires such qualification,
except where the failure to be so licensed, qualified or in good standing would
not have a Material Adverse Effect. The Company has heretofore delivered true
and complete copies of the articles of incorporation and bylaws or equivalent
documents of each Subsidiary of the Company as in effect as of the date hereof
to each Purchaser which has requested the same.
(e) AUTHORITY; DUE EXECUTION. The Company has full corporate power and
authority to perform its respective obligations under this Agreement and each of
the Related Agreements, and the execution, delivery and performance by the
Company of this Agreement and each Related Agreement have been duly authorized
by all necessary corporate action on the part of the Company. This Agreement has
been duly executed and delivered by the Company and constitutes, and each of the
Related Agreements, when duly executed and delivered by the Company, will
constitute, a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except (i) rights to indemnity and
contribution under the Registration Rights Agreement may be limited by
applicable law, (ii) enforceability may be limited by bankruptcy, insolvency,
moratorium and similar laws affecting creditors' rights generally and (iii)
rights of acceleration and the availability of equitable remedies may be limited
by equitable principles of general applicability.
(f) NO CONFLICT. Neither the execution and delivery of this Agreement
and each of the Related Agreements, nor consummation of the transactions
contemplated hereby and thereby, nor compliance by the Company with any of the
provisions hereof or thereof, (i) does or will conflict with or result in a
breach of any provisions of the Certificate of Incorporation or Bylaws of the
Company or the equivalent documents of any Company Subsidiary, (ii) violate,
conflict with or result in a breach of any term, condition or provision of, or
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
Lien upon any property or asset of the Company or a Company Subsidiary pursuant
to, any material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which the Company or a Company
Subsidiary is a party, or by which any of their respective properties or assets
may be bound or affected, or (iii) subject to the compliance referred to in
clauses (i) and (ii) of the succeeding sentence, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company or a
Company Subsidiary. Except for (i) compliance with applicable federal and State
securities laws in connection with this Agreement and the performance by the
Company of its obligations under the Registration Rights Agreement and (ii) any
required compliance by the Company with applicable federal and State securities
laws and/or the HSR Act in connection with the issuance of shares of Common
Stock upon conversion of the Notes in accordance with their terms, no consent,
approval, order or other authorization of any Governmental Entity or of any
third party is required by or on behalf of the Company or a Subsidiary of the
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Company in connection with the execution, delivery and performance of this
Agreement and each of the Related Agreements. The representations and warranties
contained in this Section 3.1(g), insofar as they relate to federal and State
securities laws requirements, are made in reliance on the representations and
warranties of the Purchaser contained in Section 3.2 of this Agreement.
(g) STATUS OF SECURITIES. The Securities have been authorized by all
necessary corporate action on the part of the Company. When delivered to the
Purchasers at the Closing against payment therefor as provided herein, the Notes
will be duly authorized and validly issued and will not be issued in violation
of the preemptive rights of any Person. Subject to the approvals and compliance
referred to in the second sentence of Section 3.1(f) hereof, shares of Common
Stock issued by the Company upon conversion of the Notes in accordance with
their terms will be duly authorized, validly issued and non-assessable at the
time of issuance and will not be issued in violation of the preemptive rights of
any Person. The representations and warranties contained in this Section 3.1(g),
insofar as they relate to federal and State securities laws requirements, are
made in reliance on the representations and warranties of the Purchaser
contained in Section 3.2 of this Agreement.
(h) SECURITIES REPORTS. The Company has filed all Securities Documents
required to be filed by it under the Securities Laws on a timely basis or has
received a valid extension of such time of filing, and all such Securities
Documents complied in all material respects with the requirements of the
Securities Laws and did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, at the time and in light of the
circumstances under which they were made, not misleading.
(i) FINANCIAL STATEMENTS.
(i) The Company has previously delivered to each Purchaser (x)
statements of financial condition of the Company as of August 31, 1998 and 1997
and statements of operations, changes in stockholders' equity and cash flows of
the Company for each of the years ended August 31, 1998, 1997 and 1996,
accompanied by the related audit report of Deloitte & Touche LLP, and (y) an
unaudited balance sheet of the Company as of May 31, 1999 and unaudited
statements of operations, changes in shareholders' equity and cash flows of the
Company for the three and nine months ended May 31, 1999 and 1998. The foregoing
financial statements, as well as the financial statements of the Company
included in the Securities Documents to be delivered to the Purchaser pursuant
to Section 5.7 hereof or otherwise required to be delivered to the Purchaser
pursuant to such section (collectively the "Company Financial Statements"),
fairly present or will fairly present, as the case may be, in all material
respects the consolidated financial condition of the Company as of the
respective dates set forth therein, and the consolidated results of operations,
changes in shareholders' equity and cash flows of the Company for the respective
periods or as of the respective dates set forth therein in accordance with GAAP.
(ii) Each of the Company Financial Statements has been or will
be, as the case may be, prepared in accordance with GAAP consistently applied
during the periods involved, except as stated therein. The books and records of
the Company and its Subsidiaries are being maintained
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in material compliance with applicable legal and accounting requirements, and
such books and records accurately reflect in all material respects all dealings
and transactions in respect of the business, assets, liabilities and affairs of
the Company and its Subsidiaries.
(iii) Except to the extent (x) reflected, disclosed or
provided for in the Securities Documents filed by the Company prior to the date
hereof and (y) of liabilities incurred since May 31, 1999 in the ordinary course
of business, neither the Company nor any Subsidiary of the Company has any
liabilities, whether absolute, accrued, contingent or otherwise, which has had
or could reasonably be expected to have a Material Adverse Effect.
(j) MATERIAL ADVERSE CHANGE. Since May 31, 1999, (i) the Company and
the Subsidiaries of the Company have conducted their respective businesses in
the ordinary and usual course (excluding the incurrence of expenses in
connection with this Agreement and the Stock Purchase Agreement and the
transactions contemplated hereby and thereby) and (ii) no event has occurred or
circumstance arisen that, individually or in the aggregate, has had or could
reasonably be expected to have a Material Adverse Effect.
(k) ENVIRONMENTAL MATTERS.
(i) The Company is in compliance with all Environmental Laws,
except for any violations of any Environmental Law which, individually or in the
aggregate, has not had and could not reasonably be expected to have a Material
Adverse Effect. The Company has not received any communication alleging that the
Company or any Company Subsidiary is not in such compliance and, to the
knowledge of the Company, there are no present circumstances that would prevent
or interfere with the continuation of such compliance.
(ii) None of the properties owned, leased or operated by the
Company or the any Company Subsidiary has been or is in violation of or liable
under any Environmental Law, except for any such violations or liabilities
which, individually or in the aggregate, has not had and could not reasonably be
expected to have a Material Adverse Effect.
(iii) To the knowledge of the Company, there are no past or
present actions, activities, circumstances, conditions, events or incidents that
could reasonably form the basis of any Environmental Claim or other claim or
action or governmental investigation that could result in the imposition of any
liability arising under any Environmental Law against the Company or any Company
Subsidiaries or against any Person whose liability for any Environmental Claim
the Company or any Company Subsidiary has or may have retained or assumed either
contractually or by operation of law, except such as, individually or in the
aggregate, have not had and could not reasonably be expected to have a Material
Adverse Effect.
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(l) TAX MATTERS.
(i) The Company and the Company Subsidiaries have timely filed
all Tax Returns required by applicable law to be filed by them (including,
without limitation, estimated tax returns, income tax returns, information
returns and withholding and employment tax returns) and have paid, or where
payment is not required to have been made, have set up an adequate reserve or
accrual for the payment of, all Taxes required to be paid in respect of the
periods covered by such Tax Returns, except in all cases where the failure to do
so, individually or in the aggregate, has not had and could not reasonably be
expected to have a Material Adverse Effect. As of the date hereof, there is no
audit examination, assessed deficiency, deficiency litigation or refund
litigation with respect to any Taxes of the Company or any Company Subsidiary.
All Taxes due with respect to completed and settled examinations or concluded
litigation relating to the Company have been paid in full or adequate provision
has been made for any such Taxes on the Company's consolidated statement of
financial condition in accordance with GAAP. The Company has not executed an
extension or waiver of any statute of limitations on the assessment or
collection of any Tax that is currently in effect.
(ii) Neither the Company nor any Company Subsidiary (i) is a
party to any agreement providing for the allocation or sharing of taxes, (ii) is
required to include in income any adjustment pursuant to Section 481(a) of the
Code by reason of a voluntary change in accounting method initiated by the
Company or a Company Subsidiary (nor does the Company have any knowledge that
the Internal Revenue Service has proposed any such adjustment or change of
accounting method) or (iii) has filed a consent pursuant to Section 341(f) of
the Code or agreed to have Section 341(f)(2) of the Code apply.
(iii) There has been no "ownership change," as defined under
Section 382 of the Code and regulations thereunder, of the Company since August
31, 1998, and consummation of the transactions contemplated by the Stock
Purchase Agreement, the issuance of the Notes pursuant to this Agreement and, to
the knowledge of the Company, any subsequent conversion of the Notes, will not
result in such an ownership change of the Company.
(m) ERISA. The Company is in compliance in all material respects with
all presently applicable provisions of ERISA; to the knowledge of the Company,
no "reportable event" (as defined in ERISA) has occurred with respect to any
"pension plan" (as defined in ERISA) for which the Company would have any
material liability; the Company has not incurred and does not expect to incur
liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 (whether or not waived)
or 4971 of the Code; and each "pension plan" for which the Company would have
any liability that is intended to be qualified under Section 401(a) of the Code
is so qualified in all material respects and to the knowledge of the Company
nothing has occurred, whether by action or by failure to act, which would cause
the loss of such qualification.
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(n) LITIGATION. There are no actions, suits, investigations or legal
proceedings instituted, pending or, to the knowledge of the Company, threatened
against the Company or any Company Subsidiary or against any asset, interest or
right of the Company or any Company Subsidiary, or against any director, officer
or employee of any of them that in any such case, if decided adversely, could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. Neither the Company nor any Company Subsidiary is a party to any
order, judgment or decree which has had or could reasonably be expected to have
a Material Adverse Effect.
(o) COMPLIANCE WITH LAWS. The Company and each Company Subsidiary has
all permits, licenses, certificates of authority, orders and approvals of, and
has made all filings, applications and registrations with, federal, State, local
and foreign governmental or regulatory bodies that are necessary in order to
permit it to carry on its business as it is presently being conducted and the
absence of which could reasonably be expected to have a Material Adverse Effect;
all such permits, licenses, certificates of authority, orders and approvals are
in full force and effect; and to the best knowledge of the Company, no
suspension or cancellation of any of the same is threatened.
(p) NO DEFAULT OR VIOLATION. Neither the Company nor any Company
Subsidiary currently is in violation of its Certificate of Incorporation or
Bylaws or equivalent documents, or of any applicable federal, State or local law
or ordinance or any order, rule or regulation of any Governmental Entity
(including, without limitation, all securities, safety, health, environmental,
zoning, anti-discrimination, antitrust, and wage and hour laws, ordinances,
orders, rules and regulations), or in default with respect to any order, writ,
injunction or decree of any court, or in default under any order, license,
regulation or demand of any Governmental Entity, any of which violations or
defaults could, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect, and neither the Company nor any Company Subsidiary
has received any notice or communication from any Governmental Entity asserting
that the Company or any Company Subsidiary is in violation of any of the
foregoing which could reasonably be expected to have a Material Adverse Effect.
Neither the Company nor any Company Subsidiary is subject to any regulatory or
supervisory cease and desist order, agreement, written directive, memorandum of
understanding or written commitment, and none of them has received any written
communication requesting that they enter into any of the foregoing.
(q) CERTAIN FEES. No fees or commissions will be payable by the Company
to brokers, finders, investment bankers or banks pursuant to any agreement
entered into by the Company with respect to the offer and sale of the Notes or
any of the other transactions contemplated hereby, by any Related Agreement or
by the Stock Purchase Agreement.
(r) PATENTS, TRADEMARKS, ETC. The Company and each of its Subsidiaries
owns or possesses all legal rights to use all proprietary rights, including
without limitation all trademarks, trade names, service marks and copyrights,
that are material to the conduct of their existing businesses. Neither the
Company nor any of its Subsidiaries is bound by or a party to any options,
licenses or agreements of any kind with respect to any trademarks, service marks
or trade names which it claims to own. Neither the Company nor any of its
Subsidiaries has received any
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communications alleging that any of them has violated or would violate any of
the patents, trademarks, service marks, trade names, copyrights or trade secrets
or other proprietary rights of any other Person.
(s) LOAN MATTERS
(i) Each loan agreement, note or borrowing arrangement,
including without limitation portions of outstanding lines of credit and loan
commitments on the books and records of the Company and its Subsidiaries
(collectively, "Loans") that was made by the Company and to the knowledge of the
Company that was made by any third party was made, and has been serviced in all
material respects in accordance with, the Company's underwriting standards and
the relevant Loan documentation in the ordinary course of business, is evidenced
in all material respects by appropriate and sufficient documentation and, to the
best knowledge of the Company, constitutes the legal, valid and binding
obligation of the obligor named therein, subject to bankruptcy, insolvency,
fraudulent conveyance and other laws of general applicability relating to or
affecting creditor's rights and to general equity principles.
(ii) None of the agreements pursuant to which the Company or
any Subsidiary has sold Loans or pools of Loans or participations in Loans or
pools of Loans contain any obligation to repurchase such Loans or interests
therein on account of a payment default by the obligor on any such Loans.
Neither the Company nor any of its Subsidiaries is in default under any such
agreement or has received any notice alleging default.
(iii) To the knowledge of the Company, all brokers and other
third parties who originate or have originated Loans have all required licenses
and approvals from all jurisdictions requiring licenses and approvals and have
complied with and are not in violation of any applicable law, regulation, order,
rule, policy or guidelines of any Governmental Entity.
(iv) The practices of the Company and its Subsidiaries with
respect to compensation paid to mortgage brokers comply with the policy
statement issued by the Department of Housing and Urban Development in March
1999.
(t) CERTAIN ASSETS. The Company has Previously Disclosed a true and
correct listing of the following assets of the Company and its Subsidiaries as
of May 31, 1999: (i) all non-performing Loans, securities or other assets (i.e.,
all assets on which the Company has ceased recognizing interest under GAAP or as
to which any payments of principal or interest are past due 90 or more days as
of such date), (ii) all Loans, securities or other assets as to which any
payments of principal or interest are past due 60 or more days, (iii) all Loans,
securities or other assets not included in the foregoing which have been
classified special mention, substandard, doubtful or loss, or otherwise
classified adversely, by management of the Company or regulatory examiners, and
(iv) each parcel of Real Estate Owned (excepting such parcels as may have been
disposed of in the ordinary course of business subsequent to such date),
including an identification of the amount of reserves which have been
established with respect to each such parcel and its net carrying value.
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(u) YEAR 2000 COMPLIANCE. All computer hardware and software owned,
used or licensed by the Company or any of its Subsidiaries, including but not
limited to system and application programs, files, databases and computer
services, the failure or disfunctionality of which would individually or in the
aggregate have a Material Adverse Effect is Year 2000 Complaint. "Year 2000
Complaint" means that such hardware and software will (i) correctly process date
data from at least January 1, 1900 through December 31, 2000 without error or
interruption due to date, (ii) maintain functionality with respect to the input,
storing, processing or output of records or data containing dates falling on or
after January 1, 2000, and (iii) be interoperable with other Year 2000 compliant
hardware or software owned, used or licensed by the Company or any of its
Subsidiaries which may deliver records to, receive records from or otherwise
interact with such hardware or software in the course of processing records or
data.
(v) LABOR MATTERS. Neither the Company nor any of its Subsidiaries is a
party to or is bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is the
Company or any of its Subsidiaries the subject of a proceeding naming the
Company or any Subsidiary as a defendant asserting that the Company or any such
Subsidiary has committed an unfair labor practice (within the meaning of the
National Labor Relations Act) or seeking to compel the Company or any such
Subsidiary to bargain with any labor organization as to wages or conditions of
employment, nor is there any strike or other material labor dispute or disputes
involving it or any of its Subsidiaries pending, or to the Company's knowledge,
threatened, nor the Company aware of any activity involving its or any of its
Subsidiaries' employees seeking to certify a collective bargaining unit or
engaging in other organizational activity.
(w) INSURANCE. The Company believes that it and each Company Subsidiary
is insured, and during each of the past three calendar years has been insured,
for reasonable amounts with financially sound and reputable insurance companies
against such risks as companies engaged in a similar business would, in
accordance with good business practice, customarily be insured and has
maintained all insurance required by applicable laws and regulations. All of the
policies and bonds maintained by the Company and its Subsidiaries are in full
force and effect and all claims thereunder have been filed in a due and timely
manner and, to the Company's knowledge, no such claim has been denied.
(x) PROPERTIES. All real and personal property owned by the Company or
a Company Subsidiary or presently used by any of them in its respective business
is in an adequate condition (ordinary wear and tear excepted) and is sufficient
to carry on its business in the ordinary course of business consistent with its
past practices. The Company has good and marketable title free and clear of all
Liens (other than equities of redemption under applicable foreclosure laws) to
all of the material properties and assets, real and personal, reflected on the
consolidated statement of financial condition of the Company as of May 31, 1999
included in the Company Financial Statements or acquired after such date, other
than properties sold by the Company in the ordinary course of business, except
(i) Liens for current taxes not yet due or payable, (ii) pledges to secure
deposits and other liens incurred in the ordinary course of its banking
business, (iii) such imperfections of title, easements and encumbrances, if any,
as are not material in character, amount or extent and (iv) as
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reflected on the consolidated statement of financial condition of the Company as
of May 31, 1999 included in the Company Financial Statements. All real and
personal property which is material to the Company's business and leased or
licensed by the Company or a Company Subsidiary is held pursuant to leases or
licenses which are valid and enforceable in accordance with their respective
terms.
(y) INVESTMENT COMPANY ACT OF 1940. The Company is not, and will not
become upon consummation of the transactions contemplated hereby and by the
Stock Purchase Agreement, an "investment company" or an entity "controlled" by
an "investment company," as such terms are defined in the Investment Company Act
of 1940, as amended.
(z) PRIVATE OFFERING. Neither the Company nor any Person acting on its
behalf has taken or will take any action which might subject the offering,
issuance or sale of the Notes to the registration requirements of the Securities
Act or comparable provisions of any applicable State securities laws.
(aa) EXERCISE OF WARRANTS; STOCKHOLDER APPROVAL. After taking into
account the 600,000 shares of Common Stock to be issued in connection with the
Acquisition but without regard to the shares of Common Stock issuable upon
conversion of the Notes, an aggregate of 11,027 shares of Common Stock may be
issued by the Company in connection with the Acquisition and the transactions
contemplated hereby without compliance with the stockholder approval
requirements of the NASD. The affirmative vote of the holders of a majority of
the shares of Company Common Stock present in person or by proxy at a duly
called meeting of the stockholders of the Company at which a quorum, consisting
of the holders of a majority of the outstanding shares of Company Common Stock
present in person or by proxy, is present is the only vote of the stockholders
of the Company necessary to approve the conversion features of the Notes in
their entirety.
(bb) STOCK PURCHASE AGREEMENT. The Company has heretofore delivered a
true and complete copy of the Stock Purchase Agreement, including the related
disclosure schedules, to the Purchaser.
(cc) DISCLOSURE. None of the representations and warranties of the
Company or any of the information or documents which have been Previously
Disclosed to the Purchaser pursuant hereto are false or misleading in any
material respect or contain any untrue statement of a material fact, or omit to
state any material fact required to be stated or necessary to make any such
information or document, at the time and in light of the circumstances, not
misleading. Copies of all documents referred to in this Section 3.1 are true,
correct and complete copies thereof and include all amendments, supplements and
modifications thereto and all waivers thereunder.
SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
(a) INVESTMENT INTENT. The Purchaser represents and warrants to the
Company that the Securities to be acquired by it hereunder are being acquired
for its own account for investment and
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with no intention of distributing or reselling such Securities or any part
thereof or interest therein in any transaction which would be in violation of
federal or State securities laws, without prejudice, however, to the Purchaser's
right, subject to the provisions of this Agreement and the Registration Rights
Agreement, at all times to sell participation interests in the Notes in
accordance with Section 6.13 hereof and/or to sell or otherwise dispose of all
or any part of such Securities under an effective registration statement under
the Securities Act and other applicable State securities laws or under an
exemption from such registration, and subject, nevertheless, to the disposition
of the Purchaser's property being at all times within its control.
(b) TRANSFER RESTRICTIONS. If the Purchaser should decide to dispose of
any of the Securities, such Purchaser understands and agrees that it may do so
only as set forth below: (i) to the Company or (ii) to any Person reasonably
believed by such Purchaser to be a "qualified institutional buyer" (as defined
in Rule 144A under the Securities Act) in compliance with Rule 144A under the
Securities Act. In connection with any transfer of any Securities. In connection
with any transfer pursuant to clause (ii) above, the Company may request
reasonable certification as to the status of the transferor's transferee as a
qualified institutional buyer. The Purchaser agrees to the imprinting, so long
as appropriate, (i) on the Notes of the legend set forth on the form of Note
included as Exhibit B hereto and (ii) on certificates representing the Common
Stock issuable upon conversion of the Notes of a legend substantially similar to
such legend. The Notes and certificates evidencing the Common Stock issuable
upon conversion of the Notes also shall bear any other legends required by
applicable federal or State securities laws, which legends may be removed when,
in the opinion of counsel to the Company experienced in the applicable
securities laws, the same are no longer required under the applicable
requirements of such securities laws. The Company agrees that it will provide
the Purchaser, upon request, with a substitute document evidencing the
Securities not bearing such legend at such time as such legend is no longer
applicable.
(c) STOP TRANSFER INSTRUCTIONS. The Purchaser agrees that the Company
shall be entitled to make a notation on its records and give instructions to any
transfer agent of the Securities in order to implement the restrictions on
transfer set forth in Section 3.2(b) of this Agreement.
(d) ACCREDITED INVESTOR, ETC. The Purchaser represents and warrants to,
and covenants and agrees with, the Company that (i) at the time it was offered
the Notes, it was, (ii) at the date hereof, it is, and (iii) at the Closing, it
will be, a "qualified institutional buyer" as defined in Rule 144A under the
Securities Act, and has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Notes, and has so evaluated the
merits and risks of such investment, is able to bear the economic risk of such
investment and, at the present time, is able to afford a complete loss of such
investment.
(e) DUE EXECUTION. The Purchaser represents and warrants to the Company
that this Agreement has been, and each Related Agreement to which it will become
a party will be, duly executed and delivered by it or on its behalf and
constitutes, or will constitute, as applicable, a valid and binding obligation
of such Purchaser, enforceable against the Purchaser in accordance with its
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terms, except that (i) rights to indemnity and contribution under the
Registration Rights Agreement may be limited by applicable law, (ii)
enforceability may be limited by bankruptcy, insolvency, moratorium and similar
laws affecting creditors' rights generally and (iii) rights of acceleration and
the availability of equitable remedies may be limited by equitable principles of
general applicability.
(f) NO CONFLICT. The Purchaser represents and warrants to the Company
that neither the execution and delivery of this Agreement and each of the
Related Agreements to which the Purchaser is or will become a party, nor
consummation of the transactions contemplated hereby and thereby, nor compliance
by the Purchaser with any of the provisions hereof or thereof, (i) does or will
conflict with or result in a breach of any provisions of the articles of
incorporation or bylaws or equivalent documents of the Purchaser, (ii) violate,
conflict with or result in a breach of any term, condition or provision of, or
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
Lien upon my property or asset of the Purchaser pursuant to any material note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which the Purchaser is a party, or by which any of
its properties or assets may be bound or affected, or (iii), subject to the
compliance referred to in clause (i) and (ii) of the succeeding sentence,
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Purchaser. Except for (i) compliance with applicable federal
and State securities laws in connection with the performance by the Purchaser of
its obligations under the Registration Rights Agreement and (ii) any required
compliance by the Purchaser with applicable federal and State securities laws
and the HSR Act in connection with the issuance of shares of Common Stock upon
conversion of the Notes in accordance with their terms, the Purchaser represents
and warrants to the Company that no consent, approval, order or other
authorization of any Governmental Entity or of any third party is legally
required by or on behalf of the Purchaser in connection with the execution,
delivery and performance of this Agreement and each Related Agreement to which
it will become a party.
(g) ACCESS TO INFORMATION. The Purchaser acknowledges that prior to the
date hereof it has been afforded (i) the opportunity to ask such questions as it
has deemed necessary of, and to receive answers from, representatives of the
Company concerning the terms and conditions of the offering of the Notes and the
merits and risks of investing in the Notes and (ii) access to information about
the Company and the Company's financial condition, results of operations,
business, properties, management and prospects sufficient to enable it to
evaluate its investment in the Notes.
(h) RELIANCE. The Purchaser understands and acknowledges that (i) the
Notes are being offered and sold without registration under the Securities Act
in a transaction that is exempt from the registration provisions of the
Securities Act and (ii) such exemption depends in part on, and that the Company
will rely upon, the accuracy and truthfulness of the foregoing representations
and warranties of such Purchaser, and such Purchaser hereby consents to such
reliance.
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ARTICLE IV
CONDITIONS PRECEDENT TO THE CLOSING
SECTION 4.1 CONDITIONS TO OBLIGATIONS OF THE PARTIES. The
respective obligations of each of the parties hereto to fulfill their
obligations under Section 2.1 hereof at the Closing shall be subject to the
satisfaction or waiver prior to the Closing of the following conditions:
(a) All requirements prescribed by law which are necessary to the
consummation of the transactions contemplated by this Agreement shall have been
satisfied.
(b) No party hereto shall be subject to any order, decree or injunction
of a court or agency of competent jurisdiction which enjoins or prohibits the
consummation of any of the transactions contemplated by this Agreement.
(c) No statute, rule or regulation shall have been enacted, entered,
promulgated, interpreted, applied or enforced by any Governmental Entity which
prohibits, restricts or makes illegal consummation of any of the transactions
contemplated by this Agreement.
(d) Each of the parties hereto shall have received (i) a counterpart to
this Agreement, duly executed and delivered by the parties hereto, and (ii) a
counterpart of each Related Agreement (other than the Notes), substantially in
the form attached hereto as an exhibit, which shall have been duly executed and
delivered by the Company, the Purchaser and in the case of the Intercreditor
Agreement the other party or parties thereto.
SECTION 4.2 CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER. The
obligations of the Purchaser to fulfill its obligations under Section 2.1 hereof
shall be subject to the satisfaction or waiver prior to the Closing of the
following conditions:
(a) Each of the representations and warranties of the Company contained
in this Agreement shall be true and correct in all material respects as of the
date of this Agreement and as of the Closing Date as if made on the Closing Date
(or on the date when made in the case of any representation or warranty which
specifically relates to an earlier date); the Company shall have performed, in
all material respects, each of its covenants and agreements contained in this
Agreement to be performed prior to the Closing; and the Purchaser shall have
received a certificate signed by the Chief Executive Officer and the Chief
Financial Officer of the Company, dated the Closing Date, to the foregoing
effect.
(b) The Company shall have delivered to the Purchaser a duly executed
Note, registered in the name of the Purchaser, sufficient to evidence the Note
to be issued and sold by the Company and purchased by the Purchaser, as set
forth on Exhibit A hereto, against payment therefor to the Company in an amount
equal to the principal amount thereof.
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(c) The Purchaser shall have received, in form and substance reasonably
satisfactory to it, (i) opinions, addressed to the Purchaser and dated the
Closing Date, of King & Spalding and Venable, Baetjer and Howard, LLP special
counsel to the Company, with respect to the indicated matters set forth in
Exhibit F hereto and (ii) the opinions delivered pursuant to Sections 8.11 and
9.05 of the Stock Purchase Agreement, addressed to the Purchaser or otherwise
indicated therein or in an accompanying document that they may be relied upon by
the Purchasers as if addressed directly to them.
(d) No party to this Agreement (other than the Purchaser) shall be in
material breach of this Agreement unless such breach shall have been waived in
writing by each of the other parties to this Agreement.
(e) The Company shall have obtained in writing all consents of third
parties necessary to permit the consummation of the transactions contemplated by
this Agreement and the Related Agreements, as Previously Disclosed pursuant to
Section 3.1(f) hereof, and no such consent shall contain any term or condition
that the Purchaser reasonably deems to be materially disadvantageous to the
Company or the Purchaser.
(f) Each of City National Bank of West Virginia and Sovereign Bancorp,
Inc. shall have waived any adjustments to the terms of the stock options issued
to them pursuant to the Stock Option Agreement, dated May 29, 1998, between the
Company and each such entity, that may be required pursuant to Section 7 of such
Stock Option Agreements as a result of the issuance of the Notes or the
conversion thereof to shares of Common Stock, in each case in form and substance
reasonably satisfactory to the Purchaser.
(g) The Purchaser and T. Rowe Price shall have entered into a
Participation Agreement, substantially in the form previously provided by the
Purchaser to the Company, pursuant to which T. Rowe Price shall purchase a
$2,000,000 participation interest in the Notes issued to the Purchaser pursuant
to this Agreement.
(h) The Purchaser shall have received such other certificates,
opinions, documents and instruments related to the transactions contemplated
hereby (including without limitation the Acquisition) as may have been
reasonably required by it and are customary for transactions of this type, and
all corporate and other proceedings, and all documents, instruments and other
legal matters in connection with the transactions contemplated by this
Agreement, shall be reasonably satisfactory in form and substance to it and its
counsel.
SECTION 4.3 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company to fulfill its obligations under Section 2.1 hereof
shall be subject to the satisfaction or waiver prior to the Closing of the
following conditions:
(a) Each of the representations and warranties of the Purchaser
contained in this Agreement shall be true and correct in all material respects
as of the date of this Agreement and as
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of the Closing Date as if made on the Closing Date (or on the date when made in
the case of any representation and warranty which specifically relates to an
earlier date), and the Company shall have received a certificate signed by a
duly authorized representative of each Purchaser to the foregoing effect.
(b) The Purchaser shall have delivered to the Company a dollar amount
equal to the principal amount of the Notes to be issued and sold by the Company
and purchased by the Purchaser pursuant to this Agreement, as set forth on
Exhibit A hereto, such amount to be payable (i) by wire transfer of immediately
available funds to an account with a bank designated by the Company, by notice
to the Purchaser to be provided no later than two Business Days prior to the
Closing Date, or (ii) a federal (same day) funds check payable to the order of
the Company.
(c) No party to this Agreement (other than the Company) shall be in
material breach of this Agreement unless such breach shall have been waived in
writing by each of the other parties to this Agreement.
(d) The Company shall have obtained in writing all consents of third
parties necessary to permit the consummation of the transactions contemplated by
this Agreement and the Related Agreements (other than the consents referred to
in Section 4.2(f) hereof) and no such consent shall contain any term or
condition that the Company reasonably deems to be materially disadvantageous to
the Company.
(e) The Company shall have received such other certificates, opinions,
documents and instruments related to the transactions contemplated hereby as may
have been reasonably required by the Company and are customary for transactions
of this type, and all corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the transactions
contemplated by this Agreement, shall be reasonably satisfactory in form and
substance to the Company and its counsel.
ARTICLE V
COVENANTS
SECTION 5.1 SHAREHOLDER MEETING. The Company shall (i) take all
action necessary (including without limitation the preparation, filing and
dissemination of requisite proxy materials) to have its shareholders approve in
accordance with the requirements of the NASD the issuance of the number of
shares of Common Stock issuable upon conversion of the Notes to be sold pursuant
to this Agreement which may not be issued without such approval (the
"Stockholder Approval") at the first annual meeting of the shareholders of the
Company held after the date hereof or at a special meeting of shareholders which
is called for the purpose prior to the holding of such annual meeting of
shareholders, (ii) recommend that its shareholders approve the issuance of such
Common Stock
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and use its reasonable best efforts to obtain, as promptly as practicable, such
approval and (iii) reasonably cooperate and consult with the Purchasers with
respect to the foregoing matters.
SECTION 5.2 APPLICATIONS.
(a) Notwithstanding any other provision hereof to the contrary, the
right of a holder, whether on its own behalf or on behalf of a holder of a
participation interest in the Notes, to convert the principal amount of any
Note, or any portion thereof, and the obligation of the Company to issue any
shares of Common Stock upon the exercise of such conversion right, are subject
to the condition that, if upon receipt by the Company of written notice of
conversion from any holder, whether on its behalf or on behalf of a holder of
participation interest in the Notes, outside counsel advises the Company in
writing (a copy of which shall be provided to the converting holder) that in its
opinion the Company, such holder and/or any participant on behalf of whom such
holder is attempting to exercise conversion rights are required under applicable
law to make a filing under the HSR Act in connection with such conversion and
issuance of shares of Common Stock, no shares of Common Stock shall be issued to
such holder until all applicable filings under the HSR Act are made by the
Company and, if required under the HSR Act, by such holder and any other person
or persons and all applicable waiting periods under the HSR Act have expired or
been terminated. As soon as practicable after the receipt from any holder of the
Notes, whether on its behalf or on behalf of a holder of a participation
interest in the Notes (collectively the "Notice Giver"), of notice of an intent
to convert an amount of Notes sufficient to require a filing under the HSR Act,
but in any event no later than the tenth Business Day after receipt of such
notice, the Company will (i) prepare and file with the Antitrust Division of the
U.S. Department of Justice (the "DOJ") and the Federal Trade Commission (the
"FTC") the Notification and Report Form (accompanied by all documentary
attachments contemplated thereby) required by the HSR Act, (ii) upon the request
of any Notice Giver, request early termination of the waiting period imposed by
the HSR Act, (iii) coordinate and cooperate with the Notice Giver in responding
to formal and informal requests for additional information and documentary
material from the DOJ and the FTC in connection with such filing, (iv) use its
reasonable best efforts to take, or cause to be taken, all reasonable action and
to do, or cause to be done, all things reasonably necessary and appropriate to
permit the issuance to the Notice Giver of the shares of Common Stock issuable
upon the conversion of the Notes with respect to which any filing is required
under the HSR Act and (v) reimburse the holders of the Notes for the entire
amount of any filing fee or any other costs and expenses incurred by holders of
the Notes in connection therewith (including legal fees) or as required to be
paid under the HSR Act. The Notice Giver agrees to provide to the Company all
reasonable cooperation in connection with the making of such filings under the
HSR Act; provided, however, that neither the Company nor any such Notice Giver
shall be required in connection with any such filing to enter into any
agreement, or take or refrain from taking any action, as a condition to
obtaining any approval required under the HSR Act if, in the judgment of such
party, such condition could have a material adverse effect on such party or its
business. In the event that despite their reasonable efforts, the Company and
such Notice Giver do not receive all approvals required under the HSR Act in
connection with such conversion, such holder's notice of conversion shall be
deemed to be rescinded and the Company shall not be
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obligated to take any further action with respect to the conversion of such Note
pursuant to such notice of exercise.
(b) In the event that any other approval, consent or non-objection need
be obtained by the Company from, or a notice or other filing need be filed by
the Company with, any Governmental Entity in connection with (i) the execution,
delivery and performance of this Agreement or any Related Agreement by the
Company or (ii) the Company's issuance of Common Stock upon conversion of the
Notes, the Company shall take all actions reasonably necessary to obtain any
such approval, consent or non-objection or file such notice or other filing as
promptly as practicable, and the Purchaser agrees to cooperate with the Company
in obtaining or filing the same. The Company shall provide copies of any notice,
application or other document required to be filed pursuant to this Section 5.2
(excluding any confidential information) to the holder(s) seeking to convert a
Note or Notes into Common Stock for review not less than three Business Days
prior to the making of such filing and shall keep such holder apprised of the
status of such filing and the consideration thereof by the relevant Governmental
Entity.
SECTION 5.3 INVESTIGATION AND CONFIDENTIALITY.
(a) The Company shall permit the Purchaser and its representatives
reasonable access during normal business hours to its properties and personnel,
and shall disclose and make available to the Purchaser all books, papers and
records relating to the assets, stock ownership, properties, operations,
obligations and liabilities of the Company and its Subsidiaries, including, but
not limited to, all books of account (including the general ledger), tax
records, minute books of meetings of boards of directors (and any committees
thereof) and shareholders, organizational documents, bylaws, material contracts
and agreements, filings with any regulatory authority, accountants' work papers,
litigation files, loan files, plans affecting employees, and any other business
activities or prospects in which the Purchaser may have a reasonable interest in
connection with an investment in the Securities, provided that such access shall
be reasonably related to the transactions contemplated hereby and not unduly
interfere with normal operations, and provided further that in the event that
any of the foregoing are in the control of any third party, the Company shall
use its reasonable best efforts to cause such third party to provide access to
such materials to the Purchaser who shall request the same. In the event that
the Company is prohibited by law from providing any of the access referred to in
the preceding sentence to the Purchaser, it shall use its reasonable best
efforts to obtain promptly waivers thereof so as to permit such access. The
Company shall make the directors, officers, employees and agents and authorized
representatives (including counsel and independent public accountants) of the
Company and its Subsidiaries available to confer with the Purchaser and its
representatives, provided that such access shall be reasonably related to the
transactions contemplated hereby and not unduly interfere with normal
operations.
(b) All information furnished to the Purchaser by the Company
previously in connection with the transactions contemplated by this Agreement or
pursuant hereto shall be treated as the sole property of the Company and the
Purchaser covenants, severally and not jointly and as to itself only, that it
shall use its best efforts to keep confidential all such information and shall
not directly or
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indirectly use such information for any purpose other than in connection with
the transactions contemplated hereby. The obligation to keep such information
confidential shall continue for five years from the date hereof but shall not
apply to (i) any information which the Purchaser can establish by convincing
evidence (x) was already in its possession prior to the disclosure thereof by
the Company; (y) was then generally known to the public; or (z) became known to
the public through no fault of the Purchaser; or (ii) disclosures pursuant to a
legal requirement or in accordance with an order of a court of competent
jurisdiction, provided that the Purchaser shall use its reasonable best efforts
to give the Company prior notice thereof as promptly as practicable but in any
event not less than five Business Days prior to such disclosure and shall limit
such disclosure to the minimum amount required by such legal requirement or
court order.
SECTION 5.4 PRESS RELEASES. The Company and the Purchaser shall
agree with each other as to the form and substance of any press release related
to this Agreement or the transactions contemplated hereby, and consult with each
other as to the form and substance of other public disclosures which may relate
to the transactions contemplated by this Agreement, provided, however, that
nothing contained herein shall prohibit any party, following prior notification
to such other parties, from making any disclosure which it determines in good
faith is required by law or regulation. For purposes of the foregoing, the
Company may treat a law firm designated from time to time by the Purchaser as
the authorized representative of the Purchaser.
SECTION 5.5 NO SOLICITATION. Prior to the Closing, neither the
Company nor any of the directors, officers, employees, representatives or agents
of the Company shall solicit or encourage inquiries or proposals with respect
to, furnish any information relating to, or participate in any negotiations or
discussions concerning, any acquisition, lease or purchase of all or a
substantial portion of the assets of, or any equity interest in, the Company, or
any business combination with the Company, other than as contemplated by this
Agreement. The Company will immediately notify the Purchaser orally and in
writing if any such inquiries or proposals are received by, or such information
is requested from, or any such negotiations or discussions are sought to be
initiated with, the Company.
SECTION 5.6 USE OF PROCEEDS. On the Closing Date the Company
shall use the net proceeds from the sale of the Notes pursuant to this Agreement
to repay the Amended and Restated Promissory Notes, dated July 30, 1999, by and
between the Company and each of the Purchaser and T. Rowe Price Recovery Fund
II, L.P., plus interest thereon to the date of repayment, which repayment shall
occur concurrently with the issuance of the Notes upon transfer of the Amended
and Restated Promissory Notes to the Company. Any remainder of such net proceeds
shall be available to the Company for general corporate purposes.
SECTION 5.7 CURRENT INFORMATION. Between the date hereof and the
Closing, the Company shall provide to the Purchaser (i) promptly following the
filing thereof, copies of each Securities Document filed by the Company under
the Securities Laws and (ii) concurrently with the mailing thereof, copies of
each communication sent by the Company to its shareholders generally.
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SECTION 5.8 RULE 144 AND RULE 144A REPORTING. With a view to
making available to holders of Securities the benefits of certain rules and
regulations of the Commission which may permit the sale of the Securities to the
public without registration, the Company agrees at all times to:
(a) make and keep public information available, as those terms are
understood and defined in Rules 144 and 144A under the Securities Act (or any
successors thereto); and
(b) use its reasonable best efforts to file with the Commission in a
timely manner all Securities Documents required to be filed by the Company under
the Securities Laws.
SECTION 5.9 STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay, extension or usury law or other
law which would prohibit or forgive the Company from paying all or any portion
of the principal of, premium, if any, or interest on the Notes, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of its obligations under the Notes, and the Company
(to the extent it may lawfully do so) hereby expressly waives all benefits or
advantages of any such law.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 SURVIVAL OF PROVISIONS. The representations,
warranties, covenants and agreements of the Company and the Purchaser made
herein shall remain operative and in full force and effect regardless of (i) any
investigation made by or on behalf of the Purchaser or the Company, as the case
may be, (ii) acceptance of any of the Securities and payment by the Purchaser
therefor and retirement thereof, (iii) the transfer of any Securities or
interest therein by the Purchaser or (iv) any termination of this Agreement.
SECTION 6.2 TERMINATION. This Agreement may be terminated:
(a) by mutual agreement of the Company and the Purchaser;
(b) by the Company by written notice to the Purchaser if any of the
conditions specified in Sections 4.1 and 4.3 of this Agreement has not been met
or waived by it pursuant to the terms of this Agreement by 5:00 p.m., Eastern
Time, on August 31, 1999, provided, however, that the right to terminate this
Agreement pursuant to this Section 6.2(b) shall not be available to the Company
to the extent that any action by the Company or failure by the Company to
fulfill any obligation
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under this Agreement has been a cause of, or resulted in, the failure of any one
or more of the conditions specified in Sections 4.1 and 4.3 of this Agreement
not being fulfilled by such date; or
(c) by the Purchaser by written notice to the Company if any of the
conditions specified in Sections 4.1 and 4.2 of this Agreement has not been met
or waived by such Purchaser pursuant to the terms of this Agreement by 5:00
p.m., Eastern Time, on August 31, 1999, provided, however, that the right to
terminate this Agreement pursuant to this Section 6.2(c) shall not be available
to the Purchaser to the extent that any action by such Purchaser or failure by
such Purchaser to fulfill any obligation under this Agreement has been a cause
of, or resulted in, the failure of any one or more of the conditions specified
in Sections 4.1 and 4.2 of this Agreement not being fulfilled by such date.
SECTION 6.3 WAIVER; AMENDMENTS.
No failure or delay on the part of the Company or the Purchaser in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to the Company or
the Purchaser at law or in equity. No waiver of or consent to any departure by
the Company or the Purchaser from any provision of this Agreement shall be
effective unless signed in writing by the party entitled to the benefit thereof.
Except as otherwise provided herein, no amendment, modification or termination
of any provision of this Agreement shall be effective unless signed in writing
by or on behalf of the Company and the Purchaser. Any amendment, supplement or
modification of or to any of this Agreement, any waiver of any provision of this
Agreement, and any consent to any departure from the terms of any provision of
this Agreement, shall be effective only in the specific instance and for the
specific purpose for which made or given. Except where notice is specifically
required by this Agreement, no notice to or demand on any party hereto in any
case shall entitle another party hereto to any other or further notice or demand
in similar or other circumstances.
SECTION 6.4 COMMUNICATIONS. All notices, demands and other
communications provided for or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, telex, telecopier, or air courier
guaranteeing overnight delivery:
(i) if to the Purchaser, initially at the address set forth
below its name on Exhibit A hereto, and thereafter at such other
address, notice of which is given in accordance with this Section 6.4,
with a copy to T. Rowe Price at T. Rowe Price Recovery Fund, II, L.P.,
100 E. Pratt Street, Baltimore, Maryland 21202; and
(ii) if to the Company, initially at 1000 Parkwood Circle,
Suite 600, Atlanta, Georgia 30339, Attention: Chief Financial Officer;
and thereafter at such other address notice of which is given in
accordance with this Section 6.4.
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All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being sent by certified mail, return receipt requested, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next Business Day if timely delivered to an air courier guaranteeing
overnight delivery.
SECTION 6.5 COSTS, EXPENSES AND TAXES. The Company agrees to pay
(i) all costs and expenses incurred by it in connection with the negotiation,
preparation, typing, reproduction, execution, delivery and performance of this
Agreement and the Related Agreements and any amendment or supplement or
modification hereof or thereof (except to the extent otherwise provided in the
Registration Rights Agreement), including without limitation, attorneys fees and
expenses and all reasonable costs and expenses incurred by it in connection with
the Company's administration of this Agreement and any Related Agreement, and
(ii) the expenses of the Purchaser and T. Rowe Price incurred in connection with
the transactions provided for herein, including reasonable fees and expenses
payable to counsel to the Purchaser and T. Rowe Price in connection with the
negotiation, preparation, typing, reproduction, execution and delivery of this
Agreement and the Related Agreements, provided that such fees and expenses of
counsel in this clause (ii) shall not exceed $200,000. The Company shall pay all
reasonable costs and expenses (including, without limitation, attorneys' fees
and expenses), if any, incurred by the Purchaser in connection with any waiver,
amendment or modification of any provision of this Agreement or any Related
Agreement with respect to an obligation of, or requested by, the Company. In
addition, the Company shall pay any and all stamp, transfer and other similar
taxes payable in connection with the execution and delivery of this Agreement or
the original issuance of any of the Securities, and shall save and hold the
Purchaser harmless from and against any and all liabilities with respect to or
resulting from any delay in paying, or omission to pay, such taxes.
SECTION 6.6 EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto on
separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Agreement.
SECTION 6.7 BINDING EFFECT; ASSIGNMENT. Prior to the Closing, the
rights and obligations of any Purchaser under this Agreement may not be assigned
to any other Person except with the prior written consent of the Company, and
after the Closing the rights and obligations of the Purchaser may be assigned by
such Purchaser to any Person purchasing Securities from the Purchaser
contemporaneously with such assignment (provided the rights so assigned shall
apply to the Securities so purchased), subject to the provisions of Section
3.2(b). The rights and obligations of the Company under this Agreement may not
be assigned by the Company without the consent of the Purchaser. Except as
expressly provided in this Agreement, this Agreement shall not be construed so
as to confer any right or benefit upon any Person other than the parties to this
Agreement, and their respective successors and permitted assigns. This Agreement
shall be binding upon the Company and the Purchaser and their respective
permitted successors and assigns.
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SECTION 6.8 GOVERNING LAW. THE PARTIES HERETO ACKNOWLEDGE THAT
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND THE NOTES BEAR A REASONABLE
RELATION TO THE STATE OF MARYLAND IN THAT, INTERALIA, T. ROWE PRICE HAS ITS
PRINCIPAL PLACE OF BUSINESS IN THE STATE OF MARYLAND, PART OF THE NEGOTIATIONS
RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY HAS OCCURRED IN THE STATE OF
MARYLAND AND THE CLOSING WILL OCCUR IN SUCH STATE. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
MARYLAND, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
SECTION 6.9. USURY.
All agreements between the Company and the holders of the Notes,
whether now existing or hereafter arising and whether written or oral, are
hereby limited so that in no contingency, whether by reason of acceleration of
the maturity of the Notes or otherwise, shall the interest contracted for,
charged, received, paid or agreed to be paid to the Noteholders exceed the
maximum amount permissible under the laws of the State of Maryland (hereinafter
the "Applicable Law"). If, from any circumstance whatsoever, interest would
otherwise be payable to the holders of the Notes in excess of the maximum amount
permissible under the Applicable Law, the interest payable to the holders of the
Notes shall be reduced to the maximum amount permissible under the Applicable
Law, and if from any circumstance the holders of the Notes shall ever receive
anything of value deemed interest by the Applicable Law in excess of the maximum
amount permissible under the Applicable Law, an amount equal to the excessive
interest shall be applied to the reduction of the principal of the Notes and not
to the payment of interest, or if such excessive amount of interest exceeds the
unpaid principal amount of the Notes, such excess shall be refunded to the
Company. All interest paid or agreed to be paid to the holders of the Notes
shall, to the extent permitted by the Applicable Law, be amortized, prorated,
allocated and spread throughout the full term of the Notes (including any
renewal or extension) until payment in full of the principal so that the
interest on the Notes for such full term shall not exceed the maximum amount
permissible under the Applicable Law. The Purchaser expressly disavows any
intent to contract for, charge or receive interest in an amount which exceeds
the maximum amount permissible under the Applicable Law. This paragraph as well
as similar paragraphs set forth in the Notes and the Collateral Documents shall
control all agreements between the Company and the holders of the Notes.
SECTION 6.10 SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability only without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 6.11 HEADINGS AND GENDER. The Article and Section headings
and Table of Contents used or contained in this Agreement are for convenience of
reference only and shall not affect the construction of this Agreement. Use of a
particular gender herein shall be considered to represent the masculine,
feminine or neuter gender whenever appropriate.
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<PAGE>
SECTION 6.12 INTEGRATION. This Agreement (including documents
delivered pursuant hereto), the Related Agreements and the Agreement among the
Company, the Purchaser and T. Rowe Price, dated the date hereof, constitute the
entire agreement among the parties with respect to the subject matter thereof
and there are no promises or undertakings with respect thereto not expressly set
forth or referred to herein or therein.
SECTION 6.13 PARTICIPATION INTERESTS. The Company acknowledges and
agrees that immediately following the consummation of the transactions
contemplated hereby the Purchaser will sell an undivided participation interest
in the Note or Notes acquired by it in the principal amount of $2,000,000 to T.
Rowe Price Recovery Fund II, L.P. ("T. Rowe Price") pursuant to a Participation
Agreement of even date herewith, and that the Purchaser or any other registered
holder of a Note shall have the right to sell additional participation interests
to T. Rowe Price and/or any other third party (individually a "Participant" and
collectively the "Participants") on such terms as it may determine in its sole
discretion. The Company acknowledges that the original intent of the parties
hereto and T. Rowe Price was for T. Rowe Price to be a party to this Agreement
and an acquirer of a Note or Notes with an aggregate principal amount of
$2,000,000, that the Purchaser entered into this Agreement on the condition that
T. Rowe Price be permitted to purchase a participation interest in such amount
and that the transaction was restructured to provide for T. Rowe Price's
acquisition of a participation interest in the Notes in such amount solely
because the Company is not eligible under the terms of certain of the
mortgage-related securities included in the collateral subject to the Security
Agreement to pledge an interest in such collateral directly to T. Rowe Price.
Accordingly, the Company covenants and agrees that (i) the Purchaser or any
other registered holder of a Note shall be entitled to obtain on behalf of an
applicable Participant the benefits of this Agreement and each Related Agreement
and (ii) the Company shall take such action as may be necessary or advisable in
order to enable the Purchaser or any other registered holder of a Note to do the
same and shall not at any time insist upon, plead or in any manner whatsoever
claim that a Participant is not indirectly entitled to a right or benefit
available to a registered holder of a Note under this Agreement or any Related
Agreement because it is a Participant and not such a registered holder. Without
in any way limiting the foregoing, the Company acknowledges and agrees that its
obligations under the Registration Rights Agreement are for the benefit of both
the holders of the Notes and Participants and that any shares of Common Stock
acquired by a Participant upon conversion of a Note or Notes in which such
Participant holds a participation interest shall be subject to the terms of the
Registration Rights Agreement until such shares are no longer "Transfer
Restricted Securities," as such term is defined therein.
SECTION 6.14 KNOWLEDGE LIMITATION. All representations and
warranties of the Company that directly or indirectly relate to MCI contained in
Article III of this Agreement are based on the actual knowledge of the Company.
For this purpose, "actual knowledge of the Company" shall be deemed to mean the
actual knowledge of the Company's Chief Executive Officer and its Executive Vice
President and Chief Financial Officer after the conduct of such inquiry,
including without limitation a review of this Agreement and related schedules
and the Stock Purchase Agreement and related schedules, as they deem necessary
or appropriate in order to ensure the accuracy of such representations and
warranties in all material respects.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
ALTIVA FINANCIAL CORPORATION
By: /s/ Edward B. Meyercord
-------------------------------------------
Name: Edward B. Meyercord
Title: Chairman and Chief Executive Officer
VALUE PARTNERS, LTD
By: EWING & PARTNERS,
General Partner
By: /s/ Timothy G. Ewing
-------------------------------------------
Name: Timothy G. Ewing
Title: Managing Partner
28
<PAGE>
Exhibit 3
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY ITS ACCEPTANCE HEREOF,
AGREES FOR THE BENEFIT OF ALTIVA FINANCIAL CORPORATION (THE "COMPANY") THAT THIS
NOTE MAY BE OFFERED, SOLD OR OTHERWISE DISPOSED OF ONLY (1) TO THE COMPANY OR
(2) SO LONG AS THIS NOTE IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER," AS DEFINED IN RULE 144A, THAT IS PURCHASING
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE SALE OR OTHER DISPOSITION IS BEING MADE IN
RELIANCE ON RULE 144A. BY PURCHASING THIS NOTE, THE HOLDER HEREOF AGREES AND
REPRESENTS FOR THE BENEFIT OF THE COMPANY THAT (A) IT IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A AND (B) IT WILL NOTIFY ANY
PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO ABOVE.
THIS AGREEMENT IS SUBJECT TO THE TERMS AND CONDITIONS OF THE
INTERCREDITOR AND COLLATERAL SUBORDINATION AGREEMENT, DATED AUGUST 31, 1999 (THE
"SUBORDINATION AGREEMENT"), AS THE SAME MAY BE AMENDED, MODIFIED OR OTHERWISE
SUPPLEMENTED FROM TIME TO TIME, BY AND AMONG ALTIVA FINANCIAL CORPORATION, AS
BORROWER, GREENWICH CAPITAL MARKETS, INC. AND GREENWICH CAPITAL FINANCIAL
PRODUCTS, INC., PARTIES TO THE SENIOR AGREEMENTS REFERRED TO IN THE
SUBORDINATION AGREEMENT, AND THE HOLDERS FROM TIME TO TIME OF THE OBLIGATIONS
ARISING UNDER THE SUBORDINATION LOAN AGREEMENT REFERRED TO IN THE SUBORDINATION
AGREEMENT.
<PAGE>
ALTIVA FINANCIAL CORPORATION
12% SECURED CONVERTIBLE NOTE DUE 2006
No.1 $7,000,000
Altiva Financial Corporation (together with its permitted successors
and assigns hereunder, the "Company"), a corporation duly organized and validly
existing under the laws of the State of Delaware, for value received, hereby
promises to pay Value Partners, LTD, 4514 Cole Avenue, Suite 808, Dallas, Texas
75205 or registered assigns, the principal sum of $7,000,000 in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts, on August 15, 2006
(the "Maturity Date"), and to pay interest thereon semi-annually as provided
herein in like coin or currency, at the rate per annum of 12%, subject to
adjustment as provided herein.
ARTICLE I
DEFINITIONS
For all purposes hereof, except as otherwise expressly provided or
unless the context otherwise requires, the terms defined in this Article have
the meanings assigned to them in this Article and include the plural as well as
the singular.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agreement" has the meaning set forth in Section 2.1 hereof.
"Board of Directors" means either the Board of Directors of the Company
or any committee of such Board duly authorized to act for it hereunder.
"Business Day" means any day other than (i) a Saturday or Sunday or
(ii) a day on which banking institutions in the City of Atlanta, Georgia are
authorized or required by law or executive order to remain closed.
"Capitalized Lease Obligation" means indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with generally
2
<PAGE>
accepted accounting principles; the amount of such indebtedness shall be the
capitalized amount of such obligations determined in accordance with such
principles.
"Closing Price" has the meaning set forth in Section 7.5(h).
"Collateral Documents" means the Security Agreement, the Escrow
Agreement and the Intercreditor Agreement.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted.
"Common Stock" means the common stock, par value $0.01 per share, of
the Company.
"Company" has the meaning set forth in the first paragraph hereof.
"Default" means any event which is, or after notice or passage of time,
or both, would be, an Event of Default.
"Escrow Agreement" has the meaning set forth in the Agreement.
"Event of Default" means any event specified in Section 5.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Holder" or "Noteholder" means a Person in whose name a Note is
registered on the Note Register.
"Indebtedness" means, with respect to any Person, and without
duplication, (a) the principal of and premium, if any, and interest on, and
fees, costs, enforcement expenses, collateral protection expenses and other
reimbursement or indemnity obligations in respect to all indebtedness or
obligations of such Person to any other Person, including but not limited to
banks and other lending institutions, for money borrowed that is evidenced by a
note, bond, loan agreement or similar instrument or agreement (including
purchase money obligations with original maturities in excess of one year and
noncontingent reimbursement obligations in respect of amounts paid under letters
or credit), (b) all reimbursement obligations and other liabilities (contingent
or otherwise) of such Person with respect to letters of credit, bank guarantees
or bankers' acceptances, (c) all obligations and liabilities (contingent or
otherwise) in respect of Capitalized Lease Obligations on the balance sheet of
such Person, (d) all obligations of such Person (contingent or otherwise) with
respect to an interest rate or other swap, cap or collar agreement or other
similar instrument or agreement or foreign currency hedge, exchange, purchase or
similar instrument or agreement, (e) all direct or indirect guaranties or
similar agreements by such Person in respect of, and obligations or liabilities
(contingent or otherwise) of such Person to purchase or otherwise acquire or
otherwise assure a
3
<PAGE>
creditor against loss in respect of indebtedness, obligations or liabilities of
another Person of the kind described in clauses (a) through (d), (f) any
indebtedness or other obligations, excluding any operating leases such Person is
currently (or may become) a party to, described in clauses (a) through (d)
secured by any mortgage, pledge, lien or other encumbrance existing on property
which is owned or held by such Person, regardless of whether the indebtedness or
other obligation secured thereby shall have been assumed by such Person and (g)
any and all deferrals, renewals, extensions and refundings of, or amendments,
modifications or supplements to, any indebtedness, obligation or liability of
the kind described in clauses (a) through (f).
"Intercreditor Agreement" has the meaning set forth in the Agreement.
"Liens" means any mortgage, charge, pledge, lien (statutory or
otherwise), security interest, hypothecation, assignment for security, claim, or
preference or priority or other encumbrance (whether or not filed, recorded or
otherwise perfected under applicable law) upon or with respect to any property
owned by a Person.
"Liquidated Damages" shall have the meaning set forth in the
Registration Rights Agreement.
"Maturity Date" has the meaning set forth in the first paragraph
hereof.
"Note Register" has the meaning set forth in Section 2.3.
"Notes" has the meaning set forth in Section 2.1.
"Officer" means the Chairman of the Board, the President, the Chief
Financial Officer, the Controller, the Secretary, any Assistant Secretary or any
Vice President of the Company.
"Officer's Certificate" means a certificate signed by two Officers, one
of whom must be the Chairman of the Board, the President, the Chief Executive
Officer or the Chief Financial Officer of the Company.
"Person" means any individual, corporation, partnership, joint venture,
trust, association, joint stock company, unincorporated organization or
government or any agency or political subdivision thereof.
"Redemption Date," when used with respect to any Note to be redeemed,
means the date fixed for such redemption by or pursuant to the provisions of the
Note.
"Redemption Price," when used with respect to any Note to be redeemed,
means the price at which it is to be redeemed pursuant to the provisions of the
Note.
"Related Agreements" means the Agreement, the Security Agreement, the
Escrow Agreement, the Intercreditor Agreement and the Registration Rights
Agreement.
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<PAGE>
"Repurchase Event" has the meaning set forth in Section 8.4.
"Repurchase Price," when used with respect to any Note to be
repurchased, means the price at which it is to be repurchased pursuant to the
terms of the Notes.
"Registration Rights Agreement" has the meaning set forth in the
Agreement.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Securities Documents" shall mean all reports, offering circulars,
proxy statements, registration statements and all similar documents filed, or
required to be filed, pursuant to the Securities Laws.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisors Act of 1940,
as amended; the Trust Indenture Act of 1939, as amended; and the rules and
regulations of the Commission promulgated thereunder.
"Security Agreement" has the meaning set forth in the Agreement.
"Significant Subsidiary" means, with respect to any Person, any
Subsidiary which is a "significant subsidiary" (as defined in Article 1, Rule
1-02 of Regulation S-X, promulgated pursuant to the Securities Act) of such
Person.
"Stockholder Approval" means the approval of the stockholders of the
Company, pursuant to Section 5.1 of the Agreement, of the issuance of Common
Stock upon conversion of the Notes in their entirety.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of capital stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more Subsidiaries of such Person (or a combination thereof) and
(ii) any partnership (a) the sole general partner or managing general partner of
which is such Person or a Subsidiary of such Person or (b) the only general
partners of which are such Person or one or more Subsidiaries of such Person (or
any combination thereof).
"Trading Day" has the meaning set forth in Section 7.5(h).
5
<PAGE>
ARTICLE II
ISSUANCE OF NOTES
SECTION 2.1 DESIGNATION AND AMOUNT OF NOTES; RANKING.
This Note is one of a duly authorized issue of notes of the Company,
designated as its 12% Secured Convertible Notes due 2006 (herein called the
"Notes") in the maximum aggregate principal amount of $7,000,000 issued pursuant
to a Secured Convertible Note Purchase Agreement, dated as of August 31, 1999,
by and among Altiva Financial Corporation and the purchaser listed on the
signature page thereto (as amended, supplemented or otherwise modified from time
to time, the "Agreement"), to which all the terms of this Note are subject.
The Notes constitute senior obligations of the Company and shall not be
subordinated in right or priority of payment to any existing or future unsecured
obligation of the Company.
SECTION 2.2. DATE AND DENOMINATION OF NOTES; PAYMENTS OF INTEREST.
The Notes shall be issuable in registered form without coupons in
denominations of $1,000 principal amount and any integral multiple thereof.
Every Note shall be dated August 31, 1999.
Interest on the principal amount of the Notes shall accrue at the rate
set forth in the first paragraph hereof from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
issuance. Interest on the Notes shall be computed on the basis of a 360-day year
comprised of twelve 30-day months.
In the event that the Company is obligated to pay Liquidated Damages to
Holders, the interest rate otherwise payable on the Notes shall be increased for
the period during which the Company is obligated to pay Liquidated Damages by
the amount of such Liquidated Damages and all references herein to interest
shall include Liquidated Damages, if any. The Company shall promptly notify each
Holder of Notes at its address as it appears on the Note Register in the event
that the Company is obligated to pay Liquidated Damages to Holders.
In the event that the Company does not obtain the Stockholder Approval
on or before February 15, 2000, the interest rate otherwise payable on the Notes
shall increase monthly, commencing on February 15, 2000, by 1% per annum, up to
a maximum interest rate of 18% commencing on August 15, 2000 (exclusive of
Liquidated Damages, if any), provided that if the Company subsequently obtains
the Stockholder Approval, the interest rate on the Notes shall revert to the
amount otherwise payable hereunder and shall not reflect any increase in the
interest rate as a result of the requirements of this sentence. The Company
shall promptly notify each Holder of Notes at its address as it appears on the
Note Register in the event that the Company is obligated to increase the
interest rate otherwise payable on the Notes pursuant to the requirements of
this paragraph.
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<PAGE>
The Person in whose name any Note is registered at the close of
business on any record date with respect to any interest payment date (including
any Note that is converted after the record date and on or before the interest
payment date) shall receive the interest payable on such interest payment date
notwithstanding the cancellation of such Note upon any transfer, exchange or
conversion subsequent to the record date and on or prior to such interest
payment date. Interest may, at the option of the Company, be paid by check
mailed to the address of such Person on the Note Register, provided that at the
request of a Holder in writing to the Company at least five days prior to the
date set for payment of interest, interest on such Holder's Notes shall be paid
by wire transfer in immediately available funds in accordance with the wire
transfer instructions supplied by such Holder to the Company. The term "interest
payment date" shall mean August 15 and February 15 of each year commencing on
February 15, 2000. The term "record date" with respect to any interest payment
date shall mean the August 1 or February 1 preceding said August 15 or February
15, respectively.
Any interest on any Note which is payable, but is not punctually paid
or duly provided for, on any said August 15 or February 15 (herein called
"Defaulted Interest") shall be paid by the Company, at its election in each
case, as provided in clause (1) or (2) below.
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names Notes are registered at the
close of business on a special record date for the payment of such
Defaulted Interest, which shall be not more than 15 days and not less
than 10 days prior to the date of the proposed payment. The Company
shall cause notice of the proposed payment of such Defaulted Interest
and the special record date therefor to be mailed, first-class postage
prepaid, to each Noteholder at his address as it appears in the Note
Register not less than 10 days prior to such special record date.
Notice of the proposed payment of such Defaulted Interest and the
special record date therefor having been so mailed, such Defaulted
Interest shall be paid to the Persons in whose names the Notes were
registered at the close of business on such special record date and
shall no longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner.
SECTION 2.3. EXCHANGE AND REGISTRATION OF TRANSFER OF NOTES; RESTRICTIONS ON
TRANSFER.
The Company shall cause to be kept at its executive offices a register
(the "Note Register") in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of Notes and of
transfers of Notes. The Note Register shall be in written form or in any form
capable of being converted into written form within a reasonably prompt period
of time.
Upon surrender for registration of transfer of any Note to the Company
and satisfaction of the requirements for such transfer set forth in this Section
2.4 and in the Agreement, the Company shall execute and deliver, in the name of
the designated transferee or transferees, one or more new
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<PAGE>
Notes of any authorized denominations and of a like aggregate principal amount
and bearing such restrictive legends as may be required by the Agreement.
Subject to the requirements of the immediately succeeding paragraph,
Notes may be exchanged for other Notes of any authorized denominations and of a
like aggregate principal amount upon surrender of the Notes to be exchanged to
the Company. Whenever any Notes are so surrendered for exchange, the Company
shall execute and deliver the Notes which the Noteholder making the exchange is
entitled to receive bearing registration numbers not contemporaneously
outstanding.
Each initial Holder of the Notes shall be issued a Note with a
principal amount equal to such Holder's initial aggregate investment in the
Notes and may not exchange such Note for other Notes of any authorized
denominations and of a like aggregate principal amount unless it has a valid
business reason therefor, provided that nothing herein shall be deemed to
restrict an initial Holder from exchanging Notes for other Notes of authorized
denominations and of a like aggregate principal amount in connection with any
sale, disposition or other transfer of the Notes or any conversion of the Notes
in accordance with Article VII hereof.
All Notes issued upon registration of transfer or exchange of Notes
shall be the valid obligations of the Company, evidencing the same debt and
entitled to the same benefits as the Notes surrendered upon such registration of
transfer or exchange.
All Notes presented or surrendered for registration of transfer or for
exchange, redemption, repurchase or conversion shall (if so required by the
Company) be duly endorsed, or be accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company, and the Notes shall
be duly executed by the Noteholder thereof or his attorney duly authorized in
writing.
No service charge shall be made for any registration of transfer or
exchange of Notes, but the Company may require payment of a sum sufficient to
cover any tax, assessment or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes.
SECTION 2.4. MUTILATED, DESTROYED, LOST OR STOLEN NOTES.
In case any Note shall become mutilated or be destroyed, lost or
stolen, the Company in its discretion may execute and deliver a new Note,
bearing a number not contemporaneously outstanding, in exchange and substitution
for the mutilated Note, or in lieu of and in substitution of the Note so
destroyed, lost or stolen. In every case the applicant for a substituted Note
shall furnish to the Company such security or indemnity as may be required by
the Company to save it harmless for any loss, liability, cost or expense caused
by or connected with such substitution, and, in every case of destruction, loss
or theft, the applicant shall furnish to the Company, evidence to its
satisfaction of the destruction, loss or theft of such Note and of the ownership
thereof.
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<PAGE>
Every substitute Note issued pursuant to the provisions of this Section
2.4 by virtue of the fact that any Note is destroyed, lost or stolen shall
constitute an additional contractual obligation of the Company, whether or not
the destroyed, lost or stolen Note shall be found at any time, and shall be
entitled to all the benefits of and subject to all the limitations set forth
herein equally and proportionally with any and all other duly issued Notes. To
the extent permitted by law, all Notes shall be held and owned upon the express
condition that the foregoing provisions are exclusive with respect to the
replacement or payment or conversion of mutilated, destroyed, lost or stolen
Notes and shall preclude any and all other rights or remedies notwithstanding
any law or statute existing or hereafter enacted to the contrary with respect to
the replacement or payment or conversion of negotiable instruments or other
securities without their surrender.
ARTICLE III
REDEMPTION OF NOTES
SECTION 3.1. OPTIONAL RIGHTS TO REDEEM NOTES.
The Notes are not redeemable at the Company's option prior to August
15, 2004. Thereafter, the Notes may be redeemed, in whole but not in part, at
the option of the Company at the Redemption Prices specified below (expressed as
percentages of the principal amount thereof), in each case, together with
accrued and unpaid interest, if any, thereon to the Redemption Date, if redeemed
during the 12-month period beginning on August 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR REDEMPTION RATE
<S> <C>
2004 106%
2005 100%
</TABLE>
Notwithstanding the foregoing, the Notes may be redeemed at the
Company's option prior to August 15, 2004, in whole but not in part, at a
Redemption Price equal to 100% of the principal amount thereof, together with
accrued and unpaid interest, if any, thereon to the Redemption Date, if the
Closing Price of the Common Stock equals or exceeds $15.00 per share (subject to
adjustment as provided herein, the "Redemption Trading Price") for twenty (20)
consecutive Trading Days after the date of issuance of the Notes and prior to
August 15, 2004.
In case outstanding shares of Common Stock shall be subdivided into a
greater number of shares of Common Stock, the Redemption Trading Price in effect
at the opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately reduced, and conversely,
in case outstanding shares of Common Stock shall be combined into a smaller
number of shares of Common Stock, the Redemption Trading Price in effect at the
opening of business on the day following the day upon which such combination
becomes effective shall be
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proportionately increased, such reduction or increase, as the case may be, to
become effective immediately after the opening of business on the day following
the day upon which such subdivision or combination becomes effective.
SECTION 3.2. NOTICE OF OPTIONAL REDEMPTION.
At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail or cause to be mailed a notice of optional redemption by
first-class mail to each Holder of Notes to be redeemed at such Holder's address
as it appears on the Note Register.
The notice shall identify the Notes to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) the then current Conversion Price;
(4) that Notes called for redemption must be presented and
surrendered to the Company to collect the Redemption Price;
(5) that the Notes called for redemption may be converted at
any time before the close of business on the fifth Business Day
immediately preceding the Redemption Date;
(6) that Holders who wish to convert Notes must satisfy the
requirements in Article VII of the Notes;
(7) that, unless the Company defaults in making the redemption
payment, the only remaining right of the Holder shall be to receive
payment of the Redemption Price upon presentation and surrender to the
Company of the Notes; and
(8) that interest on Notes called for redemption ceases to
accrue on and after the Redemption Date.
SECTION 3.3. EFFECT OF NOTICE OF OPTIONAL REDEMPTION.
Once notice of optional redemption is mailed, Notes called for
redemption become due and payable on the Redemption Date and at the Redemption
Price stated in the notice, except for Notes that are converted in accordance
with the provisions of Section 7.1. Upon presentation and surrender to the
Company, Notes called for redemption shall be paid at the Redemption Price, plus
accrued interest up to but not including the Redemption Date.
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ARTICLE IV
CERTAIN COVENANTS
SECTION 4.1. PAYMENT OF NOTES.
The Company shall pay the principal of and interest on the Notes on the
dates and in the manner provided herein. To the extent lawful, the Company shall
pay interest (including post-petition interest in any proceeding under any
bankruptcy law) on (i) overdue principal, at the rate borne by the Notes at the
time, and (ii) overdue installments of interest (without regard to any
applicable grace period) at the same rate, compounded semi-annually.
SECTION 4.2. CURRENT INFORMATION.
Between the date of issuance of the Notes and the Maturity Date, the
Company shall provide to each Holder of Notes at such Holder's address as it
appears in the Note Register (i) promptly following the filing thereof, copies
of each Securities Document filed by the Company under the Securities Laws and
(ii) concurrently with the mailing thereof, copies of each communication sent by
the Company to its stockholders generally.
SECTION 4.3. STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay, extension or usury law or other
law which would prohibit or forgive the Company from paying all or any portion
of the principal of, premium, if any, or interest on the Notes as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of its obligations herein, and the
Company (to the extent it may lawfully do so) hereby expressly waives all
benefits or advantages of any such law.
SECTION 4.4. COMPLIANCE CERTIFICATES.
The Company shall deliver to each Holder at such Holder's address as it
appears in the Note Register, within 90 days after the end of each fiscal year
of the Company, an Officers' Certificate as to the signer's knowledge of the
Company's compliance with all conditions and covenants on its part contained
herein and in the Related Agreements and stating whether or not the signer knows
of any Default or Event of Default. If such signer knows of such a Default or
Event of Default, the Officers' Certificate shall describe the Default or Event
of Default and the efforts to remedy the same.
SECTION 4.5. NOTICE OF DEFAULTS.
The Company will promptly give written notice to the Holders of any
Default or Event of Default and the efforts to remedy the same.
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SECTION 4.6. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all material taxes, assessments and
governmental charges levied or imposed upon the Company, directly or by reason
of its ownership of any Subsidiary or upon the income, profits or property of
the Company and (b) all material lawful claims for labor, materials and
supplies, which, if unpaid, might by law become a lien upon the property of the
Company, provided, however, that the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings or for which adequate provision has been made.
SECTION 4.7. CORPORATE EXISTENCE.
Subject to Article VI, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, rights (charter and statutory) and franchises, provided, however,
that the Company shall not be required to preserve any such right or franchise
if the Board of Directors shall determine in good faith that the preservation is
no longer desirable in the conduct of the Company's business and that the loss
thereof is not, and will not be, reasonably likely to be adverse in any material
respect to the Holders.
SECTION 4.8. MAINTENANCE OF PROPERTIES.
The Company and its Subsidiaries will cause all material properties
(real and personal) owned, leased or licensed in the conduct of their business
to be maintained and kept in good condition, repair and working order and
supplied with all necessary equipment and will cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof and
thereto, all as in the reasonable judgment of the Board of Directors may be
necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times while any Notes are
outstanding, provided, however, that nothing in this Section 4.8 shall prevent
the Company and its Subsidiaries from discontinuing the maintenance of any such
properties if, in the reasonable judgment of the Board of Directors, such
discontinuance is desirable in the conduct of the Company's business and is not,
and will not be, reasonably likely to be adverse in any material respect to the
Holders.
SECTION 4.9. PAYMENT OF DIVIDENDS FROM SUBSIDIARIES.
To the extent necessary to enable it to make payments on the Notes in
accordance with their terms, the Company shall cause dividends to be paid to it
by its Subsidiaries (whether in existence as of the date of issuance of the
Notes or thereafter formed or acquired, including without limitation pursuant to
the Stock Purchase Agreement) in amounts which are sufficient to enable the
Company to satisfy its payment obligations under the Notes, provided that the
Company shall not be required to take any action which would result in a
Subsidiary paying dividends to the extent not permitted by applicable law and
regulation and/or restrictions existing under agreements in effect on the date
of issuance of the Notes if the Company receives an opinion of counsel (in form
and substance
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satisfactory to the Holders of a majority in aggregate principal amount of the
Notes) as to the existence of the relevant restriction no later than the
applicable interest payment date or the date of maturity of the Notes, whether
by acceleration or otherwise.
SECTION 4.10. LIMITATIONS ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES.
The Company will not, and will not permit any of its Subsidiaries
(whether in existence as of the date of issuance of the Notes or thereafter
formed or acquired, including without limitation pursuant to the Stock Purchase
Agreement) to, create, assume or otherwise cause or suffer to exist or to become
effective any consensual encumbrance or restriction on the ability of any such
Subsidiary to:
(a) pay any dividends or make any other distribution on its
capital stock to the Company or any of its
Subsidiaries;
(b) make payments in respect to any Indebtedness owed to
the Company or any other Subsidiary of the Company;
or
(c) make loans or advances to the Company or any Subsidiary
or to guarantee Indebtedness of the Company or any
other Subsidiary of the Company;
other than, in the case of (a), (b) and (c),
(1) restrictions existing under agreements in effect on the
date of issuance of the Notes;
(2) consensual encumbrances or restrictions binding upon any
Person at the time such Person becomes a Subsidiary of the Company so long as
such encumbrances or restrictions (i) are not created, incurred or assumed in
contemplation of such Person becoming a Subsidiary and (ii) do not encumber or
restrict the Company or any other Subsidiary of the Company;
(3) restrictions with respect to a Subsidiary imposed pursuant
to an agreement which has been entered into for the sale or disposition of all
or substantially all the assets (which term may include the capital stock) of
such Subsidiary;
(4) restrictions on the transfer of assets which are subject
to Liens; and
(5) restrictions existing under any agreement which refinances
or replaces any of the agreements containing the restrictions in clauses (1) and
(2), provided that the terms and conditions of any such restrictions are not
materially less favorable to the Holders than those under the agreement
evidencing or relating to the Indebtedness refinanced.
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SECTION 4.11. REPURCHASE OF NOTES.
The Company will not, and will not permit any Subsidiaries to, purchase
any Notes other than pursuant to a repurchase offer made to each Holder pro rata
in accordance with the aggregate principal amount of Notes held by such Holder.
SECTION 4.12 TRANSACTIONS WITH AFFILIATES.
Neither the Company nor any Subsidiary will enter into any transaction,
including, without limitation, any purchase, sale, lease or exchange of any
asset or the rendering of any service, with any Affiliate (other than the
Company or a Subsidiary of the Company) unless such transaction (a) is otherwise
not in violation of the Notes and the Related Agreements and (b) is approved by
a majority of the disinterested members of the Board of Directors, is in the
ordinary course of its business and is upon fair and reasonable terms no less
favorable to it than it would obtain in a comparable arm's-length transaction
with a Person not an Affiliate, provided that the requirements of this clause
(b) shall not apply to (i) any transaction pursuant to agreements in effect on
the date of issuance of the Notes and (ii) any transaction or series of related
transactions in which the amount involved does not exceed $250,000.
SECTION 4.13. PAYMENTS FOR CONSENT.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder as an inducement to any
consent, waiver or amendment of any of the terms or provisions of the Notes
unless such consideration is paid to all Holders that provide such consent or so
waive or agree to amend.
ARTICLE V
REMEDIES OF NOTEHOLDERS
ON AN EVENT OF DEFAULT
SECTION 5.1. EVENTS OF DEFAULT.
In case one or more of the following Events of Default (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) shall have occurred and be continuing:
(a) default in the payment of any installment of interest upon
any of the Notes as and when the same shall become due and payable, and
continuance of such default for a period of 30 days; or
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(b) default in the payment of the principal of or premium, if
any, on any of the Notes as and when the same shall become due and
payable either at maturity or in connection with any redemption
pursuant to Article III or repurchase pursuant to Article VIII, by
acceleration or otherwise; or
(c) failure on the part of the Company duly to observe or
perform any other of the covenants or agreements on the part of the
Company herein or in any of the Related Agreements (other than a
covenant or agreement a default in whose performance or whose breach is
elsewhere in this Section 5.1 specifically dealt with) continued for a
period of 60 days after the date on which written notice of such
failure, requiring the Company to remedy the same, shall have been
given to the Company by the Holders of at least 25% in aggregate
principal amount of the Notes at the time outstanding; or
(d) failure of the Company or any Subsidiary of the Company to
make any payment, including any applicable grace period, in respect of
principal or interest on any Indebtedness which default shall have
resulted in Indebtedness in an amount in excess of $2,000,000; or
(e) default by the Company or a Subsidiary of the Company with
respect to any Indebtedness of the Company or such Subsidiary, which
default results in acceleration of any such Indebtedness which is in an
amount in excess of $2,000,000 without such Indebtedness having been
discharged, or such acceleration having been rescinded or annulled,
within the applicable grace period; or
(f) the entry by a court having jurisdiction in the premises
of a final judgment, decree or order against the Company or any
Subsidiary of the Company which shall require the payment by the
Company or any Subsidiary of the Company of an amount (to the extent
not covered by insurance) in excess of $2,000,000 and the continuance
of any such judgment, decree or order unstayed or unsatisfied and in
effect for a period of 60 consecutive days which is not being contested
in good faith by appropriate judicial proceedings; or
(g) the Company or any Significant Subsidiary shall commence a
voluntary case or other proceeding seeking liquidation, reorganization
or other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its property, or shall consent to any such relief or to the appointment
of or taking possession by any such official in an involuntary case or
other proceeding commenced against it, or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay
its debts as they become due; or
(h) an involuntary case or other proceeding shall be commenced
against the Company or any Significant Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or
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other similar official of it or any substantial part of its property,
and such involuntary case or other proceeding shall remain undismissed
and unstayed for a period of 60 consecutive days; or
(i) failure on the part of the Company duly to observe or
perform any of the covenants or agreements of the Company in any of the
Collateral Documents continued for a period of 30 days after the date
on which written notice of such failure, requiring the Company to
remedy the same, shall have been given to the Company by the Holders of
at least 25% in aggregate principal amount of the Notes at the time
outstanding; or
(j) any of the Collateral Documents after delivery thereof
shall for any reason, except to the extent permitted by the terms
thereof, cease to be in full force and effect and valid, binding and
enforceable against the Company in all material respects in accordance
with their terms, or cease in any material respect to create a valid
and perfected Lien of the priority required thereby on any of the
collateral purported to be covered thereby, or the Company shall so
state in writing, and such default shall continue unremedied for a
period of 30 days; or
(k) any annual audited financial statement of the Company is
qualified as to going concern or similar qualifications;
then, and in each and every such case (other than an Event of Default specified
in Section 5.1(g) or (h)), unless the principal of all of the Notes shall have
already become due and payable, the Holders of not less than 25% in aggregate
principal amount of the Notes then outstanding, by notice in writing to the
Company, may declare the principal of all the Notes and the interest accrued
thereon to be due and payable immediately, without presentment, demand, protest,
notice of protest or dishonor, notice of intent to accelerate or other notice of
default of any kind, all of which are expressly waived by the Company, and upon
any such declaration the same shall become and shall be immediately due and
payable, anything herein contained to the contrary notwithstanding.
If an Event of Default specified in Section 5.1(g) or (h) occurs, the
principal of all the Notes and the interest accrued thereon shall be immediately
and automatically due and payable without presentment, demand, protest, notice
of protest or dishonor, notice of intent to accelerate or other notice of
default of any kind, all of which are expressly waived by the Company.
SECTION 5.2. PAYMENT OF NOTES ON DEFAULT; SUIT THEREFOR.
The Company covenants that (a) in case default shall be made in the
payment of any installment of interest upon any of the Notes as and when the
same shall become due and payable, and such default shall have continued for a
period of 30 days, or (b) in case default shall be made in the payment of the
principal of or premium, if any, on any of the Notes as and when the same shall
have become due and payable, whether at maturity of the Notes or in connection
with any redemption or repurchase hereunder, by declaration or otherwise, then
the Company will pay to the Holders the whole amount that then shall have become
due and payable on the Notes for principal
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and premium, if any, or interest, or both, as the case may be, with interest
upon the overdue principal and premium, if any, and (to the extent that payment
of such interest is enforceable under applicable law) upon the overdue
installments of interest at the rate then borne by the Notes and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection.
In case the Company shall fail forthwith to pay such amounts, a Holder
shall be entitled and empowered to institute any actions or proceedings at law
or in equity for the collection of the sums so due and unpaid to it and to
exercise any of the rights or remedies provided in the Collateral Documents, and
may prosecute any such action or proceeding to judgment or final decree, and may
enforce any such judgment or final decree against the Company and collect in the
manner provided by law out of the property of the Company (including without
limitation the collateral held pursuant to the Collateral Documents) wherever
situated the monies adjudged or decreed to be payable.
In the case there shall be pending proceedings for the bankruptcy or
for the reorganization of the Company under Title 11 of the United States Code,
or any other applicable law, or in case a receiver, assignee or trustee in
bankruptcy or reorganization, liquidator, sequestrator or similar official shall
have been appointed for or taken possession of the Company, the property of the
Company, or in the case of any other judicial proceedings relative to the
Company or to the creditors or property of the Company, a Holder, irrespective
of whether the principal of the Notes shall then be due and payable as herein
expressed or by declaration or otherwise, shall be entitled and empowered, by
intervention in such proceedings or otherwise, to file and prove a claim or
claims for the whole amount of principal, premium, if any, and interest owing
and unpaid in respect of the Notes, and, in case of any judicial proceedings, to
file such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Holders allowed in such judicial
proceedings relative to the Company or its creditors or its property, and to
collect and receive any monies or other property payable or deliverable on any
such claims.
SECTION 5.3. APPLICATION OF MONIES COLLECTED.
Any monies collected by or on behalf of a Holder pursuant to this
Article V shall be applied in the following order:
First, to reimbursement of expenses and indemnities provided herein and
in the Related Documents;
Second, in case the principal of the outstanding Notes shall not have
become due and be unpaid, to the payment of interest on the Notes in default in
the order of the maturity of the installments of such interest, with interest
upon the overdue installments of interest at the rate then borne by the Notes,
such payments to be made ratably to the Holders entitled thereto;
Third, in case the principal of the outstanding Notes shall have become
due, by declaration or otherwise, and be unpaid, to the payment of the whole
amount then owing and unpaid upon the Notes for principal and premium, if any,
and interest, with interest on the overdue principal and premium, if any, and
upon overdue payments of interest at the rate then borne by the Notes, and in
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case such monies shall be insufficient to pay in full the whole amounts so due
and unpaid upon the Notes, then to the payment of such principal and premium, if
any, and interest without preference or priority of principal and premium, if
any, over interest, or of interest over principal and premium, if any, or of any
installment of interest over any other installment of interest, or of any Note
over any other Note, ratably to the aggregate of such principal and premium, if
any, and accrued and unpaid interest; and
Fourth, to the payment of the remainder, if any, to the Company or any
other Person lawfully entitled thereto.
SECTION 5.4. REMEDIES CUMULATIVE AND CONTINUING.
Except as provided in the last paragraph of Section 2.4, all powers and
remedies given by this Article V to a Holder shall, to the extent permitted by
law, be deemed cumulative and not exclusive of any thereof or of any other
powers and remedies available to a Holder by judicial proceedings or otherwise,
to enforce the performance or observance of the covenants and agreements
contained herein, and no delay or omission of any Holder of any of the Notes to
exercise any right or power accruing upon an Event of Default shall impair any
such right or power, or shall be construed to be a waiver of any such default or
any acquiescence therein and every power and remedy given herein, by the
Collateral Documents or by law to the Holders may be exercised from time to
time, and as often as shall be deemed expedient, by the Holders.
SECTION 5.5. WAIVER OF DEFAULTS BY MAJORITY OF HOLDERS.
The Holders of a majority in aggregate principal amount of the Notes at
the time outstanding may on behalf of the Holders of all of the Notes waive any
past Default or Event of Default hereunder and its consequences, except (i) a
default in the payment of interest or premium, if any, on, or the principal of,
the Notes, (ii) a failure by the Company to convert any Notes into Common Stock
in accordance with the provisions hereof, (iii) a default in the payment of the
Redemption Price pursuant to Article III or the Repurchase Price pursuant to
Article VIII or (iv) a default in respect of a covenant or provision hereof
which under Article X cannot be modified or amended without the consent of the
Holders of all Notes then outstanding. Upon any such waiver, the Company and the
Holders shall be restored to their former positions and rights hereunder, but no
such waiver shall extend to any subsequent or other Default or Event of Default
or impair any right consequent thereon. Whenever any Default or Event of Default
hereunder shall have been waived as permitted by this Section 5.5, said Default
or Event of Default shall for all purposes of the Notes be deemed to have been
cured and to be not continuing, but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereon.
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SECTION 5.6 SET-OFF.
Upon the occurrence of any Event of Default, any Noteholder shall have
the right to set-off any funds of the Company in the possession of the
Noteholder against any Indebtedness (or accrued interest on Indebtedness) then
due by the Company to the Noteholder. The rights of a Noteholder under this
Section 5.6 are in addition to any other rights and remedies that a Noteholder
may have hereunder.
ARTICLE VI
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
SECTION 6.1. COMPANY MAY CONSOLIDATE ETC. ONLY ON CERTAIN TERMS.
Subject to the provisions of Section 8.1, nothing contained herein
shall prevent any consolidation or merger of the Company with or into any other
Person (whether or not affiliated with the Company), or successive
consolidations or mergers in which the Company or its successor or successors
shall be a party or parties, or shall prevent any sale, conveyance or lease (or
successive sales, conveyances or leases) of the property of the Company,
substantially as an entirety, to any other Person (whether or not affiliated
with the Company), authorized to acquire and operate the same and which, in each
case, shall be organized under the laws of the United States of America, any
state thereof or the District of Columbia, provided, that (i) upon any such
consolidation, merger, sale, conveyance or lease, if the Company is not the
surviving entity, the due and punctual payment of the principal of and premium,
if any, and interest on all of the Notes, according to their tenor, and the due
and punctual performance and observance of all of the covenants and conditions
to be performed by the Company hereunder and under the Related Agreements, shall
be expressly and unconditionally assumed, by agreement in form and substance
reasonably satisfactory to the Holders of not less than a majority in aggregate
principal amount of the Notes at the time outstanding, executed and delivered to
the Noteholders by the Person (if other than the Company) formed by such
consolidation, or into which the Company shall have been merged, or by the
Person which shall have acquired or leased such property, (ii) the agreement
referred to in clause (i) shall provide for the applicable conversion rights set
forth in Section 7.6 and the applicable repurchase rights set forth in Section
8.5, (iii) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing and (iv) the Company or
the Person formed by such consolidation, or into which the Company shall have
been merged, or which shall have acquired or leased such property, as
applicable, shall have delivered an Officer's Certificate to the Noteholders to
the effect that such consolidation, merger, sale, conveyance or lease complies
with the terms hereof and that all conditions precedent provided for herein
relating to such transaction have been complied with.
SECTION 6.2. SUCCESSOR CORPORATION TO BE SUBSTITUTED.
In case of any such consolidation, merger, sale, conveyance or lease
referenced in Section 6.1, and upon the assumption by any Person of the due and
punctual payment of the principal of and premium, if any, and interest on all of
the Notes and the due and punctual performance of all of the
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covenants and conditions to be performed by the Company hereunder and under the
Related Agreements, in accordance with Section 6.1 such Person shall succeed to
and be substituted for the Company, with the same effect as if it had been named
herein as such. In the event of any such consolidation, merger, sale or
conveyance (but not in the event of any such lease), the Person named as the
"Company" in the first paragraph hereof or any successor which shall thereafter
have become such in the manner prescribed in this Article VI shall be released
from its liabilities as obligor and maker of the Notes and from its obligations
hereunder.
ARTICLE VII
CONVERSION OF NOTES
SECTION 7.1. RIGHT TO CONVERT.
Subject to and upon compliance with the provisions of this Article, the
Holder of any Note shall have the right, at his option, at any time before the
close of business on the last Business Day prior to the Maturity Date (except
that, with respect to any Note or portion of a Note which shall be called for
redemption, such right shall terminate, except as provided in Section 7.2, at
the close of business on the last Business Day preceding the date fixed for
redemption of such Note or portion of a Note, unless the Company shall default
in payment due upon redemption thereof), to convert the principal amount of any
such Note, or any portion of such principal amount which is $1,000 or an
integral multiple thereof, into that number of fully paid and non-assessable
shares of Common Stock (as such shares shall then be constituted) obtained by
dividing the principal amount of the Note or portion thereof surrendered for
conversion by the Conversion Price in effect at such time, by surrender of the
Note so to be converted in whole or in part in the manner provided in Section
7.2. A Holder of Notes is not entitled to any rights of a holder of Common Stock
until such Holder has converted his Notes to Common Stock, and only to the
extent such Notes are deemed to have been converted to Common Stock under this
Article VII.
SECTION 7.2. EXERCISE OF CONVERSION PRIVILEGE; ISSUANCE OF COMMON STOCK ON
CONVERSION; NO ADJUSTMENT FOR INTEREST OR DIVIDENDS.
In order to exercise the conversion privilege with respect to any Note,
the Holder of any such Note, to be converted in whole or in part, shall
surrender such Note, duly endorsed, to the Company, and shall give written
notice of conversion in the form provided herein (or such other notice which is
acceptable to the Company) to the Company that the Holder elects to convert such
Note or the portion thereof specified in said notice. Such notice shall also
state the name or names (with address or addresses) in which the certificate or
certificates for shares of Common Stock which shall be issuable on such
conversion shall be issued, and shall be accompanied by transfer taxes, if
required pursuant to Section 7.7. Each such Note surrendered for conversion
shall, unless the shares issuable on conversion are to be issued in the same
name as the registration of such Note, be duly endorsed by, or be accompanied by
instruments of transfer in form satisfactory to the Company duly executed by,
the Holder or his duly authorized attorney.
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As promptly as practicable after satisfaction of the requirements for
conversion set forth above, subject to compliance with any restrictions on
transfer if shares issuable on conversion are to be issued in a name other than
that of the Noteholder (as if such transfer were a transfer of the Note or Notes
(or portion thereof) so converted), the Company shall issue and shall deliver to
such Holder a certificate or certificates for the number of full shares of
Common Stock issuable upon the conversion of such Note or portion thereof in
accordance with the provisions of this Article VII and a check or cash in
respect of any fractional interest in respect of a share of Common Stock arising
upon such conversion, as provided in Section 7.3. In case any Note of a
denomination greater than $1,000 shall be surrendered for partial conversion,
the Company shall execute and deliver to the Holder of the Note so surrendered,
without charge to him, a new Note or Notes in authorized denominations in an
aggregate principal amount equal to the unconverted portion of the surrendered
Note.
Each conversion shall be deemed to have been effected as to any such
Note (or portion thereof) on the date on which the requirements set forth above
in this Section 7.2 have been satisfied as to such Note (or portion thereof),
and the Person in whose name any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become on said date the Holder of record of the shares represented thereby,
provided, however, that any such surrender on any date when the stock transfer
books of the Company shall be closed shall constitute the Person in whose name
the certificates are to be issued as the record Holder thereof for all purposes
on the next succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price in effect on the date upon which
such Note shall be surrendered.
SECTION 7.3. CASH PAYMENTS IN LIEU OF FRACTIONAL SHARES.
No fractional shares of Common Stock or scrip representing fractional
shares shall be issued upon conversion of Notes. If more than one Note shall be
surrendered for conversion at one time by the same Holder, the number of full
shares which shall be issuable upon conversion shall be computed on the basis of
the aggregate principal amount of the Notes (or specified portions thereof to
the extent permitted hereby) so surrendered. If any fractional share of stock
would be issuable upon the conversion of any Note or Notes, the Company shall
make an adjustment and payment therefor in cash at the current market value
thereof to the Holder of Notes. The current market value of a share of Common
Stock shall be the Closing Price on the last Trading Day prior to the day on
which the Notes (or specified portions thereof) are deemed to have been
converted.
SECTION 7.4. CONVERSION PRICE.
Subject to adjustment as provided in this Article VII, the conversion
price shall be $5.00 (herein called the "Conversion Price").
SECTION 7.5. ADJUSTMENT OF CONVERSION PRICE.
The Conversion Price shall be adjusted from time to time by the Company
as follows:
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(a) If the Company shall hereafter pay a dividend or make a
distribution to all holders of the outstanding Common Stock in shares of Common
Stock, the Conversion Price in effect at the opening of business on the date
following the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution shall be reduced by multiplying such
Conversion Price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination and of which the denominator shall be the sum of such
number of shares and the total number of shares constituting such dividend or
other distribution, such reduction to become effective immediately after the
opening of business on the day following the date fixed for such determination.
The Company will not pay any dividend or make any distribution on shares of
Common Stock held in the treasury of the Company. If any dividend or
distribution of the type described in this Section 7.5(a) is declared but not so
paid or made, the Conversion Price shall again be adjusted to the Conversion
Price which would then be in effect if such dividend or distribution had not
been declared.
(b) If the Company shall issue rights or warrants to all holders of its
outstanding shares of Common Stock entitling them to subscribe for or purchase
shares of Common Stock at a price per share less than the Current Market Price
(as defined below) on the date fixed for determination of stockholders entitled
to receive such rights or warrants, the Conversion Price shall be adjusted so
that the same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the date fixed for determination of
stockholders entitled to receive such rights or warrants by a fraction of which
the numerator shall be the number of shares of Common Stock outstanding at the
close of business on the date fixed for determination of stockholders entitled
to receive such rights and warrants plus the number of shares which the
aggregate offering price of the total number of shares so offered would purchase
at such Current Market Price, and of which the denominator shall be the number
of shares of Common Stock outstanding on the date fixed for determination of
stockholders entitled to receive such rights and warrants plus the total number
of additional shares of Common Stock offered for subscription or purchase. Such
adjustment shall be successively made whenever any such rights and warrants are
issued, and shall become effective immediately after the opening of business on
the day following the date fixed for determination of stockholders entitled to
receive such rights or warrants. To the extent that shares of Common Stock are
not delivered after the expiration of such rights or warrants, the Conversion
Price shall be readjusted to the Conversion Price which would then be in effect
had the adjustments made upon the issuance of such rights or warrants been made
on the basis of delivery of only the number of shares of Common Stock actually
delivered. In the event that such rights or warrants are not so issued, the
Conversion Price shall again be adjusted to be the Conversion Price which would
then be in effect if such date fixed for the determination of stockholders
entitled to receive such rights or warrants had not been fixed. In determining
whether any rights or warrants entitle the Holders to subscribe for or purchase
shares of Common Stock at less than such Current Market Price, and in
determining the aggregate offering price of such shares of Common Stock, there
shall be taken into account any consideration received by the Company for such
rights or warrants, the value of such consideration, if other than cash, to be
determined by the Board of Directors.
(c) If the outstanding shares of Common Stock shall be subdivided into
a greater number of shares of Common Stock, the Conversion Price in effect at
the opening of business on the day
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following the day upon which such subdivision becomes effective shall be
proportionately reduced, and conversely, in case outstanding shares of Common
Stock shall be combined into a smaller number of shares of Common Stock, the
Conversion Price in effect at the opening of business on the day following the
day upon which such combination becomes effective shall be proportionately
increased, such reduction or increase, as the case may be, to become effective
immediately after the opening of business on the day following the day upon
which such subdivision or combination becomes effective.
(d) If the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock shares of any class of capital stock of the Company
(other than any dividends or distributions to which Section 7.5(a) applies) or
evidences of indebtedness or assets (including securities, but excluding any
rights or warrants referred to in Section 7.5(b), and excluding any dividend or
distribution paid exclusively in cash (any of the foregoing hereinafter in this
Section 7.5(d) called the "Securities")), then, in each such case (unless the
Company elects to reserve such Securities for distribution to the Holders upon
the conversion of the Notes so that any such Holder converting Notes will
receive upon such conversion, in addition to the shares of Common Stock to which
such Holder is entitled, the amount and kind of such Securities which such
Holder would have received if such Holder had converted its Notes into Common
Stock immediately prior to the Record Date (as defined in Section 7.5(h) for
such distribution of the Securities)), the Conversion Price shall be reduced so
that the same shall be equal to the price determined by multiplying the
Conversion Price in effect on the Record Date (as defined below) with respect to
such distribution by a fraction of which the numerator shall be the Current
Market Price per share of the Common Stock on such Record Date less the fair
market value (as determined by the Board of Directors, whose determination shall
be conclusive, and described in a resolution of the Board of Directors) on the
Record Date of the portion of the Securities so distributed applicable to one
share of Common Stock and the denominator of which shall be the Current Market
Price per share of the Common Stock, such reduction to become effective
immediately prior to the opening of business on the day following such Record
Date, provided, however, that in the event the then fair market value (as so
determined) of the portion of the Securities so distributed applicable to one
share of Common Stock is equal to or greater than the Current Market Price of
the Common Stock on the Record Date, in lieu of the foregoing adjustment,
adequate provision shall be made so that each Noteholder shall have the right to
receive upon conversion the amount of Securities such Holder would have received
had such Holder converted each Note on the Record Date. In the event that such
dividend or distribution is not so paid or made, the Conversion Price shall
again be adjusted to be the Conversion Price which would then be in effect if
such dividend or distribution had not been declared. If the Board of Directors
determines the fair market value of any distribution for purposes of this
Section 7.5(d) by reference to the actual or when issued trading market for any
securities, it must in doing so consider the prices in such market over the same
period used in computing the Current Market Price of the Common Stock to the
extent possible.
Rights or warrants distributed by the Company to all holders of Common
Stock entitling the holders thereof to subscribe for or purchase shares of the
Company's capital stock (either initially or under certain circumstances), which
rights or warrants, until the occurrence of a specified event or events
("Trigger Event"): (i) are deemed to be transferred with such shares of Common
Stock, (ii)
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are not exercisable and (iii) are also issued in respect of future issuances of
Common Stock, shall be deemed not to have been distributed for purposes of this
Section 7.5 (and no adjustment to the Conversion Price under this Section 7.5
will be required) until the occurrence of the earliest Trigger Event, whereupon
such rights and warrants shall be deemed to have been distributed and an
appropriate adjustment (if any is required) to the Conversion Price shall be
made under this Section 7.5(d). If any such rights or warrants are subject to
events upon the occurrence of which such rights or warrants become exercisable
to purchase different securities, evidences of indebtedness or other assets,
then the date of the occurrence of any and each such event shall be deemed to be
the date of distribution and record date with respect to new rights or warrants
with such rights (and a termination or expiration of the existing rights or
warrants without exercise by any of the Holders thereof). In addition, in the
event of any distribution (or deemed distribution) of rights or warrants, or any
Trigger Event or other event (of the type described in the preceding sentence)
with respect thereto that was counted for purposes of calculating a distribution
amount for which an adjustment to the Conversion Price under this Section 7.5
was made, (1) in the case of any such rights or warrants which shall all have
been redeemed or repurchased without exercise by any Holders thereof, the
Conversion Price shall be readjusted upon such final redemption or repurchase to
give effect to such distribution or Trigger Event, as the case may be, as though
it were a cash distribution, equal to the per share redemption or repurchase
price received by a holder or holders of Common Stock with respect to such
rights or warrants (assuming such holder had retained such rights or warrants),
made to all holders of Common Stock as of the date of such redemption or
repurchase, and (2) in the case of such rights or warrants which shall have
expired or been terminated without exercise by any holders thereof, the
Conversion Price shall be readjusted as if such rights and warrants had not been
issued.
For purposes of this Section 7.5(d) and Sections 7.5(a) and (b), any
dividend or distribution to which this Section 7.5(d) is applicable that also
includes shares of Common Stock, or rights or warrants to subscribe for or
purchase shares of Common Stock (or both), shall be deemed instead to be (1) a
dividend or distribution of the evidences of indebtedness, assets or shares of
capital stock other than such shares of Common Stock or rights or warrants (and
any further Conversion Price reduction required by this Section 7.5(d) with
respect to such dividend or distribution shall then be made) immediately
followed by (2) a dividend or distribution of such shares of Common Stock or
such rights or warrants (and any further Conversion Price reduction required by
Sections 7.5(a) and (b) with respect to such dividend or distribution shall then
be made), except (A) the Record Date of such dividend or distribution shall be
substituted as "the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution" and "the date fixed for such
determination" within the meaning of Sections 7.5(a) and (b), and (B) any shares
of Common Stock included in such dividend or distribution shall not be deemed
"outstanding at the close of business on the date fixed for such determination"
within the meaning of Section 7.5(a).
(e) If the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock cash (excluding any cash that is distributed upon a
merger or consolidation to which Section 7.6 applies or as part of a
distribution referred to in Section 7.5(d)) in an aggregate amount that,
combined together with (1) the aggregate amount of any other such distributions
to all holders of its Common Stock made exclusively in cash within the 12 months
preceding the date of payment
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of such distribution, and in respect of which no adjustment pursuant to this
Section 7.5(e) has been made, and (2) the aggregate of any cash plus the fair
market value (as determined by the Board of Directors, whose determination shall
be conclusive and described in a resolution of the Board of Directors) of
consideration payable in respect of any tender offer by the Company for all or
any portion of the Common Stock concluded within the 12 months preceding the
date of payment of such distribution, and in respect of which no adjustment
pursuant to Section 7.5(f) has been made, exceeds 10% of the product of the
Current Market Price (determined as provided in Section 7.5(h)) on the Record
Date with respect to such distribution times the number of shares of Common
Stock outstanding on such date, then, and in each such case, immediately after
the close of business on such date, the Conversion Price shall be reduced so
that the same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the close of business on such Record Date
by a fraction (i) the numerator of which shall be equal to the Current Market
Price on the Record Date less an amount equal to the quotient of (x) the excess
of such combined amount over such 10% and (y) the number of shares of Common
Stock outstanding on the Record Date and (ii) the denominator of which shall be
equal to the Current Market Price on such Record Date provided, however, that,
if the portion of the cash so distributed applicable to one share of Common
Stock is equal to or greater than the Current Market Price of the Common Stock
on the Record Date, in lieu of the foregoing adjustment, adequate provision
shall be made so that each Noteholder shall have the right to receive upon
conversion the amount of cash such Holder would have received had such Holder
converted such Note immediately prior to such Record Date. If such dividend or
distribution is not so paid or made, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect if such
dividend or distribution had not been declared.
(f) If a tender offer made by the Company or any of its Subsidiaries
for all or any portion of the Common Stock expires and such tender offer (as
amended upon the expiration thereof) requires the payment to stockholders (based
on the acceptance (up to any maximum specified in the terms of the tender offer)
of Purchased Shares (as defined below)) of an aggregate consideration having a
fair market value (as determined by the Board of Directors, whose determination
shall be conclusive and described in a resolution of the Board of Directors)
that, combined together with (1) the aggregate of the cash plus the fair market
value (as determined by the Board of Directors, whose determination shall be
conclusive and described in a resolution of the Board of Directors), as of the
expiration of such tender offer, of consideration payable in respect of any
other tender offers, by the Company or any of its Subsidiaries for all or any
portion of the Common Stock expiring within the 12 months preceding the
expiration of such tender offer and in respect of which no adjustment pursuant
to this Section 7.5(f) has been made and (2) the aggregate amount of any
distributions to all Holders of the Common Stock made exclusively in cash within
12 months preceding the expiration of such tender offer and in respect of which
no adjustment pursuant to Section 7.5(e) has been made, exceeds 10% of the
product of the Current Market Price (determined as provided in Section 7.5(h))
as of the last time (the "Expiration Time") tenders could have been made
pursuant to such tender offer (as it may be amended) times the number of shares
of Common Stock outstanding (including any tendered shares) at the Expiration
Time, then, and in each such case, immediately prior to the opening of business
on the day after the date of the Expiration Time, the Conversion Price shall be
adjusted so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the close of business on the
date of the Expiration
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Time by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding (including any tendered shares) at the Expiration Time
multiplied by the Current Market Price of the Common Stock on the Trading Day
next succeeding the Expiration Time and the denominator shall be the sum of (x)
the fair market value (determined as aforesaid) of the aggregate consideration
payable to stockholders based on the acceptance (up to any maximum specified in
the terms of the tender offer) of all shares validly tendered and not withdrawn
as of the Expiration Time (the shares deemed so accepted, up to any such
maximum, being referred to as the "Purchased Shares") and (y) the product of the
number of shares of Common Stock outstanding (less any Purchased Shares) at the
Expiration Time and the Current Market Price of the Common Stock on the Trading
Day next succeeding the Expiration Time, such reduction (if any) to become
effective immediately prior to the opening of business on the day following the
Expiration Time. If the Company is obligated to purchase shares pursuant to any
such tender offer, but the Company is permanently prevented by applicable law
from effecting any such purchases or all such purchases are rescinded, the
Conversion Price shall again be adjusted to be the Conversion Price which would
then be in effect if such tender offer had not been made. If the application of
this Section 7.5(f) to any tender offer would result in an increase in the
Conversion Price, no adjustment shall be made for such tender offer under this
Section 7.5(f).
(g) If the Company shall issue Common Stock or securities convertible
into, or exchangeable for, Common Stock at a price per share (or, as applicable,
having a conversion or exchange price per share) that is less than the Current
Market Price (determined as provided in Section 7.5(h)) determined at the time
of such issuance, the Conversion Price shall be adjusted so that the holder of
each Note shall be entitled to receive, upon the conversion thereof, the number
of shares of Common Stock determined by multiplying (i) the Conversion Price on
the date (the "Measurement Date") immediately prior to the day of such issuance
by (ii) a fraction, the numerator of which shall be the sum of (1) the number of
shares of Common Stock outstanding on the Measurement Date day and (2) the
number of shares of Common Stock which the aggregate consideration receivable by
the Company for the total number of shares of Common Stock so issued (or into
which the convertible securities may convert) would purchase at such Conversion
Price on the Measurement Date, and the denominator of which shall be the sum of
(x) the number of shares of Common Stock outstanding on the Measurement Date and
(y) the number of additional shares of Common Stock so issued (or into which the
convertible securities may convert). An adjustment made pursuant to this Section
7.5(g) shall be made on the next business day following the day on which any
such issuance is made and shall be effective retroactively to the day of such
issuance immediately after the close of business on such date. For purposes of
this Section 7.5(g), the aggregate consideration receivable by the Company in
connection with the issuance of shares of Common Stock or of securities
convertible into shares of Common Stock shall be deemed to be equal to the sum
of the aggregate offering price (before deduction of underwriting discounts or
commissions and expenses payable to third parties) of all such securities plus
the minimum aggregate amount, if any, payable upon conversion of any such
convertible securities into shares of Common Stock; provided, however, that any
non-cash consideration received or receivable by the Company shall be valued at
its fair market value as of the date of the adjustment made pursuant to this
Section 7.5(g), such fair market value to be as determined by the Company's
Board of Directors (whose determination shall be conclusive and described in a
resolution of the Board of Directors).
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Notwithstanding any other provision of this Section 7.5(g) to the
contrary, the following shall be deemed not to have been issued for purposes of
this Section 7.5(g): (a) issuances pursuant to any bona fide plan for the
benefit of employees or directors of the Company or any Subsidiary in effect on
the date of issuance of the Notes or thereafter, (b) issuances to acquire all or
any portion of a business in an arm's-length transaction between the Company and
an unaffiliated third party, including, if applicable, issuances upon exercise
of options or warrants assumed or issued in connection with such an acquisition,
(c) issuances in a bona fide public offering pursuant to a firm commitment
underwriting or sales at the market pursuant to a continuous offering stock
program, (d) issuances pursuant to the exercise of rights or warrants, or upon
the conversion of convertible securities, which are issued and outstanding on
the date of issuance of the Notes, or which may be issued in the future at fair
value and with an exercise price or conversion price at least equal to the
Current Market Price (determined as provided in Section 7.5(h)) at the time of
issuance of such right, warrant or convertible security, (e) issuances pursuant
to a dividend reinvestment plan or other plan hereafter adopted for the
reinvestment of dividends or interest, provided, that such Common Stock is
issued at a price at least equal to 95% of the Current Market Price (determined
as provided in Section 7.5(h)) determined at the time of such issuance and (f)
issuances to which Section 7.5(a), (b) or (d) applies.
(h) For purposes of this Section 7.5, the following terms shall
have the meaning indicated:
(1) "Closing Price" with respect to any securities on any day
shall mean the closing sale price regular way on such day or, in case
no such sale takes place on such day, the average of the reported
closing bid and asked prices, regular way, in each case on the New York
Stock Exchange, or, if such security is not listed or admitted to
trading on such Exchange, on the principal national security exchange
or quotation system on which such security is quoted or listed or
admitted to trading, or, if not quoted or listed or admitted to trading
on any national securities exchange or quotation system, the average of
the closing bid and asked prices of such security on the
over-the-counter market on the day in question as reported by the
National Quotation Bureau Incorporated, or a similar generally accepted
reporting service, or if not so available, in such manner as furnished
by any New York Stock Exchange member firm selected from time to time
by the Board of Directors for that purpose, or a price determined in
good faith by the Board of Directors or, to the extent permitted by
applicable law, a duly authorized committee thereof, whose
determination shall be conclusive.
(2) "Current Market Price" shall mean the average of the daily
Closing Prices per share of Common Stock for the ten consecutive
Trading Days immediately prior to the date in question, provided,
however, that (1) if the "ex" date (as hereinafter defined) for any
event (other than the issuance or distribution requiring such
computation) that requires an adjustment to the Conversion Price
pursuant to Section 7.5(a), (b), (c), (d), (e), (f) or (g) occurs
during such ten consecutive Trading Days, the Closing Price for each
Trading Day prior to the "ex" date for such other event shall be
adjusted by multiplying such Closing Price by the same fraction by
which the Conversion Price is so required to be adjusted as a result
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of such other event, (2) if the "ex" date for any event (other than the
issuance or distribution requiring such computation) that requires an
adjustment to the Conversion Price pursuant to Section 7.5(a), (b),
(c), (d), (e), (f) or (g) occurs on or after the "ex" date for the
issuance or distribution requiring such computation and prior to the
day in question, the Closing Price for each Trading Day on and after
the "ex" date for such other event shall be adjusted by multiplying
such Closing Price by the reciprocal of the fraction by which the
Conversion Price is so required to be adjusted as a result of such
other event, and (3) if the "ex" date for the issuance or distribution
requiring such computation is prior to the day in question, after
taking into account any adjustment required pursuant to clause (1) or
(2) of this proviso, the Closing Price for each Trading Day on or after
such "ex" date shall be adjusted by adding thereto the amount of any
cash and the fair market value (as determined by the Board of Directors
or, to the extent permitted by applicable law, a duly authorized
committee thereof in a manner consistent with any determination of such
value for purposes of Section 8.5(d), (f) or (g), whose determination
shall be conclusive and described in a resolution of the Board of
Directors or such duly authorized committee thereof, as the case may
be) of the evidences of indebtedness, shares of capital stock or assets
being distributed applicable to one share of Common Stock as of the
close of business on the day before such "ex" date. For purposes of any
computation under Section 7.5(f) or (g), the Current Market Price of
the Common Stock on any date shall be deemed to be the average of the
daily Closing Prices per share of Common Stock for such day and the
next two succeeding Trading Days, provided, however, that if the "ex"
date for any event (other than the tender or exchange offer requiring
such computation) that requires an adjustment to the Conversion Price
pursuant to Section 7.5(a), (b), (c), (d), (e), (f) or (g) occurs on or
after the Expiration Time for the tender or exchange offer requiring
such computation and prior to the day in question, the Closing Price
for each Trading Day on and after the "ex" date for such other event
shall be adjusted by multiplying such Closing Price by the reciprocal
of the fraction by which the Conversion Price is so required to be
adjusted as a result of such other event. For purposes of this
paragraph, the term "ex" date, (1) when used with respect to any
issuance or distribution, means the first date on which the Common
Stock trades regular way on the relevant exchange or in the relevant
market from which the Closing Price was obtained without the right to
receive such issuance or distribution, (2) when used with respect to
any subdivision or combination of shares of Common Stock, means the
first date on which the Common Stock trades regular way on such
exchange or in such market after the time at which such subdivision or
combination becomes effective, and (3) when used with respect to any
tender or exchange offer means the first date on which the Common Stock
trades regular way on such exchange or in such market after the
Expiration Time of such offer.
(3) "fair market value" shall mean the amount which a willing
buyer would pay a willing seller in an arm's-length transaction.
(4) "Record Date" shall mean, with respect to any dividend,
distribution or other transaction or event in which the holders of
Common Stock have the right to receive any cash, securities or other
property or in which the Common Stock (or other applicable security) is
exchanged for or converted into any combination of cash, securities or
other
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property, the date fixed for determination of stockholders entitled to
receive such cash, securities or other property (whether such date is
fixed by the Board of Directors or by statute, contract or otherwise).
(5) "Trading Day" shall mean (x), if the applicable security
is listed or admitted for trading on the New York Stock Exchange, the
Nasdaq Stock Market (National Market) or another national security
exchange, a day on which the New York Stock Exchange, the Nasdaq Stock
Market (National Market) or another national security exchange is open
for business or (y) if the applicable security is quoted on the Nasdaq
National Market, a day on which trades may be made thereon or (z) if
the applicable security is not so listed, admitted for trading or
quoted, any day other than a Saturday or Sunday or a day on which
banking institutions in the State of Georgia are authorized or
obligated by law or executive order to close.
(i) The Company may make such reductions in the Conversion Price, in
addition to those required by Sections 7.5(a), (b), (c), (d), (e), (f) and (g),
as the Board of Directors considers to be advisable to avoid or diminish any
income tax to Holders of Common Stock or rights to purchase Common Stock
resulting from any dividend or distribution of stock (or rights to acquire
stock) or from any event treated as such for income tax purposes.
To the extent permitted by applicable law, the Company from time to
time may reduce the Conversion Price by any amount for any period of time if the
period is at least 20 days, the reduction is irrevocable during the period and
the Board of Directors shall have made a determination that such reduction would
be in the best interests of the Company, which determination shall be
conclusive. Whenever the Conversion Price is reduced pursuant to the preceding
sentence, the Company shall mail to Holders of record of the Notes a notice of
the reduction at least 15 days prior to the date the reduced Conversion Price
takes effect, and such notice shall state the reduced Conversion Price and the
period during which it will be in effect.
(j) No adjustment in the Conversion Price shall be required unless such
adjustment would require an increase or decrease of at least 1.00% in such
price, provided, however, that any adjustments which by reason of this Section
7.5(j) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Article VIII
shall be made by the Company and shall be made to the nearest cent or to the
nearest one hundredth of a share, as the case may be.
(k) Whenever the Conversion Price is adjusted as herein provided, the
Company shall prepare a notice of such adjustment of the Conversion Price
setting forth the adjusted Conversion Price and the date on which each
adjustment becomes effective and shall mail notice of such adjustment of the
Conversion Price to the Holder of each Note at his last address reflected in the
Note Register. Failure to deliver such notice shall not affect the legality or
validity of any such adjustment.
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(l) In any case in which this Section 7.5 provides that an adjustment
shall become effective immediately after a record date for an event, the Company
may defer until the occurrence of such event (i) issuing to the Holder of any
Note converted after such record date and before the occurrence of such event
the additional shares of Common Stock issuable upon such conversion by reason of
the adjustment required by such event over and above such conversion by reason
of the adjustment required by such event and above the Common Stock issuable
upon such conversion before giving effect to such adjustment and (ii) paying to
such Holder any amount in cash in lieu of any fraction pursuant to Section 7.5.
(m) For purposes of this Section 7.5, the number of shares of Common
Stock at any time outstanding shall not include shares held in the treasury of
the Company but shall include shares issuable in respect of scrip certificates
issued in lieu of fractions of shares of Common Stock. The Company will not pay
any dividend or make any distribution on shares of Common Stock held in the
treasury of the Company.
SECTION 7.6. EFFECT OF RECLASSIFICATION, CONSOLIDATION MERGER OR SALE.
If any of the following events occur, namely (i) any reclassification
or change of the outstanding shares of Common Stock (other than a subdivision or
combination to which Section 7.5(c) applies), (ii) any consolidation, merger or
combination of the Company with another corporation as a result of which Holders
of Common Stock shall be entitled to receive stock, securities or other property
or assets (including cash) with respect to or in exchange for such Common Stock
or (iii) any sale or conveyance of the properties and assets of the Company as,
or substantially as, an entirety to any other corporation as a result of which
Holders of Common Stock shall be entitled to receive stock, securities or other
property or assets (including cash) with respect to or in exchange for such
Common Stock, then the Company and the successor or purchasing corporation, as
the case may be, shall take appropriate steps to ensure that the legal
documentation evidencing any such transaction provides, in form and substance
reasonably satisfactory to the holders of not less than a majority in aggregate
principal amount of the Notes at the time outstanding, that the Notes shall be
convertible into the kind and amount of shares of stock and other securities or
property or assets (including cash) receivable upon such reclassification,
change, consolidation, merger, combination, sale or conveyance by a Holder of a
number of shares of Common Stock issuable upon conversion of such Notes
immediately prior to such reclassification, change, consolidation, merger,
combination, sale or conveyance, assuming such Holder of Common Stock did not
exercise his rights of election, if any, as to the kind or amount of shares of
stock and other securities or property or assets (including cash) receivable
upon such reclassification, change, consolidation, merger, combination, sale or
conveyance, provided that, if the kind or amount of shares of stock and other
securities or property or assets (including cash) receivable upon such
reclassification, change, consolidation, merger, combination, sale or conveyance
is not the same for each share of Common Stock in respect of which such rights
of election shall not have been exercised ("non-electing share"), then for the
purposes of this Section 7.6 the kind and amount of shares of stock and other
securities or property or assets (including cash) receivable upon such
reclassification, change, consolidation, merger, combination, sale or conveyance
for each non-electing share shall be deemed to be the kind and amount so
receivable per share by a plurality of
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the non-electing shares. Such legal documentation shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article.
The Company shall cause notice of the execution of such legal
documentation to be mailed to each Holder of Notes, at his last address
reflected in the Note Register, within 20 days after execution thereof. Failure
to deliver such notice shall not affect the legality or validity of such legal
documentation.
The above provisions of this Section shall similarly apply to
successive reclassifications, changes, consolidations, mergers, combinations,
sales and conveyances.
If this Section 7.6 applies to any event or occurrence, Section 7.5
shall not apply.
SECTION 7.7. TAXES ON SHARES ISSUED.
The issue of stock certificates on conversions of Notes shall be made
without charge to the converting Noteholder for any tax in respect of the issue
thereof. The Company shall not, however, be required to pay any tax which may be
payable in respect of any transfer involved in the issue and delivery of stock
in any name other than that of the Holder of any Note converted, and the Company
shall not be required to issue or deliver any such stock certificate unless and
until the Person or Persons requesting the issue thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
SECTION 7.8. RESERVATION OF SHARES TO BE FULLY PAID; COMPLIANCE WITH
GOVERNMENTAL REQUIREMENTS; LISTING OF COMMON STOCK.
The Company shall reserve, free from preemptive rights, out of its
authorized but unissued shares or shares held in treasury, sufficient shares of
Common Stock to provide for the conversion of the Notes from time to time as
such Notes are presented for conversion.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the shares of Common Stock
issuable upon conversion of the Notes, the Company will take all corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue shares of such Common Stock at such
adjusted Conversion Price.
The Company covenants that all shares of Common Stock which may be
issued upon conversion of Notes will upon issue be fully paid and non-assessable
by the Company and free from all taxes, liens and charges with respect to the
issue thereof.
The Company covenants that it will in good faith and as expeditiously
as possible comply with its obligations under the Registration Rights Agreement.
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The Company further covenants that so long as the Common Stock shall be
listed or quoted on the New York Stock Exchange, the Nasdaq Stock Market
(National Market) or any other national securities exchange the Company will, if
permitted by the rules of such exchange, list and keep listed so long as the
Common Stock shall be so listed on such market or exchange, all Common Stock
issuable upon conversion of the Notes.
SECTION 7.9. NOTICE TO HOLDERS PRIOR TO CERTAIN ACTIONS.
If:
(a) the Company shall declare a dividend (or any other
distribution) on its Common Stock that would require an adjustment in
the Conversion Price pursuant to Section 7.5, or
(b) the Company shall authorize the granting to all or
substantially all the holders of its Common Stock of rights or warrants
to subscribe for or purchase any share of any class of Common Stock or
any other rights or warrants, or
(c) there is a reclassification or reorganization of the
Common Stock (other than a subdivision or combination of outstanding
Common Stock, or a change in par value, or from par value to no par
value, or from no par value to par value), or a consolidation or merger
to which the Company is a party and for which approval of any
stockholders of the Company is required, or a sale or transfer of all
or substantially all of the assets of the Company, or
(d) there is a voluntary or involuntary dissolution,
liquidation or winding-up of the Company,
the Company shall cause to be mailed to each Holder at his last address
reflected in the Note Register, as promptly as possible but in any event at
least 15 days prior to the applicable date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution or rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution or rights or warrants are to be determined, or
(y) the date on which such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up is expected to become effective
or occur, and the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer, dissolution, liquidation or winding-up. Failure to give such
notice, or any defect therein, shall not affect the legality or validity of such
dividend, distribution, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up.
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SECTION 7.10. RESTRICTION ON CONVERSION OF NOTES.
Notwithstanding any other provision hereof to the contrary, unless and
until the Company has obtained the Stockholder Approval, the Notes may be
converted into a maximum of 11,027 shares (subject to adjustment as provided
below, the "Maximum Number"), which is equal to 19.99% of the number of shares
of Common Stock issued and outstanding on the date of issuance of the Notes,
less the 600,000 shares to be issued by the Company in connection with its
acquisition of The Money Centre, Inc. Unless and until the Company has obtained
the Stockholder Approval, and subject to the $1,000 authorized denomination of
the Notes set forth in Section 2.2, any individual Note may be converted
pursuant to Section 7.1 into a maximum number of shares of Common Stock equal to
the amount determined by multiplying the Maximum Number by a fraction (rounded
to the nearest one one-thousandth) of which the numerator is the principal
amount of the Note to be converted and the denominator of which is the total
principal amount of the outstanding Notes, and thereafter the remaining Notes
shall not be convertible into shares of Common Stock unless and until the
Company has obtained the Stockholder Approval. To illustrate, prior to
obtainment of the Stockholder Approval a holder of a Note with a principal
amount of $2,000,000 may convert $15,000 principal amount of such Note into
3,000 shares of Common Stock and the $1,985,000 principal amount of Note or
Notes to be issued by the Company to the converting Holder upon such conversion
may not be converted into shares of Common Stock unless and until the Company
has obtained the Stockholder Approval. The Maximum Number shall be subject to
appropriate adjustment by reason of a stock dividend, split-up, merger,
recapitalization, combination, subdivision, conversion, exchange of shares,
distribution on or in respect of the Common Stock or any similar transaction,
and proper provision shall be made in the agreements governing such transaction,
so that a Holder shall receive upon conversion the number of shares of Common
Stock that a Holder would have held immediately after such event if the Notes
had been converted immediately prior to such event, or the record date therefor,
as applicable.
ARTICLE VIII
REPURCHASE OF NOTES AT OPTION OF THE HOLDER
SECTION 8.1. RIGHT TO REQUIRE REPURCHASE.
In the event that a Repurchase Event (as hereinafter defined) shall
occur, then each Holder shall have the right, at the Holder's option, to require
the Company to repurchase, and upon the exercise of such right the Company shall
repurchase, all of such Holder's Notes, or any portion of the principal amount
thereof that is an integral multiple of $1,000 (provided that no single Note may
be repurchased in part unless the portion of the principal amount of such Note
to be outstanding after such repurchase is equal to $1,000 or an integral
multiple of $1,000), on the date (the "Repurchase Date") that is 60 days after
the date of the Company Notice (as defined in Section 8.2) for cash at a
purchase price equal to 101% of the aggregate principal amount of such Notes in
the event that the Repurchase Event is a Change in Control (as hereinafter
defined) and 112% of the aggregate
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principal amount of such Notes in the event that the Repurchase Event is the
failure to obtain the Stockholder Approval on or before February 28, 2000 (the
"Repurchase Price"), plus interest accrued and unpaid to, but excluding, the
Repurchase Date.
Whenever in this Note there is a reference, in any context, to the
principal of any Note as of any time, such reference shall be deemed to include
reference to the Repurchase Price payable in respect of such Note to the extent
that such Repurchase Price is, was or would be so payable at such time, and
express mention of the Repurchase Price in any provision of this Note shall not
be construed as excluding the Repurchase Price in those provisions of this Note
when such express mention is not made.
SECTION 8.2. NOTICES; METHOD OF EXERCISING PURCHASE RIGHT, ETC.
(a) Unless the Company shall have theretofore called for redemption all
of the outstanding Notes pursuant to Article III, on or before the 15th day
after the occurrence of a Repurchase Event, the Company shall give to all
Holders of Notes notice (the "Company Notice") of the occurrence of the
Repurchase Event and of the repurchase right set forth herein arising as a
result thereof.
Each notice of a repurchase right shall state:
(1) the Repurchase Event and the Repurchase Date,
(2) the date by which the repurchase right must be
exercised,
(3) the Repurchase Price,
(4) a description of the procedure which a Holder must follow
to exercise a repurchase right,
(5) that on the Repurchase Date the Repurchase Price will
become due and payable upon each such Note designated by the Holder to
be repurchased, and that interest thereon shall cease to accrue on and
after said date,
(6) the Conversion Price, the date on which the right to
convert the Notes to be repurchased will terminate and the place where
such Notes may be surrendered for conversion, and
(7) the place where such Notes are to be surrendered for
payment of the Repurchase Price and accrued interest, if any.
No failure of the Company to give the foregoing notices or defect
therein shall limit any Holder's right to exercise a repurchase right or affect
the validity of the proceedings for the repurchase of Notes.
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If any of the foregoing provisions or other provisions of this Article
are inconsistent with applicable law, such law shall govern.
(b) To exercise a repurchase right, a Holder shall deliver to the
Company on or before the 30th day after the date of the Company Notice (i)
written notice of the Holder's exercise of such right, which notice shall set
forth the name of the Holder, the principal amount of the Notes to be
repurchased (and, if any Note is to be repurchased in part, the portion of the
principal amount thereof to be repurchased and the name of the Person in which
the portion thereof to remain outstanding after such repurchase is to be
registered) and a statement that an election to exercise the repurchase right is
being made thereby, and (ii) the Notes with respect to which the repurchase
right is being exercised.
(c) In the event a repurchase right shall be exercised in accordance
with the terms hereof, the Company shall pay or cause to be paid the Repurchase
Price in cash to the Holder on the Repurchase Date, together with accrued and
unpaid interest to, but excluding, the Repurchase Date payable with respect to
the Notes as to which the repurchase right has been exercised.
(d) If any Note (or portion thereof) surrendered for repurchase shall
not be so paid on the Repurchase Date, the principal amount of such Note (or
portion thereof, as the case may be) shall, until paid, bear interest from the
Repurchase Date at the rate per annum then currently in effect, and each Note
shall remain convertible into Common Stock until the principal of such Note (or
portion thereof, as the case may be) shall have been paid or duly provided for.
(e) Any Note which is to be repurchased only in part shall be
surrendered to the Company (with, if the Company so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company duly
executed by, the Holder thereof or his attorney duly authorized in writing), and
the Company shall execute and deliver to the Holder of such Note without service
charge, a new Note or Notes, containing identical terms and conditions, each in
an authorized denomination in aggregate principal amount equal to and in
exchange for the portion of the principal of the Note so surrendered that was
not repurchased.
(f) Any Holder that has delivered to the Company its written notice
exercising its right to require the Company to repurchase its Notes upon a
Repurchase Event shall have the right to withdraw such notice at any time prior
to the close of business on the Repurchase Date by delivery of a written notice
of withdrawal to the Company prior to the close of business on such date. A Note
in respect of which a Holder is exercising its option to require repurchase upon
a Repurchase Event may be converted into Common Stock in accordance with Article
VII only if such Holder withdraws its notice in accordance with the preceding
sentence.
SECTION 8.3. CERTAIN DEFINITIONS.
For purposes of this Article VIII,
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(a) the term "beneficial owner" shall be determined in accordance with
Rule 13d-3 promulgated by the Commission pursuant to the Exchange Act;
(b) the term "Person" shall include any syndicate or group which would
be deemed to be a "Person" under Section 13(d)(3) of the Exchange Act; and
(c) the term "controlled" shall mean ownership or control of more than
50% of the voting power of an entity.
SECTION 8.4. REPURCHASE EVENT.
A "Repurchase Event" shall be deemed to occur upon the occurrence of a
Change in Control or in the event that the Company fails to obtain the
Stockholder Approval on or before February 15, 2000.
A "Change in Control" shall be deemed to have occurred if after the
date of issuance of the Notes:
(a) any Person, other than the Company, any Subsidiary of the Company
or any entity controlled by the foregoing, or any employee benefit plan of the
Company or any such Subsidiary, becomes the beneficial owner, directly or
indirectly, through a purchase or other acquisition transaction or series of
transactions (other than a merger or consolidation involving the Company), of
shares of capital stock of the Company entitling such Person to exercise in
excess of 50% of the total voting power of all shares of capital stock of the
Company entitled to vote generally in the election of directors, provided that a
Change in Control shall not be deemed to have occurred pursuant to this
paragraph (a) as a result of issuances of capital stock by the Company upon the
exercise of rights or warrants, or upon conversion of convertible securities,
which are issued and outstanding on the date of issuance of the Notes to the
holders of such rights, warrants or convertible securities on the date of
issuance of the Notes;
(b) there occurs any consolidation of the Company with, or merger of
the Company into, any other Person, any merger of another Person into the
Company, or any sale or transfer of the assets of the Company as, or
substantially as, an entirety to another Person (other than (i) any such
transaction pursuant to which the Holders of the Common Stock immediately prior
to such transaction have, directly or indirectly, shares of capital stock of the
continuing or surviving corporation immediately after such transaction which
entitle such Holders to exercise in excess of 50% of the total voting power of
all shares of capital stock of the continuing or surviving corporation entitled
to vote generally in the election of directors and (ii) any merger (1) which
does not result in any reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock or (2) which is effected solely to change the
jurisdiction of incorporation of the Company and results in a reclassification,
conversion or exchange of outstanding shares of Common Stock solely into shares
of Common Stock and separate series of Common Stock carrying substantially the
same relative rights as the Common Stock); or
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(c) individuals who constituted the Board of Directors of the Company
at the beginning of any one-year period (together with any other director whose
election by the Board of Directors of the Company or whose nomination for
election by the stockholders of the Company was approved by a vote of at least a
majority of the directors then in office either who were directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
directors then in office.
SECTION 8.5. CONSOLIDATION, MERGER, ETC.
In the case of any reclassification, change, consolidation, merger,
combination, sale or conveyance to which Section 7.6 applies, in which the
Common Stock of the Company is changed or exchanged as a result into the right
to receive shares of stock and other securities or property or assets (including
cash) which includes shares of Common Stock of the Company or common stock of
another Person that are, or upon issuance will be, traded on a United States
national securities exchange or approved for trading on an established automated
over-the-counter trading market in the United States and such shares constitute
at the time such change or exchange becomes effective in excess of 50% of the
aggregate fair market value of such shares of stock and other securities,
property and assets (including cash) (as determined by the Board of Directors of
the Company, which determination shall be conclusive and binding), then the
Person formed by such consolidation or resulting from such merger or combination
or which acquires the properties or assets (including cash) of the Company, as
the case may be, shall execute and deliver to the Holders of the Notes, at their
last address reflected in the Note Register, an amendment to the Notes, in form
and substance satisfactory to the holders of not less than a majority in
aggregate principal amount of the Notes at the time outstanding, modifying the
provisions of the Notes relating to the right of Holders to cause the Company to
repurchase the Notes following a Repurchase Event, including without limitation
the applicable provisions of this Article VIII and the definitions of Common
Stock and Change in Control, as appropriate, and such other related definitions
set forth herein as determined in good faith by the Board of Directors of the
Company (which determination shall be conclusive and binding), to make such
provisions apply to the common stock and the issuer thereof if different from
the Company and Common Stock of the Company (in lieu of the Company and the
Common Stock of the Company).
ARTICLE IX
CONCERNING THE NOTEHOLDERS
SECTION 9.1. ACTION BY HOLDERS.
When herein it is provided that the Holders of a specified percentage
in aggregate principal amount of the Notes may take any action (including the
making of any demand or request, the giving of any notice, consent or waiver or
the taking of any other action), the fact that at the time of taking any such
action, the Holders of such specified percentage have joined therein may be
evidenced (a) by any instrument or any number of instruments of similar tenor
executed by Holders in person or by agent or proxy appointed in writing, or (b)
by the record of the Holders of Notes voting in favor
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thereof at any meeting of Holders duly called and held in accordance with the
provisions hereof and applicable law or (c) by a combination of such instrument
or instruments and any such record of such a meeting of Holders. Whenever the
Company solicits the taking of any action by the Holders, the Company may fix in
advance of such solicitation a date as the record date for determining Holders
entitled to take such action. The record date shall be not more than 15 days
prior to the date of commencement of solicitation of such action.
SECTION 9.2 WHO ARE DEEMED ABSOLUTE OWNERS.
The Company may deem the Person in whose name a Note is registered on
the Note Register to be, and may treat him as, the absolute owner of such Note
(whether or not such Note shall be overdue and notwithstanding any notation of
ownership or other writing thereon) for the purpose of receiving payment of or
on account of the principal of, premium, if any, and interest on such Note, for
conversion of such Note and for all other purposes and the Company shall not be
affected by any notice to the contrary. All such payments so made to any Holder
for the time being, or upon his order, shall be valid, and, to the extent of the
sum or sums so paid, effectual to satisfy and discharge the liability for monies
payable upon such Note.
SECTION 9.3 COMPANY-OWNED NOTES DISREGARDED.
In determining whether the Holders of the requisite aggregate principal
amount of Notes have concurred in any direction, consent, waiver or other action
hereunder, Notes which are owned by the Company or any other obligor on the
Notes or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company or any other obligor on
the Notes shall be disregarded and deemed not to be outstanding for the purpose
of any such determination.
ARTICLE X
AMENDMENT, ETC.
No provision of the Notes may be amended, modified, supplemented or
waived without notice to and the written consent of the Company and the Holders
of not less than a majority in aggregate principal amount of the Notes at the
time outstanding, provided that no such amendment, modification, supplement or
waiver shall, unless signed by each Holder of a Note affected hereby, (i) extend
the fixed maturity of such Note, or reduce the rate or extend the time of
payment of interest thereon, or reduce the principal amount thereof or premium,
if any, thereon, or reduce any amount payable on redemption thereof, or impair
the right of any such Holder to institute suit for the payment thereof, or make
the principal thereof or interest or premium, if any, thereon payable in any
coin or currency other than that provided herein, or change the obligation of
the Company to repurchase any Note upon the occurrence of a Repurchase Event in
a manner adverse to such Holder, or impair the right to convert the Notes into
Common Stock in any material respect, or (ii) reduce
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the aforesaid percentage of Notes, the Holders of which are required to consent
to any such amendment, modification, supplement or waiver.
ARTICLE XI
SECURITY FOR NOTES; RELATED AGREEMENTS
The Notes shall be secured by the Collateral Documents, duly executed
by the Company and the other parties thereto for the ratable benefit of the
Noteholders granting a security interest in the collateral covered thereby,
which security interest shall be subordinate in priority only to those Liens
granted in certain of the same collateral to secure the performance of the
Company under the senior loan agreements referred to therein. The Notes are
entitled to the benefits of and subject to the limitations contained in the
Collateral Documents and the other Related Agreements, and the Holder of any
Note may enforce such rights in accordance with the terms hereof and thereof.
ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 12.1. ASSIGNMENT; SUCCESSORS.
A Note and the rights and obligations of the Company thereunder may not
be assigned or otherwise transferred by the Company without the prior written
consent of the Holder thereof. A Note may not be assigned or otherwise
transferred by any Holder to any Person, other than an Affiliate of such Holder,
unless the Holder has complied with the applicable requirements set forth in
Section 3.2(b) of the Agreement. This Note shall be binding upon and inure to
the benefit of the Company and the Holder and their respective permitted
successors and assigns.
SECTION 12.2. OFFICIAL ACTS BY SUCCESSOR CORPORATION.
Any act or proceeding by any provision hereof authorized or required to
be done or performed by any board, committee or officer of the Company shall and
may be done and performed with like force and effect by the like board,
committee or officer of any corporation that shall at the time be the lawful
sole successor of the Company.
SECTION 12.3. ADDRESSES FOR NOTICES, ETC.
All notices, demands and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, registered first-class
mail, telex, telecopier, or air courier guaranteeing overnight delivery:
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(a) if to the Holder, initially at the address set forth
above, and thereafter at such other address, notice of which is given
in accordance with this Section 12.3;
(b) if to the Issuer, initially at 1000 Parkwood Circle, Suite
600, Atlanta, Georgia 30339, and thereafter at such other address,
notice of which is given in accordance with this Section 12.3.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being sent by certified mail, return receipt requested, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next Business Day if timely delivered to an air courier guaranteeing
overnight delivery.
Failure to mail a notice or communication to a Noteholder or any defect
in it shall not affect its sufficiency with respect to other Holders. If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 12.4. GOVERNING LAW.
THE PARTIES HERETO ACKNOWLEDGE THAT THE TRANSACTIONS CONTEMPLATED BY
THE AGREEMENT AND THE NOTES BEAR A REASONABLE RELATION TO THE STATE OF MARYLAND
IN THAT, INTERALIA, A PARTICIPANT IN THE NOTES HAS ITS PRINCIPAL PLACE OF
BUSINESS IN THE STATE OF MARYLAND AND PART OF THE NEGOTIATIONS RELATING TO THE
ISSUANCE OF THE NOTES AND THE CLOSING OF SUCH ISSUANCE OCCURRED IN THE STATE OF
MARYLAND. THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF MARYLAND, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF
LAWS THEREOF.
SECTION 12.5. USURY.
All agreements between the Company and the Holders, whether now
existing or hereafter arising and whether written or oral, are hereby limited so
that in no contingency, whether by reason of acceleration of the maturity of the
Notes or otherwise, shall the interest contracted for, charged, received, paid
or agreed to be paid to the Holders exceed the maximum amount permissible under
the laws of the State of Maryland (hereinafter the "Applicable Law"). If, from
any circumstance whatsoever, interest would otherwise be payable to the Holders
in excess of the maximum amount permissible under the Applicable Law, the
interest payable to the Holders shall be reduced to the maximum amount
permissible under the Applicable Law, and if from any circumstance the Holders
shall ever receive anything of value deemed interest by the Applicable Law in
excess of the maximum amount permissible under the Applicable Law, an amount
equal to the excessive interest shall be applied to the reduction of the
principal of the Notes and not to the payment of interest, or if such excessive
amount of interest exceeds the unpaid principal amount of the Notes, such excess
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shall be refunded to the Company. All interest paid or agreed to be paid to the
Holders shall, to the extent permitted by the Applicable Law, be amortized,
prorated, allocated and spread throughout the full term of the Notes (including
any renewal or extension) until payment in full of the principal so that the
interest on the Notes for such full term shall not exceed the maximum amount
permissible under the Applicable Law. Each Holder expressly disavows any intent
to contract for, charge or receive interest in an amount which exceeds the
maximum amount permissible under the Applicable Law. This paragraph as well as
similar paragraphs set forth in the Agreement and the Collateral Documents shall
control all agreements between the Company and the Holders.
SECTION 12.6. LEGAL HOLIDAYS.
In any case where the date of maturity of interest on or principal of
the Notes or the date fixed for redemption or repurchase of any Note will not be
a Business Day, then payment of such interest on or principal of the Notes need
not be made on such date, but may be made on the next succeeding Business Day
with the same force and effect as if made on the date of maturity or the date
fixed for redemption or repurchase, and no interest shall accrue for the period
from and after such date.
SECTION 12.7 SEVERABILITY OF PROVISIONS.
Any provision of this Note which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability only without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
SECTION 12.8. HEADINGS AND GENDER.
The titles and headings of the articles and sections hereof have been
inserted for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms or provisions
hereof. Use of a particular gender herein shall be considered to represent the
masculine, feminine or neuter gender whenever appropriate.
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed under its corporate seal.
Dated: August 31, 1999
ALTIVA FINANCIAL CORPORATION
By: /s/ Edward B. Meyercord
--------------------------------------------
Name: Edward B. Meyercord
Title: Chairman and Chief Executive
Officer
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CONVERSION NOTICE
To: ALTIVA FINANCIAL CORPORATION
The undersigned registered owner of this Note hereby
irrevocably exercises the option to convert this Note, or the portion hereof
(which is $1,000 or an integral multiple thereof) below designated, into shares
of Common Stock of Altiva Financial Corporation in accordance with the terms of
this Note, and directs that the shares issuable and deliverable upon such
conversion, together with any check in payment for fractional shares and any
Notes representing any unconverted principal amount hereof, be issued and
delivered to the registered Holder hereof unless a different name has been
indicated below. If shares or any portion of this Note not converted are to be
issued in the name of a Person other than the undersigned, the undersigned will
set forth the appropriate information below and pay all transfer taxes payable
with respect thereto.
Date:
-------------------------
-----------------------------
-----------------------------
Signature (s)
NOTICE: The above signatures of the Holder(s) hereof must correspond with the
name as written upon the face of the Note in every particular without
alteration, enlargement or any change whatever.
<PAGE>
Fill in for registration of shares of Common Stock if to be
issued, and Notes to be delivered, other than to and in the name of the
registered Holder:
- ---------------------------
(Name)
- ---------------------------
(Street Address)
- ---------------------------
(City, State and Zip Code)
Please print name and address
Principal amount to be converted (if less than all): $_____________
- -------------------------------------------------------
Social Security or Other Taxpayer Identification Number
2
<PAGE>
OPTION TO ELECT REPURCHASE
UPON A REPURCHASE EVENT
To: ALTIVA FINANCIAL CORPORATION
The undersigned registered owner of this Note hereby
irrevocably acknowledges receipt of a notice from Altiva Financial Corporation
(the "Company") as to the occurrence of a Repurchase Event with respect to the
Company and requests and instructs the Company to repay the entire principal
amount of this Note, or the portion thereof (which is $1,000 or an integral
multiple thereof) below designated, in accordance with the terms of this Note at
the repurchase price, together with accrued interest to, but excluding, such
date, to the registered Holder hereof.
Date:
-----------------------
-----------------------------
-----------------------------
Signature (s)
NOTICE: The above signatures of the Holder(s) hereof must correspond with the
name as written upon the face of the Note in every particular without
alteration, enlargement or any change whatever.
Principal amount to be repurchased (if less than all): $_________
- ---------------------------------------------
Social Security or Other Taxpayer Identification Number
<PAGE>
Exhibit 4
THIS AGREEMENT IS SUBJECT TO THE TERMS AND CONDITIONS OF THE INTERCREDITOR AND
COLLATERAL SUBORDINATION AGREEMENT DATED AUGUST 31, 1999 (THE "SUBORDINATION
AGREEMENT"). AS THE SAME MAY BE AMENDED, MODIFIED OR OTHERWISE SUPPLEMENTED FROM
TIME TO TIME, BY AND AMONG ALTIVA FINANCIAL CORPORATION, AS BORROWER, GREENWICH
CAPITAL MARKETS, INC. AND GREENWICH CAPITAL FINANCIAL PRODUCTS, INC., PARTIES TO
THE SENIOR AGREEMENTS REFERRED TO IN THE SUBORDINATION AGREEMENT, AND THE
HOLDERS FROM TIME TO TIME OF THE OBLIGATIONS ARISING UNDER THE SUBORDINATED LOAN
AGREEMENT REFERRED TO IN THE SUBORDINATION AGREEMENT.
PLEDGE AND SECURITY AGREEMENT
This PLEDGE and SECURITY AGREEMENT, dated as of August 31, 1999 (as
amended, supplemented or otherwise modified from time to time, this "Pledge
Agreement"), between ALTIVA FINANCIAL CORPORATION, a Delaware corporation (the
"Borrower"), having its principal place of business at 1000 Parkwood Circle,
Suite 500, Atlanta, Georgia 30339 and VALUE PARTNERS, LTD., a Texas limited
partnership, having its principal place of business at 4514 Cole Avenue, Suite
808, Dallas, Texas 75205, on its own behalf and as agent (in such agency
capacity and together with any successor agent, the "Agent") for Value Partners,
Ltd. as the initial purchaser (the "Initial Purchaser") of the Notes, as defined
herein, issued pursuant to the Secured Convertible Note Purchase Agreement (the
"Purchase Agreement") and any subsequent Registered Owners of the Notes sold,
assigned or otherwise transferred in accordance with the Purchase Agreement (who
together with any successor agent acting as such under the Purchase Agreement,
are referred to collectively as the "Lenders").
W I T N E S S E T H
WHEREAS, on August 31, 1999, the Borrower and the Initial Purchaser
entered into the Purchase Agreement, which Purchase Agreement is incorporated
herein by reference, which provides for the loan by the Lenders of $7,000,000.00
in the aggregate to be evidenced by the issuance by the Borrower of 12% Secured
Convertible Notes due 2006 (the "Notes") to the Initial Purchaser in the
aggregate principal amount of $7,000,000.00; and
WHEREAS, concurrently with the execution and delivery hereof, the
Borrower has issued the Notes to the Initial Purchaser; and
WHEREAS, in order to induce the Initial Purchaser to purchase the
Notes, the Borrower has agreed to grant to the Agent for the account of the
Lenders (a) a first priority lien and security interest in certain Collateral,
as defined herein, and (b) a subordinated lien and security interest in the
Subordinated Collateral, as defined herein, which is presently pledged to and
subject to the security interest of Greenwich Capital Financial Products, Inc.,
a Delaware corporation ("Greenwich") pursuant to that certain Pledge and
Security Agreement, dated April 17, 1997, which
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subordinated lien shall become a first priority lien and security interest upon
the Borrower's satisfaction of its indebtedness and obligations to Greenwich
secured by the Subordinated Collateral; and
WHEREAS, in order to induce the Initial Purchaser to purchase the
Notes, the Borrower has agreed to grant to the Lenders a first priority lien and
security interest in the Textron Collateral, as defined herein, pledged by the
Borrower to Textron Financial Corporation ("Textron") pursuant to the Textron
Documents, as defined herein, and to deliver to the Agent for the account of the
Lenders the Textron Collateral within ten (10) Business Days of the date the
security interest of Textron Financial Corporation ("Textron") in the Textron
Collateral is extinguished;
NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Borrower, the Agent and the Lenders hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS. As used herein, the following terms shall have the
following meanings:
"Accounts" shall have such meaning as such term is defined in Article 9
of the UCC, and shall include, without limitation, each of the following,
whether now owned or hereafter acquired by the Borrower: (a) all accounts
receivable, contract rights, book debts, notes, drafts and other obligations or
indebtedness owing the Borrower (including, without limitation, any such
obligation that might be characterized as an account, contract right, or general
intangible under the UCC in effect in any jurisdiction) and all monies due to or
to become due to the Borrower under all contracts for the sale, lease, or
exchange of goods or other property (whether or not earned by performance on the
part of the Borrower), in each case whether now in existence or hereafter
arising or acquired, including, without limitation, the right to receive the
proceeds thereof; (b) all rights of the Borrower to receive any payment of money
or other form of consideration; (c) all security pledged, assigned or granted to
or held by the Borrower to secure any of the foregoing; and (d) all guaranties
of, or indemnifications with respect to, any of the foregoing.
"Additional Collateral" means property acceptable to the holders of not
less than a majority in aggregate principal amount of the Notes then outstanding
in writing, in their sole and absolute discretion.
"Agent" shall have the meaning specified in the introductory paragraph
hereof.
"Borrower" shall have the meaning specified in the introductory
paragraph hereof.
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"Borrower's Residual Percentage" means the percentage of residual
interest in a Securitization which a particular Residual Interest Instrument
owned by the Borrower (and not by a subsidiary or affiliate) and pledged as
Collateral represents.
"Business Day" means any day other than Saturday, Sunday or other day
on which banking institutions in Atlanta, Georgia are authorized or required by
law or executive order to be closed.
"Certificates" means any security, chattel paper, certificated security
or instrument, as from time to time amended, modified or supplemented, including
the following: any Residual Interest Instrument, any Interest Only Instrument,
the Senior Trust Certificate, and a Certificated Security as defined in Section
8-102 of the UCC.
"Clearing Corporation" shall have the meaning given such term in
Section 8-102(a)(5) of the UCC.
"Collateral" shall have the meaning specified in Section 2.1 hereof and
shall include the Subordinated Collateral.
`
"Collateral Requirement" means an aggregate dollar amount equal to one
hundred seventy-five percent (175%) of the aggregate outstanding principal
amount unpaid under the then outstanding Notes, plus accrued and unpaid interest
thereon and any other sums then due the Lenders under the Loan Documents.
"Current Market Value" means the lesser of (a) the fair market value of
the Qualified Collateral on such day as determined in good faith by the Agent,
applying standards of commercial reasonableness that are customary in the
mortgage-related securities industry, minus all sums due any Person who holds a
security interest senior to that of the Agent for the account of the Lenders in
such Qualified Collateral, or (b) the sum of the Overcollateralization Amount
for each Qualified Securitization as reported by the most recent trustee
certificate to which the Borrower is entitled, plus the fair market value of any
Additional Collateral (the value of which shall be determined by the Agent in
its sole and absolute discretion), plus the Restricted Proceeds, minus all sums
due any Person who holds a security interest senior to that of the Lenders in
Collateral issued pursuant to such Qualified Securitization, in the Restricted
Proceeds or in any Additional Collateral.
"Default" has the meaning set forth in Article I of the Notes.
"Delivery" means a delivery of Collateral to the Agent (or Escrow
Agent, in the case of proceeds) in accordance with this Pledge Agreement,
including Section 2.2 hereof.
"Escrow Agent" means U.S. Trust Company of Texas, N.A., or such
successor thereto, who acts as escrow agent pursuant to the Escrow Agreement.
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"Escrow Agreement" means that certain Escrow and Security Agreement, in
the form attached hereto as Exhibit "B" and by this reference incorporated
herein.
"Event of Default" has the meaning set forth in Section 5.1 of the
Notes.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time.
"Governmental Authority" means any nation, government, state, or any
political subdivision thereof, or any court, stock exchange, entity or agency
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Grantor Trust Right" means all rights of the Borrower, including the
right to payments to the Borrower, in the Sale Agreement executed in relation to
Mego Mortgage Home Loan Trust 1996- 3, including, without limitation, the rights
set forth in Section 4.05(b)(xvii) of such Sale Agreement.
"Greenwich" has the meaning specified in the third recital paragraph
hereof.
"Greenwich Documents" means that certain Amended and Restated Master
Loan Purchase and Servicing Agreement dated as of October 1, 1996 between
Greenwich as lender and the Borrower, that certain Promissory Note in the
original maximum aggregate principal amount not to exceed $11,000,000.00 and all
related documents, including that certain Pledge and Security Agreement dated as
of April 17, 1997, financing statements and transfer powers, all as amended,
supplemented or otherwise modified.
"Indebtedness" has the meaning set forth in Section 2 of the Notes.
"Intercreditor Agreement" means that certain Intercreditor and
Collateral Subordination Agreement in the form attached hereto as Exhibit "A"
and by this reference incorporated herein, executed effective as of the date
hereof by Greenwich, the Agent and the Borrower, pursuant to which, inter alia
Greenwich agrees to hold the Subordinated Collateral to perfect the pledge of
such Subordinated Collateral to the Agent for the account of Lenders, subject to
the security interest of Greenwich.
"Interest Only Instrument(s)" shall, as to that particular Certificate,
have the meaning ascribed to the term "Class S Certificate" or a similar phrase
describing an interest only security in the respective Sale Agreement arising
from the Securitization pursuant to which such security is issued, which
security represents the undivided interest of the Borrower in all or a portion
of the interest payments due on certain loans securitized in that
Securitization.
"Lenders" shall have the meaning specified in the introductory
paragraph hereof.
"Loan Documents" means, collectively, the Purchase Agreement, the
Notes, the Escrow Agreement, this Pledge Agreement, the Registration Rights
Agreement and any other documents
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evidencing or relating to the Notes or the Collateral, including the
Subordinated Collateral, the Additional Collateral or any such security which
may now or hereafter be given as further security for or in connection with the
Notes.
"Notes" shall have the meaning specified in the first recital paragraph
hereof.
"Original Collateral" means the Certificates and Grantor Trust Right
and all other rights described on Exhibit "C" attached hereto and by this
reference incorporated herein.
"Overcollateralization Amount" has, as to a particular Securitization,
the meaning ascribed it in the respective Sale Agreement related to a Qualified
Securitization, multiplied by the Borrower's Residual Percentage of that
Securitization.
"Person" means any individual, partnership, corporation, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization, or governmental entity (or any department, agency
or political subdivision thereof), or any other entity.
"Pledge Agreement" shall have the meaning specified in the introductory
paragraph hereof.
"Proceeds Accounts" shall mean any and all accounts established and
maintained by the Escrow Agent in the name of the Borrower, established pursuant
to the Escrow Agreement, for the deposit of proceeds of the Collateral.
"Purchase Agreement" shall have the meaning specified in the
introductory paragraph hereof.
"Qualified Collateral" means: the Original Collateral, the Subordinated
Collateral, the Restricted Proceeds and any Additional Collateral, to the extent
each is Collateral at such time. The Textron Collateral shall become Qualified
Collateral only when it becomes Collateral pursuant to the terms hereof.
"Qualified Securitization" means a Securitization as to which a
Residual Interest Instrument (which represents not less that ninety-nine percent
(99%) of the residual interest in such Securitization) is pledged as Qualified
Collateral pursuant to the terms of this Pledge Agreement.
"Quarter" means any final quarter ended on the last day of the months
of February, May, August and November.
"Registration Rights Agreement" shall have the meaning set forth in the
Purchase Agreement.
"Residual Interest Instrument(s)" shall, as to that particular
Certificate, have the meaning ascribed to the term "Class R Certificate",
"Residual Interest Instrument", "Residual Certificate", "Residual Instrument" or
a similar phrase describing a certificated residual interest in the Sale
Agreement arising from the Securitization pursuant to which such security is
issued, which security represents the undivided residual interest of the holder,
including in all or a portion of the interest
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and principal payments due on certain loans securitized in that Securitization.
Neither the Grantor Trust Right nor the Senior Trust Certificate are Residual
Interest Instruments.
"Restricted Proceeds" shall mean those sums deposited in the Proceeds
Accounts, which constitute proceeds of the Collateral, which the Borrower is
prohibited from withdrawing from the Proceeds Accounts pursuant to the terms of
this Pledge Agreement, including Section 2.7.
"Sale Agreement" means the respective Pooling and Servicing Agreement,
Sale and Servicing Agreement or similar agreement, together with related
agreements, including trust agreements and indentures, which create and grant
rights in Certificates and the Grantor Trust Right, entered into in relation to
a particular Securitization.
"Securitization" means the respective securitization as set forth on
Exhibit "E" hereto and by this reference incorporated herein.
"Senior Trust Certificate" means that certain 125 Home Loan Owner Trust
1998-1, Senior Trust Certificate.
"Subordinated Collateral" means the Certificates and all other rights
presently pledged to Greenwich as described in Section 2.1 below and in Exhibit
"D" attached hereto and by this reference incorporated herein.
"Textron" shall have the meaning specified in the fourth recital
paragraph hereof.
"Textron Collateral" means those Certificates and all other rights
presently pledged to Textron as described in Exhibit "F" attached hereto and by
this reference incorporated herein.
"Textron Documents" means that certain Credit Agreement dated as of
October 27, 1997 by and between Textron as agent and the Borrower, that certain
Note as of the same date issued to the lenders under such Credit Agreement and
all related documents, including that certain Security Agreement dated as of
October 27, 1997, financing statements and transfer powers, all as amended,
supplemented or otherwise modified.
"UCC" means the Uniform Commercial Code as in effect in the State of
Maryland; PROVIDED, that if by mandatory provisions of law, the perfection or
effect of perfection or non-perfection of the security interest in any
Collateral to which this Pledge Agreement relates is governed by the Uniform
Commercial Code as in effect on or after the date hereof in any other
jurisdiction, UCC means the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such perfection
or the effect of perfection or non-perfection.
"Uncertificated Security" shall have the meaning given such term in
Section 8-102(a)(18) of the UCC.
ARTICLE II
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PLEDGE AND DELIVERY OF COLLATERAL
MANAGEMENT OF COLLATERAL
2.1 SECURITY. As security for the payment (whether at the stated
maturity, by acceleration or otherwise) of all obligations, liabilities and
indebtedness of the Borrower to the Lenders, whether now or hereafter owing or
existing, arising under or relating to this Pledge Agreement, the Notes and the
other Loan Documents, and for the payment, performance and discharge of all
other obligations or undertakings now or hereafter made for the benefit of the
Lenders under this Pledge Agreement, the Notes, the other Loan Documents or
under any other agreement, promissory note or undertaking now existing or
hereafter entered into by the Borrower with or to the Lenders pursuant to the
terms hereof, including any guaranty or surety obligations of the Borrower owed
to the Lenders arising under or relating to the Pledge Agreement, the Notes and
the other Loan Documents, the Borrower hereby pledges, assigns, transfers and
delivers to Agent for the account of the Lenders, and grants to the Agent for
the account of the Lenders, a continuing first priority lien and security
interest (except as noted below or, in the case of Additional Collateral, as
otherwise agreed by the Lenders in accepting the same) in all of the Borrower's
rights, title and interest in, to and under: (a) the Certificates representing
the Original Collateral and Subordinated Collateral, subject only to the
security interest of Greenwich in the Subordinated Collateral; (b) the Grantor
Trust Right, subject to the Securitizations; (c) any other property of the
Borrower held by the Agent on behalf of the Lenders arising under or relating to
the Loan Documents, from time to time, or securing any other obligation of the
Borrower to the Lenders or any of their respective affiliates; (d) Additional
Collateral, and (e) all proceeds, payments, income, products and profits derived
from or related to the above-described property, including without limitation,
the Restricted Proceeds (all of the foregoing are collectively referred to
herein as the "Collateral"). The agreements and related documents evidencing the
Grantor Trust Right and the Certificates and related documents comprising the
Original Collateral are set forth on Exhibit "C". The Certificates and related
documents comprising the Subordinated Collateral are set forth on Exhibit "D".
The Collateral shall include all rights of the Borrower related to the
Original Collateral, the Subordinated Collateral, the Additional Collateral and
any other Collateral pledged pursuant to the terms hereof, including the
following:
(a) Cash Proceeds. All rights to receive the payment of money in
respect of the Collateral, including the Certificates and Grantor Trust Right.
(b) Chattel Paper, Instruments, etc. All chattel paper, securities,
uncertificated securities, instruments, non-negotiable instruments, negotiable
instruments, investment property, general intangibles, documents (as those terms
are defined in the UCC), Accounts and Certificates evidencing or with respect to
any of the Collateral.
(c) Deposit Accounts. All rights to payments under the Collateral,
including payments due to the holders of Certificates and the Grantor Trust
Right from the accounts of the trustee (or other Person) into which funds to be
payable under Certificates and the Grantor Trust Right are deposited or held
under a Securitization, and all money, cash and cash equivalents of the
Borrower,
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in each case arising from payments with respect to any of the Collateral,
including the Certificates and the Grantor Trust Right or other Collateral.
(d) Collateral. All collateral granted by third party obligors to, or
held by, the Borrower with respect to the Collateral, including the Certificates
and the Grantor Trust Right.
(e) Books and Records. All books and records, including books of
account and ledgers of every kind and nature, all electronically recorded data
(including all computer programs, disks, tapes, electronic data processing media
and software used in connection with maintaining the Borrower's books and
records), all files and correspondence and all receptacles and containers for
the foregoing, all with respect to the Collateral, including Certificates and
the Grantor Trust Right.
(f) Cash. All cash and other property (including the Proceeds Account)
held by the Escrow Agent under this Pledge Agreement and the Escrow Agreement.
(g) Proceeds Accounts. Each of the Proceeds Accounts (to the extent a
security interest therein is not otherwise created pursuant to this Pledge
Agreement), including any and all assets of whatever type or kind deposited by
on behalf of the Borrower in such Proceeds Accounts, whether now owned or
hereafter acquired, existing or arising, including, without limitation, all
moneys, checks, drafts, instruments, securities or interests therein of any type
or nature deposited in such Proceeds Accounts, and all investments and all
certificates and other instruments (including depository receipts, if any) from
time to time representing or evidencing the same, and all dividends, interest,
distributions, cash and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the
foregoing.
(h) Miscellaneous. All right, title, interest in, to and under the
clean-up call provisions, including as contained in Section 9.01 of each of the
Sale Agreement with respect to the subject Securitization, and all proceeds,
payments and income derived from or relating thereto.
(i) Proceeds and Products. All proceeds and products of the Collateral,
to the extent not included in the foregoing, including:
(i) all distributions arising from and pursuant to
the designated trust agreements or other Securitization
agreements (including Sales Agreements) with respect to the
Collateral,
(ii) all other proceeds of insurance and guarantees,
if any, with respect to the Collateral provided by MBIA
Insurance Corporation, the Federal Housing Administration or
any other Person providing coverage for loss or diminution in
value of the Collateral, and
(iii) all other proceeds from the liquidation or
other recovery (if any) of loans relating to the Collateral;
and
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(iv) all "proceeds", as that term is defined in
Section 9-306 of the UCC.
The Borrower will pay all filing, recording, search and other expenses
reasonably incurred by the Lenders with respect to perfection of the Lenders'
security interest under this Pledge Agreement and the confirmation of the
priority of the Lenders' security interest in the Collateral.
2.2 DELIVERY OF COLLATERAL.
(a) Delivery of Collateral to the Agent under this Pledge Agreement
shall be made in the following manner: (i) in the case of cash, including
proceeds on the Collateral and cash which constitutes Additional Collateral, by
wire transfer or other method acceptable to the Agent of immediately available
funds to the applicable Proceeds Account; (ii) in the case of a Certificate (or
similar property perfected by possession), by the physical delivery thereof
evidencing such Collateral to the Agent or its designee, whenever possible,
registered in the name of the Agent, and in all other instances, in suitable
form for delivery and transfer, accompanied by duly executed instruments of
transfer or assignment in blank or such other documentation as may be necessary
to effect transfer to the Agent, whereupon the Agent may take such steps as it
deems necessary to effect the recordation or re-registration of such Collateral
in its name; (iii) with respect to an Uncertificated Security by registration in
the name of the Agent, whenever possible, and in all other instances (other than
an Uncertificated Security credited on the books of a Clearing Corporation), the
Borrower shall cause the issuer of such Uncertificated Security to duly
authorize and execute, and deliver to the Agent, an agreement for the benefit of
the Lenders substantially in the form of Exhibit "G" hereto (appropriately
completed to the satisfaction of the Agent and with such modifications, if any,
as shall be satisfactory to the Agent) pursuant to which such issuer agrees to
comply with any and all instructions originated by the Agent for the account of
the Lenders without further consent by the registered owner and not to comply
with instructions regarding such Uncertificated Security originated by any other
Person other than a court of competent jurisdiction: ( (iv) with respect to a
certificated security (as defined in the UCC) or Uncertificated Security
credited on the books of a Clearing Corporation (including a Federal Reserve
Bank, Participants Trust Company or The Depository Trust Company), the Borrower
shall promptly notify the Agent thereof and shall promptly take all actions (x)
required (i) to comply with the applicable rules of such Clearing Corporation
and (ii) to perfect the security interest of the Lenders under applicable law
(including, in any event, under Sections 9-115 (4)(a) and (b), 9-115 (1)(e) and
8-106(d) of the UCC) and (y) as the Agent deems necessary or desirable to effect
the foregoing;and (v) in the case of any other Collateral (such Collateral to be
subject to the written approval of the Agent, which approval may be withheld in
the sole discretion of the Agent), in such manner as the Agent shall agree to in
writing. Except as otherwise provided herein or, in the case of Additional
Collateral, as otherwise agreed by the Agent in accepting the same, all
Collateral shall be delivered free and clear of all liens and security interests
other than the lien and security interest created in favor of the Agent for the
account of the Lenders under this Pledge Agreement.
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(b) In addition to the actions required to be taken pursuant to
preceding Section 2.2(a), the Borrower shall take the following additional
actions with respect to the Collateral:
(i) with respect to all Collateral of such Borrower whereby or
with respect to which the Agent for the account of the Lenders may obtain
"control" thereof within the meaning of Section 8-106 of the UCC (or under any
other provision of the UCC as the same may be amended or supplemented from time
to time, or under the laws of any relevant State other than the State of
Maryland), the Borrower shall take all actions as may be requested from time to
time by the Agent so that "control" of such Collateral is obtained and at all
times held by the Agent; and
(ii) Borrower shall from time to time cause appropriate
financing statements (on Form UCC-1 or other appropriate form) under the Uniform
Commercial Code as in effect in the various relevant states, covering all
Collateral hereunder (with the form of such financing statements to be
satisfactory to the Agent), to be filed in the relevant filing offices so that
at all times the Agent has a security interest in all Collateral which is
perfected by the filing of such financing statements (in each case to the
maximum extent perfection by filing may be obtained under the laws of the
relevant states, including, without limitation, Section 9-115(4)(b) of the UCC).
2.3 THE ESCROW.
(a) RESTRICTED PROCEEDS. Restricted Proceeds shall be deposited into
one or more Proceeds Accounts, established as a cash account, over which the
Agent shall have exclusive and absolute control and dominion (and no withdrawals
or transfers may be made therefrom by any Person except with the prior written
consent of the Agent). Deposits of Restricted Proceeds shall be held in a
segregated account or accounts. The Proceeds Accounts shall be established at
the Escrow Agent and shall be subject to the Escrow Agreement. Cash deposited in
that account on behalf of the Lenders shall constitute Collateral. The Agent may
exercise all rights granted a secured party under ss. 9-502 of the UCC, without
need of notice or consent of the Borrower, whether or not a Default exists. This
Section 2.3 shall not limit or otherwise affect any other rights and remedies of
the Lenders.
(b) CASH AS COLLATERAL. In the event cash is provided as Additional
Collateral, the Borrower shall deposit such sums in an account (other than the
Proceeds Accounts) with the Escrow Agent, subject to the terms of the Escrow
Agreement and shall take all steps necessary to perfect a security interest in
such account in favor of the Agent, including permitting such account to be
located in the State of California and complying with all requirements of the
UCC of the State of California necessary to perfect such a pledge.
2.4 NOTICE, REGISTRATION AND CONSENTS.
On or prior to the date a Certificate, the Grantor Trust Right or any
other property becomes or is to become Collateral, the Borrower shall:
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(a) obtain all requisite consents necessary to provide to the Lenders
the rights granted in this Pledge Agreement, including the grant and perfection
of the Agent (for the account of the Lenders) of a security interest in such
Collateral and, in the case of registered or certificated Collateral, to cause
the registration thereof (on the books of the Securitization trustee,
certificate transfer agent and registrar or similar Person) in the name of the
Agent on behalf of the Lenders; and
(b) provide all requisite notices necessary to provide to the Lenders
the rights granted in this Pledge Agreement, including the grant and perfection
of the Lenders' security interest in such Collateral, including the notices set
forth in Exhibits "G" attached hereto and by this reference incorporated herein.
Notices and consents shall include notices to and consents of the
indenture trustee and the certificate transfer agent and registrar of any
Securitization.
2.5 ADDITIONAL COLLATERAL.
(a) Delivery of Collateral. If the Current Market Value is less than
the Collateral Requirement at the close of business on any Business Day, the
Borrower shall, within five (5) Business Days of receipt of written notice from
the Agent, make Delivery to the Agent of Additional Collateral such that the
aggregate Current Market Value (determined as of the Business Day prior to such
Delivery) is equal to or in excess of the Collateral Requirement. Once delivered
such Additional Collateral shall remain Collateral pursuant to this Agreement,
even if no longer necessary to cause the Current Market Value to exceed the
Collateral Requirement.
(b) Right of Agent to Direct Payment of Additional Collateral. The
Agent may, at any time, whether or not there then exists a Default or an Event
of Default, without the consent of the Borrower, direct the issuer which has
issued an instrument constituting Additional Collateral to make payment to the
Escrow Agent, on behalf of the Lenders, with such payments to be deposited in a
segregated Proceeds Account with the Escrow Agent to be held as collateral
pursuant to this Pledge Agreement. The Borrower shall provide irrevocable
written notice of such right to the issuer of such instrument in a form
acceptable to the Agent, in its sole and absolute discretion.
(c) Nothing herein shall limit any other right or remedy of the
Agent.
2.6 SUBORDINATED COLLATERAL AND TEXTRON COLLATERAL.
(a) Subordinated Collateral. The Intercreditor Agreement, dated as of
the date of this Pledge Agreement, shall be entered into among the Borrower, the
Agent, Greenwich and Greenwich Capital Markets, Inc. The Subordinated Collateral
shall be held by Greenwich pursuant to the Intercreditor Agreement until such
time as such Certificates are delivered to and registered in the name of the
Agent or its designee in compliance with Section 2.2.
(b) Textron Collateral. On the date Textron's security interest in
the Textron Collateral is terminated in accordance with the terms of the Textron
Documents, the Textron Collateral shall
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be deemed Collateral as if it were set forth in Section 2.1 and included on
Exhibit "C". Commencing at such time the Lenders shall have a first priority
lien and security interest therein pursuant to this Pledge Agreement and the
Borrower shall within ten (10) Business Days after the expiration of Textron's
security interest deliver to and register in the name of the Agent (including in
compliance with Section 2.2) those items on Exhibit "F" hereto, together with
any other such documents necessary to perfect the Lenders' first priority lien
and security interest therein and to grant control to the Agent under Article 8.
2.7 Proceeds.
(a) Until such time as the security interest granted the Agent herein
is terminated, without limiting any rights or remedies of the Agent in the Loan
Documents, all payments due the holder of a Certificate and/or the Grantor Trust
Right shall be disbursed as follows:
(i) all proceeds from the Collateral received following a
Default (including without limitation because the Current Market Value is less
than the Collateral Requirement at the close of business on any Business Day) or
an Event of Default, shall be made to the Agent's account for deposit into the
Proceeds Accounts as Restricted Proceeds and shall remain as Collateral and
shall not thereafter be released to the Borrower upon cure of a Default or an
Event of Default; and
(ii) all proceeds from the Collateral received when no Default
or an Event of Default exists shall be disbursed to the Borrower, except as
otherwise limited by this Pledge Agreement or any of the other Loan Documents.
(b) Nothing in this paragraph shall serve to limit any other rights or
remedies of the Agent;
(c) Registration of the Certificates and the Grantor Trust Right shall
remain in the name of the Agent until all obligations of the Borrower to the
Lenders under the Loan Documents are satisfied and the Lenders' liens under this
Pledge Agreement are terminated. This Section shall not limit or otherwise
effect any other rights or remedies of the Lenders. The Agent shall promptly
notify the Securitization trustees to disburse proceeds to the Borrower during
the time period where the Borrower is entitled to receive such proceeds under
the terms hereof.In the event proceeds to which the Agent, pursuant to paragraph
(a) of this Section 2.7, is entitled or which are to be deposited into the
Proceeds Accounts as Restricted Proceeds are paid to Borrower, Borrower shall
promptly pay such proceeds to the Escrow Agent. In the event proceeds which the
Borrower, pursuant to paragraph (a) of this Section 2.7, is entitled are
deposited in the Proceeds Accounts, the Agent shall cause the Escrow Agent to
pay such sums to Borrower. Nothing herein shall prevent the Agent from causing
proceeds to which the Borrower is entitled to be deposited into the Proceeds
Accounts and then disbursed to the Borrower.
(d) The Borrower shall not cause any sums to be deposited into the
Proceeds Accounts which are not proceeds of the Collateral.
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2.8 HELD IN TRUST. Any sums collected or received and any property
recovered or possessed by the Borrower in connection with the Collateral, which,
under the terms of this Pledge Agreement, should have been delivered to the
Agent or the Escrow Agent, shall be received and held by the Borrower in trust
for and on the Lenders' behalf, shall be segregated from the other assets and
funds of the Borrower, and shall be delivered to the Escrow Agent or the Agent
for the benefit of the Lenders.
ARTICLE III
FURTHER ASSURANCES
Subject to the terms of the Greenwich Documents and the Textron
Documents, the Borrower will, from time to time, at its expense, execute,
deliver, file, register, and record (in such manner and form as the Agent may
require) any statement, assignment, instrument, document, agreement, or other
paper and take any other action (including, without limitation, any filings of
financing or continuation statements under the UCC) that the Agent may from time
to time determine to be necessary or desirable in order to create, preserve,
upgrade in rank (to the extent required hereby), perfect, confirm, or validate
the lien and first or other priority security interests granted the Lenders, or
to enable the Lenders to obtain the full benefits of this Pledge Agreement
(including control, as that term is used in Articles 8 and 9 of the UCC), and to
enable the Lenders to exercise and enforce any of its rights, powers, and
remedies hereunder with respect to any of the Collateral.
At the request of the Agent, the Borrower will use its reasonable best
efforts to obtain the consent or acknowledgement of any Person that is necessary
or desirable to effect the pledge hereunder of any right, title, claims, and
benefits now owned or hereafter acquired by the Borrower.
To the extent permitted by law, the Borrower hereby authorizes the
Agent to execute and file financing statements or continuation statements
without the Borrower's signature appearing thereon. The Borrower agrees that a
carbon, photographic, or other reproduction of this Pledge Agreement or of a
financing statement is sufficient as a financing statement. The Borrower shall
pay the costs of, or incidental to, any financing or continuation statements
concerning the Collateral. In the event that any re-recording or refiling
thereof (or filing of any statements of continuation or assignment of any
financing statement) is required to protect and preserve such security interest,
the Borrower, at its own cost and expense, shall cause the same to be
re-recorded and/or refiled at the time and in the manner requested by the Agent.
The Borrower hereby authorizes the Agent for the account of the Lenders
to file or refile any financing statements, continuation statements, and/or
amended statements with respect to the security interests granted or to be
granted pursuant to this Pledge Agreement which, at any time, may be required or
appropriate, although the same may have been executed only by the Agent, and to
execute such statements on behalf of the Borrower.
In addition, in the event and to the extent that any of the Collateral
consists of or is represented by Certificates, including instruments or other
evidences of ownership such as would
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require physical possession of the same in order to perfect the security
interests therein, subject to the terms of the Greenwich Documents and the
Textron Documents, the Borrower will promptly, at its expense, deliver the same
to the Agent, with any necessary endorsements thereon. The Borrower shall take
all steps necessary to cause the Collateral to be registered in the name of the
Agent, on behalf of the Lenders, with the appropriate Person, including under
the Securitizations. Upon the Agent's request, subject to the terms of the
Greenwich Documents and the Textron Documents, the Borrower shall promptly
deliver any documents related to any of the Collateral and provide the Lenders
all information it may reasonably request concerning the Collateral. The
Borrower will take all steps requested by the Agent to perfect a security
interest in the Additional Collateral, including delivery of physical
possession, the granting of control, the execution and delivery of assignments
and/or endorsements, the registration thereof in the name of the Agent, and the
execution of financing statements. The Borrower hereby irrevocably designates
the Agent for the account of the Lenders as agent and attorney-in-fact for the
Borrower for the aforesaid purposes.
ARTICLE IV
COVENANTS
4.1 NO LIENS. Subject to the terms of the Greenwich Documents and the
Textron Documents, the Borrower shall not, without the prior written consent of
the Agent, in any manner, transfer, assign or further encumber or permit the
encumbrance of the Borrower's interest in the Collateral. If the Collateral, or
any part thereof, is sold or otherwise disposed of in violation of these
provisions, the security interest of the Lenders shall continue in such
Collateral or any part thereof notwithstanding such sale or other disposition,
and the Borrower will deliver any proceeds thereof to the Escrow Agent.
4.2 LOAN DOCUMENTS. The Borrower shall at all times during the term of
this Pledge Agreement comply with all of the affirmative covenants, negative
covenants and other terms and provisions contained in the Loan Documents.
4.3 GREENWICH COLLATERAL. The Borrower shall take all action which is
necessary or advisable in order for the Lenders to obtain, and the Lenders shall
receive, a first priority lien and security interest in the Subordinated
Collateral after the lien of Greenwich in the Subordinated Collateral
terminates.
4.4 TEXTRON COLLATERAL. The Borrower shall take all action which is
necessary or advisable in order for the Lenders to obtain, and the Lenders shall
receive, a first priority lien and security interest in the Textron Collateral
after the lien of Textron in the Textron Collateral terminates.
4.5 DELIVERY OF CERTIFICATES AND REPORTS. The Borrower shall deliver,
by facsimile and first class mail, to the Agent, the following: (a) not later
than ten (10) Business Days following the end of each Quarter, a certificate
setting forth the Current Market Value (determined by the Company under
generally accepted accounting principles pursuant to clause (a) of the
definition of this term) as of the last day of such Quarter in the form of
Exhibit "H", a copy of which is attached
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hereto and by this reference incorporated herein; and (b) not later than ten
(10) Business Days following the end of each month, a certificate setting forth
an analysis of subpart (b) of the Current Market Value (as determined pursuant
to clause (b) of the definition of this term) as of the last day of such month,
in the form of Exhibit "I", a copy of which is attached hereto and by this
reference incorporated herein. Such certificates shall set forth in detail the
basis of the above information and attach all reports from the respective
trustee, servicer or other party of the particular Securitization related to
such certifications, even in the event such report is not utilized in preparing
such certifications. Each certification shall be executed by the chief financial
officer of the Borrower and shall provide that such officer has caused such
certificate to be reviewed and that the information provided in such certificate
is true and correct in all material respects. Should the Agent, in writing,
request additional information related to any such certificate, such information
shall be provided to the Agent by facsimile and first class mail not later than
five (5) Business Days following the date of such written request.
4.6 TAXES. All payments due the Lenders under the Loan Documents shall
be made without set-off or counterclaim and free and clear of any deductions,
including deductions for taxes, unless the Borrower is required by law to make
such deductions. If (a) any Lender shall be subject to any tax with respect to
any such payment (other than income or franchise taxes), or (b) the Borrower
shall be required to withhold or deduct any tax on any such payment, then such
Lender may claim compensation from the Borrower under Section 4.7. Whenever
taxes must be withheld by the Borrower with respect to any such payments, the
Borrower shall promptly furnish to the Agent official receipts (to the extent
that the relevant governmental authority delivers such receipts) evidencing
payment of any such taxes so withheld. If the Borrower fails to pay any such
taxes when due or fails to remit to the Agent the required receipts evidencing
payment of any such taxes so withheld or deducted, the Borrower shall indemnify
the affected Lender for any incremental taxes and interest or penalties that may
become payable by such Lender as a result of any such failure.
4.7 COMPENSATION CLAIMS. Within fifteen (15) days after the receipt by
the Borrower of a certificate from the Agent on behalf of a Lender setting forth
why such Lender is claiming compensation under Section 4.6 and computations (in
reasonable detail) of the amount thereof, the Borrower shall pay to such Lender
such additional amounts as such Lender sets forth in such certificate as
sufficient fully to compensate it on account of the foregoing provisions of
Section 4.6, together with interest on such amount from the 15th day after
receipt of such certificate until payment in full thereof at the applicable
interest rate on the Notes which is then in effect. The reasonable determination
of such Lender of the amount to be paid to it and the basis for computation
thereof hereunder shall, in the absence of manifest error, be conclusive. In
determining such amount, such Lender may use any reasonable averaging and
attribution methods.
4.8 OTHER INFORMATION. The Borrower shall use its best efforts to, and
cause the trustee or servicing agent for a Securitization to, enable the Agent's
authorized officers and representatives, during normal business hours upon
reasonable notice and at reasonable intervals, to examine documents, bank
statements and other records and to make copies and notes therefrom for the
purpose of ascertaining the financial condition of the Borrower and its
subsidiaries and the condition of the Collateral, PROVIDED, HOWEVER, that any
such examination shall be at the Borrower's expense,
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including all reasonable and necessary travel expenses, but excluding salaries
for the officers and representatives conducting such examination.
4.9 BOOKS AND RECORDS. The Borrower shall at all times keep its records
concerning the Collateral at its chief executive office and principal place of
business (which shall be one and the same) as set forth in this Pledge
Agreement, or so long as the Borrower shall have taken all steps reasonably
necessary to perfect the Agent's security interest in the Collateral with
respect to such new address, at such other address as the Borrower may specify
by notice actually received by the Agent not less than (10) Business Days prior
to such change of address.
4.10 INSURANCE POLICIES. The Borrower grants to the Agent full power
and authority as its attorney-in-fact, effective upon notice to the Borrower
after the occurrence and during the continuance of an Event of Default, to
adjust and settle any insurance policy owned by the Borrower insuring against
loss to the Collateral, to endorse any drafts thereon and to sign receipts for
any payments thereunder. Any amounts that the Agent receives under any such
policy (including return of unearned premiums) insuring against loss to the
Collateral shall be delivered to the Escrow Agent to be held as Collateral.
4.11 PERFORMANCE OF SECURITIZATION OBLIGATIONS. The Borrower shall
perform all servicing and other obligations required to be performed by it under
the Securitization agreements or any other agreement relating to the Collateral
and the Textron Collateral.
4.12 PROTECTION OF THE COLLATERAL. All Collateral shall be free and
clear of any liens and restrictions on the transfer hereof, except as
specifically permitted or granted herein. The Borrower shall defend the title to
the Collateral against all claims and demands which could have an effect on the
Lenders' rights or privileges hereunder. Except as set forth in the
Securitization documents, the Greenwich Documents and the Textron Documents, the
Borrower shall keep the respective Collateral free and clear of all liens,
claims, security interests, restrictions of transfer, charges, encumbrances,
taxes and assessments, and shall pay all taxes, assessments and fees relating to
the Collateral. The Borrower will exclude from contracts to which it becomes a
party after the date hereof, provisions that would prevent the Borrower from
creating and maintaining in favor of the Lenders a security interest in the
Collateral as pledged hereby. The Borrower shall not modify, amend or waive any
terms or conditions of the Collateral or the Textron Collateral (including the
waiver of a default), or any rights or interest therein, without the Agent's
prior written consent. The Borrower will not sell, assign, transfer or otherwise
dispose of any of the Collateral. The Borrower will not take any action or
suffer to exist any conditions that could have an adverse effect on the Lenders'
rights (including, without limitation, the security interest in the Collateral)
granted hereunder, subject to the Greenwich Documents and the Textron Documents.
4.13 APPLICABLE LAW. The Borrower will not use any of the Collateral in
violation of any applicable law.
ARTICLE V
REMEDIES
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5.1 REMEDIES. If an Event of Default shall have occurred and be
continuing, then the Agent may, at its election, to the fullest extent permitted
by applicable law, but subject to Greenwich and Textron Documents :
(a) Proceed to exercise any rights or remedies the Lenders' may have
hereunder or under the Notes or any other Loan Documents or otherwise;
(b) Pursue, consecutively or cumulatively, any rights or remedies it
may have at law, equity or otherwise, including all rights and remedies
available to secured parties under the applicable UCC provisions;
(c) Cancel or otherwise terminate this Pledge Agreement, the Notes and
any other agreement with the Borrower without prior notice to the Borrower (and
the Borrower will be liable to the Lenders for any resulting loss, costs and
expenses), and the Lenders may: (i) set off any obligation to the Borrower
hereunder or thereunder against any obligation of the Borrower to the Lenders
hereunder or thereunder; and (ii) realize upon property securing any obligation
to Lenders hereunder or thereunder;
(d) Require the Borrower to, upon the Agents' request, assemble the
Collateral and otherwise make it available to the Agent. The Agent may have a
receiver appointed for all or any portion of the Borrower's assets or business
which constitutes the Collateral in order to manage, protect, preserve, sell and
otherwise dispose of all or any portion of the Collateral in accordance with the
terms of the Loan Documents, to continue the operations of the Borrower and to
collect all revenues and profits therefrom to be applied to the payment of the
Notes, including the compensation and expenses of such receiver. The Agent may
offset and apply toward the payment of the Notes or require to be paid to the
Escrow Agent (and/or toward the curing of any Event of Default) any indebtedness
from any Lender to the Borrower, including any indebtedness represented by
deposits in any account maintained with any Lender, and the Proceeds Account
regardless of the adequacy of any security for the Loan. The Agent shall have no
duty to determine the adequacy of any such security in connection with any such
offset;
(e) To the extent specified in written notice from the Agent to the
Borrower take any of the following actions (for the sole benefit of the Lenders
but at the Borrower's expense):
(i) To ask for, demand, take, collect, sue for and receive all
payments in respect of any Collateral which the Borrower could otherwise ask
for, demand, take, collect, sue for and receive for its own use;
(ii) To extend the time of payment of any Collateral and to
make any allowance or other adjustment with respect thereto;
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(iii) To settle, compromise, prosecute or defend any action or
proceeding with respect to any Collateral and to enforce all rights and remedies
thereunder which the Borrower could otherwise enforce;
(iv) To enforce the payment of any Collateral, either in the
name of the Borrower or in its own name, and to endorse the name of the Borrower
on all checks, drafts, money orders and other instruments tendered to or
received in payment of indebtedness to the Lenders;
(v) To notify the third party payor with respect to any
Collateral of the existence of the security interest created hereby and to cause
all payments in respect thereof thereafter to be made directly to the Agent,
PROVIDED, HOWEVER, that whether or not the Agent shall have so notified such
payor, the Borrower will at its expense render all reasonable assistance to the
Agent in collecting such items and in enforcing claims thereon;
(vi) To sell, transfer, assign or otherwise deal in or with
any Collateral or the proceeds thereof, as fully as the Borrower otherwise could
do;
(vii) To withdraw any and all cash from the Proceeds Accounts;
(viii) To vote all or any part of the Collateral (whether or
not transferred into the name of the Agent) and give all consents, waivers and
ratifications in respect of the Collateral and otherwise act with respect
thereto as though it were the outright owner thereof (the Borrower hereby
irrevocably constituting and appointing the Agent the proxy and attorney in fact
of the Borrower, with full power of substitution to do so); and
(ix) To transfer all or any part of the Collateral into the
Agent's name or the name of its nominee or nominees;
(f) All or any part of the Collateral may be sold for cash or other
value, and the proceeds thereof applied against any amounts owed to the Lenders
by the Borrower, in any number of lots at public or private sale in a
commercially reasonable manner, without demand, advertisement or notice,
PROVIDED, HOWEVER, that the Agent shall give the Borrower 10 days' prior written
notice of the time and place and proposed terms of any public sale, or the time
after which a private sale may be made, which notice each of the Borrower and
the Agent agrees to be reasonable. At any sale or sales of Collateral, the Agent
or the Lenders or any of their officers acting on their behalf, or their
assigns, may bid for and purchase all or any part of the property and rights so
sold, may use all or any portion of the indebtedness owed to the Lenders as
payment for the property or rights so purchased, and upon compliance with the
terms of such sale may hold and dispose of such property and rights without
further accountability to the Borrower, except for the proceeds of such sale or
sales pursuant to Article X. The Borrower acknowledges that any such sale will
be made by the Agent or the Lenders on an "as is" basis with disclaimers of all
warranties, whether express or implied. The Borrower will execute and deliver or
cause to be executed and delivered such instruments, documents, assignments,
waivers, certificates and affidavits, will supply or cause to be supplied such
further information and will take such further action, as the Agent or the
Lenders shall
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reasonably request in connection with any such sale. The Agent and the Lenders
shall not be obligated to make such sale of Collateral regardless of whether
such notice of sale has theretofore been given. Each purchaser at any such sale
shall hold the property so sold absolutely free from any claim or right on the
part of the Borrower. In lieu of selling the Collateral, the Lenders may credit
the current market value of the Collateral, as determined in a commercially
reasonable manner, all free from any right of redemption, against any amounts
owed by the Borrower to the Lenders; provided, however, that the Borrower shall
remain liable for any deficiency and shall pay interest on such deficiency as
prescribed in the Notes (the Borrower agreeing that, to the extent that
applicable law requires the giving of notice by the Agent to the Borrower of any
such disposition, the minimum time required by such law (or if no minimum time
is specified, one Business Day) shall constitute reasonable notice). Neither the
Agent nor any Lender shall be liable for failure to collect or realize upon any
or all of the Collateral or for any delay in so doing nor shall any of them be
under any obligation to take action whatsoever with regard thereto;
(g) If, at any time when the Agent shall determine to exercise its
rights hereunder to sell all or a part of the securities included in the
Collateral, the securities in question shall not be effectively registered under
applicable law, the Agent may, in its sole discretion, sell such securities by
private or other sale not requiring such registration in such manner and in such
circumstances as the Agent may deem necessary or advisable in order that such
sale may be effected in accordance with applicable securities laws without such
registration and the related delays, uncertainty and expense. Without limiting
the generality of the foregoing, in any event the Agent may in its sole
discretion; (a) approach and negotiate with a single purchaser or one or more
possible purchasers to effect such sale; (b) restrict such sale to one or more
purchaser each of whom will represent and agree that such purchaser is
purchasing for its own account, for investment and not with a view to the
distribution or sale of such securities; and (c) cause to be placed on
certificates representing the securities in question a legend to the effect that
such securities have not been registered under applicable law and may not be
disposed of in violation of the provisions thereof. The Borrower agrees that
such manner of disposition is commercially reasonable, that it will, upon the
Agent's request, give any such purchaser access to such information regarding
the issuer of the securities in question as the Agent may reasonably request and
that the Agent shall not incur any responsibility for selling all or a part of
the securities included in the Collateral at any private or other sale not
requiring such registration, notwithstanding the possibility that a
substantially higher price might be realized if the sale were deferred until
after registration under applicable law or until made in compliance with certain
other rules or exemptions from the registration provisions under applicable law.
The Borrower acknowledges that no adequate remedy at law exists for breach by it
of this provision and that such breach would not be adequately compensable in
damages and therefore agrees that this provision may be specifically enforced;
and/or
(h) Transfer or assign the Loan Documents to any Person without the
prior written consent of the Borrower.
5.2 COST AND EXPENSES ON DEFAULT. If an Event of Default shall have
occurred, the Lenders shall be entitled to collect, in addition to principal,
interest and delinquency charges hereunder, all costs of collection, including
without limitation, reasonable attorneys' fees and
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disbursements, incurred in connection with the protection or realization of
Collateral or in connection with any of the Lenders' collection efforts, whether
or not suit on the Notes or any foreclosure proceeding is filed, and all such
costs and expenses shall be payable on demand and until paid shall also be
secured by the Collateral and other Loan Documents and by all other collateral
held by the Agent as security for the Borrower's obligations to the Lenders.
5.3 MARSHALING. Neither the Agent nor the other Lenders shall be
required to make any demand upon, or pursue or exhaust any of its rights or
remedies against, the Borrower or any guarantor, pledgor or any other Person
with respect to the payment of the Notes or to pursue or exhaust any of its
rights or remedies with respect to any Collateral therefore or any direct or
indirect guarantee thereof or insurance with respect thereto. Neither the Agent
nor the Lenders shall be required to marshal the Collateral or any guarantee of
the Notes or to resort to the Collateral or any such guarantee in any particular
order, and all of its rights hereunder or under any other Loan Document shall be
cumulative. To the extent it may lawfully do so, the Borrower absolutely and
irrevocably waives and relinquishes the benefit and advantage of, and covenants
not to assert against the Agent or the other Lenders, any valuation, stay,
appraisement, extension, redemption or similar laws now or hereafter existing
which, but for this provision, might be applicable to the sale of any Collateral
made under the judgment, order or decree of any court, or privately under the
power of sale conferred by this Pledge Agreement, or otherwise. Without limiting
the generality of the foregoing, the Borrower: (a) agrees that it will not
invoke or utilize any law which might prevent, cause a delay in or otherwise
impede the enforcement of the rights of the Agent or the Lenders in the
Collateral; (b) waives all such laws; and (c) agrees that it will not invoke or
raise as a defense to any enforcement by the Agent or the other Lenders of any
rights and remedies relating to the Collateral or the Notes, any legal or
contractual requirement with which the Agent or the other Lenders may have in
good faith failed to comply. In addition, the Borrower waives any right to prior
notice (except to the extent expressly required by the other provisions of this
Pledge Agreement) or judicial hearing in connection with foreclosure on or
disposition of any Collateral, including any such right which the Borrower would
otherwise have under the Constitution of the United States of America, any state
or territory thereof or any other jurisdiction. The Borrower hereby waives and
releases to the fullest extent permitted by law any right or equity of
redemption with respect to the Collateral, whether before or after sale
hereunder.
ARTICLE VI
CONTINUING SECURITY INTEREST
The Borrower shall not assign or otherwise transfer this Pledge
Agreement or any interest herein without the Agent's prior written consent. This
Pledge Agreement shall create a continuing security interest in the Collateral
and shall: (a) remain in full force and effect until the final payment in full
of all amounts payable under the Notes and the other Loan Documents; (b) bind
the Borrower, its successors and permitted assigns; and (c) inure to the benefit
of the Lenders and its successors, transferees and assigns.
Subject to the requirements of Sections 3.2 of the Purchase Agreement,
upon transfer of Notes, each of the respective Lenders may transfer its interest
in the Loan Documents to any of its
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successors or assigns, by notice to the Borrower, and such other person or
entity shall thereupon be vested with all the benefits in respect thereof
granted to such Lender herein or otherwise; provided that such successor or
assign has agreed in a writing, which shall be delivered to the Borrower, to
assume all of the obligations of the respective Lender under the Loan Documents.
ARTICLE VII
REPRESENTATIONS, WARRANTIES
AND ADDITIONAL COVENANTS OF BORROWER
7.1 REPRESENTATIONS AND WARRANTIES. The Borrower represents and
warrants to the Lenders continuously throughout the term of the Notes, that:
(a) The Collateral is owned by the Borrower free and clear of all
liens, claims or encumbrances, except for those granted Lenders herein (except,
as to the Subordinated Collateral, the security interest of Greenwich and as to
the Textron Collateral, the security interest of Textron, and as to the
Certificates and the Grantor Trust Right, subject to the applicable
Securitization). Except as disclosed in this Pledge Agreement, none of the
Collateral is subject to any option to purchase or similar rights of any Person;
(b) All Collateral (other than cash, the Grantor Trust Right or
Additional Collateral consented to in writing) shall be evidenced by
certificates or instruments, which certificates or instruments shall be
registered in the name of and delivered to the Agent with any related assignment
forms, duly completed by the Borrower, required by the Securitization agreements
(or, as to the Subordinated Collateral held by Greenwich, shall be subject to
the Intercreditor Agreement until such registration in the name of the Agent and
delivery to the Agent and, as to the Textron Collateral, shall be subject to the
Textron Documents until such registration in the name of the Agent and delivery
to the Agent). The Borrower will, promptly upon the receipt thereof, deliver to
the Agent any certificate or similar instrument representing any of such
Collateral, together with appropriate, duly executed assignment forms, in
accordance with the terms hereof. The Borrower will take all steps necessary to
register the pledge to the Agent (or ownership if requested by the Agent in
writing) on the books of the issuer, purchaser, trustee or custodian, as the
case may be, with respect to all Collateral that is not evidenced by
certificates or other instruments in accordance with the terms hereof;
(c) The Borrower has obtained any and all permits, licenses, approval
and consents of any Governmental Authority and any third party as may be
required to own, purchase, pledge, sell or otherwise dispose of the Collateral
and to conduct or to transact its business or own, lease or operate its
properties and is in material compliance with all applicable requirements of
law;
(d) The lien of this Pledge Agreement constitutes a first priority
perfected and enforceable security interest in the Collateral in favor of the
Lenders (other than the Subordinated Collateral, which shall be subject only to
the existing security interest of Greenwich and other than the Textron
Collateral, which shall be subject to the existing security interest of
Textron); on each occasion which the Borrower makes a Delivery of Collateral to
the Agent, the Borrower will be the
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sole record and beneficial owner of that Collateral (until registration thereof
in the name of the Agent) and will, subject to the terms of the Pledge
Agreement, have the right to receive all payments (subject to the terms of any
sales and servicing or pooling and servicing agreement, indenture or any similar
agreement pursuant to which the Certificates were issued or to which the Grantor
Trust Right or any other right or interest arose) on the Collateral, in each
case free and clear of all liens and security interests other than the lien of
this Pledge Agreement, other than the Subordinated Collateral, which, subject to
the Intercreditor Agreement and the terms hereof, shall be subject to the
security interest of Greenwich, and other than the Textron Collateral, which is
subject to the Textron Documents and the security interest of Textron;
(e) Except for financing statements contemplated or permitted by this
Pledge Agreement, there are no financing statements or other actions required
under the UCC or similar law of any state or jurisdiction required in connection
with the grants of security interests to the enders set forth in this Pledge
Agreement;
(f) No representation or warranty made by or on behalf of Borrower
contained in any Loan Document and no information (written or oral),
certificate, financial statement or report furnished or to be furnished by or on
behalf of the Borrower thereunder or in connection with the transactions
contemplated thereby, contains or will contain an untrue statement of a material
fact, or, omits or will omit to state any material fact (including without
limitation, whether, to the best knowledge of Borrower, Borrower or any of its
respective officers or directors (past or present) is (or during the last five
(5) years has been) under civil or criminal investigation by a Governmental
Authority or is under indictment by any Governmental Authority) necessary to
make the statements herein or therein contained, in light of the circumstances
in which made, not misleading;
(g) It does not have any reason to believe that it will not be able to
perform in all material respects all covenants and agreements to be performed by
it under this Pledge Agreement and each of the other Loan Documents;
(h) Each of the representations and warranties of the Borrower
contained in the other Loan Documents is true and correct;
(i) The right of Borrower to receive a residual cash payment pursuant
to Section 4.05(b)(xvii) of the sale Agreement arising from the Mego Mortgage
Home Loan Trust 1996-3 is non-certificated and is evidenced only by the Sale
Agreement arising from that Securitization;
(j) Any Residual Interest Instrument pledged as Collateral shall
represent the right of the holder thereof to receive one hundred percent (100%)
of the residual interest in the interest and principal payments due on the
underlying loans securitized in that Securitization, except as follows: (a)
Class R Certificate R-0001, 1996-3 represents the right to receive one hundred
percent (100%) of the residual interests in Group 1 Loans, as that term is
defined in the Sale Agreement for that Securitization; and (b) Residual Interest
Instrument No. 1 1997-1 and Residual Certificate No. 1, 1997-2 each represent
the right to receive ninety-nine percent (99%) of the residual interest in the
respective Securitization;
PAGE 22
<PAGE>
(k) Except as disclosed on Schedule I hereto, there is no circumstance
presently in existence which prohibits the receipt of payment of obligations due
pursuant to the terms of the Certificates and the Grantor Trust Right pledged as
Collateral;
(l) To the best of Borrower's knowledge, all of the Collateral has been
duly and validly issued, is fully paid and non-assessable and is subject to no
options to purchase or similar rights;
(m) The pledge, collateral assignment and delivery to and continuous
possession by the Agent of the Collateral consisting of certificated securities
pursuant to this Pledge Agreement creates a valid and perfected first priority
security interest in such securities and the proceeds thereof, subject to no
prior lien or encumbrance or to any agreement purporting to grant to any third
party a lien or encumbrance on the property or assets of the Borrower which
would include the Collateral and the Agent for the account of the Lender is
entitled to all the rights, priorities and benefits afforded by the UCC or other
relevant law as enacted in any relevant jurisdiction to perfect security
interests in respect of such Collateral; and
(n) "Control" (as defined in Section 8-106 of the UCC) has been
obtained by the Lenders over all Collateral consisting of Securities with
respect to which such "control" may be obtained pursuant to Section 8-106 of the
UCC.
ARTICLE VIII
THE AGENT MAY PERFORM
The Borrower hereby appoints any officer, general partner or agent of
the Agent as the Borrower's true and lawful attorney-in-fact with full authority
in the place and stead of the Borrower and in the name of the Agent or
otherwise, from time to time in the Agent's discretion, to take any action and
to execute any agreements, documents and instruments which the Agent may deem
necessary or advisable to accomplish the purpose of this Pledge Agreement. The
powers conferred on the Agent hereunder are solely to protect its interest in
the Collateral and shall not impose any duty upon the Agent to exercise any such
powers. All authorization and agencies herein contained with respect to the
Collateral are irrevocable and powers coupled with an interest.
ARTICLE IX
CUSTODY OF COLLATERAL
Except as provided by applicable law that cannot be waived, the Agent
will have no duty as to the custody and protection of the Collateral, the
collection of any part thereof or of any income thereon or the preservation or
exercise of any rights pertaining thereto, including rights against prior
parties, except for the use of reasonable care in the custody and physical
preservation of any Collateral in its possession. The Agent will not be liable
or responsible for any loss or damage to any Collateral, or for any diminution
in the value thereof, by reason of the act or omission of any agent selected by
the Agent (including without limitation the Escrow Agent) acting in good faith.
ARTICLE X
PAGE 23
<PAGE>
APPLICATION OF COLLATERAL AND PROCEEDS
The proceeds of any sale of, or other realization upon, all or any part
of the Collateral shall be applied in the order set forth in Section 5.3 of the
Notes.
ARTICLE XI
SECURITY INTEREST ABSOLUTE
All rights of the Lenders hereunder and the interest and all
obligations of the Borrower hereunder shall be absolute and unconditional
irrespective of:
(a) except as expressly provided in Section 13.9, any lack of
validity or enforceability of the Loan Documents or any other agreement or
instrument relating to the Loan Documents;
(b) any change in the time, manner or place of payment of, or
in any other term of, the Loan Documents, or any renewal or extension of the
Loan Documents or any other amendment or waiver of or any consent to any
departure from this Pledge Agreement or any other agreement or instrument;
(c) any sale, exchange, release or nonperfection of any of the
Collateral, or any release of any guarantor or any person liable in any manner
for the collection of the Notes, or any amendment or waiver of or consent to or
departure from any guaranty or the Loan Documents; or
(d) any other circumstance that might otherwise constitute a
defense available to, or a discharge of, the Borrower in respect of any of the
Loan Documents.
ARTICLE XII
REMEDIES CUMULATIVE
Each right, power and remedy of the Borrower provided for in this
Pledge Agreement or any other Loan Document, or now or hereafter existing at law
or in equity or by statute shall be cumulative and concurrent and shall be in
addition to every other such right, power or remedy. The exercise or beginning
of the exercise by the Agent of any one or more of the rights, powers or
remedies provided for in this Pledge Agreement or any other Loan Document or now
or hereafter existing at law or in equity or by statute or otherwise shall not
preclude the simultaneous or later exercise by the Agent of all such other
rights, powers or remedies, and no failure or delay on the part of the Agent to
exercise any such right, power or remedy shall operate as a waiver thereof.
Unless otherwise required by the Loan Documents, no notice to or demand on the
Borrower in any case shall entitle the Borrower to any other or further notice
or demand in similar other circumstances or constitute waiver of any of the
rights of the Agent to any other or further action in any circumstances without
demand or notice. The obligations of the Borrower under the Loan Documents are
with full recourse to the Borrower and the Borrower shall remain liable for any
deficiency upon the exercise of remedies by Agent.
PAGE 24
<PAGE>
ARTICLE XIII
MISCELLANEOUS
13.1 SUCCESSORS AND ASSIGNS; NO THIRD-PARTY BENEFICIARIES. This Pledge
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective permitted successors and assigns. This Pledge Agreement
shall not confer any rights, obligations, remedies or liabilities upon any
Person other than the parties hereto and their permitted successors and assigns.
13.2 GOVERNING LAW. THE PARTIES HERETO ACKNOWLEDGE THAT THE
TRANSACTIONS CONTEMPLATED BY THIS PLEDGE AGREEMENT AND THE NOTES BEAR A
REASONABLE RELATION TO THE STATE OF MARYLAND IN THAT, INTER ALIA, AN INTENDED
PARTICIPANT IN THE NOTES HAS ITS PRINCIPAL PLACE OF BUSINESS IN THE STATE OF
MARYLAND, PART OF THE NEGOTIATIONS RELATING TO THE TRANSACTIONS CONTEMPLATED
HEREBY HAS OCCURRED IN THE STATE OF MARYLAND AND THE CLOSING WILL OCCUR IN SUCH
STATE. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF MARYLAND, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT
OF LAWS THEREOF.
13.3 NOTICES. All notices, requests, demands, claims and other
communications under this Pledge Agreement shall be in writing (unless otherwise
specified herein) and shall be deemed duly given if (and then two (2) Business
Days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to Borrower:
Altiva Financial Corporation
Sixth Floor
1000 Parkwood Circle
Atlanta, Georgia 30339
Attention: Office of the Chief Executive Officer
Telephone: (770) 952-6700
Facsimile: (770) 937-7576
With a Copy to:
King & Spalding
191 Peachtree Street
48th Floor
Atlanta, Georgia 30303
Attention: Walter Driver, Esq.
Telephone: (404) 572-4600
Facsimile: (404) 572-5149
PAGE 25
<PAGE>
If to the Agent:
Value Partners, Ltd.
4514 Cole Avenue
Suite 808
Dallas, Texas 75205
Attention: Timothy G. Ewing
Telephone: (214) 522-2100
Facsimile: (214) 522-2176
With a copy to:
Bergman, Stein & Bird, L.L.P.
4514 Travis Street
Suite 300
Dallas, Texas 75205
Attention: Jack R. Bird
Telephone: (214) 528-2444
Facsimile: (214) 599-0602
And
Elias, Matz, Tiernan & Herrick
734 15th Street, N.W.
12th Floor
Washington, DC 20005
Attention: Gerard L. Hawkins
Telephone: (202) 347-0300
Facsimile: (202) 347-2172
Any party may send any notice, request, demand, claim or other
communications hereunder to the intended recipient at the address set forth
above using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the intended
recipient. Any party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other party notice in the manner herein set forth.
13.4 AMENDMENTS; WAIVERS. This Pledge Agreement may not be amended,
modified or supplemented except in writing signed by each of the parties hereto.
Each party may, by written notice to the other, extend the time for or waive the
performance of any of the obligations of such other hereunder. The waiver by any
party hereto of a breach of this Pledge Agreement shall not operate or be
construed as a waiver of any other or subsequent breach. No delay, omission or
act by a party shall be deemed a waiver of such party's rights, powers or
remedies. No course of dealing between the parties hereto shall operate a waiver
of any provision hereof.
PAGE 26
<PAGE>
13.5 PAYMENT OF EXPENSES; INDEMNITY. The Borrower shall:
(a) pay or reimburse the Agent on demand for all of its reasonable
out-of-pocket costs and expenses incurred in connection with the development,
preparation and execution of any amendment, modification or supplement to, or
any waiver under, any Loan Document and any other document prepared in
connection therewith, and the consummation of the transactions contemplated
thereby, including, without limitation, the reasonable fees and disbursements of
counsel to the Lenders;
(b) pay on demand all reasonable costs and expenses of the
Lenders, including, without limitation, the reasonable fees and disbursements of
counsel to Lenders, in connection with the occurrence or continuance of an Event
of Default and the enforcement, collection, protection or preservation (whether
through negotiation, legal proceedings or otherwise) of this Pledge Agreement or
any other Loan Document, the Collateral, and any obligation or any rights,
remedy, power or privilege of the Lenders hereunder or thereunder;
(c) pay and hold the Lenders harmless from and against any and all
present and future stamp, excise, recording or other similar taxes or fees
payable in connection with the execution, delivery, recording and filing of any
Loan Document and hold the Lenders harmless from and against any and all
liabilities with respect to or resulting from any delay or omission to pay such
taxes or fees; and
(d) indemnify and hold harmless the Lenders and their respective
directors, officers, partners, employees and agents from and against, any and
all liabilities, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements, including, without limitation, the reasonable
fees and disbursement of counsel to the Lenders and such other parties, incurred
by any of them in connection with, arising out of or in any way relating to any
investigation, claim, litigation or other proceeding, pending or threatened
(whether or not any of them is designated a party thereto), in connection with,
arising out of or in any way related to this Pledge Agreement or any other Loan
Document or any of the transactions contemplated herein or therein or any use of
the proceeds of the Notes by the Borrower; provided that the Lenders shall not
be entitled to any indemnification for any of the foregoing resulting from their
gross negligence or willful misconduct as determined by a court of competent
jurisdiction.
If, and to the extent that, the indemnity obligations of the Borrower
hereunder may be unenforceable for any reason, the Borrower hereby agrees to
make the maximum contributions to the payment and satisfaction of each of such
indemnity obligations which is permissible under applicable law.
13.6 LIMITED LIABILITY. No recourse under any Loan Document shall
be had against, and no personal liability shall attach to, any officer,
employee, director, partner, affiliate, shareholder or agent of any party
hereto, as such, by the enforcement of any assessment or by any legal or
equitable proceeding, by virtue of any statute or otherwise in respect of any of
the Loan Documents, it being expressly agreed and understood that each Loan
Document is solely a corporate or limited liability
PAGE 27
<PAGE>
entity obligation of each party hereto, and that any and all personal liability,
either at common law or in equity, or by statute or constitution, of every such
officer, employee, director, partner, affiliate, shareholder or agent for
breaches by any party hereto of any obligation under any Loan Document is hereby
expressly waived as a condition of and in consideration for the execution and
delivery of this Pledge Agreement.
13.7 COUNTERPARTS. This Pledge Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.
13.8 SEVERABILITY; INTERPRETATION. Any term or provision of this
Pledge Agreement that is invalid, illegal or unenforceable in any situation in
any jurisdiction shall not affect the validity, legality or enforceability of
the remaining terms and provisions hereof or the validity, legality or
enforceability of the offending term or provision in any other situation or in
any other jurisdiction.
13.9 USURY. All agreements between Borrower and the Agent on behalf
of the Lenders, whether now existing or hereafter arising and whether written or
oral, are hereby limited so that in no contingency, whether by reason of demand
or acceleration of the maturity Date, as that term is defined in the Notes, or
otherwise, shall the interest contracted for, charged, received, paid or agreed
to be paid to the Lenders exceed the maximum amount permissible under the laws
of the State of Maryland (hereinafter the "Applicable Law"). If, from any
circumstance whatsoever, interest would otherwise be payable to Lenders in
excess of the maximum amount permissible under the Applicable Law, the interest
payable to Lenders shall be reduced to the maximum amount permissible under the
Applicable Law, and if from any circumstance Lenders shall ever receive anything
of value deemed interest by the Applicable Law in excess of the maximum amount
permissible under the Applicable Law, an amount equal to the excessive interest
shall be applied to the reduction of the principal of the Notes and not to the
payment of interest, or if such excessive amount of interest exceeds the unpaid
balance of principal of the Notes, such excess shall be refunded to the
Borrower. All interest paid or agreed to be paid to the Lenders shall, to the
extent permitted by the Applicable Law, be amortized, pro-rated, allocated and
spread throughout the full period (including any renewal or extension) until
payment in full of the principal so that the interest on the Notes for such full
period shall not exceed the maximum amount permissible under the Applicable Law.
The Lenders expressly disavow any intent to contract for, charge or receive
interest in an amount which exceeds the maximum amount permissible under the
Applicable Law. This paragraph as well as a similar paragraph as set forth in
the Notes shall control all agreements between Borrower and the Lenders.
13.10 TIME IS OF THE ESSENCE; NO WAIVER; CUMULATIVE REMEDIES. Time
and exactitude of each of the terms, obligations, covenants and conditions of
this Pledge Agreement are hereby declared to be of the essence.
13.11 BINDING EFFECT. This Pledge Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and assigns. Subject to Article VI, the
Lenders may assign this Pledge Agreement, and if assigned, the assignee
PAGE 28
<PAGE>
shall be entitled, upon notifying the Borrower, to the payment and performance
of the obligations arising under the Loan Documents and agreements of the
Borrower hereunder and to all of the rights and remedies of the Lenders
hereunder, and the Borrower will assert no claims or defenses the Borrower may
have against the Lenders against the assignee. The gender and number used in
this Pledge Agreement are used for reference term only and shall apply with the
same effect whether the parties are masculine, feminine, neuter, singular or
plural.
13.12 MULTIPLE COUNTERPARTS. This Pledge Agreement may be executed
in separate or multiple counterparts by the parties, and all of such
counterparts shall be considered as one and the same instrument notwithstanding
the fact that various counterparts are signed by only one or more of the
parties, and all of such Pledge Agreements shall be deemed but one and the same
Pledge Agreement.
13.13 HEADINGS. The captions and Section headings in this Pledge
Agreement are for convenience of reference only, and shall not limit or
otherwise affect the meaning or interpretation of any provision hereof.
13.14 SECURED PARTY. This Pledge Agreement shall constitute a
security agreement, and the Lenders shall have all of the rights in the
Collateral of a secured party, including under Articles 8 and 9 of the UCC.
13.15 CHIEF EXECUTIVE OFFICE; RECORDS. The chief executive office of
the Borrower is located at the address specified in the introduction. The
Borrower will not move its chief executive office except to such new location as
such Borrower may establish in accordance with the last sentence in this Section
13.16. The Borrower shall not establish a new location for such office until (i)
it shall have given to the Agent and the Escrow Agent not less than 30 days'
prior written notice of its intention so to do, clearly describing such new
location and providing such other information in connection therewith as the
Agent may reasonably request and (ii) with respect to such new location, it
shall have taken all action, satisfactory to the Agent, to maintain the security
interest of the Agent in the Collateral intended to be granted hereby at all
times fully perfected and in full force and effect.
PAGE 29
<PAGE>
PAGE 30
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed as of the date first above written.
VALUE PARTNERS, LTD., on its own behalf and on
behalf of the Lenders as Agent
By: EWING & PARTNERS,
General Partner
By: /s/ TIMOTHY G. EWING
------------------------------------------
Name: Timothy G. Ewing
Title: Managing Partner
Address:
4514 Cole Avenue, Suite 808
Dallas, Texas 75205
ALTIVA FINANCIAL CORPORATION
By: /s/ CHAMP MEYERCORD
------------------------------------------
Name: Champ Meyercord
Title: Chairman
Address:
1000 Parkwood Circle, Sixth Floor
Atlanta, Georgia 30339
PAGE 31
<PAGE>
STATE OF MARYLAND ss.
ss.
COUNTY OF Harford ss.
BEFORE ME, the undersigned authority, on this day personally appeared
Timothy G. Ewing, the Managing Partner of Ewing & Partners, general partner of
Value Partners, Ltd. who stated that he has read the foregoing, and that the
information contained therein is within his personal knowledge and is true and
correct.
------------------------------------------
SUBSCRIBED AND SWORN TO BEFORE ME, on this the 25th day of August, 1999
to certify with my hand and seal of office.
/s/ SHARON A. GLOVER
------------------------------------------
Notary Public in and for the
State of Maryland
My Commission Expires:9-1-2003
SHARON A. GLOVER
------------------------------------------
Printed Name of Notary Public
PAGE 32
<PAGE>
STATE OF MARYLAND ss.
ss.
COUNTY OF Harford ss.
BEFORE ME, the undersigned authority, on this day personally appeared
Champ Meyercord, the Chairman of Altiva Financial Corporation who stated that he
has read the foregoing, and that the information contained therein is within his
personal knowledge and is true and correct.
------------------------------------------
SUBSCRIBED AND SWORN TO BEFORE ME, on this the 25th day of August, 1999
to certify with my hand and seal of office.
/s/ SHARON A. GLOVER
------------------------------------------
Notary Public in and for the
State of Maryland
My Commission Expires:9-1-2003
SHARON A. GLOVER
------------------------------------------
Printed Name of Notary Public
PAGE 33
<PAGE>
SCHEDULE I
RESTRICTIONS ON PAYMENT
None
PAGE 34
<PAGE>
Exhibit 5
EXECUTION COPY
INTERCREDITOR
AND COLLATERAL SUBORDINATION AGREEMENT
INTERCREDITOR AND COLLATERAL SUBORDINATION AGREEMENT, dated as
of August 13, 1999, by and among VALUE PARTNERS, LTD. (together with its
successors and assigns, each a "SUBORDINATED LENDER", and collectively the
"SUBORDINATED LENDERS"), ALTIVA FINANCIAL CORPORATION, a Delaware corporation,
formerly known as Mego Mortgage Corporation (together with its successors and
assigns, "ALTIVA"), GREENWICH CAPITAL MARKETS, INC., a Delaware corporation
(together with its successors and assigns, "GCM"), and GREENWICH CAPITAL
FINANCIAL PRODUCTS, INC., a Delaware corporation (together with its successors
and assigns, "GCFP"; collectively with GCM, "GREENWICH").
Altiva and Greenwich are parties to the Senior Agreements (as
defined herein) whereby Altiva pledged or sold certain assets to Greenwich to
secure the Senior Obligations (as defined herein). Altiva and the Subordinated
Lenders intend to enter into the Subordinated Loan Agreement (as defined herein)
whereby Altiva intends to pledge all or part of the assets securing the Senior
Obligations to the Subordinated Lenders to secure the Subordinated Obligations
(as defined herein). Greenwich is willing to permit the pledge of such assets to
the Subordinated Lenders, but only in accordance with the terms and conditions
contained herein.
The parties hereto hereby agree as follows:
1. DEFINITIONS.
(a) Unless otherwise defined herein, terms defined in the
Senior Agreements and used herein shall have the meanings given to them in the
Senior Agreements.
(b) The following terms shall have the following meanings:
"AGREEMENT": this Intercreditor and Collateral Subordination
Agreement, as the same may be amended, modified or otherwise supplemented from
time to time.
"ALTIVA": as defined in the Heading hereto.
"COLLATERAL": the collective reference to any and all property
subject to security interests to secure payment or performance of both the
Senior Obligations and the Subordinated Obligations as of the date of this
Agreement and listed on Schedule 1 attached hereto.
"GCM": as defined in the Heading hereto.
"GCFP": as defined in the Heading hereto.
"GREENWICH": as defined in the Heading hereto.
<PAGE>
"INSOLVENCY EVENT": (1) Altiva commencing any case, proceeding
or other action (i) under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency, reorganization,
conservatorship or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent,
or seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or
(ii) seeking appointment of a receiver, trustee, custodian, conservator or other
similar official for it or for all or any substantial part of its assets, or
Altiva making a general assignment for the benefit of its creditors; or (2)
there being commenced against Altiva any case, proceeding or other action of a
nature referred to in clause (1) above which (i) results in the entry of an
order for relief or any such adjudication or appointment or (ii) remains
undismissed, undischarged or unbonded for a period of 60 days; or (3) there
being commenced against Altiva any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar process
against all or any substantial part of its assets which results in the entry of
an order for any such relief which shall not have been vacated, discharged, or
stayed or bonded pending appeal within 60 days from the entry thereof; or (4)
Altiva taking any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in clause (1), (2) or
(3) above; or (5) Altiva generally not paying, or being unable to pay, or
admitting in writing its inability to pay, its debts as they become due.
"SENIOR AGREEMENTS": the collective reference to (i) the
Master Repurchase Agreement, dated as of September 4, 1996, between Altiva and
GCM and (ii) the Pledge and Security Agreement, dated as of April 17, 1997,
between Altiva and GCFP, as such agreements may have been or may hereafter be
amended, modified or supplemented from time to time, including, without
limitation, amendments, modifications, supplements and restatements thereof
giving effect to increases, renewals, extensions, refundings, deferrals,
restructurings, replacements or refinancings of, or additions to, the
arrangements provided in such agreement (whether provided by Greenwich under
such agreement or by a successor to or assignee of Greenwich).
"SENIOR DOCUMENTS": the collective reference to the Senior
Agreements and all other documents that from time to time evidence the Senior
Obligations or secure or support payment or performance thereof.
"SENIOR OBLIGATIONS": the collective reference to the unpaid
principal, interest, repurchase price, pricing differential and all other
obligations and liabilities of Altiva to Greenwich (including, without
limitation, if applicable, interest accruing at the then applicable rate
provided in the relevant Senior Agreement after the maturity of such obligations
and interest accruing at the then applicable rate provided in the relevant
Senior Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating to
Altiva, whether or not a claim for post-filing or post-petition interest is
allowed in such proceeding), whether direct or indirect, absolute or contingent,
due or to become due, or now existing or hereafter incurred, which may arise
under, out of, or in connection with, any Senior Agreement and the other Senior
Documents or any other document made, delivered or given in connection
therewith, in each case whether on account of principal, interest, reimbursement
obligations, repurchase obligations, pricing differential, fees, indemnities,
costs,
-2-
<PAGE>
expenses or otherwise (including, without limitation, all fees and disbursements
of counsel to Greenwich that are required to be paid by Altiva pursuant to the
terms of the Senior Agreements or this Agreement or any other Senior Document).
"SUBORDINATED LOAN AGREEMENT": the Secured Convertible Note
Purchase Agreement, dated as of August __, 1999, among Altiva and the
Subordinated Lenders parties thereto, as the same may be amended, modified or
otherwise supplemented from time to time.
"SUBORDINATED LENDERS": as defined in the Heading hereto.
"SUBORDINATED LOAN DOCUMENTS": the collective reference to the
Subordinated Loan Agreement, the Subordinated Notes and any other documents or
instruments that from time to time evidence the Subordinated Obligations or
secure or support payment or performance thereof.
"SUBORDINATED LOANS": the loans made by the Subordinated
Lenders to Altiva pursuant to the Subordinated Loan Agreement.
"SUBORDINATED NOTES": the promissory notes of Altiva
outstanding from time to time pursuant to the Subordinated Loan Agreement.
"SUBORDINATED OBLIGATIONS": the collective reference to the
unpaid principal of and interest on the Subordinated Notes and all other
obligations and liabilities of Altiva to the Subordinated Lenders (including,
without limitation, interest accruing at the then applicable rate provided in
the Subordinated Loan Agreement after the maturity of the Subordinated Loans and
interest accruing at the then applicable rate provided in the Subordinated Loan
Agreement after the filing of any petition in bankruptcy, or the commencement of
any insolvency, reorganization or like proceeding, relating to Altiva, whether
or not a claim for post-filing or post-petition interest is allowed in such
proceeding), whether direct or indirect, absolute or contingent, due or to
become due, or now existing or hereafter incurred, which may arise under, out
of, or in connection with, the Subordinated Loan Agreement, the Subordinated
Notes, this Agreement, or any other Subordinated Loan Document, in each case
whether on account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without limitation, all
fees and disbursements of counsel to the Subordinated Lenders that are required
to be paid by Altiva pursuant to the terms of the Subordinated Loan Agreement or
this Agreement or any other Subordinated Loan Document).
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section and
paragraph references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
2. RIGHTS IN COLLATERAL.
-3-
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(a) Notwithstanding anything to the contrary contained in any
Senior Document or any Subordinated Loan Document and irrespective of:
(1) the time, order or method of attachment or perfection of
the security interests created by any Senior Document or any
Subordinated Loan Document,
(2) the time or order of filing or recording of financing
statements or other documents filed or recorded to perfect security
interests in any Collateral,
(3) anything contained in any filing or agreement to which
Greenwich or any Subordinated Lender now or hereafter may be a party,
and
(4) the rules for determining priority under the Uniform
Commercial Code or any other law governing the relative priorities of
secured creditors,
any security interest in any Collateral pursuant to any Senior Document has and
shall have priority, to the extent of any unpaid Senior Obligations, over any
security interest in such Collateral pursuant to any Subordinated Loan Document.
(b) So long as the Senior Obligations have not been paid in
full and any Senior Document remains in effect, whether or not any event or
proceeding described in clause (1) of the definition of "Insolvency Event" has
been commenced by or against Altiva,
(1) no Subordinated Lender will (A) exercise or seek to
exercise any rights or exercise any remedies with respect to any
Collateral or (B) institute any action or proceeding with respect to
such rights or remedies, including without limitation, any action of
foreclosure against any Collateral or (C) contest, protest or object to
any foreclosure proceeding or action brought by Greenwich or any other
exercise by Greenwich of any rights and remedies under any Senior
Document; and
(2) Greenwich shall have the exclusive right to enforce rights
and exercise remedies with respect to the Collateral;
PROVIDED, that, except as provided in Section 10(b) of this Agreement, nothing
contained in this Agreement shall prevent a Subordinated Lender from exercising
or seeking to exercise any rights or remedies with respect to any assets pledged
by Altiva to secure the Subordinated Obligations which are not included in the
Collateral.
(c) In exercising rights and remedies with respect to the
Collateral, Greenwich may enforce the provisions of the Senior Documents, all in
such order and in such manner as they may determine in the exercise of their
sole business judgment. Such exercise and enforcement shall include, without
limitation, the rights to sell or otherwise dispose of Collateral, to incur
expenses in connection with such sale or disposition and to exercise all the
rights and remedies of a secured lender under the Uniform Commercial Code of any
applicable jurisdiction.
(d) When all Senior Obligations have been paid in full and the
Senior Documents
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no longer are in effect, the Subordinated Lenders shall have the right to
enforce the provisions of the Subordinated Loan Documents and exercise remedies
thereunder with respect to the Collateral.
(e) Any money, property or securities realized upon the sale,
disposition or other realization by Greenwich, Altiva or any Subordinated Lender
upon all or any part of the Collateral or any collections, distributions or
other proceeds received by Greenwich in respect of the Collateral shall be
applied by Greenwich, Altiva or any Subordinated Lender in the following order:
(1) FIRST, to the payment in full of all costs and expenses
(including, without limitation, attorneys' fees and disbursements) paid
or incurred by Greenwich in connection with the such realization on the
Collateral or the protection of their rights and interests therein;
(2) SECOND, to the payment in full of all Senior Obligations
in such order as Greenwich may elect in its sole discretion;
(3) THIRD, to pay the balance to the Subordinated Lenders,
unless the Subordinated Lenders shall have notified Greenwich in
writing that the Subordinated Lenders have been paid in full; and
(4) FOURTH, if the Subordinated Lenders has been paid in full,
to pay to Altiva, or its representative or as a court of competent
jurisdiction may direct, any surplus then remaining.
(f) Greenwich's rights with respect to the Collateral include
the right to release any or all of the Collateral from the lien of any Senior
Document or Subordinated Loan Document in connection with the sale of such
Collateral; PROVIDED, that the net proceeds of any such sale shall be used to
permanently prepay the Senior Obligations or Subordinated Obligations
(including, without limitation, reimbursement of expenses and indemnities
provided in the Subordinated Loan Documents), and subject to the Subordinated
Lenders' right under the Subordinated Loan Documents to retain such balance as
security for repayment of the Subordinated Notes in accordance with their terms.
If Greenwich shall determine, in connection with any sale of Collateral, that
the release of the lien of any Subordinated Loan Document on such Collateral in
connection with such sale is necessary or advisable, the Subordinated Lenders
shall execute such release documents and instruments and shall take such further
actions as Greenwich shall request, subject to the Subordinated Lenders' right
under the Subordinated Loan Documents to retain such proceeds as security for
repayment of the Subordinated Notes in accordance with their terms. Each
Subordinated Lender hereby irrevocably constitutes and appoints Greenwich and
any officer or agent of Greenwich, with full power of substitution, as its true
and lawful attorney-in-fact with full irrevocable power and authority in the
place and stead of such Subordinated Lender and in the name of such Subordinated
Lender or in Greenwich's own name, from time to time in Greenwich's discretion,
for the purpose of carrying out the terms of this paragraph, to take any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this paragraph,
including, without limitation, any financing statements, endorsements,
assignments or other instruments of transfer or release.
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Each Subordinated Lender hereby ratifies all that said attorneys shall lawfully
do or cause to be done pursuant to the power of attorney granted in this
paragraph.
3. COLLATERAL AGENCY.
(a) Greenwich acknowledges that it holds and will hold the
Collateral (i) for the purpose of perfecting and maintaining perfection of its
own first and prior security interest therein and (ii) as bailee for the
Subordinated Lenders for the purpose of maintaining perfection of the
Subordinated Lenders' second and subordinate security interest therein.
Notwithstanding anything to the contrary herein, Greenwich's sole duties
hereunder with respect to the Collateral shall be to hold the Collateral, to
release the Collateral in accordance with the terms hereof and to remit amounts
received by Greenwich in respect of the Collateral in accordance with Section
2(e) hereof.
(b) Greenwich agrees that it shall not release or deliver the
Collateral to any person or entity other than the Subordinated Lenders or their
designee (designated in writing by the Subordinated Lenders to Greenwich),
without the express prior written consent of the Subordinated Lenders, except in
connection with the enforcement of remedies against the Collateral by Greenwich.
(c) Greenwich agrees that if and when the Senior Obligations
are paid in full and satisfied, Greenwich shall deliver physical possession of
the Collateral to (and only to) the Subordinated Lenders or their designee, at
the address designated by the Subordinated Lenders in writing, unless Greenwich
shall have received written notice from the Subordinated Lenders that the
Subordinated Obligations have been paid in full and satisfied in accordance with
the terms of the Subordinated Loan Documents, in which case Greenwich shall
deliver physical possession of the Collateral to Altiva or its designee.
(d) Greenwich agrees that it shall handle and maintain the
Collateral with the same standard of care with which it holds similar
instruments pledged to Greenwich as collateral.
(e) The Subordinated Lenders agree to indemnify Greenwich, its
affiliates, officers, directors and agents (the "INDEMNIFIED PARTIES") and hold
the Indemnified Parties harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Senior
Obligations) be imposed on, incurred by or asserted against any of the
Indemnified Parties in any way relating to or arising out of this Agreement or
any action taken or omitted by any of the Indemnified Parties under or in
connection herewith; PROVIDED, that no Subordinated Lenders shall be liable to
any Indemnified Party for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting in substantial part from such Indemnified
Party's gross negligence or willful misconduct. The agreements in this Section
3(e) shall survive the payment of the Senior Obligations and all other amounts
payable under the Senior Documents.
4. CONSENT OF SUBORDINATED LENDERS.
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(a) Each Subordinated Lender consents that, without the
necessity of any reservation of rights against any Subordinated Lender, and
without notice to or further assent by any Subordinated Lender:
(1) any demand for payment of any Senior Obligations made by
Greenwich may be rescinded in whole or in part by Greenwich, and any
Senior Obligation may be continued, and the Senior Obligations, or the
liability of Altiva or any guarantor or any other party upon or for any
part thereof, or any collateral security or guarantee therefor or right
of offset with respect thereto, or any obligation or liability of
Altiva or any other party under the Senior Agreements or any other
agreement, may, from time to time, in whole or in part, be renewed,
extended, modified, accelerated, compromised, waived, surrendered, or
released by Greenwich; and
(2) the Senior Agreement and any other Senior Document may be
amended, modified, supplemented or terminated, in whole or in part, as
may deem advisable from time to time, and any collateral security at
any time held by Greenwich for the payment of any of the Senior
Obligations may be sold, exchanged, waived, surrendered or released,
in each case all without notice to or further assent by any Subordinated Lender,
which will remain bound under this Agreement, and all without impairing,
abridging, releasing or affecting the lien subordination provided for herein.
(b) Each Subordinated Lender waives any and all notice of the
creation, renewal, extension or accrual of any of the Senior Obligations and
notice of or proof of reliance by Greenwich upon this Agreement. The Senior
Obligations, and any of them, shall be deemed conclusively to have been created,
contracted or incurred in reliance upon this Agreement, and all dealings between
Altiva and Greenwich shall be deemed to have been consummated in reliance upon
this Agreement. Each Subordinated Lender waives notice of or proof of reliance
on this Agreement and protest, demand for payment and notice of default.
5. NEGATIVE COVENANTS OF THE SUBORDINATED LENDERS. So long as
any of the Senior Obligations shall remain outstanding, no Subordinated Lender
shall, without the prior written consent of Greenwich:
(a) sell, assign, or otherwise transfer, in whole or in part,
the Subordinated Obligations or any interest therein to any other Person (a
"TRANSFEREE") or create, incur or suffer to exist any security interest, lien,
charge or other encumbrance whatsoever upon the Subordinated Obligations in
favor of any Transferee unless (1) such action is made expressly subject to this
Agreement and (2) the Transferee expressly acknowledges to Greenwich, by a
writing in substantially in the form of Exhibit A attached hereto, the lien
subordination provided for herein and agrees to be bound by all of the terms
hereof;
(b) permit any of the Subordinated Loan Documents to be
amended, modified or otherwise supplemented to provide for a stated maturity
date or scheduled payments of principal
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or interest prior to December 31, 1999.
6. SENIOR OBLIGATIONS UNCONDITIONAL. All rights and interests
of Greenwich hereunder, and all agreements and obligations of the Subordinated
Lenders and Altiva hereunder, shall remain in full force and effect irrespective
of:
(a) any lack of validity or enforceability of any Senior
Document;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Senior Obligations, or any amendment or
waiver or other modification, whether by course of conduct or otherwise, of the
terms of any Senior Document;
(c) any exchange, release or nonperfection of any security
interest in any Collateral, or any release, amendment, waiver or other
modification, whether in writing or by course of conduct or otherwise, of all or
any of the Senior Obligations or any guarantee thereof; PROVIDED, that any
Collateral which is released by Greenwich shall no longer be subject to this
Agreement; or
(d) any other circumstances which otherwise might constitute a
defense available to, or a discharge of, Altiva in respect of the Senior
Obligations, or of either any Subordinated Lender or Altiva in respect of this
Agreement.
7. REPRESENTATIONS AND WARRANTIES. Each Subordinated Lender
represents and warrants to Greenwich as of the date hereof that:
(a) Its Subordinated Notes (1) have been issued to it for good
and valuable consideration and (2) constitute the only evidence of the
obligations evidenced thereby.
(b) Such Subordinated Lender has capacity and the legal right
to execute and deliver and to perform its obligations under this Agreement and
has taken all necessary action to authorize its execution, delivery and
performance of this Agreement.
(c) This Agreement constitutes a legal, valid and binding
obligation of such Subordinated Lender.
(d) The execution, delivery and performance of this Agreement
will not violate any provision of any requirement of law or contractual
obligation of such Subordinated Lender and will not result in the creation or
imposition of any lien on any of the properties or revenues of such Subordinated
Lender pursuant to any requirement of law affecting or any contractual
obligation of such Subordinated Lender.
(e) No consent or authorization of, filing with, or other act
by or in respect of, any arbitrator or Governmental Authority and no consent of
any other Person (including, without limitation, any creditor of such
Subordinated Lender), is required in connection with the execution, delivery,
performance, validity or enforceability of this Agreement.
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8. NO REPRESENTATION BY GREENWICH. Greenwich has not made, and
does not hereby or otherwise make to the Subordinated Lenders, any
representations or warranties, express, or implied, nor does Greenwich assume
any liability to any Subordinated Lender with respect to: (a) the financial or
other condition of obligors under any instruments of guarantee with respect to
the Senior Obligations, (b) the enforceability, validity, value or
collectibility of the Senior Obligations or the Subordinated Obligations, any
collateral therefor, or any guarantee or security which may have been granted in
connection with any of the Senior Obligations or the Subordinated Obligations or
(c) Altiva's title or right to transfer any Collateral or security.
9. WAIVER OF CLAIMS. To the maximum extent permitted by law,
each Subordinated Lender waives any claim it might have against Greenwich with
respect to, or arising out of, any action or failure to act or any error of
judgment, negligence, or mistake or oversight whatsoever on the part of
Greenwich or their respective directors, officers, employees or agents with
respect to any exercise of rights or remedies under the Senior Documents or any
transaction relating to the Collateral. Neither Greenwich nor any of their
respective directors, officers, employees or agents shall be liable for failure
to demand, collect or realize upon any of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of Altiva or any Subordinated Lender or any other
Person or to take any other action whatsoever with regard to the Collateral or
any part thereof.
10. PROVISIONS APPLICABLE AFTER BANKRUPTCY; NO TURNOVER.
(a) The provisions of this Agreement shall continue in full
force and effect notwithstanding the occurrence of any event contemplated under
clause (a) of the definition of "Insolvency Event."
(b) To the extent that any Subordinated Lender has or acquires
any rights under Section 363 or Section 364 of the Bankruptcy Code with respect
to the Collateral, such Subordinated Lender hereby agrees not to assert such
rights without the prior written consent of Greenwich, which shall not be
unreasonably withheld.
11. FURTHER ASSURANCES. The Subordinated Lenders and Altiva,
at their own expense and at any time from time to time, upon the written request
of Greenwich will promptly and duly execute and deliver such further instruments
and documents and take such further actions as Greenwich reasonably may request
for the purposes of obtaining or preserving the full benefits of this Agreement
and of the rights and powers herein granted.
12. EXPENSES.
(a) Altiva will pay or reimburse Greenwich, upon demand, for
all its reasonable costs and expenses in connection with the enforcement or
preservation of any rights under this Agreement, including, without limitation,
reasonable fees and disbursements of counsel to
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Greenwich.
(b) Altiva will pay, indemnify, and hold Greenwich harmless
from and against any and all other liabilities, obligations, losses, damages,
penalties, actions (whether sounding in contract, tort or on any other ground),
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever with respect to the execution, delivery, enforcement, performance and
administration of, or in any other way arising out of or relating to this
Agreement or any action taken or omitted to be taken by Greenwich with respect
to any of the foregoing.
13. PROVISIONS DEFINE RELATIVE RIGHTS. This Agreement is
intended solely for the purpose of defining the relative rights of Greenwich on
the one hand and the Subordinated Lenders on the other, and no other Person
shall have any right, benefit or other interest under this Agreement.
14. POWERS COUPLED WITH AN INTEREST. All powers,
authorizations and agencies contained in this Agreement are coupled with an
interest and are irrevocable until the Senior Obligations are paid in full.
15. NOTICES. All notices, requests and demands to or upon
Greenwich or Altiva or any Subordinated Lender to be effective shall be in
writing (or by fax or similar electronic transfer confirmed in writing) and
shall be deemed to have been duly given or made (1) when delivered by hand or
(2) if given by mail, when deposited in the mails by certified mail, return
receipt requested, or (3) if by fax or similar electronic transfer, when sent
and receipt has been confirmed, addressed as follows:
If to Greenwich: 600 Steamboat Road
Greenwich, Connecticut 06830
Attention: General Counsel
Fax: 203-618-2132
Telephone: 203-625-6072
If to Altiva: 1000 Parkwood Circle
6th Floor
Atlanta, Georgia 30339
Attention: Dick Walker
Fax: 800-694-6346
Telephone: 770-952-6700
If to any Subordinated Lender, at its address or transmission number for notices
set forth under its signature below.
Greenwich, Altiva and any Subordinated Lender may change their addresses and
transmission numbers for notices by notice in the manner provided in this
Section.
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16. COUNTERPARTS. This Agreement may be executed by one or
more of the parties on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the counterparts of this Agreement signed by all the
parties shall be lodged with Greenwich.
17. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
18. INTEGRATION. This Agreement represents the agreement of
Greenwich and the Subordinated Lenders with respect to the subject matter hereof
and there are no promises or representations by Greenwich or any Subordinated
Lender relative to the subject matter hereof not reflected herein.
19. AMENDMENTS IN WRITING; NO WAIVER: CUMULATIVE REMEDIES.
(a) None of the terms or provisions of this Agreement may be
waived, amended, supplemented or otherwise modified except by a written
instrument executed by Greenwich, Altiva and each Subordinated Lender; PROVIDED,
that any provision of this Agreement may be waived by Greenwich in a letter or
agreement executed by Greenwich or by facsimile transmission from Greenwich.
(b) No failure to exercise, nor any delay in exercising, on
the part of Greenwich, any right, power or privilege hereunder shall operate as
a waiver thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
20. SECTION HEADINGS. The section headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
21. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the successors and assigns of Altiva and the Subordinated Lenders and shall
inure to the benefit of Greenwich and their successors and assigns.
22. GOVERNING LAW. This Agreement shall be governed by, and
construed and interpreted in accordance with, the law of the State of New York.
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23. LEGEND. The Subordinated Lenders shall cause each
Subordinated Loan Document at all times to bear a conspicuous legend relating to
the applicability of this Agreement to such Subordinated Loan Document as
follows:
"THIS AGREEMENT IS SUBJECT TO THE TERMS AND CONDITIONS OF THE
INTERCREDITOR AND COLLATERAL SUBORDINATION AGREEMENT, DATED
AUGUST 13, 1999 (THE "SUBORDINATION AGREEMENT"), AS THE SAME
MAY BE AMENDED, MODIFIED OR OTHERWISE SUPPLEMENTED FROM TIME
TO TIME, BY AND AMONG ALTIVA FINANCIAL CORPORATION, AS
BORROWER, GREENWICH CAPITAL MARKETS, INC. AND GREENWICH
CAPITAL FINANCIAL PRODUCTS, INC., PARTIES TO THE SENIOR
AGREEMENTS REFERRED TO IN THE SUBORDINATION AGREEMENT, AND THE
HOLDERS FROM TIME TO TIME OF THE OBLIGATIONS ARISING UNDER THE
SUBORDINATED LOAN AGREEMENT REFERRED TO IN THE SUBORDINATION
AGREEMENT."
[Signature Pages Follow]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the day and year first above
written.
GREENWICH CAPITAL MARKETS, INC.
By: /s/ Brian Bernard
----------------------------
Name: Brian Bernard
Title: Senior Vice President
GREENWICH CAPITAL FINANCIAL
PRODUCTS, INC.
By: /s/ Brian Bernard
----------------------------
Name: Brian Bernard
Title: Senior Vice President
ALTIVA FINANCIAL CORPORATION
By: /s/ Champ Meyercord
----------------------------
Name: Champ Meyercord
Title: Chairman
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VALUE PARTNERS, LTD.
by: EWING & PARTNERS,
general partner
By: Timothy G. Ewing
----------------------------
Name: Timothy Ewing
Title: Managing Partner
Address:
4514 Cole Avenue, Suite 808
Dallas, Texas 75205
Telephone: 214-522-2100
Fax: 214-522-2176
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Exhibit 6
REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement (the "Agreement"), dated as of August 31,
1999, by and among Altiva Financial Corporation, a Delaware corporation (the
"Company"), and Holders (as defined herein) of the Company's 12% Secured
Convertible Notes due 2006 (the "Notes").
WHEREAS, the Company has issued to Holders $7,000,000 principal amount
of the Notes; and
WHEREAS, the Notes are convertible, subject to certain conditions, into
1,400,000 shares of the common stock of the Company, par value $0.01 (the
"Common Stock") (such shares, subject to adjustment in accordance with the terms
of the Notes are herein after referred to as the "Securities"); and
WHEREAS, as an inducement to Holders to purchase the Notes, the Company
agreed to register the Securities into which the Notes are convertible;
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged by
all parties hereto, the parties, intending to be legally obligated, hereby agree
as follows: SECTION 1. DEFINITIONS As used in this Agreement, the following
capitalized terms shall have the following meanings:
"Act": The Securities Act of 1933, as amended.
"Broker-Dealer": Any broker or dealer registered as such under the
Exchange Act.
"Closing Date": The date of this Agreement.
"Commission" or "SEC": The United States Securities and Exchange
Commission.
"DTC": The Depository Trust Company.
"Effectiveness Target Date": As defined in Section 3 hereof.
"Exchange Act": The Securities Exchange Act of 1934, as amended.
"Holders": As defined in Section 2(b) hereof.
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"Indemnified Holder": As defined in Section 7(a) hereof
"NASD": National Association of Securities Dealers, Inc.
"Person": An individual, partnership, corporation, trust or
unincorporated organization, or a government or an agency, authority or
political subdivision thereof.
"Prospectus": The prospectus included in a Resale Registration
Statement, as amended or supplemented, including post-effective
amendments, thereto.
"Registration Default": As defined in Section 4 hereof.
"Resale Registration Statement": As defined in Section 3 hereof.
"Securities": As defined in the preamble hereto.
"Transfer Restricted Securities": Each Security, until the earliest to
occur of (a) the date on which such Security has been effectively registered
under the Act and disposed of in accordance with a Resale Registration Statement
or other applicable registration statement and (b) the date on which such
Security is distributed to the public pursuant to Rule 144 under the Act or may
be sold to the public without compliance with such rule.
"Underwritten Registration" or "Underwritten Offering": An offering in
which securities of the Company are sold to an underwriter for reoffering to the
public pursuant to an effective registration statement filed with the
Commission.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) TRANSFER RESTRICTED SECURITIES. The Transfer Restricted
Securities are subject to the terms of this Agreement and may be sold in
accordance with the provisions hereof.
(b) HOLDERS OF TRANSFER RESTRICTED SECURITIES. A Person is deemed
to be a holder of Transfer Restricted Securities (each, a "Holder") whenever
such Person owns (i) Notes, directly or indirectly through a participation
interest therein, or (ii) Securities prior to (A) the resale of Securities in
accordance with the terms hereof or (B) the time that such Securities are no
longer considered to be Transfer Restricted Securities.
SECTION 3. RESALE REGISTRATION STATEMENT
(a) REGISTRATION. The Company shall cause to be filed with the
Commission promptly after the Closing Date, but in no event later than November
30, 1999, one or more registration statements on Form S-1, S-2 or S-3, or other
applicable form (each a "Resale Registration Statement"), and use its reasonable
best efforts to cause such Resale Registration Statement to be
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declared effective by the Commission on or before the date of the meeting of the
stockholders of Altiva called for the purpose of approving the conversion
features of the Notes, but in no event later than February 28, 2000 (the
"Effectiveness Target Date"). In connection with the foregoing, the Company
shall (A) file all pre-effective amendments to such Resale Registration
Statement as may be necessary in order to cause such Resale Registration
Statement to become effective, (B) if applicable, file a post-effective
amendment to such Resale Registration Statement pursuant to Rule 430A under the
Securities Act and (C) cause all necessary filings in connection with the
registration and qualification of the Securities to be made under the state
securities and Blue Sky laws of such jurisdictions as are necessary. Subject to
the provisions of Section 5(c) hereof, the Company shall use its reasonable best
efforts to keep such Resale Registration Statement continuously effective,
supplemented and amended to the extent necessary to ensure that it is available
for resales of Securities by the Holders of Transfer Restricted Securities
entitled to the benefit of this Section 3(a), and to ensure that it conforms
with the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, and all state
securities or Blue Sky laws until the earlier of (i) the sale of all Securities
in accordance with a Resale Registration Statement or (ii) the date on which all
Transfer Restricted Securities may be sold without restriction pursuant to Rule
144 under the Act.
(b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH
THE SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted Securities
may include any of its Transfer Restricted Securities in any Resale Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within twenty (20) business days after receipt of a
request therefor, such information as the Company may reasonably request for use
in connection with any Resale Registration Statement or Prospectus or
preliminary Prospectus included therein. No Holder of Transfer Restricted
Securities shall be entitled to Liquidated Damages pursuant to Section 4 hereof
unless and until such Holder shall have used its reasonable best efforts to
provide all such reasonably requested information. Each Holder as to which any
Resale Registration Statement is being effected agrees to promptly furnish to
the Company any and all information required to be disclosed in order to make
the information previously furnished to the Company by such Holder not
materially misleading.
SECTION 4. LIQUIDATED DAMAGES
If (a) the Company shall not have filed the Resale Registration
Statement with the Commission on or prior to November 30, 1999, (b) the Resale
Registration Statement shall not have been declared effective by the SEC by the
Effectiveness Target Date or (c) the Resale Registration Statement is filed and
declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded within ten (10) business
days by a post-effective amendment that cures such failure and that is itself
declared effective within thirty (30) business days (each such event referred to
in clauses (a) through (c), a "Registration Default"), additional cash interest
("Liquidated Damages") shall accrue to each Holder of the Notes commencing upon
the occurrence of such Registration Default in an amount equal to $0.05 per week
per $1,000 principal amount of the Notes held by such Holder during the ninety
(90) day period following the occurrence
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of such Registration Default. The amount of Liquidated Damages will increase by
an additional $0.05 per week per $1,000 principal amount of the Notes with
respect to each subsequent 90-day period until all Registration Defaults have
been cured, up to a maximum amount of Liquidated Damages for all Registration
Defaults of $0.50 per week per $1,000 principal amount of Notes. All accrued
Liquidated Damages shall be paid to Holders by the Company in the same manner as
interest is paid pursuant to the Notes. Following the cure of all Registration
Defaults relating to any particular Transfer Restricted Securities, the accrual
of Liquidated Damages with respect to such Transfer Restricted Securities will
cease.
All obligations of the Company set forth in the preceding paragraph
that are outstanding with respect to any Transfer Restricted Security at the
time such Security ceases to be a Transfer Restricted Security shall survive
until such time as all such obligations with respect to such Security shall have
been satisfied in full.
SECTION 5. REGISTRATION PROCEDURES
(a) RESALE REGISTRATION STATEMENT. In connection with each Resale
Registration Statement, the Company shall comply with all the provisions of
Section 5(b) below and shall file and use its reasonable best efforts to effect
such registration to permit the sale of the Transfer Restricted Securities in
accordance with the terms of this Agreement.
(b) GENERAL PROVISIONS. In connection with any Resale Registration
Statement and any Prospectus required by this Agreement to permit the sale or
resale of Transfer Restricted Securities (including, without limitation, any
Registration Statement and the related Prospectus required to permit resales of
the Securities by Broker-Dealers), the Company shall:
(i) use its reasonable best efforts to keep such Resale
Registration Statement continuously effective and provide all requisite
financial statements during the period specified in Section 3 of this
Agreement, and upon the occurrence of any event that would cause any
such Resale Registration Statement or the Prospectus contained therein
(A) to contain a material misstatement or omission or (B) not to be
effective and usable for resale of Transfer Restricted Securities
during the period required by this Agreement, the Company shall file
promptly, and as appropriate, an amendment or supplement to such Resale
Registration Statement, in the case of clause (A), correcting any such
misstatement or omission, and, in the case of either clause (A) or (B),
use its reasonable best efforts to cause such amendment to be declared
effective and such Resale Registration Statement and the related
Prospectus to become usable for their intended purpose(s) as soon as
practicable thereafter;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Resale Registration Statement as may
be necessary to keep the Resale Registration Statement effective for
the applicable period set forth in Section 3 hereof or such shorter
period as will terminate when all Transfer Restricted Securities
covered by such
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Resale Registration Statement cease to be Transfer Restricted
Securities; cause the Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Act in a timely manner; and reasonably assist
Holders in complying with the provisions of the Act with respect to the
disposition of all Securities covered by such Resale Registration
Statement during the applicable period in accordance with the intended
method or methods of distribution by the sellers thereof set forth in
such Resale Registration Statement or supplement to the Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons in writing, to confirm such
advice in writing, (A) when the Prospectus or any Prospectus supplement
or post-effective amendment has been filed, and, with respect to any
Resale Registration Statement or any post-effective amendment thereto,
when the same has become effective, (B) of any request by the
Commission for amendments to the Resale Registration Statement or
amendments or supplements to the Prospectus or for additional
information relating thereto, (C) of the issuance by the Commission of
any stop order or other order or action suspending the effectiveness of
the Resale Registration Statement under the Act or of the suspension by
any state securities or Blue Sky commission of the exemption,
qualification or registration of the Transfer Restricted Securities for
offering or sale in any jurisdiction, or the initiation of any
proceeding for any of the preceding purposes, or (D) of the existence
of any fact or the happening of any event that makes any statement of a
material fact made in the Resale Registration Statement, the
Prospectus, any amendment or supplement thereto, or any document
incorporated by reference therein untrue, or that requires the making
of any additions to or changes in the Resale Registration Statement or
the Prospectus in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. If at any
time the Commission shall issue any stop order or other order or take
other action suspending the effectiveness of the Resale Registration
Statement, or any state securities commission or other regulatory
authority shall issue an order suspending the exemption, qualification
or registration of the Transfer Restricted Securities under state
securities or Blue Sky laws, the Company shall use its reasonable best
efforts to obtain the withdrawal or lifting of such order at the
earliest possible time;
(iv) furnish to each of the selling Holders and each of the
underwriter(s), if any, before filing with the Commission, copies of
any Resale Registration Statement or any Prospectus included therein or
any amendments or supplements to any such Resale Registration Statement
or Prospectus (including all documents incorporated by reference after
the initial filing of such Resale Registration Statement), which
documents will be subject to the review of such Holders and
underwriter(s), if any, for a period of at least five (5) business
days, and the Company will not file any such Resale Registration
Statement or Prospectus or any amendment or supplement to any such
Resale Registration Statement or Prospectus (including all such
documents incorporated by reference) to which a selling Holder of
Transfer Restricted Securities covered by such Resale Registration
Statement or
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the underwriter(s), if any, shall reasonably object within five (5)
business days after the receipt thereof. A selling Holder or
underwriter, if any, shall be deemed to have reasonably objected to
such filing if such Resale Registration Statement, amendment,
Prospectus or supplement, as applicable, as proposed to be filed,
contains a material misstatement or omission;
(v) make available at reasonable times and upon reasonable
notice for inspection by the selling Holders, any underwriter
participating in any disposition pursuant to such Resale Registration
Statement and any attorney or accountant retained by such selling
Holders or any of the underwriter(s), all financial and other records,
pertinent corporate documents and properties of the Company and cause
the Company's' officers, directors and employees to supply all
information reasonably requested by any such Holder, underwriter,
attorney or accountant in connection with such Resale Registration
Statement subsequent to the filing thereof and prior to its
effectiveness;
(vi) if requested by any selling Holders or the
underwriter(s), if any, promptly incorporate in any Resale Registration
Statement or Prospectus, pursuant to a supplement or post-effective
amendment, if necessary, such information as such selling Holders and
underwriter(s), if any, may reasonably request to have included
therein, provided such information is usual and customary in such a
document, including, without limitation, information relating to the
"Plan of Distribution" of the Transfer Restricted Securities,
information with respect to the Transfer Restricted Securities being
sold to such underwriter(s) and any other terms of the offering of the
Transfer Restricted Securities to be sold in such offering, and make
all required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after the Company is notified of the
matters to be incorporated in such Prospectus supplement or
post-effective amendment;
(vii) furnish to each selling Holder and each of the
underwriter(s), if any, without charge, one copy of the Resale
Registration Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by reference
therein and all exhibits;
(viii) deliver to each selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the
Prospectus (including each preliminary Prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; and the
Company hereby consents to the use of the Prospectus and any amendment
or supplement thereto (other than in those states or jurisdictions in
which the Company has not complied with or satisfied the requirements
of the relevant securities or Blue Sky laws) by each of the selling
Holders and each of the underwriter(s), if any, in connection with the
offering and the sale of the Transfer Restricted Securities covered by
the Prospectus or any amendment or supplement thereto;
(ix) enter into such agreements (including an underwriting
agreement), and make
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such representations and warranties and take all such other actions in
connection therewith in order to expedite or facilitate the disposition
of the Transfer Restricted Securities pursuant to any Resale
Registration Statement contemplated by this Agreement, all to the
extent customary in offerings of the type contemplated hereby and as
may be reasonably requested by any Holder of Transfer Restricted
Securities or underwriter in connection with any sale or resale
pursuant to any Resale Registration Statement contemplated by this
Agreement; and if the registration is an Underwritten Registration, the
Company shall:
(A) furnish to each selling Holder and each
underwriter, if any, in such substance and scope as they may
request and as are customarily made by issuers to underwriters
in primary underwritten offerings, upon the date of the
effectiveness of the Resale Resale Registration Statement:
(1) a certificate, dated the date of
effectiveness of the Resale Resale Registration
Statement, signed by (i) the President or any Vice
President and (ii) a principal financial or
accounting officer of the Company, confirming, as of
the date thereof, that the representations and
warranties of the Company in the underwriting
agreement, if applicable, are true and correct in all
material respects as of such date and such other
matters as such parties may reasonably request;
(2) an opinion, dated the date of
effectiveness of the Resale Resale Registration
Statement, of counsel for the Company to the effect
that the shares covered by the Resale Resale
Registration Statement shall be validly issued and
non-assessable, and such opinion shall include a
statement to the effect that such counsel has
participated in conferences with officers and other
representatives of the Company, representatives of
the independent public accountants for the Company,
the underwriters' representatives and the
underwriters' counsel in connection with the
preparation of such Resale Registration Statement and
the related Prospectus and have considered the
matters required to be stated therein and the
statements contained therein, although such counsel
has not independently verified the accuracy,
completeness or fairness of such statements; and that
such counsel advises that, on the basis of the
foregoing, no facts came to such counsel's attention
that caused such counsel to believe that the
applicable Resale Registration Statement, at the time
such Resale Registration Statement or any
post-effective amendment thereto became effective,
contained an untrue statement of a material fact or
omitted to state a material fact required to be
stated therein or necessary to make the statements
therein not misleading, or that the Prospectus
contained in such Resale Registration Statement, as
of its date, contained an untrue statement of a
material fact or omitted to state a material fact
necessary in order to make the statements therein, in
light of the circumstances under which they were
made, not misleading. Without
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limiting the foregoing, such counsel may state
further that such counsel assumes no responsibility
for, and has not independently verified, the
accuracy, completeness or fairness of the financial
statements, notes and schedules and other financial
data included in any Resale Registration Statement
contemplated by this Agreement or the related
Prospectus; and
(3) a customary comfort letter, dated as of
the date of effectiveness of the Resale Registration
Statement, from the Company's independent public
accountants, in the customary form and covering
matters of the type customarily covered in comfort
letters by underwriters in connection with primary
underwritten offerings;
(B) set forth in full or incorporate by reference in
the Underwriting Agreement, if any, the indemnification
provisions and procedures of Section 7 hereof with respect to
all parties to be indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as
may be reasonably requested by such parties to evidence
compliance with clause (A) above and with any customary
conditions contained in the underwriting agreement or other
agreement entered into by the Company pursuant to this clause
(ix), if any.
If at any time the representations of the Company contemplated in
clause (A)(1) above cease to be true and correct, the Company shall so advise
the underwriter(s), if any, and each selling Holder promptly and, if requested
by such Persons, shall confirm such advice in writing;
(x) prior to any public offering of Transfer Restricted Securities,
cooperate with the selling Holders, the underwriter(s), if any, and their
respective counsel in connection with the registration and qualification of the
Transfer Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders or underwriter(s) may reasonably request
and do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Transfer Restricted Securities covered
by the Resale Registration Statement; provided that the Company shall not be
required to register or qualify as a foreign corporation where it is not now so
qualified or to take any action that would subject it to the service of process
in suits or to taxation, other than as to matters and transactions relating to
the Resale Registration Statement, in any jurisdiction where it is not now so
subject;
(xi) cooperate with the selling Holders and the underwriter(s), if any,
to facilitate the timely preparation and delivery of certificates representing
Transfer Restricted Securities to be sold and not bearing any restrictive
legends; and enable such Securities to be in such denominations and registered
in such names as the Holders or the underwriter(s), if any, may reasonably
request at least two (2) business days prior to any sale of Transfer Restricted
Securities made by such underwriter(s) or selling Holders;
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(xii) use its reasonable best efforts to cause the Transfer Restricted
Securities covered by the Resale Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the seller or sellers thereof or the underwriter(s), if any, to
consummate the disposition of such Transfer Restricted Securities, subject to
the provisions contained in paragraph (x) above;
(xiii) if any fact or event contemplated by paragraph (b)(iii)(D) above
shall exist or have occurred, prepare a supplement or post-effective amendment
to the Resale Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of Transfer Restricted Securities, the
Prospectus will not contain an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not misleading;
(xiv) provide a CUSP number for all Transfer Restricted Securities not
later than the effective date of the Resale Registration Statement;
(xv) cooperate and assist in any filings required to be made with the
NASD and in the performance of any due diligence investigation by any
underwriter that is required to be retained in accordance with the rules and
regulations of the NASD, and use its reasonable best efforts to cause such
filings to become effective and approved by such governmental agencies or
authorities as may be necessary to enable the Holders selling Transfer
Restricted Securities to consummate the disposition of such Transfer Restricted
Securities;
(xvi) otherwise comply with all applicable rules and regulations of the
Commission, and make generally available to its security holders, as soon as
practicable, a consolidated earnings statement meeting the requirements of Rule
158 under the Act (which need not be audited) for the twelve-month period (A)
commencing at the end of any fiscal quarter in which Transfer Restricted
Securities are sold to underwriters in a firm commitment or best efforts
Underwritten Offering or (B) if not sold to underwriters in such an offering,
beginning with the first month of the Company's first fiscal quarter commencing
after the effective date of the Resale Registration Statement;
(xvi) cause all shares of Transfer Restricted Securities covered by the
Resale Registration Statement to be listed on each securities exchange or
market, if applicable, on which similar securities issued by the Company are
then listed; and
(xvii) provide promptly to each Holder upon request each document filed
with the Commission pursuant to the requirements of Section 13 or Section 15 of
the Exchange Act.
(c) BLACKOUT. Each Holder agrees by acquisition of a Transfer
Restricted Security that, upon receipt of any notice from the Company of the
existence of any fact of the kind described in Section 5(b)(iii)(D) hereof, such
Holder will forthwith discontinue disposition of Transfer Restricted Securities
pursuant to the Resale Registration Statement until such Holder's receipt of the
copies of the supplemented or amended Prospectus as contemplated by section
5(b)(xiii) hereof, or until it is
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advised in writing (the "Advice") by the Company that the use of the Prospectus
may be resumed, and has received copies of any additional or supplemental
filings that are incorporated by reference in the Prospectus. If so directed by
the Company, each Holder will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies then in such Holder's possession,
of the Prospectus covering such Transfer Restricted Securities that was current
immediately prior to the time of receipt of such notice. In the event the
Company shall give any such notice, the time period regarding the effectiveness
of such Resale Registration Statement or any post-effective amendment thereto
set forth in Section 3 shall be extended by the number of days during the period
from and including the date of the giving of such notice pursuant to Section
5(b)(iii)(D) hereof to and including the date when each selling Holder covered
by such Resale Registration Statement shall have received the copies of the
supplemented or amended Prospectus as contemplated by section 5(b)(xiii) hereof
or shall have received the Advice, provided that, notwithstanding the foregoing,
such time period may be extended in any given calendar year only one time for a
maximum of (30) business days.
SECTION 6. REGISTRATION EXPENSES
All expenses incident to the Company's performance of or compliance
with this Agreement will be borne by the Company, regardless whether a Resale
Registration Statement becomes effective, including without limitation: (i) all
registration and filing fees and expenses (including filings made by any Holder
with the NASD (and, if applicable, the fees and expenses of any "qualified
independent underwriter" and its counsel that may be required by the NASD));
(ii) all fees and expenses of compliance with federal securities, foreign
securities and state Blue Sky or securities laws; (iii) all expenses of printing
(including the printing of Prospectuses and new certificates representing
Securities), messenger and delivery services and telephone expenses incurred by
the Company; (iv) all fees and disbursements of counsel for the Company; (v) all
application and filing fees in connection with listing the Securities on a
national securities exchange or automated quotation system pursuant to the
requirements hereof; and (vi) all fees and disbursements of independent
certified public accountants of the Company (including the expenses of any
special audit and comfort letters required by or incident to such performance).
The Company will, in any event, bear its internal expense (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit, all
trustee and rating agency fees and charges and the fees and expenses of any
person, including special experts, retained by the Company.
Each Holder shall pay all expenses of its counsel, underwriting
discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of such Holder's Transfer Restricted Securities pursuant to a Resale
Registration Statement.
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SECTION 7. INDEMNIFICATION
(a) The Company shall indemnify and hold harmless (i) each Holder, (ii)
each person, if any, who controls (within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act) any Holder (any of the persons referred to in
this clause (ii) being hereinafter referred to as a "Controlling Person") and
(iii) the respective officers, directors, partners, employees, representatives
and agents of any Holder or any Controlling Person (any person referred to in
clause (i), (ii) or (iii) may hereinafter be referred to as an "Indemnified
Holder"), to the fullest extent lawful, from and against any and all losses,
claims, damages, liabilities, judgments, actions and expenses, joint or several
(including without limitation, reimbursement of all reasonable costs of
investigating, preparing, pursuing or defending any claim or action,
investigation or proceeding by any governmental agency or body, commenced or
threatened, including the reasonable fees and charges of counsel directly or
indirectly caused by, related to, based upon, arising out of or in connection
with any untrue statement or alleged untrue statement of a material fact
contained in (A) any Resale Registration Statement or Prospectus (or any
amendment or supplement thereto) or (B) any state securities or Blue Sky
application or other document prepared or executed by the Company (or based upon
any information furnished by the Company) for the purpose of qualifying any of
the Securities under the securities or Blue Sky laws of any state or other
jurisdiction (any such application, document or information hereinafter is
referred to as a "Blue Sky Application") or any omission or alleged omission to
state in any Resale Registration Statement or Prospectus (or any amendment or
supplement thereto) or in any Blue Sky Application a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, except insofar as such
losses, claims, damages, liabilities or expenses are caused by an untrue
statement or omission or alleged untrue statement or omission that is made in
reliance upon and in conformity with information relating to any of the Holders
furnished in writing to the Company by any of the Holders or counsel or agents
of Holders expressly for use therein. The foregoing indemnification is in
addition to any liability which the Company may otherwise have to any
Indemnified Holder.
(b) Each Holder agrees, severally and not jointly, to indemnify and
hold harmless (i) the Company, (ii) each person who controls (within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act) the Company and
(iii) the respective officers, directors, partners, employees, representatives
and agents of the Company and any such controlling person to the same extent as
the foregoing indemnity from the Company to each of the Indemnified Holders, but
only with respect to claims and actions based on information relating to such
Holder furnished in writing by such Holder expressly for use in any Resale
Registration Statement. The foregoing indemnification is in addition to any
liability which any Holder may otherwise have to any of the foregoing
indemnified persons.
(c) Promptly after receipt by an indemnified party under this Section 7
of notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under this Section 7, notify the indemnifying party in writing of the
claim or the commencement of that action; provided, however, that the failure to
notify
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the indemnifying party shall not relieve it from any liability which it may have
under this Section 7 except to the extent it has been materially prejudiced by
such failure and, provided further, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have to an
indemnified party otherwise than under this Section 7 (except to the extent so
provided in any such other obligation). If any such claim or action shall be
brought against an indemnified party, and it shall have notified the
indemnifying thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it wishes, jointly with any other similarly
notified indemnifying party, to assume the defense thereof with counsel
reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such action, the indemnifying party shall not be liable to the
indemnified party under this Section 7 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation, provided, however, that
the indemnified party shall have the right to employ separate counsel to
represent jointly the indemnified party and those other Indemnified Holders and
their respective officers, employees and controlling persons who may be subject
to liability arising out of any claim in respect of which indemnity may be
sought by Indemnified Holders against the indemnifying party under this Section
7, but the fees and expenses of such counsel shall be at the expense of such
indemnified party unless, (i) the employment thereof has been specifically
authorized by the indemnifying party in writing, (ii) such indemnified party
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party and in the reasonable judgment of such
counsel it is advisable for such indemnified party to employ separate counsel or
(iii) the indemnifying party has failed to assume the defense of such action and
employ counsel reasonably satisfactory to the indemnified party, in which case,
if such indemnified party notifies the indemnifying party in writing that it
elects to employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party. In no event shall the indemnifying parties
be liable for the fees and expenses of more than one counsel (in addition to
local counsel). Each indemnified party, as a condition of the indemnity
agreements contained in this Section 7, shall use its reasonable best efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall (i) without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding or (ii) be liable for any
settlement of any such action, compromise of any action or any judgment with
respect to any action effected without its written consent, but if settled with
its written consent or if there be a final judgment of the plaintiff in any such
action, the indemnifying party agrees to indemnify and hold harmless any
indemnified party, to the extent set forth herein, from and against any loss or
liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 7 shall for any
reason be unavailable to (except for a reason expressly provided herein) or
insufficient to hold harmless an
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indemnified party under Section 7(a) or 7(b) in respect of any loss, claim,
damage or liability, or any action in respect thereof, referred to therein, then
each indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, in such
proportion as shall be appropriate to reflect the relative fault of the Company
on the one hand and the Holders on the other hand with respect to the statements
or omissions which resulted in such loss, claim, damage or liability, or action
in respect thereof, as well as any other relevant equitable considerations. The
relative fault shall be determined by reference to whether the untrue or alleged
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company or the Holders, the intent
of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the Holders agree that it would not be just and equitable if contributions
pursuant to this Section 7(d) were to be determined by pro rata allocation (even
if the Holders were treated as one entity for such purpose) or by any other
method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section 7(d) shall be deemed to include, for
purposes of this Section 7(d), any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 7(d), no
Indemnified Holder shall be required to contribute any amount in excess of the
amount by which proceeds received by such Indemnified Holder from an offering of
the Securities exceeds the amount of any damages which such Indemnified Holder
has otherwise paid or become liable to pay by reason of any untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Indemnified Holders' obligations to contribute as
provided in this Section 7(d) are several and not joint.
SECTION 8. RULE 144 AND RULE 144A
The Company hereby agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding, to use its reasonable best efforts to
make and keep public information available as is required by Rules 144 and 144A
under the Act to permit sales of Transfer Restricted Securities pursuant to such
rules, including, without limitation, complying with the requirements of Rule
144A(d)(4), and to furnish to each Holder promptly upon request a written
statement by the Company as to its compliance with the reporting requirements of
Rule 144 and Rule 144A under the Act.
SECTION 9. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in any underwriting arrangements provided by
the Persons entitled hereunder to approve such arrangements
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and (b) completes and executes all reasonable questionnaires, powers of
attorney, indemnities, underwriting agreements, lock-up letters and other
documents required under the terms of such underwriting arrangements.
SECTION 10. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the Resale
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority of the
Transfer Restricted Securities included in such offering; provided, that such
investment bankers and managers must be reasonably satisfactory to the Company.
SECTION 11. MISCELLANEOUS
(a) REMEDIES. The Company agrees that monetary damages (including
the Liquidated Damages contemplated hereby) would not be adequate compensation
for any loss incurred by reason of a breach by it of the provisions of this
Agreement and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. The Company will not on or after
the date of this Agreement enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof. The rights granted
to the Holders hereunder do not in any way breach or conflict with and are not
inconsistent with the rights granted to the holders of the Company's securities
under any agreement in effect on the date hereof.
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement may
not be amended, modified or supplemented, and waivers or consents to or
departures from the provisions hereof may not be given unless the Company has
obtained the written consent of Holders of a majority of the outstanding
Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof that relates exclusively to the
rights of Holders whose Transfer Restricted Securities are being resold pursuant
to the Resale Registration Statement and that does not affect directly or
indirectly the rights of other Holders whose Transfer Restricted Securities are
not reselling pursuant to such Resale Registration Statement may be given by the
Holders of a majority of the outstanding Transfer Restricted Securities being
resold pursuant to such Resale Registration Statement.
(d) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class or
certified mail, telex, telecopier or reliable overnight delivery service:
(i) if to a Holder, initially at the address set forth
below its name on the signature
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page hereto, and thereafter at such other address notice of which is
given in accordance with this Section 11(d); and
(ii) if to the Company:
Altiva Financial Corporation
Sixth Floor
1000 Parkwood Circle
Atlanta, Georgia 30339
Telecopier No.: (770) 937-9576
Attention: Edward B. Meyercord
With a copy to:
King & Spalding
191 Peachtree Street
Atlanta, GA 30303
Telecopier No.: (404) 572-5100
Attention: John D. Capers, Jr., Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five (5) business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next business day, if sent via a reliable overnight delivery service.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities.
(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, by the parties hereto, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement.
(g) HEADINGS. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND, WITHOUT REGARD
TO THE CONFLICT OF LAW RULES THEREOF.
(i) SEVERABILITY. In the event that any one or more of the
provisions contained herein or the application thereof, in any circumstances, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
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(j) ENTIRE AGREEMENT. This Agreement is intended by the parties as
a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter hereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the Transfer Restricted Securities. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
ALTIVA FINANCIAL CORPORATION
By: /s/ Edward B. Meyercord
------------------------------------------
Name: Edward B. Meyercord
Title: Chairman and Chief Executive
Officer
VALUE PARTNERS, LTD
By: EWING & PARTNERS,
General Partner
By: /s/ Timothy Ewing
------------------------------------------
Name: Timothy Ewing
Title: Managing Partner
Address:
4514 Cole Avenue - Suite 808
Dallas, Texas 75205
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T. ROWE PRICE RECOVERY FUND II, L.P.
By: T. Rowe Price Recovery Fund II
Associates, L.L.C., General Partner
By: /s/ Hubert M. Stiles, Jr.
------------------------------------------
Name: Hubert M. Stiles, Jr.
Title: President
Address:
100 E. Pratt Street
Baltimore, Maryland 21202
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